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 caramelcolored syrup in a three legged 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 reduces 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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Introduction ○ Brand Name: Coca-Cola ○ Drink Type: Soft Drink ○ Coca-Cola: Coca-Cola is the most popular and biggest-selling soft drink in history, as well as the best-known product in the world. ○ Available in the following flavors: Cola, Cola Green Tea, Cola Lemon, Cola Lemon Lime, Cola Lime, Cola Orange and Cola Raspberry. Created in Atlanta, Georgia, by Dr. John S. Pemberton, Coca-Cola was first offered as a fountain beverage by mixing Coca-Cola syrup with carbonated water. Coca-Cola was introduced in 1886, patented in 1887, registered as a trademark in 1893 and by 1895 it was being sold in every state and territory in the United States. In 1899, The Coca-Cola Company began franchised bottling operations in the United States. Coca-Cola might owe its origins to the United States, but its popularity has made it truly universal. Today, you can find Coca-Cola in virtually every part of the world. From amongst the million companies across the globe we have selected this business for its strong business practices. The company, which we have identified for this project is Coca Cola. The main reason for selecting this company is that Coca-Cola has been ranked as a most popular soft drink in today world. Coca-Cola is a type of carbonated soft drink sold in stores, restaurants in more than 200 countries. It is produced by The Coca-Cola Company which is often referred to as simply Coca-Cola or Coke. Coke is one of the world’s most recognizable and widely sold commercial brands. Pharmacist John Smith Pemberton invented Coca Cola in 1884. According to the 2005 Annual Report, the company sells beverage products in more than 200 countries. In general the Coca Cola Company (TCCC) only produces syrup concentrate, which is then sold to various bottlers throughout the world who hold a Coca Cola franchise. The Coca Cola Company offers nearly 400 brands in over 200 countries, besides its namesake Coca Cola beverage.
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Mission, Vision & Values The world is changing all around us. To continue to thrive as a business over the next ten years and beyond, we must look ahead, understand the trends and forces that will shape our business in the future and move swiftly to prepare for what's to come. We must get ready for tomorrow today. That's what our 2020 Vision is all about. It creates a long-term destination for our business and provides us with a "Roadmap" for winning together with our bottling partners.
Our Mission Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. •
To refresh the world...
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To inspire moments of optimism and happiness...
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To create value and make a difference.
Our Vision Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth. •
People: Be a great place to work where people are inspired to be the best they can be.
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Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.
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Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.
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Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.
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Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.
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Productivity: Be a highly effective, lean and fast-moving organization.
Our Winning Culture defines the attitudes and behaviors that will be required of us to make our 2020 Vision a reality.
Live Our Values Our values serve as a compass for our actions and describe how we behave in the world. •
Leadership: The courage to shape a better future
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Collaboration: Leverage collective genius
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Integrity: Be real
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Accountability: If it is to be, it's up to me
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Passion: Committed in heart and mind
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Diversity: As inclusive as our brands
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Quality: What we do, we do well
Focus on the Market •
Focus on needs of our consumers, customers and franchise partners
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Get out into the market and listen, observe and learn
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Possess a world view
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Focus on execution in the marketplace every day
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Be insatiably curious
Work Smart •
Act with urgency
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Remain responsive to change
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Have the courage to change course when needed
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Remain constructively discontent
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Work efficiently
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Act Like Owners •
Be accountable for our actions and inactions
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Steward system assets and focus on building value
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Reward our people for taking risks and finding better ways to solve problems
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Learn from our outcomes -- what worked and what didn’t
Be the Brand •
Inspire creativity, passion, optimism and fun
Complete List of Product:
International
○ Coca-Cola C2
○ Grape Soda
Products
○ Coca-Cola Zero
○ Orange Soda
○ Coke Classic
○ Diet Coke W/Lime
○ Caffeine Free Coke
○
Diet Coke W/Splenda
Classic ○ Diet Coke
○ Diet Cherry Coke
○ Caffeine Free Diet
○
Diet Barqs Root
○
Beer Barqs Root
Coke
Beer
○ Diet Coke ○ W/Lemon Cherry Coke ○ Vanilla Coke ○ Sprite ○ Diet Sprite ○ Diet Sprite Zero ○ Coke W/Lime
○
Dasani Raspberry Water
○ Lemon Water ○ Strawberry Water
Powerade
○ Citra Nestea Cool
○ Lemon Lime
○ Nestea Raspberry
(Yellow)
Fresca ○ Black Cherry ○ Peach Citrus
Fanta ○ Strawberry Soda
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Dasani Water
○ Fruit Punch (Red) ○ Mountain Blast (Blue) ○ Black Cherry ○ Lemon ○ Strawberry
○ Orange (Orange) ○
Arctic Shalter
○
(White)
○ Apple Juice
Cran/Apple/Rasp
○ Orange Juice
Fruitopia ○
Minute Maid Juice
Kiwiberry Ruckus
○ Strawberry Passion ○ Hi-C Fruit Punch Hi-C Pink Lemon
○
Cran/Grape
○ Tropical Citrus ○ Strawberry Passion ○ Berry Kiwi Approved Coca-
Minute Maid ○ Lemonade ○ Pink Lemonade ○ Strawberry Passion ○ Berry Kiwi ○ Tropical Citrus ○ Lemonade Light ○ Orchard Best Cranberry Juice
Cola Product List
Fuze Bottles ○ Green Tea ○ White Tea ○ Tropical Punch ○ Tangerine Grapefruit ○ Cranberry Raspberry
○ Strawberry-Melon ○ Banana Colada ○ Strawberry-Guava
Energy ○ Full Throttle ○ Sugar Free Full Throttle
Local Products ○ Coca cola ○ Diet coke ○ Sprite ○ Sprite Zero ○ Sprite 3G ○ Fanta ○
Fanta citrus
○ Kinley (Mineral water)
Overview of the Products of the Coca-Cola Company 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 top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries.
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Energy Drinks For those with a high-intensity approach to life, Coca Cola’s brands of Energy Drinks contain ingredients such as ginseng extract, Guarani extract, and caffeine and B vitamins.
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. 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 CocaCola Company are both icons and innovators in the beverage industry. 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 Tea and Coffee
Bottled and canned teas and
coffees
provide consumers' favorite
drinks in
Smooth andtake-anywhere essential, our packaging, Waters and Water Beverages offer convenient satisfying both traditional hydration in its purest form.
tea drinkers and today's growing coffee culture. Water
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SWOT Analysis Strengths 1. Leading brand value and a strong brand portfolio 2. Large investments in brand promotions 3. Sells its products in more than 200 countries 4. Large Scale of Operations 5. Leading Market Position 6. Strong cash flow from operations
Weaknesses 1. Coca-Cola has recently reported some "declines in Sales due to reduced consumer
purchasing power." 2. Entire infrastructure needs a face-lift. 3. Financial market volatility 4. Negative publicity 5. Sluggish performance
Opportunities 1. Targeting the ageing customers and the young and more environmental concern people. 2. Expansion – Reaching all segments. 3. Booming Global functional drink market e.g. Energy drinks
4. Intense competition 5. Catering to Health Consciousness of People 6. Bottled water growth 7. Acquisitions of smaller players.
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Threats 1. The threat of substitutes, however, is a very real threat. The soft drink industry is very
strong, but consumers are not necessarily married to it. 2. Economic Climate - Consumer buying power also represents a key threat in the industry. 3. Health and wellness concerns – Fruit Juice Companies 4. Intense competition (Pepsi, etc)
5. Commodity prices growth 6. Image perception in certain parts of the world. 7. Overdependence on Bottling partners
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Industry Features 1.Market Size & Growth Rate Today, Coca Cola has a portfolio of more than 3,000 beverages. The market size and growth rate of coke is high and there is a lot of opportunity that coke increase market size and growth rate, because the product line of coke include a different type of beverages and all beverage that made by coke according to the need of consumers. So, lot of chance available for coke that they increase industry growth rate and generate high profit margin. On the other side coke competitor also introduce different type of beverages but the product line of coke is high, but there is no chance that Pepsi capture coke market.
