2009-10 Term 2 Assignment 1

Section A) Essay Questions

A1. Identify steps and stages of strategic management. Companies that implement strategic planning
may sometimes face failure. Can you suggest some potential reasons for the failure?

A2. Describe major external environments that may possibly affect organizations strategic
development. Provide examples as illustration.

A3. Please discuss the following strategies and use appropriate examples to illustrate your answer.
Integration strategies
Intensive strategies
Diversification strategies
Defensive strategies
Michael Porters Generic strategies

Session B) Case Study

Coca-Cola Company 2007

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall
Forest David: Francis Marion University
Alan Badal: The Union Institute

A. Case Abstract

Coca Cola (www.cocacola.com) is a comprehensive business policy and strategic management

case that includes the companys fiscal year-end December 2006 financial statements,
competitor information and more. The case time setting is the year 2007. Sufficient internal
and external data are provided to enable students to evaluate current strategies and recommend
a three-year strategic plan for the company. Headquartered in Atlanta, Georgia, Coca Colas
common stock is publicly-traded on the New York Stock Exchange under the ticker symbol
KO.

Coca Cola operates in over 200 nations around the world and sells carbonated and non
carbonated beverages. Coca Colas line of non carbonated drinks includes: water, juice, and
teas. The company has over 70,000 employees and is led by CEO Neville Isdell.

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 The Coca-Cola Companys (Cokes) operating segments include 1) Africa, 2) East, South East
Asia & Pacific Rim, 3) European Union, 4) Latin America, 5) North America, 6) North Asia,
Eurasia, and the Middle East, and 7) bottling investments. Not all soft drink products/flavors of
the company are available in all the operating groups.
The Coca-Cola Company has two major rivals: PepsiCo and Cadbury Schweppes PLC.

Its interesting to note that PepsiCo has more that double the employees as Coca-Cola as listed
in Exhibit 6. Groupe Danone competes to a lesser degree with Coke. The number 3 soft drink
producer, Cadbury Schweppes PLC (behind Coca-Cola and PepsiCo Inc.), is a diversified
company that produces and markets beverages, chocolate, and chewing gum. Cadbury plans to
divest its beverage division in 2007. Hershey Foods has expressed interest as well as various
private-equity firms.

The soft drink industry primarily consists of PepsiCo, Coca Cola Company, and Cadbury
Schweppes PLC. Federal regulations may prohibit PepsiCo and Coke from bidding for
Cadburys carbonated soft drink business. Analysts however believe the brand Snapple, which
Cadbury sells, would be a good fit for Coke. PepsiCo would likely benefit most from
acquiring Cadburys Mexican assets with such strong brands as Squirt, Crush, and Canada Dry.

B. Vision Statement

To maintain our reputation as the leading cola company in the world.

C. Mission Statement

Everything we do is inspired by our enduring mission:

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.

D. External Audit

Opportunities

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 Forums 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.

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 Threats

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.

CPM Competitive Profile Matrix

Coca-Cola Pepsi Cadbury Schweppes

Critical Success Weight Rating Weighted Rating Weighted Rating Weighted
Factors Score Score Score
Market Share 0.15 4 0.60 3 0.45 2 0.30
Price Comp 0.10 3 0.30 3 0.30 3 0.30
Financial Position 0.12 4 0.48 4 0.48 3 0.36
Product Quality 0.15 3 0.45 3 0.45 3 0.45
Product Lines 0.15 4 0.60 4 0.60 3 0.45
Customer Loyalty 0.15 4 0.60 4 0.60 3 0.45
Employees 0.11 3 0.33 3 0.33 3 0.33
Marketing 0.07 3 0.21 3 0.21 3 0.21
Total 1.00 3.71 3.56 2.85

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

Opportunities
1. Bottled water consumption has increased 11 0.06 4 0.24
percent.
2. According to the S&P Industry Survey,
consumers are drawn to new smaller beverage 0.05 2 0.10
brands that are not sold on a mass scale.
3. Word Economic Forums annual Davos, 0.02 2 0.04
Switzerland gathering grants international voice.
4. Less developed countries are in desperate need 0.02 2 0.04
to improve community water supplies.
5. Energy drink sales are expected to increase 7 to 0.06 3 0.18
8 percent in 2007.
6. Disposable income has increased 6.2 percent. 0.05 3 0.15
7. Consumers are striving to drink and eat their 0.07 3 0.21
way to better health than pervious generations.
8. EPS is expected to rise 7 to 8 percent in 2007. 0.07 4 0.28
Threats
1. Consumption of American beverages is
denounced by foreign officials in areas where 0.02 3 0.06

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 conflicting interest exist.
2. Multiple lawsuits against the new Enviga
beverage for calorie burning claims in 0.04 2 0.08
advertising
3. Smaller, lesser known brands are turning to 0.06 2 0.12
major beer distributors for bottling.
4. Overall carbonated drink sales have been flat
due to links of sugar to obesity and high fructose 0.10 2 0.20
corn syrup to heart disease.
5. Pepsi is more diversified offering beverage and 0.20 3 0.60
food products.
6. High cost of commodities such as sugar, and 0.10 3 0.30
metals used in production of cans.
7. Many smaller companies are fierce competitors 0.08 3 0.24
around the world in their local markets.
TOTAL 1.00 2.84

E. Internal Audit

Strengths

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.

Weaknesses

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 Colas inventory turnover is only 5.4 compared to Pepsi Co.s 8.0.

Internal Factor Evaluation (IFE) Matrix

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Key Internal Factors Weight Rating Weighted
Score
Strengths
1. Product line has over 400 brands. 0.09 4 0.36
2. 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 0.05 4 0.20
including the Olympics.
5. Industry leader in market capitalization with $112 0.12 4 0.48
billion.
6. Return on Equity yielded 30 percent in 2006. 0.04 4 0.12
7. Leader of dividend yields of 2.6 percent. The company
has had 43 consecutive years of an annual dividend 0.04 4 0.16
increase.
8. Joint venture between The Coca Cola Company and
Nestle has resulted in the establishment of Beverage 0.06 4 0.24
Partners Worldwide (BPW).
9. Coca-Cola has formed a strong partnership with
McDonalds, with McDonalds becoming their largest 0.10 4 0.40
customer.
Weaknesses
1. Product line is limited to beverages. 0.09 1 0.09
2. A failed $16 billion acquisition of Quaker Oats hinders 0.10 1 0.10
long-term growth.
3. Negative publicity in India because of water issues, has 0.03 2 0.06
led to poor brand image and hindered growth there.
4. Lack of management willingness to place foreign 0.02 2 0.04
products into American markets.
5. Marketing deficiencies due to turnover in leadership and 0.05 2 0.10
a 16 percent decrease in advertising spending.
6. Coca Colas inventory turnover is only 5.4 compared to 0.05 2 0.10
Pepsi Co.s 8.0.
TOTAL 1.00 3.09

C.1 Comment on Coca Colas vision and mission statement.

C.2 Based on the weighted scores of SWOT, identify the most important elements in the SWOT that
faced by Coca Cola.

C.3 Based on the SWOT analysis, can you propose strategies to Coca company in order to seize its
strengths and opportunities, and to avoid threats and weaknesses?

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