BUSINESS PLAN

Strategic Management
Submitted to: Sir Shameel Ahmed Zubair
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Coca Cola Company

Submitted By: Abdul Basit(02)

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COCA COLA BUSINESS PLAN

CASE ABSTRUCT

Coca-Cola is a comprehensive strategic management case that includes the company’s year-end 2010
financial statements, organizational chart, competitor information and more. The case time setting is the
year 2011. Sufficient internal and external data are provided to enable students to evaluate current
strategies and recommend a three-year strategic plan for the company. Headquartered in Atlanta, Georgia,
Coke’s common stock is publicly traded under the ticker symbol KO.
Coca-Cola is the world's largest nonalcoholic beverage company, owning four of the top five soft-drink
brands (Coca-Cola, Diet Coke, Fanta, and Sprite). Founded in 1886 by Atlanta pharmacist John Pemberton,
Coca-Cola brands today include Minute Maid, Powerade, and Dasani water. In North America the
company sells Groupe Danone's Evian and also sells brands owned by rival Dr Pepper Snapple Group
(Crush, Dr Pepper, and Schweppes) outside Australia, Europe, and North America. Coca-Cola today
produces or licenses more than 3,500 drinks for sale in 200-plus countries.
In late 2010, Coca-Cola Company bought out its leading bottler, Coca-Cola Enterprises (CCE), and
renamed it Coca-Cola Refreshments USA. The company continues to buy out its bottlers worldwide.
Some of Coca-Cola’s $15 billion brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater,
Powerade, Minute Maid, Simply and Georgia. Coca-Cola is the No. 1 provider of sparkling beverages,
juices and juice drinks and readyto-drink teas and coffees. Through the world's largest beverage
distribution system, consumers in more than 200 countries enjoy the company's beverages at a rate of 1.7
billion servings a day.

Vision Statement (proposed)

To maintain our status as the number one beverage company in the world.

Mission Statement (proposed)

At Coca Cola we aspire to stay the world’s (3) leader focused on producing and selling superior
quality
(7) carbonated beverages in the soft drink industry (2). We strive to treat our employees (9),
customers (1), and our communities with respect (8). We also seek to provide healthy financial
rewards to our shareholders and business partners (5) by using the latest technology (4) and hiring
the most skill employees. We always use ethical practices that assist in displaying Coca Cola’s
public image as being trustworthy, loyal, and honest (6).

1. Customers
2. Products or services
3. Markets
4. Technology
5. Concern for survival, growth, and profitability
6. Philosophy
7. Self-concept
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8. Concern for public image

9. Concern for employees

INDUSTRY ANALYSIS

Coke is the world’s #1 nonalcoholic beverage company. The Coca -Cola Company (TCCC) owns four of
the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite). Its other top brands include
Minute Maid, Powerade, and Dasani water.

Soft drinks belong to the non-alcoholic beverage industry. Depending on the region, they are also known as
soda, pop, or carbonated beverages, and cover drinks containing water, sugar or a type of artificial
sweetener, and a flavoring agent. These fizzy drinks are mostly available in regular and diet varieties.

Multinational companies competing in the soft drink market are comprised of THE COCACOLA
COMPANY, Pepsi-Co. Inc. and DR PEPPER SNAPPLE, to name a few. In the beverage segment, The
Coca-Cola Company and PepsiCo have been bitter rivals for ages. PepsiCo always has to face the so-called
’Pepsi challenge’ as competing with Coca-Cola.

The ‘Pepsi challenge’ originally took place as a taste test. Consumers were invited to try beverages out of
two blank cups – one containing Pepsi Cola and one containing Coca-Cola. Consumers were then asked to
evaluate the taste of these two beverages and to decide which one they would prefer. The blind tests let
most Americans surprising ly learn that they would prefer Pepsi Cola over Coca-Cola, based on exclusive
taste.

PEPSICO, INC. is based in Purchase, NY, United States and was founded in 1965. Their beverage
product portfolio comprises soft drinks, bottled water, fruit juices, iced tea and ready-to-drink coffee
beverages. Pepsi-Cola, Mountain Dew, and Aquafina are some of their best-selling global brands.
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Consumers, public health officials and government officials are becoming increasingly concerned about the
public health consequences associated with obesity, particularly among young people. In addition, some
researchers, health advocates and dietary guidelines are encouraging consumers to reduce consumption of
sugar-sweetened beverages, including those sweetened with HFCS or other nutritive sweeteners. Increasing
public concern about these issues; possible new taxes and governmental regulations concerning the
marketing, labeling or availability of the Company’s beverages; and negative publicity resulting from
actual or threatened legal actions against the Company or other companies in the industry relating to the
marketing, labeling or sale of sugar-sweetened beverages may reduce demand for our beverages, which
could affect the Coca Cola Company’s profitability.

