“Coca-Cola Company”

Case Study STRATEGIC MANAGEMENT

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 Stith Pemberton, a pharmacist, in the year 1886 in Atlanta, Georgia when he concocted caramel-colored 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. Interbrand’s Global Brand Scorecard for 2003 ranked Coca-Cola the #1 Brand in the World and estimated its brand value at $70.45 billion. Coca-Cola currently offers nearly 400 brands in over 200 countries or territories and serves 1.5 billion servings each day. Today, products of the Coca Cola Company are consumed at the rate of more than one billion drinks per day.

HISTORY OF COCA COLA

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.

1894 – A modest start for a Bold Idea

In a candy store in Vicksburg, Mississippi, brisk sales of the new fountain beverage called Coca-Cola impressed the store's owner, Joseph A. Biedenharn. He began bottling Coca-Cola to sell, using a common glass bottle called a Hutchinson.

Biedenharn sent a case to Asa Griggs Candler, who owned the Company. Candler thanked him but took no action. One of his nephews already had urged that Coca-Cola be bottled, but Candler focused on fountain sales.

1899 The first bottling agreement

Two young attorneys from Chattanooga, Tennessee believed they could build a business around bottling Coca-Cola. In a meeting with Candler, Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive rights to bottle Coca-Cola across most of the United States (specifically excluding Vicksburg) -- for the sum of one dollar. A third Chattanooga lawyer, John T. Lupton, soon joined their venture.

1900-1909 … Rapid growth

The three pioneer bottlers divided the country into territories and sold bottling rights to local entrepreneurs. Their efforts were boosted by major progress in bottling technology, which improved efficiency and product quality. By 1909, nearly 400 Coca-Cola bottling plants were operating, most of them family-owned businesses. Some were open only during hot-weather months when demand was high.

1916 … Birth of the contour bottle

Bottlers worried that the straight-sided bottle for Coca-Cola was easily confused with imitators. A group representing the Company and bottlers asked glass manufacturers to offer ideas for a distinctive bottle. A design from the Root Glass Company of Terre Haute, Indiana won enthusiastic approval in 1915 and was introduced in 1916. The contour bottle became one of the few packages ever granted trademark status by the U.S.

Patent Office. Today, it's one of the most recognized icons in the world - even in the dark!

1920s … Bottling overtakes fountain sales

As the 1920s dawned, more than 1,000 Coca-Cola bottlers were operating in the U.S. Their ideas and zeal fueled steady growth. Six-bottle cartons were a huge hit after their 1923 introduction. A few years later, open-top metal coolers became the forerunners of automated vending machines. By the end of the 1920s, bottle sales of Coca-Cola exceeded fountain sales.

1920s and 30s … International expansion

Led by longtime Company leader Robert W. Woodruff, chief executive officer and chairman of the Board, the Company began a major push to establish bottling operations outside the U.S. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and South Africa. By the time World War II began, Coca-Cola was being bottled in 44 countries.

1940s … Post-war growth

During the war, 64 bottling plants were set up around the world to supply the troops. This followed an urgent request for bottling equipment and materials from General Eisenhower's base in North Africa. Many of these war-time plants were later converted to civilian use, permanently enlarging the bottling system and accelerating the growth of the Company's worldwide business.

1950s … Packaging innovations

For the first time, consumers had choices of Coca-Cola package size and type -- the traditional 6.5-ounce contour bottle, or larger servings including 10-, 12- and 26-ounce versions. Cans were also introduced, becoming generally available in 1960.

1960s … New brands introduced

Following Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined brand Coca-Cola in the 1960s. Mr. Pibb® and Mello Yello® were added in the 1970s. The 1980s brought diet Coke® and Cherry Coke®, followed by POWERADE® and DASANI® in the 1990s. Today hundreds of other brands are offered to meet consumer preferences in local markets around the world.

