SA Audit of Coca Cola Inc

Executive Summary - Coca Cola Inc. is number one soft drink company in the world. Coca Cola is started their journey of business in the 1886. First manufacturing of Coca Cola is from Atlanta, Georgia. Coca Cola provide its soft drink in bottling of which first bottling plant initiated by Joseph. From year 1985, Coca Cola planned to change formula of their cold drink by developing “New Coke”. But due to lower response of public on New Coke, Company again move to their old formula. Coca Cola provides its range of products to the consumers with the different taste and quality. Main objective of Coca Cola is to become number one brand in the world and for that Currently Coca Cola used following Strategies for the purpose of their management – 

·        Provide unique and different market tasted formula.

·        Develop standardise logo for differentiate from competitors, in order to this strategies company develop their logo in 1923 which is continue used till.

·        Distribute drink in proprietary bottle. In order to make some different looks of the bottle, Coca Cola develop different bottle which differentiate them with competitors.

·        Retailer should be held responsible for maintenance of its standard of quality of product, In order to maintain its quality Coca Cola served their drink at 36 degree Fahrenheit and Coca Cola told to retailers that never serve drink at 40 degree.

·        Maintain same price from 70 years; in order to this strategies company maintain its price as 5 cent from the beginning to the till.

·        Best kind of marketing strategies; word of mouth marketing plan is one of the best plan and it is very effective to attract customers.

·        Franchise model for sales of products, in this strategies company provide franchise to the 250 bottlers in the world.

·        Doubling the marketing expense for lower sugar, nil sugar and calories cola.

Based on above information we have developed some alternative strategies for the company which are as follow –

·        Quality of the product.

·        Global availability of the products.

·        Continuous innovation.

·        Consumer relevance.

·        Cost leadership of the products.

·        Innovation of the product based on taste and preferences of consumer.

Current Situation of Coca Cola –

A.     Current performance - Even there is much argument and claim about the pesticides in the products come in the market though performance of company does not affected any manner. Coca Cola operate their business continuously like it operates previously.

1.     Total turnover of Coca Cola in Year 2014 is $45998 million which is 2% lower than the 2013. But net income of the company is $7098 million which is 17% lower than year 2013. In 2014 performance of company have downtrend due to some negative impression about the soft drink in the market.

2.     Coca Cola have more than 20 brands over world.

3.     Company have one of the big competitors is PepsiCo but some other local brand also provide competition to the company.

B.     Strategic Posture –

Mission – Mission of Coca Cola is to provide refreshes to the world by create value and make difference of moment and creating optimism of happiness.

Vision - Vision of company includes achieving sustainable growth by providing quality of product to the customer. Vision of company includes 6P i.e. People, Portfolio, Partners, Planet, Profit and Productivity. Company try to create winning culture within company for achieve 2020 vision in reality.

Objective - Objective of company includes work smart, be the brand, act like owners and focus on the market.  

Strategies – Strategies of Coca Cola is to become brand name in the world. For create some different brand name Coca Cola uses following strategies - 

1.     Improvement in product based on taste and preference of customer and continuous innovation on that product to provide best quality of product to the customer.

2.     Developing brand name by different logo, different bottling and differentiate presentation with customer.

3.      Provide same rate for the product even passage of time of 70 year of those product. In today’s business world every one try to enter into market by providing cheaper price  and then gradually increase in price once market will be established but Coca Cola serve their product at the same price which is 70 year before.

4.     Marketing by word of mouth, Strategic team of Coca Cola Believe in Marketing by word of mouth.

Policies of Coca Cola –

1.     Comply with all applicable law on time and duly.

2.     Provide response to the customer feedback and changes in the product taste and preferences based on that product.

3.     Maintain cost at stable level by continuous improvement in production facilities.

Strategic Managers

Board of Directors

The board of directors of Coca Cola Enterprise is comprised of total 12 members. Mr. John F. Brock stands in the position of chairman of board and also as a chief executive of the company. He has also served as president of Legacy CCE during 2006 to 2008. He has wide range of international beverage industry experience and has well leadership and consensus building skills. The other members of the board of directors are also very knowledgeable and skilful. The group managing director is working as the executive director of the company. Geoffrey Kelly and Martin Jansen are working as non-executive directors, and all the non-executive directors are independent.

