Coca-Cola-Strategies Analysis Report 4

Strategies Analysis Of

Coca Cola

Class 6 Group1:

Cao Rui 379176 Chen Jun 379180 Wu Wei 379369 Weng Lufan 379357 Xue Zhangxu 379395 Zheng Junwei 379449

TABLE OF CONTENTS

CONTENTS

1. Executive Summary 2. Overview

3. 2011 Financial Performance 4. Strategy Formulation 5. SWOT Analysis

6. Internal Factor Evaluation (IFE)

- Strengths - Weaknesses

7. External Factor Evaluation (EFE)

- Opportunities - Threats

8. Construct a Competitive Profile Matrix (CPM) 9. Strategy Decision

10. Strategic Planning and Action Evaluation (SPACE) Matrix 11. Boston Consulting Group (BCG) Matrix 12. Internal – External (IE) Matrix 13. SWOT Matrix

14. Quantitative Strategic Planning Matrix (QSPM) 15. Conclusion

16. Exhibit 1 – Income Statement (including forecast 2012) Exhibit 2 – Balance Sheet (including forecast 2012)

Exhibit 3 – Trend Ratio Analysis

Exhibit 4 – Internal Factor Evaluation (IFE) Matrix Exhibit 5 – External Factor Evaluation (EFE) Matrix Exhibit 6 – Competitive Profile Matrix (CPM) Exhibit 7 – Comparative Ratio Analysis Exhibit 8 – SWOT Matrix

Exhibit 9 – Strategic Planning and Action Evaluation (SPACE) Matrix

Exhibit 10 – Boston Consulting Group (BCG) Matrix Exhibit 11 – Internal-External (IE) Matrix

Exhibit 12 – Quantitative Strategic Planning Matrix (QSPM)

Executive Summary:

Now, Coca-Cola Company is the world's largest beverage company and leader and pioneer in selling soft drinks market. Its success mainly benefits from the perfect combination of its marketing strategy and tactics, It’s a

success of marketing strategy. On this basis, it should also take time to survey the likes and dislikes of different clients, and then produce different products according to different needs. Expand product consumers, and not just focus on young people. Place the right products in the right markets at the right time. Of course, the most important is: seize the opportunities and meet the challenges!

Overview:

The Coca-Cola company was founded in 1892 and currently its headquarters is in Atlanta, the United States. It is the world's largest drinks company, has 48% of the world market share and ranks the world's top three drinks. Coca-Cola was first sold to the public in Atlanta at Jacob’s Pharmacy. Only 9 servings of the soft drink were sold each day. Sales for the first year were only $50. Its 2001 revenue of $20.092 billion, common stock shareholder rights was $11.351 billion. Now Coca-Cola in 200 countries with 160 kind of beverage brands, including soda, sports beverage, dairy drinks, juice, tea and coffee.

2011 Financial Performance (see exhibits 1, 2, and 3)

The company reported revenues of (U.S. Dollars) USD 35,502,000 thousands during the fiscal year ended September 2011, an increase of 1.09% over 2010. The operating profit of the company was USD 9,228,000 thousands during the fiscal year 2011, an increase of 3.15% over 2009. The net profit of the company was USD 7,453,000 thousands during the fiscal year 2011, an increase of 28.35% over 2008.

Selling General and Administrative expenses increased $11671000 thousand in 2009 to $13486000 thousand in 2011, increase by 15.55%, which means that the company focused more on Selling General and Administrative.

Strategy Formulation:

Development for a strategy for the Coca-Cola Company includes the use of SWOT analysis and the SWOT matrix. Review the main rivals, the evaluation of its strengths and weaknesses, and the comparison.

SWOT Analysis:

Coca-Cola is the world's largest drinks company, with giant and strong

advantages of global competitiveness, brand image has been popularity, in the market share high. Not only with innovation and high research and

development ability, also has a fast food industry by strong sales channel. But its organization large, not easy management. With the development of society, more and more people to pursue health food, many people think that it is not healthy food, easy to cause fat. The company’s new expansion plans could ensure its progress for the near future catering to the needs of its customers.

Internal Factor Evaluation (IFE)

As shown in Exhibit 4, Coca-Cola's IFE score was 2.7, reflected strong

competitive advantages for the company, and favorable marketing positioning for the company’s products. Coca-Cola offers a unique combination of organizational and physical resources that support it’s favorable operating results.