2.Coca Cola Life Cycle Stage
OLA C CA CO
INTRODUCTORY
GROWTH
MATURITY
DECLINE
Coca-cola is in a stage of growth according to a product life cycle analysis. It is recovering its market share very quickly which it had lost in previous years although there is
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good competition in market but it is still recovering and enjoying healthy profits. There are no barriers for new entrants, and many companies are entering in this industry because of healthy growth.
3.Number of Rivals If we talk about the number of rival in the beverages industry so the strong rival of coke is: •
PepsiCo (direct & strong competitor)
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nestle (indirect competitor)
•
Gourmet cola (Potential competitor)
1.Major Customers Need First of all the majority don’t care that what they are going to have. In other words, they don’t care before drinking that whether it is “Pepsi” or “coke”. They don’t actually differentiate between these two brands in order to their tastes. Consumers basically drink what they get. They believe on “What Cold They Sold” Consumer’s availability in brands is basically works like: •
Push availability
•
Pull consumer’s demand.
For this reason Coca-Cola have provided their coolers and freezers in the market. They have maximum number of coolers and freezers in the market. They provide this infrastructure free of cost just to provide child coke to their customer, which they want to be purchase. Their salesman and mechanics regularly visit all the shops where coke has its infrastructure to check that either it is in proper condition or not, if not then they immediately change or repair it.
1.Production Capacity Of Coca Cola
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Coca cola production plant is the world sixth largest production plant. They are working in more than 200 countries through FDI, licensing and franchising. So they are heavily investing on their production capacity improvement. In almost every country where they are working they have their own production plants. They are rapidly growing their market in Middle East and central Asian countries.’’ Their fastest production high technology can produce a faster than an eye see.’’ They are continuously improving their production system because for them efficient production at minimum cost is real achievement. They are emphasizing on their bottling plan process for quick filling. Their bottling system is best all over the world. Their one assembly line can produce 2000 cans in minute. From their one production line they have 25000 bottle storage capacities per minute. Approximately 250 Lorries leave daily.
2.Pace of Technological Change "To continue to provide the highest level of service to The Coca-Cola Company by using technologies to improve efficiency, leverage existing knowledge, and proactively mitigate legal issues by educating clients on key issues affecting the Company, while at the same time recognizing the constraints of cost, supportability, and compatibility with the overall Company's Information Technology strategy." The coca cola company has always worked for bringing in technological changes to meet the customer needs. These are the various examples of latest technology adopted by the company ○ Coca-Cola Seeks Edge With 120-Drink Jet Fountain ○ Interactive Vending Machines ○ Coca-Cola Commits To Climate-Friendly Refrigeration ○ Worldwide MasterCard Acceptance ○ Water Treatment at the Coca Cola Co.
1.Vertical Integration Coca cola vertical integration system is one of its major systems that are helping them to achieve the economies of scale. They are using both forward & backward integration. If we talk about backward integration they owned their supplies of soda, bottling, water filtration. In
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downward stream they have their distributors, franchisers, and licensees. Why coca cola, channel management is active, & why they purchase their suppliers because they don’t want to build the monopoly to any distributor who will influence them later on. In this way they save & secure themselves from their upper & down steam channel member’s conflict.
2.Product Innovation ○ 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. ○ 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. ○ Product innovation is the major driver for soft drink industry because for long term sustainability and to fulfill the consumer demand according to their choices product innovation is the tool that helps the companies in this regard.
9. Degree of Product differentiation If we talk about the degree of product differentiation, so coke has a lot of product through which coke easily differentiate their product such as coke beverage Minute Maid. There is no substitute of this product available, so we say that coke has a degree of product differentiation.
10. Scope of Competitive Rivalry The Pepsi competitive rivalry scope is high in case of coke and Pepsi because the competitor of coke is strong and there is a chance if coke competitor work fast on their beverage line of product, then may be Pepsi beat coke. If Pepsi introduced new innovative and differentiation product from coke. So we say that the scope of competitive rivalry is high and there is a strong competition between these because both companies work international level and every time the struggle of every company is to beat their rivals.
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11. Economies of Scale If we talk about the economies of scale we see that due to increase in the production of coke the price of coke bottle fall.
Porter’s Five Forces Soft drink industry is divided into two segments namely production of soft drink syrup and manufacturing and/or distribution of soft drinks in retail level. Coke chose to concentrate their operation on the first segment while intimately depending on independent bottlers companies. Basically, the company is engaged into blending raw material ingredients (product planning), packaging in plastic canisters (market research) and shipping to bottlers (advertising). Rivalry condition is concentrated on two main actors – Coca-Cola and Pepsi Cola – thus, the emergence duopoly competition or the Cola wars. The term Cola war was invented to describe the extent of campaigns of mutually-targeted advertisements between the two cola giants. Through these advertisements, the two companies attack each other and therefore a tough competition that strategically hampers the profitability of each other. Existence of substitute products is wide and thick and substitute products for Coke reached the market where Coke has a strong presence. Apart from the primary rival (PepsiCo), the company finds intensified competitions on companies that produce, market and sell teas, beers, milk, coffee, wine, powered drinks, juice, bottled water, sport drink and other refreshments causing a significant decline in Coke prices. To reduce threats, Coke embraced the idea of bottling and concentrated on product diversification. Penetrating the soft drink industry is hard because of the established name of Coke; hence, new entrants must first overcome the remarkable marketing muscle and marketing presence of Coke. Other barriers to new entrants are the: direct-store-delivery (DSD) strategies and the Soft Drink Inter-Brand Competition Act of 1980. Respectively, Coke has long-term
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relationships with their retailers and distributors making possible the defense of the position by means of discounts and other tactics, and regulation make it impossible for new bottlers to enter areas where an existing bottler operates. Bargaining power of suppliers is low due to two reasons. First, the main inputs are sugar and packaging. Sources of sugar are on the open market which subsequently makes the creation power of suppliers at low levels. There are several suppliers for packaging as well as the abundance in supply of inexpensive aluminum. Second, direct negotiations from concentrate producers to suppliers are present; an initiative to encourage reliable supply, faster delivery and lower prices. Bargaining power of buyers depends on the marketing channel used. For Coke, there are five core channels such as food stores, convenient stores, fountain, vending machine and mass merchandisers. The bargaining power of buyer is high for fountain supermarkets and mass merchandising because of the low profitability and strong negotiation power of retail channels but for vending bargaining power is non-existing caused by high profitability.
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PESTEL Analysis Political Factor In Pakistan Taxation polices are governed by Federal board of revenue. And tax duties for different commodities are varying to the great context. i.e. food products & automobiles. The current environment a business is also unfavorable due to terrorist attacks. The law & order situation is also posing threat for commercial activities. This is one of the helping instruments for multinationals for doing a business in different countries. Coca cola has no problem from doing business in Pakistan, because of GATT rules; and Govt. also supporting the FDI inflow in Pakistan. Coca-Cola is monitoring the policies and regulations set by the government. There are no political issues in this instance.
Economic Factors High inflation rates are also disturbing the disposable incomes of the consumers. The major reasons of low GNP growth are, low productivity, high unemployment rate, high inflation, low development budget & high defense budge, frequent increase in central bank interest rate. Devaluation of currency and low foreign reserves are also posing threats for the development of economy. Another major hindrance of business activities in Pakistan is electricity shortage. Economic factor is major threat in external environment for coca cola; because due to instability in economy the major problem that they are facing is “Getting Maximum Output With Minimum Input” the reason is due to shortage of electricity and devaluation of currency they are suffering to get economies of scale, and increase in oil prices, sales tax and inflation the price of per unit output has been increased. The prices of per bottle in the market have also increased.
