full version Coca-Cola Business Strategy Essay

Coca-Cola Business Strategy

Category: Business

Autor: tomy 18 January 2010

Words: 7787 | Pages: 32

1.0 Introduction
Coca-Cola has sold more than one billion servings every day. More than 10,450 beverages are consumed every second. The company achieved earnings of $4,347,000,000 in 2003. It is present on all seven continents and is recognized by 94% of the world population. How did Coca-Cola grow from its humble roots as a home-brewed Georgia-based patent medicine to be the international soft drink powerhouse that it is today? Coca-Cola used numerous technologies to achieve its rise to the top of the soft drink industry, defining new technologies and establishing paradigms that popped the status quo like a cap from a soda bottle. Through technology, Coca-Cola perfected Coke as a beverage and spread it throughout the world. Even today, the US soft drink industry is organized on this principle. "The Coca-Cola Company” is now the largest soft drink company in the world. Every year 800,000,000 servings of just "Coca-Cola" are sold in the U.S alone.

1.1 Company Background
The Coca-Cola Company is now the largest soft drink company in the world. Coca-Cola became the largest manufacturer, distributor, and marketer of non-alcoholic beverage concentrates and syrups which operate in more than 200 countries. Coca-Cola was invented on May 1886 by Dr. John Stith Pemberton in Jacob’s Pharmacy in Atlanta, Georgia. The name Coca-Cola was suggested by Pemberton's book-keeper, Frank Robinson. He penned the name Coca-Cola in the flowing script that is famous today.

2.0 Corporate Vision & Mission
Coca-Cola has been marketed with catching marketing themes such as “Drink Coca-Cola” and “Delicious and Refreshing”. After years of globalization and brand building, Coca-Cola proudly pronounces its Mission Statement “The Coca-Cola Company exists to benefit and refresh everyone who is touched by our business”. And their goals: The basic proposition of our business is simple, solid and timeless. When we bring refreshment, value, joy and fun to our stakeholders, then we successfully nurture and protect our brands, particularly Coca-Cola. That is the key to fulfilling our ultimate obligation to provide consistently attractive returns to the owners of our business. Indeed, it was!

2.1 Evaluation of Coca-Cola’s Overall Strategic Vision & Mission
Coca-cola’s mission “our people and our promise” mainly focuses in Coca-Cola world is to celebrate, refresh, strengthen and protect. Coca-Cola feels that they should offer a soft-drink to the entire global community, which is environmentally safe and accepted. The company’s mission is directed towards its soft drink business and the strategy management changes that will be forthcoming. Coca-Cola appeals to the long term interests of stakeholders particularly shareowners, employees and customers. This helps to support the local populations by offering job opportunities, and it also helps out the local and global economies in which the employees live.

Woodruff’s vision that coca-cola to be placed within “arm’s reach of desire” came true from the mid 1940s until 1960, the number of countries with bottling operations nearly doubled. It is so feasible that the company can reasonably expect to achieve in due time. Coca-Cola strives to find new innovations to better its products and to stay a step ahead of its competitors as what is mentioned in the mission “the action we will take”. This is a key element in the company’s drive to be number one in the industry. Also it is constantly looking for improvements in everything that it does, both in the production and the manner in which the company is run daily.

2.2 Evaluation of the CEO’s Overall Strategic Leadership
Coca-Cola persuaded their former executive, E. Neville Isdell to come out of retirement in June 2004 to steer the company out of their doldrums with new strategic mission and vision being crafted and executed. Over the years, Coca-Cola has experienced different strategic paradigm change ranging from financial re-engineering to offload bottling related debts to product diversification and growth through distribution.

“That combination infuses all the elements of the strategy that we are implementing to deliver value to our share owners in the year to come, and well into the future:
a) Accelerate carbonated soft-drink growth, led by Coca-Cola;
b) Selectively broaden our family of beverage brands to drive profitable growth;
c) Grow system profitability and capability together with our bottling partners;
d) Serve customers with creativity and consistency to generate growth across all channels;
e) Direct investments to highest potential areas across markets; and
f) Drive efficiency and cost-effectiveness everywhere.”

2.2.1 Responsible Business Model and Good Corporate Governance
In today’s ultra-competitive world, organizations strive to sustain long-term growth by having a distinctive competitive advantage. Coca-Cola believes its long-term success would only be sustained through a responsible business model with good corporate governance. Essentially, this has lead to the setting up of their “quadrant framework” to develop and communicate core values (in the community, market place, environment and workplace) and strategy to its bottlers.

2.2.2 Growth and Collaboration with Bottling Partners
As part of Coca-Cola’s Chief Financial Officer, M. Douglas Ivester led financial re-engineering in 1986. Coca-Cola revamped its strategy to spin off their bottling operation while retaining minority shareholding but with board control. Local partnership has since become an essential part of Coca-Cola’s business equation with great support towards the evolvement of their business structures. Now, wherever Coca-Cola goes, it would tie up with a local bottling partner with interdependent relationship. Whilst Coca-Cola’s business scope is indeed global, it’s remains, at heart, a truly local business (Siewert, 2003).

