Coca Cola Report On Strategic Management Case 2007

 

A Report on Strategic Management Case Of COCA COLA (Year 2007) Subject: Managerial Policy Section: “B” [MBA – Evening Program] Faculty: B rig. (ret.) Shakeel Ahmed Prepared & Presented by: Faraz Ahmed Arshad Khan Mohammad Waqas Zeeshan Ul Haque Group 2 Zohaib Genda Muh ammad Tabish Taha Ashok Kumar Tariq Hamidi Mehboob Hassan Sehrish Anwar Tariq Kh an Babar Raza Zakia Rasheed Obaid Ullah Aleem

 

Managerial Policy Table of Contents 1- EXECUTIVE SUMMARY..................................... SUMMARY.......................................... ..... .................................................4 .............................................. ...4 2- HISTORY OF COCA COLA...... .............................................. ...................... ................................................. .................................. ......... .5 3- BRANDS OF COCA COLA...................................................... COLA....................................................... . ..................................8 3.1- Energy Drinks........................................ Drinks.............................................................. ...................... ....................... ...................... . ..............8 3.2- Juices/Juice Drinks................ .............................................. ...................... ................................................. ..............................8 .....8 3. 3- Soft Drinks........................................ Drinks................................................................. .......................... . ............................... ...................... ......... .......9 3.5- Tea and Coffee.................... Coffee.................... .............................................. ...................... ................................................. ............................. .... ...9 3.6 Water............................................ Water.................... ................................................. .......................... . ...................... ................................. ........... ..........9 3.7- Other Drinks................. .............................................. ...................... ........................................... ................... .............. ...10 4- CONSUMER CHOICE AT A GLANCE......................................... GLANCE.................................................. ......... .................11 ...................... .............................................. ...................................... .............. .............................................. ...................... ................................................. .................................1 ........1 2 5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET...............................1 MARKET...............................1 3 Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K. and Schwep pes of Ireland founded in 1783. Cadbury Schweppes is unified bussing which manag es the relations his with over 240 franchised bottling operation on Zambia and Z imbabwe. Cadbury Schweppes has fottlery and partnership operations in 14 countri es around the world........................................... world............................................................. .................. .............................................. ...................... ..............................................13 ......................13 6- OUR MI SSION:................................................................. SSION:........................................ .................................. ......... ................................14 ...................... ..........14 7- OUR VISION:................. VISION:............................... .............. .............................................. ...................... ................................................. .................................1 ........1 4 8- IMPROVED MISSION STATEMENT:....................................... STATEMENT:................................................ ......... ....................15 9- IMPROVED VISION STATEMENT:............................ STATEMENT:............................ ...........................................15 ...................... .....................15 10- COCA COLA - RATIO ANALYSIS.... .............................................. ...................... ..............................................19 ......................19 10.1 RATIO ANALYSIS....................................... ANALYSIS............................................................. ...................... ................................20 11- FINANCIAL HIGHLIGHTS...................................... HIGHLIGHTS........................................................ .................. ............................21 12- UNIT CASE VOLUME............................. ............................21 VOLUME............................. .............................................. ...................... ..........................................21 ..................21 13- CURRENT O RGANIZATIONAL CHART................... CHART........................................... .........................................2 .................2 3 2

 

Managerial Policy 14- VALUE CHAIN ANALYSIS FOR COCA COLA.................... COLA.......................................... ...................... ........23 15- E-COMMERCE:............ E-COMMERCE:.................................... .......................................... .................. .............................................. ...................... ...........................27 ...27 16- VALUE OF THE FIRM....... .............................................. ...................... ................................................. .................................. ......... .....27 17- KEY INTERNAL FACTORS Weight Rating weight Score ..................31 18- KEY EXTERNAL FACTOR................................... FACTOR......................................................... ...................... ...........................32 ...................... .....32 19- COMPETITORS .................................. .............................................. ...................... ..............................................33 ......................33 20- SWOT ANALYSIS...................................... ANALYSIS.............. ................................................. .................................. ......... ......................34 ...................... 34 21- SPACE MATRIX STRATEGIC MANAGEMENT METHOD........... .................37 22BCG MATRIX................ MATRIX......................................... .............................. ..... .............................................. ...................... .......................................40 ...............40 23- IE MATRIX... .............................................. ...................... ................................................. .................................. ......... ............................42 ...................... ......42 24- QSPM OF COCA COLA............................ COLA............................ .............................................. ...................... ........................................43 ................43 25- PROJECTED R ATIO ANALYSIS......................................... ANALYSIS.................................................................. .......................... . .......47 S26- CONCLUSION:.................................... CONCLUSION:...................................................... .................. ................................................48 3

 

