Coca Cola
Executive Summary
Coca Cola is the most popular brand in the world. It is the highest grossing soft drink and
offers many other products as well. There are several strategic issues Coca Cola faces despite
being so popular and profitable.
Coca Cola should expand it production of non-soda items. Markets like bottled water,
energy drinks and sports drinks are on the rise and the growth is worldwide. In a time where the
consumers are becoming more health conscious, it is good to explore these markets that can offer
healthier alternatives to soft drinks. Globally bottled water consumption is growing and it is very
important for the most well-known brand in the world to increase its efforts to meet the demand
of this growing market.
Coca Cola also needs to acknowledge the growing Hispanic population in the United
States. By tailoring advertising specifically to this demographic, Coca Cola can increase its
revenue and develop a stronger customer base from the largest growing group in the country.
The Hispanic population is projected to continue to rise, so Coca Cola should alter the way it
advertises to adapt to these changes.
Coca Cola is also dependent on bottling partners to distribute its products. This is
incredibly risky due to what could happen if something went wrong with a major partner. To
combat this issue, Coca Cola can either expand the amount of partners it does business with or
decide to bottle its own products. By bottling its own products Coca Cola can gain more control
in the timeliness in which its products are distributed. Although the upfront costs will be great, in
the long run this could be a money saving decision and give Coca Cola more leverage over
retailers by eliminating a step in the manufacturing process.
Clearly Coca Cola knows what it is doing, being one of the most profitable and
recognizable companies in the world. However, by acknowledging a few strategic issues it may
be able to expand its business into other markets and demographics, thus improving its success.
NAICS Code and Industry Definition
The NAICS code for Coca Cola is 312111. The industry definition is: Firms in the Soda
Production industry blend various ingredients with carbonated water and also package and
distribute these beverages for resale. This industry excludes still beverage producers, water
purifiers, ice manufacturers and companies that only produce beverage ingredients or distribute
beverages. [4]
Key success factors
Distribution Management:
Efficient and effective marketing channels are critical in this industry to minimize
logistics costs and maximize sales at retail stores. Coca-Cola has many distributions centers
spread out around the world which allows them to distribute their products easier.
Marketing Products: Image is everything in this industry, so product positioning, through
package design and advertising, is a key to attracting new customers. Coca-Cola has a very great
brand image and this allows them to be very attracting to any consumer.
Economies of Scale: Minimizing marginal and average production costs by buying inputs at bulk
prices and producing more enables companies to sell at a lower price and still maintain profits.
Otherwise, firms need to charge higher prices to maintain profit margins. Coca-Cola can be
bought at a lot of retail stores, gas stations, schools, and other public areas. This allows them to
make larger profits without driving up costs.
Economies of scope: The ability to switch production to multiple products will enable a producer
to diversify its product portfolio, thereby appealing to wider markets. Coca-Cola has many
different types of drinks which help them gain more demographics.
Ability to manage external contracts: The management and effective use of outsourcing noncore
functions can reduce costs and contribute to success. Coca-Cola gets their bottles from a supplier
which help saves money spent on bottle manufacturing. [3]
Driving Forces
1. Changes and increasing growth in health products- One potential growth market for soda
companies is the growth in healthier drinks. For Coca-Cola, their sugarless products such as
Coke Zero and their waters will see increases in sales.
2. Increasing Globalization- Although the industry is declining, Coca Cola will continue to
increase globalization to new parts of the world.
3. Changes in who buys the product- With Coca-Cola increasing products that are healthier;
there will be consumers who will purchase their products.
4. Product Innovation- A health niche is a major driver of product innovation, and this will
increasingly support demand for Coca Cola. The company will strive to present consumers with
healthier yet still tasty drinks by rolling out new products.