1970s and 80s … Consolidation to serve customers

As technology led to a global economy, the retailers who sold Coca-Cola merged and evolved into international mega-chains. Such customers required a new approach. In response, many small and medium-size bottlers consolidated to better serve giant international customers. The Company encouraged and invested in a number of bottler consolidations to assure that its largest bottling partners would have capacity to lead the system in working with global retailers.

1990s … New and growing markets

Political and economic changes opened vast markets that were closed or underdeveloped for decades. After the fall of the Berlin Wall, the Company invested heavily to build plants in Eastern Europe. And as the century closed, more than $1.5 billion was committed to new bottling facilities in Africa.

21st Century

The Coca-Cola bottling system grew up with roots deeply planted in local communities. This heritage serves the Company well today as people seek brands that honor local identity and the distinctiveness of local markets. As was true a century ago, strong locally based relationships between Coca-Cola bottlers, customers and communities are the foundation on which the entire business grows.

BRANDS OF COCA COLA

Coca-Cola Zero® has been one of the most successful product launches 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 our top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries.

3.1- Energy Drinks

For those with a high-intensity approach to life, Coca Cola’s brands of Energy Drinks contain ingredients such as ginseng extract, guarana extract, and caffeine and B vitamins.

3.2- 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.

3.3- 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 Coca-Cola Company are both icons and innovators in the beverage industry.

3.4- 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

3.5- Tea and Coffee

Bottled and canned teas and coffees provide consumers' favorite drinks in convenient take-anywhere packaging, satisfying both traditional tea drinkers and today's growing coffee culture.

3.6 Water

Smooth and essential, our Waters and Water Beverages offer hydration in its purest form.

3.7- Other Drinks

So much more than soft drinks. 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.

4- CONSUMER CHOICE AT A GLANCE

Coca-Cola Mainly preferred by the Youngster & Kids.

Thums-Up Youngster. Limca Common Drink.

Fanta Basically Preferred by Ladies and Kids. Maaza Also Ladies and Kids.

Sprite Not clearly defines. Kinley Soda Mostly those who consume liquor.

Mission Statement (actual)

Our mission declares our purpose as a company. It serves as the standard against which we weigh our actions and decisions. It is the foundation of our Manifesto.

To Refresh the World... in body, mind, and spirit. To Inspire Moments of Optimism... through our brands and our actions. To Create Value and Make a Difference... everywhere we engage.

Vision Statement (actual)

“To maintain our reputation as the leading cola company in the world”

Our vision guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable growth.

People: Being a great place to work where people are inspired to be the best they can be.

Portfolio: Bringing to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.

Partners: Nurturing a winning network of customers and suppliers, together we create mutual, enduring value.

Planet: Being a responsible citizen that makes a difference by helping build and support sustainable communities.

Profit: Maximizing long-term return to shareowners while being mindful of our overall responsibilities.

IMPROVED MISSION STATEMENT:

(1) At Coca Cola we're committed to achieving business and financial success while leaving a positive imprint on society – delivering what we call Performance with Purpose.

(2) Our mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to in8vestors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

IMPROVED VISION STATEMENT:

(1) Coca cola Co responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today."

(2) Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making Coca cola Co a truly sustainable company.

Comments on vision and mission (in terms of how they support the strategies)

The vision statement of our company supports the existing strategies that is (generic strategy) that Coca Cola needs to pursue is that of differentiation. In their current vision and mission statements, the company says it aims to be a low cost leader, yet through our thorough analysis of the strategic direction the company needs to adopt a generic strategy of differentiation. This will allow Coca cola to do three things;

1. Charge a premium 2. Increase unit sales 3. Gain buyer loyalty

However, at the expense of sounding simplistic, it is necessary that the company communicate its differentiation to its customers, otherwise these three advantages will not avail themselves. Initially Coca cola will need to adopt a focused differentiation approach, which means that they should selectively choose which markets will profit them the most and then target only those markets until such provisions are in place from where the company is able to expand its target base. After which they should opt for a broad differentiation generic strategy.