Managerial Policy 1- EXECUTIVE SUMMARY Coca-Cola, the product that has given the world its best-kn own 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 be verage concentrates and syrups to bottling and canning operators, distributors, fountain retailers and fountain wholesalers. Coca-Cola was first introduced by J ohn Syth Pemberton, a pharmacist, in the year 1886 in Atlanta, Georgia when he c oncocted 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 Ph armacy and customers bought the drink for five cents at the soda fountain. Carbo nated water was teamed with the new syrup, whether by accident or otherwise, pro ducing a drink was proclaimed refreshing”, a theme continue s to echo todaythat wherever Coca-Cola “delicious is enjoyed.and Coca-Cola originated as that a soda fo untain beverage in 1886 selling for five cents a glass. Early growth was impress ive, but it was only when a strong bottling system developed that Coca-Cola beca me the world-famous brand it is today. Coca- Cola was the leading soft drink bra nd in India until 1977, when it left rather than reveal its formula to the Gover nment 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 li beralized 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 or ganization and studying and understanding the consumers’ perception and opinion ab out 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 i n a span of 30 days across major cities in order to give the product the require d 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 ou t in form of graphs and suggestions have been offered there from 4

 

Managerial Policy 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 whe n a strong bottling system developed that Coca-Cola became the world-famous bran d 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 CocaCola impresse d 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 G riggs Candler, who owned the Company. Candler thanked him but took no action. On e of his nephews already had urged that Coca-Cola be bottled, but Candler focuse d 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 Benjamin F. Thomas and B. Whitehead obt ained exclusive rights toCandler, bottle Coca-Cola across most ofJoseph the United States (spe cifically excluding Vicksburg) -- for the sum of one dollar. A third Chattanooga lawyer, John T. Lupton, soon joined their venture. 1900-1909 … Rapid growth The t hree pioneer bottlers divided the country into territories and sold bottling rig hts to local entrepreneurs. Their efforts were boosted by major progress in bott ling technology, which improved efficiency and product quality. By 1909, nearly 400 Coca-Cola bottling plants were operating, most of them family-owned business es. Some were open only during hot-weather months when demand was high. 1916 … Bir th of the contour bottle Bottlers worried that the straight-sided bottle for Coc awas easily confused with imitators. A group representing Company and bottlers a sked 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 e ver granted trademark status by the U.S. Patent Office. Today, it s one of the m ost recognized icons in the world - even in the dark! Cola the 5

 

Managerial Policy 1920s … Bottling overtakes fountain sales As the 1920s dawned, more than 1,000 Coc a-Cola bottlers were operating in the U.S. Their ideas and zeal fueled steady gr owth. Six-bottle cartons were a huge hit after their 1923 introduction. A few ye ars later, open-top metal coolers became the forerunners of automated vending ma chines. By the end of the 1920s, bottle sales of Coca-Cola exceeded fountain sal es. 1920s and 30s … International expansion Led by longtime Company leader Robert W. Woodruff, chief executive officer and chairman of the Board, the Company bega n a major push to establish bottling operations outside the U.S. Plants were ope ned in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Austral ia 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 supply the troops. This followedsan urgent request fo r bottling equipment andto materials from General Eisenhower base in North Afric a. Many of these war-time plants were later converted to civilian use, permanent ly enlarging the bottling system and accelerating the growth of the Company s wo rldwide business. 1950s … Packaging innovations For the first time, consumers had choices of Coca-Cola package and type -- the traditional 6.5-ounce contour bottl e, or larger servings including 10-, 12- and 26-ounce versions. Cans were also i ntroduced, becoming generally available in 1960. 1960s … New brands introduced Fol lowing Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined brand CocaCola 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 hundr eds of other brands are offered to meet consumer preferences in local markets ar ound 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 i nternational mega-chains. Such customers required a new approach. In response, m any small and medium-size bottlers consolidated to better serve giant internatio nal customers. The Company encouraged and invested in a number of bottler consol idations to assure that its largest bottling partners would have capacity to lea d the system in working with global retailers. 1990s … New and growing markets siz e 6

 

Managerial Policy Political and economic changes opened vast markets that were closed or underdeve loped for decades. After the fall of the Berlin Wall, the Company invested heavi ly 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 Coc a-Cola bottling system grew up with roots deeply planted in local communities. T his heritage serves the Company well today as people seek brands that honor loca l identity and the distinctiveness of local markets. As was true a century ago, strong locally based relationships between Coca-Cola bottlers, customers and com munities are the foundation on which the entire business grows. 7

 

Managerial Policy 3- BRANDS OF COCA COLA Coca-Cola Zero® has been one of the most successful product launch hes in Coca Col a’s history. In 2007, Coca Cola’s sold nearly 450 million cases globally. Put into p erspective, that s roughly the same size as Coca Cola’s total business in the Phil ippines, one of our top 15 markets. As of September 2008, Coca-Cola Zero is avai lable in more than 100 countries. 3.1- Energy Drinks For those with a high-intensity approach to Coca Cola’s brands of Energy Drinks co ntain ins. ingredients such as ginseng extract, guarana extract, caffeine and B vitam life, 3.2- Juices/Juice Drinks We bring innovation to the goodness of juice Coca Cola’s more than 20 juice and juice drink brands, offering both adults and children nut ritious, refreshing and flavorful beverages. in 8

