ORGANIZATIONAL POLICY & STRATEGY COCA-COLA COMPANY

Introduction:

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Coca-Cola is a household name. It has been in operation since 1886. Coca-Cola almost controls the soft drink market. Coke products include Coca-Cola ,Diet Coke, Sprite, and Fanta. Coke produce 400 brands, over 2,600 beverage products. Coke portfolio contains , water, juice, sport drinks, energy drinks, tea & coffee. The company success can be attributed to overall company strategy to produce and promote its products. Coca-Cola uses many marketing techniques to encourage consumers to buy their products. These techniques are of varying effectiveness and have been adjusted over time to appeal to changing societies. Coca-Cola determined to build a global brand to bottlers throughout the world. And a portion of the proceeds goes toward advertising to build and maintain brand awareness. Vision Statement To maintain our reputation as the leading cola company in the world. Mission Statement Everything we do is inspired by our enduring mission: • • To Refresh the World... in body, mind, and spirit. To Inspire Moments of Optimism... through our brands and our actions. • To Create Value and Make a Difference... everywhere we engage.

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The Five Forces Framework: Barriers to Entry: There is many factors that make it very difficult for the competition to enter the soft drink market include:

Bottling Network: Coke is increasing investment in bottling. Coke long term bottling strategy is to reduce ownership interest in bottlers besides, have an option to sell the company interest to investee bottlers. Coke using franchisee agreements with their existing bottler’s who have rights in a certain geographic area in perpetuity. These agreements prohibit bottler’s from taking on new competing brands for similar products. Now Coke owns significant percent of bottling companies as backward strategy. Recently Coke implement horizontal strategy by acquiring a whole

companies to support the business. .

Brand Image / Loyalty: Coke and Pepsi have a long history of heavy advertising and this has earned them huge amount of brand equity and loyal customer’s all over the world. This makes it virtually impossible for a new entrant to match this scale in this market place.(FIFA 2006,Apple iTunes, )

Retailer Shelf Space (Retail Distribution): Retailers enjoy significant margins of 15-20% on these soft drinks for the shelf space they offer. These margins are quite significant for their bottom-line. This makes it tough for the new entrants to

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convince retailers to carry/substitute their new products for Coke and Pepsi.

Fear of Retaliation: To enter into a market with entrenched rival behemoths like Pepsi and Coke is not easy as it could lead to price wars which affect the new comer.

Suppliers:

Commodity Ingredients: Most of the raw materials needed to produce concentrate are basic commodities like Color, flavor, caffeine or additives, sugar, packaging. Essentially these are basic commodities. The producers of these products have no power over the pricing hence the suppliers in this industry are weak.

Buyers: The major channels for the Soft Drink industry are food stores, Fast food fountain, vending, convenience stores and others in the order of market share. The profitability in each of these segments clearly illustrate the buyer power and how different buyers pay different prices based on their power to negotiate.

Food Stores: These buyers in this segment are some what consolidated with several chain stores and few local

supermarkets, since they offer premium shelf space they command lower prices.

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Convenience Stores: This segment of buyer’s is extremely fragmented and hence have to pay higher prices.

Vending: This channel serves the customer’s directly with absolutely no power with the buyer.

Substitutes: Large numbers of substitutes like water, beer, coffee, juices etc are available to the end consumers but this countered by concentrate providers by huge advertising, brand equity, and making their product easily available for consumers, which most substitutes cannot match. Also soft drink companies diversify business by offering substitutes themselves to shield themselves from competition. Rivalry: The Concentrate Producer industry can be classified as a Duopoly with Pepsi and Coke as the firms competing. The market share of the rest of the competition is too small to cause any upheaval of pricing or industry structure. Pepsi and Coke mainly over the years competed on differentiation and advertising rather than on pricing. Pricing wars are however a feature in their international expansion strategies External assessment

Opportunities

Threats

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Bottled water consumption has increased 11 percent.

Consumption of American beverages is denounced by foreign officials in areas where conflicting interest exist.

According to the S&P Industry Survey, consumers are drawn to new Multiple lawsuits against the new smaller beverage brands that are Enviga beverage for calorie not sold on a mass scale. burning claims in advertising Word Economic Forum’s annual Davos, Switzerland gathering grants international voice. Less developed countries are in desperate need to improve community water supplies. Energy drink sales are expected to increase 7 to 8 percent in 2007. Disposable income has increased 6.2 percent. Consumers are striving to drink and eat their way to better health than pervious generations. EPS is expected to rise 7 to 8 percent in 2007. Smaller, lesser known brands are turning to major beer distributors for bottling. Overall carbonated drink sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease. Pepsi is more diversified offering beverage and food products. High cost of commodities such as sugar, and metals used in production of cans. Many smaller companies are fierce competitors around the world in their local markets.

