SWOT AND PESTAL Analysis of COCA COLA

BY
Yousaf Abbasi
Executive Summary
This paper is a strategic analysis of The Coca-Cola Company
Coca-Cola, a leader in the beverage industry. Coca-Cola, the worlds
leading soft drink maker, operates in more than 200 countries and
owns or licenses more than 400 brands of non-alcoholic beverages.
The Coca-Cola Company faces challenges in todays market
because of market changes, socio-economic changes and
globalization. An external analysis of the soft drink industry is
performed to understand the impact of environment. An internal
analysis of Coca-Cola is performed to understand the internal
capabilities.
The conclusion of this report emphasizes that the company needs
to reduce its dependence on carbonated beverage and diversify its
product portfolio into the noncarbonated sector to remain competitive.

EXECUTIVE SUMMARY........................................................................................................................2
1. INTRODUCTION.................................................................................................................................4
1.1 History................................................................................................................................................4
2. BUSINESS PLANNING AND STRATEGY USED IN THE COCA-COLA COMPANY................5
2.1 Mission, Vision & Values..................................................................................................................5
2.2 Mission of Coca-Cola Company.......................................................................................................5
2.3 Vision of Coca-Cola Company.........................................................................................................5
2.4 Values of Coca-Cola Company .......................................................................................................6
3. GOALS AND VALUES PROCESSES OF THE COCA-COLA COMPANY...................................6
3.1 Corporate Social Responsibility Approach......................................................................................6
4. PEST ANALYSIS OF THE COCA-COLA COMPANY...................................................................7
4.1 Political Analysis and Factors.........................................................................................................7
4.2 Economic Analysis...........................................................................................................................7
4.3 Sociological Analysis........................................................................................................................8
4.4 Technological Analysis....................................................................................................................8
5. HOW THE COCA-COLA COMPANY MONITORS AND EVALUATES ITS OBJECTIVES,
STRATEGIES AND GOALS................................................................................................................9
5.1 Threat of New Entrants/Potential Competitors: (Medium Pressure)............................................9
5.2 Threat of Substitute Products: (Medium to High pressure)..........................................................9
5.3 The Bargaining Power of Buyers: (Low pressure)........................................................................9
5.4 The Bargaining Power of Suppliers: (Low pressure)....................................................................9
5.5 Rivalry among Existing Firms: (High Pressure)..........................................................................9
6. SWOT ANALYSIS OF COCA COLA...............................................................................................9
6.1. Strengths.........................................................................................................................................9
6.2. Weaknesses....................................................................................................................................10
6.3. Opportunities.................................................................................................................................10
6.4. Threats...........................................................................................................................................11
7. HOW THE COCA COLA CAN GAIN COMPETITIVE ADVANTAGE IN RESPECT OF THE
EXTERNAL FACTORS AND FORCES............................................................................................11
8. CONCLUSION................................................................................................................................13

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9. REFERENCE LIST........................................................................................................................14

1.

Introduction

The Coca-Cola Company is the worlds leading soft drink maker, operates in more
than 200 countries and sells 400 brands of non-alcoholic beverages. Coca-Cola is also
the most valuable brand in the world. Coca-Cola is a globally recognized successful
company. The Coca-Cola was founded in May of 1886 and continues for more than a
century through the times of war and peace, prosperity and depression and economic
boom and bust. As late as the 1990s, Coca-Cola was one of the most respected
companies in the world, known as a very successful management team. Since 1998,
the company has been struggling with internal weaknesses and external threats.
The purpose of this case study is to assess the current situation of Coca-Cola and
the industry, evaluate the existing resources, and provide strategic recommendations.

1.1 History
It was 1886, and in New York Harbor, workers were constructing the Statue of
Liberty. Eight hundred miles away, another great American symbol was about to be
unveiled.
Like many people who change history, John Pemberton, an Atlanta pharmacist,
was inspired by simple curiosity. One afternoon, he stirred up a fragrant, caramelcolour liquid and, when it was done, he carried it a few doors down to Jacobs'
Pharmacy. Here, the mixture was combined with carbonated water and sampled by
customers who all agreed -- this new drink was something special. So Jacobs'
Pharmacy put it on sale for five cents a glass.
Pemberton's bookkeeper, Frank Robinson, named the mixture Coca-Cola, and
wrote it out in his distinct script. To this day, Coca-Cola is written the same way. In
the first year, Pemberton sold just 9 glasses of Coca-Cola a day.
A century later, The Coca-Cola Company has produced more than 10 billion
gallons of syrup. Unfortunately for Pemberton, he died in 1888 without realizing the
success of the beverage he had created.
Over the course of three years, 1888-1891, Atlanta businessman As a Griggs
Candler secured rights to the business for a total of about $2,300. Candler would
become the Company's first president, and the first to bring real vision to the business
and the brand.