5. Entry or Exit of major firms- There will be a .7% increase in companies over the next five
years and Coca Cola will continue to acquire smaller companies. [3]
External Analysis
Opportunities
To perform an external analysis of the company Coca Cola, one must first examine the
opportunities and threats that face the company on a day- to- day basis. There are a number of
opportunities and threats that interact with, The Coca Cola Company. Being that Coca Cola is
the world’s largest manufacturer of nonalcoholic beverages it has the opportunity of pursuing
certain business acquisitions that other manufacturers do not. If Coca Cola were to make the
right decision concerning an acquisition they could possibly gain control over manufacturing and
distribution ventures in countries unexplored by other manufacturers who do not have the funds
to explore and expand in those markets. European countries and China are prime examples of
places where Coca Cola could expand and quite possibly dominate in the manufacturing and
distribution of nonalcoholic beverages.
According to a press release made available on the Coca Cola website, Coca Cola tried to
gain acquisition of a Chinese Juice manufacturing company but failed to do so. Even though this
acquisition did not go through the Coca Cola Company still plans to try to gain acquisitions such
as these in growing potential markets. This type of acquisition and other acquisitions like this
provide amazing growth opportunities in international operations for the Coca Cola Company.
[17]
The growing bottled water market is another opportunity that Coca Cola should take
advantage of. According to the National Resources Defense Council, over half of all Americans
drink bottled water. As of July 7, 2011 Coca Cola has begun to take steps towards dominating
the growing bottled water market. According to the Coca Cola website the Coca Cola Company
opened a new Valpre plant and began the introduction of PlantBottle packaging in Africa. Valpre
is Coca Cola's new bottled spring water. Coca Cola should continue in this path in order to grasp
full advantage of the growing bottled water market. [12] [16]
Another opportunity facing the Coca Cola Company is the fact that the Hispanic
population is growing exponentially in the United States. The US Census estimates that by 2020,
the Hispanic population will reach 60 million in the United States. That is 18% of the United
States population. In order to achieve higher consumptions of Coca Cola products by Hispanics,
The Coca Cola Company should focus more advertising towards the Hispanic population; this in
turn would increase revenue for the company. Coca Cola could also increase its partnership with
fast food chains. According to an article on myfitness.com, over 50,000,000 people in the United
States alone depend on fast food. The Coca Cola Company should make sure that coke products
are made available at each and every fast food restaurant, thus sales would increase for the
company. [11]
Maintaining good relationships with Coca Cola's bottling partners is another opportunity
that Coca Cola should address on a day to day basis. According to the Coca Cola website they
have nearly 300 bottling partners worldwide. Coca Cola also explains that the companies
bottling partners are its most important connection with the company’s customers. Coca Cola
should continue to have a positive relationship with its bottling partners and stay informed on
how each plant is operating. [17]
Threats
Coca Cola also has a number of threats that can interfere with the growth of the company.
First of which is the intense competition that surrounds the nonalcoholic beverage market.
Significant competitors include, PepsiCo, Nestle, Cadbury Schweppes, Group DANONE and
Kraft Foods. Coca Cola needs to be aware of these competitors and make adjustments when
necessary to counter act other company’s competitions strategies. Adjustments could be made in
the pricing, advertising, product innovation, and sales promotion programs.
Another threat facing the Coca Cola Company is there dependence on its bottling
partners. Coca Cola does not have controlling ownership interest with a number of its bottling
partners. These means that Coca Cola does not control what the bottling partner can do in
regards to business decisions. The companies bottling partners could make adverse business
decisions that could negatively affect the profit and mission of the Coca Cola Company. Coca
Cola should take protective measures so that they are less dependent on its bottling partners. [17]
The changing of Coca Colas consumers’ lifestyle is another threat affecting the Coca
Cola Company. As consumers lifestyles are changing from an unhealthy lifestyle to a healthy
lifestyle their consumption of carbonated beverages are declining. This in turn is negatively
affecting Coca Colas revenue. This threat should be meet with the expansion of healthy based
products and Coca Cola needs to put a deeper focus towards R&D for such products.
The manufacture of raw materials that the Coca Cola Company uses is yet another threat
facing the nonalcoholic beverage industry. These raw materials include sugar and metal, both of
which are major supplies needed to produce Coca Cola products. Coca Cola should remain
aware of the market prices for such materials and make adjustments where necessary in order to
make a profit.
