BA236-Marketing Management

Part II-Midterm Examination (Case analysis of Coca-Cola Co. )

Dyanna A. Azumbrado
Tyrone V. Inocente
Coca-cola is a reputable company that has been a recognizable brand in the United Sates since
its creation in the late 1800s. It flourished in the 1980s and 1990s under the leadership of
former CEO Roberto C. Goizueta when he made the brand into a growth story that captivated
the world. But after the untimely death of Goizueta in 1997, the financial struggles of the
company started. After generating average annual earnings growth of 18% between 1990 and
1997, Cokes net income in recent years has grown an average of just 4%. Shares have fallen
hard, currently trading at less than half their 1998 peak as more investors conclude that Cokes
best days are behind them.
Former Coca-Cola Co. executive E. Neville Isdell agreed to come out of retirement and become
chief executive of the company. He was optimistic that the financial situation at Coke can still
turn around but after a tour of the companys operations in India, China and 14 other key
markets, he saw a different reality. Things looked so bad that just 100 days into his new job, he
interrupted his fact-finding mission to deliver a surprise warning to Wall Street Coke.
A.

Statement of the Problem

Can E. Neville Isdell turn around the financial condition of Coca-Cola and return it to a
company with sustainable profit and growth?

B.

Objectives
1. Identify the factors that lead to the financial decline of Coca-Cola Company.
2. Present alternative course of action to combat the companys financial struggle.
3. Recommend the best alternative that will help resolve the problem and return the
company to its former position as the leader in the industry.

C.

Situation Analysis
Putting a Coke within an arms reach of desire of consumers around the globe has been
the mantra first coined by legendary Coke chairman Robert W. Woodruff and often
repeated by Goizueta. This was the companys guiding principle as they successfully
expand operations in the United States and in the international market. Through the years,
the market preference has shifted increasingly from soda to non-carbonated products such
as sports drinks, vitamin-fortified waters and energy drinks while Coca-cola remain fixated
in marketing its flagship Coke brand as the universal beverage. Pepsi, the biggest rival of
Coke meanwhile has adapted to the changing demand in the market. They have in their
portfolio billion-dollar beverage brands such as Tropicana juice, Gatorade sports drink and
Aquafina water.
According to financial analysts, another factor of the companys decline is their
conservative advertisements that do not resonate with the teenagers and young adults,
which comprises the majority portion of the market. They stick to the carbonated soft drink
model which, according to a president of a consulting firm in Santa Barbara, California is
30 years old and out of date.

The lack of desire to diversify and the lack of innovation have also contributed to the
decline of Coke. The company has not created a best-selling new soda since they
introduced Diet Coke in 1982 and have not made transformative acquisitions that could
have improved their market share. Instead, the company cling to its past and believes that
theres plenty of growth left in soda pop. The problems the company had with their bottlers
certainly do not help its cause. Coke has often made its profits over the years at the
expense of bottlers by implementing price hikes on their products. The key bottlers fought
back by increasing the price of Coke in retail and by refusing to carry the new products of
the company.
Perhaps the biggest factor of the companys decline over the years is the notorious board
of directors. They have strictly enforced obedience the Goizueta way and are very
involved in the company affairs. They have chewed through 2 CEOs in the past 5 years
and have vetoed potential acquisitions that could have transformed the company. They
oppose product diversification, did not believe in mergers and involved themselves in
operations.
D.

Course of Action
1. Coca-cola should increase advertising to maintain competitive edge. It should target
the younger and tech savvy generation by advertising on social media sites. They may
also consider updating or changing their products packaging to provide for a more
modern design that would appeal to a younger customer base.
2. Coca-cola should invest more on research and development to create innovative
products that appeal to health-conscious consumers. They could gain market share by
capitalizing on the energy-drink market.
3. The company should capitalize on their strong brand name and expand operations to
include food. Currently, Coca-cola only offers beverages, the company needs to create
product diversification and expand into the food market.
4. Implement integration strategy by reacquiring the portion of Coca-Cola Enterprises Inc
it does not own. This is to maintain control on the companys market share and
minimize potential costs in the future.

E.

Recommendation
We recommend alternatives number 2 and 3. Coca-cola should adapt to changing market
trend which leans toward healthy lifestyle for consumers. This will enable the company to
improve its market share as well as the company image, which was affected by bad
publicity brought about by the adverse effects of consuming carbonated soft drinks.
Product diversification meanwhile is the key for the company to regain its status as the
leader in the industry.

F.

Conclusion
We conclude that E. Neville Isdell can turn around the financial condition of Coca-Cola if
he can persuade the board of directors to realign the company vision with the current
market trends. This includes engaging into product diversification by expanding into the
food market and come up with beverages that is appealing to health-conscious
consumers.