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A Report on

Strategic Management Case


Of
COCA COLA
(Year 2010)
Subject: Managerial Policy
Section:

Prepared & Presented by:


• Group 8
Elham A.Rahman Afifi 200710240

Sara Adel AlTattan 200710121


Strategic Management

Table of Contents

1- EXECUTIVE SUMMARY...........................................................................................4

2- HISTORY OF COCA COLA.......................................................................................5

3- BRANDS OF COCA COLA.........................................................................................8

3.1- Energy Drinks...................................................................................................8

3.2- Juices/Juice Drinks............................................................................................8

3.3- Soft Drinks........................................................................................................9

3.5- Tea and Coffee.................................................................................................9

3.6 Water.................................................................................................................9

3.7- Other Drinks...................................................................................................10

4- CONSUMER CHOICE AT A GLANCE..................................................................11

...........................................................................................................................................12

5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET..............................13

Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K. and Schweppes of
Ireland founded in 1783. Cadbury Schweppes is unified bussing which manages the
relations his with over 240 franchised bottling operation on Zambia and Zimbabwe.
Cadbury Schweppes has fottlery and partnership operations in 14 countries around the
world.................................................................................................................................13

6- OUR MISSION:..........................................................................................................14

7- OUR VISION:..............................................................................................................14

8- IMPROVED MISSION STATEMENT:...................................................................15

9- IMPROVED VISION STATEMENT:......................................................................15

10- COCA COLA - RATIO ANALYSIS.......................................................................19

10.1 RATIO ANALYSIS............................................................................................20

11- FINANCIAL HIGHLIGHTS...................................................................................21

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Strategic Management
12- UNIT CASE VOLUME............................................................................................21

13- CURRENT ORGANIZATIONAL CHART...........................................................23

14- VALUE CHAIN ANALYSIS FOR COCA COLA.................................................23

15- E-COMMERCE:.......................................................................................................26

16- VALUE OF THE FIRM...........................................................................................26

17- KEY INTERNAL FACTORS Weight Rating weight Score .................30

18- KEY EXTERNAL FACTOR...................................................................................31

19- COMPETITORS ......................................................................................................32

20- SWOT ANALYSIS..............................................................................................33

21- SPACE MATRIX STRATEGIC MANAGEMENT METHOD...........................36

22- BCG MATRIX...........................................................................................................39

23- IE MATRIX...............................................................................................................41

24- QSPM OF COCA COLA..........................................................................................42

25- PROJECTED RATIO ANALYSIS.........................................................................46

S26- CONCLUSION:......................................................................................................47

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1- EXECUTIVE SUMMARY
Coca-Cola, the product that has given the world its best-known taste was born in Atlanta,
Georgia, on May 8, 1886. Coca-Cola Company is the world’s leading manufacturer, marketer
and distributor of non-alcoholic beverage concentrates and syrups, used to produce nearly 400
beverage brands. It sells beverage concentrates and syrups to bottling and canning operators,
distributors, fountain retailers and fountain wholesalers. Coca-Cola was first introduced by John
Syth Pemberton, a pharmacist, in the year 1886 in
Atlanta, Georgia when he concocted caramel-colored syrup in a threelegged brass kettle in his
backyard. He first “distributed” the product by carrying it in a jug down the street to Jacob’s
Pharmacy and customers bought the drink for five cents at the soda fountain. Carbonated water
was teamed with the new syrup, whether by accident or otherwise, producing a drink that was
proclaimed “delicious and refreshing”, a theme that continues to echo today wherever Coca-Cola
is enjoyed. Coca-Cola originated as a soda fountain beverage in 1886 selling for five cents a
glass. Early growth was impressive, but it was only when a strong bottling system developed that
Coca-Cola became the world-famous brand it is today. Coca- Cola was the leading soft drink
brand in India until 1977, when it left rather than reveal its formula to the Government and
reduce its equity stake as required under the Foreign Regulation Act (FERA) which governed the
operations of foreign companies in India. In the new liberalized and deregulated environment in
1993, Coca-Cola made its re-entry into India through its 100% owned subsidiary, HCCBPL, the
Indian bottling arm of the Coca-Cola Company. The main objective of this study lies in
understanding the organization and studying and understanding the consumers’ perception and
opinion about the latest product, Minute Maid Pulpy Orange, introduced
into India, by the Coca-Cola Company. A consumer sampling involving 5.5 lakh people was
conducted in a span of 30 days across major cities in order to give the product the required
marketing push and to recognize the prospective consumers and their opinion in order to develop
and market the product in a better way in the near future. The methodology used in studying and
understanding the perceived views of consumers towards the product was ‘SAMPLING’. The
findings of the activity have been drawn out in form of graphs and suggestions have been offered
there from

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2- HISTORY OF COCA COLA

Coca-Cola® originated as a soda fountain beverage in 1886 selling for five cents a glass. Early
growth was impressive, but it was only when a strong bottling system developed that Coca-Cola
became the world-famous brand it is today.

1894 – A modest start for a Bold Idea


In a candy store in Vicksburg, Mississippi, brisk sales of the new fountain beverage called Coca-
Cola impressed the store's owner, Joseph A. Biedenharn. He began bottling Coca-Cola to sell,
using a common glass bottle called a Hutchinson.

