STRATEGIC MANAGEMENT

COCA-COLA COMPANY
Case Study

Bilal Shakil
BBA IV, Section C

Introduction Case
The case Coca-Cola Company 2007 gives a brief overview about the company, its major
products, operating segments and problems which Coke is facing in those segments. The case
describes the global soft drink industry along with cokes major competitors like Pepsi Co,
Cadbury Schweppes PLC and Groupe Danone. Financial statements along with the
organizational structure of coke is also provided in the case.
Introduction Company
Established in 1886, Coca-Cola Company is the worlds largest company of nonalcoholic
beverage with products that include coco-cola, diet coke, sprite, and Fanta. The company owns
more than 400 brands, including diet and light beverages, waters, juice and juice drinks, teas,
coffees, sports and energy drinks. It has ownership interests in numerous bottling and canning
operations. Coca- Cola sells finished beverage products bearing the Coca-Cola trademarks in
more than 200 countries and employs about 71,000 people worldwide.
Coca-Cola Company is operating in many different segments which include: Africa, East and
South East and Pacific Rim, European Union, Latin America, North America, North Asia and
Middle East. The geographic coverage of Coca-Cola is the best in the world.
The activities of Coca-Cola include all sectors of the soft drink industry. The company has
generated 73% of the revenue from locations outside the company's domestic US market.
Current growth has been mainly in the form of brand extensions and an ever-expanding
distribution network.

Organizational Structure
The Coca Cola Company employs about 71,000 employees and has a separate international
division structure because its international staffs operate separately and in isolation from head
office. It has various divisions in all continents around the world.
Chairman of the board/CEO, E. Neville Isdell is on the top of executive officers. Below him
there are 7 divisions which include EVP and president bottling invest/supply chain, CFO,
President Marketing strategies, SVP and general counsel, SVP and director of HR, SVP and
director public affairs and COO.
Below COO there are 5 presidents of all the operating segments in which coke operates, namely,
Eurasia group, European Union market, African Group, Latin America Group and Pacific group.

Chairman of the Board/ CEO

Director Public Afairs
Director

SVP & General Counsel

MKT strategies
President & President
COO
of HR
President Bottling invest
CFO & EVP

President Pacifc
Group Latin America
President
Group African Group
President EU market
President
President Eurasia Group

Coca Cola Vision statement (Actual)

To maintain our reputation as the leading cola company in the world.
Coca Cola Vision statement (Proposed)
To remain at the market leader as leading cola company throughout the world.
Coca Cola mission statement (Actual)
To refresh the world - in mind, body and spirit To inspire moments of optimism - through our
brands and actions To create value and make a difference everywhere we engage
Coca Cola Mission statement (Proposed)
Our main responsibility is to delight our customers (1) with refreshing soft drinks, water, energy
drinks, juices, and tea (2) to fit any occasion in their daily lives (3). Our product is of superior
quality (4), favorite around the world, sold over 200 nations (5). We use leading technology and
equipment (6) to process and make our products and ensure each glass of Coke product is as good
as the last (7). We support team members excellence and happiness (8). We practice fair trade in
all markets we compete and create wealth through profit and growth. We value our responsibility
to all communities and share the worlds obligation for the protection of the environment (9).
1.
2.
3.
4.
5.
6.
7.
8.
9.

Customers
Products/ services
Philosophy
Self-Concept
Market
Technology
Concern for survival, profitability, growth
Concern for employees
Concern for public image

SWOT
Strength
- Worlds largest beverage Company - sales of about $92 billion in 200 markets
- Collaboration with customer in 2006 FIFA World Cup
- Top seller of nonalcoholic beverages in Russia - 22% growth in volume
- Well diversified - 72% revenues outside US
- Strong leadership
- Involve in digital programs that focuses on youth
- Receives annual award as favorite drink in South Africa
- Growth of 15% in unit case volume in China
- Digital marketing platform in Mexico and Brazil - 5 million registered
- Acquired mineral water company in Germany and Italy
Weaknesses
- Operating revenue dropped by 0.2% in Africa
- Declining sales due to availability and affordability in India and Philippines
- No research and development budget
- Loss of joint venture with Nestle
- Decreasing of 1.5% in Inventory Turnover in 2006
- Decrease in unit case volume of 5% in south and east Asia in 2006
- Parting ways with Nestle on selling tea US
Opportunities
- Sports events such as Olympic and FIFA World Cup with more than 3 billion audience
- Growth in bottling industry, front end capability and equipment
- tea/coffee (dispensing tech) - one of the fastest growing drinks
- Juice/Sports drinks market in Latin America and other parts of the world
- growth in snacks and confectionary business
Threats
- Trend towards more healthy eating and drinking
- low value of dollar in international market 72% revenue comes from outside US
- increase in manufacturing cost per unit and raw materials - corn prices up 57%
- ban on selling of drinks in public school due to obesity issues among youth
- Federal regulations prohibit from bidding for Cadburys products
- fierce competitors
- low share in homeland
- Limitation of water