 

Managerial Policy 3.3- Soft Drinks Coca Cola’s dozens of soft drink brands provide flavor and refreshment in a variet y choices. From the original Coca-Cola to most recent introductions, soft drinks from Coca-Cola Company are both icons and innovators in the beverage industry. 3.4- Sports Drinks of The Carbohydrates, fluids, and electrolytes team together in Coca Cola’s Sports Drinks , providing rapid hydration and terrific taste fitness-seekers at any level for 3.5- Tea and Coffee Bottled and canned teas and coffees provide consumers favorite drinks in conven ient take-anywhere packaging, satisfying both traditional tea drinkers and today s growing coffee culture. 3.6 Water Smooth and essential, our Waters and Beverages offer hydration in its purest Water form. 9

 

Managerial Policy 3.7- Other Drinks So much more than soft drinks. Coca Cola’s brands also include milk products, and more so you can choose a Coca Cola Company product anytime, anywhere for nutriti on, refreshment or other needs. soup, 10

 

Managerial Policy 4- CONSUMER CHOICE AT A GLANCE Coca-Cola Mainly preferred by the Youngster & Kid s. Thums-Up Youngster. Limca Common Drink. Fanta Basically Preferred by Ladies and Kids. 11

 

Managerial Policy Maaza Also Ladies and Kids. Sprite Not clearly defines. Kinley Soda Mostly those who consume liquor. 12

 

Managerial Policy 5- DIFFERENT PLAYERS IN THE SOFT DRINKS MARKET PEPSI Caleb Brandhum, a North Car oline Pharmacist, structure Pepsi Cola In2 the 1890’s as cure of dyspepsia (indige stion). 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 gallon s 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 internati onal arence and is available in 187 Nations throughout the world. CADBURY SCHWEP PES Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K. and Schw eppes of Ireland founded in 1783. Cadbury Schweppes is unified bussing which man ages the relations his with over 240 franchised bottling operation on Zambia and Zimbabwe. Cadbury Schweppes has fottlery and partnership operations in 14 count ries around the world. 13

 

Managerial Policy 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 insp ire 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 eve ry aspect of our business by describing what we need to accomplish in order to c ontinue 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 des ires 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. P rofit: Maximizing long-term return to shareowners while being mindful of our ove rall responsibilities. 14

 

Managerial Policy 8- IMPROVED MISSION STATEMENT: (1) At Coca Cola we re committed to achieving bus iness and financial success while leaving a positive imprint on society – deliveri ng what we call Performance with Purpose. (2) Our mission is to be the world s p remier consumer Products Company focused on convenient foods and beverages. We s eek to produce financial rewards to in8vestors as we provide opportunities for g rowth 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 a nd integrity. 9- IMPROVED VISION STATEMENT: (1) Coca cola Co responsibility is t o 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 i nto 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 ge products in consumer more mpanies in the staying a step

our vision to be the best and leading provider of food and bevera Pakistan, to facilitate the people of Pakistan and we emphasis on rather than competitors we among the top ten food and beverage co world, by continually challenging present conventions and always 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, expe rience, and satisfaction. We will ensure this through an unwavering dedication t o the continuous development of our products and processes ensuring that we rema in best in class. We will strive to hire the most competent and dedicated employ ees whose work ethic will set the standard in the industry. We will be paymaster s, as we strongly believe that human resource is the only asset that truly appre ciates over time. We will also be a responsible social corporate citizen, and st rive to enhance the quality of life in the markets we serve. 15

 

Managerial Policy Compare Vision & mission with leading competitors Pakola is firstly introducing in Pakistan in 1950 by Haji Ali Muhammad. It is th e first Nationally branded soft drink in Pakistan, it is produced by mehran bott lers (Pvt) Ltd. Mehran is the first bottling plant in South Asia. Which has been certified to in tegrated management system based on (ISO 9001:2000), (ISO 14001:1996) Standard a nd (RVA HACCP) standard Pakola quality and food safety system follows the FDA GM P 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 emer ging categories. To develop, implement and continuously improve the integrated m anagement systems in a culture of continuous improvement which: (1) Directs the continual up-gradation for efficient and environment friendly manufacturing tech nology. (2) Monitor and improve the efficiency and effectiveness of all business processes. (3) Promotes professional and flexible work environment, teamwork an d innovation through employee participation and process ownership. (4) Drives cu stomer orientation at all levels within the organization. (5) Monitor and econom ize the Cost of Quality. Vision statement: To be SECOND TO NONE in exceeding customer expectations for Taste and Flavor, Pr oduct Safety, Quality and Price Competitiveness. 16

 

