Analysis of Coca-Cola Enterprises Inc - Statistics Project Example

Analysis of Coca Cola Enterprises Inc. of Analysis of Coca Cola Enterprises Inc Table of Contents ment of Ownership 3 Introduction 4 Data and Methodology 5 Analysis of Central Tendency and Spread 6 II. Costs Analysis by Henry Mitchell 9 III. Profits Analysis by Mercy Williams 12 IV. Forecasting 14 Sales Forecasting 14 Profits Forecasts 16 V. Comparison of individual results 16 V. Conclusion and Recommendations 17 The Recommendations to the Company 18 References 18 Statement of Ownership I confirm that this work is my own. Additionally, I confirm that no part of this coursework, except where clearly quoted and referenced, has been copied from material belonging to any other person e.g. from a book, handout, another student. I am aware that it is a breach of GIHE regulations to copy the work of another without clear acknowledgement and that attempting to do so renders me liable to disciplinary procedures. To this effect, I have uploaded my work onto Turnitin and have ensured that I have made any relevant corrections to my work prior to submission. Name ………………………………………………………….. Signature………………………… Name………………………………………………………….. Signature……………………………… Name………………………………………………………… Signature………………………. Introduction The Coca Cola Company is the largest beverage company in the world accounting for about 1.3 billion servings of the 50 billion servings consumed each day. There are over 500 nonalcoholic beverage brands consisting of sparkling beverages and still beverages. Sparkling beverages include Coca Cola, Diet Coke, Sprite and Fanta. The still beverages are water, enhanced waters, juices, ready to drink teas and coffees, energy and sports drinks. The company makes huge profits but notable it made loss in 2006 and 2008 financial years as indicated by the consolidated statement of income (CE-AR, 2006 and CE-AR, 2008). The company is however doing the best to correct mistakes that lead to losses witnessed earlier and prevent such eventuality. The sales of these products tend to be seasonal. The second and third quarters normally accounts for higher unit sales than the first and fourth quarters. The second and third quarters accounts for over 60 percent of the annual net operating income. The seasonality of the sales volume affects the results on quarterly basis. The changes in weather patterns, selling times/days and the shifts in holidays influence the results on annual or quarterly basis. (The Coca Cola Company 2006 Annual Report) The emergence of new companies that deal in beverages have presented a case of stiff competition for Coca Cola. Market research becomes an important determinant of attracting customers. The company hires research experts to facilitate such. In order to counter the steps made by their competitors, the company watches over them. The company has several branches across the world. Although the major branches are in the United States, sales volume outside US exceeds them. Given the marketing strategies used in other parts of the world, the products sell a lot (Breneiser & Allen, 2011). The Coca Cola Company operates in socially and environmentally friendly manner. That remains a long-term priority of the company. It is committed to sustainable innovations in all areas of operation including sourcing ingredients, expanding beverage capacity, recycling and provision of quality water. It awards hardworking employees based on their strong philosophy of hard work pays. In order to recognize employees who serve diligently, they offer them compensation as well as other benefits (Herbst & Forrest, 2008; and Yeung, 2006). The executives conduct the company’s business in a sustainable manner. The executives include the employees, portfolio, partners, profit, planet and productivity. The company highlights the contribution made by every executive and the roles played. Data and Methodology This research uses secondary type of data obtained from the Coca Cola Company’s annual reports. The consolidated statement of income from 2002 to 2012 was of great importance to this research project. Costs, sales and profits are the variables used and measured. The amount of each variable is in US dollars. The research adopted descriptive research design. Data collected was analyzed using descriptive statistics methods, especially the measures of central tendency (mode, mean and median). Microsoft Excel has been used to analyze data collected. Data is organized in frequency distribution tables as well as measures of dispersion, that is, range and variance. Graphical presentation of data included