Strengths – The highest scores for the company's strengths include the high ability of innovation, research, and development. Coca-Cola has created a strong brand for itself in the drinking industry, and provides a competitive advantage over other players in the market. They use the unique flavor and price strategy to attract more customers.

Weaknesses - Coke contains caffeine and other components, this is a slightly bad places that compared with other health drinks, such as milk. And it's a large organization, not easy to manage, and less use of celebrity advertising, decrease attraction.

External Factor Evaluation (EFE)

As shown in exhibit 5, Coca-Cola scored an overall EFE score of 2.74, which is relatively high for the industry.

Opportunities - World-wide family drinks market is expected to increase. The growing Fast food market could strongly promote the company's retail growth. Favorable growth expectations from advertising can boost revenues. Coke's

contributions to charity provide greater opportunity to make it better known to the public, and earn more returns.

Threats - Its major competitor Pepsi also has more and more consumers, and there are new products of the same kind every year, which threatens

Coca-Cola greatly. On the other hand, consumers think carbonated drinks like Coca-Cola are easy to cause fat, they wanted to be more healthy.

Competitive Profile Matrix

As shown in exhibit 6, Coca-Cola's major competitor is Pepsi.

The top critical success factors used included product quality, market share, consumer loyalty, and sales distribution. Coca-Cola scored the higher in its industry with an overall score of 2.75, with the higher market share and sales distribution. And the PepsiCo with an overall score of 2.5, and its major contributors programming financial position and quality.

Strategy Decision

Because of its strong leadership position, the coca-cola can continue to

leverage its existing brand to leverage across a number of product lines and distribution channels. The SPACE Matrix indicates that coca-cola should pursue aggressive strategies. The BCG matrix indicates coca-cola's

leadership position in its major segments. The QSPM indicates that coca-cola can continue to increase market share and improve operating margins.

Strategic Planning and Action Evaluation (SPACE) Matrix

As shown in exhibit 9, coca-cola company, whose financial strength is a dominating factor in the industry, but its competitive advantages is not so obvious. Generally say it’s a growing and stable industry.

Action Evaluation: Coca-Cola price strategy is very realistic, now people like \season impact on sales. The company turns3 A (availability, affordability, acceptability) into today's 3 P (pervasiveness, price, preference), expand the company's market and to improve sales.

Boston Consulting Group (BCG) Matrix

As shown in exhibit 10, most of Coca-Cola Company’s products belong to Cash cows, those products have a high relative market share position but compete in a low-growth, and they are yesterday’s stars. They should be

managed to maintain their strong position for as long as possible. Product development or diversification may be attractive strategies for them.

Internal – External (IE) Matrix

Just like the BCG Matrix, the IE matrix shown in exhibit 11 indicates the four kind products of Coca-Cola Company, Coke and Sprite can be described as grow and build, intensive or integrative strategies can be most appropriate for them. Diet Coke and Fanta can best managed with hold and maintain

strategies, market penetration and product development are two commonly strategies for them.

SWOT Matrix

As shown in exhibit 8, five key strategies were chosen by the SWOT Matrix for use in the QSPM. For the Strength-Opportunity Strategies, Coca-Cola should continue developing new products and resort services to contribute to the company's long-term growth. For the Strength-Threat strategies Coca-Cola needs to innovate a new product which is more health to our body. For the Weaknesses-Opportunities strategies, Coca-Cola can do more contributions to charity organizations instead of use of celebrity advertising. For

Weaknesses-Threat strategies, Coca-Cola needs to Think more about win win situation, hiring more high-quality employees, and they will not fear of the high rate of unemployment, but also can solve the company big and hard to management problem.

Quantitative Strategic Planning Matrix (QSPM)

As shown in the Exhibit 12, Coca-cola has two alternative strategies-- The company layer strategy, and Business layer strategy. Sum the total

attractiveness scores of 3.6 versus 4.1that indicates the business should strive to its Business layer strategy.

Conclusion

While Coca-Cola competes with many companies across a variety of industries, there is no other entertainment company that serves as many markets as Coca-Cola. Such breadth of product offerings coupled with

arguably the strongest brand in the industry gives Coca-Cola the opportunity to shape the future of the industries that it operates. It is this ability to create synergies across its revenue segments that should be the focus of any future strategic decisions.

