Case Study: Coca-Cola Company Essay Example
Case Study: Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is mainly a public beverage corporation. Its primary business model entails the fabrication, retailing, and marketing non-alcoholic syrups and beverages. It has its headquarters in Atlanta, Georgia. The enterprise is mainly known for its primary product Coca-Cola, which was incorporated by the founder, Asa Griggs, in 1992. It can be considered the world’s largest beverage company and markets over 500 nonalcoholic beverage brands, which are primarily sparkling (Coca-Cola’s Annual Report, 2015). However, the company also owns a variety of still beverages, such as water, ready-to-drink coffee and tea, juices, as well as sport and energy drinks. In addition, the company owns the world’s top four sparkling beverages. These are Fanta, Sprite, Coca-Cola, and Diet Coke. Also, as the company is a multinational, its finished products sold in the US since the year 1886, are now sold in over 200 countries (Coca-Cola’s Annual Report, 2015). The enterprise fabricates its beverage products, which it has effectively branded, and ships to consumers located in the whole world via a network of corporate owned or controlled bottling and distribution operations. In addition, it also has independent bottling distributors, partners, retailers, and wholesalers, making this network to be the largest beverage distribution system.
The organization believes that its success in business owes to its ability to connect to consumers, and thereby offering them with various options that can meet their desires, lifestyles, and needs, as well as the ability of its people to execute the business effectively on a daily basis. The company was incorporated in 1919, under the State of Delaware’s laws. The company maintains high revenues, for instance, according to Jurevicius (2016), the company had abundant revenues driven the company’s profitability. In addition, it also invests in marketing its products, mainly via making advertisements, which provides the company with competitive advantage Jurevicius (2016). The annual revenues are very high, as cited by Market Watch (n.d), which reports that they are always above USD 40 billion in the last couple of years.
Mission, Vision, and Purpose
The company acknowledges the changing environment in global business, and therefore, for it to thrive, the company looks ahead and incline to market trends and forces (Coca-Cola Company, n.d.). For this reason, one of the strategies employed by the company includes getting ready for tomorrow today, which provides the company with a framework to win along with its bottling partners. As the company cites, its mission is to refresh the world, inspiring moments of happiness and optimism, as well as creating value that can make a difference (Coca-Cola Company, n.d.). The framework for the company’s success commences with this mission, which declares the sole purpose of the organization and also serves as the standard upon which the organization weighs its decisions and actions. Its vision is inclined to achieve sustainable development and quality growth. To align to the vision, which provides the blueprint for guiding its business aspects, it seeks to undertake various actions. Firstly, it ensures that the company is a good place to work, where people are motivated via inspirations, and by being supported to become the best. Secondly, it has developed a product portfolio of quality brands that satisfy people’s lifestyle, needs, and desires. Thirdly, it has a network of partners, including customers and suppliers, who together, have created a mutual and enduring value. Fourthly, it seeks to be responsible for helping support and building sustainable communities. Fifthly, it aims to achieve high profitability and maximizing long-term returns to shareholders while also minding the responsibilities of the company. Lastly, it seeks to be productive be being highly effective, fast-moving, and lean company (Coca-Cola Company, n.d.).
It also has a variety of values, including a strong leadership that gives courage in shaping a brighter future for the company. Other values include collaboration, accountability, passion, integrity, quality, and diversity. It aims at focusing on the needs of the customers, consumers, as well as partners. It also capitalizes on emerging trends by performing frequent market analysis that are aimed at listening, observing, and learning more about the market. It also aims at working smart, acting like owners, as well as building a better brand inspired by optimism, fun, passion, and creativity (Coca-Cola Company, n.d.).
Operating Segments and Products
The operating structure is based on the company’s internal financial reporting. According to the Coca-Cola’s annual report for 2015, the operating structure included seven operating segments. These are Eurasia and Africa, Europe, Asia Pacific, Bottling Investments, Latin America, North America, and Corporate (Coca-Cola’s Annual Report 2015). The six segments, excluding corporate, division are often referred to as operating groups. In January 2016, the company transferred Coca-Cola Refreshments bottling, as well as the other associated supply chain operations in US and Canada from the North America Segment into the Bottling Investments division. The company fabricates, markets, and sells beverage concentrates and syrups, including fountain syrups, as well as finished sparkling and still beverages. Ideally, as the 2015 annual report points out, the finished product operations have higher revenues but lower gross profits compared to the concentrate operations (Coca-Cola’s Annual Report, 2015). The concentrate operations usually generate revenues by merchandizing syrups and concentrates to authorized canning and bottling operations, which in turn, combine these concentrates with viable sweeteners, sparkling or still water, or in most instances, combine sparkling water with syrups to produce the finished beverages.
