strategic management in coke

1

COCA-COLA

Strategic Intent
Mission
Coca Cola’s Roadmap starts with their mission, which is enduring. It declares their purpose as a company and serves as the standard against which they weigh their actions and decisions.    To refresh the world... To inspire moments of optimism and happiness... To create value and make a difference.

Vision 2020
Their vision serves as the framework for their Roadmap i.e. their mission and guides every aspect of the company’s business by describing what is needed to accomplish in order to continue achieving a long-term, sustainable and quality growth. People: Be a great place to work where people are inspired to be the best they can be. Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs. Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value. Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities. Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities. Productivity: Be a highly effective, lean and fast-moving organization.

A Winning Culture
Their Winning Culture defines the attitudes and behaviors that will be required of them to make their 2020 Vision a reality.

Core Values
These values serve as a compass for actions and describe how to work with the environment and customers.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

2

COCA-COLA

Leadership: The courage to shape a better future Collaboration: Leverage collective genius Integrity: Be real Accountability: If it is to be, it's up to me Passion: Committed in heart and mind Diversity: As inclusive as our brands Quality: What we do, we do well

Business Definition
Customer Groups (who)
Coke is for everyone! Children, teenagers, middle-aged and old aged people; everyone is the target market of Coca Cola company. It is a mass market product sold globally. Though everyone does drink Coca cola but its major target markets are children and teen-agers.

Customer Function (what)
Coca Cola Company produces a vast range of beverages ranging from sodas to power/energy drinks to juices, bottled water and ice teas. Thus we can say that its customer function is to quench thirst.

Alternative Technologies (How) Focus on the Market
     Focus on needs of their consumers, customers and franchise partners Get out into the market and listen, observe and learn Possess a world view Focus on execution in the marketplace every day Be insatiably curious

Work Smart
   Act with urgency Remain responsive to change Have the courage to change course when needed

N.R.INSTITUTE OF BUSINESS MANAGEMENT

3
 

COCA-COLA

Remain constructively discontent Work efficiently

Act Like Owners
    Be accountable for our actions and inactions Steward system assets and focus on building value Reward our people for taking risks and finding better ways to solve problems Learn from our outcomes -- what worked and what didn’t

Be the Brand
Inspire creativity, passion, optimism and fun

Key Success factors of Coca Cola
1. Coca-Cola is a unique and recognized brand among the most recognized trademarks. 2. Its quality which is consistently offering consumers products of the highest quality 3. Marketing that deliverers creative and innovative marketing programmes worldwide 4. The global availability of Coca-Cola and its products are bottled and distributed worldwide efficiently. 5. The ongoing innovation that keeps the company continually providing their consumers with new product offerings such as Diet Coke, Coca-Cola Vanilla, etc.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

4

COCA-COLA

Environmental Analysis
SWOT
Coca Cola SWOT analysis 2013

Strengths 1. The best global brand in the world in terms of value ($77,839 billion) 2. World’s beverage 3. Strong marketing and advertising 4. Most extensive beverage distribution channel 5. Customer loyalty 6. Bargaining power over suppliers 7. Corporate social responsibility Opportunities 1. Bottled water consumption growth 2. Increasing demand for healthy food and beverage 3. Growing beverages consumption in emerging markets 4. Growth through acquisitions largest market share in

Weaknesses 1. Significant focus on carbonated drinks 2. Undiversified product portfolio 3. High debt level due to acquisitions 4. Negative publicity 5. Brand failures or many brands with insignificant amount of revenues

Threats 1. Changes in consumer preferences 2. Legal requirements to disclose negative information on product labels 3. Competition from PepsiCo 4. Saturated carbonated drinks market

Strengths
1. The best global brand in the world in terms of value. According to Interbrand, The Coca Cola Company is the most valued ($77,839 billion) brand in the world. 2. World’s largest market share in beverage. Coca Cola holds the largest beverage market share in the world (about 40%). 3. Strong marketing and advertising. Coca Cola’ advertising expenses accounted for more than $3 billion in 2012 and increased firm’s sales and brand recognition.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

5

COCA-COLA

4. Most extensive beverage distribution channel. Coca Cola serves more than 200 countries and more than 1.7 billion servings a day. 5. Customer loyalty. The firm enjoys having one of the most loyal consumer groups. 6. Bargaining power over suppliers. The Coca Cola Company is the largest beverage producer in the world and exerts significant power over its suppliers to receive the lowest price available from them. 7. Corporate Social Responsibility (CSR). Coca Cola is increasingly focusing on CSR programs, such as recycling/packaging, energy conservation/climate change, active healthy living, water stewardship and many others, which boosts company’ social image and result in competitive advantage over competitors.

Weaknesses
1. Significant focus on carbonated drinks. The Coca Cola Company is still focusing on selling Coke, Fanta, Sprite and other carbonated drinks. This strategy works in short term as consumption of carbonated drinks will grow in emerging economies but it will prove weak as the world is fighting obesity and is moving towards consuming healthier food and drinks. 2. Undiversified product portfolio. Unlike most company’s competitors, Coca Cola is still focusing only on selling beverage, which puts the firm at disadvantage. The overall consumption of soft drinks is stagnating and Coca Cola Company will find it hard to penetrate to other markets (selling food or snacks) when it will have to sustain current level of growth. 3. High debt level due to acquisitions. Nearly $8 billion of debt acquired from CCE’s acquisition significantly increased Coca Cola's debt level, interest rates and borrowing costs. 4. Negative publicity. The firm is often criticized for high water consumption in water scarce regions and using harmful ingredients to produce its drinks. 5. Brand failures or many brands with insignificant amount of revenues. Coca Cola currently sells more than 500 brands but only few of the brands result in more than $1 billion sales. Plus, the firm’s success of introducing new drinks is weak. Many of its introduction result in failures, for example, C2 drink.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

6

COCA-COLA

Opportunities
1. Bottled water consumption growth. Consumption of bottled water is expected to grow both in US and the rest of the world. 2. Increasing demand for healthy food and beverages. Due to many programs to fight obesity, demand for healthy food and beverages has increased drastically. The Coca Cola Company has an opportunity to further expand its product range with drinks that have low amount of sugar and calories. 3. Growing beverages consumption in emerging markets. Consumption of soft drinks is still significantly growing in emerging markets, especially BRIC countries, where Coca Cola could increase and maintain its beverages market share. 4. Growth through acquisitions. Coca Cola will find it hard to keep current growth levels and will find it hard to penetrate new markets with its existing product portfolio. All this can be done more easily through acquiring other companies.