Exhibit 1 – Income Statement

Exhibit 2 – Balance Sheet

Exhibit 3 – Trend Ratio Analysis Profitability

10/01/2010 10/02/2010 10/032009

Ratios

ROA%(Net) 5.8 ROE%(Net) 9.7 ROI%(Operating) 13.44 EBITDA Margin% 20.44 Calculated Tax Rate% 39 Revenue per Employee 389362 Liquidity Ratios Quick Ratio 0.66 Current Ratio 1.33 Net Current Assets%TA 1.34 Debt Management LT Debt to Equity 0.4 Total Debt to Equity 0.37 Interest Coverage 22.1 Asset Management

Total Asset Turnover

0.45 Receivables Turnover

8.4 Inventory Turnover 7.1 Accounts Payable

Turnover

7.6 Accrued Expenses

Turnover

32.1 Property Plant&

Equip Turnover

2.1 Cash& Equivalents

Turnover

13.2 Per Share Cash Flow per Share 3.33 Book Value per

Share

12.2

6.2 11.2 16.3 25.5 30.5

349880

0.71 1.36 2.11

0.34 0.23 23.4

0.47

6,4 8.32 29 2.8 15.4 2.99 13.4

7.0 14.25 11.4 27.5 37.3

339220

0.81 1.34 1.7

0.53 0.33 24.3

0.51

6.2

6.4

7.99

31.2

2.3

14.2

3.02 16.3

Exhibit 4 – Internal Factor Evaluation (IFE) Matrix

Exhibit 5 – External Factor Evaluation (EFE) Matrix

Exhibit 6 – Competitive Profile Matrix (CPM)

Exhibit 7 – Comparative Ratio Analysis

Liquidity Ratios Coca-cola

1. Current ratio (2010) 1.35 2. Quick ratio (2010) 0.86

B. Leverage Ratios

3. Debt to total assets (%) 0.69 4. Times interest earned

7.0

(2010)

5. Fixed charges coverage

4.82

(2010)

C. Activity Ratios

PepsiCo

2.00 1.25 0.55

6.0 4.12

6. Average collection

period

7. Inventory turnover

(2010)

8. Fixed assets turnover

(2010)

9. Total assets turnover

(2010)

D. Profitability Ratios

10. Profit margin on sales

(%)

11. Return on total assets

(%)

44 8.7 2.1 1.4 8.4 5.4

53 6.3 4.3 2.1 6.2 4.4

14.3

12. Return on equity [% 17.6

Exhibit 8 – SWOT Matrix

Exhibit 9 – Strategic Planning and Action Evaluation (SPACE) Matrix

F S CA IS ES

Exhibit 10 – Boston Consulting Group (BCG) Matrix

Exhibit 11 – Internal-External (IE) Matrix

Exhibit 12 – Quantitative Strategic Planning Matrix (QSPM)

Alternatives

1. The company 2. Business layer strategy layer strategy

Key factors weight AS TAS AS TAS

Strengths:

1.The world's largest 0.2 4 0.8 3 0.6 soft beverage giant,

2. A strong marketing ability, 0.1 3 0.3 2 0.2 3.The brand image deeply 0.1 3 0.3 3 0.3 rooted in people's mind,

4. The core of the product

formula in extreme 0.1 --- ---- --- -- mysterious secret, Weaknesses:

1. Large organization, 0.2 1 0.2 2 0.4 control is not easy.

2.Consumer stereotypes-not 0.1 2 0.2 3 0.3 health drink,

3.The major consumer groups

slightly inferior to Pepsi. 0.2 3 0.6 2 0.4 1 Opportunities：

1. General soft beverage

industry into the market 0.2 3 0.5 4 0.8 obstacle low,

2.Carbonated drinks more 0.1 2 0.2 3 0.3 accord with young people demand,

3.Drinks brand image of 0.2 2 0.4 3 0.6 influence sale situation a lot. Threats:

1. Many competitors. 0.1 1 0.1 2 0.2 2. Appearance of new products, 0.2 --- ---- --- --- 3. Bargaining power of consumers 0.2 --- ---- --- ---

total 1 3.6 4.1

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