histograms, pie charts and bar graphs. According to Kothari (1978), a sample size of 10-30% is appropriate for any given study. The research uses ten observations analyzed annually. The Coca Cola Company was the choice since it forms a good sample of leading companies. The research derived information on the consolidated statements of income, balance sheet and financial statements. These documents give the financial position of the company in question. The different statements project the future sales, costs and income. Analysis of Central Tendency and Spread I. Sales Analysis by Clinton Brown The table below shows the sales values from 2003 to 2012 Table 1.0 Year Sales in $ (millions) 2003 17330 2004 18190 2005 18743 2006 19804 2007 20936 2008 21807 2009 21645 2010 35119 2011 46542 2012 48062 The table above shows summary statistics Sales in $(millions) Mean 26817.8 Standard Error 3763.25013 Median 21290.5 Mode 0 Standard Deviation 11900.4418 Sample Variance 141620515 Kurtosis -0.175288 Skewness 1.23597285 Range 30732 Minimum 17330 Maximum 48062 Sum 268178 Count 10 The mean sales of the Coca Cola Company is US $ 26,817.8 million with a standard error of US $ 3763.25 million. The median value of sales is US $ 21,290 million. The mode is zero (0)-no frequent occurrence of same sales value. Sales is skewed towards the right/positive. The maximum sales value was witnessed in 2012 with the lowest so far recorded in 2003. Standard error indicates the mistakes in calculations that might occur during entries. The errors could arise due to omission, commission, error of original entry, double entry, error of principle, complete reversal of entries and transposition errors. The sales value totals to US $ 268.178 billion over the ten-year period. The histogram below shows the variation in sales value over the -year period Figure 1.0 It is evident that sales has been increasing every year except in 2009 where there was a drop. The increase in sales has been so due to the marketing strategies employed by the company. Expansion of production increases sales volume. The World Cup, a football competition, held in 2010 highly promoted the Coca Cola Company. The company sponsored that world event and many consumers bought the product during that year. The introduction of new brands of drinks also raises the sales volume. The pie chart below also presents then above data. Figure 1.1 One to ten below the pie chart indicates the years 2003 to 2012. The different sales indicated by different colors. II. Costs Analysis by Henry Mitchell The table below shows costs involved in manufacture of beverages in the company. Table 1.1 Year Costs in US $ (millions) 2003 10165 2004 10771 2005 11185 2006 12067 2007 12955 2008 13763 2009 11088 2010 12693 2011 18216 2012 15162 (Annual Reports 2003- 2012) The following is the summary statistics of the above table (table 1.1) Costs in US $ (millions) Mean 12806.5 Standard Error 767.4709 Median 12380 Mode 0 Standard Deviation 2426.956 Sample Variance 5890116 Kurtosis 1.761108 Skewness 1.317812 Range 8051 Minimum 10165 Maximum 18216 Sum 128065 Count 10 The mean costs of the company are US $ 12806.5 million with a standard deviation of US $ 2426.96 million. The median cost is US $ 12,380 million. The above data is skewed to the right indicated by positive skewness. A range of US $ 8051 million is expected. The maximum amount of costs is US $ 18,216 million recorded in 2011 with a minimum of US $ 10165 million in 2003. The standard error provides for any mistakes committed in data collection. Secondary data do not give first-hand information. Even with primary data, errors could still occur. The standard deviation on the other hand shows how the sales value can move away from the mean expected costs value. The graph below represents data of costs as presented in the table 1.1 Figure 1.2 The highest cost occurred during 2011. This could be due to increase production by the company. The costs reduction in 2009 might be because of decrease production. This happened probably due to decrease in demand of the products of the company. Another reason may be competition from another company. The above information can as well be presented in pie chart as shown. Figure 1.3 The pie chart clearly gives a simple way to compare data. The above methods of data presentation are used since they are easy to construct, analyze and interpret. III. Profits Analysis by Mercy Williams Profits are closely associated with costs and sales. Production at low costs boosts the profits of a firm so long it produces large volumes of products. The analysis of the Coca Cola