TITLE INTERNSHIP/PROJECT

Coca. Cola Beverages Pakistan Ltd.

By

STUDENT NAME: M.Mateen zafar

MASTER OF BUSINESS ADMINISTRATION

(MBA) Executive 4th

RIPHAH INTERNATIONAL UNIVERSITY

FAISALABAD

Passing Year: 2020

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 ACKNOWLEDGEMENT

My humble gratitude and all thanks to ALMIGHTY ALLAH, Who has been so kind in
conferring His blessings upon me and providing me the energy, courage, quest and sanity to
discharge our responsibilities, to successfully accomplish my task and enabling me to write this
report.
I have no words to state my innermost wisdom of appreciation and thanks to Almighty Allah
(The Kind & the Generous) who enabled me to complete this Internship on COCA COLA
BEVERAGES PAKISTAN LTD.

M.Mateen zafar

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 DEDICATION
We are very thankful to ALLMIGHTY ALLAH who give us so much courage and bless.
To our Guide and Instructor/Teachers who have given us the knowledge and help in preparation
and designing of this project.
To our friend’s/group fellows who participated with great courage in completion of this project.
To our loving parents whose prayers make us to complete this project.
To our loving teachers whose prayers make us to complete this project.

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 DECLARATION

I hereby declare that content of the research ‘’Coca Cola Beverages Pakistan Limited” Research
and no part has been copied from any published sources (except the references). I further
declare that this work has not been submitted for award of any other diploma/degree. The
university may take action if the above statement is found inaccurate at any stage.

Student’s signature……………...……………….

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 Table of content

Contents Page
ACKNOWLEDGEMENT................................................................................................................ 2
DEDICATION.................................................................................................................................. 3
DECLARATION.............................................................................................................................. 4
Chapter No 1 Executive summery.................................................................................................... 7
(2.1) What is Coca Cola?...........................................................................................................8
(2.2) History of Coca Cola........................................................................................................8
(2.3) Challenges being faced by Coke............................................................................................. 11
(2.3.1) Extensive Distribution.................................................................................................11
(2.3.2) Relationship with Retailers..........................................................................................11
(2.3.3) Fake Bottling................................................................................................................11
(2.3.4) Sustaining as Market Leader........................................................................................11
Chapter No 3 External Analysis: Environment, Industry, and extended-five forces.......................13
(3.1) TRENDS AND FORCES...............................................................................................13
(3.2) New Aversion to Soda Threatens Main Business...........................................................13
(3.3) Integrated Bottler Strategy Increases Flexibility............................................................14
(3.4) Bottled Water Falling Out of Favor................................................................................14
(3.5) Dollar Affects International Performance.......................................................................14
(3.6) Commodity Cost Fluctuations Affect Margins...............................................................15
(3.7) POTER’S FIVE FORCES..............................................................................................16
(3.8) RIVALRY AMONG EXISTING FIRMS......................................................................16
(3.9) POTENTIAL ENTRANTS.............................................................................................16
(3.10) BARGANING POWER OF BUYERS.........................................................................17
(3.11) BARGANING POWER SUPPLIERS..........................................................................18
(3.12) PESTEL ANALYSIS OF COCA- COLA....................................................................18
(3.12.1) Political Analysis...................................................................................................18
(3.12.2) Economic Factors...................................................................................................19
(3.12.3) Social Factors.........................................................................................................19
(3.12.4) Technological Factors............................................................................................20
(3.12.5) Legal Factors..........................................................................................................21
(3.12.6) Environment Factors..............................................................................................21
Chapter no 4 Internal Analysis: Resources, Capabilities, and Core Competencies.........................22
(4.1) SWOT ANALYSIS OF COCA-COLA..........................................................................22
(4.1.1) STRENGTHES:.......................................................................................................22
(4.1.2) LARGE SCALE OF OPERATIONS......................................................................22

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 (4.1.3) WEAKNESS:...........................................................................................................23
(4.1.4) DECLINE IN CASH FROM OPERATING ACTIVITIES....................................23
(4.1.5) OPPORTUNITIES...................................................................................................23
(4.1.6) GROWING BOTTLED WATER MARKET..........................................................24
(4.1.7) THREATS................................................................................................................24
(4.1.8) DEPENDENCE ON BOTTLING PARTNERS......................................................25
Chapter No 5 Strategic goals and recommendation........................................................................26
(5.1) Pricing strategy...............................................................................................................26
(5.1.1) Psychological Pricing...............................................................................................26
(5.1.2) Promotional Pricing.................................................................................................26
(5.1.3) Segmented Pricing...................................................................................................26
(5.1.4) Discriminatory Pricing.............................................................................................27
(5.1.5) Direct Selling...........................................................................................................28
(5.1.6) Indirect Selling.........................................................................................................28
(5.1.7) International Pricing.................................................................................................28
(5.1.8) Cold War between Coca Cola and Pepsi.................................................................28
(5.1.9) Pricing Strategy used by Pepsi v/s Coca Cola.........................................................29
(5.1.10) Competition Based Pricing Strategy......................................................................30
(5.1.11) Promotional Pricing Strategy.................................................................................30
(5.2) Promotional Strategies....................................................................................................31
(5.2.1) Getting Shelves........................................................................................................31
(5.2.2) Fridges Distribution.................................................................................................31
(5.2.3) Eye Catching Position..............................................................................................31
(5.2.4) Sale Promotion.........................................................................................................31
(5.2.5) UTC Scheme...........................................................................................................31
(5.3) Recommendations...........................................................................................................32
(5.3.1) Customer Support Through Helpline.......................................................................32
(5.3.2) Production and Demand Gap...................................................................................32
(5.3.3) Job Security Threat..................................................................................................32
(5.3.4) Resolving Management Issues.................................................................................33
(5.3.5) Price Controlling......................................................................................................33
(5.3.6) Highlighting Social Issues.......................................................................................33
(5.3.7) Distribution Channels Improvement........................................................................33
References....................................................................................................................................... 34

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 Chapter No 1 Executive summery

This report has been prepared with the specific purpose in mind. It outlines the history and
current scenario of coca-cola company globally and locally. The first part of the study takes us
through the present state of affairs of the beverage industry and the coca-cola company
globally.
The report contains the brief introduction of coca-cola company and coca-cola Pakistan and a
detailed view of tasks. Which have been undertaken to analyze the market of coca cola i.e. we
have performed competitive, PESTLE and SWOT analysis of coca-cola company. In order to
identify the area of potential growth of coca-cola company. We have also given a brief
description of trend and forces that are effecting coca-cola company globally.
The main objective of this project report is to analyze and study in efficient way the current
position of coca-cola company. The study also aims to perform market analysis of coca-cola
company and find out different factors effecting the growth of coca-cola. Another objective of
the study was to perform competitive analysis between coca-cola and its competitors. Apart
from these objectives this study is also conducted to understand the customer preferences
towards various coca-cola products.

