Assignment
On
“Analyzing a Case Study of Coca-Cola Company”
Program: MBA (Evening)
Course No. MGT- 503
Course Title: Strategic Management
Submitted to:
Md. Ashad Ullah
Lecturer
Dept. of Management, BUBT
Submitted by:
Shah Md. Ikhtiar Fahim Shoaib
Id No. 12132201007
Intake: 27th
Section: 1
Coca Cola in a nutshell
Coca Cola was established more than 120 years ago after the invention of the original drink in
May 1986 by Dr John Smith Pemberton who was a pharmacist from Georgia, Atlanta. The name
Coca Cola and the trade mark logo are both attributed to Frank Robinson who was partner to
Dr John Smith Pemberton when they used to charge 5 cents for tasting a glass of Coke at a local
Jacob’s pharmacy. In 1988, Dr John Smith Pemberton sold his shares to an entrepreneur who
wanted to replicate the success the drink had at Jacob’s pharmacy to the national level
(Brennan et al, 2007).
After the Dr John Smith Pemberton sold his shares to the entrepreneur, the company
experienced success in the US markets which was later on followed by the company’s
establishing its presence in various foreign markets. The company first international presence
was in Canada and Mexico which was followed by the company establishing its presence in
many other foreign countries. Currently, Coca Cola has operations in more than 200 countries
and provides jobs to hundreds of thousands of people in the various countries where the
company has operations (Coca Cola 2012).
Coca Cola owns more than 3300 in more than 200 countries which consist of carbonated drinks,
light and diet beverages, juice and juice drinks, coffees, tea, and sports and energy drinks. As far
as the soft drinks markets are concerned, Coca Cola and PepsiCo are the main players with
PepsiCo been the market leader after dislodging Coca Cola from the position in 2006. The two
companies are still the market leaders in the US soft drink market and account for 76 % of the
US market (Brennan et al, 2007).
Throughout the years, Coca Cola has been developing new products that would meet customer
needs and expectations. A notable approach is the company’s strategy of introduction drinks
that are low in sugar since majority of the potential customers are concerned with their well
being and would prefer to buy drinks with no added sugar. In addition to introduction of new
products, Coca Cola has at times bought some upcoming products as well as formed strategic
partnership with other manufacturer of drinks in order to make sure that the company remains
profitable.
DEEPLIST Analysis
The word DEEPLIST stands for demographics, economics, ecological/environment, political,
legal, informational, social, and technological aspects that may have effect on operations of an
organization. Conducting of a DEEPLIST analysis is important in any organization since it helps
the organization understand the environment in which it is conducting business in. (Kerin and
Peterson, 2007). According to Brennan et al, (2007) a DEEPLIST analysis is the quite effective
since it reduces the risk of forgetting an important aspect of the environment within which a
company is operating in since it includes all the major aspects unlike in case of PEST and PESLE
techniques.
Demographic
Different ages have their specific requirements. The company should target the age group that
consumes most of its brands and customize promotional and marketing strategies that suit
their behavior. The target market for Coca Cola is based on age and most of its audience is the
youth or the youngest. This is however, a wide range of targeting with ages ranging from 15-25
but it extends to 40 years and more. The growing trend among young adults is the need for
healthier drinks with high juice content and low sugar content. (Brennan et al, 2007)
In order to appeal to its target market, Coca Cola has increased its investment in promotional
activities such as family events, trade deals, bonus packs and in-store display. Coca Cola has
been spending large part of its promotional budget on sponsoring physical and nutritional
education worldwide. Other promotional activities conducted by the firm include development
of physical-activity based clubs, health camps, and funding to sports activities and clubs in many
countries. In order to serve the different segments, Coca Cola produces different brands for
specific regions. Some of the products developed for different markets include Qoo which is a
light carbonated juice drink which is targeted for Taiwan and Asian countries, Burn energy drink
which is aimed at the Spanish and European markets and Samuria in Afghanistan. (Coca Cola,
2012, Brennan et al, 2007)
Economic
Over the years, Coca Cola has been facing increased advertising controls, price restrictions, lack
of infrastructure, foreign exchange controls and increase competition from companies such as
Cadbury Schweppes and Pepsi (Brennan et al, 2007). These economical factors have in turn
affected the market share of Coca Cola in various countries.