The Board of directors has a crucial position in framing of strategy for the company future. The Board of directors has been considered as the ultimate body for decision making, expect for certain matters which has been reserved for shareholders of the company. The composition of the board comprised with many overseas management experts who serves in the best interest of the company coca cola enterprises. The other directors of the company provide necessary information and guidance to chief executive officer and senior officer of the board to take some crucial decisions. In discharging of their duties, the members of the board have reliance on the senior officers of the company, and outside on the experts serving as advisors and auditors of the company.

Top-management of the company

Since 1986, when the first soda fountain sales, coca cola has been considered as the driver of marketplace innovation, and today they are leading the market with more than 500 beverage brands and which also includes world’s four out of top five brands. The chairman of the board and chief executive officer of the company leads the company with new firm commitment to the values and provide coca cola and opportunity to become world’s greatest brand. The top management of the company leading by some senior officers having experience in the beverages market for more than 20 years and contributed well in the journey of the company to sustain, and to make profitable growth.

Internal Environment:

Corporate Structure:

The organizational structure of coca cola enterprise consisting of following operating segments and these has been considered as the operating groups of the company. Under these groups following are includes Europe, Eurasia and Africa, the Latin America; the North America; and Asia Pacific. The major area of this groups operations are in the bottling investments and corporate.

Operations of the company mainly in the market of products which nonalcoholic beverages. The company derives its main revenue from manufacture operations and sale of beverages products. The operating segment of North America derives its main revenue from the selling of finished beverages. The bottling investment project of the company, is composed of company owned by coca cola and other consolidate operations are going outside of the North America.

Corporate Culture:

The corporate culture of the company, has received many industrial awards for the cultural environment of the company. The corporate culture of the company attracts and retains the best employees, and has been known to complete project successfully. The company’s efforts to provide best corporate culture encouraged people and inspire them to make innovative ideas and creative approaches towards their work and business of the company.

The various financial and non-financial incentives provided by coca-cola helps to emerge them to be as the best corporate culture environmental industry at globally.

Corporate Resources

Following are the main areas which are contributing as the corporate resource environment:

Marketing

The company is conducting its own independent advertising and other marketing activities, and they are also engaging in the promotional and marketing services to their bottlers also. In mostly cases, the company doing this on discretionary basis, as they are under the commitment even as per the agreement made between the company and its bottlers they are not obligated to do.

The company is also developing and introducing new products, packages and other equipments as a marketing strategy to assist the bottlers. The aggregate amount of funds being provided by the company to its bottlers and resellers so that they can participate in the promotional and marketing programs was almost $ 7 billion in financial year 2014.

External Environment -

Natural Environment – Natural environment does not that much effect on the turnover of the Coca Cola though natural environment like over rain and cold reduce sales of its drink products. All the products of Coca Cola is bottling product hence it does not create environment pollution.

Societal Environment -  

1.     Economic - Now whole word is facing economic crisis and in order to economic crisis in the world Coca Cola also facing crisis of economy. Due to economic crisis turnover of Coca Cola is going to the downward. Economic Crisis make difficult for some big company to survive in competitive market but with that crisis also Coca Cola have reduce only 2% gross profit but net profit of Coca Cola is reduce by 17% in 2014. Increase in transportation cost also having effect on operating cost of Coca Cola but Coca Cola maintain their fixed sales price even though there is change cost. 

2.     Technological – In today’s every company change in their technological environment in order to improvement in technological environment of company, Coca Cola also improve their technological environment so that they can cover the area by good technologies. Now Coca Cola tied up with many other brand like MacDonald, Pizza Zone and any other big brand which is related to business of FMCG, that’s why Coca Cola have to maintain all the transaction by way of technological manner so that they can trace what portion of profit company have.

3.     Political and Legal - Coca Cola operate their business in more than 200 countries and all the countries have some different rules and regulation applicable. Some countries permitted Coca Cola to easily operate their business whereas some countries take stringent action against the Coca Cola for some deregulation in the country hence Coca Cola have to face much different kind of rules from different countries. Coca Cola also have to face local labour law applicable in the country. In means time Coca Cola face the problem of pesticides case in India due to some quality issue. Sometimes some union goes against the Coca Cola for their non familiar business with the employee.

4.     Socio Cultural - Young Generation is more interested in the soft drink product. We can say that 70% of consumer of Coca Cola is from young generation. Price of Coca Cola is maintain at stable level which help to the young generation for consume more and more products of its. Based on that we can understand that Coca Cola is specially made for young generation.