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 Chapter No 2 Introduction of Coca-Cola

(2.1) What is Coca Cola?

Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines in more
than 200 countries. It is produced by The Coca-Cola Company and it is often referred to as
Coke. Originally it was intended as a patent medicine, when it was first invented in the late
19th century by John Pemberton, Coca-Cola was bought out by businessman As a Griggs
Candler, whose marketing knowledge led Coke to its recognition as super one brand of the
world soft-drink market throughout the 20th century.

(2.2) History of Coca Cola

Coca-Cola was invented by John Stitch Pemberton in Covington, Georgia in May 1886. The
beverage was initially a coca wine and was called Pemberton’s French Wine Coca. After
Atlanta and Fulton County passed Prohibition legislation, Pemberton made a carbonated, non-
alcoholic version of French Wine Cola and called it Coca-
Cola. Coca leaves from South America were added as a
stimulant to the beverage along .with kola nuts which
were added to give flavor to the drink. Due to them the
name Coca-Cola was given to the beverage.

Asa Candler, who was also a pharmacist of

Atlanta, bought the formula for Coca-Cola in
1887 from John Pemberton for $2,300Asa a
Candler marketed Coke aggressively and was
responsible of the dominance of the world soft
drink market by Coke.

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During Pemberton’s time five ounces of coca leaf were added per gallon of the syrup which
constituted a significant dose. Candler claimed in 1891 that he had altered the formula of Coca-
Cola and it now contained only a tenth of amount of coca leaves. Coca-Cola also contained nine
milligrams of cocaine per glass till 1904, when they started using “spent” leaves instead of
fresh leaves. The spent leaves were the leftovers of cocaine-extraction process and contained
just traces of cocaine. But cocaine is still present in the drink as it is one of the alkaloids present
in the
drink. Even today the flavoring is done with kola nuts and “spent” coca leaf. There actually
exists a plant in New Jersey, authorized by Federal Government, where coca plant for
manufacturing.
Coca- cola syrup is grown. Coca-Cola was first sold as a patent medicine at soda fountains for
five cents a glass. Pemberton claimed that Coca-Cola was good for health and cured many
diseases such as headache, impotence, morphine addiction. The first sale of Coca-Cola was
made at Jacob’s Pharmacy in Atlanta and on an average nine drinks were sold per day for first
nine months. The first advertisement for the beverage appeared in Atlanta Journal on May 29.
Asa Candler bought the formula from Pemberton in 1887 and incorporated the company as the
Coca-Cola Company in 1888. In 1888, Pemberton sold the rights of the company a second time
to four businessmen: J. C. Mayfield, A.O. Murphy, C. O. Mullahs and E. H. Blood worthwhile
he himself was suffering from morphine addiction. Charley Pemberton, son of John Pemberton
and an alcoholic started selling his own version of the drink. To sort out the situation
Pemberton declared that the name Coca-Cola belonged to Charley but the other two
manufacturers could continue to use the formula. Candler sold his beverage under the names
Yum and Coke but both failed. After the failure of his beverages, Candler claimed that he was
the only one who had rights to Coca-Cola; Candler purchased exclusive rights to the formula
from John Pemberton, Margaret Dozier and Wool-folk Walker. In 1914, Dozier claimed that
her signature on the sale papers had been forged and analysis indicated that John Pemberton’s
signature might have been a forgery as well. Candler incorporated a second company; “The
Coca-Cola Company” in 1892 and in 1910 burned the records of the company so as to make the
legal origins of the company obscure.The drink was certified kosher by Rabbi Tobias Geffen in
1935 after the Coca-Cola Company made some minor changes in procuring some ingredients.
On March 12, 1984 Coca-Cola was sold for the first time in bottles and was sold in cans in

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1955. The first bottling of Coca-Cola was done at Vicksburg, Mississippi in 1891 by the
Biedenharn Candy Company.
The first bottles were not of the design that we are familiar with.
When Pepsi started giving serious competition to Coca-Cola, a new drink called “New Coke”
was formulated and launched on 23 April, 1985 with much publicity. Then CEO, Robert
Goizueta, and the president, Don Keough, were instrumental for coming out with a
reformulated Coca-Cola. The New Coke was a disaster; it was rejected by the public. The
failure of the drink was a big bow to the Coca-Cola Company. A person from Seattle founded
the Old Cola Drinkers of America and tried to sue the company and force it to release the
formula of Old Coke to be released in public domain. The company had to bow to the public
pressure and reintroduce the Old Coke on July 10, 1985 under the name of Coca-Cola Classic.
It has been accused that the company introduced the new coke with a bad flavor deliberately to
revive interest in the old product and regain the market share they were fast losing to Pepsi.
The Coca-Cola Company declared in 2005 that were planning to launch Diet Coke which will
be sweetened with Splenda, artificial sweetener sucralose. (Pepsi One was using the same
sweetener). In the same year it came out with another diet drink, “Coca-Cola Zero”, which was
sweetened with a mixture of aspartame and acesulfame potassium.
A lot has been speculated about the secret formula of Coca-Cola. The original copy of the
formula is kept secured in the main vault of SunTrust bank in Atlanta. The Trust Company was
the underwriter of initial public offering of the Coca-Cola Company in 1919. Coca-Cola has a
rule which restricts the number of executives having access to the formula to two. The Coca-
Cola Company only produces a syrup concentrate and sells it to several bottlers across the
globe. The bottlers use the syrup to make the final drink by adding sugar and filtered water to it.
The bottling, packaging, distribution, and selling are done by the bottlers.
The Coca-Cola Company holds minority shares in some of the largest franchisees such as
Coca-Cola Enterprises, Coca-Cola Amatil. The amount of sweeteners added varies so as to
cater to the local taste.
Frank Mason Robinson created the famous Coca-Cola logotype in 1885. Robinson came up
with the name as well as responsible for the logo’s distinct cursive script.
Pepsi is the main rival of Coca-Cola. Even though it is second to Coke in terms of sales, Pepsi
performs better in some specific regions. Kola Real gives coke competition in South and
Central America. Inca Kola of Peru sells more than Coca-Cola in Peru, but was purchased by

