Introduction
Coca-cola is one of the USA’s largest Multinationals operating in more than 200 countries worldwide. A pharmacist incorporated it more than 200 years ago after discovering the refreshing drink with three C’s. They operate in the soft drinks industry and they have been performing very well.
Economic Trends
The US sub-prime crisis has already had a global impact on global financial markets and could also affect consumer spending worldwide. At first sight, this would seem a disproportionate reaction but banks all over the world are exposed to US debt. Sub-prime lending was lending at higher interest rates as a means of helping American consumers of lower incomes and poorer credit records obtain mortgages. These loans were then sold on, in complex ways, to other institutions including hedge (higher risk higher return) funds. The treatment of sub-prime loans by the banks is likely to have far-reaching effects including, possibly, a slowdown in the US economy and a confidence-linked decline in US consumer spending.
The effect is being felt in the large market segments of Coca-Cola Company. There is a fall in the economy in Russia where Coca-cola had the largest market. The economic downturn has many people not afford this drink.
Technological Trends
Nearly a quarter of the words population, have broadband Internet connections in their homes. Most consumers are now relying on adverts made thorough internet. Research carried out indicate 69% urban residents said they used the Internet or they go online to locate items before going to the store to make a purchase. Only 13% said the Internet had not improved their in-store shopping experience. The conclusion is that, instead of replacing brick and mortar stores, the Internet is an extension of consumers’ in-store shopping experience, providing a resource to research product and price. When asked what the most powerful influencer was concerning purchasing decisions, 60% said word of mouth, followed by advertising (47%) and online information (43%). In view of the technological trend of consumers being reliant on the Internet for information, it is recommended that Coca cola should consider setting up an online shop which will give them an hedge against their competitors.
Socio-Political Trends
According to a survey Research, 70% of US adults support government actions like restricting TV ads. Women are more supportive than men of such measures, with 73% reporting support of government actions versus 63% of men. There are restrictions about production of drinks and the of preservatives. Majority of the worlds population are concern about health and thus majority have resorted for natural foods and fruits. Coca-Cola Company should diversify and introduce soft drinks that are almost natural. All these developments in the in the world are beneficial for to soft drinks companies because the growing concern about healthy drinks would surely boost their sales.
Five Forces Analysis
Porter, the Father of Competitive strategies identified five forces that drive competition within an industry (Porter M, 1986),. He listed them and explained how they are applied in the industry. These strategies include (1) The threat of entry by new competitors into the industry: this is main problem of the competition. A new competitors comes in there chances that he will go with some of the buyers. Another related problem is entering new market either through geographical or vertical expansion. ( 2) The intensity of rivalry among existing competitors that the change of strategies: the current competitors and the task of staying competitive in current market was identified by Porter as another problem that needed strategies. (3) Pressure from substitute products. (4)The bargaining power of buyers. (5) The bargaining power of suppliers.
No matter which competitive force is to used the most important thing to keep in mind is the relationship between profit margins or returns and the intensity of competition. The higher the intensity of competition, the low is profits (Varadarajan p and Cunningham H, 1995),
Porter Model Analysis for the Beverage (nonalcoholic) industry
Using Porter’s model of analysis (Rugman A and Verbeke A, 2004),, when analyzing the model you start with (1) Intra-Industry Rivalry: this are companies that operate in the industry and they compete for the same market. The companies operating in this industry include: Coca cola, Pepsi, Suntory and other small companies in various countries where coca cola is operating. From the case study, we are told that industry was very competitive with Pepsi engaging in price wars in various parts of the world. They were more capital constrained, had less predictable revenues and cash flows, lacked product diversity, and were forced to spread fixed costs over a smaller revenue base—factors that were prompting the industry to consolidate to a smaller number of companies. The shrub also is diminishing thus causing the industry to diversify to other drinks.
Another force in Porter’s model is buyers. Most of the customers for these soft drinks and beverages include the world at large. The companies making these beverages spend a lot of money to advertise targeting the at large world market. Most adverts have target world at periods of festivities and during hot seasons. Coca cola company should target desert areas part of world where this drink will be at high demand because of the climate. This will increase the market share of the company and open up an exploited market. They should enter strategic relationship with companies exploring oil and drilling water in desert countries this will stamp there product in those countries. The purchasing power of the population has been affect by the economic performance of countries in the world.
