BUS640 Final Paper

8/12/2019 BUS640 Final Paper

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Analysis 1

Managerial Decision Making Research and Analysis

Robert Baca

BUS640: Managerial Economics

ro!" Michael #hirtle

$o%ember 1&th '01(


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Analysis '

Managerial Decision Making Research and Analysis

Introduction

)oca*)ola has had many managerial decisions that +ere made o%er time and ha%e battled

some challenges" ,rom the change in the market to com-etition -ro%iding a challenge. )oca*

)ola has had to stay its co/rse and do +hat it can to remain on to-" )oca*)ola is one o! the

leading so!t drink and be%erage man/!act/ring com-anies" ne o! the reasons it has achie%ed

this stat/s is d/e to the great decisions it has made +hen it comes to management and the

strategies that they /se" #o remain as a to- -lay in the market yo/ ha%e to maintain a strong

re-/tation and make good decisions" hat )oca*)ola has been s/ccess!/l on is ada-ting

strategies that other com-etitors /se to achie%e the s/ccess that they ha%e" #he -/r-ose o! this

-a-er is to e2-lain those challenges it has o%ercome +hile also addressing the !ollo+ing to-ics:

ro%iding a brie! history o! o-erations and !inancial -er!ormance o%er the years

3denti!ying the risk or /ncertainty o! its o-erations based on the stat/s o! the economy

o%ernment reg/lations that ha%e a!!ected the com-any5s o-erations

3n-/ts that are /sed in the com-any5s -rod/ction

$e+ -rod/cts introd/ced and the im-act on !inances

rice !l/ct/ations and demand elasticity

ro!itability and the a!!ect o! its costs and o-erations

)om-etition

)om-etiti%e strategies

)om-any obser%ations and recommendations

Financial Performance and History


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Analysis (

)oca*)ola +as established in the United States in 1&6 and gre+ by merging and

ac7/iring se%eral other com-anies in the market" Some o! the com-anies it ac7/ired are:

Min/te Maid 81609

Bar75s 819

,/;e Be%erage 8'00


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Analysis 4

Less: C!ent mat!ities o lon-%tem de)t 1,577 2,041 1,276 51 465

Less: Lon-%tem de)t 14,7#6 1#,656 14,041 5,059 2,781

Operating liabilities 20,396 19,!8 18,18" 11,!66 10,3!

.et o*eatin- assets 49,227 46,454 4#,#97 27,992 25,195/alance%sheet%)ased a--e-ateacc!als 2,77# #,057 15,405 2,797Balance-Sheet-Based Accruals Ratio,Comparison to Industry

Coca%Cola Co 580 680 4#16 1052

nd!st+, Cons!me 3oods 116 924 540 042

Stoc( nal+sis on .et stoc(%anal+sis%onnetCo*+i-ht 201# /T inancial

nal+ses Cente

,rom December (1. '00& till December (1. '01' the net o-erating asset im-ro%ed !rom

='.1.000.000 to =4.''/st as im-ressi%e is the cash !lo+ based aggregate accr/al"

#he chart belo+ sho+s the im-ressi%e lea- !rom = million to ="


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Analysis

Stoc( nal+sis on .et stoc(%anal+sis%onnetCo*+i-ht 201# /T inancial

nal+ses Cente

#he !/t/re -lans o! )oca )ola are ?/st as im-ressi%e as they -lan to increase re%en/e by < billion

!rom '01( to '01 or an increase o! ( billion a year" #he goal to achie%ing this is to !ind a +ay to

lo+er the costs o! -rod/ction +hile ma2imi;ing -ro!itability" #his is +here the management

strategies ha%e to come into -lace" Ada-ting a strategy to lo+er costs +hile increasing sales +ill

be a di!!ic/lt one" #here are obstacles that co/ld come in the +ay s/ch as s/--ly chain

management. -rod/ct -lacement. and the economy"

Operational Risks Based on Economy

#he economy has -layed a h/ge role in many cor-orations do+n!all" hen the -eo-le

ha%e no money to sho- then the com-anies ha%e no money to contin/e to make a -rod/ct" #his is

+hen the +ant has to become a need" 3n the c/lt/re o! -eo-le today. i! the +ant something so bad

then it +ill become something they need to get" )oca*)ola has done a great ?ob o! making this

transition and relying on its re-/tation to carry them thr/ an economic do+n!all" #here are risks

that do come +ith this s/ch as o-erational c/tbacks o! -ossible !actories or distrib/tion centers"

#he goal is to ha%e a strategy that +ill c/t back the risks and lead to -ro!it" ther -ossible risks

are the costs o/t+eighing the -rod/cti%ity being bro/ght in by the distrib/tion center" @ee-ing a

close eye on the economy +hile also -lanning !or the +orst +ill hel- c/shion the blo+" ith

economic h/rdles there comes legal h/rdles"

Government Regulations

%er the years there has been reg/lations that ha%e a!!ected )oca*)ola" Some o! the

h/rdles that ha%e held them back !rom e2-ansion are ta2ation and do/ble ta2ation -olicies"

#hese -olicies ha%e made it hard !or )oca*)ola to e2-and to other co/ntries" #here ha%e been


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Analysis 6

restricti%e -olicies sets that ha%e made it di!!ic/lt to o-erate s/ch as -olicies on man/!act/ring.