Managerial Policy In comparison to coca cola the mission statement of Pakola is simple one. The pl ayers 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 shar e, Pakola can still manage to be profitable in a cut-throat Industry, and hive p lan to position it strategically in order to do so. The beverage Industry is a r easonably attractive industry to be in, and with Its 55 years of established pre sence, Pakola is well positioned to leverage that history so as to attain a comp etitive edge. It is our vision to be the best and leading provider of food and b everage 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 (ge neric strategy) that Coca Cola needs to pursue is that of differentiation. In th eir 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 co mpany 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 buy er loyalty However, at the expense of sounding simplistic, it is necessary that the company communicate its differentiation to its customers, otherwise these th ree advantages will not avail themselves. Initially Coca cola will need to adopt a focused differentiation approach, which means that they should selectively ch oose 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 str ategy. 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 m ore infantry on the battle ground to use to their advantage in this war of brand s. Therefore, we believe that the current strategic objective of Coca cola shoul d be to consolidate its existing brand, Coca cola through extensive strategic ma rket research and 17

 

Managerial Policy consumer insights to be able to home in on the correct target market like a prec ision targeting missile rather than as an Anti-aircraft gun 18

 

Managerial Policy 10- COCA COLA - RATIO ANALYSIS 2006 Income Statement Revenue Cost of Goods Sold Interest Expense Tax Expense Income from Cont Operations Net Income Balance Shee t Cash Short Term Investments Accounts Receivable Inventory Current Assets Long Term Investments Net Fixed Assets Other Assets Total Assets Current Liabilities Total Liabilities Stockholders Equity Cash Flow Cash Flow from Operations Divid ends Paid Interest Paid Per Share Market Price at Year End Earnings Per Share Basic $ Percent (in millions) 24,088 100.0% 8,164 33.9% 220 0.9% 1,498 6.2% 5,08 0 21.1% 5,080 21.1% 2005 $ Percent (in millions) 23,104 100.0% 8,195 35.5% 240 1 .0% 1,818 7.9% 4,872 21.1% 4,872 21.1% 2004 $ (in millions) 21,962 4,847 2,440 150 2,704 1,641 8,441 6,783 6,903 7,668 29,963 8,890 13,043 16,920 8.1% 0.5% 9.0% 5.5% 28.2% 22.6% 23.0% 25.6% 100.0% 29.7% 43.5% 56.5% 4,701 66 2,281 1,424 10,250 6,922 5,786 6,469 29,427 9,836 13,072 16,355 16.0% 0.2% 7.8% 4.8% 34.8% 23.5% 19.7% 22.0% 100.0% 33.4% 44.4% 55.6% 2,171 1,420 31,327 5,957 2,912 220 6,423 2,679 240 5,968 48.25 2.16 40.31 2.04 19

 

Managerial Policy 10.1 RATIO ANALYSIS Growth Ratios Sales Growth Income Growth Asset Growth Activi ty Ratios Receivable Turnover Inventory Turnover Fixed Asset Turnover Profit Rat ios Profit Margin Return on Assets Return on Equity Dividend Payout Ratio Price Earnings Ratio Liquidity Ratios Current Ratio Quick Ratio Solvency Ratios Debt t o Total Assets Times Interest Earned (Accrual) Times Interest Earned (Cash) 4.3% 4.3% 1.8% 9.7 5.3 3.5 21.1% 17.1% 30.5% 57.3% 22.3 0.95 0.60 0.44 30.90 28. 08 5.2% 0.5% -6.1% 10.4 5.8 4.0 21.1% 16.0% 59.6% 55.0% 19.8 1.04 0.72 0.44 28.88 2 7.76 20

 

Managerial Policy 11- FINANCIAL HIGHLIGHTS 2006 Year Ended December 31, Net operating revenues Ope rating income Net income Net income per share (basic and diluted) Net cash provi ded by operating activities Dividends paid Share repurchase activity Unit case v olume (in billions) International operations North America operations Worldwide 15.6 5.8 21.4 14.8 5.8 20.6 6% 0% 4% ($) 24,088 6,308 5,080 2.161 5,957 2,911 2, 474 2005 ($) 23,104 6,085 4,872 2.042 6,423 2,678 2,019 Percent Change 4% 4% 4% 6% (7%) 9% 23% 12- UNIT CASE VOLUME 21

 

Managerial Policy MAP: Showing Workforce [71,000 in 2006] 22

 

Managerial Policy 13- CURRENT ORGANIZATIONAL CHART CEO EVP/ President Bottling Invest/ Supply Chain CFO and EVP EVP/ President MKT Strategy President & COO SVP & General Counsel SVP & Director Human Resources SVP & Director Public Affairs/ Communi-cation President of Eurasia Group President European Union Market President of African Group President Latin America Group President of Pacific Group 14- VALUE CHAIN ANALYSIS FOR COCA COLA 2005 (in thousands) 1,424,000 2006 (in thousands) SUPPLIER COSTS Raw Materials Fuel Energy Transportation Truc k Drivers Truck Maintenance Component Parts Inspection Storing Warehouse PRODUCT IONS COSTS 1,641,000 Sufficient date is not provided, but since Inventory is increased in 2006, hence , we can infer that suppliers are effeciently providing Raw Materials. At the sa me time, increase will result in some incline in store/ ware house charges. 23

 

