final question

Fils-Aime 13

Valdirene Fils-Aime

Michael Matvichuk

CMGMT 4140 -- Strategic Management

Project: Five-Step Strategic Management Plan Analysis

Coca-Cola Company in the beverages industry

Step I. Corporate Mission and Goals

Brief history of the background and evolution of the organization

Coca-Cola Company is the manufacturer of Coke or Coca-Cola soft drinks. The company was founded in 1886 by John Pemberton. He was inspired by his curiosity as he stirred up a fragrant, caramel-colored liquid that he brought down to a place called Jacobs’ Pharmacy. There he added carbonated water and let several customers sample the new concoction. Although John Pemberton invented Coca-Cola, which is a carbonated soft drink, he later sold it to businessman Asa Griggs Candler, whose smart marketing tactics made the soft drinks to dominate the world of beverages in the entire 20th century. During the introduction stage into the market, the company used to sell nine drinks in Atlanta per day, but currently it is selling more than 19400 beverages every second around the globe (Moran). Its advertising strategies have changed to reach greater markets. Today Coca-Cola is one of the best-known brands around the world. However, when the company started, it used free coupons to promote its product. When Griggs Candler acquired the company, his budget to promote the product was $11,000. In 2011, the company allocated $4 billion for the marketing of its products (Moran). Also, over the decades the bottling of the beverages has changed to differentiate it from other close substitutes. These changes have also been seen in the company logos.

Mission and Vision

Coca-Cola has aimed to maximize its profit while keeping long-term sustainable growth in the beverage industry. The mission statement of the company states that it aims to refresh the world, inspire the moments of happiness and optimism, and create value and build a difference in the world. The vision of the company is their road map and acts as a guide to every aspect of their business by explaining what ought to be accomplished to achieve sustainable and quality growth around the world. It appears that the vision of Coca-Cola consists of 6 P’s which are people, portfolio, partners, planet, profit, and productivity. The company’s values include integrity, collaboration, accountability, diversity, leadership, passion, and quality (“Mission, Vision & Values”). The winning culture of the company explains its behaviors and attitudes that will make their vision 2020 a reality.

General Structure and Leadership Style

The organizational structure of the company is structured in such a way that it operates smoothly, and the growth of the company is enhanced. The company is composed of fifteen board members who include the CEO of the company James Quincey. The board members are all divided, and each of the board heads several other committees. Currently, the company is now divided into three regional groups, which include EMEA (Europe, Middle East, and Africa), Asia Pacific and Latin America (“The Coca-Cola Company Announces New International Structure, Promotes Key Leaders”). Whenever major regional or divisional decisions are required, all members overlook the decision to ensure that the growth of the company is sustained. The leadership style in this company is delegative style itself. The company believes in the need to delegate duties and rule instead of taking every responsibility in the company. The organization’s-based functions are divided, and it ensures that all the functions are not under the control of one entity and the use of SME’s to function in every functional division is a very ingenious strategy. This is a clear example of delegative leadership. It includes Innovative Leadership, Cross Cultural Leadership, and Visionary Leadership.

Statement of Issues

Coca-Cola is one the most identifiable international brand in the world. On, May1, 2017 James Quincey replaced Muhtar Kent as the CEO of the company. Kent had been the face of the company for almost a decade. He joined the company in the late 1970s but became the CEO of the company in 2008 (“Fresh Challenges for New Leader at Coke”). Like any other traditional non-alcoholic company, Coca-Cola Company is facing strategic challenges that seem to shape the whole industry in the next few years. Some of the challenges include government policies which are aimed to reduce sugary drinks consumption to fight obesity, the socials movements that are against the bottled beverages to minimize environmental pollution, and the economic retardation in the majority of the emerging markets. The appointment of Quincey is in line with the strategy of the company to tackle those challenges by introducing healthier drinks, expanding the company’s corporate sector by diversifying its products to include non-soda drinks, and last bringing to market beverages that have a smaller container and little or no calories. The company also, must capitalize on consumer trends by acquiring smaller competitors that can supplement their current offerings. As an example, Coca-Cola recently invested in Body Armor, a new trendy player in the sports drink world.

Step II: External analysis

By analyzing the external industry environment, the company is able to identify its opportunities and threats in their operating industry. Besides it is very important to select and formulate an appropriate strategic planning, because external factors have the effects on the organization in different aspects.