Threats
1. Changes in consumer tastes. Consumers around the world become more health conscious and reduce their consumption of carbonated drinks, drinks that have large amounts of sugar, calories and fat. This is the most serious threat as Coca Cola is mainly serving carbonated drinks. 2. Legal requirements to disclose negative information on product labels. Some Coca Cola’s carbonated drinks have adverse health consequences. For this reason, many governments consider to pass legislation that requires disclosing such information on product labels. Products containing such information may be perceived negatively and lose its customers. 3. Competition from PepsiCo. PepsiCo is fiercely competing with Coca Cola over market share in BRIC countries, especially India. 4. Saturated carbonated drinks market. The company significantly relies on the carbonated drinks sales, which is a threat for the Coca Cola as the market of carbonated drinks is not growing or even declining in the world.

Competitor analysis
The top four competitors of Coca Cola Company are listed below:

N.R.INSTITUTE OF BUSINESS MANAGEMENT

7

COCA-COLA

1. 2.

Pepsi Co. Nestle

The major competition is faced by Coca Cola Company is Pepsi company. Pepsi is one of the world leader brand with approximate revenues of $27billion and over 143,000 employees. Pepsi products are available in nearly 200 countries (Pepsi Co 2011).

Porter’s Five forces Model
Porter’s five forces model help the companies to evaluate their business strategy. Three out of five forces talk about the rivalry which is expected from micro-environment, macro-environment and also some of the internal threats as well.

Threat of new competitors
The soft –drink market is already ruled by big giants like Pepsi and Coca-Cola. A survey done in 2000 which showed that advertisement expenditure is almost about $ 8.3 million of the current competitors. It is very huge amount for the new player to invest in the marketing from an early stage. Also, due to the huge investment in advertisement, Coca-cola and Pepsi have created a strong brand image and position in the minds of consumers. Customer loyalty has been increased and they are not ready to leave this product for a new player (IvyThesis , 2009). Moreover the extended supply chain and bottling networks of Coca-Cola and Pepsi are major threat for the new players.

Intensity of Competitive Rivalry
The soft-drink industry is dominated by two large players, namely Coca-Cola and Pepsi. This industry is also known for duopoly created by Pepsi and Coca-cola. These players have the huge market share and other small players have very less market share (Valuation Academy, 2011). The bigger giants are mostly competing with each other on the factors of differentiation and advertisement. The price war hasn’t seen between the two competitors. However, a price war is experienced in some of the International markets.

Threat of Substitute Products
This beverage industry has a lot of substitutes which are available to the end consumers. Some of these substitutes include: water, tea, coffees, juices, and beer etc. All of the suppliers of these substitutes only need a huge advertisement campaign in order to create brand loyalty and consumer demand (Valuation Academy, 2011). However the switching cost to substitute products is quite low but consumers prefer differentiation of Coca-cola to the lower prices of substitute products.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

8

COCA-COLA

The Bargaining Power of Customers
There are some major buyers of soft-drink industry including fast-food-chains, restaurants, convenience stores etc. The bargaining power of the buyers depends on the position and potential market it has. For example: Fast-food chain segment is regarded as the “Paid-Sampling” by the Coke and PepsiCo due to quite small profit margins. The bargaining power of these buyers is quite high. Contrary to that, vending machines provide no power to the customers (Valuation Academy, 2011).

The Bargaining Power of the Suppliers
The raw materials used to manufacture soft-drink or Coca-cola include color, caffeine, flavor, and sugar etc. the supplier of these products have relatively no power over the price bargaining. These raw materials can easily available to any of the producer so they don’t need to hire some specific suppliers. Switching costs to these suppliers is very low because the producers can shift to other suppliers anytime.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

9

COCA-COLA

N.R.INSTITUTE OF BUSINESS MANAGEMENT

10

COCA-COLA

Environmental Appraisal
PESTEL Analysis
Political
In every business environment, there are potential pressures from the government. Coca-Cola produces non-alcoholic beverages which come under the category of FDA and government plays an important role in the manufacturing of these products. There are certain regulations that governments of different countries enforce on these companies. If the company fails to produce the product according to the required quality standard, there are certain fines which they have to pay. It is equally important to consider the changing laws and regulations of the foreign countries. These changes may occur in the accounting standards, environmental laws and the taxation requirements etc. These changes have the severe impact on the account books of the companies. There profit potential can be dependent on such factors as well. So companies like Coca-cola should adapt proactive approach and remain aware of such changes to able to cope up with the changing business laws and regulations. The current political conditions of the target country also hold a lot of importance for the company wishing to enter in the foreign markets. The governmental laws and other political scenario can affect the ability of the company to penetrate its business successfully in the emerging market. All the emerging markets have volatile political and economic conditions. Coca-cola always monitors the changing policies and government regulations set by the government.

Economic
Economic Analysis is used to examine the local, national, international markets and world economy which can play a major role for the company in selection of its target markets. The economic analysis also includes the issues of recession and inflation. This recession and inflation has also affected coke as its prices have considerably increased over the years.