MARKET ANALYSIS

External Audit

Opportunities

1. Customers currently prefer favored soft drinks over colas such as Powerade, Sprite, and Fanta.
2. Flavored teas, and bottled water are expected to grow 24 percent and 9 percent respectively.
3. Customers are becoming more health minded in their food and drink choices.
4. Brazil, India, and Eastern Europe should offer good long term opportunities.
5. China's food and beverage consumption is forecasted to increase by 54.1% by 2014.
6. 25% of Americans eat fast food everyday.
7. Energy drinks hold 62% of the functional beverages market.
8. Coconut water is becoming a popular alternative to sports drinks such as Gatorade and
Powerade.
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9. Weaker US Dollar.

Threats

1. High commodity prices in sugar and tin.

2. Soft drinks are considered discretionary products and don’t perform well in poorer economic
times.
3. Increased concern in health and wellness among consumers.
4. Sales are slower in the winter months as the business is seasonal.
5. Retailers are consolidating reducing the number of companies and increasing their bargaining
power.
6. Pepsi has a large food stuff business along with beverages.
7. Store brand and private label products still have great appeal among cost conscious customers.
8. Governments are looking to tax sugary drinks.

Internal Audit

Strengths

1. Coke is the largest manufacturer, distributer and marketer of nonalcoholic beverage

concentrates and syrups in the world.
2. New “micro-dosing” technology to dispense over 120 beverages from one machine.
3. Produced over 400 brads consisting over 3,000 beverage products including, water, juice, sports
drinks, energy drinks, soft drinks, and others.
4. Products are sold in over 200 countries and people consume 1.4 billion Coke product servings
every day.
5. Net income increased from $6.8 billion in 2009 to $11.8 billion in 2010.
6. Coke’s Coca-Cola, Diet Coke, Fanta, and Sprite comprise 4 of the top 5 soft drink brands In the
world.
7. Coke has 5 water brands and just acquired Apollinaris and Traficante two European companies.
8. Coke Zero has yielded double-digit volume growth for four consecutive years.
9. Coke employees half the people of Pepsi, yet has higher net income.

Weaknesses

1. Coke continues to struggle in Europe as a whole; experiencing zero percent growth in 2010.
2. Coke continues to struggle in North America experiencing zero percent growth since 2009.
3. Coke is focused solely on the beverage business.
4. 45% of sales and revenue rely solely on Coca Cola and Diet Coke.
5. Inventory turnover is 6.7 while Pepsi is 9.0 and the industry average is 7.5.
6. Goodwill increased from $4 billion to over $11 billion in 2010 with Coke’s recent bottling
acquisitions and goodwill and intangibles accounts for 87% of all equity.
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COMPETATIVE ANALYSIS

The Company competes in the nonalcoholic beverages segment of the commercial beverages industry. The
nonalcoholic beverages segment of the commercial beverages industry is highly competitive, consisting of
numerous companies. These include companies that, like Coca Cola, compete in multiple geographic areas,
as well as firms that are primarily regional or local in operation. Competitive products include numerous
nonalcoholic sparkling beverages; various water products, including packaged, flavored and enhanced
waters; juices and nectars; fruit drinks and dilatable (including syrups and powdered drinks); coffees and
teas; energy and sports and other performance-enhancing drinks; dairy-based drinks; functional beverages;
and various other nonalcoholic beverages. These competitive beverages are sold to consumers in both
ready-to-drink and other than ready-to-drink form. In many of the countries in which Coca Cola does
business, including the United States, PepsiCo, Inc., is one of their primary competitors. Other significant
competitors include, but are not limited to, Nestlé’s, Dr Pepper Snapple Group, Inc., Groupe Danone, Kraft
Foods Inc. and Unilever.
Coca Cola’s competitive strengths include leading brands with a high level of consumer acceptance; a
worldwide network of bottlers and distributors of Company products; sophisticated marketing capabilities;
and a talented group of dedicated associates. Their competitive challenges include strong competition in all
geographic regions and, in many countries, a concentrated retail sector with powerful buyers able to freely
choose among Company products, products of competitive beverage suppliers and individual retailers’ own
store or private label beverage brands.
Five Forces analysis of The Coca-Cola Company in relationship to its Coca-Cola brand.
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Threat of New Entrants/Potential Competitors: Medium Pressure

