Coca-Cola’s

2. Question A : Current Company Situation
1. Current Performance

3. Month Coca-Cola AMBEV Others
January 50.60% 16.50% 32.90%
February 50.50% 16.10% 33.40%
March 50.20% 15.80% 34.00%
April 48.90% 16.70% 34.40%
May 48.80% 17.20% 34.00%
June 49.00% 17.40% 33.60%
July 50.40% 16.70% 32.90%
August 50.70% 16.50% 32.80%
September 50.10% 16.40% 33.50%
October 50.60% 16.40% 33.00%
November 50.40% 16.70% 32.90%
December 50.10% 17.20% 32.70%
Average 50.03% 16.63% 33.34%

4. Financial and Strategic Objectives
 To make the Brazilian subsidiary the largest overseas operation,
surpassing Mexico.
Financial Objective
Improve profitability and regain lost market share.
 Brazil’s market was third in sales and 20th in profitability for Coca Cola.
 Coca Cola’s combined sales accounted for 50% of the soft drink market
in 2003.
Coca Cola’s above average market share
 Coca Cola’s combined sales accounted for 50% of the soft drink market
in 2003
 3/1 to ratio between Coke and Pepsi in overseas sale
 Coke grew 30% worldwide in 2003 compare to Pepsi 2%
 Pepsi held 6% of soft drink market in Brazil, while in the Cola segment
it was number 2.

5. Coke's sales are growing.
 Overseas annual growth is 7%.
Coke demonstrated continued improvement in its internal
performance, processes and per unit cost.
 Coke expended the output of Guarana Kuat.
 Renovated production facilities and Planted 200 hectares of guarana to
flavor Kuat.
Coke's technology, product innovation and delivery of
products to customers is better than rivals etc.
 In 2003, Coke reintroduced returnable glass bottles.
 The lower price of this made Coke more accessible to class C and D
consumers.
 In partnership with Norsa, Coke regained distribution in several
northeastern states. This led to 40% growth in operational profit.

6. Question A : Current Company Situation
II. Strategic Posture
a. Mission
b. Objective
c. Strategies

7. Strategic Posture
Defensive strategy:
 In 1999, Coca cola took quick action and cut its price from
1.80 $ to 1.25 $ to stop tubaina’s growth.
 Expended the number of brands offered in the market.
 Coca Cola designed returnable bottles’ price quite close to
tubainas so it appealed and became accessible to class C and
D consumers.
Mission
 To gain a maximum market share.
 To refresh the world - in mind, body and spirit.
 To inspire moments of optimism - through our brands and
actions.
 To create value and make a difference everywhere we
engage.

8. Objectives
To improve the subsidiary’s profitability, sales and obtain
customer’s loyalty in order to gain market share.
Strategies
 Coca Cola’s current strategy is in process to switch
to Low-Cost provider from Best-Cost Provider.
 Coca Cola has applied Best-Cost strategy in Brazil
with efforts to match the price of tubainas as close
as possible.
 It cut down its cost and final price to the consumer
to compete with lowest priced tubainas

9. Acquisition
Coca Cola took over some competitive brands to
undercut growth of tubainas.
Vertical Integration
The company promoted changes in its
distribution channels, such as buying back
franchisee operations.
Strategic Alliance
Coca Cola entered a partnership with Norsa to
regain control of distribution in several
northeastern states. It boosted its market share
in 2003.

10. Question B. Industry Analysis
1. Competitive Intensity

11. Factors HUFA MUFA Neutral MFA HFA Comment
 Economies
of scale
 Capital
required
 Access to
distribution
channels
 Expected
retaliation




Even small size
companies can compete
at low cost
A new entrant can easily
locally produce and
market its product.
Several tubainas brands
were available in the
leading supermarket
chain at low prices
Coca cola was accused
of economic abuse and
unfair business practiced
by one of the tubaina

12. Factors HUFA MUFA Neutral MFA HFA Comment
 Differentiati
on
 Brand
Loyalty
 Govt.
Action



Low differentiation
among most competing
products.
Brand loyalty is very little
for the major part of
market.
Brazilian authorities
overlooked tax evasion
practiced by existing
tubainas competitors.

