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CASE STUDY ANALYSIS

In Partial Fulfillment of Strategic


Management MGT657
:
PREPARED FOR
Mdm. Rohani bt Jangga
Class of BMB5P1
:
PREPARED BY
Nuraishah bt Sazali 2007285246
Nur Razilah bt Juhari 2007285258
Qiistina bt Zainal Alam 2007285544
Noor Syafiqah bt Nazor Ilahi 2007285218
Nur Asikin bt Aziz @ Abd Aziz 2007285266
Introduction

The Coca-Cola Company


1.0 Background
 Coca-Cola is the product that has given the world its best-known taste
was born in Atlanta Georgia, on May 8, 1886
 Coca-Cola Company is the world’s leading manufacturer, marketer and
distributor of non-alcoholic beverage concentrates and syrups, used to
produce nearly 400 beverage brands
 Coca-Cola was first introduced by John Syth Pemberton, a pharmacist in
the year 1886 in Atlanta when he concocted caramel-colored syrup in a
three legged brass kettle in his backyard. He first “distributed” the
product by carrying it in a jug down the street to Jacob’s Pharmacy and
customers bought the drink for five cents at the soda fountain.
Carbonated water was teamed with the new syrup, whether by accident
or otherwise, producing a drink that was proclaimed “delicious and
refreshing”
 Coca-Cola originated as a soda fountain beverage in 1886 selling for five
cents a glass
 Early growth was impressive, but it was only when a strong bottling
system developed that Coca-Cola became the world-famous brand it is
today
Vision & Mission

Vision Mission
Our vision serves as the framework for our

Roadmap and guides every aspect of our
 Our Roadmap starts with
business by describing what we need to
accomplish in order to continue achieving our mission, which is
sustainable, quality growth. enduring. It declares our
People: Be a great place to work where
purpose as a company and

people are inspired to be the best they can
be.
 Portfolio: Bring to the world a portfolio of
serves as the standard
quality beverage brands that anticipate and
satisfy people's desires and needs.
against which we weigh
 Partners: Nurture a winning network of our actions and decisions.
customers and suppliers, together we
create mutual, enduring value.  To refresh the world...
 Planet: Be a responsible citizen that
makes a difference by helping build and
 To inspire moments of
support sustainable communities. optimism and happiness...
 Profit: Maximize long-term return to
shareowners while being mindful of our  To create value and make a
overall responsibilities.
 Productivity: Be a highly effective, lean
difference
and fast-moving organization.
1.2 Existing Objective
 Our objectives is to use our formidable assets
– brands, financial strength, unrivaled
distribution systems, global reach and a
strong commitment by our management and
associates worldwide – to achieve long-term
sustainable growth.
1.3 Strategies
 Distributes products through restaurants, grocery markets, street
vendors & others, which sell to the end users.
 2006 FIFA – Germany promotes Coke with the “It’s Your Heimspiel –
Make It Real!” campaign.
 Introducing new products, innovating packaging & collaborating
with customers.
 Acquisition to gain competition advantage. For example: mineral
water company Apollinaris (Germany) and Traficante (Italy).
 Apply different kinds of marketing according to region. For example:
Sensitivity marketing in European region.
 Increase investment in bottling investments, front-end capability,
equipment, and people/training.
 Collaboration with Apple iTunes – involved in a digital program that
focuses on youth.
New Mission Statement

The Coca-Cola Company


2.0 New Mission Statement
 At Coca Cola we're committed to achieving business
and financial success by using advanced technology
while leaving a positive imprint on society – delivering
what we call Performance with Purpose. Our mission
is to be the world's premier consumer products
Company focused on convenient foods and
beverages. We seek to produce financial rewards to
investors as we provide opportunities for growth and
enrichment to our employees, our business partners
and the communities in which we operate. And in
everything we do, we strive for honesty, fairness and
integrity.
SWOT Analysis

The Coca-Cola Company


4.1 External Opportunities
External Factors
Opportunities
Increasing number of demand for Healthy conscious of public make
new ready-to-drink products (tea, them request more for healthy
coffee, etc) in market drinks
Pepsi earns 60% profit from snacks Growing Hispanic population in US