Biedenharn sent a case to Asa Griggs Candler, who owned the Company. Candler thanked him
but took no action. One of his nephews already had urged that Coca-Cola be bottled, but Candler
focused on fountain sales.
1899 The first bottling agreement
Two young attorneys from Chattanooga, Tennessee believed they could
build a business around bottling Coca-Cola. In a meeting with Candler,
Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive
rights to bottle Coca-Cola across most of the United States (specifically
excluding Vicksburg) -- for the sum of one dollar. A third Chattanooga
lawyer, John T. Lupton, soon joined their venture.
1900-1909 … Rapid growth
The three pioneer bottlers divided the country into territories and sold bottling rights to local
entrepreneurs. Their efforts were boosted by major progress in bottling technology, which
improved efficiency and product quality. By 1909, nearly 400 Coca-Cola bottling plants were
operating, most of them family-owned businesses. Some were open only during hot-weather
months when demand was high.
1916 … Birth of the contour bottle
Bottlers worried that the straight-sided bottle for Coca- Cola
was easily confused with imitators. A group representing the
Company and bottlers asked glass manufacturers to offer
ideas for a distinctive bottle. A design from the Root
Glass Company of Terre Haute, Indiana won enthusiastic
approval in 1915 and was introduced in 1916. The
contour bottle became one of the few packages ever
granted trademark status by the U.S. Patent Office.
Today, it's one of the most recognized icons in the world - even in the
dark!

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Strategic Management
1920s … Bottling overtakes fountain sales
As the 1920s dawned, more than 1,000 Coca-Cola bottlers were operating in the U.S. Their ideas
and zeal fueled steady growth. Six-bottle cartons were a huge hit after their 1923 introduction. A
few years later, open-top metal coolers became the forerunners of automated vending machines.
By the end of the 1920s, bottle sales of Coca-Cola exceeded fountain sales.
1920s and 30s … International expansion
Led by longtime Company leader Robert W. Woodruff, chief
executive officer and chairman of the Board, the Company began a
major push to establish bottling operations outside the U.S. Plants were
opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and
South Africa. By the time World War II began, Coca-Cola was being bottled in 44 countries.
1940s … Post-war growth

During the war, 64 bottling plants were set up around the world to supply
the troops. This followed an urgent request for bottling equipment and
materials from General Eisenhower's base in North Africa. Many of these
war-time plants were later converted to civilian use, permanently
enlarging the bottling system and accelerating the growth of the
Company's worldwide business.
1950s … Packaging innovations

For the first time, consumers had choices of Coca-Cola package size
and type -- the traditional 6.5-ounce contour bottle, or larger
servings including 10-, 12- and 26-ounce versions. Cans were also
introduced, becoming generally available in 1960.
1960s … New brands introduced
Following Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined brand Coca-
Cola in the 1960s. Mr. Pibb® and Mello Yello® were added in the 1970s. The 1980s brought
diet Coke® and Cherry Coke®, followed by POWERADE® and DASANI® in the 1990s.
Today hundreds of other brands are offered to meet consumer preferences in local markets
around the world.
1970s and 80s … Consolidation to serve customers
As technology led to a global economy, the retailers who sold Coca-Cola merged and evolved
into international mega-chains. Such customers required a new approach. In response, many
small and medium-size bottlers consolidated to better serve giant international customers. The
Company encouraged and invested in a number of bottler consolidations to assure that its largest
bottling partners would have capacity to lead the system in working with global retailers.

1990s … New and growing markets

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Political and economic changes opened vast markets that were closed or underdeveloped for
decades. After the fall of the Berlin Wall, the Company invested heavily to build plants in
Eastern Europe. And as the century closed, more than $1.5 billion was committed to new bottling
facilities in Africa.
21st Century
The Coca-Cola bottling system grew up with roots deeply planted in local communities. This
heritage serves the Company well today as people seek brands that honor local identity and the
distinctiveness of local markets. As was true a century ago, strong locally based relationships
between Coca-Cola bottlers, customers and communities are the foundation on which the entire
business grows.

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3- BRANDS OF COCA COLA

Coca-Cola Zero® has been one of the most successful product launch hes in
Coca Cola’s history. In 2007, Coca Cola’s sold nearly 450 million cases
globally. Put into perspective, that's roughly the same size as Coca Cola’s total
business in the Philippines, one of our top 15 markets. As of September 2008,
Coca-Cola Zero is available in more than 100 countries.

3.1- Energy Drinks

For those with a high-intensity approach to life,


Coca Cola’s brands of Energy Drinks
contain ingredients such as ginseng
extract, guarana extract, caffeine and B
vitamins.

3.2- Juices/Juice Drinks


We bring innovation to the goodness of
juice in Coca Cola’s more than 20 juice and
juice drink brands, offering both adults and
children nutritious, refreshing and flavorful
beverages.

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Strategic Management

3.3- Soft Drinks

Coca Cola’s dozens of soft drink brands


provide flavor and refreshment in a variety of
choices. From the original Coca-Cola to
most recent introductions, soft drinks from The
Coca-Cola Company are both icons and
innovators in the beverage industry.

3.4- Sports Drinks

Carbohydrates, fluids, and electrolytes team


together in Coca Cola’s Sports Drinks,
providing rapid hydration and terrific taste for
fitness-seekers at any level

3.5- Tea and Coffee

Bottled and canned teas and coffees


provide consumers' favorite drinks in
convenient take-anywhere packaging,
satisfying both traditional tea drinkers and
today's growing coffee culture.

3.6 Water

Smooth and essential, our Waters and


Water Beverages offer hydration in its
purest form.

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Strategic Management

3.7- Other Drinks

So much more than soft drinks. Coca


Cola’s brands also include milk products, soup,
and more so you can choose a Coca Cola
Company product anytime, anywhere for
nutrition, refreshment or other needs.