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2.
BUSINESS PLANNING AND
STRATEGY USED IN THE COCA-COLA
COMPANY
2.1 Mission, Vision & Values
The world is changing all around us. To continue to thrive as a business over
the next ten years and beyond, we must look ahead, understand the trends and forces
that will shape our business in the future and move swiftly to prepare for what's to
come. We must get ready for tomorrow today. That's what our 2020 Vision is all
about. It creates a long-term destination for our business and provides us with a
"Roadmap" for winning together with our bottling partners.

2.2 Mission of Coca-Cola Company

Companys Roadmap starts with its mission, which is enduring. It declares companys
purpose as a company and serves as the standard against which the company weighs
its actions and decisions.

To refresh the world...

To inspire moments of optimism and happiness...

To create value and make a difference.

2.3 Vision of Coca-Cola Company

The Coca-Cola Companys vision serves as the framework for its Roadmap and
guides every aspect of its business by describing what it needs to accomplish in order
to continue achieving sustainable and quality growth.

People: Be a great place to work where people are inspired to be the best
they can be.

Portfolio: Bring to the world a portfolio of quality beverage brands that

anticipate and satisfy people's desires and needs.

Partners: Nurture a winning network of customers and suppliers,

together we create mutual, enduring value.

Planet: Be a responsible citizen that makes a difference by helping build

and support sustainable communities.
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Profit: Maximize long-term return to shareowners while being mindful of

our overall responsibilities.

Productivity: Be a highly effective, lean and fast-moving

organization.

2.4 Values of Coca-Cola Company

The Companys values serve as a compass for its actions and describe how it behaves
in the world.

Leadership: The courage to shape a better future

Collaboration: Leverage collective genius

Integrity: Be real

Accountability: If it is to be, it's up to me

Passion: Committed in heart and mind

Diversity: As inclusive as our brands

Quality: What we do, we do well

3.
GOALS AND VALUES PROCESSES
OF THE COCA-COLA COMPANY
3.1
Corporate
Approach

Social

Responsibility

Companys most important responsibility is to fulfil the expectations of its

stakeholders and to continuously improve its social, environmental, and economical
performance while ensuring the sustainability and operational success of company.
The Corporate Social Responsibility (CSR) approach is companys main
guiding principle in this matter. The Company evaluates all of its operations and their
impacts on the 10 countries, in which the company operates, while considering social,
economic, ethical and environmental impacts. CCI accepts 10 principles of the UN
Global Compact, which outlines business principles for companies in social, economic
and environmental areas. In this context, the company evaluates performance results

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and expectations of stakeholders, define its priorities and determine improvement

targets in conformity with its CSR approach that aims at continuous improvement.

4. PEST ANALYSIS OF THE COCACOLA COMPANY

4.1 Political Analysis and Factors
Those Non- Alcoholic Beverages like; Coca-Cola, are within the food category,
under the FDA (Food and Drug Administration). The government has control over the
manufacturing procedure of these products in terms of regulations. Companies, who
fail to meet the standards of law, are fined by the government. Following are provided
some of the factors that are influencing Coca-Cola's Operations.

Changes in Laws and Regulations

Changes in Accounting Standards, taxation requirements (tax rate changes, modified
tax law interpretations, entrance of new tax laws), and environmental laws either in
domestic or foreign authorities.

Political
Conditions,
international markets

specifically

in

Civil conflict, governmental changes and restrictions concerning the ability to relocate
capital across borders.

Changes in Non-Alcoholic business era.

Competitive product and pricing policy pressures, ability to maintain or earn share of
sales in worldwide market compared to rivals.

Ability to penetrate emerging and developing

markets,
That also relies on economic and political conditions, and also their ability to form
effectively strategic business alliances with local bottlers, and to enhance their
production amenities, distribution networks, sales equipment, and technology.
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4.2 Economic Analysis

In 2001, the recession influenced the companys operations, but because of
aggressive actions the US Economy estimated to have returned in positive growth in
2002. Currently, because of global recession, Coca-Cola can borrow capital and invest
in other products, because the interest rates are lowered. Also, it can borrow to
advance its research of new products and technology. By researching for new products
are cost effective, the company could sell its products at a lower price, so its
customers would purchase more Coca-Cola products at a lower price.