 Entry barriers are relatively low for the beverage industry: there is no consumer switching cost and
zero capital requirement. There is an increasing amount of new brands appearing in the market
with similar prices than Coke products
 Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market
share for a long time and loyal customers are not very likely to try a new brand.
Threat of Substitute Products: Medium to High pressure
 There are many kinds of energy drink s/soda/juice products in the market. Coca-cola doesn’t really have
an entirely unique flavor. In a blind taste test, people can’t tell the difference between Coca-Cola
and Pepsi.
The Bargaining Power of Buyers: Low pressure
 The individual buyer no pressure on Coca-Cola
 Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the
bargaining power is lessened because of the end consumer brand loyalty.
The Bargaining Power of Suppliers: Low pressure
 The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and
caffeine. The suppliers are not concentrated or differentiated.
 Coca-Cola is likely a large, or the largest customer of any of these suppliers.
Rivalry Among Existing Firms: High Pressure
 Currently, the main competitor is Pepsi which also has a wide range of beverage products under
its brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages and committed
heavily to sponsoring outdoor events and activities.
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 There are other soda brands in the market that become popular, like Dr. Pepper, because of their
unique flavors. These other brands have failed to reach the success that Pepsi or Coke

FINANCIAL ANALYSIS
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PROPOSE STRATEGY

 Generic Strategies:

The main generic strategy used by Coca Cola is that of cost leadership. This is a strategy employed by
several big brands of the world that are leading in the market. Cost leadership is a very effective strategy
that helps brands quickly increase market share and gain popularity. Everyone wants to spend less on any
product.
Especially, the middle class which forms a very large part of Coca Cola’s customer base loves low prices of
products. Coca Cola has kept the prices of its products low. These are affordable products and available
easily in every corner of the world. Coca Cola has ensured both affordability and accessibility which has
led to both higher sales and popularity. This has proved to be a source of sustainable competitive advantage
for Coca Cola.

From time to time, Coca Cola also uses discounts and promotional campaigns to increase sales and
popularity. It is mainly for the affordability of its products however, that the sales of the brand and its
products have remained high. Thus, the benefits of cost leadership are clear. It helps achieve higher sales,
build a large customer base and also gain recognition. Coca Cola spends a lot on marketing and promotion
but still if its products’ prices were not as affordable, its sales would have been lower. While cost
leadership is the main generic strategy sued by Coca Cola, it has also used differentiation to gain an
advantage over the competitors. It has introduced a number of healthy products including health drinks and
juices that are aimed at the health conscious customers. So, Coca Cola has sued a mix of cost leadership
and differentiation to gain competitive advantage and to build customer loyalty.

 Intensive Strategy

 Market penetration:

This is the strategy of selling more to the existing customer base. It is one of the key strategies Coca
Cola has used to grow its sales. Apart from keeping prices affordably low, the brand also uses
promotional tactics like seasonal discounts to push sales among its existing customers. It releases new
packages and runs promotional campaigns that are aimed at increasing the sales of its products
worldwide.

 Market development:

This is the strategy of entering new markets or regions and selling to new customers. It is another key
strategy that has helped Coca Cola become a global brand. Coca Cola products are sold in more than 200
countries. The brand has spread globally to nearly every corner of the world. Apart from the flavor of the
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coca cola products and there affordable rices, the credit also goes to the use of marketing and promotions for
international growth. The strategy has been highly effective and helped Coca Cola grab the leadership
position in the beverages industry.

 Product development:

Product development is the strategy of bringing more products to the market to increase sales and
revenue. Overtime, the product array of Coca Cola has grown quite broad. Its large product portfolio is
made up of 500 sparkling and still brands and it serves nearly 3900 beverage choices. Now, there are 21
billion dollar brands in its portfolio. In this way, Coca Cola has achieved a lot of growth through product
development.

This was a discussion of the generic and intensive strategies that Coca Cola has used to grow its brand and
earn a competitive advantage. It is the leading brand in the beverages industry and this position has been
achieved with the help of a sustainable competitive advantage. Its global growth story is a testimony of its
use of generic and intensive strategies.