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International Business Strategy Coca-Cola.

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This is an International Business Strategy assignment on Coca Cola for Indian Institute for Foreign Trade.

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International Business Strategy Coca-Cola.

  1. 1. Presentation Identifier Goes Here 1 COCA-COLA CASE STUDY International Business Strategy Submitted to Dr. K Rangarajan Submitted by Group: 1
  2. 2. STATISTICS AND FACTS ON LIQUID REFRESHMENT BEVERAGE BRANDS The liquid refreshment beverage (LRB) market encompasses CSDs, bottled water, ready-to-drink (RTD) coffee and tea, fruit beverages, energy drinks and sports beverages. Based on sales, Coca-Cola, Pepsi, Mountain Dew, Dr Pepper and Gatorade were the leading liquid refreshment beverage (LRB) brands in the United States in 2013. All five brands combined, held a market share of over 42 percent in the U.S. in 2013. Especially to be emphasized is the performance of the carbonated soft drink Coca- Cola, which accounted for a U.S. market share of 18.1 percent alone. Coca-Cola is owned by The Coca-Cola Company, which is headquartered in Atlanta, GA. The brands’ outstanding performance is more than present among all regions and channels. Coca-Cola is not only listed as the leading LRB in the U.S., it also topped the list of soft drinks brands worldwide in 2014, based on brand value. Additionally, the soft drink brand had the second highest number of fans on its Facebook site. A big competitor of the Coca-Cola Company in the liquid refreshment beverage business is undoubtedly PepsiCo, Inc., which is based in Purchase, NY. The company owns, among others, the soft drink brands Pepsi and Mountain Dew and the sports drink Gatorade, which were ranked second, third and fifth in the market share ranking of LRB. 2 SoftSrinks Off-Trade RTD Volume 534.8 Billion Litres Carbonates 169.5 billion liters Fruit/Vegetables Juice 62 billion liters Bottlked water 205.1 billion liter Sporys and Energy Drinks 16. Concentrates 43.7 billion liter RTD TEA 30.1 Billion Liters RTD Coffe 4.5 Billion liters
  3. 3. COCA-COLA 3 Name The Coca Cola Company Logo Industries served Beverages Geographic areas served Worldwide Headquarters U.S. Current CEO Muhtar Kent Revenue $ 48.01 billion (2012) Profit $ 9.01 billion (2012) Employees 146,200 (2012) Main Competitors PepsiCo Inc., Dr Pepper Snapple Group, Inc., Unilever, Groupe Danone, Kraft Foods Inc., Nestlé S.A. and many others. Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines throughout the world. It is produced by The Coca-Cola Company of Atlanta, Georgia, and is often referred to simply as Coke (a registered trademark of The Coca-Cola Company in the United States since March 27, 1944). Originally intended as a patent medicine when it was invented in the late 19th century by John Pemberton, Coca-Cola was bought out by businessman Asa Griggs Candler, whose marketing tactics led Coke to its dominance of the world soft-drink market throughout the 20th century.
  4. 4. Company & Brand Facts Values Global net operating revenue of Coca-Cola Co. $46,854 m Revenue distribution share of North America 46.1% Product portfolio distribution share of juices/juice drinks 38% Advertising spending of Coca-Cola Co. in TV segment $231.5m Volume of Coca-Cola Co. in the U.S. 2,322.1 m gal Company Overview Values Number of Facebook fans of Coca-Cola (Coke) 93.3m Brand value of Coca-Cola $79.21b n Coca-Cola Company’s market share in soft drinks market 25.9% Coca-Cola Company’s market share in the U.S. 42.2% Sustainability Values PET largest part of packaging distribution mix 56.6% System energy use of Coca-Cola Co. worldwide 63.2bn MJ Charitable contributions of Coca-Cola Co. to local community initiatives $28m COCA-COLA COMPANY FACTS: 4
  5. 5. COCA- COLA FINANCIAL RATIO ANALYSIS 5 Ratio data TTM as of 12/31/2014 Profitability - Coca-Cola Co/The (KO) Return on Assets Industry Comparison 7.22% Return on Equity Industry Comparison 22.26% Return on Capital Industry Comparison 9.21% Margin Analysis - Coca-Cola Co/The (KO) Gross Margin Industry Comparison 61.11% Levered Free Cash Flow Margin Industry Comparison 12.14% EBITDA Margin Industry Comparison 27.18% SG&A Margin Industry Comparison 37.43% Asset Turnover- Coca-Cola Co/The (KO) Total Assets Turnover Industry Comparison 0.5x Accounts Receivables Turnover Industry Comparison 9.9x Fixed Assets Turnover Industry Comparison 3.1x Inventory Turnover Industry Comparison 5.6x
