Business Strategy On Coca Cola r4u3a

Business Strategy of

1

Introduction Coca-Cola is a very popular cola (a carbonated soft drink) sold in stores, restaurants and vending machines in more than 200 countries. It is also known as Coke. Coke is one of the world’s most recognizable and widely sold commercial brands and. The major rival of coke is major rival is Pepsi.

Coca-Cola was invented on May 1886 by Dr. John Stith Pemberton in Jacob's Pharmacy in Atlanta, Georgia. The first sales of coke were made from that pharmacy. For the first eight months only nine drinks were sold each day. The name Coca-Cola was suggested by Pemberton's book-keeper, Frank Robinson. He penned the name Coca-Cola that is famous today. Coca-Cola was sold in bottles for the first time on March 12, 1894, and cans of Coke first appeared in 1955.

The

Coca-Cola

Company

merged

some

of

its

company-owned

operations with two large ownership groups that were for sale, the John T. Lupton franchises and BCI Holding Corporation's bottling holdings, to form Coca-Cola Enterprises Inc. The Company off ered its stock to the public on November 21, 1986. The adjusted price per share is $5.50. The company became stronger when after merger with the Johnston Coca-Cola Bottling Group, Inc. (Johnston) in December 1991. Presently The Coca-Cola Company is the largest soft drink company in the world. Every year 800,000,000 servings of just "Coke" are sold in the U.S alone.

2

Vision To achieve sustainable growth, the company has established a vision with clear goals. Profit: Maximizing return to shareowners while being mindful of our overall responsibilities. 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 beverage brands that anticipate and satisfy peoples; desires and needs. Partners: Nurturing a winning network of partners and building mutual loyalty. Planet: Being a responsible global citizen that makes a difference.

Mission It declares the purpose as a company and serves as the standard against which the company weighs the actions and decisions. It is the foundation of company manifesto. To refresh the world in body, mind and spirit. (Market, Customer, Philosophy) To inspire moments of optimism through the brands and actions. (Products) To create value and make a difference. (Self concept) 3

The Corporate Objective Strategic Goals These strategic goals are decide by the top management with consultation by the parent company head quartered at Singapore. They are: • To continue to be an organization providing the quality products to the valuable customers. • To select and retain the professional people for the organization. • To project an outstanding corporate image. • To satisfy the customer through extra ordinary service and an excellent service along with the complete tactical and operational .

Tactical Goals The top management of the company on an annual basis devises these goals together with the consultation of the lower level employees.

Operational Goals Operational goals are decided by the top management in consultation with the lower level employees. They are following the concept of management by objectives (MBO). Each employee is assigned its goals and is told what is

4

expected of him and then he is evaluated on the basis of certain rules and regulations followed evenly by the company.

Major Competitors Pepsi Co PepsiCo is a world leader in convenient foods and beverages. The revenue of the company is about $27 billion and the number of employees is 143000. PepsiCo brands are available in nearly 200 countries and territories. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001. The new name, “Pepsi Cola”, is derived from the two of the principle ingredients, Pepsin and Kola Nuts. It was first used on the August 28. At that time, Bradham’s advertising praises his drink as “Exhilarating, invigorating, aids digestion”.

Nestlé Nestle does not give that tough a competition to Coca-Cola as it mainly deals with milk products, Baby foods and Chocolates. But the iced tea that is Nestea which has been introduced into the market by Nestle provides a considerable amount of competition to the products of the Company. Iced tea is one of the closest substitutes to the Colas. The flavored milk products also have become substitutes to the products of the company due to growing health awareness among people.

In Bangladesh there are some others competitors, these are 5

Pran PRAN keeps its presence in carbonated soft drink producing cola, Lime and lemon. Its refreshing products are widely accepted in Bangladesh and international market.

RC Cola Consumers enjoy RC in more than 60 countries worldwide. Royal Crown Cola International products are sold through a global network of more than 100 franchised bottling plants and distributors. It has become one of the big competitors of coca-cola in Bangladesh. In rural areas RC cola is a very popular.