10
the Coca-Cola Company in 1999. In India Coca-Cola bought Thums-Up, a local drink, which
had more sales than Coke but less than Pepsi. In many countries of Middle-East, Parsi Cola and
ZamZam Cola are major competitors to Coca-Cola. In UK Robinsons drinks is major rival
coke rather than Pepsi.

(2.3) Challenges being faced by Coke

(2.3.1) Extensive Distribution:
Coca-Cola has well established distribution channel which has its own uniqueness in terms of
quality service providing. The challenges being faced by the company are; (1) getting access to
maximum rural areas. This is a big task for the company because their distribution is limited
towards agencies or wholesalers. It means that company has less access to reach to their target
consumers in rural areas. Second big challenge in distribution is timely delivering of the
products. These days and upcoming days are big challenge for every big organization including
Coca-Cola because of value for time.
(2.3.2) Relationship with Retailers:
Developing relationship with retailers is not a big deal because they already have big brand
name and already sustained in the consumers mindsets. The challenge is to maintain or sustain
the relationship with more than just business partnering with retailers. Providing retailers with
more than just products are the essential qualities to sustain the association between two
business entities.
(2.3.3) Fake Bottling:
In Pakistan it is merely an obvious thing that any big brand or any big business name has its
duplicates and fake makers in the markets. Those fake players tend to be the representatives of
original but the truth is actually in addition the actual happening. Fake beverages are also
playing their roles to distribute their products which pretend to be the real one. The challenge is
to cope with them and to remain in the market. Consumers are also not willing to get access to
replicas.
(2.3.4) Sustaining as Market Leader:
Achieving highest growth in terms of market share is merely a big achievement for any
business. The other big and main challenge is to remain at the top of that category. Coke
achieved highest growth in the market which is an excellent achievement, but the challenge is
to remain at the top in future as well. Competitors will always try to defame or devalue the

11
brand through any means; the success is to defeat them with distinctively. It is merely an
essential for any business to not just achieve the top positions but to remain in that position for
the long time. Similarly, it is also big challenge for the company to remain at the top ranking in
presence of tough competitors. With unique value among them, Coke can remain at the
distinction position in the market with highest market share and good percentage of growth
rate. This is the strategic approach which supports the company to remain among top brands in
the world.

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 Chapter No 3

External Analysis: Environment, Industry, and extended-five

forces

(3.1) TRENDS AND FORCES

The Global Economic Recession Threatens Overall Demand: In 2008 and 2009, the global
economy has fallen into a recession. Not just the United States but countries from all over the
world have felt the impacts of the 2008 Financial Crisis. This may be a problem for Coke,
which derives approximately 75% of its sales from outside North America. Still, the company
has positioned itself well in international markets both organically and through acquisitions,
such as that of Chinese juice maker Huiyuan for $2.4 billion. However the company was
unsuccessful with its purchase of Huiyuan as it broke antitrust laws in China. On March 5,
2010, Coke's CEO said that emerging markets are bouncing back quicker than more developed
markets
(3.2) New Aversion to Soda Threatens Main Business:
74% of the Coca Cola Company's products are classified as carbonated soft drinks, making it
particularly sensitive to changes in demand for CSD. Consumer demand for CSD has been
negatively affected by concerns about health and wellness. This is true across most of KO's
markets. There has been an increase in the number of regulations regarding CSD in the United
States in response to the heightened desire for healthy food consumption. In 2006, many state
public school systems banned the sale of soft drinks on their campuses. The Centre for Science
and Public Interest proposed that a warning label be placed on all beverages containing more
than 13g of sugar per 12-oz serving. This proposal would affect all non-diet, full calorie drinks
produced by KO. These factors have driven a shift in consumption away from CSD to healthier
alternatives, such as tea, juices, and water. Within the CSD segment consumers have been
moving away from sugared drinks, opting instead for diet beverages, which do not generally
contain any sugar or calories. Though KO has been somewhat slow to respond to this shift in
consumer preferences, it has recently begun to increase its development of both diet CSD and
non-CSD beverages. KO is faced with the task of balancing the risk of new innovations with
the low growth rates of established brands, a predicament for manufactures throughout the
beverage industry.

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(3.3) Integrated Bottler Strategy Increases Flexibility:
After CEO was brought out of retirement in 2004 to revive the then flagging beverage maker,
one of the first areas that he targeted for improvement was KO's frayed relations with its
extensive network of bottlers. Since consolidating all company-owned bottlers into the Bottling
Investments division, has continued to increase KO's interest in its bottlers through stake
purchases or outright buyouts. This strategy represents a weakening of the division between
KO's production and distribution operations. He believes that by combining production and
distribution operations the company will have enhanced its ability to quickly respond to
changing market conditions. In KO's 2007 Q3 Analyst call, credited the outright purchase of
Coca-Cola Bottlers for double-digit volume growth in that country. Additionally, KO has
signed new agreements with many of its bottlers which allow them to distribute drinks
produced by other companies. see these agreements as another way of taking advantage of the
rapidly growing non-CSD market.
(3.4) Bottled Water Falling Out of Favor:
In Q3 2009, Dasani bottled water's revenues fell by double digits; this decrease is emblematic
of the bottled water industry as a whole. In August 2009, sales of bottled water had fallen for
the first time in five years. The combination of the recession and upper class consumers'
increased environmental consciousness has lead many customers to cut back on bottled water in
favour of tap water and reusable containers. Following this trend, at least one town have
outlawed the selling of bottled water within their city limits. In 2008, bottled water was the
third most popular beverage (behind soda and milk), but compared to 2007, Americans
consumption declined for the first time, down to 8.7 billion gallons from 8.8 billion gallons.
Although this is a seemingly small decrease, industry experts don't expect bottled water to
bounce back anytime soon.
(3.5) Dollar Affects International Performance:
Another trend affecting Coca-Cola is the relative strength of the U.S. Dollar (USD). Although
the company is based in the US, KO derives about 75% of its operating income from outside
United States. Because of this, the company is very sensitive to the strength of the dollar. As
foreign currencies weaken relative to the dollar, goods sold in foreign markets are suddenly
worth fewer dollars back in the US, lowering earnings. Thus, if the dollar strengthens (as it did
14
in the second half of 2008 and 2009), it has a negative effect on KO's earnings. CocaCola
executives expect currency fluctuations to adversely affect 3Q09 operating income by 10-12%
and 4Q09 operating income by high single digits. KO has broad exposure to foreign currencies
and actively hedges a large portion of these to avoid wide swings in earnings from currency
fluctuations. Although this hedging insulates from the potential downside of a strengthening
dollar, it also limits larger gains from drastic downswings in the dollar's value.

