Business Plan of The Coca-Cola Company on the Orbis Database - Essay Example

International business opportunity Of COCA-COLA COMPANY (THE) Business opportunity analysis: Headquartered in Atlanta, Georgia, United s of America, the Coca-Cola Company is a publicly traded and publicly quoted company. It mainly manufactures, allocate and sell nonalcoholic beverages and syrups. Mr. John Stith Pemberton has founded the company in 1984. It is a large beverage company in USA. The company produces more than 500 brands of beverage, mainly sparking beverages. In its product items there are also many ranges of still beverages products, such as enhanced water, juice drinks and juices, variety of ready-to-drink coffee and tea products and different kind of energy and sports drinking products. Generally its products are available in bottled form or in canned form. Its carbonated soft drinks and noncarbonated beverages are very famous through out the world. The company is also engaged in activities and businesses, such as empowers its bottling partners to produce fountain syrup to sell in the restaurants, convenience store and other fountain retailers and wholesalers for the immediate consumption of the fountain syrup. Its famous soft drinks bands are- Coca-Cola, Fanta, Sprite and Diet Coke. So the company has various opportunities in manufacturing, retailing and distributing the nonalcoholic drinks, tea and coffee and juices products. To increase its business the company may take its initiative to undertake a new international business venture in any of its product and business lines in which it has a comparative advantage. It may undertake or enhance its mergers/acquisitions activities in such a location where the demand of its product is high enough or expected to increase in future so that it can get easy market access by using its brands. If we see only its Pacific operation, we will notice that over the last 7 years, its sales have increased tremendously. This is also true regarding its assets investments. We have shown this by the figure 1 as follows: Figure 1: Increase of sales and asset investment of the Coca-Cola Company in the Pacific Region over the last 7 years.  Source: Orbis database As an example, we can consider one of the new business ventures of the company, through which it plans to acquire 100 % of a fruit juice maker company of Russia, engrossing the founders and the biggest shareholders of that company, as reported by Dow Jones on March, 2010. Some other sources have informed that the Coca-Cola Company is going to take 75 % share of that Russian Company. What ever may be the position of the Coca-Cola Company, there is no doubt that this business venture will be a successful one for the company. The reason behind this is that the company has planned to take such a business expansion method in accordance its business activity where it has comparative advantage both in terms of the demand for its product and the cost of production. (Coca-Cola Company (The), 2010). Figure 1 has clearly stated that the investment and sales of the company in the Pacific region is increasing which in turn say that the demand of products of the Coca-Cola is increasing. Beside, except the facility of its reputation, the Coca-Cola Company will also be benefited to capture the existing customers of that Russian company as it has opined to undertake almost all share of it. Regarding the cost aspect, the Coca-Cola will also reap the benefit of the already well-established production set up of that Russian Company. So, the company will get two advantages from two opposite angles, the expected huge demand from the local market along with the low cost opportunity. However, one thing should be noted here. We have seen that the net asset turnover of Coca-Cola has fallen from million $ 1.16 in 2008 to million $.89 in 2009 and over the last five year the trend of the net asset turnover is also negative. (Coca-Cola Company (The), 2010). We have shown this in figure 2. This implies that the growth of invested asset is more than the growth of sales of the company. This is one of the risks for the company. So before going any further business venture the company should look into this matter so that it can enhance its sales from its future business ventures. Figure 2: Decreasing trend in the net asset turnover of Coca-Cola over the last five years. Source: Orbis database Environmental analysis: For analyzing the environment of any company the identification of the factors which are mainly responsible to impact the demand, supply, cost and even employment level, is utmost important. The continuous change that occurs in a society in turn produces an uncertain environment, which ultimately affects the operation and functioning of the company. All these factors can affect any company whether it is a small or a big company. These may affect one of the giant companies like the Coca-Cola in the field of non-alcoholic beverages, juices and branded soft drinks and in turn the Company may also affect the functioning of the factors through its operation. The Coca-Cola Company has both their strengths and weaknesses, which affect both their current and further business performances. So the proper analysis of its future business environment and business constraints eases out to identify