With the market just turning the bend to ‘saturation’, it is entering a phase of intense competition with all major players diversifying their product lines, ranges and even businesses into a versatile range of products to put in place more infantry on the battle ground to use to their advantage in this war of brands. Therefore, we believe that the current strategic objective of Coca cola should be to consolidate its existing brand, Coca cola through extensive strategic market research and consumer insights to be able to home in on the correct target market like a precision targeting missile rather than as an Anti-aircraft gun

Internal Audit

Strength Weakness

1. Product line has over 400 brands.

2. Strong global presence, located in over 200 countries.

3. Long history has built excellent brand recognition.

4. Partnership longevity with established sporting events including the Olympics.

5. Industry leader in market capitalization with $112 billion.

6. Return on Equity yielded 30 percent in 2006.

7. Leader of dividend yields of 2.6 percent. The company has had 43 consecutive years of an annual dividend increase.

8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW).

9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer.

1. Product line is limited to beverages.

2. A failed $16 billion acquisition of Quaker Oats hinders long-term growth.

3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there.

4. Lack of management willingness to place foreign products into American markets.

5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending.

6. Coca Cola’s inventory turnover is only 5.4 compared to Pepsi Co.’s 8.0.

Internal Factor Evaluation (IFE) Matrix

Key Internal FactorsWeight Rating Weighted

ScoreStrengths1. Product line has over 400 brands. 0.09 4 0.362. Strong global presence, located in over 200

countries.0.10 4 0.40

3. Long history has built excellent brand recognition.

0.06 4 0.24

4. Partnership longevity with established sporting events including the Olympics.

0.05 4 0.20

5. Industry leader in market capitalization with $112 billion.

0.12 4 0.48

6. Return on Equity yielded 30 percent in 2006. 0.04 4 0.127. Leader of dividend yields of 2.6 percent. The

company has had 43 consecutive years of an annual dividend increase.

0.04 4 0.16

8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW).

0.06 4 0.24

9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer.

0.10 4 0.40

Weaknesses1. Product line is limited to beverages. 0.09 1 0.092. A failed $16 billion acquisition of Quaker Oats

hinders long-term growth.0.10 1 0.10

3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there.

0.03 2 0.06

4. Lack of management willingness to place foreign products into American markets.

0.02 2 0.04

5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending.

0.05 2 0.10

6. Coca Cola’s inventory turnover is only 5.4 compared to Pepsi Co.’s 8.0.

0.05 2 0.10

TOTAL 1.00 3.09

External Audit

Opportunities Threats

1. Bottled water consumption has increased 11 percent.

2. According to the S&P Industry Survey, consumers are drawn to new smaller beverage brands that are not sold on a mass scale.

3. Word Economic Forum’s annual Davos, Switzerland gathering grants international voice.

4. Less developed countries are in desperate need to improve community water supplies.

5. Energy drink sales are expected to increase 7 to 8 percent in 2007.

6. Disposable income has increased 6.2 percent.

7. Consumers are striving to drink and eat their way to better health than pervious generations.

8. EPS is expected to rise 7 to 8 percent in 2007.

1. Consumption of American beverages is denounced by foreign officials in areas where conflicting interest exist.

2. Multiple lawsuits against the new Enviga beverage for calorie burning claims in advertising

3. Smaller, lesser known brands are turning to major beer distributors for bottling.

4. Overall carbonated drink sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease.

5. Pepsi is more diversified offering beverage and food products.

6. High cost of commodities such as sugar, and metals used in production of cans.

7. Many smaller companies are fierce competitors around the world in their local markets.

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

Opportunities1. Bottled water consumption has increased 11

percent.0.06 4 0.24

2. According to the S&P Industry Survey, consumers are drawn to new smaller beverage brands that are not sold on a mass scale.