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4- CONSUMER CHOICE AT A GLANCE

Coca-Cola Mainly preferred by the Youngster & Kids.

Thums-Up Youngster.

Limca Common Drink.

Fanta Basically Preferred by Ladies and Kids.

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Maaza Also Ladies and Kids.

Sprite Not clearly defines.

Kinley Soda Mostly those who consume liquor.

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5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET

PEPSI

Caleb Brandhum, a North Caroline Pharmacist, structure Pepsi Cola In2 the 1890’s as cure of
dyspepsia (indigestion). In 1902, Bradhum applied for a trade mark, issued ninety seven share of
stock and began selling Pepsi syrup in earnest. In his first year of business he spend $1900 on
advertising a huge sum that he sold only 8000 gallons of syrup. In 1905 Bradhum built Pepsi’s
bottling plant. By 1907 he was selling 10,000 gallons a year, two years later, he hired a New
York advertising agency. After passing through many troubles for some period now Pepsi is a
market leader in international arence and is available in 187 Nations throughout the world.

CADBURY SCHWEPPES

Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K. and Schweppes of
Ireland founded in 1783. Cadbury Schweppes is unified bussing which manages the
relations his with over 240 franchised bottling operation on Zambia and Zimbabwe. Cadbury
Schweppes has fottlery and partnership operations in 14 countries around the world.

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6- OUR MISSION:
Our mission declares our purpose as a company. It serves as the standard against which we
weigh our actions and decisions. It is the foundation of our Manifesto.

(1) To refresh the world in body, mind and spirit.

(2) To inspire moments of optimism through our brands and our actions.

(3) To create value and make a difference everywhere we engage.

7- OUR VISION:
Our vision guides every aspect of our business by describing what we need to accomplish in
order to continue achieving sustainable growth.

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

Portfolio: Bringing to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.

Partners: Nurturing a winning network of customers and suppliers, together we create mutual,
enduring value.

Planet: Being a responsible citizen that makes a difference by helping build and support
sustainable communities.

Profit: Maximizing long-term return to shareowners while being mindful of our overall
responsibilities.

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8- IMPROVED MISSION STATEMENT:
(1) At Coca Cola we're committed to achieving business and financial success while leaving
a positive imprint on society – delivering what we call Performance with Purpose.

(2) Our mission is to be the world's premier consumer Products Company focused on
convenient foods and beverages. We seek to produce financial rewards to in8vestors as
we provide opportunities for growth and enrichment to our employees, our business
partners and the communities in which we operate. And in everything we do, we strive
for honesty, fairness and integrity.

9- IMPROVED VISION STATEMENT:


(1) Coca cola Co responsibility is to continually improve all aspects of the world in which
we operate – environment, social, economic – creating a better tomorrow than today."

(2) Our vision is put into action through programs and a focus on environmental stewardship,
activities to benefit society, and a commitment to build shareholder value by making
Coca cola Co a truly sustainable company.

Why it is improved:

There is It is our vision to be the best and leading provider of food and beverage products
in Pakistan, to facilitate the people of Pakistan and we emphasis on consumer more rather
than competitors we among the top ten food and beverage companies in the world, by
continually challenging present conventions and always staying a step ahead of the
competition.

It is our mission to be the number one food and Beverage Company in Pakistan by
providing our customers with the highest product quality in terms of taste, experience,
and satisfaction. We will ensure this through an unwavering dedication to the continuous
development of our products and processes ensuring that we remain best in class. We
will strive to hire the most competent and dedicated employees whose work ethic will set
the standard in the industry. We will be paymasters, as we strongly believe that human
resource is the only asset that truly appreciates over time. We will also be a responsible
social corporate citizen, and strive to enhance the quality of life in the markets we serve.

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Compare Vision & mission with leading competitors

Pakola is firstly introducing in Pakistan in 1950 by Haji Ali Muhammad. It is the first
Nationally branded soft drink in Pakistan, it is produced by mehran bottlers (Pvt) Ltd.

Mehran is the first bottling plant in South Asia. Which has been certified to integrated
management system based on (ISO 9001:2000), (ISO 14001:1996) Standard and (RVA
HACCP) standard Pakola quality and food safety system follows the FDA GMP
requirements and codex. Pakola products are manufactured under strict CGMP and
Hygiene controls.

Mission statement:

We are focused on driving growth in our business in selected profitable and emerging
categories. To develop, implement and continuously improve the integrated management
systems in a culture of continuous improvement which:

(1) Directs the continual up-gradation for efficient and environment friendly
manufacturing technology.

(2) Monitor and improve the efficiency and effectiveness of all business processes.

(3) Promotes professional and flexible work environment, teamwork and innovation
through employee participation and process ownership.

(4) Drives customer orientation at all levels within the organization.

(5) Monitor and economize the Cost of Quality.

Vision statement:

To be SECOND TO NONE in exceeding customer expectations for Taste and Flavor,


Product Safety, Quality and Price Competitiveness.

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In comparison to coca cola the mission statement of Pakola is simple one.

The players in the beverage industry have one of the moat competitive rivalries in any
industry. In Pakistan the market is dominated by the two international giants. Pepsi and
Coke, with market shares respectively of 77%, and 16%, leaving little room for others to
grow. Yet even with approximately 5% of the total market share, Pakola can still manage
to be profitable in a cut-throat Industry, and hive plan to position it strategically in order
to do so. The beverage Industry is a reasonably attractive industry to be in, and with Its
55 years of established presence, Pakola is well positioned to leverage that history so as
to attain a competitive edge.