Another threat facing the Coca Cola company is the fact that there are a wide arrange of
substitutes that the end consumers can choose from, such as, coffee, beer, juices, and water. Coca
Cola should provide substitutes as well for its consumers instead of other companies providing
the substitutes and making all the profit.
Mission Statement
•To refresh the world...
•To inspire moments of optimism and happiness...
•To create value and make a difference. [18]
Coca Cola’s mission statement is unique and refreshing for a company that is one of the best
known brands in the world. It centers on a few key ideas and isn’t overly wordy or redundant. It
is simple, concise and right to the heart of the values the company holds most important.
Vision Statement
•People: Be a great place to work where people are inspired to be the best they can be.
•Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.
•Partners: Nurture a winning network of customers and suppliers, together we create mutual,
enduring value.
•Planet: Be a responsible citizen that makes a difference by helping build and support sustainable
communities.
•Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
•Productivity: Be a highly effective, lean and fast-moving organization. [18]
The six P’s serve as a strong vision for Coca Cola and show the company is interested in much
more than making soda and generating profits. The emphasis placed on people and the business
relationships Coca Cola creates, along with environmental responsibility shows that Coca Cola
understands its place as a worldwide commodity and takes that responsibility very seriously.
Strategic and Financial Objectives
-Accelerate carbonated soft-drinks growth.
Coca Cola understands that its bell cow for profitability is soft drinks and maintaining its
position as the world leader in their production is priority one.
- Selectively broaden our family of beverage brands to drive profitable growth.
There is a tremendous opportunity with things like juice, bottled water, tea, sports and energy
drinks.
- Grow system profitability and capability together with our bottling partners.
Coca Cola’s relationships with its bottling partners are the most important and it is essential
that they are well maintained.
- Serve customers with creativity and consistency to generate growth across all channels.
Coca Cola understands that many of its customers rely on its product to generate profits, and it
is constantly striving to be innovative and remain a market leader.
- Direct investments to highest-potential areas across markets
It is essential to understand which markets are on the rise and which are declining, so it can
invest accordingly
- Drive efficiency and cost-effectiveness everywhere
Maintaining the best technology and economies of scale will allow Coca Cola to remain cost
effective and efficient. [2]
Five Forces
Barriers to Entry: High
Entry into the market may be hindered by saturation of the domestic market by existing
brands. New entrants must differentiate themselves from other products or find specific niches in
which to operate. In addition, many incumbent producers will manufacture a range of beverages
that increases their overall distribution capabilities and market intelligence. It may be difficult for
new entrants to gain access to existing distribution channels. In most markets, these are
controlled by existing producers and establishment of new distribution channels is costly.
However, this competition does not constitute a formal barrier to entry, since new companies can
enter the market nonetheless. [3]
Substitutes: Medium
Large numbers of substitutes are available in the market such as water, tea, juices coffee
etc. But firms counter them with innovative marketing and massive advertising which build
growth for their brands by highlighting their benefits. Players also differentiate themselves by
well-known global trade marks, brand equity and availability of the products which most of the
substitute products cannot contest. To protect themselves from competition players in soft drink
industry offer Diversify products such as such as Pepsi offers soft drinks (Pepsi, Slice, Mountain
Dew), beverages (Tropicana Juices, Dole Juices, Lipton tea, Aquafina bottled water, Sport
drinks, Tropicana Juices), Snacks (Rold Gold pretzels and Frito-Lay). Coke also offers most
diversified range of products such as Cola-Cola Cherry, Coca-Cola Vanilla, Diet Coke, Diet
Coke Caffeine-Free, Caffeine-Free Coca-Cola and range of lime or coffee and lemon. [3]
Rivalry: High
Beverage industry competition can be classified as a Duopoly with Pepsi and Coca Cola.