Task Environment    - 

1.     Competition in domestic market of USA is very strong for Soft drink product; one of the big competitors of Coca Cola is PepsiCo, who provide tough competition to Coca Cola n global market as well as domestic market.

2.      Coca Cola operate their business in more than 200 countries and each country have their local brand as well, who provide tough competition to Coca Cola; stringent things is that now a day people move towards local brand compared to Coca Cola.

3.     Threats of new entrants are also very high as even single product at entry level reduces the market by 1% domestically.

4.     Threats of rivalry - In local market of each country have many local manufacturer of soft drink, who provides tough competition to Coca Cola.  

5.     Bargaining power of supplier - Suppliers bargaining has high impact in profitability of Company.

6.     Buyer Bargaining Power -  Coca Cola is big brand in the name of Coke market as it is one of the big brand hence buyer is more interested to buy it though some time strong buyer negotiation  power impact to companies profit.

Strategic Alternative and recommended strategy - 

A.      Strategic Alternative  -

1.     Corporate Directional Strategy -  Coca Cola have business operation in 200 countries therefore company just try to retain in the country where they have existing market even company strategy does not include expansion rather include innovation.

2.     Supporting Business Strategy - Company have some tough competitor in domestic as well as global market hence to compete with that competitor company try to create some standardisation in their product and packing.

3.     Supporting Functional Strategies  -

Technological function - technological function of the company is growing with the growing edge in the business of the country. Proper use of technology can help to business of company to reach at new height.

HR – Continue to operate business in all the branches of company is done by effective use of human resource of the company.

Marketing – Marketing plan of Coca Cola is very strategic and well developed by team of marketing which help to add new consumer with the company products.

Recommended strategy – Recommended strategy for the company is to develop some innovative product based on taste and preference of customer group, Country, culture and environment to strive in the competitive market. Company already have market in every area of world so company need not to concentrate on growth strategy rather company need to concentrate on cost control and quality maintenance strategy to survive in the continuous issue comes from different area of world against company.

Implementation - In order to implement companies strategy in the different area of Business Company have to select low labour cost country for manufacturing their product. Second option to reduce cost is develop plant in each country where they have operated their business.  

Evaluation - Strategy planned and implemented should be continuously evaluated for proper implementation of strategy in implementation phase as Coca Cola is company of FMCG business hence Company should have to maintain their quality first, so evaluation of quality is also necessary for the company.

         

Ratio of Coca Cola  -

RATIO ANALYSIS
Gross Margin
Particulars	2014	2013	2012	2011	2010
Gross Profit	1,58,245.50	1,23,321.23	105190.22	77,246.79	58,481.00
Net Sales	3,95,068.34	3,12,597.86	245392.72	196020.46	142434.00
	40.06%	39.45%	42.87%	39.41%	41.06%
Operating Margin
Particulars	2014	2013	2012	2011	2010
Operating Profit	47,203.02	57,170.66	40,984.07	13,303.03	20,070.51
Net Sales	3,95,068.34	3,12,597.86	245392.72	196020.46	142434.00
	11.95%	18.29%	16.70%	6.79%	14.09%
Return on Assets
Particulars	2014	2013	2012	2011	2010
Net Income	32,335.56	45,072.11	29,155.70	8,182.20	14,306.02
Assets	13,85,324.43	12,18,622.45	961668.39	753363.68	657609.39
	2.33%	3.70%	3.03%	1.09%	2.18%
Return on Equity
Particulars	2014	2013	2012	2011	2010
Net Income	32,335.56	45,072.11	29,155.70	8,182.20	14,306.02
Shareholder Investment	5,13,358.81	4,79,784.44	438429.38	426574.89	386020.72
	6.30%	9.39%	6.65%	1.92%	3.71%
Return on Capital Employed
Particulars	2014	2013	2012	2011	2010
Earnings before interest and taxes	90,114.05	84,702.24	59,535.51	46,820.22	32,523.66
Total assets - Current liabilities	10,89,304.43	10,52,355.97	743461.87	645296.54	585396.69
	8.27%	8.05%	8.01%	7.26%	5.56%
Earnings per Share
Particulars	2014	2013	2012	2011	2010
Net Operating Profit After Tax	32,335.56	45,072.11	29,155.70	8,182.20	14,306.02
No. of Outstanding Shares	1,924.17	1,917.54	1,951.33	1,205.03	601.19
	16.80	23.51	14.94	6.79	23.80
PE Ratio
Particulars	2014	2013	2012	2011	2010
Market Price Per Share	179.90	74.75	88.30	94.80	136.90
Earning Per Share	16.80	23.51	14.94	6.79	23.80
	10.71	3.18	5.91	13.96	5.75
Dividend Yield
Particulars	2014	2013	2012	2011	2010
Cash Dividend Per Share	0.50	0.50	0.50	1.00	1.00
Market Value Per Share	179.90	74.75	88.30	94.80	136.90
	0.00278	0.01	0.01	0.01	0.01