Sociological
Changes in society such as lifestyle changes and attitudes of the people can also determine the market potential. It is important to analyze the current sociological factors which can help in understanding the market growth and demand of the products in any area. There has been seen a changing trend among the people in the age –group of 37 to 55 that they are concerned with the nutrition (IvyThesis , 2009). They want to eat healthy food in order to live a

N.R.INSTITUTE OF BUSINESS MANAGEMENT

11

COCA-COLA

healthy life. The baby boomers are now grown adults and as they are becoming old so their concern with their health is also increasing with time.

Technological
In this rapid-paced world, we encounter with new emerging technologies which can increase the efficiency of the business in many ways. Technological advancements create opportunities for new product development and also product improvements (Valuation Academy, 2011). Technological improvements and enhancements also force companies to develop new products in order to remain competitive in the market. This advancement of technology has also helped Coca-Cola in development of Cherry Coke in 1985.

Legal
The legal environment also holds a lot of importance in every business progress. Coca-Cola has determined all the rights applicable to its business and they gain patent of all the products they develop. All the companies must align company’s policy with the changing legislation of the world (IvyThesis , 2009).

Environmental
Environmental analysis includes the close examination of local, international and all world environmental issues. The companies must respect the environment and must carry out some projects to reduce the environmental pollution. The basic idea here is that a company must be environmental-friendly (Goos Kant, 2007). The Coca-Cola Company strictly monitors all the environmental regulations and laws imposed by the foreign and local governments.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

12

COCA-COLA

Environment Opportunity Threat Profile (ETOP) for SAP
Environmental sectors Economic Nature of Impact Unfavorable Impact Impact of each sector The overall impact of inflation has effected everyone.

Therefore we can say that economy has an unfavorable impact on Coke too as the prices have raised considerably in past 10years. Market Favorable The majority of have for customers a Coca strong Cola

worldwide preference

instead of its competitor Pepsi. Also, soft drinks are something that are consumed by people of all age groups. International Favorable It is already a global brand and has its operations worldwide. Still the economic trade groups are increasing opportunities for Coke to expand. Political Neutral Political system usually does not impact the food and

beverage industry much. Regulatory Favorable The products are in accordance to the quality standards. Social Less favorable The socio culture trend is that people are becoming more health conscious. Supplier Favorable The supplying system of Coke is strong worldwide. Technological Favorable The Coca Cola company is up to date with technology in their day to day operations and

N.R.INSTITUTE OF BUSINESS MANAGEMENT

13

COCA-COLA

activities.

Organizational Appraisal
Internal Analysis Porters generic value chain model

As far as coca cola is concerned the cross business strategic fits can exist anywhere along the value chain of coca cola. We will discuss these value chains one by one and see how coca cola can strategically fit into these value chains

N.R.INSTITUTE OF BUSINESS MANAGEMENT

14

COCA-COLA

Support Activities
Firm Infrastructure
Firm has a strong infrastructure as it is shown by its financials. The financial data is readily available to the management for strategic decision making. Financial data can be extracted through different networks that are present at the Coca-Cola Company for e.g. they use mySAP which helps them in forecasting and consolidation of data.

Managerial and administrative support Activities
Coca cola can also diversify because of its managerial and administrative support activities. Many times most of the businesses require same management, administrative and operating know how. The products which coca cola is producing are under the control of same management. This is a huge cost saving benefit for coca cola.

Technology Development
Coca cola can fit into a kind of business where it can utilize its resources of R & D and technology. As we already know that the R & D and technology of coca cola is very strong. In the area of technology coca cola is very advance when we see their packaging and bottling technology. When coca cola will diversify into any other business which is related to its industry it will obviously have the advantage of its technological expertise. The coca cola company has always worked for bringing in technological changes to meet the customer needs. These are the various examples of latest technology adopted by the company

Procurement
Businesses who have supply chain strategic fit can perform better together because of potential for skills transfer in procurement, greater bargaining power and benefits of collaboration with common supply chain partners. Coca cola has a strong supply chain network. It makes the syrup used to make the coke and gives it to its distributors and they make the final good. It also has contract with a bottling company which makes bottles for coca cola. So having such a strong supply chain network it can also diversify into relative business as this will help the company in reducing costs and increasing efficiency. Coca cola is using the same supply chain for its diversified products.

Primary Activities
Operations
Coca cola has the World sixth largest production plant. One assembly line can produce 2000 cans in minute. Production line has 25000 bottle storage capacities per minute. So coca cola can also fit

N.R.INSTITUTE OF BUSINESS MANAGEMENT

15

COCA-COLA

because of its production related activities. Such a strong production capacity will result in lower costs.

Inbound and Outbound Logistics
Separate contracts (‘‘Bottler’s Agreements’’) exist between Company and each of its bottlers regarding the manufacture and sale of soft drinks. Subject to specified terms and conditions and certain variations, the Bottler’s Agreements generally authorize the bottler to prepare particular designated Company Trademark Beverages, to package the same in particular authorized containers, and to distribute and sell the same in (but generally only in) an identified territory. The bottler is obligated to purchase its entire requirement of concentrates or syrups for the designated Company Trademark Beverages from the Company or Company authorized suppliers. They typically agree to refrain from selling or distributing or from authorizing third parties to sell or distribute the designated Company Trademark Beverages throughout the identified territory in the particular authorized containers; however Coca-Cola typically reserve for ourselves or our designee the right (1) to prepare and package such beverages in such container sin the territory for sale outside the territory and (2) to prepare, package, distribute and sell such beverages in the territory in any other manner or form.

Sales and marketing activities
Many cost saving opportunities arise for coca cola as single sales and marketing activities will be used to sell the products. There will be a single sales force for the related products. Advertising of the related products is carried out together. The strong company brand name is also important in this case. The new product gains attractiveness because of the strong brand name.