13. Factors HUA MUA Neutral MA HA Comment
Specialized
Assets
Fixed Cost
of Exit
Strategic
interrelatio
nship
Governme
nt Barriers




Assets are easily convertible
to other related products
Companies do not have to
incur significant cost of exit
due to the presence of
number of small brands
Pepsi and Coke both have
strategic alliances with local
distributors
As such no government
barriers

14. Factors HUFA MUFA N MFA HFA Comments
No. of
important
Suppliers
Switching
cost
Threat of
forward
integration



No shortage for the
sources of raw
materials in the
market hence low cost
of switching reduced
supplier power.
No such occurrence
was reported.

15. Factors HUFA MUFA N MFA HFA Comment
Threat of
Obsolescence
of Industry’s
product
Switching Cost
Aggressiveness
of substitute
products in
promotion
Perceived



 No such threat.
Consumers were enjoying
relatively low cost substitute
Substitutes are aggressive in
offering lowest cost
C and D class buyers were
price sensitive. Returnable
bottles by Coca Cola still
caught their attention
C and D class buyers were
price sensitive

16. Factors HUFA MUFA N MFA HFA Comments
Importance of
Buyer industry
to supplier’s
profit
Quantity
purchased by
the industry of
supplier’s
product
Suppliers
product an
important input
to the buyer’s
business



Cisper welcomed Coca
Cola’s move for
returnable bottles as it
would increase its sales
by 20%.
The soft drink company
buys in huge quantity
and it have long term-
stable relationships
Beverage and Bottlers
had few requirements
which are easily
available from other
suppliers.

17. Factors HUFA MUFA N MFA HFA Comments
Number of
Important
buyers
Threat of
Backward
Integration
Switching
cost



Coca cola's buyers consist of
chain of leading
supermarkets, stores etc.
In 1996, DGB, leading
distributor developed Frevo,
its own soft drink. No such
instance reported again
Cost associated concerns by
leading supermarket chains
give them a bit of edge

18. Factors HUFA MUFA N MFA HFA Comments
Profit
earned by
buyer
Importance
to final
quality of
buyers Pr. 
 A quarter of sales through
supermarkets
Consumers were more
inclined to tantalizing taste
and lower price than the
quality of the soft drinks.
This should lead
distributors placing low
cost products than high
quality

19. Factors HU MU N MFA HFA Comments
Composition
of
Competitors
Mkt. Growth
rate
Scope of
competition
Fixed
storage Cost




Many small competitors
Marketing growing rapidly.
Huge market potential
Presence of Pepsi and RC
Cola with Coca Cola enhanced
the scope of competition to
global level
Soft drinks come with a limited
expiration date

20. Factors HU MUFA Neu MFA HFA Comments
Capacity
Increase
Degree of
differentia
tion
Strategic
Stake



AmBev and Coca Cola had
large plants at disposable to
compete in the market.
Degree of differentiation was
little in spite of various major
players competing
Strategic Stake is high for
both local and global
competitors

21. Overall Industry Attractiveness
Factors Unfavorable Neutral Favorable
Entry Barriers 
Exit Barriers 
Rivalry among
existing firms

Power of buyers

Power of
Suppliers

Threat of
substitutes


22. Economic Growth
Brazil has high market growth rate and potential
consumers of Soft drinks. High growth markets
included Latin America and Asia as China (29%) and
India (17%) and Philippines
A new Entrant
RC Cola entered the market seeing the growth and
potential of the market. A taste backed by consumer
preferences in US.

23. Changes in cost and efficiency
Coca cola attempted different strategies to undercut
Tubainas ‘growth for about a decade. Consumer shifts were
observed among the price sensitive Brazilian consumers
throughout the cut throat competition with considerable
decline in their profitability
Strategic Partnerships
Partnerships between local companies and global players
will ensue more partnerships among new and old
competitors which will make the market very competitive on
price and distribution, eventually.