Environmental
As discussed by Brennan et al, (2007), the impacts that Coca Cola operations have on
environment can be disastrous to the operation of the company. In India, Coca Cola together
with its fierce rival Pepsi received negative publicity after a report released by Indian based CSE
showed that the two companies pumped a lot of water from villages making public wells to dry
up which resulted to people lacking access to enough water that is necessary to meet their
basic needs(Brennan et al, 2007). In response to these accusations, Coca Cola was forced to
minimize on its water usage by 25% and in addition build dams which would be used to harvest
rainwater.
Political
Being an international company Coca Cola faces different political landscapes in its areas of
operation. The company is faced with political instability in many countries where it has
operations. Environment protection laws imposed by governments in different countries have
made the firm to undergo some hurdles in their operations. In 2006, the company was sued by
State of California for using lead in on its labels, which it was forced to change. The company
was also charged for practicing monopoly in Mexico after forcing some restaurants and stores
to agree to some exclusive contracts (Brennan et al, 2007)..
Informational
Coca Cola has a secret concentrate recipe that has enabled it to have control over its
distribution channel. This has enabled the company maintain strong control of the prices that
bottlers pay for the concentrate, their obligation to distribute and market Coca Cola products
and regularly upgrade their plants. In addition, Coca Cola also maintains the right to distribute
its products directly to retailers and restaurants selling from fountain pumps. The company’s
franchisees are only allowed to distribute soft drinks products of producers who are not in
direct completion to Coca Cola. The company has also invested significantly in developing
bottlers and franchisees. Coca Cola has recently developed a multi-billion data warehousing and
decision support system in order to ensure efficient and effective communication with its
affiliates around the globe (Brennan et al, 2007). Since the company operates in different
countries in different environments, Coca Cola has been forced to restructure some of the
practices so that they are in line with regulations in different countries.
Legal
Legal aspect includes the constraints or limits on business operations. In its bid to gain market
monopoly in Mexico, the company went against the Federal anti-competition laws prohibiting
retailers to agree to exclusive rights. Coca Cola faced the same regulation when it tried to
acquire Cadbury Schweppes in 1999. The company also faced EU regulations in 2005 after the
company tried to force retailers to include its less popular brands in addition to Coke (Brennan
et al, 2007).
Social
There has been a rapid growth in the segment for healthier drinks with higher juice content and
low sugar content. The target markets for these drinks are adults above the age of 25 who are
increasingly becoming aware of health issues. The company introduced Coca Cola C2 in Japan, a
product featuring low carbohydrates, sugar, and calories. The company has produced more
brands with low calories and sugar such as Minute Made Light and Coke Zero (Brennan et al,
2007). Some brands are lifestyle oriented targeting people with busy lifestyles, sports people,
and mobile generation. Coca Cola has brands targeting people according their lifestyles and this
saw the introduction of energy drinks and drinks on plastic packages.
Technology
Changes in technology have created opportunities for creation of new products and product
improvements. Another important factor is the emergence of new marketing technologies such
as e-commerce and social networking. The company has effective marketing, advertising, and
promotional programs. The new technology has made advertisement to make some products
more attractive. The introduction of plastic bottles and cans have significantly increased the
sales of Coca Cola since they are easier to carry and dispose. Technological advancement has
enabled the firm to develop new environmentally friendly bottles which are light weight (Kerin
and Peterson, 2007).
Coca-Cola SWOT Analysis
A SWOT analysis as discussed by Kotler (2011) is usually applied when one wants to examine
both the internal and external environment within which an organization operates in.