For any production to be successive there must be suppliers. Porter recognized that fact in his model. Suppliers of this company include: farmers of the shrub, glass manufactures, carbon making companies, water distributing companies and government authorities, sugar manufacturing companies and plastic bottle manufacturers.
Substitutes have been identified as another force that affects the market of goods and services. Porter recognized that fact and he enlisted it as one of forces. The beverage industry are facing substitute products like banana juices, mango juices , passion juices, mango juices which are currently being manufactured by many companies.
The other force in the market entry of into the industry new competitors this is evident from the way far east countries are industrializing and how they are taking innovations. Coca cola should aggressively enter geographically into Far East markets and acquire through mergers and acquisitions or takeovers companies that are seen to cause a threat in the future.
SWOT Analysis
the company main objective is to be a market leader and produce the best products.
Strengths: Unique Products with refreshing taste that has been in the market for over 200 years with the same brand name. They are strategically located at the home of the shrub that is used to make the drink. they have also located their plants in various parts of the worlds. From Russia, Japan, India, Indonesia, various parts of Europe and parts of Africa.
Weaknesses: there are emerging companies like Orengina, Cadbury, and Schweppes and other small companies that in Latin America, Africa, North America, Asia and Europe. The consumers are getting saturated.
Opportunities: there is enlarging target Market especially un exploited desert areas of the world. There is an increase of awareness of people about Healthy Living thus are drinking nonalcoholic drinks. The opportunity is potentials of informing more customers about product Offers through internet.
Threats: the gradual disappearing of the shrub, economic downturn brought by sub prime crisis and other problems of the economic. Strict regulation on production of drinks and the issues of social responsibilities. Price wars with Pepsi and other competitors.
Analysis
In our case, since Coca cola enterprise Inc. largest beverage company and the larger they become the challenges they face. With regards to threats, we cannot control these threats that might hinder business operations. However, these threats will serve as challenges and will focus on the strengths in order to attain success in achieving goals and missions.
4Ps
Positioning – Coca cola Enterprises would like to create a niche in offering a wider array of beverages in the world market. As most competitors are offering sodas and juices. Coca cola enterprises inc. will go a mile higher by offering bottled water, juices and natural fruits drinks to the world specifically desert countries. In achieving this, they will need to join oiling mining companies, water drilling companies and social groups in various markets. Coca cola needs to be known as a company with a difference in producing their products.
Promotion – use of internet, television adverts, promoting social activities, fliers, sponsoring sports and many other promotional activity. Since we are involved in providing wider soft drinks choices, Coca cola is inclined for product differentiation, which is essential in positioning. The products should be positioned so it can stand apart from competitive products. Coca cola refreshing unique combinations that differentiate their products from other competitive offerings will enable customers to define the important attributes of the business.
Place – Coca cola is situated in various parts of the world with head office in Atlanta.
Pricing – Coca cola enterprises will make all the prices of their goods to match the prices of their competitors but will have an hedge because they are unique.
Potential Customers
Coca cola will focus on customers who are well-being consumers and living in various parts of the world.. It is expected that people in hot environment will be the largest consumers and the current market should be kept intact as the expand to other markets. China has ¼ of the population thus offering a huge market.
Coca cola products
Coca cola products are a health and of a wide array of soft drink products to the growing market of wellness consumers in the world. It should also plan to venture in producing other products. Since there is large market for beverages, the success will definitely rely on quality and standards.
The goals and objectives of Coca-Cola are as follows:
- To be a market leader in the industry.
- To provide affordable and high quality beverage to the wellness consumers in the world;
- To constantly guide and inform wellness consumers about their products they offer;
- To continuously strive to make service fast, accommodating and excellent towards all wellness consumers in all parts of the world..
The mission statement of Coca cola would be:
The health and wellness of there consumers is the main prime concern. This means they produce worldwide respected products.
Competitive Analysis
One of the more established competitors seen for Coca cola is the Pepsi offering similar products also with international presence. Since Pepsi already knows cocacola strengths and weakness, Coca cola company should make themselves an inspiration to strive harder in satisfying the customers needs.
Conclusion
In order to achieve better future results, better or higher to industrial average, the Coca cola needs to cut down its operating expenses, enter to new markets through vertical integration, geographical expansion and product differentiation. This would considerably improve the profitability which is declining recently. They also have to review their policy on capital management and keep optimal levels of various items of current assets. This would improve the firm’s liquidity position. In order to improve the return on owner’s equity ratio, the management should invest in viable projects that would yield positive NPV’s.This has the effect of maximizing their wealth.
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