Product Line The Coca-Cola Company has on occasion introduced other cola drinks under the Coke brand name. The most famous of these is Diet Coke, which has become a major diet cola. The other cola drinks are also exists such as Cherry Coke, Coke Zero, and Vanilla Coke. The Coca-Cola Company owns and markets other soft drinks that do not carry the Coca-Cola branding, such as Sprite, Fanta, and others.

Coca Cola Company deals mainly in soft drink industry and these are some of its major brand. It also deals in soda and mineral water through the brand name Kinley.

6

Diet coke: Diet coke was born in 1982 and became the no. 1 sugar free soft drink in diet conscious America. It is also known as coca cola light drink in some countries. Now, Diet coke is the no. 3 soft drink in the world. Thums up: Thums up is known as strong fizzy taste. Thums up was introduced in 1977 and it was acquired by coca cola company in 1993.

Sprite: Sprite is sold more than 190 countrues and it is the no. 4 soft drink in the world. Today. Sprite is one of the fastest growth soft drink in the world.

Limca: the soft drink first launched in 1971 and from then it is one of the thirst choice of millions of customer.

Fanta: over the year fanta has occupied a strong marketplace. Fanta stands for its vibrant colour, tempting taste and tingling bubles. This drink is very favourite to the female consumers.

Maaza: Maaza launched in 1976 and in 1993 coca cola aquire maaza. It is dominates in fruite drink category.

Strategies Positioning Strategy It means that a company tries to give image to its product in the mind of the customers. To give a true and positive picture of the product is the best

7

positioning. The company should promote its good points or comparative advantage which it has over its competitor. Differentiation Strategy There are many bases on which a product can be differentiated but Coke has differentiated its product on the following base: Product Differentiation: Coke differentiates its product from its competitors on the basis of brand, quality and taste. Image Differentiation: Logo is used for image differentiation. Logo is what establishes a brand name in the consumer mind. It is the brands identification, signature and image.

Promotional Strategies Price Strategy Trade Promotion: Coca Cola Company gives incentives to middle men or retailers in way a that they offer them free samples and free empty bottles. By this these retailers and middle man push their product in the market. That's why coca cola seen more in the market. They have a good sale in the market because according to the expert which product seen more in the market that sells more."Seen as sold".

Sale Promotion Coca Cola Company also does sponsorships with different college and school's cafes and sponsors their sports events and other extra curriculum activities for getting market share. Normally they keep their freezers near the entrance of the stores. Sale Promotion Company also does sponsorships 8

with different college and school's cafes and sponsors their sports events and other extra curriculum activities for getting market share.

Getting shelves Coca Cola gets or purchase shelves in big departmental stores and display their products in those shelves in that style which show their product clearer and more attractive for the consumer.

Distribution Channels Coca Cola Company makes two types of selling o Direct selling o Indirect selling

1. Direct Selling: In direct selling they supply their products in shops by using their own transports. In this type of selling company have more profit margin. 2. Indirect Selling : They have their whole sellers and agencies to cover all area. For providing their product in good manner company has provided infrastructure these includes, Vizi cooler, Freezers, Display racks etc.

ment Strategies Coca Cola Company use different mediums for ment. • Print media • Pas material

9

• TV commercial • Billboards and holding

Competitive strategies Coca-Cola is a dominating force in the beverage industry and sets a very high standard of competition. Research shows that its trademark is recognized by over 94% of the world’s population. There are many factors contributing to Coca-Cola’s success: Marketing: Coca-Cola was among the pioneers of advertising techniques and styles used to capture an audience. It was around 1900 when Coca-Cola began presenting their signature drink as a delicious and refreshing formula. This slogan has been repeated for over the last 100 years for selling Coke all over the world. The image has been subconsciously installed in our brain by the advertising campaigns. Innovation: Coca-Cola has been able to survive in the ever changing market because of its ability to systematically innovate and deliver new products. It was apparent that the market was changing and in order to keep up with these changes, Coca-Cola had to move from a single core product to a total beverage company. The company began operating in a decentralized environment that was unfeasible in previous years. Now Coca- Cola offers nearly 400 different products in and is still dominating the beverage industry. This is made possible by the company’s ability to innovate and adapt to changing markets.