0.05 2 0.10

3. Word Economic Forum’s annual Davos, Switzerland gathering grants international voice.

0.02 2 0.04

4. Less developed countries are in desperate need to improve community water supplies.

0.02 2 0.04

5. Energy drink sales are expected to increase 7 to 8 percent in 2007.

0.06 3 0.18

6. Disposable income has increased 6.2 percent. 0.05 3 0.15

7. Consumers are striving to drink and eat their way to better health than pervious generations.

0.07 3 0.21

8. EPS is expected to rise 7 to 8 percent in 2007. 0.07 4 0.28

Threats1. Consumption of American beverages is denounced

by foreign officials in areas where conflicting interest exist.

0.02 3 0.06

2. Multiple lawsuits against the new Enviga beverage for calorie burning claims in advertising 0.04 2 0.08

3. Smaller, lesser known brands are turning to major beer distributors for bottling.

0.06 2 0.12

4. Overall carbonated drink sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease.

0.10 2 0.20

5. Pepsi is more diversified offering beverage and food products.

0.20 3 0.60

6. High cost of commodities such as sugar, and metals used in production of cans.

0.10 3 0.30

7. Many smaller companies are fierce competitors around the world in their local markets.

TOTAL

0.08

1.00

3 0.24

2.84

CPM – Competitive Profile Matrix

Coca-Cola Pepsi Cadbury SchweppesCritical Success Factors

Weight Rating Weighted Score

Rating Weighted Score

Rating Weighted Score

Market SharePrice CompFinancial PositionProduct QualityProduct LinesCustomer LoyaltyEmployeesMarketingTotal

0.150.100.120.150.150.150.110.071.00

4 0.603 0.304 0.483 0.45 4 0.604 0.603 0.333 0.21 3.71

3 0.453 0.304 0.483 0.454 0.604 0.603 0.333 0.21 3.56

2 0.303 0.303 0.363 0.453 0.453 0.453 0.333 0.21

2.85

SWOT ANALYSIS

SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats inside a company, project, or a business venture. It involves identifying the internal and external factors that are favorable/unfavorable for business to succeed

SWOT ANALYSIS FOR COCA COLA COMPANY

STRENGTHS

1. Brand equity/image & recognition2. Product distribution and worldwide network 3. Solid financial performance 4. One of the world's most recognized brand.5. Product diversification (water, juices, soft drinks, sport drinks, etc) 6. Co-operate identity.7. Innovation

WEAKNESSES

1. Credit rating 2. Customer concentration, particularly in the US (Wal-Mart accounts for more than 10% of

Coca Cola's business in the US) 3. A lot of loyal Pepsi customers are not enough loyal Coca Cola customers4. Does not enjoy the number one position in India, Pakistan.

OPPURTUNITIES

1. Possible growing demand.2. Expansion – Reaching all segments.3. Globalization4. Catering to Health Consciousness of People5. Bottled water growth 6. Acquisitions of smaller players.

THREATS

1. Health Drinks – Fruit Juice Companies2. Key competitors (Pepsi, etc) 3. Commodity prices growth 4. Image perception in certain parts of the world.5. Smaller, more nimble operators/players

Suggestion to Stay ahead Of Competition

The three main ways are through innovation, relations or reputation.  

ST:

First of all innovation can be used. This may certainly give coca cola competitive advantage because it introduces a new product, which many people will want to try. People will like to purchase the commodity even though price is high because no substitutes are available. It may also give coca cola brand loyalty which means customers will stay loyal to them no matter what happens.(S1,S2,S4,S5,S7,T1,T2,T3)

If coca cola used strong marketing with environment friendly attitude it may raise barriers to entry, thus decreasing the threat of new entrants to the industry.  (T1,T4,T5,S2,S4,S5,S6)

SO:

Coca Cola's brand represents quality, taste and excitement to the market, qualities that remain unmatched by the company's competitors, thus severely reducing any threat of being substituted. (S1,S4,S2,O1,O2,O3)

 WO:

Another factor is marketing. This is a very important factor for coca cola. In order for the company to maintain its strong market position, Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and positive responses and differentiate itself from its competitors.(W2,W3,W4,O1,O2,O3,O4)

WT:

They should installed hi-tech water recycling system so that they can save 50% water savings of its operations. (W3, W4, T4)