The demand of computer internet, Diversification of bottling business


network and cell gaming is to other industries like
increase among youth worldwide pharmaceuticals
4.1 External Threats
External Factors
Threats
Hurting products containing sugar Lack of purified water (being main
& sugar-substitute based drinks component) in different parts
(trend towards more healthy eating of the world
& drinking)
Increase in raw material costs Lack of share in homeland market
Government policies may hurdle in Government policies - for
expansion disclosure of health warning
Competitor may access unreached
parts of the world prior to Coca
Cola
EFE Matrix
Key Eternal Factors Weight Rating Weighted
Score
Opportunities
Increasing number of new ready-to-drink 0.095 3 0.285
products (tea, coffee, etc) in the market
Pepsi earns 60% profits from snacks 0.060 2 0.120
Healthy conscious among public make them 0.105 3 0.315
request more for healthy drinks
Diversification of bottling business to other 0.075 2 0.150
industries like pharmaceuticals
The demand for computer internet, network 0.030 2 0.060
and cell gaming is increase among youth
worldwide 0.045 4 0.180
Growing Hispanic population in US
EFE Matrix
Key Eternal Factors Weight Rating Weighted
Score
Threats
Hurting products containing sugar & sugar- 0.100 4 0.400
substitute based drinks (trend towards more
healthy eating & drinking)
Increase in raw material costs 0.075 3 0.225
Government policies may hurdle in expansion 0.065 3 0.195
Government policies - for disclosure of health 0.090 4 0.360
warning 0.095 2 0.190
Lack of share in homeland market - room for
other brands 0.080 4 0.320
Lack of purified water (being main
component) in different parts of the world 0.085 2 0.170
Competitor may access unreached parts of
the world prior to Coca Cola

Total 1.000 2.970


4.2 Internal Strengths
Internal Factors
Strengths
Average customer purchases Newspaper advertisement
increased by 18.54% expenditures decreased
Technical support and research Debt to total asset ratio decline
efficiency
Revenues from other segments Locations in the world
Employee moral Expansion by taking over Cadbury
division
Entering into new sport events to Strong financial & assets support
introduce energy drinks Internal available
Factors worldwide to take
financing for expansion
Weaknesses
Inventory turnover decreased by Return on equity down decreased
13.29%
Insufficient supplier time delivery Lack of information and appealing
website
IFE Matrix
Key Internal Factors Weight Rating Weighted
Score
Strengths
Average customer purchases increased by 0.060 3 0.180
18.54% 0.075 4 0.300
Employee moral 0.075 4 0.300
Technical support and research efficiency 0.030 3 0.090
Newspaper advertisement expenditures 0.070 4 0.280
decreased 0.044 4 0.176
Revenues from other segments 0.095 4 0.380
Debt to total asset ratio decline 0.060 3 0.180
Locations in the world 0.080 3 0.240
Expansion by taking over Cadbury division 0.106 4 0.424
Entering new sport events to introduce
energy drinks
Strong financial & assets support available
worldwide to take financing for expansion

Weaknesses
Inventory turnover decreased by 13.29% 0.090 2 0.180
Return on equity down decreased 0.105 2 0.210
Lack of information and appealing website 0.040 1 0.040
Insufficient supplier time delivery 0.070 1 0.070
Total 1.000 3.050
Financial Ratio

The Coca-Cola Company


Ratio Analysis
2006 2005 2004
$ in millions % $ in millions % $ in millions

Income Statement
Revenue 24 088 100.0 23 104 100 21 962
Cost of Good Sold 8 164 33.9 8 195 35.5 -
Interest Expense 220 0.9 240 1.0 -
Tax Expense 1 498 6.2 1 818 7.9 -
Income from Cont. Operation 5 080 21.1 4 872 21.1 4 847
Net Income 5 080 21.1 4 872 21.1 -
Balance Sheet
Cash 2 440 8.1 4 701 16.0 -
ST Investments 150 0.5 66 0.2 -
Acc. Receivable 2 704 9.0 2 281 7.8 2 171
Inventory 1 641 5.5 1 424 4.8 1 420
Current Assets 8 441 28.2 10 250 34.8 -
LT Investments 6 783 22.6 6 922 23.5 -
Net Fixed Assets 6 903 23.0 5 786 19.7 -
Other Assets 7 668 25.6 6 469 22.0 -
Total Assets 29 963 100.0 29 427 100.0 31 327
Current Liabilities 8 890 29.7 9 836 33.4 -
Total Liabilities 13 043 43.5 13 072 44.4 -
Stockholders’ Equity 16 920 56.5 16 355 55.6 -
Ratio Analysis
2006 2005 2004
$ in millions % $ in millions % $ in millions