Company’s profits is important for them to make forecasts. The table shows the profits experienced by the company from 2003 to 2012 Table1.3 Year Profits US $ (millions) 2003 676 2004 596 2005 514 2006 (1143) 2007 711 2008 (4394) 2009 731 2010 624 2011 749 2012 677 The information is represented as shown in summary statistics. Profits in US $ (millions) Mean 352.8 Standard Error 209.6345 Median 650 Mode 0 Standard Deviation 662.9225 Sample Variance 439466.2 Kurtosis 2.382215 Skewness -1.88898 Range 1892 Minimum -1143 Maximum 749 Sum 3528 Count 10 The expected mean profits of the company are US $ 352.8 million annually. That mean is distributed with a standard deviation of US $ 662.92 million. The median sale is US $ 650 million. There is no mode in the data. The profits are negatively skewed toward the left. A range of US $ 1892 million is offered. The maximum payoff is US $ 749 million. US $ 1143 million loss occurred at some point. A total of about US $ 3.528 billion in profits surfaced over the ten-year period. The information is graphed as shown below. Figure 1.4 From the graph, it can be seen that there are 2 years that experienced losses, that is, 2006 and 2008. The losses may have occurred due to huge costs in production and other expenses (CE-AR, 2006 and CE-AR, 2008). The management could be doing compensation to majority of the staff. Another reason could be fall in marketing of the products. In cases where products expire, losses occur. Profits are above US $ 500 million apart from the two years. The pie chart below shows the trends in profits over the years. The pie chart indicates the profits gained by the Coca Cola Company over the 10-year period. A big loss to the company occurred during 2006 financial year. This could be due to the adoption of the Statements of Financial Accounting Standards, which increased the expenditure. IV. Forecasting Sales Forecasting Since this is a time series data, the time series models are used to make forecasts. The autoregressive moving average (ARMA), Moving average (MA) and Autoregressive are some of the examples. Use of the times series graph can predict the future sales. Trends are shown in the line graph below By extrapolating the line, predictions are made about the future sales. This method is not effective since it is based on assumption of trends either moving up or down. Costs Forecast The line graph shows trends in costs The costs of the company have an upward trend in the years 2003 to 2008 falls shortly and increases. Based on the annual reports, the costs continue to rise. It varies with time making it a non-stationary series. In future, cost increase is likely. The demand of the product is increasing so is the population. Better remuneration motivates employees and therefore costs would increase in future (Wudhikarn, 2012; and Walsh & Dowding, 2012). The continuous compensation to the directors and administrative personnel raises expenses. Profits Forecasts The line graph shows trends of profits over the years It is quite difficult to estimate or predict the future profits of any given company. This could be because of uncertainty and risks in the business environment. The costs variation makes profits vary as they relate inversely. V. Comparison of individual results In 2006, sales increased while profits decreased as costs increased. Expansion of production leads to increase in sales hence profits (Regassa & Corradino, 2011; and Harish & Gopal, 2008). However, this is not always the case. Sometimes increase in production leads to high production costs that lower the profits. The company manages their foreign exchange on a consolidated basis to net exposures in order to take advantage of the market. The world experienced unfavorable ten percent change in exchange rates that increased unrealized losses by $ 395 million. The unfavorable change would have otherwise made the losses by $ 244 million. The losses were however offset by hedge item hence no net material impact on earnings. Profit is the difference between sales and costs. Expenses increase costs that in turn reduce the profits. Among the three variables used only sales value that has been increasing over the years with varying costs. The profits in turn rise or fall depending on costs. The company operates in a rather competitive beverage industry. It therefore undergoes stiff competition. A number of factors affect the beverage companies. They include cost of manufacturing and distribution of the products, economic situations (business cycles), consumers’ tastes and preferences, the local and national laws and regulation in each