10

Globalization: Technology is continually changing business, and these constant changes have been making it more feasible and profitable for businesses to expand their operations globally. Now, Coca-Cola is taking advantage of the large revenue opportunities made possible by participating in a global market and now offers products in 200 countries around the world.

Financial analysis of Coca Cola Company Latest 12 Months Data Items (Latest Full Context Quarter Ending Date (2010/03) Gross

Pre-Tax

Profit

Margin

Profit Interest

Current Ratio

Coverage

Margin 1.3 29.7%

27.0

Quick

Receivables

Asset Turnover

Ratio

Turnover

68.8%

Return

on

Invested Capital 0.7

0.9

9.2

Most

24.2%

Recent

Data Return Total Debt/

Assets

on 5-Year Averages Return

on

Return

on

Invested Capital 11

Equity

Equity 14.9%

28.5%

25.1%

0.47

Gross

Net

Profit Current

Profit

Margin

(Total Ratio

Margin

Operations)

68.5%

20.6%

5-Year Avg. 12 P/E Ratio 20.7

16.9

P/E 5-Year High P/E Ratio 26.3

Month

Normalized

P/E

Ratio 16.6

Source: idoub.com Factors Affecting Sales There are so many factors, which affect the sale of coke. Here we are discussing two major factors which effects coke. 

Per capita income



Weather

Per Capita Income 12

This is major factor that affects the sale of this soft drink. Because, every ing year the budgets are becoming very strict and tight in order to purchase things. So the disposable incomes of the people are coming down. They spend heavily on rents, utilities, and education and basic necessities and after that when they get extra money they think about this soft drink. So the decreasing per capita income effects badly in selling and production of this soft drink.

Weather Weather is also the major factor in effecting the Coke’s selling. This is underdeveloped market so the coke’s consumption in summers is 60% and in winters is 40%. Threats from Competitors Price is the major threat. Though the price goes certain beyond the exact price whether come down or go higher its effects the consumption of soft drink. Because when the prices go higher people go for the substitute of “coke” i.e. Pepsi and when price goes down the people think that there is must be some thing wrong in it. It all depends on customer’s perception. So, price is an important factor for the success of the company.

The PESTLE Analysis A scan of the external macro-environment in which the firm operates can be expressed in of the following factors: 

Political 13



Economic



Educational



Social



Technological

Political Analysis for Coca-Cola The following are some of the factors that could cause Coca-Cola company's actual results to differ from the expected results,  Changes in laws and regulations, including changes in ing standards, taxation requirements, (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign jurisdictions.  Changes in the non-alcoholic business environment. These include, without limitation, competitive product and pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors.  Political conditions, especially in international markets, including civil unrest, government changes and restrictions on the ability to transfer capital across borders.

Economic Analysis for Coca-Cola Economic factor can affect the consumption of soft drinks. When there is economic crisis all over the world people buy their basic need products such as food, cloths etc. As a result of this the sales of coke goes down. But as the economy recover slightly consumers are now resuming their normal habits, going to the malls, car shopping, and eating out at restaurants, it create positive impact on the sales of coca cola. Again, If the economic conditions of the country is not that strong and Coke increases its Price in this situation. 14

Then it would impact highly negative. And inflation is also not a good position for any country’s production point of view. It also impacts highly negative in the Coke’s production.

Educational The Coca-Cola Company has always believed that education is a powerful force in improving the quality of life and creating opportunity for people and their families around the world. All over the world, the coca cola company is involved in innovative programs that give hard-working, Knowledge-hungry students books, supplies, places to study and scholarships.

Social Analysis for Coca-Cola As people are more health conscious day by day, many of them are switching to bottled water and diet colas instead of other alcoholic beverages. Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. This will continue to affect the non-alcoholic beverage industry by increasing the demand.