VRIO Framework
Resources capabilities Brand (Coca Cola) Yes No Yes and Value Rarity Inimitable Organized Usage yes for

Value: Coke’s main value would be their Brand. Coke is globally recognized. Rare: This asset is semi-rare. While it is true that few of their competitors have the strength of brand that Coke has, it is not a resource that is unattainable by other companies. Inimitable: As we have well established, Cola is easily inimitable. Perhaps the strength of their brand however, is not as easy to imitate.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

16

COCA-COLA

Organized: The resource is definitely useable by Coke to drive sales and capture market share

Organizational Capability Profile for SAP
Capability Factor Nature of Impact Competitive weaknesses
Finance Marketing Strength Neutral There is a strong competition between Pepsi and Coke going in the industry. Both try hard to market their products in best

Strengths

and

possible way. Therefore we can say that Coke has a secure position in the Industry Operations Neutral Plant and machinery are

compareable to that of competitors.

Personnel

Strength

Really good managers and workers are present at coke

Information

Strength

Advanced information systems are available. Coke website also has extensive company information

available on it General Management Strength High quality and experienced top management available

N.R.INSTITUTE OF BUSINESS MANAGEMENT

17

COCA-COLA

Organizational Structure
Coca Cola has a very tall and bureaucratic organizational structure. A graphical representation of its organizational structure is given below:

The above graphical representation shows the top functionaries of the company.

Coca Cola International Strategy:
Coca Cola has a global strategy to operate in the 200 countries it is offering its products. This is because Coca Cola has unique yet consistent recipe/taste of beverages all across the world but the marketing and sales strategies are localized as per the region’s socio-cultural dimensions. Considering the corporate and business strategies of Coca Cola mentioned earlier in the report, we could analyze its organizational structure and see that it is structured in a way to complement its strategies in the best possible manner. The reason for the tall structure of the organization is because the corporate headquarters want full control of its product. Since, the one of the key success factors for the company is the consistent

N.R.INSTITUTE OF BUSINESS MANAGEMENT

18

COCA-COLA

unique tastes of its beverages; hence the higher ups of Coca Cola don’t want to take any risks in that matter. Coca Cola faces some problem in slow process of communication because of tall hierarchy of the organization but to keep it centralized, this is the cost the company needs to pay. It can reduce this problem by introducing latest IT solutions to speed up its communications.

Roles and responsibilities of Top Functionaries
Corporate Headquarter:
Corporate headquarters is where all corporate decisions are made. It also keeps an eye over the different operations across the world. The strategic decisions of innovations, diversification, introducing new beverages are taken here. Once the decision is taken, then it is communicated to all the regional offices which further pour it down to the country subsidiaries.

Regional Office:
There are a total of four regional offices of Coca Cola around the world. Regional offices keep a check of all country subsidiaries coming under its defined boundary. It keeps a track of all the sales, financials of all the country subsidiaries and then reports them to the corporate headquarters. Also, any orders from the corporate headquarters for the country subsidiary are channelized through regional offices.

Country Subsidiary:
The corporate headquarter keeps a watch over the activities of different regional offices located in every continent where Coca Cola operates. Under a regional office, every country has its own subsidiary. This subsidiary is responsible for the manufacturing of the beverages from the secret recipe, distribution of the products and the sales & marketing as well. As mentioned earlier, the marketing is localized as per the country the product is selling in.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

19

COCA-COLA

COMPETITIVE ADVANTAGE
Market Leadership. Coca-Cola FEMSA is the largest bottler of Coca-Cola trademark beverages in the world in terms of total sales volume, with operations in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Argentina and Brazil. Business partnerships. Coca-Cola FEMSA is working together with the Coca-Cola Company to develop more advanced joint business models to continue exploring and participating in new lines of beverages, extending existing product lines and effectively advertising and marketing our products. As partners, we have a shared incentive to capture important growth opportunities in Latin America’s fast-growing, but under-developed non-carbonated beverage segment, developing and expanding our still beverage portfolio through innovation, strategic acquisitions and by entering into agreements to jointly acquire companies with The Coca-Cola Company.

Strong brand portfolio. The company offers a powerful and wide portfolio of beverages to its customers and consumers, and continuously explores promising beverage categories to capture growth in its different markets. To get closer to its customers and help them to satisfy consumers’ expanding needs, Coca-Cola FEMSA has become a one-stop shop for its retailers by offering a complete beverage portfolio - including carbonated soft drinks, bottled water, juices, orangeades, isotonics, teas, energy drinks, milk, coffee and even beer in some markets such as Brazil.

Collaborative customer relationships. As an organization, Coca-Cola FEMSA continually looks to deepen its customer relationships. Our company is working closely with its largest clients to develop stronger multi-faceted relationships. Among the company’s initiatives, are tailoring its extensive portfolio of products and packages for their stores - based on the local market’s socioeconomic demographics, relevant consumption occasion and the store’s distinctive characteristics. We partner with our customers on multiple fronts-from knowledge management and capabilities development to go-to-market and point-of-sale execution-to ensure each and every shopper’s trip counts.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

20

COCA-COLA

Channel Marketing. In order to provide more dynamic and specialized marketing of our products, our strategy is to classify our markets and develop targeted efforts for each consumer segment or distribution channel. Our principal channels are small retailers, “onpremise” consumption such as restaurants and bars, supermarkets and third party distributors. Presence in these channels entails a comprehensive and detailed analysis of the purchasing patterns and preferences of various groups of beverage consumers in each of the different types of locations or distribution channels. In response to this analysis, we tailor our product, price, packaging and distribution strategies to meet the particular needs of and exploit the potential of each channel.

Multi-Segmentation. We have been implementing a multi-segmentation strategy in the majority of our markets. This strategy consists of the implementation of different product/price/package portfolios by market cluster or group. These clusters are defined based on consumption occasion, competitive intensity and socio-economic levels, rather than solely on the types of distribution channels.