Conducting a SWOT analysis involves investigating the strengths, weakness, opportunities and
threats of an organization. In reference to Coca Cola, conducting a SWOT analysis will help find
out the company’s strengths that can be used to help Coca Cola to be positioned as market
leader in the soft drinks market while at the same time been well prepared to respond to any
threats in the market. In addition, weaknesses established can be addressed where as any
opportunities identified can be maximized on.
SWOT Analysis of Coca Cola
Strengths
Weaknesses
Very strong brand that is well
Negative publicity
recognized throughout the world
Declining cash from operating
Large distribution channel
activities
Strong global footprint in emerging
Low success levels in North
markets
American markets
Popular brand
Negative publicity
Willingness to produce brand
Opportunities
Threats
Demographic changes in the West
Increasing competition
Growing market for bottled water
Dependence on bottling partners
Declining growth of carbonated
drinks
Strengths
Coca Cola is the market leader in the soft drink markets and has a market share of about 53% of
the market which is enhanced by the company’s various brands (Forbes, 2011). Operations of
the company are supported by well established distribution system that makes sure that the
products are available in all countries that the company has operations in. The company is the
only manufacturer of the secrete concentrates, carbonated water and recipes, which are sold
to retailers and other distributors (bottling partners). These authorized bottling partners these
concentrates and recipes to produce finished beverage products. In North America, the
company owns 65 beverage production plants, 10 major beverage concentrate and syrup
manufacturing facilities, four bottled water facilities and 10 principle beverage concentrates for
food service. The company has strong control over its bottling partners in terms of prices they
pay for the concentrate, distribution and marketing of Coca Cola products, and obligation to up
grade plants regularly. In contrast to other concentrate producers, the company owns the right
to distribute directly to retailers and restaurants that merchandise from fountain pumps. The
company has also invested significantly on data-warehousing and decision-support system
(Brennan et al, 2007).
The company has a strong global footprint highlighting emerging markets. Coca Cola has a
strong presence in established markets of North America and Europe and is also expanding into
emerging markets of Asia and Africa which present huge market potential as compared to
developed regions. Global presence in several geographic regions ensures diversified stream of
revenue and reduces business risk (Brennan et al, 2007).
Coca Cola has a popular brand and this has enabled it to secure more shelf space in grocery
stores as compared to other competitors. The company has exclusive deals with the world’s
largest food outlets, McDonalds and Burger King. Other key distribution channels include
convenience stores, vendor machines, and fountain outlets (Kerin and Peterson, 2007). The
company also has a broad product range featuring more than 2,400 products and 400 brand
names. In addition, the company is able to produce specific brands for specific markets which
make it meet its customers needs (Brennan et al, 2007).
Weaknesses
Increased competition from other soft drinks and food producers has made the company’s
strong brand to dwindle. The change in consumer taste in the mid 1990s from sugar-based soft
drinks to energy drinks, bottled waters, juice based sodas, and healthier alternatives has greatly
affected the demand for the company’s popular brands (Brennan et al, 2007)..
Most of the brands produced by Coca Cola are not good for health. There is growing concern
over sugar content in the company’s soft drinks which scientists have argued that contribute to
poor diet and growing problem of obesity especially among children. In addition, the target
market for Coca Cola is mainly younger people. It overlooks the elderly even though it presents
potential for future for this market segment that can profitable to the company (Brennan et al,
2007).
Opportunities
The change in demographics in the West connotes more opportunities for the company to
produce more products that appeal the ageing and increasingly health conscious market
(Brennan et al, 2007).Bottled water is one of the fastest growing market segments in the
world’s beverages and food market due to increasing health concerns among consumers. The
market for bottled water generated revenues of more than $15.6 billion in the US in 2006. The
market consumption volume is expected to increase significantly in the next few years. The
company’s Dasani brand is among the best-selling bottled waters in the market. Coca Cola
should leverage its strong position in the bottled water segment in order to take advantage of
growing demand for flavored water (CNN, 2010).