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On coca cola business; the impact from consumer side is positive because Pakistani economy is consumption based economy, and the nature of their products is; such for that consumers don’t have to do much planning and saving to buy a product.
Social Factors The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, cultural heritage, view toward wealth and income and scientific methods, respect for seniority, mobility of labour etc. have far-reaching impact on the business. These factors determine the work culture and mobility of labour, work groups etc. For instance, the nature of goods and services to be produced depends upon the demand of the people which in turn is affected by their attitudes, customs, so as cultural values fashion etc. Sociocultural environment determines the code of conduct the business should follow. In Pakistan people are very hard worker, trend of working for long hours, high population density, joint family system, use of child labour, availability of unskilled labour, high youth population are some of traits of Pakistan socio- environment. As majority of Pakistani population is consist on Muslim community, so they have to be careful for using ingredients in manufacturing process. And the other factor that they have to follow according to their culture is advertising messages. In Pakistan religion & culture are those factors if companies try to go against them people treat it against the people of Pakistan. But coca cola is strictly following these factors. Due to high population density and trend of working long hours; cheap labor is easily available. High youth population is an indicator/ surety for long survival in Pakistani market.
Technological Factors The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used. Technological environment
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influences the business in terms of investment in technology, consistent application of technology and the effects of technology on markets. In Pakistan, advancements in automation and information technology have posed the challenging situation for the organisations in future. Impact of technical Factors on Coca Cola Business in Pakistan Coca cola is not facing as such tough situation from Pakistan especially in technological environment. Actually coca cola adopt its own technical knowhow, technical procedures and equipments all over the world for maximum output. The technical progress in Pakistan especially in IT sector would bring positive impact on coca coal
Environmental Factors: Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities. The company is in the process of setting specific global targets, in addition. The company has worked hard to advance community recycling programs; they know that public education is a key to preventing litter. Coca Cola system supports numerous litter prevention and community beautification organizations around the world, including “Keep Australia Beautiful” in Australia, the “Tidy Britain Group” in Great Britain and “Keep America Beautiful” in the United States. In 2007, the company invested in designing and producing sustainable fashion apparel made from recycled PET bottles. The T-shirts are made from a blend of recycled PET bottles and cotton and feature playful slogans such as “Make Your Plastic Fantastic” and “Rehash Your Trash.” Coca Cola launched their sustainable fashion line of apparel and consumer products at the new World of Coca-Cola in Atlanta, Georgia.
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Legal Factors In recent years in UK there have been many significant legal changes that have affected organizations behaviour. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organization’s actions. Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service). They perform thorough study of legal and political problems to decide to enter into any country. They track the previous record of the ruling party and policies. They also keep in mind the attitude of other opposition parties about foreign companies. If any problem arises regarding political or legal issues, they don’t sacrifice their policies and secrecies, as we have a case of COKE AND INDIAN GOVERNMENT. When Indian Government asked to have formula for the concentrate and they deny and left the huge Indian market.
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Drivers of Change 1. Growing use of internet and internet application The Internet continues to change the world in ways that were completely unforeseen a generation ago—from the way people communicate to how they receive their news to where they purchase their books, clothes, and music. It is even changing the way employees report business misconduct. At the Coca-Cola Company (Atlanta), more ‘concerns’ about business conduct and ethics are now reported through the firm’s Internet portal than arrive via its ethics hotline (telephone). Indeed, about three-fourths (75 percent) of the company’s Ethics-Line questions and reports now arrive from its Internet portal as opposed to the telephone line (25 percent), according to Sharon J. Zealey, the company’s Chief Ethics & Compliance Officer. This is particularly surprising because less than half of Coca-Cola employees use a computer at their work site, notes Zealey. A lot of them use the telephone, but many are obviously connecting with the Internet portal via their home computers or from other areas, like Internet cafes. Coca-Cola’s Ethics-Line was established in 2005. From the start it included both telephone and web-based reporting mechanisms. “It was very important to provide Internet access,” says Zealey in an interview, and it was one of the reasons the company selected Ethics-Point, a third party vendor based in Lake Oswego, Oregon, as its hotline provider. That firm was able to do both. The internet applications are making the competition intense to some extent in soft drink industry. The one of example is internet advertising. But growing trend of e-commerce is also increasing the competition for soft drink industry. Internet application can lead to industry higher or lower profitability, because as explained earlier that internet applications are helping out soft drink industry in supply chain
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activities; so if a company is not adopting the internet application its supply may be not got the efficiency rate as compare to those that adopt the internet applications. And supply on the time, at right place is the main emphasis of this industry.
2. Product Innovation Product innovation is the major driver for soft drink industry because for long term sustainability and to fulfill the consumer demand according to their choices product innovation is the tool that helps the companies in this regard. This driver has great impact on the demand of industry products because with availability of various flavors of consumer’s choice and variety of brands and flavors in each category of beverage industry increased the demand of industry products. This driver has vital role in increasing the competition among rivals of soft drink industry. Because of new flavors and new brand war the competition is so intense even PepsiCo introduced its snacks as well with the brand name of Lays. The driver of product innovation can lead to lower or higher profitability of industry firms, because as I have explained earlier that with product innovation the consumers choices increased to the great extents now you don’t have only soft drink you have hundred of other products and flavors to quench your thrust. I.e. if you want to quench your thrust you have; juices, water, tea, coffee, soft drinks, sports drinks, energy drinks. So if a company is not following an industry trends it wouldn’t be able to capture as much market share as it want to. Now the competition is very intense and consumer choices are also increasing day by day. So product innovation is a strength that can insure the sustainability of any soft drink company.
3. Technological Changes As the worldwide leader in the beverage industry, The Coca-Cola Company has long worked to make sure our cold drink equipment meets the highest possible environmental standards. For the past three years, a special Company task force has been working to identify energy savings opportunities and integrate the use of alternative refrigerants and refrigeration systems. There various technical changes that boost up the demand and production of soft drink industry. The first change is internet and television technology which use special effects for
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advertising through media. They make some products look attractive. This help in selling the products. This technology helps to attract the customers in selling the products. Introduction of cans and plastic bottle also increased the sale for coca cola as these are easier to carry and bin once you used them. As the technology is getting advanced there is an introduction of new machineries for production all the time. With the introduction of these machines the production of soft drink industry increased tremendously then it was few years ago. CCE is a company in England that produces cans for coca cola drinks; they have state of the technology for soft drink industry they produces a cans faster than bullets from the gun machine. The greatest achievement of Coca Cola Company is environment friendly glass bottle launching that also won the award of light weight
4. Change in long term industry growth rate The changes in market & economic condition have impact on the business of soft drink industry; because the whole business effectiveness of this industry depends on economies of scales. Companies are able to achieve economies of scale when economic conditions are favorable. But In the wake of the current economic crisis, with inflation at a peak, huge price rises, redundancies, political instability in terms of terrorist activities and the weakening of the rupee against the US dollar and other currencies, over the forecast period the industry is not likely to enjoy tremendous support from consumers. Yet, manufacturers must see the positive side of the picture and be ready to tap into any potential opportunities even in today’s difficult climate. Despite these hard times, the soft drinks market is set to witness increasing consumption across all age and income groups, and will post a total volume CAGR of 3% over the forecast period.
5. Change in who buys the products and how they use it? This driver is related to the change in customer’s usage and buying habits. The change in buying habits about soft drink is “issues of health using soft drink” not probably in Pakistan but mostly in European countries people are health conscious and some of our health critics are also emphasizing that people should not regularly take soft drink it would create this and this health
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problems and with an increase in awareness level people are shifted towards fresh juices and other carbohydrate drinks.