24. Question C. Internal Analysis
1. Coca cola’s financial
analysis for the year 2003

25. Liquidity Ratio
Current Ratio: Current Assets/Current Liability.
8396/7886 = 1.06
Quick Ratio: Liquid Assets/current Liabilities
3322/7886 = 0.42
Inventory to working
Capital Ratio: Inventory/Working capital
1252/812 = 1.54

26. Profitability Ratios
Net Profit Margin: Net profit * 100/sales
933843*100/21044 = 16.306
Operating Profit Margin: Operating Income* 100/Sales
Revenue
5,221* 100/21,044 = 24.00
Gross Profit Margin: Gross Profit * 100/sales
13282 * 100/21044 = 61.11
Return on Investment (ROI): Net Income/Average total asset
4347/8860 = 0.44
Return on Equity (ROE): Net Income / Average Stockholders´ Equity
4347/14090 = 0.30
Earning per share: (Net profit after tax − Preference dividend) /
No. of equity common Shares
4,347/ 25,570 = .17

27. Activity Ratio
Inventory Turnover:
sales/Inventory of finished goods
21044/1252 = 16.00
Asset Turnover:
Sales/total Assets
21044/27342 = 0.70
Account Receivable Turnover:
Net Credit Sales/Account Receivable
21044/2091 = 10.06

28. Leverage Ratios
Debt to Asset Ratio: Total Debt/Total Assets
2517/27342 = 0.072
Debt to Equity Ratio: Total Liabilities/Equity
2512/29961 = 0.0038
Long Term Debt to Capital Structure:
Debts/Share holder Equity + Debts
2517/32478 = 0.047
Long-term debt to equity ratio:
Total Long Term Debts / Shareholders Fund
2517/29961 = 0.004
Times Interest Earned:
Earning before Interest and Tax/Net Interest Expense
5,495/ 178 = 30.07

29. Other Important Financial Measures
Dividend yield on common stock: Annual
Dividend per Share / Market Price of the Stock
2166/0.88 = 2401.3
Price/Earnings Ratio:
Net income/Total number of shares
4347/2442 = 1.4
Dividend payout ratio
Annual Dividend per Share/Earning per Share
2166/.17 = 12741

30. Question C. Internal Analysis
2. Develop IFE Matrix

31. INTERNAL FACTOR EVALUATION MATRIX
Weight Rating Weighted Score
Strengths
39 Manufacturing Plants-Largest
Commercial Fleet
0.1 3 0.3
Market leader in Brazil with 50%
MKT Share.
0.09 4 0.36
Product available at one million
point of sale
0.15 4 0.6
Strong distribution channel 0.18 4 0.72
Continuous growth in sale 0.05 4 0.2
Strong Financial position. 0.2 4 0.8
Weaknesses
Low coke consumption i.e. 80
ounce/person annually
0.06 1 0.06
profitability ranked 20th position 0.07 2 0.14
Price dropped nearly 30% annually
0.1 1 0.1
Total 1 3.28

32. Question C. Internal Analysis
2. Develop EFE Matrix

33. Facts explaining Strategic FactorsKey External factors
Opportunities Weight Rating Weighted Score
Market size is very large i.e. 180million 0.1 3 0.3
Highest market growth rates in Latin
America
0.1 2 0.2
increase purchasing power 0.07 4 0.28
Shortage of vending machine 0.08 2 0.16
Changes in buyer preferences 0.06 3 0.18
Small towns are still untapped 0.1 3 0.3
Threats 0
Low Cost Providers 0.1 3 0.3
Lack of govt. and legal regulation 0.1 4 0.4
Unethical business practices by
tubainas
0.09 4 0.36
Competitive pressure by Pepsi and
AMBEV partnership
0.1 4 0.4
Competition by RC cola 0.07 1 0.07
shortage of shelf place 0.03 1 0.03