the probable factors, which are responsible to affect its business trends. These probable factors vary from the political environment, social environment to cultural environment. (Deichert, Ellenbecker, Klehr, Pesarchick, and Ziegler, February 22, 2006). Political Environment Analysis: Political environment signifies the political pressures on the business of the company, whether it is the present or the potential pressure of the future political environment. The US government has various rules and regulation for manufacturing non-alcoholic beverages through the guidelines of the Food and Drug Administration. Regarding this, the government is responsible to monitor that whether the companies, which produce non-alcoholic beverage products, are following the standard rules and regulation mentioned in the FDA and if they do not they are liable to be fined by great amount of money. The company has also to be updated and follow the changes in rules and regulations, such as changes in the accounting standard, environmental law like the present carbon emission restriction, changes in taxation, etc. to get the entry in a foreign country and to access the foreign market. Besides, the company is also pressurized by the product and pricing strategy of its competitors so as to modify its business nature and to be able and sustain its market share of sales across the global market. Further, the company has also to maintain the rules laws stipulated by the government of its own nation regarding its business in the home country and regarding the market penetration of the other foreign country. (PESTLE Analysis on Coca Cola, n.d.). Economic Analysis: The economic impact on the coca-Cola may vary from local and national economic impact to international economic impact. It also includes the changes in global recession and price changes on the business of the company. The Coca-Cola Company has businesses throughout the globe, from Eurasia and Africa to Europe, from Latin America to North America to the Pacific regions. The company’s market is also steadily increasing through its new business ventures in the countries like, India, China and Brazil. The sustainability and stability of growth and business development is highly dependent on the market environment of these countries. So the proper analysis is necessary regarding the economic functioning of these countries to clearly give the idea to the company regarding the stability of its business operation in those countries and what will be the prospect of its market growth in near future. If we compare the growth of sales of Coca-Cola company in its different business region we can notice that the sales of the company has reduced in Eurasia and Africa and Europe area in 2009 from its previous year. The company’s sales in Latin America and North America are almost same for both the 2008 and 2009 period whereas in case of Pacific region the sales have increased in 2009 from its 2008 level. We have shown this in figure 3 as follows. Figure 3: Comparison of sales (in million USD) of the Coca-Cola in different region for the year 2008 and 2009 Source: Orbis database Sociological and Cultural Analysis: The cultural aspects of the business of the Coca-Cola Company are related with the effect of changes in standard of living of its consumers and the changes in the attitude of its market. With the globalization effect the people across the world are becoming more health concerned reflected through the ageing of the older people across the world. This trend has affected the non-alcoholic beverage industry significantly. Such a tendency has affected the Coca-Cola Company to maintain the same quality of their product across the world. Citizens of the developing countries are also turning out to be more worried about the food standard. In one hand the demand of the carbonated drinks has decreased and on the other hand the demand for healthier beverages has increased which led the company to produce according to the changing culture and behavior of its market. (Pest Case Study: Pepsi Cola, n.d.). Competitive Analysis: Competitive analysis of the Coca-Cola Company requires first identifying its main competitor across the globe in terms of the market share of the company with them. Then it should evaluate what the customers actually requires and what are the strategies of its competitor. The company also requires assessing the strengths and weaknesses of its own with respect to its competitors and finally the Coca-Cola needs to compare the prices of its brands with the product prices of its competitors. (Competitor Analysis - A Brief Guide: The Basic Principles of Competitive Intelligence, March 12, 2010). The Coca-Cola mainly competes in the commercial beverages industry’s nonalcoholic beverages segment. (Coca-Cola Competitive Analysis: Coca-Cola (KO) Analysis, 2010). The main competitors of the Coca-Cola Company are PepsiCo, Inc., Nestle S.A, Dr Pepper Snapple Group, Inc., Groupe Danone S.A, Kraft Foods Inc., Unilever N.V. and Unilever PLC, etc. We have shown the market share in sales of the Coca-Cola Company with that of PepsiCo, Inc. and Dr Pepper Snapple Group in 2009 and 2008 by figure 4 and 5 respectively. Figure 4: 2009 market share of sales of the Coca-Cola Company, PepsiCo, Inc. and Dr Pepper Snapple Group