Threats

It’s been no secret that soft drink providers have suffered some of late. A cultural shift towards natural and organic products has led many to opt for nutritional waters, smoothies, and various healthy beverage options. Thus, core soda offerings that include high amounts of sugar, or diet items with artificial sweeteners, have fallen out of favor with buyers. Also, health professionals have called for the elimination of beverages containing lofty amount of sugar. Also, the number of contracts a company is likely to have with its supplier is highly determined by its size. The bigger the company, the more contracts it is likely to have with its supplier securing pricing. The main ingredients for Coca-Cola drinks include carbonated water, sugar, and phosphoric acid among others. Like any other commodity, the prices of the product vary over time. The price is also greatly affected by the availability of the products. Sugarcane harvest might as well be affected by certain unforeseen natural factors and this would directly affect the cost of raw material. Indirect competition also, plays a big role, threatening the company indirectly, companies such as Starbucks and Dunkin’ Brands Group indirectly compete with Coca-Cola, they do place a dent in the company’s market share. Additionally, trends involving cafes can threaten the company as well, with their smoothies, health tonics, and teas. These products are taking over as people are looking for healthy alternatives to less sugar.

Opportunities

Developing countries are still being introduced to the delight of carbonated drinks and soft drinks. Countries like India which are developing and have a hot summer, find the consumption of cold drinks almost doubled during summers and environments like this can be a good opportunity to capitalize for Coca-Cola. Marketing the lesser selling products could also, help to leverage the revenue for the company. Coca-Cola has many products on their portfolio that haven’t found the acceptance in the market; the company should concentrate on marketing these products. Lastly, product diversification into healthy drinks and packaged water can also bring revenue and profits. Porter's five forces model was used to identify the existing industrial factors:

Potential Competitors: Within the beverage industry, there is still high possibility of a new entry. Although Coca-Cola and its major competitors have special licensing deals such as selling their products in various distribution deals and fast food chains, a new company might easily gain a foothold if it hit into the trends. Once the new company gets its products in the market, it would likely have a viral and very positive image and it would create brand recognition that Coca-Cola is enjoying (Gertner and Rifkin). In addition to that, when consumers opt to move towards much healthier products, then it is likely to have several new entrants to the beverage

industry at the same time and this could greatly affect Coca-Cola’s bottom line.

Rivalry among existing competition: When one thinks of Coca-Cola Company and its competitors, the biggest rival that is likely to come in mind is probably Pepsi. Since the late Nineteenth Century, Coca-Cola and Pepsi have been in competition with each other. The products of these two companies have very similar ingredients and they even offer similar offerings. In addition to that, the two companies also have similar non-sodas interests like bottled water and orange juice. To change the manner in which it competes, Pepsi owns Rice-A-Roni, Quaker Oats, as well as Doritos. If trends were to go against bottled drinks and soda, Pepsi would be in a position to hedge its bet with its various lines (Hitt). This is unlike Coca-Cola, which does not have a similar opportunity. Apart from Pepsi, another major competitor that Coca-Cola has to deal with is Dr Pepper Snapple Group. Although Dr Pepper Snapple Group does not have a cola. They feature some of the biggest brands in the juice and soft drink market. As consumer trends start to shift, Coca-Cola is likely to be left vulnerable. The beverage company, however, has a loyal following moderating the risk in this area.

Threat of substitute products: The Company is forced to contend with what consumers might buy instead of its products. For example, consumers might start taking coffee rather than coke. Coca-Cola realized that people love taking coffee in the right environment and having their coffee with the right flavor. It is probably due to this reason that the company has Green Mountain Coffee Roasters that makes Keurig (Hitt). Consumers might as well opt to purchase beverages like fresh pressed juice or freshly made smoothies rather than Coca Cola’s bottled beverage.

The bargaining power of buyers: When considering the bottled beverage market, consumers all over the world have a fair bargaining power, which directly affects the company’s bottom line. The company does not sell directly to their end users but instead, it deals with various distribution companies. Coca-Cola has been forced to sell its products to various distribution networks at very low prices so as to enable the distribution networks to sell to the end user at a price that would keep them coming back. The bargaining power of suppliers for coca cola and the bargaining power of its suppliers are considered to be weak. This is due to the fact that the company has many suppliers and can easily switch from one to the other. It is, however, not easy for a supplier to switch away from the company, as this would make then have create a huge loss. While Coca-Cola has several suppliers, the individual suppliers are either small or moderately large.