-ackaging. and +ater 7/ality" rod/ct s-eci!ic -olicies s/ch as restrictions. ta2ation and

go%ernment reg/lations ha%e increased the o-erating costs. +hich a!!ect the o%erall -ro!itability"

o%ernment -olicies also a!!ect the o%erall -er!ormance o! the com-any. these -olices incl/de

antitr/st. health. en%ironment. and labor"

Inputs

Each com-any needs to ha%e its in-/ts in order to make a -rod/ct" )oca*)olas in-/ts !or

-rod/ction are the ra+ materials /sed in the be%erages" #hese ra+ materials can consist o!

s+eeteners or +ater" #he im-ortant thing to remember is that )oca*)ola does not act/ally

-rod/ce soda b/t the syr/- that makes it" #he -rocess consists o! adding the right ingredients and

-ackaging it" A machine to im-ro%e the acc/racy and s-eed o! the -rod/ct does this" D/e to

these in-/ts it becomes easier to create ne+ -rod/cts"

New Products

$e+ -rod/cts are the key to ne+ -ro!it" 3t is im-ortant to do the -ro-er research +hen

deciding to come o/t +ith ne+ -rod/cts" )oca*)ola has made se%eral attem-ts to come o/t +ith

ne+ -rod/cts b/t is o!ten t/rned a+ay +hen doing testing" Recently they came /- +ith a -rod/ct

called S/n!ill. +hich is a -o+dered so!t drink" 3t +as ne%er -rod/ced beca/se it did not meet the

market dynamics" )oca*)ola has a ne+ drink called Maa;a. +hich +ill be targeted only at the

metro cities initially and +o/ld then be rolled o/t to the -o+er to+ns 8M/kher?ee. '009"

Price !emand and Profita"ility

ricing and -rod/ction decisions are the most im-ortant decisions to make as it a!!ects

the o%erall s/ccess o! the com-any" D/e to the re-/tation and s/ccess that )oca*)ola has there

+ill al+ays be a demand b/t the %ol/me is +hat is im-ortant" #here are certain cities or to+ns


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Analysis &

that +ill gain yo/ the /--er hand !or a short -eriod o! time" hen yo/ come /- +ith that ne+

-rod/ct it gi%es yo/ the -o+er to collect be!ore other match it" #his is ho+ the com-anies gain a

big -ortion o! the -ro!its" 3nno%ation is ?/st as im-ortant as -ro!it as it leads to -ro!it" 3! the

-rod/ct has no s/bstit/tes then yo/ ha%e the -o+er to raise the cost +itho/t !ear o! a com-etitor

taking the sale to their %ersion o! the -rod/ct" Ad%ertisements are the +ay to stay ahead o! yo/r

com-etition" Society is easily ind/ced by a commercial or ad that they can relate to" Using these

tools to sell yo/r -rod/ct can be %ery im-ortant" Co+e%er too m/ch ad%ertising co/ld ha%e a

negati%e e!!ect" Using the right strategy o! marketing can hel- a%oid that -roblem by /sing the

!o/r basic !actors o! marketing to increase cash !lo+:

rice *

romotion

rod/ct

lace

#ompany O"servations and Recommendations

A!ter re%ie+ing the s/ccess o! )oca*)ola o%er the years and the domination it still has on

the market. the !irst obser%ation 3 can come /- +ith is that they need to contin/e +hat they are

doing" Some o! the im-ro%ements that can be made come internationally" ooking on the +ebsite

!or )oca*)ola. it is clear that they are attem-ting to be s/ccess!/l across the +orld and based on

some o! there commercials they are becoming s/ccess!/l" )ontin/ing to +orking on the

com-etiti%e strategies and -ricing strategies +ill only increase -ro!it as +ell as demand" 3 +o/ld

recommend !or )oca*)ola to /se the S# 8segmentation. targeting and -osition9 o! the -rod/ct

in order to increase the market share" Re%ie+ing the s/ccess o! the com-etitors and attem-ting to

co/nteract +o/ld only lead to a com-etiti%e edge" Being more in%ol%ed in the comm/nity and


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Analysis

taking on a social role +ill also hel- in the n/mbers" S-orting e%ents and entertainment %en/es

are the main so/rce o! so!t drinks and this is +here the e2cl/si%e deal and marketing sho/ld take

-lace"

#onclusion

3n )oncl/sion. )oca*)ola has done a great ?ob o! staying com-etiti%e and rele%ant" #hey

are the clear leader in the so!t drink ind/stry and e-si*)ola is !ighting !or that right" Making the

correct decisions is the di!!erence bet+een being n/mber 1 and being n/mber '" #he decisions

that are made not only a!!ect the -ro!its b/t also a!!ect the +ay the -rod/ct is %ie+ed" )oca*)ola

has sho+n that +ith the right -lan in -lace and the right -eo-le in%ol%ed. anything is -ossible" #o

be the best yo/ ha%e to be like the best b/t better and right no+ e%ery com-any is trying to

achie%e that by being better then )oca*)ola"


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Analysis 10

Re!erence

Do/glas. E" 8'01'9"%anagerial Economics81st ed"9" San Diego. )A: Bridge-oint Ed/cation"

Cays. )" " 81. $o% 169" )oca*cola bottler disc/sses its -rice increase"New &ork 'imes"

Retrie%ed !rom htt-:search"-ro7/est"comdoc%ie+4(1'&0Facco/ntidG(''1

M/kher?ee. S" 8'00. A-r 0

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BUS640 Final Paper