6. Increasing globalization of industry The soft drinks industry was one of the earliest to be globalized. For years, three multinational companies - Coca-Cola, PepsiCo and Cadbury-Schweppes - have dominated the global market for soft drinks. Coca-Cola has been sold overseas for about a century, and its main competitors have been expanding abroad for decades. Together, the big three have controlled about 80 percent of the global market for many years. In some countries, their presence is overwhelming. In Chile, for example, two of the main bottlers of soft drinks are affiliated with Coke and the third with Pepsi. In India, Coke bought up the biggest local brands in the 1990s and now has a million retail outlets, according to a case study by the Institute of Chartered Financial Analysts of India's Center for Management Research; Developing countries often welcome the investment that the big three bring. The outsourcing, franchising & licensing culture aid the globalization of soft drink industry.
7. Marketing innovation Marketing innovation changed the whole scenario of soft drink industry because if it is said that marketing innovation contributed 90% for the success of soft drink industry it couldn’t be false. Its one of the example is value of coca cola brand. The value of only its brand mane is 120 billion us $ and the value of coca cola company except brand is only 50 billion us $. This shows that how important the marketing innovations are and how these are contributing towards the success of soft drink industry? The new ways of marketing a products has dramatically bring a change not only in soft drink industry but also all type of industry because in this era; products and customer choices are more but customers are few: it depends on the company that how they are differentiating their products and how they are positioning & convincing their customers that why should they purchase their products? Marketing let them all the tools; that how they should add value in their products and services? Marketing is all about adding value in your products & services!
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8. Entry or exit of major firms As the risk rate goes down in soft drink industry and Govt. regulations also supporting businesses after WTO agreement. The major change that happens fir coca cola specifically in Pakistan is entrance of local competitor in soft drink industry. AMRAT, MAKAH COLA, APNA COLA, SHEZAAN IN JUICES, NESTLE IN WATER, IN COFFEE NESTLE. The local competitor hit the coca cola business very strongly.
9. Changes in cost & efficiency The cost of production is changed & efficiency of out put produce also has been increased in a recent era; the major players are E-commerce, internet, advanced production machineries. Due to low cost of production companies become able to achieve economies of scale and got effectiveness in their business operations. This insures their higher profits.
10.Growing preferences for differentiated products: The consumer’s preferences for products are increased at a large scale, the one of the reason behind growing preference is advancement in media & internet and other one is marketing practices that led the base for different flavors of a single product and also create a desire for these products. This driver has a great impact on soft drink industry.
Companies started
providing different flavors according to the need & desire of their customers. What benefit they got from this driver? They customized themselves and showed that how concerned we are about our customers’ requirements. They also capture the maximum market share from offering different flavors, and products. Like coca cola 3G, diet cola, etc 11.
Reduction in uncertainty and business risk
Soft drink industry was established a century ago now it has covered all most every corner of world with totally customized strategy. Soft drink industry was the first one that started the foundation of global business. The business risk and uncertainty totally reduced in this industry products because these products are highly acceptable by the customer that’s why.
12.
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Regulatory influences & Govt. policy changes
Regulatory influences & Govt. policy changes have great impact on soft drink industry. In the United States and elsewhere, legislators, health experts and consumer advocates are considering levying higher taxes on the sale of soft drinks and other sweetened beverages to help curb the epidemic of obesity among consumers, and its harmful impact on overall health. Higher taxes could help reduce soda consumption. Taxes could also fund education to increase consumer awareness of the unhealthy effects of excessive soft drink consumption, and also help cover costs of caring for conditions resulting from overconsumption. 13.
Changing societal concerns, attitudes and life style
Societal concerns, attitudes and life style mostly bring these changes fashion industries, cosmetics and new ways of architecture of housing societies also tremendously changed the way of living and buying habits of people. People become more health conscious and hygienic concerned. This factor soft drink companies should recognize that in incoming years they should more secure themselves from any hygienic issue; that in current era most of the soft drink companies are facing in Europe. Like tooth decay and stomach problems issues that these drinks have.
14. Diffusion of technical knows how Countries bring a fruitful changes for the under develop countries. We discussed about the soft drink industry, one of reason of their success is technical knowhow diffusion to the foreign countries. In soft drink industry the major players are coca cola and Pepsi both are not multinational but are global companies. These are transferring technical knowhow to other countries through patents and licensing. This driver enables the soft drink companies to expand their businesses all over the world through franchising, licensing and patent rights. The technical knowhow also boost up the economic development of a host company; because mostly multinational companies deploy such technologies that enhance the personal growth of workers and also increase the production level of companies through which other industries also try to deploy the same technologies if that relate to their business.
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Strategic Mapping 1. Taste & Quality High
Coke
Pepsi
Nestle
te s a T
Medium
Low Low
Medium
High
Quality
2. Brand awareness & Advertisement High
Coke
Pepsi
Medium
s e w A d n a r B
Nestle
Low Low
Medium
Advertisement
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High
3. Market Expansion & Product Expansion
High
Coke Nestle Medium
Pepsi
io s n p x tE e rk a M
Others Low Low
Medium
High
ProductExpansion
Coke is above on the strategic mapping all the reasons are explained earlier because the strategic mapping is drawn from the previous data that is discussed in the PESTEL, DRIVERS OF CHANGE & in SWOT ANALYSIS.
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Scenario Planning Scenario planning or scenario thinking is a strategic planning tool used to make flexible long-term plans. It is a method for learning about the future by understanding the nature and impact of the most uncertain and important driving forces affecting our world. Many of the regular methods for strategy development assume that the world in three to ten years' time will not significantly differ from that of today and that an organization will have a large impact on its environment: they assume we can mould the future. Scenario planning however assumes that the future can differ greatly from what we know today. The method is based on creating a series of 'different futures' generated from a combination of known factors, such as ○ Globalization of industry ○ Technology changes ○ Inflation ○ Competitive position in the industry ○ Interest Rate ○ Product innovation ○ New competitors ○ Disposable Income
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○ Political instability ○ Religious issues
Environmental Ranking Chart
29
Scenarios
30
Chapter # 6
Key Success Factors The Coca-Cola Company is one of the largest, most successful and most widely recognized corporations in existence. 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, however, it is believed that their key success factors are
1. Technology Related KSF "To continue to provide the highest level of service to The Coca-Cola Company by using technologies to improve efficiency, leverage existing knowledge, and proactively mitigate legal issues by educating clients on key issues affecting the Company, while at the same time recognizing the constraints of cost, supportability, and compatibility with the overall Company's Information Technology strategy." The coca cola company has always worked for bringing in technological changes to meet the customer needs. These are the various examples of latest technology adopted by the company ○ Coca-Cola Seeks Edge With 120-Drink Jet Fountain ○ Interactive Vending Machines ○ Coca-Cola Commits To Climate-Friendly Refrigeration ○ Worldwide MasterCard Acceptance
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○ Water Treatment at the Coca Cola Co.
1. Manufacturing Related KSF There is lot of Manufacturing related key success factor of coke which are as:
a. Quality Control If we talk about the coke quality control then we say that coke made in all over the country under the license through which the consumer sees the consistency in coke taste due to this factor coke make it position good in market and capture a high market share. b. Low Cost Product Design In this case we say that the cost is no matter for product design because if we talk about the product of coke that is beverages and all beverages of coke will be make under a license and on the other side if we talk about the bottle design of regular coke, so in case of bottle design, coke patent there bottle design and no competitor of coke make the regular bottle of coke design. c. Customized Product Coke makes no customized products; all the product of coke will be standardized. 1.
Distribution Related KSF a. Strong Direct Sale Coke has no strong direct sale b. Strong Dealer Networks Coke has a strong dealer network due to this you will easily find coke in every
place of the country.