(3.6) Commodity Cost Fluctuations Affect Margins:

The Coca-Cola Company’s profitability can be affected both directly and indirectly by the costs
of various production inputs. KO itself is responsible for purchasing the raw materials used to
make its concentrates and syrups. Variations in the prices for these goods can affect the
company’s total cost of production as well as its profit margins. Changes in the production
costs of bottlers can also impact KO’s profitability, though in a more indirect way. If the raw
materials necessary for bottling become more expensive, the bottler may be forced to
drastically raise prices to compensate. Such a price increase would likely hurt KO, given the
competitive nature of the non-alcoholic beverage industry, and provide a possible incentive for
consumers to switch to other companies’ beverages. Aluminum, corn, and PET resin are three
examples of such production goods used by bottlers that could have significant bearing on the
Coca-Cola Company’s profit margins. In 2007, the prices of these commodities rose drastically
with general commodities bubble and dramatically pressured margins. They receded in 2008,
but the possibility of another significant rise in Commodities represents a constant threat to
profits.

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(3.7) POTER’S FIVE FORCES:

(3.8) RIVALRY AMONG EXISTING FIRMS:

The greatest competition that Coca-cola faces is from the rival sellers within the industry. Coca-
Cola, Pepsi Co, Nestle are among the largest competitors in this industry in Pakistan, and they
are all globally established which creates a great amount of competition. Aside from these
major players, smaller companies such as Next cola and Gourmet make up the remaining
market share. Though Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet
Coke, Fanta, and Sprite), it had lower sales in 2005 than did PepsiCo (Murray, 2006c).
However, CocaCola has higher sales in the global market than PepsiCo, PepsiCo is the main
competitor for Coca-Cola and these two brands have been in a power struggle for years
(Murray, 2006c). Coke has been more dominant with a 53% of market share as in 1999
compared to Pepsi with a market share of 21%.
(3.9) POTENTIAL ENTRANTS:
New entrants are not a strong competitive pressure for the soft drink industry. Coca-Cola and
Pepsi Co dominate the industry with their strong brand name and great distribution channels. In
addition, the soft-drink industry is fully saturated and growth is small. This makes it very
difficult for new, unknown entrants to start competing against the existing firms. Another
16
barrier to entry is the high fixed costs for warehouses, trucks, and labour, and economies of
scale. New entrants cannot compete in price without economies of scale. These high capital
requirements and market saturation make it extremely difficult for companies to enter the soft
drink industry therefore new entrants are not a strong competitive force. Capital requirements
for producing, promoting, and establishing a new soft drink. traditionally have been viewed as
extremely high. According to industry experts, this makes the likelihood of potential entry by
new players quite low, except perhaps in much localized situations that matter little to Coke or
Pepsi. Yet, while this view may reflect conventional wisdom, some industry observers question
whether a new time is coming, with 'new age' beverages selling to well-informed and health-
informed and health-conscious consumers. This issue was beginning to grab the attention of
both Coke and Pepsi in the summer of 1992, when they both were not able to explain a drop in
their June 1992 sales.

(3.10) BARGANING POWER OF BUYERS:

Individual consumers are the ultimate buyers of soft drinks. However, Coke and Pepsi's real
'buyers' have been local bottlers who are franchised -or are owned, especially in the case of
Coke- to bottle the companies' products and to whom each company sells its patented syrups or
concentrates. While Coke and Pepsi issue their franchise, these bottlers are in effect through
which these international cola brands get to local consumers Through the early 1980's, Coke's
domestic bottlers were typically independent family businesses deriving from franchises issued
early in the century. Pepsi had a collection of similar franchises, plus a few large franchisees
that owned many locations. Coke and Pepsi were somewhat restricted in owning bottling
facilities, which was viewed as a restraint of free trade. Coke fas, changed that by signing
legislation to allow soft-drink companies to own bottling companies or territories, plus
upholding the territorial integrity of soft-drink franchises, shortly before he left office. Also, the
three most important channels for soft drinks are supermarkets, fountain sales, and OP
channels. Super markets accounted for about 40% of total Pakistan soft drink industry sales,
fountain sales represented about 25%, and OP channel accounted for approximately 13%. Other
retailers represent the remaining percentage. While both Coca-Cola and Pepsi distribute their
bottled soft drinks through a network of bottling companies, Coca-Cola uses its own network of
wholesalers for their fountain syrup distribution, and Pepsi distributes its fountain syrup
through its bottlers.

17
(3.11) BARGANING POWER SUPPLIERS:
The principal raw material used by the soft-drink industry is high fructose corn syrup, a form of
sugar, which is available from numerous domestic sources. The principal raw material used by
the soft-drink industry outside is sucrose. It likewise is available from numerous sources.
Another raw material increasingly used by the soft-drink industry is aspartame, a sweetening
agent used in low-calorie soft-drink products. Until January 1993, aspartame was available
from just one source -the NutraSweet Company, a subsidiary of the Monsanto Company- in the
United States due to its patent, which expired at the end of 1992. Coke managers have long
held 'power' over sugar suppliers. They view the recently expired aspartame patents as only
enhancing their power relative to suppliers.