It is our vision to be the best and leading provider of food and beverage products in
Pakistan, and among the top ten food and beverage companies in the world, by
continually challenging present conventions and always staying a step ahead of the
competition.

Comments on vision and mission (in terms of how they support the strategies)

The vision statement of our company supports the existing strategies that is (generic
strategy) that Coca Cola needs to pursue is that of differentiation. In their current vision
and mission statements, the company says it aims to be a low cost leader, yet through our
thorough analysis of the strategic direction the company needs to adopt a generic strategy
of differentiation. This will allow Coca cola to do three things;

1. Charge a premium 2. Increase unit sales 3. Gain buyer loyalty However, at the
expense of sounding simplistic, it is necessary that the company communicate its
differentiation to its customers, otherwise these three advantages will not avail
themselves. Initially Coca cola will need to adopt a focused differentiation approach,
which means that they should selectively choose which markets will profit them the most
and then target only those markets until such provisions are in place from where the
company is able to expand its target base. After which they should opt for a broad
differentiation generic strategy.

With the market just turning the bend to ‘saturation’, it is entering a phase of intense competition
with all major players diversifying their product lines, ranges and even businesses into a versatile
range of products to put in place more infantry on the battle ground to use to their advantage in
this war of brands. Therefore, we believe that the current strategic objective of Coca cola
should be to consolidate its existing brand, Coca cola through extensive strategic market research

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and consumer insights to be able to home in on the correct target market like a precision
targeting missile rather than as an Anti-aircraft gun

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10- COCA COLA - RATIO ANALYSIS

2006 2005 2004


$ Percent $ Percent $
(in (in (in
Income Statement millions) millions) millions)
Revenue 24,088 100.0% 23,104 100.0% 21,962
Cost of Goods Sold 8,164 33.9% 8,195 35.5%
Interest Expense 220 0.9% 240 1.0%
Tax Expense 1,498 6.2% 1,818 7.9%
Income from Cont Operations 5,080 21.1% 4,872 21.1% 4,847
Net Income 5,080 21.1% 4,872 21.1%

Balance Sheet
Cash 2,440 8.1% 4,701 16.0%
Short Term Investments 150 0.5% 66 0.2%
Accounts Receivable 2,704 9.0% 2,281 7.8% 2,171
Inventory 1,641 5.5% 1,424 4.8% 1,420
Current Assets 8,441 28.2% 10,250 34.8%
Long Term Investments 6,783 22.6% 6,922 23.5%
Net Fixed Assets 6,903 23.0% 5,786 19.7%
Other Assets 7,668 25.6% 6,469 22.0%
Total Assets 29,963 100.0% 29,427 100.0% 31,327
Current Liabilities 8,890 29.7% 9,836 33.4%
Total Liabilities 13,043 43.5% 13,072 44.4%
Stockholders' Equity 16,920 56.5% 16,355 55.6%

Cash Flow
Cash Flow from Operations 5,957 6,423 5,968
Dividends Paid 2,912 2,679
Interest Paid 220 240

Per Share
Market Price at Year End 48.25 40.31
Earnings Per Share - Basic 2.16 2.04

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10.1 RATIO ANALYSIS


Growth Ratios
Sales Growth 4.3% 5.2%
Income Growth 4.3% 0.5%
Asset Growth 1.8% -6.1%
Activity Ratios
Receivable Turnover 9.7 10.4
Inventory Turnover 5.3 5.8
Fixed Asset Turnover 3.5 4.0
Profit Ratios
Profit Margin 21.1% 21.1%
Return on Assets 17.1% 16.0%
Return on Equity 30.5% 59.6%
Dividend Payout Ratio 57.3% 55.0%
Price Earnings Ratio 22.3 19.8
Liquidity Ratios
Current Ratio 0.95 1.04
Quick Ratio 0.60 0.72
Solvency Ratios
Debt to Total Assets 0.44 0.44
Times Interest Earned (Accrual) 30.90 28.88
Times Interest Earned (Cash) 28.08 27.76

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11- FINANCIAL HIGHLIGHTS

2006 2005
Percent
Year Ended December 31, ($) ($) Change

Net operating revenues 24,088 23,104 4%

Operating income 6,308 6,085 4%

Net income 5,080 4,872 4%

Net income per share (basic and diluted) 2.161 2.042 6%

Net cash provided by operating activities 5,957 6,423 (7%)

Dividends paid 2,911 2,678 9%

Share repurchase activity 2,474 2,019 23%

Unit case volume (in billions)

International operations 15.6 14.8 6%

North America operations 5.8 5.8 0%

Worldwide 21.4 20.6 4%

12- UNIT CASE VOLUME

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MAP: Showing Workforce [71,000 in 2006]

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13- CURRENT ORGANIZATIONAL CHART

CEO

SVP &
EVP/ EVP/ SVP & Director
CFO and President SVP &
President President Director Public
EVP & COO General
Bottling MKT Human Affairs/
Counsel
Invest/ Strategy Resources Communi-
Supply -cation
Chain

President President President President President


of Eurasia European of African Latin of Pacific
Group Union Group America Group
Market Group

14- VALUE CHAIN ANALYSIS FOR COCA COLA

2005
2006 (in
(in thousands) thousands)
SUPPLIER COSTS
Raw Materials 1,641,000 1,424,000
Fuel
Energy Sufficient date is not provided,
Transportation but since Inventory is increased
Truck Drivers in 2006, hence, we can infer
Truck that suppliers are effeciently
Maintenance providing Raw Materials. At the
Component Parts same time, increase will result in
Inspection some incline in store/ ware
Storing house charges.
Warehouse