1. Marketing Related KSF
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a. Clear Advertisement Coca-Cola is seen as one of the founding fathers of the modern day marketing model. They were among the pioneers of advertising techniques and styles used to capture an audience. Through its intense marketing campaigns, Coke has developed an image that is reflected in what we think of when we buy Coke and what we associate with drinking Coke. This image has been subconsciously installed in our brain by the advertising campaigns that show Coca-Cola associated with “good times.” b. Fast Accurate Technical Assistance In the marketing related KSF many factors play role one of them is Fast Accurate Technical Assistance; it means that they flow of information in the organization need quick speed which is only held with the help of Technology. If we see the marketing reports then we come to know that the leader of industries have unique technology and due to their fast speed or quick response they tackle the market. An excellent example of this s Standard Charted Bank in Pakistan; the customer can withdraw its money through cheque from any branch in Pakistan within 5 minutes which is only possible due to their competitive technology. Same like this Coca Cola have unique ISI system which gives information of any sales made by their distributor within 10 minutes and after this company maintain next stock for that distributor and so on company made new products by analysing demand and supply. But on the other side Coke have a Disadvantage as their product nature is FMCG and their sellers need CHILLER to cool the product but company give it to after 1-2 months as requested by seller. The reason is that for their documentation till now there is old communication process. c. Accurate Filling of buyer’s order Customer services are the major key success factor of any organization especially for those organizations where employees have direct relation with customer such as BANK, shopping marts etc. If we observe WALL-Mart then we come to know that they have unique polices regarding their customer such as ○ Rule # 1 Customer is always right ○ Rule # 2 Customer is always right if he will ever wrong please read the rule # 1. Skills & Capability Related KSF:
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a. Product Innovation Coca-Cola has been able to survive and grow in an ever-changing market because of its ability to systematically innovate and deliver new products. Coca-Cola began to employ a strategy referred to as “play to win innovation.”The company began operating in a decentralized environment that was unfeasible in previous year’s .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. b. Globalization Today’s big business takes place on a global scale, and Coca-Cola is no exception. Technology is continually changing business, and these constant changes have been making it more feasible and profitable for businesses to expand their operations globally in order to serve all different types of diverse markets around the world. This global view is reflected in Coke’s recent “I’d like to teach the world to sing” commercial. Coca-Cola is taking advantage of the large revenue opportunities made possible by participating c. Design Related Coca cola is a part of the beverages industry. The product that coca cola produces does not need much design changes regularly. The drink is packed in the bottles. These bottles are made of glass and plastic. Design cannot affect the business of coca cola as far as key success factor is concerned. This point does not suit much as far as coca cola is concerned.
1. Other Types of KSF a. Overall Low Costs Coca cola is a giant in the beverages industry and is always active to cut down its overall costs to increase the profits. Coca cola reduces its cost by only producing the soda needed to produce the final product; the distributors of coke finish the rest of the product. This results in reduced costs for coca cola. Coca cola uses latest technology for producing the products. It is also planning to produce the bottles itself. This would also encourage the profits for coca cola in future.
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b. Convenient Location Coca cola is a global company and is doing business in more than 200 countries worldwide. The products of coca cola are most conveniently available to consumers worldwide. This is a very big key success factors for coca cola. c. After Sales Services and Repairs
This point of key success factors does not suit to beverages industry as the goods are mostly perishable and cannot be repaired. d. Access to Financial Capital Coca cola is a giant as far as access to financial capital is concerned. The company is a billion dollar company. The strength of the company is so much that it can purchase everything i.e. it can acquire any company easily because of strong financial capital. This is a huge success factor of coca cola.
Assessing the Competitive Strength Sr # 1 2 3 4 5 6 7 8 9 10
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Key Success Factor Quality Control Low Cost Production Supply Chain Mgt Clear Advertisements Globalization Product Innovation Brand Positioning Convenient Locations Taste Bottle Design Total
Coke 10 10 10 9 9 9 9 9 9 9
Rating Pepsi Others 9 5 8 5 6 4 9 5 8 2 8 4 7 3 9 3 7 2 8 0
Weights 5% 10% 8% 15% 15% 10% 6% 12% 15% 4% 100%
Weights * Rating Coke Pepsi Others 0.5 0.45 0.25 1 0.8 0.5 0.8 0.48 0.32 1.35 1.35 0.75 1.35 1.2 0.3 0.9 0.8 0.4 0.54 0.42 0.18 1.08 1.08 0.36 1.35 1.05 0.3 0.36 0.32 0 7.73 6.7 2.61
Internal Analysis 1.
Company is achieving its stated financial objectives Coca cola as I explained earlier led the foundation of soft drink industry. It is still leader in
soft drink industry all over the world since its establishment. The factors that make it able to be in the market over a century are their good financial returns that are continuously increasing year by year. According to the 2005 Annual Report, the company sells beverage products in more than 200 countries. The report further states that of the more than 50 billion beverage servings of all types consumed worldwide every day, beverages bearing the trademarks owned by or licensed to Coca-Cola account for approximately 1.5 billion (the latest figure in 2010 shows that now they serve 1.6 billion drinks everyday). Of these, beverages bearing the trademark "Coca-Cola" or "Coke" accounted for approximately 78% of the Company's total gallon sales. Also according to the 2007 Annual Report, Coca-Cola had gallon sales distributed as follows: ○ 42% in the United States ○ 37% in Mexico, India, Brazil, Japan and the People's Republic of China ○ 20% spread throughout the rest of the world In 2010 it was announced that Coca-Cola had become the first brand to top £1 billion in annual UK grocery sales
1.
Whether the company is above average industry performance The coca cola performance in the market is more than average not only in financial returns;
but also having high brand identity, complete beverage product lines, still having 40% expected growth rate in Asian market. 2.
Whether the firm sales are growing faster slower or above the same pace
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Coca cola’s sales all over the world with its competitor PEPSI co. are very sound the results are as follows:
(Source: us soft drink industry report) The above transcript is showing that coca cola sale all over the world are growing as compare to its competitor. 3.
Whether the company is acquiring new and retaining existing customers Coca cola is serving the whole beverage industry like: carbonated drinks ,water, juices,
coffee, flavored milk, energy drinks, canned hot drinks etc. due to health issue company is losing its soft drink consumers but on the hand the consumption of juices all also increased. So that’s why coca cola does not have as such effect on its customer reduction. As I have explained earlier why consumer take soft drinks; due that reasons like having soda in drinks also addict the consumers take again and again. These factors also enable the company to retain the customers.
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In real life you can imagine a regular coke drinker will not easily take a Pepsi or other carbonated drink, unless coke is not available or he/she are forced to take other drinks. 4.
Whether the firm profits margin are increasing or decreasing and how well its profit margins compare to rival firms The answer of this point is relevant to point # 3. Yes coca cola profit margins are faster than
its competitor PEPSI. 5.
Whether the firms overall financial strength and credit rating are improving or on decline The firm net revenues are 99% from beverages and 1% from others.
The above figures show that coca cola financial and credit rating strength are good and sound. 6.
Whether company demonstrate continuous improvement in such internal performance measures
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a. A day of inventory (Still pending) b. Employee productivity Increasing the employee’s productivity and connecting the sales force with company Microsoft help them to do so. They are using micro soft online services to do their jobs. Their CEO commented as follows: "John Brock, our CEO, challenged us to indentify better ways to connect all our employees... Microsoft helped us launch from a legacy infrastructure to a solution that provided better business value to all our people." c. Unit cost Fluctuations in the costs of production inputs can greatly affect CCE’s profit margins. After the 2007-2008 commodity super spike, prices for many of the raw materials necessary to produce and bottle beverages have steadily fallen, lowering CCE’s per-unit cost of production.CCE will take advantage of these falling price by locking them in through hedging. In this way, the company will be able to purchase future inputs at current prices, limiting the risk of future price increases. Some commodities that have a particularly significant impact on CCE's production costs are: ○
Aluminum - Used to make cans for packaging.
○
Corn - CCE uses high-fructose corn syrup, a corn derivative, to sweeten its non-diet, full-calorie drinks.
