Analysis of Coca-Cola Company Strategies - Assignment Example

Case Analysis: Coca-Cola Company 2007 Table of Contents Coca-Cola’s Vision, Mission, Objectives and Strategies 2 Developing Vision and Mission Statement for Coca-Cola 3 External Opportunities and Threats 3 Competitive Profile Matrix 4 External Factor Evaluation Matrix 6 Identification of Internal Strengths and Weaknesses 7 Internal Factor Evaluation Matrix 8 SWOT Matrix 11 SPACE Matrix 14 BCG Matrix 17 Internal External Matrix (IE) 19 Grand Strategy Matrix 20 Quantitative Strategic Planning Matrix (QSPM) 21 Advantages and Disadvantages of Each Alternative 23 Recommendation on Specific Strategies and Long Term Objectives 23 Exhibit 1: Cost of Project 24 Implementation of the Above Mentioned Strategies 25 Exhibit 3: Projected Balance Sheet 27 Specific Annual Objectives and Policies 28 Evaluation of the Strategy 29 References 30 Coca-Cola’s Vision, Mission, Objectives and Strategies Coca-Cola Company is considered to be a biggest company of the world that tends to sell beverages. Coca-Cola Company comprises several brands under it namely Coca-Cola, Diet Coke, Sprite and Fanta among others. It tends to employ nearly 71,000 employees at 200 different countries (The Coca-Cola Company, 2011). The mission of the company has been to refresh the world in terms of mind, body as well as spirit (The Coca-Cola Company, 2011). The vision of the company has been to increase return of the shareholders, while being watchful of its overall accountabilities. Coca-Cola also attempts at introducing a collection of beverage brands that anticipates and fulfills the needs and desires of the people (The Coca-Cola Company, 2011). The case analysis revealed that the strategies of Coca-Cola have been to focus upon global marketing as well as on local manufacturing activities. On the other hand, the objective of the company has been to enhance the total volume of sales of the products, to amplify the share of ‘prepared to drink-beverage’ sales and to enlarge economic value-added by enhancing economic profit (Badal, 2007). Developing Vision and Mission Statement for Coca-Cola The new vision statement for Coca-Cola would be to introduce new products and to expand the business operation into new markets in order to increase the sales and revenues. Similarly, the new mission statement of the company would be to enhance customer satisfaction by offering quality products to the customers. External Opportunities and Threats Through the case study, it can be analyzed that there has been rise in the bottle water consumption all over the globe which has proved to be quite favorable for various products of Coca-Cola such as ‘Dasani’ and ‘Smart Water’. As per the data of Data monitor, it has been identified there has been rise in the soft-drink market in Asia-Pacific region by 4.1 percent in the year 2010. It is expected that there would be further rise in demand of soft-drink products to 23.3% by the end of the year 2015. It has further been expected that the demand of complementary food will escalate the consumption of drink. Therefore, it can be anticipated that greater number of people are most likely to purchase the products of Coca-Cola along with the complementary food products. It has further been observed that the company has attained success in past performances with some innovative products such as Coke Zero. Hence if Coca-Cola creates such new products, then there is greater opportunity for business growth (Badal, 2007). One of the biggest threats of the company is increasing rivalry with other competitors. The biggest competitors of the company are PepsiCo, Kraft Foods as well as Unilever. Furthermore, the changing taste as well as preferences of the company can also be pose threat for the company. Most of the health advocates in present days tend to suggest people on declining the consumption of high fructose corn syrup which is a form of sugar contained by Coca-Cola products. The reason for this changing preference is due to reduced purchasing power of people which resulted in shift from purchasing value products (Badal, 2007). Competitive Profile Matrix Competitive Profile Matrix is considered to be a strategic management tool that can be used for making distinction among different players in the industry. The matrix below demonstrates the competitive profile matrix that clearly shows the competitiveness of different beverage companies. It is to be noted that weight of 0.0 is considered as less important in comparison to 1 which is considered as most important. Furthermore, each success factor has been rated ranging from 1 to 4 where 1 demonstrates poor performance, 2 demonstrates average performance, 3 demonstrates above average performance and 4 demonstrates superior performance. In the context of this competitive profile matrix analysis, it has been identified that Coca-Cola is one of the pioneers and tends to dominate its competitors with the score of 3.72. While it has been further apparent that the other two companies such as Pepsi as well as Cadbury’s have attained the score of 3.52 and 2.92 respectively (Badal, 2007). External Factor Evaluation Matrix External factor evaluation (EFE) matrix is considered to be a strategic management tool which is used for the purpose of assessing the prevailing business environment. In EFE matrix, it is to be noted that weight of 0.0 is considered as less important and 1 is considered as most important. Besides, each success factor has also been rated ranging from 1 to 4 where 1 demonstrates poor performance, 2 demonstrates average performance, 3 demonstrates above average performance and 4 demonstrates superior performance. In the EFE matrix analysis described below, it can be observed that the total weighted score obtained by the Coca-Cola is greater than 1. Thus, it can be stated that the strategies prepared and implemented by Coca-Cola in business is effective. It can further be observed that the company is taking good advantages of