country. The issue of minimum wages and taxation policies is a concern. Availability of raw materials and changes in seasons or weather patterns affects the finances of the company. Changes in weather conditions mainly affect Europe. When it is too cold, sales volume reduces and thereafter affects the profits. In Africa, weather pattern variation is minimal. The sales volume is almost the same throughout the year. Towards the festive seasons, large volume of the beverages is consumed. V. Conclusion and Recommendations The Coca Cola Company being world’s largest beverage company, need arises to expand production. It is important to note that huge losses are made when they occur. This may have negative impact on the company. This company enjoys large market share across the world and it should use it to its advantage. The shipping and handling costs from points of manufacture to sale distributors are included in the cost of sales in the consolidated statements of income. The company spends many finances in shipping and handling costs. This facilitates movement of raw materials, finished goods to the sale distribution centers and to the retail shops across the many countries. About US $ 314 million, $325 million and $261 million were the shipping and handling costs in 2012, 2011 and 2010 respectively. Consumers do no pay for the costs separately but it forms part of the selling price of the beverage consumed (CE-AR, 2010, CE-AR, 2011 and CE-AR, 2012). The Recommendations to the Company 1. The company needs to clear on their consolidated statements of income as some statements contradict others. 2. The company should increase quality as well quantity of their products. 3. Marketing department should increase product promotion to increase sales. 4. The unit case volumes ought to increase due to the high demand. 5. Social corporate responsibility remains a better way of product promotion. The company should therefore do more responsibility that is social. 6. The company should try to reduce shipping and handling costs to minimize costs and increase profits. 7. The company should motivate junior employees and not just senior employees as a lot of compensation is given to directors and senior staffs. References Breneiser, J. E., & Allen, S. N. (2011). Taste Preference for Brand Name versus Store Brand Sodas. North American Journal of Psychology, 13(2), 281-290. CE-AR (2003). Coca-Cola Enterprises 2003 Annual Report. CE-AR (2004). Coca-Cola Enterprises 2004 Annual Report. CE-AR (2005). Coca-Cola Enterprises 2005 Annual Report. CE-AR (2006). Coca-Cola Enterprises 2006 Annual Report. CE-AR (2007). Coca-Cola Enterprises 2007 Annual Report. CE-AR (2008). Coca-Cola Enterprises 2008 Annual Report. CE-AR (2009). Coca-Cola Enterprises 2009 Annual Report. CE-AR (2010). Coca-Cola Enterprises 2010 Annual Report. CE-AR (2011). Coca-Cola Enterprises 2011 Annual Report. CE-AR (2012). Coca-Cola Enterprises 2012 Annual Report. CE-AR (2013). Coca-Cola Enterprises 2013 Annual Report. Elmore, B. (2013). Citizen Coke: An Environmental and Political History of the Coca-Cola Company. Enterprise & Society, (4), 717. Harish, R. R., & Gopal, B. S. (2008). Coca-Cola in India: A Responsible Corporate Citizen? Herbst, F. J., & Forrest, C. L. (2008). The drivers influencing the relationship between sales representatives and customers and the impact this relationship has on sales volume within Coca Cola’s Western Cape region. South African Journal of Business Management, 39(1), 35-43. Ignatius, A. (2011). Shaking things up at Coca-Cola. Harvard Business Review, (10), 9 ICFAI Journal of Corporate Governance, 7(4), 42-56. Krasnikov, A., Jayachandran, S., & Kumar, V. (2009). The Impact of Customer Relationship Management Implementation on Cost and Profit Efficiencies: Evidence from the U.S. Commercial Banking Industry. Journal of Marketing, 73(6), 61-76. Regassa, H., & Corradino, L. (2011). Determining the Value of the Coca Cola Company -- A Case Analysis. Journal of the International Academy for Case Studies, 17(7), 105-110. Walsh, H., & Dowding, T. J. (2012). Sustainability and The Coca-Cola Company: The Global Water Crisis and Coca Cola’s Business Case for Water Stewardship. International Journal of Business Insights & Transformation, 4106-118. Wudhikarn, R. R. (2012). Improving overall equipment cost loss adding cost of quality. International Journal of Production Research, 50(12), 3434-3449. Yeung, G. (2006). Regional Monopoly and Interregional and Intraregional Competition: The Parallel Trade in Coca-Cola between Shanghai and Hangzhou in China. Economic Geography, 82(1), 89. Read More