The bargaining power of suppliers: Although Coca-Cola is a huge company and has many contracts with its suppliers securing pricing, suppliers still have some powers. Some of it may be out of their hands because sugar is a commodity, and like other commodities, its price can vary over time and if a natural disaster happens, it can affect sugar cane harvest and impact the company’s raw materials costs.

Step III: Internal analysis

Strength

An internal analysis is an exploration of an organization’s competency, cost position and competitive viability in the marketplace. The data generated by an internal analysis is important because you can use it to develop strategic planning objectives to sustain and grow your business. As a worldwide leader in producing beverages and soft drinks, Coca-Cola company has a number of resources that play an important role in all stages of production and make sure that both, the productions as well as the delivery of its products and client services are of very high standards. The coca cola company also, has various tangible as well as intangible resources it in its different stages of production and delivery (Hitt). The tangible resources are inclusive of financial, human, and physical resources. The company has many physical resources that it possesses and manages. Some of these physical resources are inclusive of the company’s equipment and as well as its buildings. The company has constructed buildings in almost every part of the world. By having a self-owned production plant, it, therefore, means that the company maintains a low cost of production. On the other hand, having self-owned equipment ensures that coca cola as a company does not need to rent or lease any equipment. This, therefore, manages a low cost of production.

The company also, has a very strong financial position that enables it to have stable financial resources that carry the entire process of production without experiencing any major issues in relation to a shortage in cash. With a positive flow of cash, the company is able to conduct any activity that requires money. Being in such a position, the company is able to prevent any unnecessary debt financing. To add on to that, such a position enables the company to maintain a highly motivated workforce. Being in such a position has been the company’s primary force in driving its products into people’s shopping lists. Coca-Cola Company has also invested highly in employee development and training and this has greatly ensured that all its workers are delivering work that is of high quality. Training and developing of employees also ensure that those responsible for marketing ensure that the company’s products are purchased by the final consumers.

Coca cola’s intangible resources are inclusive of goodwill, intellectual as well as technical resources. For many years, the company has been enjoying technical resources that have greatly fostered its goals. Coca-Cola has successfully come up with many enjoyable flavors in their soft drinks ranging from ginger, lemon, black currant, pineapple, and orange flavors among others. All these products are an indication that Coca-Cola Company has knowledge, and it has used it to its advantage in enabling it to stay ahead of its competitors (Gertner and Rifkin). This has also, enabled the company to enjoy an intellectual property of all the brands that it provides.

For many years, Coca-Cola has also enjoyed both goodwill and customer loyalty (Hitt). This has indeed been an internal strength that the company has used to its advantage since all its brands and products have always enjoyed undying loyalty from its customers. The visibility of the company’s brands also ensures that people are able to easily access the product at any time.

The company also, enjoys a great distinctive capability that has enabled it to carry out its productions in ways that are much superior compared to its competitors. Some of the distinctive capabilities that the company has are inclusive of is architecture, reputation, as well as its innovation. This has enabled the company to continuously introduce newer products into the market.

The Four Building Blocks of Competitive Advantage.

A company is said to have a competitive advantage, when its profit rates are higher than its industry average. Similarly, a company would have a sustainable competitive advantage when it comfortably maintains a high-profit rate for many years. Coca-Cola certainly has a competitive and has been able to sustain this competitive advantage.

Efficiency: One of the factors that have led Coca-Cola to have a competitive advantaged is by having superior efficiency. This efficiency is seen when the company is able to extract more tangible value for every dollar cost of labor and asset. The company upgraded its physical distribution capability which enables it to substantially improve order of efficiency, reducing distribution and transport costs, and cutting greenhouse gas emissions by utilizing the supply chain remodeling program Project Jupiter. It was designed to ensure CCA can service their 14,000 route trade customers across the state from their Eastern Creek distribution center (Crawford 2004).

Quality: The second factor is quality that has allowed more differentiation by having to pay much closer attention to details.

Innovation: Coca-Cola Company is well known for innovation (Gertner and Rifkin). The company’s innovations have greatly contributed to differentiation by finding newer ways of achieving the desired result of the current product. The company itself is an example of a company with sustained competitive advantage, innovation, an extensive business model, and an intelligent distribution network. From producing the sweet fizzy drink to the world’s most recognized brand.

Customer Responsiveness: The fourth factor has been on customer responsiveness. The manner in which consumers of Coca-Cola products respond has contributed to low costs. Customer responsiveness has contributed to differentiation by incorporating features that customers would want to have.