PRODUCTIONS COSTS
Inventory Since cost of revenue in 2006 is

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Strategic Management
System 34% of total revenue compared
Receiving to
Plant Layout 36% cost of revenue in 2005, we
Maintenance can deduce that Coca Cola has
Plant Location improved its operating
Computer performance.
R&D nil
Cost Accounting nil

DISTRIBUTION COSTS
Loading Income statements shows just
Shipping one head and that is Selling,
Budgeting Gen.
Personnel and Admin. Expenses, which
Internet were 39% of total revenue in
Trucking 2005
Railroads and 40% in 2006. Hence, there is
Fuel increase in these expenses. We
Maintenance see Net Income proportion
remain same in year 2006 as it
SALES & MARKETING was in year 2005 i.e. 21% of
COSTS total revenue. Therefore, despite
Salespersons of the fact that some expenses
Website were increased, Coca Cola still
Internet enjoy same percentage of Net
Publicity Income. Which would be
Promotion because of, efficiency of
Advertising production, management or
Transportation distribution departments.
Food and
Lodging

CUSTOMER SERVICE
COSTS
Postage
Phone
Internet
Warranty

MANAGEMENT COSTS
Human
Resources
Administration
Employee
Benefits
Labor Relations

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Managers
Employees
Finance and
Legal

Analysis:
We do not see R&D head of expenses, which would show that
Coca Cola does not
assign sufficient amount to its R&D department which is key to
excel in the market.
If we see the proportion of Income generated by different regions,
we can easily infer
that Coca Cola, because of innovative advertisements or because
of intelligent decision making, still enjoys a competitive market
position. We can still suggest them to make an efficient R&D
head/ department which will surely make them compete in market,
effectively and profitably.

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15- E-COMMERCE:

Good points:

• Brand Promotion
• Attractive products selection
• Look and feel 8
• Provision of multimedia product, catalogue pages
• Personal attention
• Community relationships

Weak points:

• Performance and service: that is not easy navigation, shopping and purchasing, and
prompt shipping and delivery.
• Discount pricing is not being offered.

16- VALUE OF THE FIRM

Financial and Value Review

Defensive:

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Strategic Management
1) Size of firm
Net worth of $16.92billion

2) Financial condition
with a weighted current ratio of 0.94 Coke falls below the required 2, therefore they fail this
test.

3) Earnings stability
there has been positive net income for the past ten years and they 8pass this test.

4) Earnings growth
Earnings are greater than five years ago. Pass.

Overall
we would not suggest Coke being placed in the defensive investor’s portfolio at this time.

Opinion:
Seeing that currently Coke is trading at a much higher price than our internal valuation we
would be skeptical to purchase this security at this time. However, Coke is an excellent firm
with great management, products, dividend history, and earnings. This stock we would place
on our review list and periodically watch the share price to see if it dips and falls more in line
with what we would be comfortable paying.

Strengths

World’s leading brand Coca-Cola has strong brand recognition across the globe. The company
has a leading brand value and a strong brand portfolio. Coca-Cola is one of the leading brands
in their top 100 global brands ranking in 2006.8The value of the Coca-Cola was $67,000
million in 2006. Coca-Cola ranks well ahead of its close competitor Pepsi which has a ranking
of 22 having a brand value of $12,690 million Furthermore; Coca-Cola owns a large portfolio
of product brands. The compan8y owns four of the top five soft drink brands in the world:
Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce brand
extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the
company has made large investments in brand promotions. Consequently, Coca-cola is one of
the best recognized global brands. The company’s strong brand value facilitates customer
recall and allows Coca-Cola to penetrate new m2arkets and consolidate existing ones. Coca-
Cola Company, The large scale of operations with revenues in excess of $24 billion Coca-Cola
has a large scale of operation. Coca-Cola is the largest manufacturer, distributor and marketer
of nonalcoholic beverage concentrates and syrups in the world. Coco-Cola is selling
trademarked beverage products since the year 1886 in the US. The company currently sells its
products in more than 200 countries. Of the approximately 52 billion beverage servings of all
types consumed worldwide every day, be8verages bearing trademarks owned by or licensed to
Coca-Cola account for more than 1.4 billion. The company’s operations are supported by a
strong infrastructure across the world. Coca-Cola owns and operates 32 principal beverage
concentrates and/or syrup manufacturing plants located throughout the world. In addition, it

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Strategic Management
owns or has interest in 37 operations with 95 principal beverage bottling and canning plants
located outside the US. The company also owns bottled water production and still beverage
facilities as well as a facility that manufactures juice concentrates. The company’s large scale
of operation allows it to feed upcoming markets with relative ease and enhances its revenue
generation capacity. Robust revenue growth in three segments Coca-cola’s revenues recorded a
double digit growth, in three operating segments. These three segments are Latin America,
‘East, South Asia, and Pacific Rim’ and Bottling investments. Revenues from Latin America
grew by 20.4% during fiscal 2006, over 2005. During the same period, revenues from ‘East,
South Asia, and Pacific Rim’ grew by 10.6% while revenues from the bottling investments
segment by 19.9%. Together, the three segments of Latin America, ‘East, South Asia, and
Pacific Rim’ and bottling investments, accounted for 34.8% of total revenues during fiscal
2006. Robust revenues growth rates in these segments contributed to top-line growth for Coca-
Cola during 2006.