The market share of other competitors is too low to encourage any price wars. Cola-Cola gets
competitive advantage through the well-known global trade marks by achieving the premium
prices. It means Cola-Cola have something that their competitors do not have. While Pepsi has
leveraged its worldwide brand-building strength to attach with consumers in significant ways and
impel the growth globally [3]
Suppliers: Low
Most of the ingredients needed for beverages and snacks are basic commodities such as
potatoes, flavor, color, caffeine sugar, etc. So the producers of these commodities have no
bargaining power over the pricing for this reason; the suppliers in this industry are weak. [3]
Buyers: High
Buyers in this industry have the bargaining power, because main source of the revenue
and market share in beverage and food industry are fast food fountain, convenience stores food
stores vending etc. The profit margins in each of these segments noticeably demonstrate the
buyer power and how special buyers pay diverse prices based on their power to bargain. [3]
Competitive Strategy
Coca Cola is a focused differentiation provider. The company has a particular taste about
its product that the consumers love. When Coca Cola started, the formula to the product was
legendary and from that, different spin offs were done. Coca Cola has come out with Diet Coke,
Caffeine Free Coke, Coke with Lime, Coke with Lemon, Cherry Coke, Cherry Coke Zero, and
the list goes on. Coca Cola took the original formula and focused it to certain types of people that
would like a particular brand of Coke. People who don’t want the Caffeine in a soft drink could
now enjoy the same taste with Coca Cola. This really began to happen when consumers saw
what massive amount of soft drinks can do to a person’s body. The amount of calories from
drinking Coca Cola beverages were a lot so in order to keep up with the changing demands, Coca
Cola had to make improvements to their products. [13]
Internal Analysis
Strengths
There are a number of strengths that Coca Cola possesses. The greatest of which is its
strong brand image and strong brand loyalty. The Coca Cola symbol is known worldwide. They
have a very loyal customer base that has been built upon quality products and strategic
advertising. Coca Cola frequently uses celebrities to help endorse the company's products and
better connect with its targeted customers.
Another strength attached to the Coca Cola Company is its strong presence in the global
market. Coca Cola has over 200 countries in which it operates. They both manufacture and
distributed all over the globe. Operations leadership programs within the Coca Cola Company
include a Eurasia and Africa Group, Central, East and West Africa Business Unit, an India and
South West Asia business unit, a Turkey business unit and a Russia, Ukraine and Belarus
Business Unit. Due to this global presence Coca Cola can increase revenue and production in
other countries besides the U.S. Coca
Cola also has a new management system called KORE which has proved to be a major
strength of the company. This new management system ensures consistency and reliability with
Coca Cola products. KORE guarantees the highest standards in product safety and quality safety
and health and environmental occupational standards across the entire Coca-Cola system by
outlining clear requirements for the policies, specifications and programs that guide their
operations. With this high standard management system Coca Cola can maintain its loyal
customer base and in turn make a profit.
Another strength that Coca Cola has is its wide arrange of products. It has a portfolio of
more than 3500 beverages, from diet and regular sparkling beverages to still beverages; such as
fruit juices, and fruit drinks, waters, sports and energy drinks, tea and coffees and milk. This
variety of products helps please the needs to Coca Colas customer base. Through meeting their
needs Coca Cola can increase sales and revenue.
The workplace that Coca Cola provides for its employees is another strength that the
company carries. It provides its employees with a diverse, healthy, and safe work environment
aligned with internally respected human rights principles. Approximately 700,000 associates
create the Coca Cola system. Also Coca Cola provides its employees with compensation and
benefits packages. Through respecting the companies employees Coca Cola maintains its strong
brand image and makes high quality products that employees and customers can appreciate and
enjoy. [1]
Weaknesses
One weakness that affects the Coca Cola Company is its advertising towards healthier
products. Although the Coca Cola Company offers a wide arrange of products not many
consumers are made aware of these available products. Few people even know that Coca Cola
makes healthy alternatives besides its well-known carbonated beverages. Coca Cola should focus
more advertising on its healthier products so that they can increase sales in that area of the
business.
Another weakness of the Coca Cola Company is the health issues that arise around the
companies most advertised products. This leads customers to believe that Coca Cola does not
produce anything healthy for its customers. It basically shines a negative light on all Coca Cola
products. Coca Cola should advertise its products evenly so that consumers are aware of all the
options the Coca Cola company offers.