Many of coca cola’s plastic bottles are recycled and as a result less resource are lost and costs decrease. Through diversification & innovation in water & juices business supported with aggressive advertising strategy Coca Cola Company can attracts a new market segment. This will mean they will have a higher revenue increasing long term profitability and improve credit rating.(W1,W4,T1,T3,T4)

SWOT Strategies

Strengths (S)

1. Brand equity/image & recognition2. Product distribution and worldwide

network 3. Solid financial performance 4. One of the world's most recognized brand.5. Product diversification (water, juices, soft

drinks, sport drinks, etc) 6. Co-operate identity.7. Innovation

Weaknesses (W)

1. Credit rating 2. Customer concentration,

particularly in the US (Wal-Mart accounts for more than 10% of Coca Cola's business in the US)

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.

Opportunities (O)

1. Possible growing demand.2. Expansion – Reaching all

segments.3. Globalization4. Catering to Health

Consciousness of People5. Bottled water growth 6. Acquisitions of smaller

players.

SO Strategies

Coca Cola's brand represents quality, taste and excitement to the market, qualities that remain unmatched by the company's competitors, thus severely reducing any threat of being substituted. (S1,S4,S2,O1,O2,O3)

WO Strategies

Another factor is marketing. This is a very important factor for coca cola. In order for the company to maintain its strong market position, Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and positive responses and differentiate itself from its competitors.(W2,W3,W4,O1,O2,O3,O4)

Threats (T)

1. Health Drinks – Fruit Juice Companies

2. Key competitors (Pepsi, etc) 3. Commodity prices growth 4. Image perception in certain

parts of the world.5. Smaller, more nimble

operators/players

ST Strategies

First of all innovation can be used. This may certainly give coca cola competitive advantage because it introduces a new product, which many people will want to try. People will like to purchase the commodity even though price is high because no substitutes are available. It may also give coca cola brand loyalty which means customers will stay loyal to them no matter what happens.(S1,S2,S4,S5,S7,T1,T2,T3)

If coca cola used strong marketing with environment friendly attitude it may raise barriers to entry, thus decreasing the threat of new entrants to the industry.  (T1,T4,T5,S2,S4,S5,S6)

WT Strategies

They should installed hi-tech water recycling system so that they can save 50% water savings of its operations. (W3, W4, T4)

Many of coca cola’s plastic bottles are recycled and as a result less resource are lost and costs decrease. Through diversification & innovation in water & juices business supported with aggressive advertising strategy Coca Cola Company can attracts a new market segment. This will mean they will have higher revenue increasing long term

Conservative Aggressive

Defensive Competitive

-6.00 -1.00 +6.00

+6.00

-6.00

+1.00+3.6

+2.2

profitability and improve credit rating.

(W1,W4,T1,T3,T4)

SPACE Matrix

Coordinate: (3.6, 2.2)

Return on Assets (ROA) 6 Rate of Inflation -3Leverage 6 Technological Changes -2Net Income 6 Price Elasticity of Demand -2Income/Employee 6 Competitive Pressure -6Inventory Turnover 3 Barriers to Entry into Market -3

5.4 -3.2Environmental Stability (ES) Average Financial Strength (FS) Average

Environmental Stability (ES)Financial Strength (FS)

Market Share -1 Growth Potential 5Product Quality -1 Financial Stability 6Customer Loyalty -1 Ease of Entry into Market 4Technological know-how -2 Resource Utilization 5Control over Suppliers and Distributors -2 Profit Potential 5

-1.4 5.0Competitive Advantage (CA) Average Industry Strength (IS) Average

Competitive Advantage (CA) Industry Strength (IS)

X-axis : -1.4 + 5.0 = 3.6 Y-axis: 5.4 + -3.2 = 2.2

FS

ES

CA IS

Question Marks

Cash Cows Dogs

Relative Market Share Position

IndustrySales

GrowthRate

Stars Coke

Coordinate: (3.6, 2.2)

The Boston Consulting Group (BCG) Matrix

CONCLUSION:

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.