  6. 6. COCA- COLA FINANCIAL RATIO ANALYSIS 6 Credit Ratios - Coca-Cola Co/The (KO) Current Ratio Industry Comparison 1.0x Quick Ratio Industry Comparison 0.8x Long-Term Solvency - Coca-Cola Co/The (KO) Total Debt/Equity Industry Comparison 136.60% Total Liabilities/Total Assets Industry Comparison 66.79% Growth Over Prior Year - Coca-Cola Co/The (KO) Total Revenue Industry Comparison -1.83% Tangible Book Value Industry Comparison -29.02% EBITDA Industry Comparison -4.61% Gross Profit Industry Comparison -1.14% Receivables Industry Comparison -8.35% Inventory Industry Comparison -5.40% Diluted EPS Before Extra Industry Comparison -15.79% Capital Expenditures Industry Comparison -5.65%
  7. 7. THE COCA-COLA COMPANY'S NET OPERATING REVENUES WORLDWIDE FROM 2007 TO 2013 (IN BILLION U.S. DOLLARS) 28.86 31.94 30.99 35.12 46.54 48.02 46.85 0 10 20 30 40 50 60 2007 2008 2009 2010* 2011* 2012 2013 RevenuesinbillionU.S.dollars 8
  8. 8. MARKET SHARE OF THE COCA-COLA COMPANY AND OTHER SOFT DRINK COMPANIES WORLDWIDE IN 2011, BASED ON SALES VALUE 25.9% 11.5% 3% 59.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% The Coca-Cola Co. PepsiCo Inc Nestlé SA Other Globalmarketshare 9
  9. 9. CONSUMPTION SHARE OF FULL-CALORIE AND DIET SOFT DRINKS WORLDWIDE IN 2013, BY REGION 10 3.1% 3.3% 4.2% 4.8% 7% 24.5% 31% 35.3% 14.1% 96.9% 96.7% 95.8% 95.2% 93% 75.5% 69% 64.7% 85.9% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Asia Eastern Europe Southern Africa MENA* Latin America Western Europe North America Australasia Worldwide Consumption share Diet soft drinks Full calorie soft drinks
  10. 10. COCA-COLA BRANDS Aquapure Aquarius Bacardi Mixers * Bacardi Premium Mixers * Barq's Barrilitos Beverly Bright And Early Caffeine-free Barq's Caffeine-free Coca-Cola Caffeine-free Diet Coke Cascal cherry Coke Chippewa Citra Coca-Cola Coca-Cola Black Cherry Vanilla Coca-Cola Cherry Zero Coca-Cola Zero Coca-Cola Zero Caffeine-Free Cumberland Gap DANNON * DASANI Delaware Punch diet Barq's Diet cherry Coke Diet Coke Diet Coke Black Cherry Vanilla Diet Coke with Lime Diet Coke with Splenda Diet Fuze Tea diet Inca Kola Diet Master Pour Diet Northern Neck Diet Sprite Diet Sprite Zero Dr Pepper* Evian * Fanta Fanta Sugar Free Fanta Zero Five Alive Flavor Rage Fresca Fruitopia Full Throttle FUZE FUZE TEA Georgia glacéau fruitwater glacéau smartwater glacéau vitaminenergy glacéau vitaminwater glacéau vitaminwater zero Gold Peak H2OK Hi-C Honest Ade Honest Fizz Honest Kids Honest Tea Honest Tea Zero Illy * Inca Kola Java Monster* Jericho Kinley Krest Lift Master Chill Master Pour Mello Yello Mello Yello Zero Mezzo Mix Minute Maid Minute Maid Enhanced Minute Maid Fruit Falls Minute Maid Juices To Go Minute Maid Light Minute Maid Orchards Monster * Northern Neck NOS Odwalla Peace Tea * Pepe Rico Pibb Xtra Pibb Zero POWERADE POWERADE PLAY POWERADE ZERO Red Flash Schweppes Simply Southern Sun Spring! Sprite Sprite Zero Sugar Free Full Throttle Sugar Free NOS Sugar Free Sprite Sunfill Surge TaB Vanilla Coke Vanilla Coke Zero VAULT Vault Zero Vegibeta Vegitabeta Worx Energy * Zico * 11
  11. 11. COCA-COLA VISION AND MISSION Mission • Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. • To refresh the world... • To inspire moments of optimism and happiness... • To create value and make a difference. Vision • Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, 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. 12
  12. 12. POTER 5 FORCES ANALYSIS Presentation Identifier Goes Here 13 Coca-Cola Five ForcesAnalysis Threat of Substitutes The threat of substitute products is quite high for Coca-Cola Bottling Co. Consolidated. There are all types of beverages out there forconsumers to purchase. There are numerous companies out there that sell water, juices, energy drinks, carbonatedbeverages,andteas. Whena customer walks down an aisle at a grocery store there is usually an aisle full of different types of beverages that they can purchase. There is an aisle just for carbonated beverages and then there is another aisle for water, juices, energy drinks, and tea. They have over a hundred different choices to make andseveral different brands to choose from.Most of them are also aroundthe same price point, thus the customer