These are then packaged in authorized containers, including cans, plastic bottles, as well as refillable or nonrefillable glass bottles, which have been fabricated to bear the Coca-Cola’s trademark. In turn, the finished products are sold to retailers or even wholesalers. The company may also sell fountain syrups to wholesalers to resell them. As such, the company has numerous products. These include Coca-Cola, Minute Maid, Dasani, FUZE TEA, GlaceauVitaminwater, Powerade, Georgia, Coca-Cola Zero, Fanta, Sprite, Diet Coke, Ice Dew, and Del Valle among other reputable brands. In addition, the company also distributes Monster Beverage Corporation’s brands, primarily Monster Energy. Coca-Cola also participates in the distribution of third-party brands, such as Dr. Pepper Snapple Group Inc.’s brands, which as the company asserts, produces and distributes to designated territories. Coca-Cola also has a strategic partnership with Aujan Industries Company, which is one of the largest beverage companies in Middle East. It has a joint venture with Nestlé’s Beverage Partners Worldwide, which is involved in marketing and distributing Nestea products in Canada and Europe.
Strategies Employed and Market
The company has invested strongly in bottling. The bottlers are the main driving force behind Coca-Cola as they ensure that the products are fabricated, marketed, and distributed to the consumers all over the world. The bottlers hold contracts with Coca-Cola to produce the finished products. They can then sell, redistribute, and sell the products to retailers, as well as food service distributors. These bottlers include Coca-Cola Amatil, which is based in Australia, Coca-Cola European Partners, based in the UK, Coca-Cola Bottlers Philippines, Coca-Cola FEMSA, based in Philippines, Arca Continental, Coca-Cola Beverages Africa, Krin Company in Japan, Swire Group in Hong Kong, Coca-Cola Korea, as well as Coca-Cola HBC AG, located in Switzerland. The major American bottlers include Coca-Cola Bottling Company United, Coca-Cola Bottling Co. Consolidated, and Swire Coca-Cola USA (Coca-Cola’s Annual Report, 2015).
The company’s logo is timeless and has not changed compared to the major competitor, PepsiCo. Therefore, it enables the company to be differentiated from the competitors. Having been in existence for more than a century, the brand has been imprinted in people’s minds. Also, the Coke bottle has not changed, and this has also facilitated the promotion of the company’s image (Feloni, 2015).In addition, as the author asserts, it holds the retailers responsible for maintaining the high standard the company has amassed over the years, such as serving the drinks refrigerated to uphold its refreshing and sparkling sensation. For this reason, the company has commercial leadership owing to the numerous customers located all over the world and sell and serve the company’s products to the consumers. The company has developed a mutual relationship whereby Coca-Cola comprehends the customer’s needs
It had also adopted consumer marketing as one of its core capabilities. In essence, the company has made marketing investments that are meant to enhance consumer awareness, thereby increasing consumer preferences for the brands. These include advertising, sales promotions, and point-of-sale merchandising. The company focusses on differentiating the products for developing markets. For instance, there are numerous TV advertisements about Coca-Cola products, which is supported by a large advertising budget. This is helpful for the company because it provides a substantial competitive advantage. Ideally, this is realized through the promotion of the brand, helping the process of introduction of new products, increasing sales, informing the consumers on matters pertaining to the product’s features, and also in the process of communicating the brand’s message to the entire public. The Company targets consumers with variant ethnic groups, age, sexes, and lifestyles. For instance, Qoo is a fruit juice sold in Hong Kong, Japan, and China, and is very popular in Europe and Asia. It is mainly targeted for those aged three to ten primarily because of its fun fruit taste, as well as the cartoon character on its front, which as the beverage, is named Qoo (Tripod, n.d.).
Coca-Cola’s internal environment is the foundation for competitive advantage for the firm. In essence, the company encompasses a variety of strategies including adopting a well-defined distribution network and outbound factories that are capable of increasing the overall workflow. In addition, the company has perfected the art of marketing by adopting a differentiated and cost-based strategies. Corporate governance is considerably effective for Coca-Cola. This section will discuss Coca-Cola’s internal environment.