Source: Orbis database Figure 5: 2008 market share of sales of the Coca-Cola Company, PepsiCo, Inc. and Dr Pepper Snapple Group Source: Orbis database In figure 4 and 5 we have seen that at present the PepsiCo, Inc. is the main competitor of the Coca-Cola Company in terms of its global sales. The main competitive advantage of the competitors of the Coca-Cola Company is that they enjoy larger share of market through their purchase of economies of scale. Beside, the major competitors of the Coca-Cola are also very big corporations and have their brand recognition in the global market. They also have a well-structured and stable distribution network. (SWOT Analysis of Coca Cola, n.d.) The competitors of the Coca-Cola Company have commanding position over their businesses. The main competitor of the Coca-Cola has tremendously developed its business over the precedent few years by offering more brands to the customers, always keep their wild behavior to access new market activities, and invest more on successful research and development. It is well known fact that both the Coca-Cola and Pepsi have taken attacking formula to each other directly in their market campaigning. (Pepsi-Cola Competitive analysis, 2009) Each of them has assaulted each other’s products in their market drive behavior and each of them has enhanced their product lines to consume the market share in product differentiation. It has been seen that the Coca-Cola have always inclined to the youth market for generating their revenues as it is expected that the non alcoholic beverages are purchased more by the young generation compared to their predecessors. However its rivals have also followed this strategy of the Coke as they are now trying to focus their market campaign towards the young population. (Business Research: Coca-Cola SWOT Analysis, n.d.; Mathur, 2009). However, viewing the recent global turmoil, the Coca-Cola has taken less aggressive stands vis-à-vis its rival companies, though it continuously has increased its market share and has taken new business ventures. This type of business strategy of the Coke in comparison with its competitors has led it to experience less return than investment. The company’s return on capital investment has significantly fall over the last five years. If we compare the return of capital investment for both the Coca-Cola and the Pepsi, we can see that for both of them the trend in the return on invested capital is negative, however, in case of the Coca-Cola, its trend in return of capital invested has fall more steeply which implies that in comparison with its main rival, its return has fall over the last five years. We have shown this comparative study by the figure 6 as follows. Figure 6: Comparison in trend of Return on capital employed between the Coca-Cola and Pepsi. Source: Orbis database Regarding its authenticity, a company should always be dedicated to its business so as to increase its profit and try to prove the trustworthiness of its statement what it has promised to its shareholders. Regarding this, the Coca-Cola needs to re-asses itself and should be more focused about its future business plan. Strategic analysis: The strategic analysis of a company is done to analyze the strategic consolidations of the company regarding its business, network, management and competitive strengths to access new opportunities, market and to operate in the international market. A strong strategic functionalities helps the company to evaluate its business and competitive wildness so as to make more profit, more techno savvy and up to date intelligence system to access more data for its further innovative treatment. If we minutely analyze the strategic coordinative structure of the Coca-Cola we see that the market access and brand development activity of the company is very modern. It has taken some strategically strong mechanisms to heightening its business process thorough the strategy of collaboration and partnership ventures. They have taken the strategy of building partnership as their new business expansion and international market access strategy. Recently, to acquire the North American bottling business, the Coca-Cola Company has proclaimed that they are looking to the agreement, which will strategically advance the company to operate in strongly in North America so as to produce long-term value for all its shareholders. Mr. Muhtar Kent, the Chairman and Chief Executive Officer of the Coca-Cola Company has recently said "Our 2020 Vision calls for decisive and timely action to continuously improve and evolve our global franchise system to best serve our customers and consumers everywhere. Consistent with the 2020 Vision, our roadmap for winning together, we act today as an aligned system,” (The Coca-Cola Company and Coca-Cola Enterprises strategically advanced and Strengthen Their Partnership, 2009) Regarding the companies recent North American business venture Mr. Kent said “We are not acquiring CCE, rather we are acquiring their North American operations, and they remain one of our key bottling partners with world-class management, financial and operational capabilities. We have a strong and unrelenting belief in our unique and thriving global bottling system. Our new North American structure will create an unparalleled combination