Managerial Policy Inventory System Receiving Plant Layout Maintenance Plant Location Computer R&D Cost Accounting DISTRIBUTION COSTS Since cost of revenue in 2006 is 34% of total revenue compared to 36% cost of re venue in 2005, we can deduce that Coca Cola has improved its operating performan ce. nil nil 24

 

Managerial Policy Loading Shipping Budgeting Personnel Internet Trucking Railroads Fuel Maintenanc e SALES & MARKETING COSTS Salespersons Website Internet Publicity Promotion Adve rtising Transportation Food and Lodging CUSTOMER SERVICE COSTS Postage Phone Int ernet Warranty MANAGEMENT COSTS Human Resources Administration Employee Benefits Labor Relations Managers Employees Finance and Legal Analysis: Income statement s shows just one head and that is Selling, Gen. and Admin. Expenses, which were 39% of total revenue in 2005 and 40% in 2006. Hence, there is increase in these expenses. We see Net Income proportion remain same in year 2006 as it was in yea r 2005 i.e. 21% of total revenue. Therefore, despite of the fact that some expen ses were increased, Coca Cola still enjoy same percentage of Net Income. Which w ould be because of, efficiency of production, management or distribution departm ents. 25

 

Managerial Policy We do not see R&D head of expenses, which would show that Coca Cola does not ass ign 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 easil y infer that Coca Cola, because of innovative advertisements or because of intel ligent 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 t hem compete in market, effectively and profitably. 26

 

Managerial Policy 15- E-COMMERCE: Good points: • • • • • • Brand Promotion Attractive products selection Look and feel 8 Provision of multi media 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 offe red. 16- VALUE OF THE FIRM Financial and Value Review Defensive: 27

 

Managerial Policy 1) Size of firm Net worth of $16.92billion 2) Financial condition with a weighte d current ratio of 0.94 Coke falls below the required 2, therefore they fail thi s test. 3) Earnings stability there has been positive net income for the past te n years and they 8pass this test. 4) Earnings growth Earnings are greater than f ive years ago. Pass. Overall we would not suggest Coke being placed in the defen sive investor’s portfolio at this time. Opinion: Seeing that currently Coke is tra ding 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 gr eat management, products, dividend history, and earnings. This stock we would pl ace 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 comp any 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 clo se competitor Pepsi which has a ranking of 22 having a brand value of $12,690 mi llion Furthermore; Coca-Cola owns a large portfolio of product brands. The compa n8y owns four of the top five soft drink brands in the world: Coca-Cola, Diet Co ke, Sprite and Fanta. Strong brands allow the company to introduce brand extensi ons such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the c ompany has made large investments in brand promotions. Consequently, Coca-cola i s one of the best recognized global brands. The company’s strong brand value facil itates customer recall and allows Coca-Cola to penetrate new m2arkets and consol idate existing ones. Coca-Cola Company, The large scale of operations with reven ues 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 o f all types consumed worldwide every day, be8verages bearing trademarks owned by or licensed to CocaCola account for more than 1.4 billion. The company’s operatio ns are supported by a strong infrastructure across the world. Coca-Cola owns and operates 32 principal beverage 28

 

Managerial Policy concentrates and/or syrup manufacturing plants located throughout the world. In addition, it owns or has interest in 37 operations with 95 principal beverage bo ttling and canning plants located outside the US. The company also owns bottled water production and still beverage facilities as well as a facility that manufa ctures juice concentrates. The company’s large scale of operation allows it to fee d upcoming markets with relative ease and enhances its revenue generation capaci ty. Robust revenue growth in three segments Coca-cola’s revenues recorded a double digit growth, in three operating segments. These three segments are Latin Ameri ca, ‘East, South Asia, and Pacific Rim’ and Bottling investments. Revenues from Lati n America grew by 20.4% during fiscal 2006, over 2005. During the same period, r evenues from ‘East, South Asia, and Pacific Rim’ grew by 10.6% while revenues from t he 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 the se segments contributed to top-line growth for CocaCola during 2006. Weaknesses Negative publicity, Company received negative publicity in India during Septembe r 2006.The Company was accused by the Center for Science and Environment (CSE) o f selling products containing pesticide residues. Coca-Cola products sold in and around the Indian national capital region contained a hazardous pesticide resid ue. These pesticides included chemicals which could cause cancers, damage the ne rvous and reproductive systems and reduce bone mineral density. Such negative pu blicity could adversely impact the company’s brand image and the demand for Coca-C ola products. This could also have an adverse impact on the company’s growth prosp ects in the international markets. Sluggish performance in North America Coca-Co la’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 d Fanta Large investments in brand promotions sells its products 0 countries Company also owns bottled water production and still ties as well as a facility that manufactures juice concentrates. ments are Latin America, ‘East, South Asia, and Pacific Rim’ and s 29

Coke, Sprite an in more than 20 beverage facili These three seg Bottling investment

 