By not bottling all of the company's products itself Coca Cola misses out on a significant
amount of revenue, thus proving to be a weakness within the Coca Cola Company. The contract
placed between the bottling companies and the Coca Cola Company does not always prove to be
beneficial to Coca Cola. These contracts should be reevaluated and should provide better revenue
for the Coca Cola Company. Coca Cola’s major customer base resides in North American.
Therefore Coca Cola should have a strong presence in North American but is failing to do so.
This proves to be a weakness within the company. By not improving the company's presence in
North American they are risking potential growth and revenue increases in those countries.
A final weakness seen in the Coca Cola Company is the possibility of negative press. If
Coca Cola does not act fast on negative press its brand image could be permanently ruined and
this could adversely affect the profits Coca Cola could be producing. [1]
Financial Analysis
Inventory Turnover
Inventory Turnover is how many times a company’s inventory is sold and replaced over a period.
Inventory Turnover
2007
2008
2009
2010
2011
Coca Cola
5.39
5.16
4.88
5.07
6.34
Pepsi
8.56
8.46
7.82
8.87
8.78
Industry
7.61
6.81
5.76
6.27
7.02
10
9
8
7
Coca Cola
Pepsi
6
Industry
5
4
3
2007
2008
2009
2010
2011
A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies
either strong sales or ineffective buying. Pepsi has a higher turnover rate than Coca-Cola and the
industry. Based on these numbers, it can be interpreted that people have slowed down their
consumption of drinking cola beverages.
Gross Margin
The gross margin represents the percent of total sales revenue that the company retains
after incurring the direct costs associated with producing the goods and services sold by a
company. The higher the percentage, the more the company retains on each dollar of sales to
service its other costs and obligations.
Gross Margin
2007
2008
2009
2010
2011
63.94
64.39
64.22
63.86
60.86
Pepsi
54.3
52.95
53.51
54.05
52.49
Industry
17.4
27.31
19.71
-37.91
-543.28
Coca Cola
Gross Margin
150
50
-50
-150
-250
2007
2008
2009
2010
2011
Coca Cola
Pepsi
Industry
-350
-450
-550
Over the course of five years, the industry as a whole has gone down. Coca Cola did better than
Pepsi but one can only interpret that this particular brand is liked more. It could also be interpreted that
Coca Cola costs less to make therefore making the Gross Margin higher than Pepsi.
Return on Assets
ROA gives an idea as to how efficient management is at using its assets to generate
earnings. ROA is calculated by dividing a company's annual earnings by its total assets and it
gives a percentage for the year.
Return on Assets
2007
2008
2009
2010
2011
Coca Cola
16.33
13.82
15.3
19.42
11.21
Pepsi
17.58
14.6
15.72
11.74
8.99
-90.48
-114.21
-123.71
-447.31
156.05
Industry
Return on Assets
200
100
0
2007
-100
2008
2009
2010
2011
Coca Cola
Pepsi
-200
Industry
-300
-400
-500
Just from looking at the graph alone and not at the table, one can assume that the industry
as a whole made a huge recovery. As Coca Cola and Pepsi stayed neck and neck with each other
over the past 5 years, the industry took a huge dip. In 2010, there were a few competitors that
really took down the entire industry, Attitude Drinks Inc. and Uplift Nutrition. One can infer that
the two major beverage companies are doing well and will continue to do well.
Return on Equity
The amount of net income returned as a percentage of shareholders equity. Return on
equity measures a corporation's profitability by revealing how much profit a company generates
with the money shareholders have invested.
Return on Equity
Coca Cola
Pepsi
Industry
2007
2008
2009
2010
2011
30.94
27.44
30.15
43.32
27.37
34.8
35.15
41.25
33.38
30.36
-49.66
-55.72
-87.76
-1551.15
0.18
The graph shows that the economy really hit hard for the industry during 2009-2010. The
industry fell significantly but managed to climb back up. One can infer that consumers slowed down a
bit during the hard times. Coca Cola and Pepsi were neck and neck throughout the five years therefore
showing the consumers loyalty.