Technological Analysis for Coca-Cola Technological change creates opportunities for new products and product improvements and of course new marketing techniques. Some factors that cause company's actual results to differ materially from the expected results are as follows:

15

 The new technology of internet and television which use special effects for advertising through media. They make some products look attractive. This helps in selling of the products.  Introduction of cans and plastic bottles have increased sales for CocaCola as these are easier to carry and one can bin them once they are used.  Due to introduction of this machineries the production of the Coca-Cola company has increased vastly then it was few years ago.

SWOT Analysis Strength World’s leading brand The company has a leading brand value and a strong brand portfolio. . Business-Week and Interbrand, a branding consultancy, valued Coca-Cola at $67,000 million in 2006. The company 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. Coca cola has made huge amount of investment in promotional activities all over the world. Consequently, CocaCola is one of the best recognized global brands.

Large scale of operations Coca-Cola has a large scale of operation with revenues in excess of $24 billion. Coca-Cola is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. Coca-Cola owns 16

and

operates

32

principal

beverage

concentrates

and/or

syrup

manufacturing plants located throughout the world. The company’s large scale of operation allows enhancing its revenue.

Strong 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, ed for 34.8% of total revenues during fiscal 2006. Healthy revenues growth rates in these segments contributed to top-line growth for Coca-Cola.

Global Distribution Coca cola is available in each and every part of the world as it is operating globally in more than 200 countries. Innovation It always launches innovative products like diet coke, vanilla coke and many others.

Research and development: Coca cola has strong research and development department.

17

Brand loyalty Coca cola enjoys the brand loyalty from the customers Weakness Negative publicity The company received some sort of negative publicity. For example, 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.

Decline in cash from operating activities: The company’s cash flow from operating activities declined during fiscal 2006. Cash flows from operating activities decreased 7% in 2006 compared to 2005. Net cash provided by operating activities reached $5,957 million in 2006, from $6,423 million in 2005. Coca-Cola’s cash flows from operating activities in 2006 also decreased compared with 2005. Declining cash from operating activities reduced availability of funds for the company’s investing and financing activities.

Opportunities Possible growing opportunities 18

In a country like India the per capita consumption of coca cola per year is the lowest in the world that is only 6 per person. So, there are a opportunity of enhance market share.

Coca Cola Bottling System It also allows the company to take advantage. Most of the bottling companies are under the control of coke which gives that much of flexibility in the pricing strategy where the rival cola giant pepsico does not have its own bottling companies. So, they can not enjoy that much of flexibility the pricing strategy of PepsiCo.

Expansion into new market Coke is enjoying so good brand name. So if they enter in any other industry with same brand name it can also succeed in that industry.

Merge Merge with other global business is another option in front of them to expand their business.

Threats The company faces intense competition in various markets from regional as well as global players. The company also faces competition from various nonalcoholic beverages including juices and nectars and fruit drinks.

19

Dependence on bottling partners In 2006, approximately 83% of its worldwide unit case volumes were produced and distributed by bottling partners in which the company did not have any controlling interests. Many of its bottling partners have the right to manufacture or distribute their own products or certain products of other beverage companies. These bottlers may give more resources to business opportunities or products other than those beneficial for Coca-Cola.

Competition Its competition from Pepsi is a big threat to the company as the market share of Pepsi is more than coke in a country like India.

Conclusion The Coca Cola Company has a very rich history and spread over the world. 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. Further company should integrate

with

other

companies,

acquisition

of

potential

competitor

businesses, innovation in branding and aggressive marketing strategy can bring long term profitability.

References  www.coca-colaindia.com  www.cocacola.com  www. world.book.com

20

 http://www.thefinancialexpressbd.com/more.php? page=detail_news&news_id=11615&date=2007-09-19 Date- 02-122011  http://www.idoub.com/doc/9995196/Swot-Analysis-of-Coca-Cola Date- 02-12-2011 date 02-12-2011  http://www.idoub.com/doc/60374643/Business-Development-by-

right-execution date- 02-12-2011

21