of businesses, which will serve as our passport to winning in the worlds largest nonalcoholic ready-to-drink profit pool. This transaction offers compelling value to both The Coca-Cola Company and CCE shareowners and will create substantial and sustainable benefits for both companies stakeholders." (The Coca-Cola Company and Coca-Cola Enterprises strategically advanced and Strengthen Their Partnership, 2009) Mr. Kent has concluded by his statement, "This is a truly historic day for the Coca-Cola system. … Over the next several years, the nearly $650 billion dollar global nonalcoholic ready-to-drink beverage industry is expected to grow faster than worldwide GDP … These joint actions further reinforce our confidence in achieving our 2020 Vision to more than double system revenue and double servings to over 3 billion per day. …. these actions will usher in a new era of winning for our Coca-Cola system." (The Coca-Cola Company and Coca-Cola Enterprises strategically advanced and Strengthen Their Partnership, 2009). The company has a decentralized management system within its configuration. This may be proved as the weakness of the company rather than its strength. There are not any proper corporate goals that have been set by the company. Actually each operating region of the company has its own management system. This strategic system of the company is very good for its operation in the developed economies. However, in the developing countries, where the company has yet not been established its regular operations, this system may be proved wrong. In this case, the company is needed take more concerned approach. However, there are some inherent opportunities lies in the mode of operation of the company, which is nothing but its strong market place across the world and their consistent profit earning. (Coca Cola SWOT Analysis, 2010; SWOT analysis for Pepsi Cola, n.d.). If we notice the previous four-year profit margin of the company we will notice the trend is positive which indicates that the company is experiencing a rise in its profit consistently. We have shown this by the figure 7, which is as follows. Figure 7: Trend of profit margin of the Coca-Cola Company. Source: Orbis database At present as the consumers are gradually become more health concerned this has also open new door to the Coca-Cola Company in this millennium. European markets of the company are also increasing. Gradual openness of the market of China and the other East Asian Economies are also opening gradually which are ultimately generating more opportunities and growth potential for the Coca-Cola Company. Therefore, the competitive advantage of the Coca-Cola Company lies under its structural and management strategy of global functioning. As the company has already established itself across the world through its various brands and has more growth potential through openness of more market, there is no doubt that in near future the business of the company will raise further which in turn will help it to experience more sales, revenues and profit. References: 1) “PESTLE Analysis on Coca Cola”, (December 10, 2009), DIMSA, Thinking Made Easy. Available at: http://ivythesis.typepad.com/term_paper_topics/2009/12/pestle-analysis-on-coca-cola.html 2) “Pest Case Study: Pepsi Cola” (n.d.). Available at: http://web.ics.purdue.edu/~pbawa/421/pepsi%20cola%20pest%20case%20study.htm 3) “Competitor Analysis - A Brief Guide: The Basic Principles of Competitive Intelligence” (March 12, 2010), Aware. Available at: http://www.marketing-intelligence.co.uk/resources/competitor-analysis.htm 4) “Business Research: Coca-Cola SWOT Analysis” (n.d.), Scribe. Available at: http://www.scribd.com/doc/19350921/Coca-Cola-SWOT-Analysis 5) “The Coca-Cola Company and Coca-Cola Enterprises strategically advanced and Strengthen Their Partnership” (2009), News Release, The Coca-Cola Company. Availavle at: http://www.thecoca-colacompany.com/presscenter/presskit_cce_press_release.html 6) “Coca Cola SWOT Analysis” (2010), docstoc. Available at: http://www.docstoc.com/docs/5652704/Coca-Cola-SWOT-Analysis/ 7) “Coca-Cola Company (The)” (2010), Future Outlook, Orbis. Available at: http://orbis.bvdep.com/version-201047/cgi/template.dll?checkathens=1&kick=1&product=13&user=gre.0be7470285c50800&pw=satSTkKEjGpDjCMtk1Lb7g%3d%3d 8) Mathur, A (2009), “ Case Study 2: Strategic Management”. Authorstream. Available at: http://www.authorstream.com/Presentation/sunidhi1128-119631-pepsi-strategy-killing-softly-education-ppt-powerpoint/ 9) “Coca-Cola Competitive Analysis: Coca-Cola (KO) Analysis” (2010), Oppapers.com. Available at: http://www.oppapers.com/essays/Coca-Cola-Competitive-Analysis/61806?topic 10) “SWOT analysis for Pepsi Cola” (n.d.). Available at: http://web.ics.purdue.edu/~pbawa/421/pepsi%20cola%20swot.htm 11) “Pepsi-Cola Competitive analysis” (2009), slideshare. Available at: http://www.slideshare.net/craigdixon/pepsicola-competitive-analysis-1099612 12) Deichert, M, Ellenbecker, M, Klehr, E, Pesarchick, L and K, Ziegler (February 22, 2006), “Industry Analysis: Soft Drinks”, Strategic management in a global context. Available at: http://www1.csbsju.edu/liBRary/local/5thYear/zeigler_paper.pdf 13) “SWOT Analysis of Coca Cola” (n.d.). Available at: http://www.scribd.com/doc/9995196/Swot-Analysis-of-Coca-Cola Read More