Internal Factor Evaluation

IFE MATRIX
Key Internal Factors
Weight Rating
Strengths
Worlds largest beverage Company - sales of about $92 billion in 200
markets
Collaboration with customer in 2006 FIFA World Cup
Top seller of nonalcoholic beverages in Russia - 22% growth in volume
Well diversified - 72% revenues outside US
Strong leadership
Involve in digital programs that focuses on youth
Receives annual award as favorite drink in South Africa
Growth of 15% in unit case volume in China
Digital marketing platform in Mexico and Brazil - 5 million registered
Acquired mineral water company in Germany and Italy
Weaknesses
Operating revenue dropped by 0.2% in Africa
Declining sales due to availability and affordability in India and
Philippines
No research and development budget
Loss of joint venture with Nestle
Decreasing of 1.5% in Inventory Turnover in 2006
Decrease in unit case volume of 5% in south and east Asia in 2006
Parting ways with Nestle on selling tea US
TOTAL

Score

0.05

0.15

0.07
0.1
0.05
0.2
0.15
0.05
0.03
0.02
0.1

4
3
3
3
3
4
3
3
2

0.28
0.3
0.15
0.06
0.45
0.02
0.09
0.06
0.2

0.15
0.02

2
1

0.3
0.02

0.02
0.04
0.05
0.03
0.05
1

1
1
2
1
1

0.02
0.04
0.1
0.03
0.05
2.5

Strong leadership is a core area of any business. The business profits/ revenues are all directly
related to strong leadership. From managing the staff/ employees to making the policies are all
done by the management? Therefore, the highest weightage of 0.2 is given to strong leadership.
The coke company has good leadership as indicated in the case so a rating of 3 has been given.
22% growth in volume of nonalcoholic beverages in Russian and acquiring of mineral water
Company in Germany and Italy also counts for the major strength in beverage industry,
therefore, the weights of 0.1 are given to both.
A drop of 0.2% in operating revenue in Africa is of major concern. Increase in expenses and
other expenditures are directly related to the drop in operating revenues which is also of a major
concern to the Coke Company. Therefore, the weight of 0.15 is given to this weakness.

According to the analysis of IFE, the score of Coke is 2.5, which is very good. This shows that
Coca-Cola is internally strong and good enough. So by using their strengths, the can overcome
their weaknesses.

External Factor Evaluation

EFE MATRIX
Key External Factors
Weigh
t
Opportunities
Sports events such as Olympic and FIFA World Cup with more than 3
billion audience
Growth in bottling industry, front end capability and equipment
tea/coffee (dispensing tech) - one of the fastest growing drinks
Juice/Sports drinks market in Latin America and other parts of the world
growth in snacks and confectionary business
Threats
Trend towards more healthy eating and drinking
low value of dollar in international market 72% revenue comes from
outside US
increase in manufacturing cost per unit and raw materials - corn prices up
57%
ban on selling of drinks in public school due to obesity issues among
youth
Federal regulations prohibit from bidding for Cadburys products
fierce competitors
low share in homeland
Limitation of water
TOTAL

Ratin
g

Score

0.08

0.15

0.08
0.07
0.09
0.07

4
3
2
1

0.32
0.24
0.14
0.09

0.12
0.09

4
2

0.48
0.12

0.07

0.18

0.06

0.12

0.08
0.04
0.07
0.08
1

2
3
2
1

0.16
0.12
0.16
0.06
2.58

As the people are becoming more health consciousness towards eating and drinking and is of
relative importance to the beverage industry. Therefore, the highest weight of 0.12 is given to
trend towards healthier eating and drinking.
Market for juice and sports drinks is highest factor for external opportunities and followed by the
growth in bottling industry and FIFA world cup which has contributed to strong financial
position of coke.

According to the analysis of EFE, the rating is 2.58, which is slightly below average. This shows
that the threats being faced by Coca Cola are fierce, and it should take some actions to prevent
the threats and utilize the opportunities.
PEST
-

Political Factors - Changes in the non-alcoholic business environment. These include,

without limitation, competitive product and pricing pressures and their ability to gain or
maintain share of sales in the global market as a result of action by competitors. Political
conditions, especially in international markets, including civil unrest, government
changes and restrictions on the ability to transfer capital across borders. Their ability to
penetrate developing and emerging markets, which also depends on economic and
political conditions, and how well they are able to acquire or form strategic business
alliances with local bottlers and make necessary infrastructure enhancements to
production facilities, distribution networks, sales equipment and technology.