34. Question C. Internal Analysis
3. Develop Tows Matrix

35. Strength Weaknesses
1. 39 Manufacturing Plants
2. Market Leader-50% MKT Share
3. Product available at one million
point of sale
4. Strong distribution channel
5. Continuous growth in sales
6. Strong Financial position.
1. Low coke consumption i.e. 80
ounce/person annually
2. In profitability ranked 20th position
3. Price dropped nearly 30% annually
Opportunities Threats
1. Market size is very large i.e.
180million
2. Highest market growth rates in
Latin America
3. Economic stability plan increase
purchasing power
4. Continuous growth in industry by
5% annually
5. Shortage of vending machine
6. Changes in buyer preferences
7. Small towns are still untapped
1. Low Cost Providers
2. Lack of govt and legal regulation
3. Unethical business practices by
tubainas
4. Competitive pressure by AMBEV
and Pepsi Partnership
5. Competition by RC cola
6. Shortage of shelf place

36. TOWS Strategies
SO STRATEGIES
Introduce new product in existing market
(S1, S2, S3, O2, O6)
Enter in new markets with existing product
( S4, S6,O7)
WO STRATEGIES
Install vending machine to increase the consumption and
make drink available to customer at more locations(O5, W1)
Enter small towns and earn higher profitability (O7, W2)
ST STRATEGIES
Introduce different variants to compete against competitors
products .(T1,S1)
TW STRATEGIES
Enter in untapped markets as Low-Cost providers to increase
the availability and coke consumption. .(T1,W1)

37. Question C. Internal Analysis
4. Develop SPACE Matrix

38. 3
PRICE RANGE OF COMPETITIVE
PRODUCTS
-5
BARRIERS TO ENTRY
-5
COMPETITIVE PRESSURE
-4
PRICE ELASTICITY OF DEMAND -
3
AVERAGE SCORE -23/7=-
3.29
Industry Strength ( IS)
Growth Potential 5
Profit Potential 2
Technological Know how 5
Resource utilization 6
Capital Requirement 6
Ease of Entry 4
Productivity, capacity
Utilization 3
Average Score 31/7=4.42
Financial Strength (FS) (+)
Return on Investment 6
Leverage
3
Liquidity 4
Working capital 3
Cash Flow
3
Ease of exit
PRODUCT LIFE CYCLE
-3
CUSTOMER LOYALTY
-6
COMPETITION’S CAPACITY
UTILIZATION -
2
TECHNOLOGICAL KNOW HOW -2
CONTROL OVER SUPPLIERS AND
DISTRIBUTORS
-1
AVERAGE SCORE 17/7=-
2.42

39. Space Matrix
ES (-3.29) + FS (3.71) = 0.42
CA (-2.42) + IS (4.42) = 2

40. Question C. Internal Analysis
5. Identify three alternative
strategies.
Discuss its pros and cons

41. 1. Coca Cola can make further acquisitions of local
soft drinks with financial muscles and threatening
market share and increase its market share and
profitability in eventually.
 Pros: It will help in regaining mainly the control of the
market share and ease up the downward pressure on
price.
 Cons: It may put strain on the yearly profitability of
Coca Cola’s operation in Latin America and still not
prevent new rivals from entering the market.

42. 2. Develop new products for existing market by
innovating new variants and products at a rapid
pace to outcompete local tubainas producers.
 Pros: It will help differentiating Coca Cola’s products
from rivals. Products boasting different attributes will
bring higher profits and will release competitive
pressure on sales.
 Cons: It may attract big local competitors to introduce
new similar products to Coca Cola’s which may make
it an expensive strategic move for Coca Cola in the
end

43. 3. Aggressively target with markets consisted of
towns and increase its market share and
profitability.
 Pros: It will give Coca Cola first mover advantage in
the new markets thus longer sustainability of growth
and profitability.
 Cons: It may require forming partnerships with local
supply chain partners to have access to towns away
from main urban markets. The new distribution
partners may be costly and ineffective in conquering
the new geographic areas

44. Make further acquisitions of
local soft drinks with
threatening financial muscles
and market share to increase
its market share and
profitability.