○
PET Resin - CCE makes all of its plastic bottles from PET resin.
○
Concentrates - Concentrates form the base of all beverages produced by CCE. These thick syrups are purchased from KO and a few other manufacturers a. Misfiled orders This point is not applicable at coca cola co. because they are very much efficient in
delivering orders at the time also adopting latest technology of e-commerce to connect their sales people where ever in the world they are. They also outsource their IT expertise to best manage the orders online. b. Delivery times The Coca-Cola Store ships most in stock orders to their vendor (B2B orders) within 1 business day of receipt. Shipping options are provided at the time of check out. You will always
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have an opportunity to see the full amount of your purchase with shipping charges before you confirm your order. Out of stock items usually ship within 10 business days. Orders with items on back order are held until they can be shipped complete. 1.
How shareholder view the company based on stock price and trend in stock market The shareholder of every company continuously watch the balance sheet of company, this
enables them to know that what is the financial worth of company what are its profits, losses, debit & equity ratio and volume, cash flows, growth rate in the market. Besides these factors there is an other factor that is the core advantage of the coca cola that is: it’s BRAND NAME! That is very much appealing to its shareholder. Because from last many decades coke is achieving the world top ten brand award. And its brand name worth is 150 billion US $. Due to this and earning good revenue paying good attention and connectivity through their Computershare service their shareholders is very satisfied with them.
2. Firms image and reputation with its customers AWARDS on customer performance: ○ Grocery customers (including Britain’s seven leading supermarkets) rated CCE as their No 1 supplier – for the third year running – in 2007. ○ Wholesale customers rated CCE as their No 1 supplier in 2007. ○ Convenience customers rated CCE as their No 1 supplier in 2007 ○ Food Service customers rated CCE as their No 1 supplier in 2006.* ○ On Trade (Licensed) customers rated CCE as their 3rd best supplier in 2006.* “Great companies have a clear vision and great leadership to develop a strategy to meet the business objectives of the company. Results suggest that CCE has a clear strategy, which is well communicated to its trading partners and which drives the success of the business. Results also confirm that CCE enjoys strong relationships with key customers, driven by a genuine desire to understand and meet their needs, where possible.” “The strong brand name recognition all over the world is the result of having good relation with customers.” (95% people vote)
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1.
How well company position against rivals a. Technology The basic technological difference that coca cola create is its bottling system that
differentiate it from its rivals b. Product innovation Product innovation in coca cola is only related to beverages. c. Customer services They have special performance measurement group that work only for its customer care and find out that how best they are performing for different types of customers. This effort shows their concerns about their customers. d. getting newly developed products to the market Their newly developed are to juices and other energy drinks less carbonated drinks.
Chapter # 8
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Value Chain Analysis As far as coca cola is concerned the cross business strategic fits can exist anywhere along the value chain of coca cola. We will discuss these value chains one by one and see how coca cola can strategically fit into these value chains:
R & D and technology activities Coca cola can fit into a kind of business where it can utilize its resources of R & D and technology. As we already know that the R & D and technology of coca cola is very strong. In the area of technology coca cola is very advance when we see their packaging and bottling technology. When coca cola will diversify into any other business which is related to its industry it will obviously have the advantage of its technological expertise. The coca cola company has always worked for bringing in technological changes to meet the customer needs. These are the various examples of latest technology adopted by the company ○ Coca-Cola Seeks Edge With 120-Drink Jet Fountain ○ Interactive Vending Machines ○ Coca-Cola Commits To Climate-Friendly Refrigeration ○ Worldwide MasterCard Acceptance ○ Water Treatment at the Coca Cola Co. For example there are different products which coca cola has introduced which are examples of related diversification like minute maid juice, water, tea and coffee, energy drinks etc. coca cola can use this technology to have a competitive edge in the market and it can reduce its costs at the same time as it already has a strong setup.
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Supply chain activities Businesses who have supply chain strategic fit can perform better together because of potential for skills transfer in procurement, greater bargaining power and benefits of collaboration with common supply chain partners. Coca cola has a strong supply chain network. It makes the syrup used to make the coke and gives it to its distributors and they make the final good. It also has contract with a bottling company which makes bottles for coca cola. So having such a strong supply chain network it can also diversify into relative business as this will help the company in reducing costs and increasing efficiency. Coca cola is using the same supply chain for its diversified products.
Production related Activities Coca cola has the World sixth largest production plant. One assembly line can produce 2000 cans in minute. Production line has 25000 bottle storage capacities per minute. So coca cola can also fit because of its production related activities. Such a strong production capacity will result in lower costs.
Distribution related Activities Separate contracts (‘‘Bottler’s Agreements’’) exist between our Company and each of its bottlers regarding the manufacture and sale of soft drinks. Subject to specified terms and conditions and certain variations, the Bottler’s Agreements generally authorize the bottler to prepare particular designated Company Trademark Beverages, to package the same in particular authorized containers, and to distribute and sell the same in (but generally only in) an identified territory. The bottler is obligated to purchase its entire requirement of concentrates or syrups for the designated Company Trademark Beverages from the Company or Company authorized suppliers. We typically agree to refrain from selling or distributing or from authorizing third parties to sell or distribute the designated Company Trademark Beverages throughout the
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identified territory in the particular authorized containers; however, we typically reserve for ourselves or our designee the right (1) to prepare and package such beverages in such containers in the territory for sale outside the territory and (2) to prepare, package, distribute and sell such beverages in the territory in any other manner or form. Territorial restrictions on bottlers vary in some cases in accordance with local law. Like all the other fits coca cola can diversify because of its distribution activities. Already having a separate distributor the other products can be similarly distributed to the markets.
Sales and marketing activities Many cost saving opportunities will arise for coca cola as single sales and marketing activities will be used to sell the diversified products. There will be a single sales force for the related products. Advertising of the related products will be carried out together. The strong company brand name is also important in this case. The new products will gain attractiveness because of the strong brand name.
Managerial and administrative support Activities Coca cola can also diversify because of its managerial and administrative support activities. Many times most of the businesses require same management, administrative and operating know how. The products which coca cola is producing are under the control of same management. This is a huge cost saving benefit for coca cola.
Cost advantage A business can achieve a cost advantage over its competitors by firstly understanding the costs that are associated with each activity and then organizing each activity to be as efficient as possible. Porter identified 10 cost drivers related to each activity in the value chain: 1. Economies of scale 2. Learning
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3. Capacity utilization 4. Linkages among activities 5. Interrelationships among business units 6. Degree of vertical integration 7. Timing of market entry 8. Firm’s policy on targeting cost or product differentiation 9. Geographic location 10. Institutional factors (regulation, union activity, taxes, etc.) A firm can develop a cost advantage by controlling these 10 cost drivers better than its competitors.
Consultancies 1. Accenture Accenture’s Consumer Goods and Services practice is focused on helping clients become high performance businesses across all segments. But as it is ranked below on the ranking chart for leadership capabilities so we’ll not consider it for consultancy. 2. Tower Watson Towers Watson is a leading global professional services company that helps organizations improves performance through effective people, risk and financial management. It can prove to be a step to take consultancy regarding HR or Finance from Tower Watson. 3. Best practice benchmark and consultancy
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Coca cola itself is a benchmark for many corporations but where it lacks is its distribution capabilities especially in Pakistan. So for this case it should Benchmark Pepsi as it is also the biggest competitor to it.
TOWS Analysis Strength
Weaknesses
Opportunities
SO Strategies
WO Strategies
Threats
ST Strategies
WT Strategies
TOWS Analysis is an effective way of combining a) internal strengths with external opportunities and threats, and b) internal weaknesses with external opportunities and threats to develop a strategy.