Economic factors Coco-cola is quite acceptable in global market as well as local

markets. Consumers are now resuming their normal habits, going to the malls,
car shopping, and eating out at restaurants. However, many are still handling their money
cautiously. For major soft drink companies, there has been economic improvement in
many major international markets, such as Japan, Brazil, and Germany. These markets
will continue to play a major role in the success and stable growth for a majority of the
non-alcoholic beverage industry.

Social factors - Many U.S. citizens are practicing healthier lifestyles. This has affected
the non-alcoholic beverage industry in that many are switching to bottled water and diet
colas instead of beer and other alcoholic beverages. The need for bottled water and other
more convenient and healthy products are in important in the average day-to-day life.
Since many are reaching an older age in life they are becoming more concerned with
increasing their longevity. This will continue to affect the non-alcoholic beverage
industry by increasing the demand overall and in the healthier beverages.

Technological factors - The effectiveness of company's advertising, marketing

and promotional programs. The new technology of internet and television which use
special effects for advertising through media. They make some products look attractive.
This helps in selling of the products. This advertising makes the product attractive.
Similarly digital marketing concept has been introduced and has been utilized by the
industry efficiently which is good for company as well.
Introduction of cans and plastic bottles have increased sales for Coca-Cola as these are
easier to carry and used. As the technology is getting advanced there has been
introduction of new machineries.

CPM Matrix

The highest weight i.e. 0.2 is given to the market share because industry leader will always enjoy
more and more profits. Highest rating of 4 is given to coke because it is the largest beverage
industry worldwide. Second highest is given to Pepsi according to its share in the market.
The financial position is second highest factor because profitability matters a lot in businesses.
Both coke and Pepsi are utilizing its resources fully and generating profits that can be seen by
their net income and other financial ratios.
A weight of 0.15 is given to management because it is also one of the most important variable.
Coke has well experienced management team so highest rating i.e. 4 is given to coke.
Based on CPM, Coca-Cola Company is above Pepsi and Cadbury. It is shown that Coca-Cola
Company has its own strengths and opportunities to compete in this challenging market. For
Coca-Cola Company to remain ahead is should focus on uplifting its marketing strategy and
explore the new market.

Area of focus
Energy drinks, tea/coffee and juices product Since people are becoming health conscious day
by day and with an increase in demand for clean, healthy and hygienic water and juices. Coke
needs to cope up and cater the needs of the consumers. If Coca-Cola focuses only on the
carbonated soft drink sector competitively, it will weaken or make Coca-Cola lose the market
leader in beverage industry due to fierce competition. In 2006, energy drinks shot up by almost
50%. Energy drinks and juices will be major beverage needs of new generations of young
consumers and health conscious consumers.
Strategies/ Recommendations
Coca Cola Company has a very rich history and spread over the world, they 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, tea/coffee 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.

Financial Ratio Analysis

Financial Ratios
2006

2005

Liquidity ratios
Current ratio
Quick ratio

0.95
0.76

1.04
0.9

Leverage ratios
Debt to total assets
Time interest earned

0.44
30.9

0.44
28.8

Activity ratios
inventory turnover
fixed asset turnover
total assets turnover
account receivable turnover

4.98
3.5
0.8
9.7

5.8
4
0.79
10.4

Profitability ratios
profit margin
ROA
ROE
earnings per share
price earnings ratio

21.10%
17.10%
30.50%
2.16
20.3

21.10%
16%
59.60%
2.04
20.8

Growth ratios
Sales growth
net income growth
earnings per share

4.30%
4.30%
2.16

5.20%
0.50%
2.04

Liquidity ratios:
It tells about the firms ability to meet its short term obligations.
A decrease in current ratio 0.9% is observed which may suggest that a deteriorating liquidity
position of the coke company.
A decreasing quick ratios of Coke by 0.12% suggest that the company is over-leveraged,
struggling to maintain or grow sales, paying bills too quickly or collecting receivables too
slowly.
Leverage Ratio:
It tells about the extent of companys debt financing.
Coke has maintained its debt to total asset ratio by 0.44% which is a good sign.
Activity Ratio:

This ratio tells how effectively the firm is using its resources.
Inventory turnover, fixed asset turnover, account receivable turnover has decreased over the
period which is a positive sign for the company. Therefore, means that the firm is effectively
using its resources.
Profitability Ratios:
Effectiveness shown by return on sales and investments.
ROA and price to earnings ratio has increased over the period which is a health sign for the
company. Net profit margin remained stagnant.
Growth ratios:
It tells about the firms ability to maintain its economic position.
Increase in net income and earnings per share have increased over the period which is a positive
sign for the investors.
Earnings per share increased to 2.16 in 2006 as compared to 2.04 in the previous year.