chooses whatis their most favorite. Competitive Rivalry The competitive rivalry within the beverage industry, particullarly in soft drinks, is extremely high for COKE. Large competitors such as Pepsiand the Dr. Pepper Snapple Group both have a world-wide presence and are extremely competetive over every fraction of market share. Many of these companies are consistently finding new ways to introduce new products to the beverage industry including soft drinks, sports drinks and energy drinks. There is a history within the industry of intense product line buyouts and as the worldmarket becomes more accesible,rivalry will continue to grow withinthe industry. Bargaining power of buyers The bargaining power of one buyer is low. If one customer switches brands, for example fromCoca-Colato Pepsi,it is not going to have a huge affect on the company. One customer is usually not purchasingmillions of dollars of Coca-Colaproducts a year. They are only purchasing aroundseveral hundred dollars worth. If Coca-Cola were to raise their prices than a customer couldjust easily switchto another brand because there are several other choices that they are able to choose from. However,as a whole if customers were not satisfiedthenit could do major damage to the company. Currently,there are 1.4 billion servings of Coca-Cola beverages per day. Bargaining power of suppliers The bargaining power of suppliers is quite low for CCBCC. As the United States second large bottler, CCBCC has the resources to shop around for the best resources and best prices. CCBCC is also taking the initiative of constantly innovating their bottling methods and methods of distribution. This dedication to innovation will surely guard their profits from any future price spikes from suppliers within the industry. Threat of New Entrants There are not very many barriers to entry in the beverage industry. It is easy fora company to start theirowncompany andsell beverages to customers. However, it may be difficult to standout because there are already so many different brands and products of beverages out there forcustomers to choose from.The per capita soft drink consumptionrate is the highest forCoca-ColaBottling Company Consolidatedinthe world. Inaddition, it has a consumer base of over eighteen millionpeople.
  13. 13. COCA-COLA VALUE CHAIN 14 Coca-Cola Value Chain SupportActivities Firms Infrastructure Financial & Accounting Services, Legal Services, Quality Management IT Services Human Resource Management Recruiting Payroll Education & Training, Benefits Administration Compensation Technology Development Product Development, Process development, Market Research Procurement Billing Systems, Supplier Vendor relationship. Information System about raw material ERP Systems PrimaryActivities Warehouse, Storage Control Consumer Group Bottling, Operations, Canning Operations, Packaging, Water Stewardship, Recycling. Customer Order Management, Inventory Control, Warehousing, Storage, Transportation, Retails Advertising, Promotion, Product Mix, Pricing, Distribution Customer Service Inbound Logistics Operations, Outbound Logistics Marketing & Sales Services MARGIN
  14. 14. Weakness Threat Opportunity Strength SWOT 1. The best global brand in the world in terms of value ($77,839 billion) 2. World’s largest market share in beverage 3. Strong marketing and advertising 4. Most extensive beverage distribution channel 5. Customer loyalty 6. Bargaining power over suppliers 7. Corporate social responsibility 1. Bottle water consumption Growth. 2. Increase in demand of healthy food and beverages. 3. Growing Beverages consumption in emerging markets. 4. Growth through acquisition. COCA-COLA SWOT ANALYSIS ANALYSIS 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 1. Changes in consumer preferences 2. Water scarcity 3. Strong dollar 4. Legal requirements to disclose negative information on product labels 5. Decreasing gross profit and net profit margins 6. Competition from PepsiCo 7. Saturated carbonated drinks market
  15. 15. SWOT 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. 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’s social image and result in competitive advantage over competitors. 16 STRENGTHS
  16. 16. SWOT 1.Significant focus on carbonated drinks. The business 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. 17 WEAKNESS