46
To carry out a TOWS Analysis, consider the following combinations: • Strengths/Opportunities (SO) Consider all strengths one by one listed in the SWOT Analysis with each opportunity to determine how each internal strength can help you capitalize on each external opportunity. 1. Growing market for bottle water market, Coca Cola can be a leader in this market by extending its product line and campaign for healthy drink in the industry. 2. Coca Cola has the largest sponsorship in games such as football, Olympic etc, by launching energy of their own brand, it could be the fastest selling product if use some of the famous stars in the game to advertise the product. 3. Can renewed focus on ageing and affluent consumers globally. 4. Diversified in snack market 5.
Providing health consciousness brand
6. investment in global market 7.
Strong diversification
• Strength/Threats (ST)
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Consider all strengths one by one listed in the SWOT Analysis with each threat to determine how each internal strength can help you avoid every external threat. 1. A number of people have limited disposable income; the company can still take advantage through their economy of scale by reducing the price of their product at the current economic climate. 2. Do research and know what the consumers want by this they will be able to extend their product line to include sugar free product and by this they will be able to attract new customers. 3. Threat of currency devaluations 4. New management team-brand consistency. 5.
Government policies
• Weaknesses/Opportunities (WO) Consider all weaknesses one by one listed in the SWOT Analysis with each opportunity to determine how each internal weakness can be eliminated by using each external opportunity. 1. With their experience staff they should be able to make an instead market decision explore the new market. 2. Failing to conduct further market research into new market can give an advantage to competitors by extend to the new market 3. Training to unskilled labor 4. Job securities to fear employees 5. improve negative publicity
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• Weaknesses/Threats (WT) Consider all weaknesses one by one listed in the SWOT Analysis with each threat to determine both can be avoided. 1. The company slow in making decision can cost them in terms of their market if the key competitors take the lead in providing what the customers want it will be difficult for Coca Cola to win back the customers. 2. If for instance the Coca Cola sugar level exceed the requirement of the health authorities this could lead to fall in sales hence the company will lose market share to the Pepsi. 3. New infrastructure for the health related drinks 4. Improve performance in certain part of America
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Strength 1. Leading brand value and a strong brand portfolio 2. Large investments in brand promotions 3. Sells its products in more than 200 countries 4. Large Scale of Operations 5. Leading Market Position 6. Strong cash flow from operations Opportunities
SO 1. Growing market for bottle
water market (O6 S6) 1. Targeting the ageing customers and 2. Coca Cola has the largest the young sponsorship in games such as 2. Expansion football, Olympic etc, by 3. Booming Global functional drink launching energy of their own market e.g. Energy drinks brand, it could be the fastest 4. Intense competition selling product if use some of 5. Catering to Health Consciousness of the famous stars in the game to People advertise the product. (O4 S2) 6. Bottled water growth 3. Can renewed focus on ageing and affluent consumers globally.(O1 S3) 4. Diversified in snack market (02 S5) 5. Providing health consciousness brand (05 S1) 6. investment in global market
Threats 1. The threat of substitutes 2. Economic Climate
3. 4. 5. 6.
Health and wellness concerns Intense competition (Pepsi, etc) Commodity prices growth Image perception in certain parts of the world. 7. Overdependence on Bottling partners
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ST 1. A number of people have limited disposable income; the company can still take advantage through their economy of scale by reducing the price of their product at the current economic climate. 2. Do research and know what the consumers want by this they will be able to extend their product line to include sugar free product and by this they will be able to attract new
Weaknesses 1. Entire infrastructure needs a face-lift. 2. Financial market volatility 3. Negative publicity 4. Sluggish performance
WO
1. With their experience staff they should be able to explore the new market. 2. Failing to conduct further market research into new market can give an advantage to competitors by extend to the new market 3. Training to unskilled labor 4. Job securities to fear employees 5. Improve negative publicity
WT 1. The company slow in making decision can cost them in terms of their market if the key competitors take the lead in providing what the customers want. 2. If for instance the Coca Cola sugar level exceed the requirement of the health authorities this could lead to fall in sales 3. New infrastructure for the health related drinks.
Internal Strength Position
External Strength Position
Competitive Advantage
Industry Strength
(Worst -6 - Best -1) Axis x
(Worst +1 - Best +6)
Product Quality
-1
Barriers to entry
5
Market Share
-1
Growth Potential
5
Brand & Image
-1
Access to 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) ROA Axis Y
5
Leverage
4.5
Liquidity
5
Cash Flow
4.5 Average Score =4.75
(Worst -6 - Best -1) Inflation
-2.5
Technology
-1
Demand Elasticity
-2.5
Taxation
-4 Average Score =-2.5
Total Y-Axis score: 2.25
Space Matrix 51
CA IS ES FS (0, (0, Conservat +3. +2. Defensi Competi Aggress ive (4. (--2.5) 4.75) tive ve ive 5 25 75, 1.2 0) 5, 0)
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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.
Action strategies Coca cola space analysis indicates that it should go for aggressive strategies. In aggressive strategies coca cola inter in to new markets i.e. snacks most probably would be suitable.
Diversification strategies Options: 1. Diversify into Related Business Enhance shareholder value by capturing cross – business strategic fits: •
Transfer skills and capabilities from one business to another.
•
Share facilities or resource to reduce cost
•
Leverage use of a common brand name
•
Combine resources to create new strength and capabilities
1. Diversify into Unrelated Business •
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Spread risks across completely different businesses
•
Build shareholder value by doing a superior job of choosing businesses to diversify into and of managing the whole collection of businesses in the company portfolio
1. Diversify into both Related & Unrelated Businesses
For Coca Cola Related diversification: Coca cola belongs to the beverages industry. Coca cola has now completed more than 100 years of its business. During these years coca cola has used the diversification strategy many times and in almost all the cases it has opted related diversification strategy. Coca cola being a giant in the industry has a big power to use its resources of technology, R & D, supply chain, manufacturing, sales and marketing, distribution activities and support activities. is the list of businesses or products for which coca cola has used related diversification strategy: •
Energy drinks
•
Juices/juice drinks
•
Water
•
Tea and coffee
•
Soft drinks
•
Sports drinks
BCG Matrix 54
In accordance with the BCG matrix, I would recommend the following strategies for Coca-cola products in each category:
• Dog Strategy: Either invest to earn market share or consider disinvesting. • Star Strategy: Invest profits for future growth. • Question Mark Strategy: Either invest heavily in order to push the products to star status, or
divest in order to avoid it becoming a Dog. • Cash Cow Strategy: Use profits to finance new products and growth elsewhere.
Question Marks - High Growth, Low Market Share
Most businesses start as question marks (also known as problem child), currently The coca- cola company’s minute maid pulpy orange can be identified as a question mark because it is new and as yet has not got hold of a big market. It will absorb great amounts of cash if market share remains unchanged. It has the potential to become star and eventually Cash Cow, but can also become Dog
Stars - High Growth, High Market Share
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Stars are leaders in business. Kinley and sprite 3G by the coca-cola company is an example of stars. It requires heavy investment to remain its large market share which can Leads to large amounts of cash consumption and cash generation. Attempts should be made to hold the market share otherwise it will become the next Cash Cow.
Cash Cows - Low Growth, High Market Share
Cash cows are the Foundation of the company and Stars of yesterday that undoubtedly is coca-cola, As It generates more cash than required. It’s located in an industry that is mature and not growing or declining
Dogs - Low Growth, Low Market Share
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Do not have potential to bring in much cash and diet coke is located in the dogs zone of the BCG matrix.
Suggested Strategies for the Coca-Cola Company To be able to market its product properly, a firm must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers hence: ○ In markets such as Pakistan coca cola company should introduce new products that it sells in the international markets. ○ Shall offer low cost small packaging so that with the regression in economy people can still buy their drinks. ○ As for Kinley, the importance of pure and clean water shall be introduced in the market through strong advertising. ○ Diet coke has been identified as the dog segment so its retrenchment should be considered or remodel it. ○ People are becoming more health conscious so minute maid products shall be catered to this advantage and a very strong marketing campaign shall be furnished for it. ○ Among youth indulgence in sports is becoming popular day by day so energy and sports drinks shall be introduced to get a strong market holding for the company. Logistics and distribution channels shall be made stronger so that the products have a greater out reach. ○ Like its biggest competitor Pepsi-co coca-cola company can also diversify and launch snacks.