Return on Equity
100
50
0
2007
2008
2009
2010
2011
-50
-100
-150
-200
-250
-300
-350
-400
Coca Cola
Pepsi
Industry
Net Profit Margin
A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It
measures how much out of every dollar of sales a company actually keeps in earnings.
Net Profit Margin
2007
2008
2009
2010
2011
Coca Cola
20.73
18.18
22.02
33.63
18.42
Pepsi
14.33
11.89
13.75
10.93
9.69
-2344.52
-26640.3
-1399.95
-19298.1
-1077.93
Industry
Net Profit Margin
900
400
-100
2007
2008
2009
2010
2011
Coca Cola
Pepsi
Industry
-600
-1100
-1600
Coca Cola and Pepsi dominates the industry when it comes to beverages overall. This graph shows how
the industry loses so much money overall. Coca Cola is the overall leader therefore inferring that
consumers love Coca Cola better. It can be inferred that there are several companies that suffer
therefore causing the entire industry to look bad.
Strategic Issue 1: Expand the production of non-soda items.
Alternative 1: Expand bottled water production and distribution.
One option Coca Cola has for expanding its product line is to increase its production of
bottled water. Bottled water is the fastest growing beverage consumption market in the world. In
the United States alone consumption has increased dramatically in an industry where consumers
are spending nearly $50 billion annually. There is also tremendous growth in this market
overseas in countries like China, Brazil and Indonesia. In the United States, despite slightly
declining numbers in the bottled water market the past few years, there is 29 gallons consumed
per citizen each year. In countries like Mexico and Italy it is over 50 gallons per person. This
market grew 5.5% worldwide last year, and further penetration by Coca Cola is a tremendous
opportunity for the company. [8]
Coca Cola currently owns 7% of the world bottled market with its brand Dasani and has
nearly double that market share in the United States. There is rapid growth in countries like
Mexico and China in the millions of gallons consumed annually, and these are two countries that
consume more Coca Cola products than most in the world. Bottled water represents about 3% of
Coca Cola’s annual profits, and there is potential for so much more. [10]
By expanding production in this industry Coca Cola could generate serious profits. There
has been a decline in soft drink consumption and profits over the past few years. While soft
drinks remain the leader in the beverage consumption bottled water is slowly closing the gap.
Innovations in the market such as flavored water have added nearly $10 billion of revenue to the
industry, and Coca Cola has captured this by offering its brand Dasani in a variety of flavors that
include lemon and grape among others.
Coca Cola is the worldwide leader in soft drink consumption, but it lags in the bottled
water market. By increasing its production and distribution and continuing to develop innovative
products in the market Coca Cola can gain a greater market share and generate more profits in an
industry that has grown exponentially in the last decade and will continue to do so.
Pros
- Increased profitability from the largest beverage consumption market in the world.
- Innovations in the market like flavored water offer an alternative to consumers who don’t
prefer water but want healthier options than soft drinks.
Cons
- Bottled water consumption is slightly declining in the United States, however globally it is still
on the rise.
- Increased production of bottled water could take resources away from the production and
distribution of soft drinks and other products
Alternative 2: Expand production and distribution of energy and sports drinks.
Another option for Coca Cola to expand its product line is to increase production of
sports and energy drinks. Sports and energy drinks fall under the functional beverage category.
In the United States this market is dominated by energy drinks, generated 63% of consumption
while sports drinks generate roughly 27%. Coca Cola’s energy drink Full Throttle represents 7%
of the energy drink market, but it is dominated by other brands such as Red Bull, Monster and
Rockstar. [6]
PowerAde is Coca Cola’s major sports drink brand. While Coca Cola has dominated
Pepsi in the soft drink market, Pepsi’s Gatorade has always had a strangle hold on the sports
drink market. Coca Cola combatted this by being the first in introduce lower calorie varieties and
was slowly able to chip away at the lead Gatorade has in market. Coca Cola also recently
introduced Vitamin Water as a new brand of sports drink. It has helped Coca Cola gain a greater
market share with annual sales of nearly $1 billion, and is projected to continue to grow. [6]
The main concern with sports and energy drinks are nutrition based. Many of the drinks
contain large amount of caffeine, sugar or both. As our society continues to become more health
conscious in the midst of an obesity epidemic, it’s difficult to determine if these markets will
continue to grow.