Managerial Policy • Return on total assets increases over the period consistently 2005, 06, 07 15.47 %, 16.55%, and 16.95% respectively. Weaknesses: • • • • • Negative publicity in India Inventory turnover decreased by 13.29% Return on equ ity decreased by 40.50% Sluggish performance in North America Coca-Cola’s performa nce in North America was far from robust Collection form debtors decreased by 15 .68% 30

 

Managerial Policy 17- KEY INTERNAL FACTORS weight Score Strengths Average customer purchases incre ased by 18.54% Employee moral Technical support and research efficiency Newspape r advertisement expenditures increased Revenues from other segments Debt to tota l asset ratio decline Locations in the world Weight Rating 0.11 0.05 0.08 0.09 0.14 0.05 0.15 2 3 1 4 4 2 4 0.22 0.15 0.08 0.36 0.56 0.10 0.20 Weaknesses Inventory turnover decreased by 13.29% Return on equity down decrease d Website Supplier time delivery Total 0.10 80.11 0.04 0.08 1.00 3 1 2 1 0.30 0. 11 0.08 0.08 2.24 Ranked 1 to 4. Low to High respectively. Current Evaluation: 2.24 Less than aver age of 2.50 Need efficiency in the Management, Marketing, finance, MIS, R & D, a nd other operations.. 31

 

Managerial Policy 18- KEY EXTERNAL FACTOR S. No. Factor Weight Rate Score Opportunities 1 2 3 4 5 6 7 8 Entering into snacks business (Pepsi earns 60% from snacks) Expa nsion by taking over Cadbury division or product line Expansion by introducing n ew ready-to-drink products (tea, coffee, etc.) Entering into or introducing new sports events (e.g. Formula I) to introduce energy drinks Strong financial and a ssets support available worldwide to take financing for expansion Introduce soft drink with focus of "healthy soft drink" - eliminate obesity concept Diversific ation of bottling business to other industries like pharmaceuticals Link with co mputer internet/network/cell gaming business to focus on youth worldwide - to ta ke advantage of technology 0.100 0.050 0.050 0.025 0.015 0.075 0.050 0.025 0.025 0.015 0.430 0.100 0.075 0.075 0.100 0.075 0.075 0.015 0.025 0.015 0.015 0.570 1 .000 3.50 4.00 4.00 3.50 1.50 3.50 2.50 2.50 3.00 3.00 4.00 3.50 4.00 4.00 3.50 3.50 2.00 3.50 3.50 2.00 0.35 0.20 0.20 0.09 0.02 0.26 0.13 0.06 0.08 0.05 1.43 0.40 0.26 0.30 9 10 Opportunities - Total 11 Hurting products containing sugar & sugar-substitu te based drinks (trend towards more healthy eating & drinking) 12 Increase in ra w material costs 13 Government policies may hurdle in expansion 14 Government po licies - for disclosure of health warning 15 Ban in public schools due to obesit y issues 16 Lack in snacks business 17 Lack of share in homeland market (refer E xhibit 8) - room for other brands 18 Availability of purified water (being main component) in different parts of the world 19 Competitor may access unreached pa rts of the world prior to Coca Cola 20 Salesman not equipped with sales ordering devices Threats - Total Grand Total 0.26 0.03 0.09 0.05 0.03 1.43 2.86 32

 

Managerial Policy 19- COMPETITORS • • • • • • • • • • • • • • • • • • • • • • Cadbury Schweppes plc Nestle S.A. PepsiCo, Inc. Unilever Procter & Gamble Cott C orporation Kraft Foods, Inc. National Grape Cooperative National Beverage Corp. Quilmes Industrial S.A. Quinenco SA Yeo Hiap Seng Limited Wimm-Bill-Dann Foods O JSC Co-Ro Food A/S Rynkeby Foods A/S Spadel SA Delta Holding S.A. Spendrups Bryg geri AB Pago Hermann Pfanner Getraenke GmbH J Garcia Carrion Vitasoy Internation al Holding Ltd 33

 

Managerial Policy 20- SWOT ANALYSIS SWOT Analysis is a strategic planning tool used to evaluate th e Strengths, Weaknesses, Opportunities, and Threats inside a company, project, o r a business venture. It involves identifying the internal and external factors that are favorable/unfavorable for business to succeed SWOT ANALYSIS STRENGTHS 1 . 2. 3. 4. 5. 6. 7. Brand equity/image & recognition Product distribution and wo rldwide network Solid financial performance One of the world s most recognized b rand. Product diversification (water, juices, soft drinks, sport drinks, etc) Co -operate identity. Innovation FOR COCA COLA COMPANY WEAKNESSES 1. Credit rating 2. Customer concentration, particularly in the US (W al-Mart accounts for more than 10% of Coca Cola s business in the US) 3. A lot o f loyal Pepsi customers are not enough loyal Coca Cola customers 4. Does not enj oy the number one position in India, Pakistan. OPPURTUNITIES 1. 2. 3. 4. 5. 6. P ossible growing demand. Expansion – Reaching all segments. Globalization Catering to Health Consciousness of People Bottled water growth Acquisitions of smaller p layers. THREATS 1. 2. 3. 4. 5. Health Drinks – Fruit Juice Companies Key competitors (Peps i, etc) Commodity prices growth Image perception in certain parts of the world. Smaller, more nimble operators/players 34