CPM – Competitive Profile Matrix CocaCola Critical Success Factors Market Share Price Comp Financial Position Product Quality Product Lines Customer Loyalty Employees Marketing Total Weig ht 0.15 0.10 0.12 0.15 0.15 0.15 0.11 0.07 1.00 Ratin g 4 3 4 3 4 4 3 3 Weigh Ratin ted g Score 0.60 3 0.30 3 0.48 4 0.45 3 0.60 4 0.60 4 0.33 3 0.21 3 3.71 Weight ed Score 0.45 0.30 0.48 0.45 0.60 0.60 0.33 0.21 3.5 6 Pepsi Cadbury Schweppe s Ratin Weight g ed Score 2 0.30 3 0.30 3 0.36 3 0.45 3 0.45 3 0.45

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3 0.33 3 0.21 2.85 External Factor Evaluation (EFE) Matrix Key External Factors Opportunities 1. Bottled water consumption has increased 11 percent. 2. According to the S&P Industry Survey, consumers are drawn to new smaller beverage brands that are not sold on a mass scale. 3. Word Economic Forum’s annual Davos, Switzerland gathering grants international voice. 4. Less developed countries are in desperate need to improve community water supplies. 5. Energy drink sales are expected to increase 7 to 8 percent in 2007. 6. Disposable income has increased 6.2 percent. 7. Consumers are striving to drink and eat their way to better health than pervious generations. 8. EPS is expected to rise 7 to 8 percent in 2007. Threats 1. Consumption of American beverages is denounced by foreign officials in areas where conflicting interest exist. 2. Multiple lawsuits against the new Enviga beverage for calorie burning claims in advertising 3. Smaller, lesser known brands are turning to major beer distributors for bottling. 4. Overall carbonated drink Weight 0.06 0.05 Rating 4 2 Weighted Score 0.24 0.10

0.02

2

0.04

0.02 0.06 0.05 0.07 0.07

2 3 3 3 4

0.04 0.18 0.15 0.21 0.28

0.02

3

0.06

0.04 0.06

2 2

0.08 0.12

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sales have been flat due to links of sugar to obesity and high fructose corn syrup to heart disease. 5. Pepsi is more diversified offering beverage and food products. 6. High cost of commodities such as sugar, and metals used in production of cans. 7. Many smaller companies are fierce competitors around the world in their local markets. TOTAL

0.10 0.20 0.10 0.08 1.00

2 3 3 3

0.20 0.60 0.30 0.24 2.84

Internal Audit Strength 1. Product line has over 400 brands. 2. Strong global presence, located in over 200 countries. 3. Long history has built excellent brand recognition. 4. Partnership longevity with established sporting events including the Olympics. 5. Industry leader in market capitalization with $112 billion. 6. Return on Equity yielded 30 percent in 2006. 7. Leader of dividend yields of 2.6 percent. The company has had 43 consecutive years of an annual dividend increase. 8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW). 9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer. Weakness 1. Product line is limited to beverages. 2. A failed $16 billion acquisition of Quaker Oats hinders longterm growth. 3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there. 4. Lack of management willingness to place foreign products into American markets. 5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending. 6. Coca Cola’s inventory turnover is only 5.4 compared to Pepsi Co.’s 8.0.

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Internal Factor Evaluation (IFE) Matrix Key Internal Factors Strengths 1. Product line has over 400 brands. 2. Strong global presence, located in over 200 countries. 3. Long history has built excellent brand recognition. 4. Partnership longevity with established sporting events including the Olympics. 5. Industry leader in market capitalization with $112 billion. 6. Return on Equity yielded 30 percent in 2006. 7. Leader of dividend yields of 2.6 percent. The company has had 43 consecutive years of an annual dividend increase. 8. Joint venture between The Coca Cola Company and Nestle has resulted in the establishment of Beverage Partners Worldwide (BPW). 9. Coca-Cola has formed a strong partnership with McDonalds, with McDonalds becoming their largest customer. Weaknesses 1. Product line is limited to beverages. 2. A failed $16 billion acquisition of Quaker Oats hinders long-term growth. 3. Negative publicity in India because of water issues, has led to poor brand image and hindered growth there. 4. Lack of management willingness to place foreign products into American markets. 5. Marketing deficiencies due to turnover in leadership and a 16 percent decrease in advertising spending. 6. Coca Cola’s inventory turnover is only 5.4 compared to Pepsi Co.’s 8.0. TOTAL Weight Rating Weighte d Score 0.36 0.40 0.24 0.20 0.48 0.12 0.16

0.09 0.10 0.06 0.05 0.12 0.04 0.04

4 4 4 4 4 4 4

0.06

4

0.24

0.10

4

0.40

0.09 0.10 0.03 0.02 0.05 0.05 1.00

1 1 2 2 2 2

0.09 0.10 0.06 0.04 0.10 0.10 3.09

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SWOT Strategies Strengths (S) Opportunities (O) 1. Improve environmental awareness with community involvement (S2, S4, O2, O3). 2. Market new diet drinks that have healthier sugar substitutes (S5, O7). Threats (T) ST Strategies 1. Acquire Krispy Kreme (KKD) to help diversify the product line (S5, T5). 2. Acquire Golden Enterprises (GLDC) to help diversify the product line (S5, T5). Weaknesses (W) WO Strategies 1. Market international beverages to American consumers (W4, O2, O6, O7). 2. Increase marketing efforts for bottled water (W5, W6, O1). WT Strategies 1. Acquire Krispy Kreme (KKD) to help diversify the product line (W1, T5). 2. Acquire Golden Enterprises (GLDC) to help diversify the product line (W1, T5).

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