Weaknesses

Negative publicity, Company received negative publicity in India during September 2006.The
Company was accused by the Center for Science and Environment (CSE) of selling products
containing pesticide residues. Coca-Cola products sold in and around the Indian national
capital region contained a hazardous pesticide residue. These pesticides included chemicals
which could cause cancers, damage the nervous and reproductive systems and reduce bone
mineral density. Such negative publicity could adversely impact the company’s brand image
and the demand for Coca-Cola products. This could also have an adverse impact on the
company’s growth prospects in the international markets. Sluggish performance in North
America Coca-Cola’s performance in North America was far from robust. North America is
Coca-Cola’s core market generating about 30% of total revenues during fiscal 2006. Therefore,
a strong performance in North America is important for the company.

Summary in points:

Strengths:

• Leading brand value and a strong brand portfolio


• Coca-Cola, Diet Coke, Sprite and Fanta
• Large investments in brand promotions
• sells its products in more than 200 countries
• Company also owns bottled water production and still beverage facilities as well as a
facility that manufactures juice concentrates.
• These three segments are Latin America, ‘East, South Asia, and Pacific Rim’ and
Bottling investments
• Return on total assets increases over the period consistently 2005, 06, 07 15.47%,
16.55%, and 16.95% respectively.

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Strategic Management

Weaknesses:

• Negative publicity in India


• Inventory turnover decreased by 13.29%
• Return on equity decreased by 40.50%
• Sluggish performance in North America Coca-Cola’s performance in North America
was far from robust
• Collection form debtors decreased by 15.68%

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Strategic Management
17- KEY INTERNAL FACTORS Weight Rating
weight Score
Strengths

Average customer purchases increased by 18.54% 0.11 2 0.22

Employee moral 0.05 3 0.15

Technical support and research efficiency 0.08 1 0.08

Newspaper advertisement expenditures increased 0.09 4 0.36

Revenues from other segments 0.14 4 0.56

Debt to total asset ratio decline 0.05 2 0.10

Locations in the world 0.15 4 0.20

Weaknesses

Inventory turnover decreased by 13.29% 0.10 3 0.30

Return on equity down decreased 80.11 1 0.11

Website 0.04 2 0.08

Supplier time delivery 0.08 1 0.08

Total 1.00 2.24

Ranked 1 to 4. Low to High respectively.

Current Evaluation: 2.24

Less than average of 2.50

Need efficiency in the Management, Marketing, finance, MIS, R & D, and other
operations..

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Strategic Management
18- KEY EXTERNAL FACTOR
S.
Factor Weight Rate Score
No.

Opportunities
1 Entering into snacks business (Pepsi earns 60% from snacks) 0.100 3.50 0.35
2 Expansion by taking over Cadbury division or product line 0.050 4.00 0.20
3 Expansion by introducing new ready-to-drink products (tea, coffee, 0.050 4.00 0.20
etc.)
4 Entering into or introducing new sports events (e.g. Formula I) to 0.025 3.50 0.09
introduce energy drinks
5 Strong financial and assets support available worldwide to take 0.015 1.50 0.02
financing for expansion
6 Introduce soft drink with focus of "healthy soft drink" - eliminate 0.075 3.50 0.26
obesity concept
7 Diversification of bottling business to other industries like 0.050 2.50 0.13
pharmaceuticals
8 Link with computer internet/network/cell gaming business to focus on 0.025 2.50 0.06
youth worldwide - to take advantage of technology
9 0.025 3.00 0.08
10 0.015 3.00 0.05
Opportunities - Total 0.430 1.43
11 Hurting products containing sugar & sugar-substitute based drinks 0.100 4.00 0.40
(trend towards more healthy eating & drinking)
12 Increase in raw material costs 0.075 3.50 0.26
13 Government policies may hurdle in expansion 0.075 4.00 0.30
14 Government policies - for disclosure of health warning 0.100 4.00
15 Ban in public schools due to obesity issues 0.075 3.50
16 Lack in snacks business 0.075 3.50 0.26
17 Lack of share in homeland market (refer Exhibit 8) - room for other 0.015 2.00 0.03
brands
18 Availability of purified water (being main component) in different parts 0.025 3.50 0.09
of the world
19 Competitor may access unreached parts of the world prior to Coca Cola 0.015 3.50 0.05

20 Salesman not equipped with sales ordering devices 0.015 2.00 0.03
Threats - Total 0.570 1.43

Grand Total 1.000 2.86

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Strategic Management
19- COMPETITORS
• Cadbury Schweppes plc

• Nestle S.A.
• PepsiCo, Inc.

• Unilever
• Procter & Gamble

• Cott Corporation
• Kraft Foods, Inc.

• National Grape Cooperative


• National Beverage Corp.

• Quilmes Industrial S.A.


• Quinenco SA

• Yeo Hiap Seng Limited


• Wimm-Bill-Dann Foods OJSC

• Co-Ro Food A/S


• Rynkeby Foods A/S

• Spadel SA
• Delta Holding S.A.

• Spendrups Bryggeri AB
• Pago

• Hermann Pfanner Getraenke GmbH


• J Garcia Carrion

• Vitasoy International Holding Ltd

32
Strategic Management
20- SWOT ANALYSIS
SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats inside a company, project, or a business venture. It involves
identifying the internal and external factors that are favorable/unfavorable for business to
succeed

SWOT ANALYSIS FOR COCA COLA COMPANY

STRENGTHS

1. Brand equity/image & recognition


2. Product distribution and worldwide network
3. Solid financial performance
4. One of the world's most recognized brand.
5. Product diversification (water, juices, soft drinks, sport drinks, etc)
6. Co-operate identity.
7. Innovation

WEAKNESSES

1. Credit rating
2. Customer concentration, particularly in the US (Wal-Mart accounts for more than 10%
of Coca Cola's business in the US)
3. A lot of loyal Pepsi customers are not enough loyal Coca Cola customers
4. Does not enjoy the number one position in India, Pakistan.