2.2.3 Product Diversification
Coca-Cola continues to explore new beverage categories, keeping the tradition of expanding on their current portfolio of brands and products. Coca-Cola is the proud producer of more than 300 beverage brands with core focus on brand Coca-Cola, Diet Coke, Sprite, and Fanta. Branching out from its traditional carbonated soft drinks, Coca-Cola Co. ventured into sports-drink segment in Powerade and Full Throttle and non-carbonated niche offerings such as Mad River teas and Planet Java coffee. However this strategy has taken a back seat due to the lukewarm response from consumers. Nevertheless, Coca-Cola is moving towards the direction of becoming a beverage-snack company.

2.2.4 Development of New Alliances
Coca-Cola Co. is divided into six operating units which include:-
• North America Group
• Latin America Group
• Greater Europe Group
• Middle East and Far East Group
• Africa Group
• Minute Maid Group

The distribution of Coca-Cola has reach to more than 200 countries around the globe. With such a vast and spread out consumer base, Coca-cola’s marketing strategy focuses on getting their consumers to reach for their drinks more regularly as put up by the mantra coined by legendary Coke Chairman Robert W. Woodruff, “putting a Coke within an arm’s reach of desire”.

To continue with the expansion, Coca-Cola joined in the bandwagon to take up a piece of the action in once closed economies such as China, East Germany and the Soviet Union. Venturing into these new territories, Coca-Cola employs the same strategic trait in collaborating with local bottler as partner.

2.2.5 Corporate Citizenship and Responsibility
Coca-Cola realized the need to give back to the society that they serve and in doing such in a sustainable way. It gives birth to the Coca-Cola Foundation with the purpose to serve those in need. Over the years, Coca-Cola has started education programs in Malaysia (e-learning for life), Philippine (Little Red Schoolhouse) and China (Project Hope), microenterprise partnerships in Vietnam and environmental rainwater harvesting project in India. All these community projects by Coca-Cola continuously improve the quality of life of those people touched by its business.

3.0 Environmental Scanning
All businesses operate under two broad environments, namely the external environment where entrepreneurs have no control over it, and the immediate industry and competitive environment. Coca-Cola’s strategy and operation are greatly affected by these environmental factors.

3.1 Effects of External Environmental Factors
The external environmental forces exist in every part of Coca-Cola’s global business, and exert influence on Coca-Cola’s business strategy and operation. No one business is capable of being “immune” of such external forces.

3.1.1 Economic Factor
Slow economic growth in the United States has greatly adversely affected the sales and consumption of Coca-Cola soft drinks. Coca-Cola’s market has declined 0.7% and 0.9% in 2003 and 2004. It also suffered from negative growth of 2%, 3% and 1% from 2002 to 2004. Hence, the company has been working very hard to expand its presence in the fast growing economies, such as China, India and Middle East countries.

3.1.2 Political / Legal Factor
Coca-Cola has faced difficulty in gaining vast market share in India, as consumers are skeptical of the health effects of its products. The company also faces U.S. government foreign policy constrain where it is not allowed to operate in Israel (Wikipedia). The opening of China market, which was once inaccessible, has presented Coca-Cola vast opportunity to capture the soft drink market in the country. However, the company still needs to struggle to manage the country political, currency and cultural risks (Raman Muralidharan, 1996).
In the United States, soft drink ingredients have to be tested and certified by the Food and Drug Administration (FDA) before they are allowed to be used in the production.
The torn-down of Iraq has urged Coca-Cola to make a come-back after 37 years. During the international sanctions against Iraq period, Coke products were traded unofficially. Now Coca-Cola has official arrangement with the local Iraqi bottlers. However, the company is facing two great challenges: the unstable and dangerous conditions in the country and strong presence of Pepsi in the Middle East market. (BeverageWorld, 2005)

3.1.3 Technological Factor
The advancements of technology in the fields of soft drink raw material, production, information and communication technology (ICT) and logistics have great positive impacts on the operation of Coca-Cola. The availability of new soft drink ingredients enables Coca-Cola to introduce new variants of its products to its existing consumers, not forgetting to attract the new consumer groups. The use of the latest information technology has made the company “colonized” the new generation of soft drink consumers with the latest features of song downloading. The presence of company website enables the world to “keep in touch” with the latest developments of Coca-Cola. The Digital Sotrytelling Theater, located in Las Vegas tells stories of Coca-Cola through the use of short video vignettes developed by multimedia technology.

3.1.4 Social / Cultural Factor
In recent years, there have been voices of anti-Coca-Cola being aroused in the world marketplace. The most recent case is the call for Coca-Cola to stop its sponsorship of Live 8 in India. Such negative sentiment is due to severe water shortages and underground water pollution caused by Coca-Cola production activities, and distribution of its toxic waste to local farmers as fertilizer. Top level management shall review their sponsorship policy and business ethics in foreign countries (Indymedia UK).
The worldwide environmental protectionism has called for the company to the use of environmental-friendly and recyclable products in Coca-Cola production, bottling and packaging. Recyclable olyethylene terephthalate (PET) bottles have been used for its drinks, and Coca-Cola spent over $2 billion in the U.S. and over $5 billion worldwide on recycled content material and supplies (The Coca-Cola Company).

3.1.5 Demographic Factor
The increasing health consciousness and emphasis of healthy lifestyle not only in developed nations, but also in developing nations, have slowed down the sales of Coca-Cola’s carbonated soft drinks. In response to this health consciousness issue, the company introduced Diet Coke in 1982. Such change of consumer life style had also led to the introduction of its bottled purified water