  17. 17. SWOT 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. 18 OPPORTUNITIES
  18. 18. SWOT 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. Water scarcity. Water is becoming scarcer around the world and increases both in cost and criticism for Coca Cola over the large amounts of water used in production. 3. Strong dollar. More than 60% of The Coca Cola Company income is from outside US. Due to strong dollar performance against other currencies firm’s overall income may fall. 4. 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. 5. Decreasing gross profit and net profit margins. Coca Cola’s gross profit and net profit margin was decreasing over the past few years and may continue to decrease due to higher water and other raw material costs. 6. Competition from PepsiCo. PepsiCo is fiercely competing with Coca Cola over market share in BRIC countries, especially India. 7. Saturated carbonated drinks market. The business 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. 19 THREAT
  19. 19. PESTEL ANALYSIS 20 Political and Economical Political Analysis and Factors The Food and Drug Administration (FDA) regards non-alcoholic beverages such as Coca-Cola as within the food category. The government regulates the manufacturing procedure of these products. Companies that fail to meet the government's standards are subject to fines. Coca-Cola is also subject to the Occupational Safety and Health Act and to local, state, federal, and foreign environmental regulation. Following are some of the factors that are influencing Coca-Cola's operations: 1. Changes in laws and regulations—changes in accounting standards, taxation requirements (tax rate changes, modified tax law interpretations, entrance of new tax laws), and environmental laws either in domestic or foreign authorities. 2. Changes in non-alcoholic business era—competitive product and pricing policy pressures and ability to maintain or earn share of sales in worldwide market compared to rivals. 3. Political conditions, specifically in international markets—civil conflict, governmental changes, and restrictions concerning the ability to relocate capital across borders. 4. Ability to penetrate emerging and developing markets—this also relies on economic and political conditions, such as civil conflict and governmental changes, as well as Coca-Cola's ability to form effectively strategic business alliances with local bottlers, and to enhance their production amenities, distribution networks, sales equipment, and technology. Economic Analysis and Factors Operating in International Markets involves exposure to volatile movements in foreign exchange rates. The economic impact of foreign exchange rates movements on the company is complex because such changes are often linked to variability in real growth. Coca Cola Company is subject to other economical factors like money supply, energy availability and cost, business cycles, etc (Varadharajan, Vikkraman, 2010, 18-25). During the recession of 2001, the US government took aggressive actions to turn the economy around by 2002. Coca-Cola took note of this, and realized that loan interest rates would likely rise as the economy returned. Thus, they took out low-cost loans in 2001 to fund growth in 2002. They used the loans for research and development on new products to capitalize on in a strong 2002 economy. Currently, as global growth is slowing, Coca-Cola may be watching for a similar opportunity. The Coca Cola Company (2006-2011) stated that they are the largest beverages company, serving 1.6 billion people globally in 200 countries. The company has large scale of distribution channels and operation centres in all over the world. Industry analysis of S&P stated that economic improvement in international markets helps to enhance the stability of the multinational companies. The non-alcoholic beverage industry has high sales in countries outside the U.S. According to the Standard and Poor's Industry surveys, "For major soft drink companies, there has been economic improvement in many major international markets, such as Japan, Brazil, and Germany." These markets will continue to play a major role in the success and stable growth for a majority of the non-alcoholic beverage industry. There is a low growth in the market for carbonated drinks, especially in Coca Cola’s main market, North America. The market growth recorded at only 1% in 2004 for North America.