OPPURTUNITIES

1. Possible growing demand.


2. Expansion – Reaching all segments.
3. Globalization
4. Catering to Health Consciousness of People
5. Bottled water growth
6. Acquisitions of smaller players.

THREATS

1. Health Drinks – Fruit Juice Companies


2. Key competitors (Pepsi, etc)
3. Commodity prices growth
4. Image perception in certain parts of the world.
5. Smaller, more nimble operators/players

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Strategic Management

Suggestion To Stay ahead Of Competition

The three main ways are through innovation, relations or reputation.

 First of all 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.
People will like to purchase the commodity 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.(S1,S2,S4,S5,S7,T1,T2,T3)

 Another factor is marketing. This is a very important factor for coca cola. In order for
the company to maintain its strong market position, Coca Cola needs to continuously
strengthen its brand to maintain brand loyalty and positive responses and differentiate
itself from its competitors.(W2,W3,W4,O1,O2,O3,O4)

 If coca cola used strong marketing with environment friendly attitude it may raise
barriers to entry, thus decreasing the threat of new entrants to the industry.
(T1,T4,T5,S2,S4,S5,S6)
 Coca Cola's brand represents quality, taste and excitement to the market, qualities that
remain unmatched by the company's competitors, thus severely reducing any threat of
being substituted. (S1,S4,S2,O1,O2,O3)

 Reason of not being popular in India is the mis-utilization of rear water resources. This
put negative effect on the brand image, because of cola plant water level in the area
decreases which makes the resident life miserable. If Cola Company wants a number
one position in India they have to follow following criteria

 Environmental due diligence before acquiring land or starting projects


 Environmental impact assessment before commencing operations
 Ground water and environmental surveys before selecting sites
 Compliance with all regulatory environmental requirements
 Ban on purchasing CFC-containing refrigeration equipment
 Waste water treatment facilities with trained personnel at all company-owned
 bottling operations
 Energy conservation programs

 They should installed hi-tech water recycling system so that they can save 50% water
savings of its operations. (W3, W4, T4)

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Strategic Management
 Many of coca cola’s plastic bottles are recycled and as a result less resources are lost
and costs decrease. Through diversification & innovation in water & juices business
supported with aggressive advertising strategy Coca Cola Company can attracts a new
market segment. This will mean they will have a higher revenue increasing long term
profitability and improve credit rating.(W1,W4,T1,T3,T4)

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Strategic Management
21- SPACE MATRIX STRATEGIC MANAGEMENT METHOD

The SPACE matrix is a management tool used to analyze a company. It is used to determine
what type of a strategy a company should undertake. The Strategic Position & ACtion
Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on
strategy formulation especially as related to the competitive position of an organization.

The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis,
BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix).

The SPACE matrix calculates the importance of each of these dimensions and places them on a
Cartesian graph with X and Y coordinates.

The following are a few model technical assumptions:

 - By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.
-CA values can range from -1 to -6.
- IS values can take +1 to +6.
 -The FS and ES dimensions of the model are plotted on the Y axis.
- ES values can be between -1 and -6.
- FS values range from +1 to +6.

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Strategic Management

Internal Strength Position External Strength Position

Competitive Advantage Industry Strength

(Worst -6,Best (Worst +1,Best


-1) +6)

Product Quality -1 Barriers to entry 5

Axis x Market Share -1 Growth Potential 5


Access to
Brand & Image -1 Financing 4

Product Life
Cycle -2 Consolidation 5

Average Score =-1.25 Average Score =4.75

Total X-Axis score: 3.5

Financial Strength Environment Strength

(Worst +6,Best
+1) (Worst -6,Best -1)
ROA 5 Inflation -2.5
Axis Y Leverage 4.5 Technology -1
Liquidity 5 Demand Elasticity -2.5
Cash Flow 4.5 Taxation -4

Average Score =4.75 Average Score =-2.5

Total Y-Axis score: 2.25

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Strategic Management

+6.0
0
Conservative
Aggressive

+2.2
5

+1.0 +6.0
-6.00 -1.00 +3.5
0 0

Defensive Competitive
-6.00

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Strategic Management

22- BCG MATRIX

Percent Percent
Percent Percent Market Growth
Sr# Division Revenues Revenues Profits Profits Value Rate
1 Africa $1,140 4.48% $227.75 4.00% 5 -8
East South
2 Africa & Pacific $872 3.43% $174.42 5.00% 10 -5
Rim
European
3 $4,364 17.16% $871.17 18.66% 45 +7
Union
Latin
4 $2,616 10.29% $522.27 11.20% 35 +3
America
North $1,567.7
5 $7,029 27.64% 25.85% 60 +9
America 2
North Asia,
6 Eurasia & $4,123 16.21% $823.35 15.05% 40 +8
Middle East
Bottling
7 $5,198 20.44% $874.42 10.48% 20 -7
Investment
8 Corporate $93 0.37% $18.88 9.76% 15 -3
Tot $5,079.9 100.00
-- $25,435 100.00% - -
al 8 %

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Strategic Management

BCG MATRIX

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Strategic Management
23- IE MATRIX