Cash Flow
Cash Flow from Operations 5 957 6 423 5 968
Dividends Paid 2 912 2 697
Interest Paid 220 240
Per Share
Market Price at Year 48.25 40.31
Earning Per Share 2.16 2.04
Ratio Analysis
2006 2005 2004
Growth Ratios

Sales growth 4.3% 5.2%


Income growth 4.3% 0.5%
Asset growth 1.8% -6.1%
Activity Ratios

Receivable Turnover 9.7 10.4


Inventory Turnover 5.3 5.8
Fixed Asset Turnover 3.5 4.0
Profit Ratios

Profit Margin 21.1% 21.1%


Return on Assets 17.1% 16.0%
Return on Equity 30.5% 59.6%
Dividend Payout Ratio 57.3% 55.0%
Price Earnings Ratio 22.3 19.8
Ratio Analysis
2006 2005 2004
Liquidity Ratios

Current Ratio 0.95 1.04


Quick Ratio 0.60 0.72
Leverage Ratios

Debt to Total Assets 0.44 0.44


Time Interest Earned (accrual) 30.90 28.88
Time Interest Earned (Cash) 28.08 27.76
Financial Ratio Profile
Financial Ratio Profile
Profitability
Very Low Average Very High
Liquidity
Very Low Average Very High
Leverage
Very Low Average Very High
Activity
Very Low Average Very High
Matrixes

The Coca-Cola Company


TOWS Matrix
Strengths Weaknesses
1.Average customer purchase increase by 18.54% 1.Inventory turnover decrease by 13.29%
2.Employee moral

SO WO
Opportunities
1.Entering into snacks business

1. (S1, S3, S5, O1, O3, O4, O5, O6) 1. (O5, W2)
2. (S3, S4, S7, O8, O10) 2. (O8, W3)

ST WT
Threats
1.Hurting product containing sugar & sugar
substitute based drinks
2.Salesman not equipped with sales ordering devices
1. (T1, T4, T5, T8, S3, S5) 1. (T2, T8, W1, W2)
TOWS Matrixcont’d
 Increase investment and market for Coca-Cola products &
acquisition will increase profit and return on equity (S1, S3, S5, O1,
O3, O4, O5, O6)
 Efficiency of technical support & research enables Coca-Cola to
diversify its products through collaboration with computer network
company (S3, S4, S7, O8, O10)
 Continuous increase in demand for Coca-Cola products with
advanced marketing, technical support & research efficiency may
help the company to enter new business & expanding product line.
All the cost will be supported by assets & revenue gained by other
segment and worldwide (O5, W2)
 Hire computer expertise to improve website & cell gaming that
indirectly will attract youth attention & hence it will help in
enlarging Coca-Cola market segment (O8, W3)
TOWS Matrixcont’d
 Efficiency of research can help in improving the beverages
ingredients so that it can be acceptable by society. In addition, it
also help in producing a healthier products (T1, T4, T5, T8, S3, S5)
 As Many of Coca-Cola’s plastic bottles are recycled and as a result
less resources are lost & costs decrease. Through diversification &
innovation in water & juices business supported with aggressive
advertising strategy Coca-Cola Company can attracts a new
market segment. This will mean they will have a higher revenue
increasing long term profitability & improve credit rating (T2, T8,
W1, W2)
SPACE Matrix
Factors Determining Environmental Stability
Technological Changes Many 1 2 3 4 5 6 Few
Rate of Inflation High 1 2 3 4 5 6 Low
Demand Variability Large 1 2 3 4 5 6 Small
Price Range of Competing Wide 1 2 3 4 5 6 Narrow
Products
Barriers into Entry to Market Few 1 2 3 4 5 6 Many
Competitive Pressure High 1 2 3 4 5 6 Low
Price Elasticity of Demand Elastic 1 2 3 4 5 6 Inelastic

Average Score = -2.86


SPACE Matrixcont’d
Factors Determining Industry Strengths
Growth Potential Low 1 2 3 4 5 6 High
Profit Potential Low 1 2 3 4 5 6 High
Financial Stability Low 1 2 3 4 5 6 High
Technological Know-How Simple 1 2 3 4 5 6 Complex