By increasing production of sports and energy drinks Coca Cola could possibly generate
more profits and increase its market share. However since it isn’t the leading producer in either
market it could be difficult considering most consumers are brand loyal.
Pros
- Energy and Sports drink present a nice alternative to consumers looking for a beverage besides
water, but don’t prefer soft drinks.
- Increased profitability from two rapidly growing markets worldwide.
Cons
- Coca Cola currently has small market shares in sports and energy drinks, and is far from the
industry leaders.
- Health concerns associated with the large amount of caffeine and sugar found in sports and
energy drinks.
Recommendation
Coca Cola should invest heavily in the production and distribution of bottled water. This
industry has grown tremendously in the last decade and is projected to continue to do so. Also
the idea of flavored water is a relatively new commodity to the market and Coca Cola was one of
the first to introduce it, and that market is on the rise as well. Coca Cola is the world’s leading
brand, and can use that brand image to increase its share is market. Bottled water consumption is
growing rapidly around the world. The top twenty markets have all shown an increase in
consumption per person, and in many cases the increase is extreme on an annual basis. This a
$50 billion industry worldwide, and the greatest brand in the world certainly has the ability to
possess more than 7% of it.
Strategic Issue 2: The growing Hispanic population in the United States
Alternative 1: In order to take advantage of this growing target market Coca Cola needs to begin
shifting its advertising to the Hispanic race. They have begun to do is by endorsing Guillermo
Memo Ochoa, goalkeeper for the Mexican national team and for Club America in Mexico City.
Guillermo Ochoa is being used to endorse PowerAde. [15]
Pros
- Advertising techniques like this well better appeal to the growing Hispanic population in the
United States.
- Shifting advertising would be an easy solution to the issue since Coca Cola has to advertise its
products. Coca Cola would just be advertising to a different market and not changing its normal
business operations.
Cons
- Using this approach to the issue may direct attention off of Coca Cola’s other target markets.
- Hispanic Americans might begin to feel ostracized if Coca Cola over endorses its products
towards them and not other Americans.
Alternative 2: Another alternative solution to the growing Hispanic population in the United
States is for Coca Cola to increase production and distribution in Hispanic countries.
Pros
- Coca Cola can already have a strong loyal customer base in Hispanic Americans home
countries and when they move into the United States they will already be loyal to the Coca Cola
Company.
- With more production in Hispanic countries Coca Cola can increase sales.
Cons
- The Coca Cola Company could save the money spent on these new facilities in Hispanic
countries for other projects.
- According to Coca Colas website, its Latin American group already comprises a total of 41
countries, from Mexico to Argentina, clustered in four Business Units that include: Mexico,
Latin Center, Brazil and South Latin, providing 450 million servings of our more than 120
brands in the region every single day. Any more facilities might result in over production. [15]
Recommendation
According to a press release by Coca Cola, Coke is the #1 sparkling beverage brand among
Hispanic Americans and there are more than 45 million U.S. Hispanics in America today. Also
in conjunction to this fact, the U.S Census Bureau explains that the Hispanic-origin population
would contribute 32 percent of the Nation's population growth from 1990 to 2000, 39 percent
from 2000 to 2010, 45 percent from 2010 to 2030, and 60 percent from 2030 to 2050. Due to this
information Coca Cola needs to take full advantage of any changes that could eventually affect
their profits. Alternative one deems to be the best solution to the growing Hispanic population in
the United States. Using that approach to the issue may direct attention off of Coca Cola’s other
target markets but since Coca Cola already has a loyal customer base the risk is well worth it.