(3.12) PESTEL ANALYSIS OF COCA- COLA

PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental. It is
a tool that helps the organizations for making strategies and to know the EXTERNAL
environment in which the organization is working and is going to work in the future. Coca-Cola
beverage, which is the leading manufacturer and distributor of non-alcoholic drinks also need to
undergo this PESTLE analysis to know about the external environment (especially their
competitors and the opportunities available) in order to keep pace with the fast growing
economy.
(3.12.1) Political Analysis:
Political factors are how far a government intervenes in the operations of the company. The
political factors may include tax policy, trade restrictions, environmental policy, laws imposed
on the recruiting labors, amount of permitted goods by the government and the service provided
by the government. Globally, Coca-Cola beverages being a non-alcoholic industry falls under
the FDA (Food and Drug Administration), it is an agency in the Pakistan Department of Health
and Human Services. Its headquarters is in Lahore. The job of the FDA is to check and certify
whether the ingredients used in the manufacturing of Coca-Cola products in the particular
country is meeting to the standards or not. In Coca-Cola the company takes all the necessary
steps to analyze thoroughly before introducing any ingredients in its products and get prior
approval from the FDA. The company also has to take into consideration of the regulation
imposed by FDA on plastic bottled products. Apart from FDA the other political factors
includes tax policies and accounting standards. The accounting standards used by the company

18
changes from time to time which have a significant role in the reported results. The company
also is subjected to income tax policies according to the jurisdiction of various countries. In
addition to this, the company is also subjected to import and excise duties for distribution of the
products in the countries where it does not have the outsourcing units. Moreover, if there is any
unrest or changes in the government and any kind of protest by the political activists may
decline the demand for the products.
(3.12.2) Economic Factors:
The economic factors analyze the potential areas where the firm can grow and expand. It
includes the economic growth of the country, interest rates, exchange rates, inflation rates,
wage rates and unemployment in the country. The company first analyzes the economic
condition of the country before venturing into that country. When there is an economic growth
in the country, the purchasing power among people increases. It gives the company or the
marketer a good chance to market the product. Coca-Cola, in the past identified this correctly
and rightly started its distribution across various countries. The net operating profits for the
company outside pakistan stands at around 69%. Hence there is a definite impact in the
revenues due to the fluctuating foreign currency exchange rates. A strong and weak currency
tends to affect the exporting of the products globally. Interest rates are the rate which is
imposed on the company for the money they have borrowed from government. When there is
an increase in the interest rates, it may deter the company in further investment as the cost for
borrowing is higher. Coca-Cola uses derivative financial instruments to cope up with the
fluctuating interest rates. Inflation and wage rate go hand in hand, when there is an increase in
the inflation the employee demand for a higher wage rate to cope up with the cost of living.
This comes as additional cost for the company which cannot be reflected in the price of the
final product as the competition and risk in this segment is higher. This is a threat in the
external environment faced by the company. From the above explanation it is clearly seen that
the economic factors involves a major impact in the behavior of the company during various
economic situations.
(3.12.3) Social Factors:
Social factors are mainly the culture aspects and attitude, health consciousness among people,
population growth with age distribution, emphasis on safety. The company cannot change the
social factors but the company has to adjust itself to the changing society. The company adapts
various management strategies to adapt to these social trends. Coca-Cola which is a B2C

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company, is directly related to the customer, so social changes are the most important factors to
consider. Each and every country has a unique culture and attitude among the people. It is very
important to know about the culture before marketing in a particular country. Coca-Cola has
about 3300+ products in their stable, when entering into a country it does not introduce all the
products. It introduces minimum number of products according to the culture of the country
and the attitude of the people. Consumers and government are becoming increasingly aware of
the public health consequences, mainly obesity which is the second social factor in the soft
drinks industry. It inspired the company to venture into the areas of Diet coke and zero calorie
soft drinks. The problem of obesity is taken seriously among the youngsters who like to
maintain a good physique. Hence coke introduced dietary products for those youngsters who
can enjoy coke with zero calories. In one of the study it is said that “Consumer from the age
groups 37 to 55 are also increasingly concerned with nutrition”. Since many are aware, they are
concerned with the longevity of their lives. This will affect the demand of the company in the
existing product and also is an opportunity to venture into new health and energy drinks
industry. Population growth rate and the age distribution is another social factor to be
considered. It is very important because non-alcoholic markets have most of its share from the
children and youngsters. Adults used to celebrate mostly with alcohol. The age distribution of
the country becomes important for the success of the product in a country.
(3.12.4) Technological Factors:
Technology plays a varied role in the soft drinks industry. The manufacturing and distribution
of the products is relatively a Low-Tech business, although the creation of a new product with
the perfect blend and taste is a science. Technological contributions are most important in
packaging. The company rely on their bottling partners for a significant portion of their
business. Nearly 83% of the worldwide unit case volume is manufactured and distributed by
their bottling partners in whom the company does not have controlling power. Hence it is
necessary for the company to maintain a cordial relation with their bottling partners. If the
company do not give ample support in pricing, marketing and advertising then the bottling
industry while increase their short term profits, may become detrimental to the company. The
advancement in technology in the company has led to: Introduction of new ways for the
availability of Coca-Cola, it introduced general vending machines all over the world. In
products it led to the development of new products like Diet Coke etc. The technical
advancement in the bottling industries include, introduction of recyclable and non refillable

20
bottles, introduction of cans which are trendy, stylish and popular among the youngsters
(3.12.5) Legal Factors:
The legal factors include discrimination law, customer law, antitrust law, employment law and
health and safety law. In Coca-Cola the business is subjected to various laws and regulation in
the numerous countries in which they do the business, the laws include competition, product
safety, advertising and labelling, container deposits, environment protection, labour practices.
In the Pakistan the products of the company is subjected to various acts like Federal Food
authority, the Federal Trade Commission Act, Occupation Safety and Health Act, various
environment related acts and regulations, the production, distribution, sale and advertising of all
the products are subjected to various laws and regulations. Changes in these laws could result in
increased costs and capital expenditures, which affects the company profitability and also the
production and distribution of the products. Various jurisdictions may adopt significant
regulations in the additional product labelling and warning of certain chemical content or
perceived health consequences. These requirements if become applicable in the future the
company must be ready to accept and have necessary changes in hand for the same.
(3.12.6) Environment Factors:
These factors include the environment such as the weather conditions and the seasons in which
people prefer to buy cool beverages. Also the company must follow the environmental issues
related to the product manufacturing, packaging and distributing in various countries. It must
adhere to the norms and market the product accordingly. Usage of renewable plastic in the PET
bottles is followed by the company strictly.