4.3 Sociological Analysis

This analyzes the ways in which changes in society affect the organization such
as changing in lifestyles and attitudes of the market. The majority of US citizens are
exercising healthier lifestyles. That has strongly influenced the sales of non-alcoholic
beverage sector, because many customers are switching to bottled water and diet colas
like; Coca-Cola Light or Zero, instead of drinking beer or other beverages.
Additionally, Consumers from the ages of 37 to 55 are also increasingly concerned
with nutrition. There is a large population of the age range known as the baby
boomers. Since many are reaching an older age in life they are becoming more
concerned with increasing their longevity. This will continue to affect the nonalcoholic beverage industry by increasing the demand overall and in the healthier
beverages. The demand for carbonated drinks decreases and this pulled down the
revenues of Coca Cola.

4.4 Technological Analysis

Some factors that affect the company's actual results to vary essentially from
the expected results, are the following:

The efficiency of companies

Advertising Marketing and promotional programs, the new technology advances of
television and internet that use incomparable effects for advertising through the use of
media. Those advances make the products seem attractive. This supports the selling
promotion of the products. Coca-Cola in media tends to use this technology so, to sell
effectively its products.

Since the technology is advancing

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Continuously there has been entrance of new machineries' equipment all the time.
Because of that, Coca-Cola's production volume has increased sharply compared to
few years ago.

Entrance of cans and plastic bottles

In the past, have increased sales volume for the company because they are easier to
carry and customers can bin them once they have been used.

CCE-Coca-Cola Enterprises
The Company has six factories in Britain by using modern technology equipment so
to ensure top product quality and quick delivery. In Wakefield, Yorkshire in 1990,
CCE opened one of the Europe's largest soft drinks factories. That factory has the
ability to produce faster the cans of Coca-Cola even faster than bullets of a machine
gun.

5. HOW THE COCA-COLA COMPANY

MONITORS AND EVALUATES ITS
OBJECTIVES, STRATEGIES AND GOALS.
5.1
Threat
of
New
Competitors: (Medium Pressure)

Entrants/Potential

Entry barriers are relatively low for the beverage industry: there is no consumer
switching cost and zero capital requirements. There is an increasing amount of
new brands appearing in the market with similar prices than Coke products

5.2 Threat of Substitute Products: (Medium to High

pressure)

There are many kinds of energy drink s/soda/juice products in the market.
Coca-cola doesnt really have an entirely unique flavour. In a blind taste test,
people cant tell the difference between Coca-Cola and Pepsi.

5.3 The Bargaining Power of Buyers: (Low pressure)

Large retailers, like Wal-Mart, have bargaining power because of the large
order quantity, but the bargaining power is lessened because of the end consumer
brand loyalty.

5.4 The Bargaining Power of Suppliers: (Low pressure)

The main ingredients for soft drink include carbonated water, phosphoric acid,
sweetener, and caffeine. The suppliers are not concentrated or differentiated.
Coca-Cola is likely a large, or the largest customer of any of these suppliers.

5.5 Rivalry among Existing Firms: (High Pressure)

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Currently, the main competitor is Pepsi which also has a wide range of
beverage products under its brand. Both Coca-Cola and Pepsi are the predominant
carbonated beverages and committed heavily to sponsoring outdoor events and
activities.
There are other soda brands in the market that become popular, like Dr. Pepper,
because of their unique flavours. These other brands have failed to reach the
success that Pepsi or Coke has enjoyed.

6. SWOT ANALYSIS OF COCA COLA

6.1. Strengths
The best global brand in the world in terms of value. According to
Interbrand, The Coca Cola Company is the most valued ($77,839 billion) brand
in the world.
Worlds largest market share in beverage. Coca Cola holds the largest
beverage market share in the world (about 40%).
Strong marketing and advertising. Coca Cola advertising expenses
accounted for more than $3 billion in 2012 and increased firms sales and brand
recognition.
Most extensive beverage distribution channel. Coca Cola serves more than
200 countries and more than 1.7 billion servings a day.
Customer loyalty. The firm enjoys having one of the most loyal consumer
groups.
Bargaining power over suppliers. The Coca Cola Company is the largest
beverage producer in the world and exerts significant power over its suppliers
to receive the lowest price available from them.

6.2. Weaknesses
Significant focus on carbonated drinks. The Coca Cola Company is still
focusing on selling Coke, Fanta, Sprite and other carbonated drinks. This
strategy works in short term as consumption of carbonated drinks will grow in
emerging economies but it will prove weak as the world is fighting obesity and
is moving towards consuming healthier food and drinks.
Undiversified product portfolio. Unlike most companys competitors, Coca
Cola is still focusing only on selling beverage, which puts the firm at
disadvantage. The overall consumption of soft drinks is stagnating and Coca
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Cola Company will find it hard to penetrate to other markets (selling food or
snacks) when it will have to sustain current level of growth.
High debt level due to acquisitions. Nearly $8 billion of debt acquired from
CCEs acquisition significantly increased Coca Cola's debt level, interest rates
and borrowing costs.
Brand failures or many brands with insignificant amount of revenues.
Coca Cola currently sells more than 500 brands but only few of the brands
result in more than $1 billion sales. Plus, the firms success of introducing new
drinks is weak. Many of its introduction result in failures, for example, C2
drink.