Resource Utilization Inefficien 1 2 3 4 5 6 Efficient


t
Capital Intensity High 1 2 3 4 5 6 Low
Barriers of Entry into Market Easy 1 2 3 4 5 6 Difficult
Productivity, Capacity Low 1 2 3 4 5 6 High
Utilization
Average Score = 4.38
SPACE Matrixcont’d
Factors Determining Competitive Advantage
Market Share Small 1 2 3 4 5 6 Large
Product Quality Inferior 1 2 3 4 5 6 Superior

Product Life Cycle Late 1 2 3 4 5 6 Early


Product Replacement Cycle Variable 1 2 3 4 5 6 Fixed

Customer Loyalty Low 1 2 3 4 5 6 High


Competitor’s Capacity Low 1 2 3 4 5 6 High
Utilization
Technological Know-How Low 1 2 3 4 5 6 High
Vertical Integration
Average Score = -4.25 Low 1 2 3 4 5 6 High
SPACE Matrixcont’d
Factors Determining Financial Strength
Return on Investment Low 1 2 3 4 5 6 High
Leverage Imbalance 1 2 3 4 5 6 Balanced

Liquidity Imbalance 1 2 3 4 5 6 Balanced

Capital Required/Capital High 1 2 3 4 5 6 Low


Available
Cash Flow Low 1 2 3 4 5 6 High
Ease of Exit from Market Difficult 1 2 3 4 5 6 Easy

Risk Involved in Business Much 1 2 3 4 5 6 Late


Average Score = 3.00
SPACE Matrixcont’d
FS
Conservative Aggressive
•Market penetration •Backward, forward,
•Market development horizontal integration
•Product development •Market penetration
•Related diversification •Market development
•Diversification
CA IS
Defensive Competitive
•Retrenchment •Backward, forward,
•Divestiture horizontal integration
•Liquidation •Market penetration
•Market development
•Product development

ES
Conclusion
ES Average is -2.86 IS Average is 4.38
CA Average is -4.25 FS Average is 3.00
Directional Vector Coordinates: x-axis: -4.25 + 4.38 = 0.13
y-axis: -2.86 + 3.00 = 0.14

The Coca-Cola Company should pursue aggressive


strategies
BCG Matrix
Division Revenues Revenues Profits Profits Market Growth
$ % $ % Share % Rate %

Africa 1 140 4.48 227.75 4.00 5 -8


East South 872 3.43 174.42 5.00 10 -5
Africa &
Pacific Rim
European 4 364 17.16 871.17 18.66 45 7
Union
Latin America 2 616 10.29 522.27 11.20 35 3

North 7 029 27.64 1 567.72 25.85 60 9


America
North Asia, 4 123 16.21 823.35 15.05 40 8
Eurasia &
Middle East
Bottling 5 198 20.44 874.42 10.48 20 -7
Investment
Corporate 93 0.37 18.88 9.76 15 -3
Total 25 435 100% 5 079.98 100% - -
* in $ millions
BCG Matrixcont’d
RELATIVE MARKET SHARE POSITION

High Medium Low


1.0 0.5 0.0
High 10
North America
25.5%
North Asia,
Eurasia &
Middle East
15.05%

European Union
18.66%
INDUSTRY SALES Latin America
GROWTH RATE % 11.7%

Medium 0

Corporate East South Africa


9.76% & Pacific Rim
5%

Bottling
Investment
10.48% Africa
4%
Low -10
BCG Matrixcont’d
Division ? $ Cows Dogs Strategies

Africa Retrenchment, Divestiture,


Liquidation
East South Africa & Retrenchment, Divestiture,
Pacific Rim Liquidation

European Union Market Penetration, Market


Development, Product
Development, Divestiture
Latin America Market Penetration, Market
Development, Product
Development, Divestiture
North America Backward, Forward or Horizontal
Integration, Market Penetration,
Market Development, Product
Development
North Asia, Eurasia Market Penetration, Market
& Middle East Development, Product
Development, Divestiture
Bottling Investment Retrenchment, Divestiture,
Liquidation
GSM Matrix
Rapid Growth Market
Quadrant Ⅱ Quadrant Ⅰ
1.Market development 1.Market development
2.Market penetration 2.Market penetration
3.Product development 3.Product development
Weak Strong
Competitive 4.Horizontal integration 4.Forward integration Competitive
Position 5.Divestiture 5.Backward integration Position
6.Liquidation 6.Horizontal integration
7.Related diversification

Slow Growth Market


Quadrant Ⅲ Quadrant Ⅳ
1.Retrenchment 1.Related diversification
2.Related diversification 2.Unrelated diversification
3.Unrelated diversification 3.Joint venture
4.Divestiture
5.Liquidation
IE MATRIX
IFE weighted score