  20. 20. PESTEL ANALYSIS 21 Political and Economical Social Analysis and Factors - The sales of the company's product highly depend upon the lifestyle changes, due to which it design it campaigns such that it addresses the lifestyle changes. There are specific kinds of people who are more inclined to drink Pepsi and another kind who prefer drinking Coca Cola. Taking into account that Coca Cola is trying to introduce itself in underdeveloped markets, they have to be careful with the possible problems with the governments of these countries (Waldemer, 2008, 97). Social factors that affect the sales of Coca-Cola's products include the following: 1. The majority of people in the US are showing increasing interest in healthy lifestyles. That has strongly influenced the sales within non-alcoholic beverage sector as many customers switch to bottled water and diet colas such as Coca-Cola Light or Zero. 2. Time management is a concern for 43 percent of all households, a percentage that has increased over the years. 3. Customers from ages 37 to 55 are concerned with their nutrition. Also, a large portion of the population are baby boomers. As they become seniors, they are more concerned about life choices that will impact their life expectancy. That will continue to affect the non-alcoholic beverage sector by increasing the demand for healthier drinks. Technological Analysis and Factors - Some factors that cause a company's actual results to vary from expected results include: 1. The efficiency of a company's advertising, marketing, and promotional programs—For example, television, web, and social media advertising are constantly evolving. The ability of a company to effectively promote their products through these channels impacts sales. 2. Packaging design—In the past, the introduction of cans and plastic bottles increased sales volume for the company due to how easy these containers were to carry and dispose. 3. New equipment—Because the technology is continuously advancing, new equipment is constantly being introduced. Because of these new technologies, Coca-Cola's production volume has increased sharply compared to that of a few years ago. 4. New factories—Coca-Cola Enterprises (CCE) has six factories in Britain that use modern technology to ensure the quality and speedy delivery of product. In 1990, CCE opened one of Europe's largest soft drinks factories in Wakefield, Yorkshire. The factory has the ability to produce cans of Coca-Cola at a faster rate than a machine gun can fire bullets. Legal - Finally, legal factors reflect the laws and regulations relevant to the region and the organization. Legal factors can include whether the rule of law is well established, how easily or quickly laws and regulations may change, and what the costs of regulatory compliance are. For example, Coca-Cola's market share in Europe is greater than 50 percent; as a result, regulators have asked that the company give shelf space in its coolers to competitive products in order to provide greater consumer choice. Many of the PESTEL factors are interrelated. For instance, the legal environment is often related to the political environment, where laws and regulations can only change when they're consistent with the political will.
  21. 21. SUMMARY Coca cola desires to increase sales in Europe through following steps: PR Strategy “Act Local, Think Local”. Different in Consumption between USA & EU. - US –190 12 –ounce servicing per annum. - EU – Germany – 111, Great Britain – 61, France 35 Servicing per 12 - Ounce Concern expressed by various government agencies (EU, UK, Italy) Coke is focused to increase in market and wining preposition. Formation of European Union has helped coke to give cheaper and rapid offering due to elimination of Tariff between EU countries. 22 Coca Cola in 90’s
  22. 22. QUESTION: Why and how coke is making FDI in Europe? MNE features of coke. IB challenges facing coke. 23 Case Study discussion:
  23. 23. 24 WHY AND HOW IS COKE MAKING FDI IN EUROPE
  24. 24. WHY AND HOW IS COKE MAKING FDI IN EUROPE Why: Market Potential and Share • European market has great potential and Cokes Market Share in Europe is low as compared to its competitors. Improve Market Position : • Coke made these investments in order to improve its market position. This is being done in Four ways. • First, the construction of new bottling plants is helping the company produce a low-cost product. • Second, marketing expenditures are helping the firm gain the product recognition needed for growth. • Third, direct investments in facilities closer to the market are reducing delivery time and eliminating associated expenses. • Fourth, relook at it existing Franchise distribution network and realign or replace the same with more effective and market driven sellers. Formation of European Union: • It was the period were Formation of European Union was to take place and this would lead to no tariff between EU countries and hence making it possible for coke to utilize it Manufacturing and bottle assets and partners to efficiently supply its products to retailers taking into consideration that it was cheapest and most rapidly available factors. 25 Why did Coke engage is foreign direct investment in Europe:
  25. 25. WHY AND HOW IS COKE MAKING FDI IN EUROPE • Coke opened its first bottling plant in Europe in Paris and Bordeaux in 1919 • The first bottling plants are opened in Europe in Paris and Bordeaux. • This was through acquisition “backward vertical FDI”. • Coca-Cola has also used Network Model(Alliance and Joint Ventures) Mode of Entry: Assembling Assembling is a compromise between exporting and foreign manufacturing. The firm produces domestically all or most of the components or ingredients of its product and ships them to foreign markets to be put together as a finished product. By shipping completely knocked down (CKD), the firm is saving on transportation costs and also on custom tariffs which are generally lower on unassembled equipment than on finished products (Lambin, 2007). Another benefit is the use of local employment which facilitates the integration of the firm in the foreign market. Coca-Cola ships its syrup to foreign markets where local bottle plants add the water and the container (Soto, 2000). Licensing Licensing is another way to enter a foreign market with a limited degree of risk. Coca-cola had licensed bottlers in Europe and UK. 26 How is Coke making FDI in Europe.