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 Chapter no 4

Internal Analysis: Resources, Capabilities, and Core Competencies

(4.1) SWOT ANALYSIS OF COCA-COLA

(4.1.1) STRENGTHES:
WORLD’S LEADING BRAND Coca-Cola has strong brand recognition across the globe. The
company has a leading brand value and a strong brand portfolio. Business-Week and Inter-
brand, a branding consultancy, recognize. Coca-Cola as one of the leading brands in their top
100 global brands ranking in 2006.The Business Week-Inter-brand valued Coca-Cola at
$67,000 million in 2006. CocaCola ranks well ahead of its close competitor Pepsi which has a
ranking of 22 having a brand value of $12,690 million Furthermore; Coca-Cola owns a large
portfolio of product brands. The company owns four of the top five soft drink brands in the
world: Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce
brand extensions such as Coke zero, diet coke sprite mint etc. Over the years, the company has
made large investments in brand promotions. Consequently, Coca-cola is one of the best
recognized global brands. The company’s strong brand value facilitates customer recall and
allows Coca-Cola to penetrate new markets and consolidate existing ones.

(4.1.2) LARGE SCALE OF OPERATIONS

With revenues in excess of $24 billion Coca-Cola has a large scale of operation. Coca-Cola is
the largest manufacturer, distributor and marketer of non-alcoholic beverage concentrates and
syrups in the world. Coco-Cola is selling trademarked beverage products since the year 1886 in
the US. The company currently sells its products in more than 200 countries. Of the
approximately 52 billion beverage servings of all types consumed worldwide every day,
beverages bearing trademarks owned by or licensed to Coca-Cola account for more than 1.4
billion. The company’s operations are supported by a strong infrastructure across the world.
CocaCola owns and operates 32 principal beverage concentrates and/or syrup manufacturing
plants located throughout the world. The company also owns bottled water production and still
beverage facilities as well as a facility that manufactures juice concentrates. The company’s
large scale of operation allows it to feed upcoming markets with relative ease and enhances its
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revenue generation capacity.

(4.1.3) WEAKNESS:
NEGATIVE PUBLICITY
The Coca-Cola Company has been involved in a number of controversies and lawsuits related
to its relationship with human rights violations and other perceived unethical practices. There
have been continuing criticisms regarding the Coca-Cola Company's relation to the Middle East
and U.S. foreign policy. The company received negative publicity in Pakistan during
September 2006.The company was accused by the Centre for Science and Environment (CSE)
of selling products containing pesticide residues. Coca-Cola products sold in and around the
Pakistan national capital region contained a hazardous pesticide residue On 10 December 2008,
the US Food and Drug Administration (FDA) wrote to Mr. Muhtar Kent, President and Chief
Executive Officer, to warn him that the FDA had concluded that Coca-Cola's product Diet
Coke Plus 20 FL OZ was is in violation of the Federal Food, Drug, and Cosmetic Act. In
January 2009, the US consumer group the Centre for Science in the Public Interest filed a class-
action lawsuit against Coca-Cola. The lawsuit was in regards to claims made, along with the
company's flavours, of Vitamin Water. Claims say that the 33 grams of sugar are more harmful
than the vitamins and other additives are helpful.

(4.1.4) DECLINE IN CASH FROM OPERATING ACTIVITIES

The company’s cash flow from operating activities declined during fiscal 2006. Cash flows
from operating activities decreased 7% in 2006 compared to 2005. Net cash provided by
operating activities reached $5,957 million in 2006, from $6,423 million in 2005. CocaCola’s
cash flows from operating activities in 2006 also decreased compared with 2005 as a result of a
contribution of approximately $216 million to a tax-qualified trust to fund retiree medical
benefits. The decrease was also the result of certain marketing accruals recorded in
2005.Decline in cash from operating activities reduces availability of funds for the company’s
investing and financing activities, which, in turn, increases the company’s exposure to debt
markets and fluctuating interest rates.

(4.1.5) OPPORTUNITIES
ACQUISITIONS During 2006, its acquisitions included Kerry Beverages, (KBL), which was
subsequently, reappointed Coca-Cola China Industries (CCCIL). Coca-Cola acquired a

23
controlling shareholding in KBL, its bottling joint venture with the Kerry Group, in Hong
Kong. The acquisition extended Coca-Cola’s control over manufacturing and distribution joint
ventures in nine Chinese provinces. In Germany the company acquired Apollinaris which sells
sparkling and still mineral water. Coca-Cola has also acquired a 100% interest in TJC Holdings,
a bottling company in South Africa. Coca-Cola also made acquisitions in Australia and New
Zealand during 2006. These acquisitions strengthened Coca-Cola’s international operations.
These also give Coca- Cola an opportunity for growth, through new product launch or greater
penetration of existing markets. Stronger international operations increase the company’s
capacity to penetrate international markets and also gives it an opportunity to diversity its
revenue stream. On 25 February 2010, Coco cola confirms to acquire the Coca cola enterprises
(CCE) one the biggest bottler in North America. This strategy of coca cola strengthens its
operations internationally.