Corporate Governance and Ethics
The business receives guidance from the Board of Directors. The Board is elected by the shareowners and works to oversee their interests particularly I the overall health of the firm and ensuring that the company is supported by a huge financial muscle to ensure that the business is a success. In essence, the board is the ultimate decision-making body for Coca-Cola. It oversees and selects members of the senior management. The board charges them with conducting corporate business. To fulfill the various responsibilities, Coca-Cola’s Board oversees proper safeguarding of the company’s assets, ensuring that the financial among other internal controls are well managed and maintained, as well as ensuring that the company is in compliance with applicable laws and regulations (Coca-Cola’s Annual Report, 2015). Since it does not view risks in isolation, they are considered in virtually every aspect of the business, including such actions like decision-making, especially in instances of strategy formulation. However, it also recognizes its limitations as it is impossible to eliminate all risk. Therefore, it ensures that there is appropriate and purposeful risk taking so as to ensure that the company is competitive on the global scene.
The company has also enhanced its compensatory structure. The compensation committee has adopted an Equity Stewardship Guidelines, which is a set of principles that specify how the company uses equity compensation (Coca-Cola’s Annual Report, 2015). It has also revised the annual incentive plan thereby improving transparency. In addition, the committee has come up with new metrics that are directly tied to the strategies for the long-term and annual incentive plans.
The directors are elected, and this is based on the skills and qualifications of each of them. This, in turn, ensures that the Board is made up competent members able to propel the company to success. For instance, the Committee of Directors, each Director, and Corporate Governance requirements hold that each director should be an individual of high integrity, which should be accompanied by a strong trail of previous success in his or her field (Coca-Cola’s Annual Report, 2015). As such, each director should be capable of demonstrating innovativeness, familiarity on how the company operates, as well as respecting corporate governance practices and requirements. Also, since the company values diversity, the directors should be able to appreciate multiple cultures, as well as showing commitment to upholding sustainability and dealing effectively with the various social issues that the company faces. Each member should have a high level of experience in the finance field. They should also have held senior leadership positions before. For this reason, they should have served as Chief Executive Officers from previous work positions. Also, they need to have global exposure, especially on emerging markets. Marketing experience is also vital, and the respect for diversity. In addition, the members should have rich information and knowledge of the company’s undertakings, as well as the industry it operates in. For instance, Muhtar Kent, the current Chief Executive Officer (CEO) and the Chairman of the Board since 2009 has held the position of CEO since 2008 and the position pf president since 2006. As such, this reveals that most of the Board Members are highly competent and have prior experience in leadership, particularly on senior management.
For the company to compete on the Global scene favorably, Coca-Cola utilizes a differentiation strategy to create value for its consumers and customers, which is reflected in the mission statement. The main strategies that the company uses include growing core global soft drinks that are primarily carbonated. These brands are set to capture the full potential of the company’s trademark, “Coca-Cola”, as well as accelerating growth of these core brands in every market mainly via immediate consumption, which plays a vital role in improving the margin profits, as well as consumer recruitment. In addition, besides growing the core brands, the company has adopted noncarbonated drinks such as coffee, sports drinks, water, as well as energy drinks which have also captured many consumers thereby increasing the revenues (Coca-Cola’s Annual Report, 2015). The development of transformational wellness platforms including tea, juice, and soy has also contributed to the company’s success. In addition, the company has adopted a market to market focus on system’s health by balancing product aspects including volume, mix, cost, investments and share, concentrate pricing, and cost effectiveness among other factors (Coca-Cola’s Annual Report, 2015). The company also strives to create consumer and customer value by meeting and exalting their expectations. The company, being global, has also capitalized on emerging markets and thus, enabling it to generate further revenue. As such, the company has adopted a variety of products that suit these markets. The company also invests in research and development to effectively develop new products based on quality and augmenting the current portfolio.
The North American Business better reflects the company’s strategic focus (PepsiCo, n.d). In the segment, the company has established three business units, which entail still beverages, sparkling beverages, and emerging brands to counter competition from firms such as PepsiCo. In addition, it has sought to fabricate healthier products, such as the Diet Coke to curb the competition it currently faces in the North American segment.
An Effective Stakeholder Engagement Approach
The company values its shareholders. The company recognizes the need for maintaining dialogue with its global partners, which include customers, bottlers, investors, and employees (Coca-Cola’s Annual Report, 2015). This helps the company to strengthen its relationship with them as well as giving them a chance in decision-making. By using this approach, the company can deliver its commitments.
The company also engages with health and nutrition stakeholders, such as the international Food & Beverage Alliance (IFBA) to ensure that its products conform to the health standards set standards IFBA made with the World Health Organization. In essence, this enables the company to fabricate products that do not harm the consumers from a health perspective. In addition, the Ensemble Prévenonsl’Obésité Des Enfants (EPODE) is a body that helps combat obesity among the young (Coca-Cola’s Annual Report, 2015).