  26. 26. WHY AND HOW IS COKE MAKING FDI IN EUROPE The company do this in three ways. • First, the construction of new bottling plants is helping the company produce a low cost product. • Second, marketing expenditures are helping the company to gain the product recognition needed for growth. • Third, direct investments in facilities closer to the market are reducing delivery time and eliminating import duties. The Coca-Cola company is having extensive production abroad with foreign direct investment and all functions like exporting and importing and also franchasing. For example in Turkey Coca-Cola gives first franchising to IMSA(Has Group) in 1964. Coke is making FDI in order to improve its market position especially in Europe. 27 How is Coke Making FDI in Europe?
  27. 27. 28 MNE FEATURES OF COKE.
  28. 28. MNE FEATURES OF COKE. The Coca-Cola Company indeed is an MNE because it operates a headquarters in Atlanta, Georgia with other local operations in nearly 200 countries around the world. Coke succeeded as a multinational because of its understanding and appeal to global commonalities (Rugman, A. M. & Collinson, S., 2006). - Standardization in terms process and quality. -Modification of operations to meet local need local needs & marketing strategies developed per country. -Have international network of franchise and partners that help them run the operation and sales. -Its is Global -> the US and Canada occupy 1/3 of the revenues. -Whereas EU & Asia ( even they occupy less of the revenue) they are equally important for the company. -There revenue is more from outside US and the revenue is spread among all continents -> Global View and Global Strategy. 29
  29. 29. MNE FEATURES OF COKE. • Coke is an multinational enterprise because it conducts production and distribution activities in nations other than its home country. • In terms of strategy and management orientation, the firm does three things that illustrates its multinational nature. - First, Coca-Cola adjusts its operations to meet local needs. The firm markets on a country-by-country basis. - Second, Coke has international partners who help to run the operation and do not report directly to the company on day-to-day matters. - Third, the organization relies heavily on team work by all involved parties and service more as a coordinator and leader for the product than as an on-site manager. 30
  30. 30. MNE FEATURES OF COKE. 46.1% 11.5% 10.1% 9.9% 5.9% 16.2% 0.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% North America Pacific Latin America Europe Eurasia/Africa Bottling Investments Corporate Revenuedistributionshare 31 Revenue distribution share of the Coca-Cola Company worldwide in 2013, by operating segment
  31. 31. 32 IB CHALLENGES FACING COKE.
  32. 32. IB CHALLENGES FACING COKE. • Some countries prohibited the used of Coca-Cola products with the assertion that the products are health threatening and cheering obesity, which are two major concern for people nowadays. • Aside from these assertions so many suits had been filed against the Coca-Cola Company with the allegation of “child labour sweatshops” other countries suits the Company for being selective in providing healthcare to their workers. • Some government agencies and companies are concerned about the way in which Coca-Cola is pushing aside those who are unable to lower costs and generate more business. The British Monopolies and Mergers Commission is investigating possible anti-competitiveness in Coke’s joint venture with Schweppes in England. In Italy, San Pellegrino, the mineral water company, has filed a complaint with the Commission of the European Communities, contending that Coca-Cola has abused its dominant position by giving discounts to Italian retailers who promise to stock only Coke. • Another major challenged faced by the Company was the infiltration of the beverages market by other strong Companies such as Pepsi and co 33 The road to success has never been smooth and easy. For Coca-Cola Company the phrase seems perfectly matched, the Company faced a lot of challenges in some countries as it was trying to globalize.
  33. 33. IB CHALLENGES FACING COKE. • Fluctuation of monetary capital exchange between countries: This was due to the policies and regulation concerning transfer of funds between different countries, with barriers in some countries it makes transactions unattractive. • Health Concern raised and Negative Publicity: In 2003, the Centre for Science and Environment (CSE),a non- governmental organisation in New Delhi, said aerated waters produced by soft drinks manufacturers in India, including multinational giants PepsiCo and Coca-Cola, contained toxins including lindane, DDT, malathion and chlorpyrifos — pesticides that can contribute to cancer and a breakdown of the immune system. Tested products included Coke, Pepsi, and several other soft drinks (7Up, Mirinda, Fanta, Thums Up, Limca, Sprite), many produced by The Coca-Cola Company. • In March 2004, local officials in Kerala shut down a $16 million Coke bottling plant blamed for a drastic decline in both quantity and quality of water available to local farmers and villagers. 34
  34. 34. 35 Thank you

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