Client Value Management. We have been transforming our commercial models to focus on our customers’ value potential using a value-based segmentation approach to capture the industry’s potential. We have started the rollout of this new model in our Mexico, Brazil, Colombia and Central America operations. Go-to-market strategies. We continuously evaluate our distribution model in order to fit with the local dynamics of the marketplace and analyze the way we go to market, recognizing different service needs from our customers—from traditional mom-and-pop retailers to modern hyper and supermarkets—, while looking for a more efficient distribution model. As part of this strategy, we are rolling out a variety of new distribution models throughout our territories looking for improvements in our distribution network.

Flexible sales and distribution models. We use several sales and distribution models depending on market, geographic conditions and the customer’s profile: (1) the pre -sale system, which separates the sales and delivery functions, permitting trucks to be loaded with the mix of products that retailers have previously ordered, thereby increasing both sales and distribution efficiency, (2) the conventional truck route system, in which the N.R.INSTITUTE OF BUSINESS MANAGEMENT

21

COCA-COLA

person in charge of the delivery makes immediate sales from inventory available on the truck, (3) a hybrid distribution system, where the same truck carries product available for immediate sale and product previously ordered through the pre-sale system, (4) the telemarketing system, which could be combined with pre-sales visits and (5) sales through third-party wholesalers of our products.

Full Operating Potential. More with less is a key part of the Coca-Cola FEMSA corporate culture. The company continually seeks to optimize manufacturing and distribution capacity to maximize operating efficiency, adapting its organizational processes to address changing competitive, economic, and sociopolitical environments. In addition, we rely on state-ofthe-art market intelligence systems that enable the company to execute and refine its channel-marketing and multi-segmentation strategies, consistent with customers’ and consumers’ purchasing patterns and preferences.

Managerial expertise. We focus on management quality as a key element of our growth strategy and remain committed to fostering the development of quality management at all levels. Both FEMSA and The Coca-Cola Company provide us with managerial experience. To build upon these skills, we also offer management training programs designed to enhance our executives’ abilities and to provide a forum for exchanging experiences, know -how and talent among an increasing number of multinational executives from our new and existing territories. Sustainable Development. Sustainable development is an important pillar of our Company’s strategy. We continually develop programs that ensure the creation of social and economic value by fostering the quality of life of our employees, promoting a culture of health and well-being, supporting our surrounding communities and minimizing our operations’ environmental impact.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

22

COCA-COLA

Corporate Strategy & Business Level Strategies
Making the essential moves to different businesses and achieve an appropriate kind and type of diversification is very important for a business and a key part of Coca Cola’s corporate strategy is making decisions on how many, what are the types and on which specific line of business the company should be in. This may involve deciding to increase or decrease the breadth of diversification. This corporate strategy may involve closing down or opening up of a line of different other businesses (LOB). Corporate strategies initiate actions to boost the combined performance of the businesses and the company has diversified into many different businesses by strongly involving itself into pursuing rapid growth strategies in the most promising LOB's. They have kept their core businesses healthy; initiating turnaround efforts in weak-performing yet promising LOB's and dropped the LOB's that are no longer attractive or profitable with respect to existing structure of the company and market demand. Coca Cola has pursued many ways to capture valuable cross-business strategic fits and has turned them into competitive advantage. For example, transferring and sharing related technology, procurement leverage, operating facilities and distribution channels - All such changes and establishments are a vital part of Coca Cola’s corporate strategy. The various strategies pursued by Coca Cola that have been instrumental in making it the world’s largest brand in the beverage industry are:

Differentiation Strategy (Business Level)
There are many bases on which a product can be differentiated. However Coke has differentiated its product on the following base: 1. Product Differentiation: Coke differentiates its product from its competitors on the basis of brand, quality and taste. Coke does mass production but at the same time has been able to retain its distinct formula that presently no one has been able to imitate or replicate fully. 2. Image Differentiation: The Coca Cola logo is a vital too for image differentiation as it establishes a brand name in the mind of the consumer. It is the brand’s identification, signature and image. 3. Price Differentiation: Prices are kept competitive with Coke’s biggest rival Pepsi Co. Therefore, we can say that it has a mix of low cost and differentiation at the same time.

Innovation Strategy
Coca Cola, since its birth, has been as successful as it is today because of its ability to systematically innovate and deliver new products with respect to the ever changing market. The trends of the market are not constant; they change every quarter. Keeping that in mind, Coke moved from a single

N.R.INSTITUTE OF BUSINESS MANAGEMENT

23

COCA-COLA

core product to a comprehensive beverage offering. As of now Coca Cola offers nearly 400 different products – the reason for it still dominating the beverage industry around the globe.

Globalization Strategy
Technology is continually changing the way businesses operate. The trends and methodologies which are responsible for making businesses more feasible and profitable for the purpose of expansion are given strict emphasis. Presently, Coca-Cola is able to exploit large revenue opportunities by participating in a global market - Coke products are delivered in 200 countries around the world.

Related Diversification
Coca Cola started their business from sodas and then went into power drinks, bottled water, and healthy drinks like Minute Maid and ice teas.

Concentration Strategy
Coke has been able to maintain a consistent formula for its drinks, especially Coke. This indicates their consideration for their loyal customers who do not want to lose the essence of the original fizzy taste of Coca Cola.

Cooperation Strategies
Joint Venture:
  Coke joined forces with different suppliers and bottlers such as Femsa’s popular JV. Beverage Partners Worldwide: the joint venture partnership between Coca-Cola and Nestle was created in 2001.

Acquisitions:
    Coca Cola has a long history of acquisitions. For example, the acquisition of Minute Maid in 1960. The Indian cola brand Thums-Up in 1993. In 2001 it acquired the Odwalla brand for $181 million. In 2007, it acquired Fuze Beverage for an estimated $250 million and etc.

