Business Policy and Strategic Management of Coca-Cola - Essay Example

Coca Cola Analysis of Coca Cola Introduction Coca Cola is American multinational beverages company that manufacturers and markets non-alcoholic beverage concentrates and syrups. The company is headquartered in Atlanta Coca Cola is the largest beverage company in the globe that offers more than 500 brands in more than 200 countries (Srivastava & Verma, 2012). The brand portfolio includes carbonated beverages, non-carbonated energy drinks, waters, juice drinks, ready-to-drink coffees and teas. The mission of the company is to refresh the world, inspire moments of optimism and happiness while creating value and making a difference. The vision aims at creating great workplace, nurturing networks with partners, improving productivity, maximising return to shareowners while ensuring corporate responsibility in order to build sustainable communities (Kozami, 2005). Stakeholder mapping Stakeholder is any person or group who can affect or is affected by the actions of an organization. Primary stakeholders continuously participate in the organization while secondary stakeholders do not engage directly with the organization, but they either influence or are affected by the organization (Srivastava & Verma, 2012). Primary stakeholders are impacted either positively or negatively by the decisions of the management while the secondary stakeholders play an intermediary role, but are positively affected by the outcome of managerial decisions. Stakeholder analysis enables companies to identity the changing interests of stakeholders, identify the potential risks and implement measures that will satisfy the stakeholders’ needs (Srivastava & Verma, 2012). The analysis will identify the actual and potential conflict of interests and relationships among several stakeholders. Primary stakeholders Shareholders- These are primary stakeholders since they are the owners of the companies by virtue of contributing capital (Srivastava & Verma, 2012). They have a direct interest in the company and are interested in receiving acceptable return of their investment through dividend payments and appreciation of their share values (Kozami, 2005). Coca Cola is committed to ensuring high profitability in order to maximize the return to shareholders. Customers- these are primary stakeholders since they create demand for company products and their actions will influence the revenues and profitability of the company. The customers are interested in receiving value-added and high quality products at fair prices (Srivastava & Verma, 2012). Coca Cola Company must offer high quality products and ensure customer convenience in order to attain high market share and maintain customer loyalty. In this case, the company should understand and satisfy the changing customer needs and preferences. Creditors- they are providers of debt capital to the company such as loans secured by the company assets. The main interest is to the repayment of their principal and interest without default. Coca Cola values its creditors and is committed to adhering with all debt obligations and meeting the needs of the creditors (Srivastava & Verma, 2012). Suppliers- these are primary stakeholders since they are the providers of raw materials and equipments that are needed in the production process. Coca Cola has ensured an ethical supply chain management and procurement process that ensures equal opportunities in the award of contracts and tenders. The company is committed to enhancing relationships with stakeholders and paying for the suppliers on timely basis while adhering with the contractual obligations with suppliers. Employees- These are primary stakeholders and they provide the human capital that is needed to attain competitive edge in the market. Coca Cola values the employees and caters for the interest of employees through creating a great workplace that enables the employees to meet their personal and professional goals. The employees are interested in good working environment, fair wages and recognition for their efforts in the company (Kozami, 2005). Communities- The communities grant the company the charter to exist and supply important natural resources. The communities expect the company to behave ethically and contribute to the social welfare of the b society through conserving the environment and controlling pollution (Srivastava & Verma, 2012). Coca Cola has minimized toxic effluents and has corporate social responsibility initiatives that benefit the society. Government and government regulatory agencies- the government expects the company to pay taxes, follow the regulatory framework, create employment and ensure sustainability of operations. The company has complied with tax and other government requirements. The company ensure the health safety of the products (Srivastava & Verma, 2012). Secondary stakeholders Trade unions- They represent the interest of employees and Coca Cola constantly engages with the unions on employment matters. Industry trade associations- The associations are interested in the survival and profitability of the soft drinks industry and lobby for better business environment and lenient regulatory framework. The Company has appointed representatives to the industry associations. Investors- Are interested in the viability of the financial and stock market. The company provides investor information on timely basis and management desists from insider trading in order to maintain the integrity of the stock market and enable investors make informed decisions while investing in the company stocks (Srivastava & Verma, 2012). Competitors- the company engages in ethical competition practices and refrains from copyright and intellectual infringement (Kozami, 2005). The company monitors the strategic actions of the competitors in order to attain competitive edge through differentiation and new product and market development. Examples of competitors include PepsiCo. Tertiary stakeholders Research institutions- The research institutions have an external interest and aim at advancing knowledge. The company assists research institutions with product information and company information in order to facilitate new discoveries. Media- and analysts- The media aims at disseminating industry information while analysts aim at understanding market trends. The company has a public relations department that handles the concerns of the media. Advocacy groups- examples include environmentalism and human rights groups that monitor actions of companies and desire to influence the public policies. The