Also if Coca Cola does not change its advertising to Hispanic Americans another competing
company might. [15]
Strategic Issue 3: Dependence on bottling partners
Alternative 1: An alternative that Coca Cola could do is to start manufacturing their own bottles.
This would cancel contracts with suppliers but it would give Coca Cola control over another
aspect of manufacturing.
Pros
-Coca Cola would have another venture in their company and this would lead to cost savings
instead of buying from suppliers.
-Coca Cola would no longer rely on outside companies to produce bottles. Once Coca Cola has
the resources and facilities to make bottles, it will give Coca Cola another competitive
advantage.
Cons
-There will be a large upfront cost in developing the facilities to produce bottles. Also Coca Cola
will still have to purchase from suppliers until its facilities are up and running.
-With the expansion of Coca Cola as a bottle producing company along with its drinks, it runs
the risk of relying on its own supplies and it would not have a backup supplier to purchase
bottles from. This would end ties with suppliers who have been producing bottles for Coca Cola
such as Yongkang Xinquan Stainless Steel Bottle Co, Ltd. This could cause loss of jobs for the
many suppliers of Coca Cola bottles. [7]
Alternative 2: Another alternative that Coca Cola has is to continue purchasing bottles from
suppliers but gain more suppliers to help with the possibility of one not being able to supply the
wanted amount. Coca Cola states that its suppliers are vital to its continued success so keeping
the bottling suppliers are in its interests.
Pros
-Coca Cola would continue to receive bottles and should not have to worry because it will
always have a backup supplier. Having this backup supplier will give Coca Cola a failsafe in an
emergency.
-Continuing to purchase bottles will allow Coca Cola to focus on other departments such as
research and development. Coca Cola will continue to make great tasting products.
Cons
-Coca Cola will continue its dependence on bottle suppliers. Coca Cola will not be in control of
this part of manufacturing.
-Coca Cola will pay more to suppliers in the long run instead of having its own bottle
manufacturing.
Recommendation
We recommend that Coca Cola starts bottling its products. This alternative was chosen
over the other alternative because the company has the resources to bottle the products. Although
this alternative is costly, it will benefit Coca Cola in the long run. This will diversify what Coca
Cola is capable of and speed up manufacturing of Coca Cola products. Coca Cola would have
the ability to negotiate with retailers, rather than sharing the task with representatives of
separately publicly traded bottlers. [5]
Sources
1. http://360.datamonitor.com/Product?pid=45C0AF28-BCDC-435B-AB8A3F87FBC251E1&view=SWOTAnalysis
2. http://360.datamonitor.com/Product?pid=45C0AF28-BCDC-435B-AB8A3F87FBC251E1&view=CompanyView
3. http://clients.ibisworld.com.jproxy.lib.ecu.edu/industryus/competitivelandscape.aspx?indid=285
4. http://clients.ibisworld.com.jproxy.lib.ecu.edu/industryus/default.aspx?indid=285
5. http://online.wsj.com/article/SB10001424052748704240004575085871950146304.html
6. http://onlinelibrary.wiley.com/doi/10.1111/j.1541-4337.2010.00111.x/full
7 .http://www.alibaba.com/trade/search?Country=&IndexArea=company_en&fsb=y&SearchText=coca
+cola+bottle+manufacturer
8. http://www.bottledwater.org/files/2009BWstats.pdf
9. http://www.census.gov/population/www/pop-profile/natproj.html
10. http://www.globalwaterintel.com/archive/8/7/analysis/chart-of-the-month.html
11. http://www.myfit.ca/nutrition/fast_food_statistics.asp
12. http://www.nrdc.org/
13. http://www.thecoca-colacompany.com/brands/product_list_c.html
14. http://www.thecoca-colacompany.com/careers/careers_latin_america.html
15. http://www.thecoca-colacompany.com/citizenship/suppliers.html
16. http://www.thecoca-colacompany.com/dynamic/press_center/2009/03/destapa-la-felicidad-andenjoy-life-with-coca-cola.html
17. http://www.thecoca-colacompany.com/ourcompany/bottlersites.html
18. http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html