Strong Average Weak


4. 3.0 2.0 1.0
0 Ⅰ Ⅱ Ⅲ
High

3.
EFE weighted score

0 Ⅳ Ⅴ Ⅵ
Medium
Grow & Build
2.
0 Ⅶ Ⅷ Ⅸ
Low

1.
0 Backward, Forward or Horizontal Integration
Market Penetration
Market Development
Product Development
Matrix Analysis & SWOT Summary

The Coca-Cola Company


Matrix Analysis & SWOT Summary
SWOT IE SPACE GSM BCG Total

1. Forward Integration 4
2. Backward Integration 4
3. Horizontal Integration 4
4. Market Penetration 4
5. Market Development 4
6. Product Development 4
7. Concentric Development -
8. Related Diversification 2
9. Unrelated Diversification 1
10. Joint Venture -
11. Retrenchment 1
12. Divestiture 1
13. Liquidation 1
Quantity Strategic Planning

The Coca-Cola Company


QSPM
Key Factors Weight Market Product
Penetration Development

AS TS AS TS
Opportunities
1. Expansion by introducing new ready-to-drink 0.05 3 0.15 4 0.20
products
2. Entering into snacks business (Pepsi earns 0.100 3 0.30 3 0.30
60% from snacks)
3. Expansion by taking over Cadbury division 0.050 2 0.10 3 0.15
or product line
4. Entering into or introducing new sports 0.025 4 0.10 2 0.05
events to introduce energy drinks
5. Introduce soft drink with focus of "healthy 0.075 2 0.15 4 0.30
soft drink" – eliminate obesity concept
QSPMcont’d
Key Factors Weight Market Product
Penetration Development

AS TS AS TS
Threats
1.Hurting products containing sugar & sugar- 0.100 - 3 0.30
substitute based drinks (trend towards more
healthy eating & drinking)
2. Increase in raw material costs 0.075 1 0.075 4 0.30
3. Government policies may hurdle in 0.075 4 0.3 1 0.075
expansion 0.075 - 2 0.15
4. Lack in snacks business 0.015 3 0.045 2 0.03
5. Lack of share in homeland market - room for
other brands 0.025 - 2 0.05
6. Availability of purified water (being main
component) in different parts of the world 0.015 3 0.045 3 0.045
7. Competitor may access unreached parts of
the world prior to Coca Cola
QSPMcont’d
Key Factors Weight Market Product
Penetration Development

AS TS AS TS
Strengths

1. Average customer purchases increased by 0.11 3 0.33 4 0.44


18.54% 0.05 3 0.15 3 0.15
2. Employee moral 0.08 4 0.32 4 0.32
3. Technical support and research efficiency 0.09 2 0.18 -
4. Newspaper advertisement expenditures 0.14 1 0.14 3 0.42
decreased 0.05 2 0.10 -
5. Revenues from other segments 0.15 4 0.60 3 0.35
6. Debt to total asset ratio decline
7. Locations in the world
Weaknesses
1. Inventory turnover decreased by 13.29% 0.10 3 0.30 -
2. Return on equity decreased 0.11 2 0.22 4 0.44
3. Supplier time delivery 0.08 4 0.32 3 0.24

Total 3.925 4.31


Long Term Objectives &
Alternatives Strategy
The Coca-Cola Company
8.1 Long Term Objectives
 Willing continue to intensify & expand it Research
and Development (R&D) capacity to further
enhance its competitive edge in the industry
 To ensure profitability and benefits of its
shareholders and consumers
 To gain customer loyalty by fulfilling consumer
preferences
8.2 Alternative Strategies
 Market penetration
 Related diversification
 Market development
Recommendation & Conclusion

The Coca-Cola Company


Recommendations
 Focus on Water and Juices products, and catering
to health consciousness of people through
introduction of different coke flavor and
maintaining basic coke flavor

 Integrate with other companies, acquisition of


potential competitor businesses, innovation in
branding and aggressive marketing strategy that
can bring long term profitability
Conclusion
 The Coca Cola Company has a very rich history
and spread over the world, the study in this report
shows that SPACE matrix tells us that Coca Cola
Company should pursue an aggressive strategy

 Coca Cola Company has a strong competitive


position in the market with rapid growth. It needs
to use its internal strengths to develop a market
penetration and product development strategy
Q & A SESSION
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