These acquisitions shows Coca Cola’s success in the market because most of them have been seen successfully adapting with Coke’s business strategies.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

24

COCA-COLA

Strategic Alliances:
Coca Cola has been extremely active in strategic alliances over the years. - The most noteworthy alliance being with McDonald’s.

Growth and Expansion Strategies
Direct Exporting
Coca Cola has entered into foreign markets in various ways. Among them, the most common approaches are Direct Exporting, Licensing and Franchising. Besides beverages and special syrups, Coca Cola also directly exports its merchandise to overseas distributors and companies which has been an integral part in creating the brand’s global presence successfully.

Licensing:
Coca Cola markets internationally as well by licensing bottlers around the world - supplying them with the syrup needed to produce the product.

Franchising:
Among the different types of franchising, Coca Cola has been using a manufacturer-sponsored wholesaler franchise system whereby the finished products are sold to the retailers in the local market directly.

Channeling:
Coca Cola has managed the company’s marketing and sales strategy within their previously defined channels. The Company operates three primary delivery systems that are:    Bulk delivery for large channels such as supermarkets, mass merchandisers and club stores. Advanced sale delivery system for smaller channels like convenience stores, drug stores etc. Full service delivery for their full service vending customers.

Functional Level Strategies and Implementation
Seeing the magnitude of Coke in terms of the size of the company and its presence globally, the functional level strategies pertaining to this soft drink powerhouse carry vital significance. The functional strategy relates to the direction a functional area namely Marketing, Human Resource, Operations Management and Finance would need to adopt to attain Coke’s proposed corporate and business unit objectives/strategies. Moreover, uniformity with other functional strategies is also very important - The rule of thumb, always: maximize resources and productivity.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

25

COCA-COLA

The functional strategies are the measures or ways to implement the tactics of the business. For example when Coca Cola decides that it is going to add a new product to its portfolio, the ‘functions’ will make strategies in order to make the new product successful and gain market share – Attain market leadership in a new market to increase global market share or snatch the market share from the players present in the market in which the new product is being launched. How will the functions make strategies? This is how it would work with respect to Coke’s various Corporate and Business-level strategies:

Functional and Operational Level Implementation of Differentiation Strategy
Owing to the fact that Coke differentiates itself on the basis of product, image and price, the functional strategy is required to back that tactic. In terms of differentiating itself on product, R&D and market research is of the utmost important. Not only is it important to understand the changing preferences of their target audience but also their satisfaction with the current offering. Being proactive is vital. Moreover, the operations and supply chain need to be responsible for the mass production of the global drink to service the demand created. In terms of image differentiation, the marketing functional area takes top priority. The marketing efforts, be them active TVC’s, CSR activities or subtle subliminal indicators, maintaining Coke’s unique brand elements is of the utmost importance. Since Pepsi has always been a direct rival on Coke’s radar, managing and matching price with respect to competition is also extremely important. This is because not all consumers are loyal customers and product switching would be quite easy for the price-sensitive audience. To ensure this competitive pricing, the Finance function would need to expertly manage budgets – where to increase investment with respect to supply chain and marketing and where to cut costs.

Functional and Operational Level Implementation of Innovation Strategy
Since Coke finds itself in the midst of a dynamic and demanding global audience, the need to innovate is not just a tool for growth but a prerequisite for survival. On a functional level, having to innovate would require allocation of the right budget to various departments or product lines, R&D to understand present and future customer preferences, Marketing to create a push or pull with respect to the market and product offering the operations management to ensure that the idea is turned into a product and readily available for consumption.

Functional and Operational Level Implementation of Globalization Strategy
Coca Cola products are delivered and appreciated in 200 countries globally. This not only requires functional efficiency in terms of finance and operations management, but also marketing and research to understand various cultural do’s and don’ts along with coming up with a message that is

N.R.INSTITUTE OF BUSINESS MANAGEMENT

26

COCA-COLA

in line with Coke’s core ideology and relatable to a diverse consumer-base. Coke’s core message is ‘sharing happiness’ – an emotion or state that is common to all cultures. The fact that happiness is shared over an aftari table in the sacred month of Ramadan for Muslims or with a turkey dinner over thanksgiving for a Christian state is something that is altered with respect to cultural, religious and social variability.

Functional and Operational Level Implementation of Diversification, Expansion and Growth Strategy
Coca Cola started out as mere black-colored soda in a glass bottle but has expanded into energy drinks, health-oriented fresh juices, bottled water and culture-specific beverages since. For example, Coke launching Limca in India was to cater to the local population’s preference and identification with lemon and soda. The R&D, market efforts, standardization of the formula needs to be efficiently coordinated. The functional level strategy has to be adventurous enough to create some ripples in the minds of the local population and yet be disciplined enough to stay within the limitations of Coke’s core philosophy and global outlook.

Functional and Operational Level Implementation of Concentration Strategy
Coke once tried to alter its original flavor with the excuse of ‘progress and innovation with respect to changing times’. The opposition from the consumer was quite strong. Since then, Coca Cola has concentrated on maintaining the sanctity of their primary product. This has required strict quality checks to ensure consistency with respect to Coke bearing its original sweetness, carbonation and outlook (the formula behind the shade of Coke’s Red color is just as much a secret as its co nstituting ingredients) while ‘Share’ and ‘Happiness’ have been constant and recurring themes in their marketing campaigns.

