The Business Operations of Coca-Cola Company - Case Study Example

29 January 2007 Coca-Cola Case Study From its invention in 1855 by John S. Pemberton who was inspired by the formidable success of Vin Mariani, Coca-Cola has risen to become one of the world's most famous drinks. Coke, the flagship brand of the Coca-Cola Company is manufactured and distributed in 200 countries around the globe. Currently, Coke is the regarded as one of "world's most recognizable and widely sold commercial brands" as it ranks second in the international business arena. This paper aims to answer three important questions regarding the business operations of Coca-Cola. The first part of the paper will identify and evaluate the key success factors employed by the business organization. Next, this paper will analyze the weaknesses of the company and the potential threats that lie ahead. Lastly, this report will give its recommendation on how Coca-Cola can further improve its marketing strategy. In order to give a thorough investigation, this paper will utilize different strategic management tools. Key Success Factors A key success factor is defined as specific skill or talent or competitive capability which spells the difference between profit and loss or competitive success or failure of a business organization. Looking at the strategic operation of Coca-cola, it can be seen that the key success factors of the company are its superior marketing mix, focus on innovation, and global orientation. Coca-Cola's marketing mix, as with other companies have four major components which are product, price, promotion, and place. It can be seen that the company has done an excellent job in coming up with a marketing mix which appeals to the global market. The products offered by Coca-Cola, for instance, have become widely accepted in the global market because it conveys a "universal taste" which discounts the differences in nationality, culture, and traditions. Secondly, the company has a pricing strategy which is at par with the industry. The marketing campaigns launched by Coca-Cola define and become a foundation of modern day marketing. The advertisements of the business organization irrefutably reveal new techniques and styles in capturing the audience. Lastly, Coca-Cola's success is largely due to its wide availability. Its products are sold almost everywhere, from restaurants, to cafes, to vending machines, to kiosks, and most establishments. Another key success factor of Coca-cola is its focus on product innovation. Recognizing that the various changes in the market where it operates, the company reinvented itself to evolve from a single core product to a total beverage firm. Currently, Coca-Cola has nearly 400 beverages in its portfolio and is still geared in offering beverages which suits the preferences of its market. In 2005, the company announced that it has introduced "a variety of new brands, brand extension, and new beverage products." Lastly, Coca-Cola's success is also highly attributed to its global orientation. Recognizing the huge profit opportunities abroad, the company has expanded geographically. By being global oriented, the company is not only able to establish presence in foreign markets but is also able to generate new revenues and efficiently distribute costs among its operating segments. The company is also able to utilize resources which are present abroad in order to enhance its operations. However, aside from being globally oriented, the company also concentrates on creating specific products which suits the need of a specific market: "Consumer demand can vary from one locale to another and can change over time within a single locale. Employing our business strategy, and with special focus on core brands, our Company seeks to build its existing brands and, at the same time, to broaden its historical family of brands, products and services in order to create and satisfy consumer demand locale by locale." Weaknesses and Threats The weaknesses and threats faced by the Coca-Cola can be determined by conducting a SWOT analysis. Appendix 1 summarizes the strengths, weaknesses, opportunities, and threats of the company. However, for the sake of the discussion, this section will only focus on areas where the company is vulnerable (weaknesses) and what they should watch out for (threats). Internally, the operation of Coca-Cola suffers because of negative publicity about its products. It should be noted that even though the business organization has also beef up its portfolio with numerous product additions, the company is still perceived identical to Coke which has allegedly entails health risk due to its caffeine, phosphoric acid, and high fructose corn syrup content. In general, Coca-Cola appears to be profitable. However, the company also recognizes the seasonality of its business. Quoting the released 2005 Annual Report, "Sales of our ready-to-drink nonalcoholic beverages are somewhat seasonal, with the second and third calendar quarters accounting for the highest sales volumes. The volume of sales in the beverages business may be affected by weather conditions." This seasonality reflects the inability of the company to generate a steady flow of income. Being a global company, Coca-Cola faces the challenge of maintaining good communication between its operating segments and its headquarters. It is noted that the company's operation is sometimes disrupted due to poor communication. This is highlighted by the fact that Coca-Cola's corporate structure is highly decentralized. In addition, the company also faces the challenges of having high employee turnover which can hurt it in the long run. Externally, the business organization challenges the risk of more intense competition in the global market. In this hypercompetitive environment, the players in the beverage industry are creating and launching more aggressive strategies in order to capture and defend their market share. The proliferation of new entrants in the global market due to the elimination of trade and entry barriers further emphasizes this intense competition. In general, there has been a global trend and preference for a healthier lifestyle as the past decade saw the rise of obesity in children and adult alike. Coca-Cola is alarmed by this as it can significantly affect the company's sales of soft drinks and consequently in its financial results. Being a global player, Coca-Cola faces foreign currency exchange rate risks. Fluctuation in the amount of the dollar relatively to the domestic currencies of the country where the company operates can adversely affect its financial performance. Lastly, Coca-Cola also shows concern in water scarcity and poor quality. As water is the primary ingredient of its products, these threats can harm its operation in the long run. Recommendations and Conclusion Even though Coca-Cola holds a strong position in the global business arena, the presences of weaknesses in the internal operation and threats in the external environment, signifies that certain strategies should still be put in place in order for it to survive and succeed. First, in response to the clamor for healthier products, Coca-Cola should focus on creating healthier alternative to its current portfolio. The company can do this by looking at its product components and changing certain contents with healthier alternatives. Also, the company should also look into designing and manufacturing new lines which promotes the health and well-being of patrons. Coca-Cola can leverage on the popularity of teas as a healthy drink. Second, the company should not only focus on its customer but also pursue societal marketing. It should be noted that in this current business environment, consumers also look at the corporate responsibility of the different industry players. Supporting projects which aims to develop and help the communities where Coca-Cola operates is expected to balance the negative publicity about the company. This will further enhance the image of the company and can encourage customers to buy its numerous products. References Kotler, Philip. "Marketing Management." 2005. New Jersey: Prentice-Hall "Coca-Cola Company." Coca-Cola Company Website. 2007. January 29 2007 Appendix 1. SWOT Analysis for Coca-Cola Company Read More