There is growing in the market for ready to drink non-alcoholic drinks. The non-alcoholic market
is expected to continue growing retail sales for the next years to come. This market will add
more than 50,000 million unit cases and expand retail sales by more than $ 5000 billion. This
projected growth is being fueled by increase in income of middle-class consumers who will
increase their purchasing power. The company should benefit from expanding its product
portfolio to meet the demands of the non-alcoholic ready to drink market (Coca Cola, 2012).
Since 1897, the company has been expanding its operation to the international market through
alliances and acquisitions. The company now has 28 plants in China and many more plants in
other parts of the world (Brennan et al, 2007). In 1991, Coca Cola and Nestle formed a joint
market Nestlé’s Nestea and Nescafe by leveraging the company’s distribution network. Another
joint venture was between Coca Cola and BPW (Beverage Partners Worldwide) focusing on
coffee and tea brand drinks, including Coca Cola’s Chinese tea brands, Yang Guange and Tian Yu
Di. Similar brands have also been introduced in Europe as part of a joint venture with Nestle.
Stronger international operations increase the capacity of the company to penetrate the
international markets and also give it an opportunity to diversify its revenues. (Brennan et al,
2007).
Threats
There is intense competition in the non-alcoholic beverages segment of the commercial
beverages market. There is competition faced by the company from both regional as well as
international players. In addition, the company faces stiff completion from various nonalcoholic drinks including fruit drinks, nectars and juices. The major competitor to the company
in its areas of operation is PepsiCo. Other noteworthy competitors include Cadbury Schweppes,
Nestle, and Kraft Foods. Competitive factors that affect the business of the company include
advertising, pricing, product innovation, sales promotion, and trademark and brand
development and protection. Increased competition could have significant impact on the
market share and revenue growth of Coca Cola (Brennan et al, 2007).
Coca-Cola Environmental analysis
Factors
Clarity
Impact
Probability
Urgency
Demographics
70 %
66 %
80 %
15 %
Economics
50 %
80 %
65 %
16 %
Environment
80 %
95 %
90 %
85 %
Political
60 %
70 %
75 %
80 %
Legal
50 %
60 %
85 %
65 %
Informational
60 %
60 %
75 %
60 %
Social
75 %
70 %
85 %
65 %
Technological
68 %
75 %
80 %
70 %
Opportunities
78 %
80 %
70 %
60 %
Weakness
50 %
75 %
80 %
80 %
Threats
80 %
90 %
80 %
100 %
In the table above, Coca Cola environmental factor analysis have been outlined to determine
the appropriate response that the organization should adopt. Clarity illustrates the nature of
the information available on the factor and how reliable is the information. Impact on the other
hand identifies the effect that the factor could have on the organization if it occurred where as
probability shows the likely hood of the event occurring. The final section which is urgency
shows how soon a response to the identified factor should be taken. Though the percentages
indicated were initially developed from a scale of 1 to 5 with 1 been unlikely and 5 been very
unlikely, the points were later converted to percentage to make it easy to comprehend for
anyone reading this report.
Ansoff growth Matrix
The Ansoff growth matrix as discussed by Lester (2009) is a commonly known tool that is used
in analyzing various growth opportunities. Lester (2009) contends that the tool is quite effective
in driving clear strategic thinking around growth. The concept of the tool as discussed by Kumar
(2010) is based on the concept that in order for a company to achieve growth, the company has
to decide how and where its needs to compete; is it in the current markets or is it new markets
and is it going to launch new products or is the company just going to market the already
existing products.
The Ansoff growth matrix as discussed by Lester (2009) has four boxes that usually consist of
four different strategies that can be adopted by a company. The four strategies usually involve
expanding into new markets, diversifying into new product for different market, aiming to
increase market share and developing new products to meet the needs of existing market
better.
