Coca Cola.docx

Running head STRATEGY IMPLEMENTATION

Name

Course

Course professor

Date of submission

1

STRATEGY IMPLEMENTATION

2

Executive summary Coca Cola is one of the largest beverage companies, operating in different parts of the world. The company has a mission of refreshing the body, mind and spirit of the world. Its strength lies in its brand equity, large market share as well as customer loyalty, with a weakness due to law product diversification and poor water management. The company has decentralized its operations with both a functional and divisional organizational structure. Its organizational structure assists it in meeting its mission and goals. With the increasing health issues, the company is developing new products to diversify its production, like bottled water. The strong relationship that the company has created with its partners is a fundamental strength in the production process. The teamwork culture that the company has cultivated among its employees is a building block for the good customer service and inspired workforce that the company has. The company’s strong capital position gives it an opportunity to access key financial markets. The challenge is that the organizational structure does not address on the threat that the company faces of losing its customers to non-carbonated drinks. This paper recommends that the company should diversify its production to more nutritious and healthier products. Introduction Refreshing the body, mind and spirit of the world is the mission of Coca cola, with a vision serving it as a framework that guides every aspect of business by describing what it needs to attain in order to continue realizing a sustainable growth. To people, the company wants to create an environment where the people are inspired to work in by giving the best that they can. The company wants to cultivate a winning network of suppliers and consumers to create an enduring mutual value, bring a portfolio of quality beverages which anticipate and

STRATEGY IMPLEMENTATION

3

satisfy the world’s needs and desires. Coca Cola wants to be a responsible company which makes a difference by supporting and helping in building sustainable communities. Its profit objective is to maximize the long-term return it gives to shareowners and at the same time meet overall responsibilities by being a highly effective and fast-moving company. Coca cola SWOT analysis Strengths Company valuation- it is one of the most valuable in the world, valued at more than 79 billion dollars, which includes its assets, factories spread all over the world and its brand value as well as the profits and costs of the company . Brand equity- the company has a unique brand identity and a vast global presence. It is regarded as one of the coolest brand in the world. In the 2011 world inter-brand award, coca cola had the highest brand equity (Coca-Cola Company, 2016) Largest market share- out of the two biggest beverage companies, Pepsi and coca cola, the company has the largest market share. Vast global presence- the company operates in about 200 countries in the world. In any country you travel to, there is a possibility that you will get the company’s products. Marketing strategies- the company has unique marketing strategies always trying to win the hearts of many people. Unlike its close competitor, Pepsi, that targets mostly youngsters, the company targets all classes of people- the company has Distribution networks- due to the demand patterns in the market, the company has the largest distribution patterns enabling it to command a large market (Porter, 2006).

STRATEGY IMPLEMENTATION

4

Customer loyalty- the company has many loyal customers and funs due to its strong products and marketing strategies, and many people prefer its products to others. Weaknesses Competition- the company is facing stiff competition with Pepsi. Their competition is very strong that coca cola loses some its customers to Pepsi. If not for Pepsi, the company would have been the market leader. Low product diversification- coca cola has a low product diversification. Its close competitor that has diversified into snacks segments, making additional revenue from it. Health issues- being the largest manufacturer of carbonated drinks, it will lose customers due to current concerns in developed countries that these drinks are related to obesity as many people prefer a healthy alternative. Water management- the company consumes a high quantity of water even in areas with scarce water, raising issues with people in those regions. Additionally, the company is accused of using pesticides to clear contaminations in water. Opportunities Developing nations- the company is introducing its beverages in many developing countries with high demands for soft drinks. The high demand of such drinks is a good opportunity for the company to utilize, especially during summers when the demand for cold drinks go up. Diversification- the company has good grounds to diversify to health and food business, it can use its supply chain to distribute these products and share the cost of the supply chain.