6.3. Opportunities
Bottled water consumption growth. Consumption of bottled water is
expected to grow both in US and the rest of the world.
Increasing demand for healthy food and beverages. Due to many programs
to fight obesity, demand for healthy food and beverages has increased
drastically. The Coca Cola Company has an opportunity to further expand its
product range with drinks that have low amount of sugar and calories.
Growing beverages consumption in emerging markets. Consumption of soft
drinks is still significantly growing in emerging markets, especially BRIC
countries, where Coca Cola could increase and maintain its beverages market
share.

6.4. Threats
Changes in consumer tastes. Consumers around the world become more
health conscious and reduce their consumption of carbonated drinks, drinks
that have large amounts of sugar, calories and fat. This is the most serious
threat as Coca Cola is mainly serving carbonated drinks.
Strong dollar. More than 60% of The Coca Cola Company income is from
outside US. Due to strong dollar performance against other currencies firms
overall income may fall.
Legal requirements to disclose negative information on product labels.
Some Coca Colas carbonated drinks have adverse health consequences. For
this reason, many governments consider to pass legislation that requires
disclosing such information on product labels. Products containing such
information may be perceived negatively and lose its customers.
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 Competition from PepsiCo. PepsiCo is fiercely competing with Coca Cola

over market share in BRIC countries, especially India.

7. HOW THE COCA COLA CAN GAIN

COMPETITIVE ADVANTAGE IN RESPECT
OF THE EXTERNAL FACTORS AND
FORCES
Competitive advantage is the distinctive feature that makes coca-cola stand out
from its ferocious competitors such as Pepsi. Coca-Cola makes use of its core
competence i.e. its main strength in order to achieve competitive advantage and stand
out. In order for Coca-cola to have higher demands than its competitors it needs to do
something, which makes that product better than the rest.
Having competitive advantage also allows coca cola to get bigger and bigger
through increasing sales or market shares. Getting big are an advantage for coca cola
and its costumers because when a business is big enough and has high output
economies of scale can be achieved.
There are many ways in which a company such as coca-cola may get its
competitive advantage but, the most important and affective way to get competitive
advantage is innovation.
Innovation can be used. This may certainly give coca cola competitive
advantage because it introduces a new product, which many people will want to try.
The advantages of this are that there would be no substitutes. This may mean
monopoly power for a small period of time. This will obviously push up sales by a lot
increasing revenue and therefore increasing total profit. Not only demand (page 3 of
appendix) will increase but also the monopoly is likely to erect barriers to prevent
competition. The fact that it has no substitute would give coca cola inelastic demand
(page of appendix). This is when demand is less sensitive to a change in price. People
will like to purchase the good even though price is high because no substitutes are
available. It may also give coca cola brand loyalty which means customers will stay
loyal to them no matter what happens.

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8. CONCLUSION
There are some challenges that Coca-Cola will face in the future. These challenges
may pose negative impact on the long-term profitability and market share of CocaCola. Therefore, recommendations are provided to turn challenges into opportunities.

Declining Sales Volume in Soft Drink

Sector
If Coca-Cola focuses only on the carbonated soft drink sector competitively, it will
weaken or make Coca-Cola lose the market leader in beverage industry. Coca-Cola
can focus more on bottled water, noncarbonated drinks, and especially energy drinks.
In 2006, energy drinks shot up by almost 50%. In 2010, energy drinks still had 10%
growth. Energy drinks and healthy drinks will be major beverage needs of new
generations of young consumers and health conscious consumers.

Health and Wellness Trend

Coca-Cola should provide industry leadership in the health and wellness area. It
should produce different kinds of products for different segments of the market. In
baby boomers market, Coca-Cola should focus on marketing tea and water beverage
which contain less sodium and sugar. In younger generation market, besides sport
drink and energy drink, Coca-Cola can produce organic beverages for younger people.

Increased Competition from PepsiCo

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As PepsiCo has a horizontal expansion, Coca-Cola should have a vertical expansion.

Within the products in PepsiCo, only 37% of products are beverages. Coca-Cola
should focus on beverages business and related businesses, e.g. bottling, sugar
plantation or even tin can and glass recycling business.
Nowadays, environmental change is rapid. Coca-Cola should be sensitive of any new
trend and position itself as a unique brand in order to keep its competitive advantage.

9.

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