Productionand Distribution Effectiveness
The production process entails the fabrication of concentrates and syrups, and then merchandises them to authorized canning and bottling parties that subsequently package and distribute the final product to the consumers. In addition, Coca-Cola has put in place measures that guarantee that the products are handled effectively via enacting and signing separate contracts and bottler agreements (Yadav et al, 2013). These contracts enable the company to govern how the bottler and distributors manufacture and sell its products (Gonzalez Ramirez et al, 2014). In essence, they have to ensure that the final products have the trademark and are packaged well. Also, Coca-Cola allows the bottlers to buy the syrups and concentrates from authorized suppliers. According to Yadav et al (2013), there are three types of bottlers, which are: independently owned bottlers where Coca-Cola has no interest; bottlers where Coca-Cola has invested but has no intention of controlling the ownership interest; and lastly, bottlers where Coca-Cola has invested in and enjoys a controlling interest in how they operate (Gonzalez Ramirez et al, 2014). As the authors assert, all these must sigh their respective contracts for the company to ensure that kits products are produced and distributed properly.
The distribution network is one of the oldest components of the company as it dates back to when the company was founded. In essence, the network has grown to be the backbone of the company’s success. Essentially, Coca-Cola and its bottling partners operate extensively and can be considered as the largest beverage distribution network globally. The bottling partners enable Coca-Cola to distribute its products to over 200 countries in all the six continents. These products are always shipped to institutions and businesses which include supermarkets, retail chains, small neighborhood grocers, colleges, school, entertainment and sport venues, as well as restaurants(Yadav et al, 2013). The most significant step that Coca-Cola is taking is to expand its presence in emerging markets. As such, the distributing network will play an important role in ensuring that the consumers receive the products conveniently in these markets, which include Africa, Asia, and Latin America.
Coca-Cola’s Risk Profile
The company ensures that for its products to reach consumers in the emerging markets, more distributors should be put in place. Ideally, this will increase the ability for the company to grow. For this reason, the company has to ensure that its distributors and suppliers acquire strategic business alliances with the local bottlers, thereby making infrastructure enhancements to the distribution networks, production facilities, as well as sales equipment and technology. In addition, the company should ensure that the demand and supply factors are under control (Yadav et al, 2013).
Coca-Cola’s workforce can be considered as its greatest assets. The company incorporates elements of reward to ensure that the personnel are well motivated. They include a complete and comprehensive remuneration package along with benefits among other development and learning programs. The company recruits competent staff and does this aggressively while upholding an element of diversity to foster learning, value creation, as well as an advancement on a daily basis. In addition, the company develops its people so that they can achieve their full potential. In essence, this is an important component of the working relationship as it enhances fulfillment and commitment as the workers complete the tasks in the workplace. The company values the uniqueness of its employees.
Coca-Cola’s Annual Report, 2015, Annual Report: 2009, Coca-Cola, [Online] http://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/investors/2015-annual-report-on-form-10-k.pdf [Accessed 16 Mar. 2016].
Coca-Cola Company, n.d., Mission, Vision & Values. [Online] The Coca-Cola Company. Available at: http://www.coca-colacompany.com/our-company/mission-vision-values/ [Accessed 16 Mar. 2016].
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Feloni, R., 2015, 7 brilliant strategies Coca-Cola used to become one of the world’s most recognizable brands. [Online] Business Insider. Available at: http://www.businessinsider.com/strategies-coca-cola-used-to-become-a-famous-brand-2015-6 [Accessed 16 Mar. 2016].
Gonzalez Ramirez, M.M., Villamizar Rincon, J.C. and Lopez Parada, J.F., 2014, February. Liquid level control of Coca-Cola bottles using an automated system. In Electronics, Communications and Computers (CONIELECOMP), 2014 International Conference on (pp. 148-154). IEEE.
Jurevicius, O., 2016, Coca Cola SWOT analysis 2016: Strategic Management Insight. [Online] Strategicmanagementinsight.com. Available at: https://www.strategicmanagementinsight.com/swot-analyses/coca-cola-swot-analysis.html [Accessed 16 Mar. 2016].
Market Watch, n.d., Annual Financials for Coca-Cola Co., [Online] Marketwatch.com. Available at: http://www.marketwatch.com/investing/stock/ko/financials [Accessed 16 Mar. 2016].
Tripod, n.d, Target Markets, [Online] Coca-cola-remodel.tripod.com, Available at: http://coca-cola-remodel.tripod.com/id27.html [Accessed 16 Mar. 2016].
Yadav, P., Stapleton, O. and Van Wassenhove, L., 2013, Learning from coca-cola. StanfSocInnov Rev, 11(1), pp.51-55
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