(4.1.6) GROWING BOTTLED WATER MARKET

Bottled water is one of the fastest-growing segments in the world’s food and beverage market
owing to increasing health concerns. The market for bottled water in the Pakistan generated
revenues of about $15.6 billion in 2006. Market consumption volumes were estimated to be 30
billion litres in 2006. The market's consumption volume is expected to rise to 38.6 billion units
by the end of 2010. This represents a CAGR of 6.9% during 2005-2010. In terms of value, the
bottled water market is forecast to reach $19.3 billion by the end of 2010. In the bottled water
market, the revenue of flavoured water (water-based, slightly sweetened refreshment drink)
segment is growing by about $10 billion annually. The company’s Dasani brand water is the
third best-selling bottled water in the Pakistan. Coca-Cola could leverage its strong position in
the bottled water segment to take advantage of growing demand for flavoured water
(4.1.7) THREATS:
INTENSE COMPETITION
Coca-Cola competes in the non-alcoholic beverages segment of the commercial beverages
industry. The company faces intense competition in various markets from regional as well as
global players. Also, the company faces competition from various non-alcoholic sparkling
beverages including juices and nectars and fruit drinks. In many of the countries in which Coca-
Cola operates, including the Pakistan PepsiCo is one of the company’s primary competitors.
Other significant competitors include Nestle, Next cola, gourmet etc. Competitive factors
impacting the company’s business include pricing, advertising, sales promotion programs,
24
product innovation, and brand and trademark development and protection. Intense competition
could impact Coca-Cola’s market share and revenue growth rates.
(4.1.8) DEPENDENCE ON BOTTLING PARTNERS
Coca-Cola generates most of its revenues by selling concentrates and syrups to bottlers in
whom it doesn’t have any ownership interest or in which it has no controlling ownership
interest. In 2006, approximately 83% of its worldwide unit case volumes were produced and
distributed by bottling partners in which the company did not have any controlling interests. As
independent companies, its bottling partners, some of whom are publicly traded companies,
make their own business decisions that may not always be in line with the company’s interests.
In addition, many of its bottling partners have the right to manufacture or distribute their own
products or certain products of other beverage companies. If Coca-Cola is unable to provide an
appropriate mix of incentives to its bottling partners, then the partners may take actions that,
while maximizing their own short-term profits, may be detrimental to Coca-Cola. These
bottlers may devote more resources to business opportunities or products other than those
beneficial for Coca-Cola. Such actions could, in the long run, have an adverse effect on Coca-
Cola’s profitability. In addition, loss of one or more of its major customers by any one of its
major bottling partners could indirectly affect Coca-Cola’s business results. Such dependence
on third parties is a weak link in Coca-Cola’s operations and increases the company’s business
risks.

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 Chapter No 5

Strategic goals and recommendation

(5.1) Pricing strategy
Coca-Cola uses the following alternate pricing strategies over the year for Coke:
(5.1.1) Psychological Pricing
In 2009, Coca-Cola utilizes the psychological estimating system for their Original Coke. For
example, the cost of a 2-liter jug of Original Coke was 110 Rs. They set the cost to end in 19,
since this influences clients to think the cost is under 120 Rs, to speak to the client.

(5.1.2) Promotional Pricing

Coke also uses the promotional pricing strategy. Coca Cola has offered promotional prices as
often as possible. In store that offer Coca-Cola, costs are regularly incidentally valued
underneath the rundown cost to build short-run deals. Particularly on some event Coca Cola
diminishes its rates like in Ramadan Coca Cola decreases its rate unto 5 Rupees on 1.5 litre
container. It gives the item a feeling of criticalness and customers buy the item in view of the
lower cost. Coca cola organization offers motivations to middle men or retailers in way a that
they offer them free example and free bottle, by this these retailers and centre man push their
item in the market. Also, that is the reason coca cola seen more in the market.

(5.1.3) Segmented Pricing

Coke uses the segmented pricing strategy. Based on different packages, Coca Cola is available
at different price. By their product in different sizes and at different costs, they get to increase
their revenue, because there is not much difference in the costs required to produce the
products. Following are the different packages available for different target audience:

i)                   RGB - Returnable/ Refillable Glass bottles

ii)                   PET – Plastic Bottles

iii)                 CAN – Aluminium Cans (Tins)

26
vi)                   BIB - Beverages in bag

(5.1.4) Discriminatory Pricing

Discriminatory Pricing Coke also follow discriminatory pricing strategy, because they have
different pricing when sold through different channels. Following are the different channels
where it is charged differently.

·      Wholesalers/ distributers

·      Retail/ corner stores/ super markets

·      Restaurants/ cafes

·      Petrol stations

·      Medical stores

 Coca Cola is sold through following ways:

27
(5.1.5) Direct Selling:

In this type of selling their products are supplied in shops and departmental stores by using
their own transports. In this type of selling company have more profit margin.

(5.1.6) Indirect Selling:

In this type of distribution, they have their whole sellers and agencies to cover all area to assure
their customers for availability of Coca Cola products.

(5.1.7) International Pricing

Coke additionally utilizes the international pricing strategy. For example, the cost of a 2-liter
container of Coke in the United States is unique in relation to the cost of a similar item in
China. This needs to do with the distinction in financial conditions, aggressive circumstances,
and laws. Along these lines, Coca Cola has been following different evaluating procedures in
view of the necessity and considering the presentation of new items focusing on various
gathering of people.

(5.1.8) Cold War between Coca Cola and Pepsi

Cola Wars between Coca Cola and Pepsi Soft drink holds 51% (dominant part of piece of the
pie) of the aggregate refreshment advertise. Soda can be additionally isolated into carbonated
beverages (Coca-Cola, Pepsi, Diet coke, Diet Pepsi and so on.) And non-carbonated beverages.
The predominant players in soda pop market are Coca Cola and Pepsi, which possess for all
intents and purposes the greater part of the North American market's most generally circulated
and best-known brands. They are overwhelming in world markets too.

28
(5.1.9) Pricing Strategy used by Pepsi v/s Coca Cola

PEPSI:

 It has reliably used its valuing technique as an encouragement to test, expecting to transform
trial into habit. It propelled the 500-ml bottle in 2019 at Rs.50 versus pepsi cola Rs.50. Its 1.5-
liter container took after Coke into the commercial centre at Rs.90 – Rs.5 not as much as
Coke's. Pepsi raised the cost once utilization balanced out, depending on the propensity to
adjust at the absence of a cost advantage. It could proceed with bring down value situating
because of the way that in the soda pop industry the retailers infrequently pass on the
organization the value favorable circumstances picked up by them from the shoppers by
offering contending brands at a similar cost and taking the rebates.