Functional and Operational Level Implementation of Cooperation Strategy
Cooperation Strategies regarding coke has seen joint ventures between Coke and various suppliers along with partnerships with other beverage makers. A cooperation with suppliers meant coordinating supply chain efforts, creating the right amount that is in line with the generated demand due to marketing initiatives along with the capacity of bottling units and supplier’s means of transportation. In this form of strategy, while efficiently and effectively managing a function is important, it is equally important to coordinate those efforts on a unified functional front. Acquiring product lines like Minute Maid in 1960 meant creating a right balance of retaining the essence of the citrus drink along with changing some elements to accent Coke’s own philosophy. The same consideration is present when opting for a Strategic Alliance. For example, joining forces with

N.R.INSTITUTE OF BUSINESS MANAGEMENT

27

COCA-COLA

McDonald’s as the official drink to be served with their food. In such case, the reputation of the ally bears direct correlation to Coke’s brand image in the global market. Also, visibility of the Coke brand name is a must for the strategic ploy to work. This includes in-store merchandising and promotional activities like the Coke glass given away with a McDonald’s meal along with a clear visual demarcation of its logo on the McDonald’s menu. The visual sync should be in such a way that neither brand is overshadowed or cannibalized by the other but both coexist in the form of a synergy. On the financial front, allocation of budget to various departments or product lines along with getting an idea of their respective profitability is important as it becomes a source of information for the top management to come up with long-term decisions based on present trends and projected forecasts.

Functional and Operational Level Implementation of Growth and Expansion Strategy
Expanding operations would require getting the right mix of labor and machinery to be able to learn, execute and sustain in accordance to Coke’s strict evaluation of quality, quantity and consistency. Direct Exporting puts more pressure on operations as capacity needs to be increased to satisfy the aggregate demand of the local and foreign audience. Licensing may be a more cost-saving alternative financially and operationally, but it also makes the company vulnerable as Coke’s reputation would be in the hands of the licensee. The visibility of Coke’s brand name in the finished product is also important along with the accurate information on its packaging that the final product has been due to the result of a license agreement rather than any singular efforts either way – this is also important for potential legal considerations. As far as franchising is concerned, Coke uses a manufacturer-sponsored wholesaler franchise system which requires an efficient distribution and supply chain network to be able to directly sell to the retailer without a wholesaler in the middle. The bullwhip effect is an important consideration for Coke’s operations here as any miscommunication of demand would have a magnified effect on the supply side which would add to Coke’s inventory costs and reduce the product’s shelf life. Increased stock with an expiry date around the corner would require trade promotions and discounts to clear shelf space - denting Coke’s profits had the product been sold sooner but avoiding the off chance of a sale of an expired product which could potentially erode Coke’s positive image in the mind of the customer.

Scenario: Coke launching a new product or product line
1. Finance: The finance function will lay out the budgets for the new product. Will give guidelines on how much is there to spend, when and where it will be spent.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

28

COCA-COLA

Managing the cash inflows and outflows and help the other functions know how much do they have in their pockets. For example: Finance department will make periodic reports to tell whether the marketing department is overspending or not. 2. Marketing: The marketing department will make strategies to create awareness among the potential customers. Putting out new ads on TV to be top of mind of their target market. 3. Sales: The sales team will do its best in order to get an upper hand and implement the marketing strategies. Also the department through its sales force will go all out to achieve sales targets set for itself by the company. 4. Human Resource: The HR department’s job is to hire right type of people for the company. Making sure that the personnel hired have their goals aligned with the business and corporate goals of the company. The above example for a few functions shows how the strategies at functional level are related to the business level. Eventually the success at the functional level helps the company attain success and achieve goals at the business level.

Vertical and Horizontal Fit
Overall the Coca-Cola Company shows a strong vertical fit i.e. the strategy created at the corporate level is implemented throughout all the levels of hierarchy. Whatever is done at the functional level is actually in accordance to the goals and objectives of top management. Similarly, a great level of horizontal fit can also be seen as different departments work together, wherever needed, in order to achieve the overall goal of the firm.

Performance Measurement:
Performance measurement is the process whereby an organization establishes the parameters within which programs, investments and acquisitions are reaching the desired results. Coca Cola links the mission and vision to its operations and functions in a very good way. The whole performance is managed in a very well manner in order to get best out of it. Managers and employees are highly involved in the system to take decisions which results in employee loyalty. Goals of the company are formulated at the higher level, than head of the departments make their own goals accordingly, and then comes the unit office, then functional heads which generate reports, in the end supervisors and employees also set their goals. All these incomparable policies lead to the success of Coca cola globally.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

29

COCA-COLA

After the goals and strategy has been formulated, performance is measured in order to check the implementation of strategy and goals. Monthly review is done to check the implementation results. During review periods no changes in the goals can be changed. During the mid year stage goals can be further refined or altered and new policies can be designed to achieve the organizational level goals. At the final stage the performance is matched with the standards and goals of the organization. If there are positive results with increase in overall productivity, the individual performance of the employees is evaluated and the rewards are then given on the basis of performance.

Critical Success Factors
  Product quality and taste is a key success factor for coca cola. These both attributes are very important to get high customer base. Product Diversity and innovation is one of the most important critical success factors for coca cola. Changing customer’s needs with time should be recognized by the company in order to keep its customers satisfied.  Market share and size of the firm is also a critical success factor. Due to the high market share coca cola has been able to negotiate with large distributers and thus making the product available in most of the regions. In order to remain competitive it’s highly important for the company to maintain effective distribution channel.  Company image leads to the brand loyalty which is very important for the success. Brand loyalty in return increases the market share.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

30


COCA-COLA

Global expansion plays a very vital role in the company’s success. Brands that are globally present are usually preferred by the customers.

Balance Scorecard
For performance measurement at smaller units, balanced score card is used by the company.