 

Managerial Policy Suggestion To Stay ahead Of Competition The three main ways are through innovati on, relations or reputation.  First of all innovation can be used. This may certainly give coca cola competiti ve advantage because it introduces a new product, which many people will want to tr y. 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 mea ns customers will stay loyal to them no matter what happens.(S1,S2,S4,S5,S7,T1, happens.(S1,S2,S4,S5,S7,T1,T T 2,T3) 

Another factor is marketing. This is rder for the company to maintain its continuously strengthen its brand to es and differentiate itself from its

a very important factor for coca cola. In o strong market position, Coca Cola needs to maintain brand loyalty and positive respons competitors.(W2,W3,W4,O1,O2,O3,O4) competitors.(W2,W3,W4,O1,O2,O3,O4)

If coca cola used strong marketing with environment friendly attitude it may rai se 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 excitem ent 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 resour

ces. This put negative effect on the brand image, because of cola plant water le vel in the area decreases which makes the resident life miserable. If Cola Compa ny wants a number one position in India they have to follow following criteria         nvironmental due diligence before acquiring land or starting projects Environmen tal impact assessment before commencing operations Ground water and environmenta l surveys before selecting sites Compliance with all regulatory environmental re quirements Ban on purchasing CFC-containing refrigeration equipment Waste water treatment facilities with trained personnel at all company-owned bottling operat ions Energy conservation programs water  They should installed hi-tech water recycling system so that they can save 50%

savings of its operations. (W3, W4, T4) 35

 

Managerial Policy  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 busin ess supported with aggressive advertising strategy Coca Cola Company can attract s a new market segment. This will mean they will have a higher revenue increasin g long term profitability and improve credit rating.(W1,W4,T1,T3,T4) 36

 

Managerial Policy 21- SPACE MATRIX STRATEGIC MANAGEMENT METHOD The SPACE matrix is a management to ol 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 s hort a SPACE matrix is a strategic management tool that focuses on strategy form ulation especially as related to the competitive position of an organization. Th e SPACE matrix can be used as a basis for other analyses, such as the SWOT analy sis, BCG matrix model, industry analysis, or assessing strategic alternatives (I E matrix). The SPACE matrix calculates the importance of each of these dimension s and places them on a Cartesian graph with X and Y coordinates. The following a re a few model technical assumptions:  - By definition, the CA and IS values in t he 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. 37

 

Managerial Policy Internal Strength Position Competitive Advantage (Worst -6,Best -1) Product Qual ity Axis x Market Share Brand & Image Product Life Cycle -1 -1 -1 -2 External Strength Position Industry Strength (Worst +1,Best +6) Barriers to entr y Growth Potential Access to Financing Consolidation 5 5 4 5 Average Score =-1.25 Total X-Axis score: 3.5 Financial Strength Average Score =4.75 Environment Strength (Worst +6,Best +1) ROA Axis Y Leverage Liquidity Cash Flow 5 4.5 5 4.5 Inflation Technology Demand Elasticity Taxation (Worst -6,Best -1) -2.5 -1 -2.5 -4 Average Score =4.75 Average Score =-2.5 Total Y-Axis score: 2.25 38

 

Managerial Policy Conservative +6.0 0 Aggressive +2.2 5 -6.00 -1.00 +1.0 0 +3.5 +6.0 0 Defensive -6.00 Competitive 39

 

Managerial Policy 22- BCG MATRIX Sr# 1 2 3 4 5 6 7 8 Total Division Africa East South Africa & Pacific Rim European Union Latin America Nor th America North Asia, Eurasia & Middle East Bottling Investment Corporate -Revenues $1,140 $872 $4,364 $2,616 $7,029 $4,123 $5,198 $93 $25,435 Percent Revenues 4.48% 3.43% 17.16% 10.29% 27.64% 16.21% 20.44% 0.37% 100.00% Profits $227.75 $174.42 $871.17 $522.27 $1,567.7 2 $823.35 $874.42 $18.88 $5,079 .9 8 Percent Profits 4.00% 5.00% 18.66% 11.20% 25.85% 15.05% 10.48% 9.76% 100.00 % Percent Market Value 5 10 45 35 60 40 20 15 Percent Growth Rate -8 -5 +7 +3 +9 +8 -7 -3 40

 

Managerial Policy BCG MATRIX 41

 

Managerial Policy 23- IE MATRIX Strong = 3.0 to 3.99 High = 3.0 to 3.99 Medium = 2.0 to 2.99 Low = 1.0 to 1.99 I V VII I Average = 2.0 to 2.99 II V COCA COLA VIII VI IX Weak 1.0 to 1.99 III 42

 