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COCA COLA: 

Initially Coke mimicked Pepsi by introducing 300 ml cans at an invitation price of Rs.45 before
raising it to Rs.50. When it realized that the brand did not hold enough attraction to fork out a
premium from the consumers, it introduced a lower-priced, similar-sized version to gain
consumers

(5.1.10) Competition Based Pricing Strategy:

Being a close competitor of PepsiCo, the Coca-Cola Company develops plans that are based on
pure competition in the market to avoid consumers‟ switching to other products and their
satisfaction levels. Coke‟s pricing strategy in this regards is set in such a way that they cannot
exceed nor decreased below the certain limit that competitor has already set in customer‟s
mind. If the company decreases its value that would be considered worse condition because
consumers can consider it to be the fake or low quality products.

(5.1.11) Promotional Pricing Strategy

Promotional pricing is merely applied by the super stores and big stores on special occasions.
Company may not directly involve in those promotional pricing but the stores are doing for
their own promotions. Company directly offers promotional pricing on special occasion of
Ramadan (Islamic Month) and they decrease their prices to support their consumers.
Market Penetration Pricing Strategy
Prices in beverage industry are determined by the consumer. In an economy like that of
Pakistan, consumers tend to switch towards a low priced product. Coca-Cola‟s objective is to
target every consumer of the country so Coca-Cola has to set its prices at such a level which no
one can offer to its consumers. That is why Coca-Cola charges the same prices as are being
charged by its competitors. Otherwise, consumers may go for Pepsi-Cola in case of availability
of Coca-Cola at relatively high price. These strategies are applied in most part of the world by
Coke.

30
(5.2) Promotional Strategies
(5.2.1) Getting Shelves
The company gets or purchases shelves at big departmental stores and displays their products
in those shelves in that style which indicating their products clear, attractive and more eye-
catching for the consumers.

(5.2.2) Fridges Distribution

The company provides refrigerators to shops, stores and local food points (including
restaurants) in order to promote their products in high range and secondly to support their seller
with best offers. Refrigerators are successful promotional strategies because they contain
coke‟s logo and only Coca-Cola‟s products range are to be placed inside it.

(5.2.3) Eye Catching Position

Salesmen of the Coca-Cola Company position their freezers and their products in eye catching
positions. Normally they keep their freezers near the entrance of the stores. This brings
awareness about availability of the product at specific places.

(5.2.4) Sale Promotion

Company also provides sponsorships (at some areas specified) with different college and
school‟s cafes and sponsors their sports events and other extra curriculum activities for getting
market share.

(5.2.5) UTC Scheme

UTC means “under the crown scheme”. Coca-Cola often does this type of scheme and they
offer very handy prizes in it. Like once they offer bicycles, caps, TV sets, cash prizes etc. This
scheme is very much popular among children. Most often they offer glass ranges to be
composed by the consumers by showing the code to shopkeepers.

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(5.3) Recommendations
It is a fact that every business is not merely a perfect one. Similarly there are some points of
improvements that are required to take further steps into the market for acceptability. Some of
the main recommendations are as follow:
(5.3.1) Customer Support Through Helpline:
Customer support through communication is essential part for any organization. Coca-Cola
Pakistan has already developed a number to contact but consumers and people rarely contact on
that number because; lack of awareness, charging upon calling, un clear mechanism of
connecting to the company. By keeping in views of above factors, the company needs to
develop a system to interact with the consumers in both ways. Social media is another
significant part of today‟s era in order to get connected with consumers. Programs and
awareness are these days promoted through social media. The company should develop a
proper awareness program to motivate their consumers to contribute their ideas through
customer reviews via helpline calls, through sending queries on electronic mails and other ways
of getting connected.
(5.3.2) Production and Demand Gap:
This is to be considered as internal type of recommendation for the purpose of analyzing the
company’s capacity for improvement. Production and demand gap can be assessed through
sales performance. Unit production and demand gap is an internal point to be assessed by the
company’s production capacity. Operations management is rightly related to this factor and
workforce is linked to this. My recommendations for this point is to evaluate the demand
supply gap effectively then work for the fulfillment of that gap. This factor is very important
for the performance of company in terms of inventory turnover ratios.
(5.3.3) Job Security Threat:
Workforce is a core input and main asset these days for any big corporation. The human
resource management for the company should be efficient enough to support every person and
make him satisfied and loyal to the company. Job security is an important issue that needs to be
resolved in an efficient way and effective outcome should be derived from it. Loyalty must not
be considered as mandatory for the customers only, but it should be also a part of the
company’s employees to love and be loyal to their jobs. Jobs securities are to be resolved in

32
order to get maximum employee retention and ultimately the company’s performance would be
maximize.
(5.3.4) Resolving Management Issues:
Another important recommendation for the company’s optimal performance is to resolve the
personal and management issues that are linked to company’s image in the industry.
Management issues including employee motivation, job security, employee job loyalty and
internal & external motivation factors to be developed. In these factors, company’s training &
development and human resource management are directly associated for managing the optimal
performance. By devising the optimal performance measurements, management issues will
ultimately be resolved and the company would be progressed in every field of activities.
(5.3.5) Price Controlling:
This is one of the core recommendations from my point of view to control the pricing of the
products. Many of the consumers feel uncomforted due to this factor. Pricing control by the
company is merely weaker strategy. Despite of announcing official prices by the company, the
overcharging on the products are kind of routine activities. Many sellers sell at their own prices
rather than official company’s prices. This is a bad factor for the company to control the prices
for all the consumers so that they can get more access to the products. Also it is a matter of
company’s original costing systems and consumers‟ price management.
(5.3.6) Highlighting Social Issues:
Like they have already worked for the welfare foundations and water systems, the company
needs to address more social and ethical issues to have an encouraging role in development the
society towards progressive country.
(5.3.7) Distribution Channels Improvement:
Coca-Cola is having a distribution channel that is directly linked to the agencies and
wholesalers (in most of the cases). They need to redefine the distribution channels and
extensive distribution is required to deliver the bottles to maximum areas of the targeted
market. Extensive distribution will approach rural areas which are untapped at any means of
communication.

33
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