Step IV: Strategy formation

Coca-Cola could build its strengths to take advantage of its opportunity. The Company should build on its strengths to take advantage of its opportunities. One way in which the company could effectively do this is through diversification. In any health and food business, diversification helps to improve the business’s offerings. Coca-Cola’s supply chain that distributes it beverages should also, be used to distribute snacks produced by the company. By doing this, it would help to share the cost of supply. How Coca-Cola could mitigate its threat by minimizing its weaknesses? The Company also needs to mitigate its threats by minimizing its weaknesses. One of the major raw material that the company uses is water. In the recent years water scarcity has been on the rise. There have been changes in climate which have caused this scarcity. At this early stage, the company should look for ways to either reduce the amount of water it uses in its processes or to complete remove it from its processes. Coca-Cola should make investments on new technologies as well as new operating procedures that would help to reduce or replace water usage in its manufacturing operations. To do this, the company needs to find out where exactly it uses water and where it might have opportunity for improvements.

Functional strategy

The structuring of any organization does not only involve organizing its internal relationship and coca cola is one company that has certainly understood that. The company has managed to build a well-structured relationship with both internal as well as external groups. The relationship that Coca Cola has developed with its bottlers has provided them with great strength. Coca Cola works together with its bottlers and make sure that syrups and concentrates have been made into finished beverages that are then distributed to customers through the world. Coca Cola Company like most other companies has its own culture. One particular aspect of culture that is of great importance is the fact that it emphasizes on empowering and teamwork. The company considers its employees to be the most important assets that it has. On that note, Coca Cola strives to motivate its employees as it believes motivated employees would effectively drive the company’s growth.

Business-level strategy

Coca Cola makes use of the followings three business level strategy for both its local as well as it international operations

Differentiation: Firms use differentiation to operate in a competitive as well as in a unique manner within their respective industries. Since the Coca Cola was incepted back in 1886, it has at all times paid much focus on how to differentiate its products from other products produced by its competitors so as to establish its unique position within the beverage industry (Gertner, and Rifkin). The company’s top most brand such as Fanta, Sprite, and Coca Cola have always been manufactured under strict standards and using formulations that are also quite unique from the company’s competitors. The company uses differentiation in many other aspect of its operation this has made it maintain a leading market position.

Cost: Other than delivering to its customers top quality products, Coca Cola has always kept a closer eye on the increasing marketing as well as operational expenditures. Coca Cola Company has recognized the essence of cost control in order to gain a competitive advantage within its industry and consequently be able to operate in manner that is more competitive. Therefore, one of the company’s major business level strategy has been low cost leadership. Coca-Cola Company has always maintained a tight cost control over its marketing, overhead, and manufacturing.

Focus (Niche): Coca-Cola used focus or Niche strategy in differentiation as well as in cost dimension. For the niche low cost strategy, the company has been able to define particular lines of beverage products that it cans target specified market and be able to achieve low cost through manufacture of its products under processes that are highly efficient (Cunningham and Harney). Coca Cola is said to produce its Coke for all its target market so as to achieve a low-cost leadership. The company then keeps the target market under a complete niche while it selects its distribution network and designs its marketing campaigns.

Corporate Strategy

Coca-Cola has invested a large sum of money on expansion of its business. Currently, the company is present in more than 200 countries and this is a big indicator of the focus it has on its growth strategy. As a large scale corporation, the Company uses different growth strategy, in different situations, and in varying needs of its operations (Gertner and Rifkin). For instance, when the company plans to target a new market, it would often pursue a horizontal growth strategy. Throughout its history, Coca-Cola has also used diversification strategy. The company was basically founded to be a soft drink manufacturer. However, as time passed, the Company entered into different similar industries such as fruit juice, coffee, tea, and mineral water among others. For many years, the Company has worked hard ensuring that it utilizes its ample war chest and has built a major presence in the rapidly growing beverage industry. Today, Coca-Cola own about 16 per cent of Keurig Green Mountain and it is also said to be in the process of developing a fresh Keurig Kold device. The other major opportunity that coca cola has is on its extended reach (Gertner and Rifkin). As the population continues to increase, the company has capitalized on consumers’ shift towards healthier living by focusing on bolstering a number of its business line. For instance, the Chinese, as well as the Indian market, have ramped up a demand for Coca-Cola’s latest coffee and juice offerings. Thanks to these diversification strategies, the Company’s business portfolio has greatly increased.