STRATEGY IMPLEMENTATION

5

Supply chain improvement- with the rising transportation costs, the supply chain costs are increasing, the company is able to improve this sector as its business is based on distribution as well as transportation. Packaged drinking water- through Kinley, the company can focus on expanding the segment of packaged drinking water. It will have an additional advantage as water consumption is an increasing health issue and it can use this to increase its brand awareness (Dransfield, 2001). Threats Indirect competition- the coffee chain is a healthier competitor of the carbonated drinks. Healthy and energy drinks like Gatorade are an indirect competitor to beverages, taking away the market share. Raw material sourcing- the scarcity of water is becoming a big issue to coca cola. With changes in climate, some regions face water shortages and when water will be rationed, the company will face a blow in its production process. Organization strategy The Coca-Cola Company has both a functional and divisional organizational structure. In the functional structure, Coca-Cola has separate production, administration, marketing and distribution departments, while the divisional structure of Coca cola involves many different subsidiaries operating in the different regions of the world. These include 3E (Cyprus) Limited, HBC holding, involved in the production as well as the marketing of its products. To meet the dynamic demand of its customers, the company decided to decentralize itself. It has two operating groups, cooperate and the bottling investment that are located in different parts of the world. The groups are further divided into regions, allowing for decisions to be made at the

STRATEGY IMPLEMENTATION

6

local level. This allows the organization to give quick response to the demands in the market. The management at the higher levels can then focus on the long-term needs of the company. The corporate division manages the roles dealing with human resource, finance and innovative marketing (Coca-Cola Company, 2016) Coca cola Company uses differentiation strategy to compete in the global beverage market, creating value to its consumers. As its mission statement, the company has a mission of refreshing and inspiring the whole world. It wants to create value as well as make a difference. It does this by: growing its core brands of carbonated and soft drinks. The company captures its full potential and speeds up the growth of its core brands in the market. It uses the consumption opportunities as a tool to improve its margins and revenues as well as increase the number of consumers. Secondly, the company meets its mission by creating customer value. The company tries to listen to its customers’ needs and requirements, understands them and improves its services to meet the consumers’ preferences. Product strategy The company applies a high degree of product adaptation as well as modification in different markets. First, it does market research, then, it does product testing and adaptation in different markets. Different regions have different market trends and the market research and product testing helps it identify where the product will do well and in which places the product requires modifications. With the increasing health issues, the company is developing new products to diversify its production, like bottled water. Its new products are also being designed to suit the local preference, mainly targeting the developing nations where there is high demand for soft and carbonated drinks. In 2007, the company launched Dasani plus vitamin –enhanced water, this had three varieties to refresh and revive, the second being to cleanse and restore while the third variety was to defend and protect. The mineral enhanced water target the

STRATEGY IMPLEMENTATION

7

developed countries where carbonated drinks are health issues and vitamin enhanced water sells at a very high rate (Smit, 2007). Marketing strategies One of the weapons that the company has used is to thorough creating of awareness through advertising. Coca cola uses unique advertising each time and different ways of sales promotion. I would say that one thing that has created consumer loyalty is the fact that Coca cola is always creating a brand awareness, from TV’s to radios, before you could think, it would have introduced a new advert that makes you feel like taking its products. The company customizes its products to fit consumers, for example, in the current time, the company is customizing its products by writing names on the bottles like,” Mary shares a coke with James.” With the marketing strategy the company can help fight competition bringing a portfolio of quality beverages which anticipate and satisfy the world’s needs and desires. Organizational culture In most places Coca cola do not bottle and distribute it products. The primary operations of the organization is to manufacture as well as sell syrups and beverage concentrates. The syrups and concentrates are sold to its bottling partners, which manufacture and distribute as well as sell the branded products. The strong relationship that the company has created with its partners is a fundamental strength in the production process. The partners ensure that syrup and concentrates is made into finished products and distributed to the consumers around the world. The culture of the company is reflected on the teamwork that the company emphasizes and practices. Coca Cola Company has a very large workforce in different countries. The workers of this company are very loyal as the company provides them with an attractive compensation,

STRATEGY IMPLEMENTATION

8

there is minimal employee turnover as the company offers training for these employees and there is strong tendency of promotion within the company. With motivated workforce, the company is able to create a teamwork that helps maintain its brand leadership. There is global thinking in the employees of the company, though they act locally as they serve the customers with passion and respond to the competitive market situations. With this, Coca cola meets its mission to the people, where the company wants to create an environment where the people are inspired to work in by giving the best that they can. Capital structure Based on its cash flows, debt equity ratio and interest coverage ratio the company maintains a prudent debt level. To lower its overall cost of capital, the company uses a debt financing, increasing the shareowners’ return on equity. The company’s strong capital position gives it an opportunity to access key financial markets. This enables it to raise sufficient funds at a relatively low effective cost (Ahmad, 2007). Strategic fit The non-alcoholic beverage industry is rapidly changing due to the changes in preferences of consumers. The main changes are related to health and nutrition as well as concerns of obesity. Many consumers are changing their lifestyle by going for beverages without health issues. The government and public health officials are increasing awareness of the consequences of using carbonated drinks and some publicly threaten to litigate companies that manufacture those drinks, hence, reducing the demand for such products. The company’s growth strategies described are very promising, however, the company has not addressed the issue that the highest fraction, about 80%, of its product, are carbonated soft drinks, which is one of the main debates in the international markets. Carbonated drinks