Strong = 3.0 to Average = 2.0 to


3.99 2.99 Weak 1.0 to 1.99

High = 3.0 to 3.99 I II III


Medium = 2.0 to V
2.99 IV COCA COLA VI

Low = 1.0 to 1.99 VII VIII IX

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Strategic Management
24- QSPM OF COCA COLA
Introduce New
Ineter External Factor Weight Product Outsourcing
Strength AS TAS AS TAS
1. Brand equity/image & recognition 0.08 3.00 0.24 4.00 0.32
2. Product distribution and worldwide
network 0.10 3.00 0.30 3.00 0.30
3. Solid financial performance 0.10 3.00 0.30 4.00 0.40
4. One of the world's most recognized brand. 0.12 4.00 0.48 4.00 0.48
5. Product diversification (water, juices, soft
drinks, sport drinks, etc) 0.08 0.00 2.00 0.16
6. Co-operate identity. 0.08 3.00 0.24 0.00
Weakness
1. Credit rating 0.10 1.00 0.10 2.00 0.20
2. Customer concentration, particularly in 0.10 1.00 0.10 2.00 0.20
the US (Wal-Mart accounts for more than
10% of Coca Cola's business in the US) 0.08 0.00 0.00
3. A lot of loyal Pepsi customers are not
enough loyal Coca Cola customers 0.08 0.00 0.00
4. Does not enjoy the number one position in
India, Pakistan. 0.08 2.00 0.16 0.00
1.00
Opportunities
1. Possible growing demand. 0.12 2.00 0.24 0.00
2. Expansion – Reaching all segments. 0.06 3.00 0.18 3.00 0.18
3. Globalization 0.11 2.00 0.22 1.00 0.11
4. Catering to Health Consciousness of
People 0.12 0.00 2.00 0.24
5. Bottled water growth 0.13 1.00 0.13 1.00 0.13
6. Acquisitions of smaller players. 0.06 1.00 0.06 1.00 0.06
Threats
1. Health Drinks – Fruit Juice Companies 0.12
2. Key competitors (Pepsi, etc) 0.06
3. Commodity prices growth 0.12
4. Image perception in certain parts of the
world. 0.05
5. Smaller, more nimble operators/players 0.05
Total 1.00 2.75 2.78
From our Strategic Alternatives evaluation, we see that it is more attractive to outsource our
distribution networks rather than launch a diet line of products. This is in line with their current

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Strategic Management
strategic direction, and will allow Pakola to fortify their market reach before introducing new
products that will be harder to push through the distribution channels.

43
Strategic Management

2006 2007
EPS 2.162 2.57
NET INCOME 5,080,000.00 5,981,000.00

Company is performing well

Company is more stable in getting loans from financial


institutions
because it will help in tax saving
and if it will go for raising stocks, it will costs more.

PROJECTED INCOME STATEMENT


2010 2009
$ Percent $ Percent
(in
Income Statement (in millions) millions)
Revenue 46,573 100.0% 38,810 100.0%
Cost of Goods Sold 18,693 40.1% 13,156 33.9%
Interest Expense 421 0.9% 381 1.0%
Tax Expense 3,027 6.5% 2,834 7.3%
Income from Cont Operations 9,827 21.1% 8,189 21.1%
Net Income 9,827 21.1% 8,189 21.1%

PROJECTED BALANCE SHEET


2010 2009
Balance Sheet
Cash 3,984 12.7% 3,306 10.8%
Short Term Investments 324 1.0% 66 0.2%
Accounts Receivable 2,704 8.6% 2,281 7.4%
Inventory 1,641 5.2% 1,424 4.6%
Current Assets 8,441 26.9% 10,250 33.5%
Long Term Investments 6,783 21.6% 6,922 22.6%
Net Fixed Assets 6,903 22.0% 5,786 18.9%
Other Assets 7,843 25.0% 6,652 21.7%
Total Assets 31,374 100.0% 30,638 100.0%
Current Liabilities 8,942 28.5% 8,272 27.0%
Total Liabilities 13,178 42.0% 12,968 42.3%
Stockholders' Equity 17,256 55.0% 16,843 55.0%

Cash Flow
Cash Flow from Operations 11,644 9,703
Dividends Paid 4,489 3,982
Interest Paid 421 381

Per Share
Market Price at Year End 92.00 77.00
Earnings Per Share - Basic 4.20 3.51

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Strategic Management

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Strategic Management

25- PROJECTED RATIO


ANALYSIS
Growth Ratios
Sales Growth 20.0% #DIV/0!
Income Growth 20.0% #DIV/0!
Asset Growth 2.4% #DIV/0!
Activity Ratios
Receivable Turnover 18.7 34.0
Inventory Turnover 12.2 18.5
Fixed Asset Turnover 6.7 6.7
Profit Ratios
Profit Margin 21.1% 21.1%
Return on Assets 31.7% 53.5%
Return on Equity 57.6% 97.2%
Dividend Payout Ratio 45.7% 48.6%
Price Earnings Ratio 21.9 21.9
Liquidity Ratios
Current Ratio 0.94 1.24
Quick Ratio 0.78 0.68
Solvency Ratios
Debt to Total Assets 0.42 0.42
Times Interest Earned (Accrual) 31.53 29.93
Times Interest Earned (Cash) 28.66 26.47

46
Strategic Management
S26- CONCLUSION:
The Coca Cola Company has a very rich history and spread over the world, the study in this
report specially the particular SPACE matrix tells us that Coca Cola Company should pursue
an aggressive strategy. Coca Cola Company has a strong competitive position in the market
with rapid growth. It needs to use its internal strengths to develop a market penetration and
market development strategy. This includes focus on Water and Juices products, and catering
to health consciousness of people through introduction of different coke flavor and maintaining
basic coke flavor. Further company should integrate with other companies, acquisition of
potential competitor businesses, innovation in branding and aggressive marketing strategy can
bring long term profitability.

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