A closed look at Coca Cola strategies shows that the company implements two strategies. The
first strategy involves Coca Cola identifying the market that it wants to serve and then deciding
the products that the company will offer to the chosen market. As far the markets are
concerned, Coca Cola is usually faced with the option of either remaining in the current market
or expanding into new markets. In order for Coca Cola to remain competitive in the markets
that the company has already established its presence, the company usually diversifies its
product offering to include various products. Infact, Coca Cola can be argued to have
implemented the diversification strategy way back in the 1960s when it acquired Minute Maid
Corporation, a producer of Hi-C fruit drinks. Coca Cola and Nestle agreed to joint marketing for
Nestlé’s Nescafe and Nestea brands by leveraging the company’s wide global distribution
network. The company has franchised the production rights to its bottling partners making it
greatly reduce overheads while at the same time increasing its global market share (Brennan et
al, 2007).
Coca Cola has a strong brand with unique attributes relative to similar alternatives in the
market. Given its popular brand, the company has been able to get more shelf space in
supermarkets, which are the main distribution point for Coke’s products. The company invests
heavily on advertisement and marketing to maintain the brand identity and increase barriers
for competitors willing to enter this market (Brennan et al, 2007).
Coca Cola uses a mix of strategies, which include both differentiation and cost focus. Even
though Coke brand is the company’s largest seller worldwide, Coca Cola is still willing to
produce local brands. The company has products in its portfolio catering to specific regions and
countries. In addition, the company introduces new product into the market each year as a
means of staying ahead of the market. The company has also launched bottled waters, flavored
waters, energy drinks, indulgent chocolate-flavored beverages, orange juices, and ready-todrink canned coffee. The company targets all market segments and provides a range of brands
suiting the needs of each segment (Brennan et al, 2007).
Growth and profitability is the main objective of all organizations. There main aim is to grow
and expand in different markets increasing variety in their products (Brennan et al, 2007). Coca
Cola can identify its expansion strategy through the ANSOFF approach. Coca Cola is doing
market penetration through selling its product to business buyer, which includes multinational
organizations such as McDonalds, Burger King and many more in addition to its bottling
partners. The company also has buyers who are selling the Coca Cola as the only beverage in
their restaurants (Brennan et al, 2007).
The market development of Coca Cola includes exploring the international market for products
that they are already selling. The company first entered the international markets in 1897 when
it made Coke available in Mexican and Canadian shops with soda fountains. This was followed
by setting up plants in China and many other locations around the world. The company has
formed alliances and joint ventures with global companies in the bid to increase its global
market share. The company has been introducing different flavors in order to change the
beverage industry (Brennan et al, 2007).
There are risks involved in when conducting product development such a loss of customers or
demand from some segments for their product. Coca Cola Company can do product
development by introducing new flavors in specific regions, which are not sold by Coke in other
regions in the world. The company has put more effort in that and introduced product portfolio
catering for specific regions and countries. The company introduced Qoo in Taiwan and other
Asian countries, Burn Energy drink in Spain and Eastern Europe, Samuria in Afghanistan among
others (Brennan et al, 2007).
The company needs to adopt diversification strategy. There are many demographic changes
presenting opportunities for growth even though there are associated risks. The company only
deal with beverages and bottled water but it can manufacture and distribute its own snacks
since the company has that is known all worldwide. It can make more cash by making and
selling items that can be taken with the beverages that Coca Cola sells. (Brennan et al, 2007).
The other growth options that Coca Cola can consider are not necessarily related to
diversification. In both cases, the company sells new products to new markets. The company
can diversify into pure fresh juice products. Unrelated diversification for example is a case the
company diversifies into markets and products that are new like manufacturing sportswear
should also result to higher profits for the company. It is however to highlight diversification
into manufacturing of sportswear would present great risks meaning that Coca Cola should only
consider this strategy if the prospect for growth in the beverages sector is very low or the
demand for the products ceases.
References:
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