the opportunities and is attempting to reduce the impacts of threats arising from the external business environment. External Factors Evaluation (EFE) Weight Rating Weighted Score Opportunities China as well as Europe tends to have growth potentials 0.10 4 0.40 Health conscious consumers 0.20 3 0.60 Association with food chains 0.15 2 0.30 Rise in consumption of bottled water 0.20 4 0.80 Threats Declining growth rate in the carbonated drinks market 0.05 2 0.10 Greater number of substitute products 0.10 3 0.30 High competition from rivals 0.20 4 0.80 Rise in the price of raw materials 0.10 4 0.40 Total 1 3.7 Identification of Internal Strengths and Weaknesses One of the biggest strength of Coca-Cola has been its brand recognition. Among the top five non-alcoholic brands, it can be identified that Coca-Cola Company tends to own four brands namely Coca-Cola, Fanta, Diet Coke and Sprite. Due to wider product variety and market presence in most of the countries of the world, the company has been capable of attaining competitive advantage. As per the report of Data monitor, it has been analysed that Coca-Cola is considered to be one of the biggest producers of the beverages around the globe. The other strength for the company is highest market share in the global beverage market. The company is further capable of differentiating itself from that of the competitors with the help of heavy advertising as well as promotional activities. One of the weaknesses that have adversely hampered the brands image of the company has been product recalls. It was during the year 2010 when ‘Smart Water PET Bottles’, one of the Coca-Cola products were recalled because of the fact that they failed to meet the quality standards for bottled water. Owing to product recalls along with the alterations in the consumer perception, Coca-Cola faced heavy destocking of products. Thus, threat of destocking can also be considered as a major weakness of Coca-Cola. Internal Factor Evaluation Matrix Internal factor evaluation matrix is the other strategic tool used by companies to assess inner organizational effectiveness. In this matrix, it can be stated that the total weighted score has been from 1 to 4 where 1 is considered as low, 4 is considered as high and 2.5 is considered as average. A total weighted score of less than 2.5 demonstrates that the organization is internally weak and the total weighted score more than 2.5 demonstrates that the company is internally strong. From the below internal factor evaluation matrix, it can be observed that the total weighted score is 3.62 which is more than average. Therefore it can be concluded that Coca-Cola is internally strong. Internal Factor Evaluation Weight Rating Weighted Score Strength Coca-Cola is the world’s esteemed brand 0.20 4 0.80 Wider variety of products 0.04 4 0.16 Market leader in soft drink industry 0.10 4 0.40 Differentiation 0.10 4 0.40 Heavy promotional and advertising activities 0.06 4 0.24 Market share 0.20 4 0.80 Weaknesses New coke formula led to bad image of coke 0.10 3 0.30 Less aggressive market standing 0.06 2 0.12 Product offering limited to beverages 0.04 3 0.12 Discontinuation of numerous products 0.10 4 0.40 1 3.62 SWOT Matrix The following table will show the SWOT matrix for Coca-Cola Company: Strengths (S) Coca-Cola is a leading brand with high customer acceptance The company has large scale business operation as the products are sold in numerous countries of the world Coca-Cola possesses leading market position in beverage segment The company also haves strong cash flow capability to generate over $50 million sales in one particular day Weaknesses (W) Instability in the financial market might impact on the liquidity position of Coca-Cola Slow decision making power might result in competitive advantage for the competitors of Coca-Cola such as PepsiCo Opportunities (O) Development in non-alcoholic ready-to-drink beverage industry all over the globe might assist in enhancing retail sale Coca-Cola can easily target the ageing, young as well as environmental concern people Booming functional drink market in the globe such as energy drink can generate opportunity for Coca-Cola SO Excellent global market image can assist the company to take greater benefits of the growing non-alcoholic ready-to-drink beverages Coca-Cola can be the leader in the bottle water segment by extending its product line as well as campaign for healthy drink Coca-Cola tends to sponsor games such as football, Olympics. Therefore, the company can introduce energy drinks of their own brand Coca-Cola can pay due attention towards ageing as well as affluent consumers segment on a global basis WO With experienced staff, Coca-Cola needs to make an proper market decisions that can be used to explore the markets Threats(T) Recession tends to have an adverse impact on the performance of Coca-Cola High concern for health and wellness can reduce the demand of carbonated products Intense competition both in local as well as global market can cause threat for Coca-Cola ST Coca-Cola shall be capable of taking cost advantages via higher economies of scale by minimizing the price of the product Coca-Cola can acquire Krispy Kreme and Golden Enterprise for diversifying the product line The company can identify the needs and demands of the customers and can also make sugar free products WT Slow decision making capability can cost the company more as the competitors are more likely to take the lead in offering what the customers want SPACE Matrix SPACE matrix is a management instrument which is used to analyze a company. The following table will show the SPACE Matrix of Coca-Cola: Internal strategic position External strategic position Competitive (CA) Industry (IS) X-axis (-6 worst, -1 best) -1 Market share -1 Customer loyalty -1 Brand image -3 Technological knowhow -3 Life cycle of product -2 Control over suppliers Average=-1.8 (+1 worst, +6 best) +4 Profit potential +6 Resource utilisation +3 Ease of entry +4 Consolidation +6 Financial stability +6 Resource utilisation Average= +4.8 Total axis X score =3 Financial (FS) Environmental (ES) Y-axis (+6 worst, +1 best) +6 Net income +5 Return on assets +4 Inventory turnover +5 Leverage +6 Return on investment +4 Liquidity +5 Working capital Average= +5 (-6 worst, -1 best) -2 Barriers to entry -3 Inflation rate -1 Price elasticity of demand -1 Technological changes -1 Demand variability Average= -1.6 Total axis Y score=3.4 In the above matrix, X-axis denotes competitive and industry factors while y-axis denotes environmental and financial factors. The total x-axis score of Coca-Cola has been observed as 3 and the total y-axis score has been observed 3.4. The average score of Coca-Cola in term of competitiveness, industry, financial and environmental are as follows: Average CA score =-1.8 Average ES score = -1.6 Average IS score = +3 Average FS score = +3.4 (3, 3.4) From the above score, it can be stated that Coca-Cola tends to fall under the aggressive strategy of the SPACE matrix. BCG Matrix BCG matrix is the other tool used to assess the business in term of growth and market share. The following table will show the BCG matrix for Coca-Cola: From the above matrix, it can be identified that Coca-Cola falls under the star category which demonstrates the fact that the company has high market share in a high growth market. Internal External Matrix (IE) IE is the other management tool utilised for assessing the strategic position of an organisation. The following figure will show the internal external matrix of Coca-Cola: The scores obtained from the IE matrix for Coca-Cola depicts that the company has an average internal strategic position and it should hold and maintain its position in the market. Grand Strategy Matrix Grand strategy matrix is a framework used to recognize the strategic position of an organization. The following figure will show the grand strategy matrix of Coca-Cola: From the above figure, it can be stated that Coca-Cola has been capable of maintaining strong competitive position in the beverage market. Quantitative Strategic Planning Matrix (QSPM) In order to enhance the business, Coca-Cola can take two alternatives one is to acquire Krispy Kreme, a potato chips manufacturing company or to acquire Golden Enterprise, a small snack food manufacturing organisation and the other one is to produce new diet drink that have healthier sugar content. The following figure will describe the key strengths and opportunities of these two alternatives through QSPM matrix: Advantages and Disadvantages of Each Alternative From analysis of the above QSPM matrix, it can be observed that by acquiring Krispy Kreme as well as Golden Enterprise, Coca-Cola will be capable of diversifying its product line. Both the companies (Krispy Kreme and Golden Enterprise) are quite sound in terms of financial capability. Furthermore, it is also evident that the scores of first alternative i.e. acquiring Krispy Kreme and Golden Enterprise) has been high in comparison to the scores of second alternative i.e. production of new diet drink possessing healthier sugar substitute, because production of new drink might cost high (The Coca-Cola Company, 2011). Recommendation on Specific Strategies and Long Term Objectives Coca-Cola can also enter into the production of bottled water as it can offer the company with greater advantages in terms of diversification. Furthermore, it has also been apparent that the company can also produce energy drinks. The long term objective of the company shall be to increase the profitability. The projected cost of new strategies in a year has been demonstrated below: Exhibit 1: Cost of Project Implementation of the Above Mentioned Strategies The strategies mentioned above can be implemented by the support and assistance of the top management of Coca-Cola. Adequate decision making tends to be of vital while implementing such strategies. It is expected that with the execution of the above mentioned strategies, the company shall be capable of attaining its mission and objectives. It is expected that through the aforementioned strategies, Coca-Cola could be capable of expanding its market share. Coca-Cola aims at expanding the business into various parts of the world. The above recommendations can be of great assistance for the company because of the rising demand of the bottled water as well as energy drinks in different countries. The following figures will show the project income statement, balance sheet and financial ratios for Coca-Cola for implementing the strategies: Exhibit 2: Projected Income Statement Exhibit 3: Projected Balance Sheet Exhibit 4: Projected Financial Ratios Specific Annual Objectives and Policies It is expected that with the implementation of these strategies, Coca-Cola can increase the sales by nearly 15% and the profits by 5%. However, the company will require employing greater number of staffs in order to handle the operation of the extended business. Employees will oversee the new strategies that have been prepared by the company. Evaluation of the Strategy It is essential for Coca-Cola to review the policies and strategies implemented after every three months in order to determine the effectiveness. In case, the top management finds that the strategies implemented does not works as per the objectives set by the company, then it need to bring changes to the existing strategies. It is to be remembered that either the company slightly modify the existing strategy or make complete changes in case of any deviation of intended and expected outcome. However, in making complete alterations, Coca-Cola is required to bear huge amount of cost which can be a great matter of concern for the company. References Badal, A., 2007. The Coca-Cola Company-2007. The Union Institute. The Coca-Cola Company, 2011. Annual Report 2011. Business. [Online] Available at: http://sec.gov/Archives/edgar/data/21344/000002134412000007/a2011123110-k.htm [Accessed December 13, 2012]. Read More