Ansoff’s Matrix 57
Long-term business strategy is dependent on planning for their introduction Ansoff Matrix represents the different options open to a marketing manager when considering new opportunities for sales growth Two variables in Strategic marketing Decisions: ○ The market in which the firm was going to operate ○ The product intended for sale In terms of the market, managers had two options: ○ Remain in the existing market ○ Enter new ones In terms of the product, the two options are: ○ selling existing products ○ developing new ones
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Deciding Once the company identifies there is a need, Coca-Cola has to decide how it is going to meet this demand. For instance, should it make a brand new product or extend one it already has, perhaps by making a new flavor? Should it develop the product itself (internal growth) or buy a competitor’s product (external growth)? New products Ansoff’s matrix is a way of identifying opportunities to expand a product range. The matrix is a grid which sets out the choices available to businesses. These are: ○ Selling more of an existing product to an existing market. This is going deeper into a market so it is called market penetration. ○ Selling an existing product in a new market, for instance bringing out different bottle sizes to attract different buyers. This is called market development. ○
Selling a new product to an existing market. This is called product development as it means making changes to a product, for instance a new flavor like Coca-Cola Vanilla.
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○
Selling a new product to a new market.
This is called diversification. Coca-Cola
identified the need for a new sports drink and launched PowerAde.
QSP Matrix Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM provides an analytical method for comparing feasible alternative actions. The QSPM method falls within so-called stage 3 of the strategy formulation analytical framework. When company executives think about what to do, and which way to go, they usually have a prioritized list of strategies. If they like one strategy over another one, they move it up on the list. This process is very much intuitive and subjective. The QSPM method introduces some numbers into this approach making it a little more "expert" technique. Introduce New Internal External Factor
Weight
Strength
Product
Outsourcing
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
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4. One of the world's most recognized brand.
0.12
4.00
0.48
4.00
0.48
0.00
2.00
0.16
5. Product diversification (water, juices, soft drinks, sport drinks, etc) 6. Co-operate identity.
0.08 0.08
3.00
0.24
0.00
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
Weakness
the US (Wal-Mart accounts for more than 10% of Coca Cola's business in the US)
0.08
0.00
0.00
0.08
0.00
0.00
2.00
0.16
0.00
0.00
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.
0.08 1.00
Opportunities 1. Possible growing demand.
0.12
2.00
0.24
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
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Total
1.00
2.75
IE Matrix Strong
Average
Weak
3.0 to 3.99
2.0 to 2.99
1.0 to 1.99
I
II
III
IV
COCA COLA
VI
VII
VIII
IX
High 3.0 to 3.99 Medium 2.0 to 2.99 Low 1.0 to 1.99
Conclusion Ranked 1 – 4 (Low to High respectively) Current Evaluation: 2.78 Less than average of 2.50 Need efficiency in the Management, Marketing, finance, MIS, R & D, and other Operations.
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2.78
The Generic Competitive Strategies
Low Cost Leaderships Strategy 63
Low-cost leadership means low overall costs, not just low manufacturing or production costs. It can be achieve from exploring all the avenues for cost reduction and pressing for continuous cost reductions across all aspects of the company’s value chain with the passage of time. Low cost producers work diligently to create cost-conscious corporate cultures that feature broad employee participation in continuous cost improvement efforts. Many successful low cost leaders also benchmark costs against best in class performers of an activity to keep close tabs on how well they are doing cost control. Coca cola is one of the foremost participants of low cost leadership, employee’s state of art technology throughout its operations, it uses ISI systems to maintain its stocks and sales that is operates by satellite communications system that sends each sales to its head office. It has world best information and communication system and capabilities than any other member of Beverage industry.
Low Cost provider Strategy Works Best 1. Price competition among rival sellers is especially vigorous 2. The products of rival sellers are essentially identical & supplies are readily available from any of the several eager sellers
Price competition Coca cola being as a leader of industry is a benchmark for setting prices for beverage industry. In the beverage industry there is a control of bottling system on price. If Pepsi decreases the prices of its products then coke can stable these prices by involving Bottling system which can easily settle their prices dispute by involving both companies higher management. But beverage industry has a lot of product range and Coke contain more than 400 brands collectively on international level, if we compare Coke’s Kinley with Nestlé’s bottle waters then we come to know that the prices of Kinley is low then Nestle and due to this price the market share of Kinley is increasing day by day.
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Coca cola can low its cost in future by its learning curve of cola’s sector in bottle water which will be help full for it to reducing its cost than to other rival such as Sufi and Aquafina.
Products are identical & supplies are readily available As the products of beverage industry varies from customer to customer (target market) but a standardized product have same prices in a region but with an exception if Bottling system does not interfere in beverage industry then the prices of Pepsi and Coke would be differentiate. If we analysis in our Home market Pakistan then we come to know that there are no big retailer except Macro and Metro. So their products are available through distribution and wholesale channel. But in international market there are many big retail stores like Wall mart, Tesco, ASDA etc. These retail stores purchased Pepsi and coke in huge quantity and in return they got profit and their investment is not wasted because this product can be easily sold.
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Conclusion The soft drink industry is focused on the battle for supremacy of the two companies. The battle of the two companies gives life to the industry. The goal of Coca Cola is to produce growth for the company. It intends to not only reinvigorate the company but inspire the people working for them. Coca-cola’ strength is the international popularity it has. Strength of the company is the strong brand name it has. Furthermore strength of the company is the effective advertising it uses. Lastly strength of Coca Cola is its website that is easy to use, attractive, and informative. The main weakness of the company is the health issues when their product is partaken. A weakness of the company is its inability to restrict certain age from using their product. Lastly a weakness of the company is it not being able to separate from other beverage
companies.
Opportunity for the company is to create products that can give not only satisfaction to clients but health benefits as well. An opportunity for the company is to find out more ways to give a distinctive taste to their product. Lastly an opportunity for the company is to reach newer territories where it can offer its products and services. Coca Cola’s threat includes the laws in
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the country they are operating in. Another threat to the company is the tariffs and taxes that the company has in different countries, each countries has its own rate of taxes and tariff. Furthermore a threat to the company is if the country they are operating in has economic, political and other problems. Lastly a threat to the company is complaints to the health problems that their product may cause 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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Recommendatio ns Markets and industries are dynamic and change over time. They have life cycles and attract competitors in different numbers and of different sizes and strengths according to the stage in the life cycle. Returning for a moment to portfolio models, it is argued that the products that businesses have in their portfolios make different contributions to profits and overheads. Moreover, given that an organization also has a long-term survival motivation, there is the impetus to look for ways of ironing out large fluctuations in profitability and ensuring long-term survival. In order to do this the firm has to constantly review its product market posture and look for ways of achieving its survival objectives (2000).
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The company to increase profitability and occupancy must first add new methods to advertise itself to people. The company can make additional use of TV and newspaper advertisements to showcase its products to people as well as to show the effect of the use of their product to people. The company can also use more internet advertisements. They can collaborate with internet companies and post advertisements and reminders on other companies’ site. This may cause the company more finances but it may help the company in increasing its profits. The company should also increase its knowledge of communicating with international clients to increase the company’s camaraderie with them. The company’s relationship with international clients is important because the international clients are the one that can make the international expansion successful or it can make it fail. Lastly it should make use of special promotional techniques especially during days where they have low turnout of clients. There are certain days wherein the number of clients purchasing their products is low; what the company can do is to lower its rates or have special discounts or promos during these days to increase the number of clients purchasing the products.
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