Perspective

Goal Firm financial growth in terms of

Measurement Annual sales growth Net profitability Improvement

Financial

profitability Reduce cost of production

Value creation , satisfaction , support Customer

High Market share , leading position globally Consistent decrease in cost of sales

Efficient Internal Business reduction.

production

with

waste

Consistent

decrease

in

cost

of

production , increased productivity Number of new markets entered

Brand expansion

Innovation Learning and growth Employee training and satisfaction

New products and processes added in the company Reduced rate of employee turnover

Performance Evaluation and Strategy Success
For a global company like coco-cola, the measures of success are defined in far broader terms than the economic parameter alone. This is because of the diverse ways in which it affects lives of the people around the world. Thus, it is only befitting for the company to evaluate its success based on social and environment aspects it touches upon internationally apart from the obvious economic indicator. For this purpose it evaluates its performance based on the Sustainability Reporting

N.R.INSTITUTE OF BUSINESS MANAGEMENT

31

COCA-COLA
Guidelines1 (G3.1) of Global Reporting Initiative. According to the framework present in G3.1, the company declared itself to be of grade B+ in its 2010/11 Sustainability Report2. The above framework is very comprehensive and due to the constraint of time and scope of this report, we will be only focusing on only the most important points.

Sustainability Reporting Guidelines
The goal of sustainable development is to fulfill the present needs without hampering the ability of future generations to meet their own needs. The three factors of economic, social &environment that concern stakeholders according to these guidelines include: civil society, customers, employees including trade unions, local communities, shareholders and suppliers.

Economic
Apart from the obvious economic performance indicators, which are present in annual reports, two other less reported indicators include the company’s market presence & indirect economic impact that determines the contribution of a company for a larger economic system.



Economic Performance Indicators: Important elements in this category include direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.



Market Presence: These include policy, practices, and proportion of spending on locallybased suppliers at significant locations of operation. Other factors include hiring of senior management from local community.



Indirect Economic Impacts: These include development of infra-structure and similar services for the benefit of the general public.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

32

COCA-COLA

Social
The social dimension deals with the impact that coca-cola has on the social systems in the places where it operates. Such social performance indicators define how well the company deals with issues such as labor practices, human rights and product responsibility (Customer health and safety, compliance etc.)

Environment
The social aspect of sustainability deals with concern of an organization to living and non-living life it impacts through its operations. It deals with the aspect of how well a company manages the waste and emissions that results out from the production of various goods at different sites.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

33

COCA-COLA

Proposed Strategy
Consumer Engagement
What differentiates Coke from its competitors is the level at which is performs consumer engagement. Notice the word used here is ‘consumer’ rather than ‘customer’ because Coke’s direct customers are actually the distributers; however they are wise enough to know that it is the end customer’s demand and level of satisfaction that truly matters. Due to this they have formulated many different marketing strategies that help them engage customers, and that is what customers truly admire and enjoy about Coke. For example: The latest Coke marketing campaign attempts to unite the people of Pakistan and India by installing a Coke machine which allows you to make a friend across the border and you can also play an interactive game with them on the spot. Consumers believe Coke to be a full of life and fun brand which has then intrigued and loyal at all times. This technique gives Coke its competitive edge and it something we propose they should continue to do in the future too.

Use of Bottlers
Coke should keep on manufacturing and bottling its own products as it is doing in most places. This ensures good quality and timely delivery. They should definitely follow this whilst in a country where they face strong competition. Initially upon entering Pakistan they used a local bottler and many a time a complaint was recorded about insects being found in the bottles. This deteriorated the image of the brand in the mind of the Pakistani’s and had a role to play in the dominance of Pepsi over Coke in the country.

Licensing
Coke should refrain from using Licensors in countries with strong competition prevailing in them. This is because Coke mainly beats its competitors over two things: Taste and Marketing. The marketing budget of a Licensee can never match that of a Licensor; hence the marketing campaign created there will not be of the value that Coke is known for. This is why they should keep the marketing in their own hands.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

34

COCA-COLA

Africa
Although Coke is present in Africa the research showed that in 2010 the Annual Per capita consumption of Coke in Kenya was only 39 servings. This was due to the trade barriers and unfavorable environment present in the area. However, today the wars in Africa are ending and they are making a conscious effort to reduce trade barriers. Coke should take a quick step forward and step into the market fully before its competitors have a chance to, because it has reached maturity or near maturity in many countries, and many growth opportunities are present in Africa that will increase its global market share. Contingency plan: Penetrating the impoverish market can be a difficult task. Therefore, Coke shall
use Bottom of the Pyramid strategy when going into the impoverished areas. Coke can come up with buddy packs and introduce them for the people who cannot afford the big packs. They will also have to lower their prices in such area. Frequent sales on bulks can also be a good tact to market product.

Packaging
Packaging plays a large role in the image that is created in the minds of consumers about a brand. Coke has previously launched limited edition packaged products which has different names written on the bottles and the slogan was for example: “Share a Coke with Sarah”. Limited edition packaging makes Coke stand out from its competitors and portrays the image of it being an exciting product rather than a mundane one. It should continue to launch similar marketing strategies. Contingency Plan: People can become reluctant to new packaging style. Therefore heavy
advertising of the new packaging can be done to attract customers.

Pricing
Coke should price its products in such a manner that it is cheaper than water, especially in places where water itself is a rare commodity. They should create strategies that create the image of Coke as being a substitute of water in the minds of consumers and thereby increase the intake of coke, making it higher than the intake of water. For example, till recently Coke was actually cheaper than water in Saudi Arabia which is why it became the most popular beverage in the area.

N.R.INSTITUTE OF BUSINESS MANAGEMENT

35

COCA-COLA

Contingency Plan: Coke has its side effects on health. Day by day, we can see that the benefits of
drinking water are being highlighted on TV and internet. The trend of healthy drinks are increasing therefore this strategy can backfire. In such a case Coke can introduce their other brands like Kinley and Minute Maid.

Target Market
Coke should focus their efforts on countries with a growing population thereby increasing the total beverage consumption of their product. Here the focus is not on per-head consumption but on total beverage consumption. This is a strategy that can be focused upon in countries like India.

N.R.INSTITUTE OF BUSINESS MANAGEMENT