Managerial Policy 24- QSPM OF COCA COLA Ineter External Factor Strength 1. Brand equity/image & re cognition 2. Product distribution and worldwide network 3. Solid financial perfo rmance 4. One of the world s most recognized brand. 5. Product diversification ( water, juices, soft drinks, sport drinks, etc) 6. Co-operate identity. Weakness 1. Credit rating 2. Customer concentration, particularly in the US (Wal-Mart acc ounts for more than 10% of Coca Cola s business in the US) 3. A lot of loyal Pep si customers are not enough loyal Coca Cola customers 4. Does not enjoy the numb er one position in India, Pakistan. Weight 0.08 0.10 0.10 0.12 0.08 0.08 0.10 0. 10 0.08 0.08 0.08 1.00 2.00 Introduce New Product AS TAS 3.00 0.24 3.00 3.00 4.0 0 0.30 0.30 0.48 0.00 0.24 0.10 0.10 0.00 0.00 0.16 Outsourcing AS TAS 4.00 0.32 3.00 4.00 4.00 2.00 0.30 0.40 0.48 0.16 0.00 0.20 0.20 0.00 0.00 0.00 3.00 1.00 1.00 2.00 2.00 Opportunities 1. Possible growing demand. 0.12 2.00 0.24 2. Expansion – Reaching a ll segments. 0.06 3.00 0.18 3.00 3. Globalization 0.11 2.00 0.22 1.00 4. Caterin g to Health Consciousness of People 0.12 0.00 2.00 5. Bottled water growth 0.13 1.00 0.13 1.00 6. Acquisitions of smaller players. 0.06 1.00 0.06 1.00 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 worl d. 0.05 5. Smaller, more nimble operators/players 0.05 Total 1.00 2.75 From our Strategic Alternatives evaluation, we see that it is more attractive to outsourc e our distribution networks rather than launch a diet line of products. This is in line with their current 0.00 0.18 0.11 0.24 0.13 0.06 2.78 43

 

Managerial Policy strategic direction, and will allow Pakola to fortify their market reach before introducing new products that will be harder to push through the distribution ch annels. 44

 

Managerial Policy 2006 2.162 5,080,000.00 2007 2.57 5,981,000.00 EPS NET INCOME Company is performing well Company is more stable in getting loan s 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 $ Income Statement Revenue Cost of Goods Sold Interest Expense Tax Expense Income from Cont Operations Net Income PROJECTED BALANCE SHEET 2010 Balance Shee t Cash Short Term Investments Accounts Receivable Inventory Current Assets Long Term Investments Net Fixed Assets Other Assets Total Assets Current Liabilities Total Liabilities Stockholders Equity Cash Flow Cash Flow from Operations Divid ends Paid Interest Paid Per Share Market Price at Year End Earnings Per Share Basic 3,984 324 2,704 1,641 8,441 6,783 6,903 7,843 31,374 8,942 13,178 17,256 1 2.7% 1.0% 8.6% 5.2% 26.9% 21.6% 22.0% 25.0% 100.0% 28.5% 42.0% 55.0% (in million s) 46,573 18,693 421 3,027 9,827 9,827 Percent 100.0% 40.1% 0.9% 6.5% 21.1% 21.1% 2009 $ Percent (in millions) 38,810 100.0% 13,156 33.9% 381 1.0% 2,834 7.3% 8,18 9 21.1% 8,189 21.1% 2009 3,306 66 2,281 1,424 10,250 6,922 5,786 6,652 30,638 8,272 12,968 16,843 10 .8% 0.2% 7.4% 4.6% 33.5% 22.6% 18.9% 21.7% 100.0% 27.0% 42.3% 55.0% 11,644 4,489 421 9,703 3,982 381 92.00 4.20 77.00 3.51 45

 

Managerial Policy 46

 

Managerial Policy 25- PROJECTED RATIO ANALYSIS Growth Ratios Sales Growth Income Growth Asset Growth Activity Ratios Receivable Turnover Inventory Turnover Fixed Asset Turnover Profit Ratios Profit Margin Re turn on Assets Return on Equity Dividend Payout Ratio Price Earnings Ratio Liqui dity Ratios Current Ratio Quick Ratio Solvency Ratios Debt to Total Assets Times Interest Earned (Accrual) Times Interest Earned (Cash) 20.0% 20.0% 2.4% 18.7 12 .2 6.7 21.1% 31.7% 57.6% 45.7% 21.9 0.94 0.78 0.42 31.53 28.66 #DIV/0! #DIV/0! # DIV/0! 34.0 18.5 6.7 21.1% 53.5% 97.2% 48.6% 21.9 1.24 0.68 0.42 29.93 26.47 47

 

Managerial Policy S26- CONCLUSION: The Coca Cola Company has a very rich history and spread over t he world, the study in this report specially the particular SPACE matrix tells u s 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 developmen t strategy. This includes focus on Water and Juices products, and catering to he alth consciousness of people through introduction of different coke flavor and m aintaining basic coke flavor. Further company should integrate with other compan ies, acquisition of potential competitor businesses, innovation in branding and aggressive marketing strategy can bring long term profitability. 48