STRATEGY IMPLEMENTATION

9

are being associated with obesity and many people, especially in the developed countries, are substituting these drinks with bottled water and other non-carbonated drinks. Unlike its competitor, Pepsi, the company has not diversified its portfolio and due to health conscious, it will lose its customers (Smit, 2007). Considering Coca cola’s organization culture, current strategy, company structure, product strategy and capital structure as well as marketing strategy, the company is doing a lot and is strategically fit to meet its vision and mission. Ethical issues One ethical issue revolving the company is whether the carbonated drinks are healthy for humans. Some people, especially in the developed countries, consider carbonated drinks unhealthy for human consumption, relating it to cause of obesity. If these drinks are not healthy, then selling them to people is very unethical. At the same time, the company is accused of using pesticides to clear contamination in the water that it uses to make these drinks, this is another unethical practice. Another ethical issue is having the right pay structure. The pay structure of Coca Cola Company is such that the employees are paid according to their metrics. This is why its employees are inspired and motivated to give their best to the customers. One of the ethical issues that the company has addressed is making the employees’ development a part of its strategy. Coca Cola Company has included the employees, welfare as part of its mission. It trains its employees on ethical issues and customer management. Recommendation

STRATEGY IMPLEMENTATION

10

The company should use a system that replenishes water such that it will be able to reduce water wastage, instead of the usual wastage of water, the water is returned back to its nature and recycled. This system will support proper usage of water as well as balance the amount of water the company uses for the fished products (Hill et al, 2010) Diversification- the company should plan on diversifying its operations and production to healthier drinks. The company products will lose customers to other more nutritious products, due to change in life style, it should utilize its brand awareness and supply chain to manufacture and distribute more nutritious and healthier beverages as well as bottled water instead of just majoring in the carbonated drinks. It can also manufacture snacks that will go in hand with the beverages. Do more marketing and product promotion in Africa. Since the company is targeting the developing countries due to health issues in developed areas, more product promotion should be done in Africa to get a larger market share of the high demands for the soft drinks and to beat the competition. Conclusion The company is trying to gain more customers in different parts of the world, however, it has close rivals like Pepsi and another big problem is the issue that carbonated drinks is a health concern. Diversifying its production to more nutritious products can help reduce loss of customers at the same time more product promotion will help it create awareness in its potential markets. Improving service delivery can also amount into substantial gains in market share.

STRATEGY IMPLEMENTATION

11

REFERENCES Ahmad ElAmin (2007). “Coca-Cola reports progress in red environmental impact”William Reed Business Media. United State. Brian Nordmann (2004) “Organizational Structure”http://www.studymode.com/essay G.A Cole (2006). “Personnel management theory and practices” Hemisphere D.Ppublication Ltd. M. Porter (2006). “Strategy and society: the link between competitive advantage and corporate social responsibility”. Harvard Business Review Thomas Donaldson (2014).Ethical Issues in Business. Retrieved June 27, 2016from https://www.karlknapp.com/resources/ethics Ferrell, O. C., & Hartline, M. D. (2008). Marketing strategy. Mason, OH: Thomson SouthWestern. Smit, P. J. (2007). Management principles: A contemporary edition for Africa. Cape Town, South Africa: Juta. Thompson, J. L. (2001). Understanding corporate strategy. London [etc.: Thomson Learning. Hill, C. W. L., & Jones, G. R. (2010). Strategic management theory: An integrated approach. Boston, MA: Houghton Mifflin. Dransfield, R. (2001). Corporate strategy. Oxford [u.a.: Heinemann.

STRATEGY IMPLEMENTATION

12

Coca-Cola Company “Sustainability report” Retrieved June 27, 2016 http://www.cocacolacompany.com/sustainability/global-challenges.html Anthony

McGrew.

“Researching

Globalization”

http://www.polity.co.uk/global/research.asp

Retrieved

June

27,

2016