Ife and Efe Matrix Sm

COCA COLA COMPANY (COKE) EXTERNAL FACTOR EVALUATION MATRIX: EFE

1. 2. 3. 4. 5.

6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

20.

Key External factors Opportunities Growing market for sports drinks Sales of Pepsi.co declined domestically Bottled tea is fastest growing drink in industry China is huge coke customer Coke should also acquire confectionary  business to compete with Cadbury Schweppes Bottled water consumption has increased Coke should introduce complementary health conscious food with drinks Advertisement of unpopular products Increase global expansion like competitors. Sponsor fitness programs Threats Rising cost of raw material Limitation of water in some countries Ban of selling soft drinks in some countries Higher revenues of competitors from snack division and soft drink business Huge no of substitutes Competitors are more focusing on energy drinks Low value of dollar Pepsi co is doing well in fitness market Federal regulation may prohibit Coke and Pepsi co for bidding up Cadbury carbonated soft drinks. Warning label against coke ingredients Total

Weights

Rating

Weighted score

.08 .05 .06

3 4 3

.24 .2 .18

.07 .03

4 2

.28 .06

.06

4

.24

.09

4

.36

.01 .07

2 3

.02 .21

.03

2

.06

.04 .08 .07

3 3 4

.12 .24 .28

.07

4

.28

.03 .02

3 4

.09 .08

.02 .04 .04

3 3 2

.06 .12 .08

.04 1

2

.08 3.28

INTERPRETATION:

The weights in EFE matrix show us the how important is the external factor for the firm in term of threat and opportunity. Rating 1-4 to each factor indicate whether the factor represents a major  weakness (rating=1),minor weakness (rating=2),minor strength (rating=3),major strength (rating=4).The highest weight .09 is given opportunity to introduce complementary health conscious food with their drinks as trend towards healthy eating is increased globally; rate 4 is given to it as being superior opportunity and .08 is assigned to expanding product line into sports  products for athletes as also they are sponsor of many sports events like Fila world cup. Also .08 for limitation of water in some countries as water is used as a main substance in soft drinks with rate 3.Sales of Pepsi declined domestically so Coke can work on its availability locally to earn more profit it is rated 4 in terms of good opportunity. Bottled tea is fantastic opportunity in the industry so to increase the revenue they have to grab the opportunity. Rate 3 is given to it. China is a huge Coke customer with weight of .07 Coke has to introduce more products over there as they have strong brand image with rate 4.In order to compete with Cadbury they should adopt confectionary business also, to remain competitive and invest in diversified market. Bottled water consumption has increased so coke has to add up different water flavors in their product line. Also make ads for their unpopular products so that customers are aware of them and  purchase them. Increase global expansion in terms of all products to generate more revenues like Pepsi Co.Sponser fitness programs to make their brand image strong as health conscious drink  and promote their diet Coke. Some of the major threats to Coke are ban of selling soft drinks in some countries due to obesity issues. Competitors are earning major revenues from the snack  division e.g. Frito-lays so Coke have to introduce its snack division to counter this threat. Competitors are more focusing on energy drinks in product line on customer choice for  minimizing the threat Coke also has to add up energy drinks in product line. The above threats are given rating 4.Other threats are rising cost of raw material with .04 weight which can cut demand by increased  prices. Huge no of substitutes in local and foreign markets are threat for  cok e’s profit level with weight .03 and rate 3.Low value of dollar results in lower gains has weight of .02 and rate 3.Weight .04 and rate 3 is given to Pepsi Co is doing well in fitness market which can hurt coke’s profit. Federal regulation may prohibit Pepsi Co and Coke for bidding up Cadbury’s carbonated soft drinks so they can’t acquire it with weight .04 and rate 2.Weight of  .04 and rate is assigned to warning label against Coke ingredients hurt its sales. The weighted

score (weights multiply by ratings) of 3.28 shows that Coke is taking advantage of opportunities and good in minimizing the threats facing the firm.

INTERNAL FACTOR EVALUATION MATRIX: IFE Key Internal Factors Strengths 1. Innovative packaging 2. Collaborating with customers 3. Market Leader 4. Strong leadership team 5. Dealing in powerful brands 6. Earn more than 1.5 billion as coke distributed through restaurants, groceries and street vendors. 7. A strong social image by sponsoring many programs for youth. 8. Digital marketing platform 9. Operation 10. Reward system Weaknesses 11.. Trend towards healthy eating and drinking 12. Not all soft drinks are available in all operating groups 13. Low sales in Japan 14. Product line is limited to brewages 15. Market positioning as a city based brand 16. Affordability of coke in some areas 17. Net income less as compared to competitors 18. Operating revenues declined in Africa division. 19. Less no of employees 20. Price less of competitors in some areas Total

Weights

Rating

Weighted scores

.01 .07 .09 .08 .04 .05

3 4 4 3 4 4

.03 .28 .36 .24 .16 .2

.06

3

.18

.03 .07 .03

3 3 4

.09 .21 .12

.08

1

.08

.07

2

.14

.02 .07 .05 .06 .04

2 1 2 2 1

.04 .07 .1 .12 .04

.02

1

.02

.03 .03 1

2 2

.06 .06 2.6

INTERPRETATION:

Weights in IFE matrix describe relative importance of factors to the success of firm. Rating assign to each external factor indicate how effectively firm’s current strategies respond to the factor, where 4=superior response,3=above average response,2=average response and 1=poor 

response. Here highest weight of .09 is given to the strength of Coke as a market leader being a transnational company it has the highest market share in the beverages industry. Weight of .08 is given to the trend towards healthy eating which can damage the Coke revenues as a carbonated drink contains lots of sugar and chemicals. Also .08 is given to strong leadership team because running a successful company is impossible without team work. Major strengths of the company are rated as 4. Coke Company has the following major strengths like innovative packaging then competitors, collaborating with customers for repeated purchases, market leader as having highest market share, dealing in powerful brands for diversification, earning more than 1.5  billion revenue from selling through restaurants, street vendors and groceries and reward system for employee morale. Other minor strengths are with 3 ratings. A strong social image by sponsoring many events like coke studio, fifa world cup etc, digital marketing platform to connect with customers and know more about them and effective company’s operations that results in increase revenue. Some of the weaknesses of Coke Company are not all soft drinks  products/ flavors are available in all operating groups’ results in less revenue. Low sales in Japan due less demand. Product line includes beverages only while Pepsi and Cadbury and their  competitors deal in diverse products. Market positioning of Coke as city based brand, not focus on rural areas in their ads. Affordability of coke in some areas makes it less desirable in those areas.Net income is less compared to competitors means less cash flow for growth, Operating revenue declined in Africa leads to less profit from that areas, less no of employees so company needs to design compensation plans to motivate employees, Competitors less price to some  products in less developed area results in demand cut of coke in that areas. The weightage score of IFE is 2.6 which is above 2.5 (average) that means that firm has strong internal position but still there is room for improvement as the optimum score is 4.Firm has to introduce more healthy  products in soft drinks and snacks also make it more available internationally to improve their  weightage score of firm’s internal factors.