At times, Coca-Cola has had to suspend its growth strategies so as to take a stand in its market position. Coca-Cola has used this strategy many times before. However, its growth strategies have not been a feasible choice in some internal issues. The company therefore, stops at its present position and pays more attention on its supply chain, marketing efforts, R&D, and quality control. As for the business units where the company observes not to have any growth, it uses retrenchment strategy. Coca-Cola retrenches such business units in various ways that include; R&D, marketing, or budget cut for production. The company also, uses acquisitions to change the manner in which it competes, just like Pepsi owns Rice-A-Roni, Quaker Oats, as well as Doritos, Coca-Cola acquire Honest Tea among other companies.

Global Strategy

In most cases when domestic markets have matured, companies would expand their operations to other nations. Coca-Cola is a company that has expanded globally after the maturity of its domestic market. As a matter of fact, globalization is the key concern of Coca-Cola. The Company has a total control in cost pressure, so the cost pressure is low. Therefore, Coca-Cola can operate under the Multidomestic Strategy. Thus, by running the local responsiveness of Coca-Cola is high. The company customizes both their product offering and marketing strategies in different places with different national conditions. They also, are operating in seven regional operating groups such as, North America Group, Latin America Group, Europe Group, Eurasia & Africa Group, Pacific Group, Bottling Investments Group, and McDonald's Division. The reason is simple; they are trying to create their value innovation activities by doing the market and product research in different potential national market. There are various global strategies that Coca-Cola has used. One of the Company’s global strategies has been standardization. Coca-Cola has used standardization strategy in their centralized management system and has helped it achieve great economic scale by discount through purchasing in bulk (Cunningham and Harney). The other global strategy Coca-Cola uses has been adoption. Through adoption, Coca- Cola creates a customized marketing mix for every nation and every region. Although adoption strategy might cost the company more, it provides benefits of consumer diversity.

Step V: Recommendation(s)

The primary goal of Coca-Cola Company is to ensure that they have satisfied their customers while they still promote their good social and ethic responsibility to the public. With the company’s tremendous success, there is no doubt that Coca-Cola has something that most of its competitors do not have. For instance, Coca-Cola has money that it still puts back into its business. This ensures that the business continues to grow. Coca-Cola does everything in its power to satisfy all its customers to the maximum. The company plans to use some of its money to update older equipment (Cunningham and Harney). This would ensure that all its facilities are able to operate more effectively. By updating its equipment, the company will reduce the damage done to the environment. On that note, the company should also consider putting some of its money towards having a cleaner environment. The company should recycle and reuse various materials such as plastic bottles. By doing this, Coca-Cola would certainly minimize environmental pollution. The company should also actively support policies that are dealing with fair quality water. In addition to that, Coca-Cola should engage in discussions that would impact the environment in general.

The company faces some challenges such as government policies which are aimed to reduce sugary drinks consumption to fight obesity. As a way to fight obesity, some governments around the world have imposed high taxes on some of the products that Coca-Cola produces and that have high sugar content. On this point, the company should join forces with its competitors and together request the government to lower its taxes on sugary products. For the company to do that effectively, Coca-Cola should warn governments of job losses. High taxes would increase the company’s operational cost and hence force them to send some of its employee’s home. Another way is for Coca-Cola to offer a plethora of new sugar-free alternatives like Coke Zero Sugar. This effectively provides a safety net of products protected from taxation.

Work Cited

Hitt, Michael A. Strategic Management. Cengage Learning, 2017.

Cunningham, James, and Brian Harney. Strategy & Strategists. Oxford University Press, 2012.

Gertner, David, and Laura Rifkin. "Coca-Cola and the Fight against the Global Obesity Epidemic". Thunderbird International Business Review, vol 60, no. 2, 2017, pp. 161-173. Wiley, doi:10.1002/tie.21888.

“Fresh Challenges for New Leader at Coke.” Global Finance Magazine.

“Mission, Vision & Values.” The Coca-Cola Company.

Moran, Porcshe. “The Evolution of the Coca-Cola Brand.” Investopedia, Investopedia, 15 Oct. 2012.

“The Coca-Cola Company Announces New International Structure, Promotes Key Leaders.” The Coca-Cola Company, 24 May 2016.

Crawford C. (2004) Coca-Cola Amatil-Marketing, Business studies update, Vol. 4 No.2

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