company has complied with concerns of advocacy groups in order to minimise negative reputation and ensure customer loyalty to the products. (Retrieved from stakeholdermap.com) Growth strategies Growth strategies are aimed at increasing the revenues, capturing higher market share, beating intense competition, or new product development. Limited growth strategies (product development) Limited growth strategy involves doing nothing at all or developing new products for the company. Product development strategy entails creating products with new or different characteristics that will offer additional benefits to the consumers (Kozami, 2005). It may involve differentiation of the existing products or formulation of entirely new product that satisfies new needs. One of the advantages of limited growth strategy is the savings and avoidance of debt since the company will not incur debt in funding new revenue streams (Kozami, 2005). Limited growth strategy entails limited business risks and capital outlay. The disadvantages of the strategy are the inability to exploit risky and profitable market opportunities and inability to take advantage of vertical and horizontal integration. Example of the strategy was the introduction of 7.5 ounce mini-can in 2009. Substantive growth strategies (horizontal and vertical integration) The advantages of substantive growth strategy are to take advantage of high economies of scale in operations, enhance the quality of services, expand knowledge and capabilities and increase the market share. Substantive strategies enable the company to reduce the intensity of competition and control the supply chain activities (Kozami, 2005). Vertical integration Vertical integration entails both backward and forward integration. The company uses the strategy to gain control of the value chain. The company attempts to control the inputs and raw materials supply through backward integration and control the distributorship through forward integration (Kozami, 2005). The main aim is to reduce the raw material acquisition costs and eliminate inefficient operations. The advantages offered by vertical integration include the ability to control critical operations such as source of raw materials and minimise business disruptions due to failure by the distributors or suppliers (Kozami, 2005). For instance, Coca Cola purchased a bottling plant The advantages of vertical integration include the improved supply chain coordination and opportunities for differentiation due to control of the raw materials to the production process. Coca Cola can capture the upstream and downstream profit margins and also increase the barriers of entry in to the non-alcoholic industry. Coca Cola is able to lower costs due to elimination of market transaction costs and secure the distribution channels from competitors. The strategy will facilitate investments in strategic assets like the human and physical assets thus leading to new competencies. However, some of the disadvantages of vertical integration include high management costs and increased bureaucracy due to lack of flexibility. Coca Cola compromise existing competencies in order to gain the new core competencies. The strategy entails significant capital investment since the company will face capacity-balancing challenges if there is a need to build excess upstream capacity to cater for downstream operations (Kozami, 2005). Horizontal integration The strategy entails expanding the size of the company through combining with competitors through mergers and acquisitions in the same industry. The advantages of horizontal integration include the ability to sustain competitive edge through reduction in competition and satisfying the regulatory guidelines (Kozami, 2005). Horizontal integration increases the market power and enables the company to access new markets that were previously controlled by competitors. The strategy lowers the operating costs due to new capabilities and enables the company to increase the brand portfolio. The disadvantages of horizontal integration include legal repercussions due to regulatory framework on monopolies and reduction in flexibility in introducing new products in the market (Kozami, 2005). Mergers experience management challenges. Examples of horizontal integration include the purchase of 40 percent stake in Honest tea, an American bottled organic tea in 2008 and acquisition of Sacramento bottling company in early 2013. Coca Cola has acquired interest in ZICO beverages LLC and has established a joint venture with Mexican retail and bottling company Femsa. Disinvestment strategies (retrenchment) This retrenchment strategy entails downsizing the scope of business operations or eliminating portion of the business either for financial or social goals. Change in corporate strategy and negative performance of certain product categories may need disinvestment of the brands. One of the advantages of this strategy is the ability to allow the company to concentrate resources in the development of the profitable products and ensure flexibility in new product development (Kozami, 2005). The strategy enables the company to attain transparency and value especially if there are multiple lenders and investors are interested in high rate of return of their investment. The strategy enables the company to maintain its strategic focus, divest assets with negative return, and retrench products that are at the decline stage of their lifecycle (Kozami, 2005). The disadvantages of disinvestment include the high cost structure especially the fixed costs that do not change regardless of the scope of operations. Retrenchment may be costly if it entails downsizing the workforce and may lead to negative reputation in the market (Kozami, 2005). Conclusion The best growth strategy for Coca Cola is substantive growth strategy through vertical and horizontal integration. The company has enough financial resources that it can invest in mergers, joint ventures and acquisitions in order to minimize the competition and gain critical competencies like knowledge. The company will benefit from creating new markets and controlling the distribution channel thus reducing the threats of new entrants in the industry. The company will have more market power thus it can benefit from economies of scale and negotiate for low costs of raw materials and lenient regulation. References: Kozami, A. 2005. Business policy and strategic management. New Delhi: McGraw-Hill Publishers. Srivastava, R.M & Verma, S. 2012. Strategic management: concepts, skills and practices. New Delhi: PHI Learning. Read More