 

EXHIBIT 1

EXTERNAL FACTOR ANALYSIS SUMMARY (EFAS) on WAL-MART (WM)

External Factors	Weight:	Rating:	Weighted Score	Comments
Opportunities:
O1: International Growth Expansion in Argentine, Brazil, Great Britain, Japan, China, India, and Central America	.75	5.0	1.	These all are country where Coca Cola Highly consumed and even used in 200 countries of the world.
O2: Strong  Performance of Domestic Competitors (PepsiCo, Amul)	0.50	4.0	1.0	These competitor have highly competitive market in the world with competition of Coca Cola
Q3: Used by young generation.	0.40	4.0	1.0	It is used by highly young generation?
O5: Financial Services Sector	0.25	3.0	0.70	These are the area where Coca Cola is not working much more.
Threats:
T1: New entrants Threats	0.25	4.0	0.50	There is no entry barriers in Soft Drink business.
T2: Highly Competition	0.50	4.0	0.65	There is high number of competitor in the field of this business
T4: Investor Expectations	.025	2.5	.0625	Though the company is performing well, the stock continues to decline in price.  This is mostly due to the high expectations of investors for WM to continue its market dominance.  In just over a 4 year period WM’s stock price had declined by 9.9%!  This is in stark contrast to its competitors who, during the same period, saw their stock prices climb.  Since this does not have a direct impact on WM’s operations it is weighted low at .025.  In view of the fact that WM’s stock performance compared to their peers is rated (2.5) below average.
Total Scores:	1.000		3.95

EXHIBIT 2

INTERNAL FACTOR ANALYSIS SUMMARY (IFAS) on WAL-MART (WM)

Internal Factors	Weight:	Rating:	Weighted Score	Comments
Strengths:
S1: Corporate Strategy	.75	4.5	.675	Corporate strategy of Coca Cola is to develop franchise system in all the country.
S2: Corporate Culture	.50	4.0	.625	Coca Cola have tied up with many other FMCG companies
S3: Logistics and Supply-Chain Management	.80	5.0	1.0	Supply Chain Management of Coca Cola is very best in the world, as all the item is supplied to the customer and retailer on time.
S4: Social Responsibility	.025	4.0	.10	Coca Cola have does not the much social involvement though it have done good job in the field of this.
Weaknesses:
W1: Foreign Market Penetration	.70	4.0	.80	Coca Cola have maximum business in foreign country but all the country have local competitor.
W2: Employee Practices	.05	3.0	.15	Coca Cola has been criticized, by many outside forces, for its employment practices.  They have been the defendant in multiple legal actions.  Their pay and benefits are below other unionized stores.  Less than one-half of their employees have health insurance
W5: Slowing Same Store Sales Growth	.025	3.0	.075	Growth of Coca Cola is very fast as compared to other soft drink company.
Total Scores:	1.00		4.075

EXHIBIT 3

STRATEGIC FACTOR ANALYSIS SUMMARY (SFAS) on WAL-MART (WM)

Strategic Factors	Weight	Rating	Weighted Score	S H O R T	I N T E R M E D I A T E	L O N G	Comments
S1: Corporate Strategy	.10	4.5	.45			X	Coca develop there good business market in the world by creating very main kind of supports from other company.
S3: Logistics and Supply-Chain Management	.15	5.0	.75	X	X	X	Strategic Management for SCM is being developed by team coca cola and they try to serve within limited period of time to their customer.
O2: International Growth Expansion	.20	4.0	.80		X	X	Coca Cola have well develop international market in the world.
T2: Increasing Competition	.10	4.0	.40	X	X		There is high level of competition in the field
Total Scores:	1.00		4.1125