1.

0 INTRODUCTION
1.1 STRATEGIC MANAGEMENT Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of rms in their external environments. It entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs. Strategic management process is made up of three main components: Strategy formulation Strategy implementation Strategy evolution

1.2 COMPANY OVERVIEW The Coca-Coal Company (Coca-Cola) is a leading manufacturer, distributor and marketer of Non-alcoholic beverage concentrates and syrups, in the world. The company owns or licenses more than 500 brands and 3500 beverage products and sell 1.7 billion servings per day in over 200 countries. They are growing their reach, strengthening their brands and advancing their global momentum, every momentum, and every moment of every day. The Coca-Cola Company traces its beginning to 1886, when an Atlanta pharmacist, Dr. John Pemberton, began to produce Coca-Cola syrup for sale in fountain drinks. However the bottling business began in 1899 when two Chattanooga businessmen, Benjamin F. Thomas and Joseph B. Whitehead, secured the exclusive rights to bottle and sell Coca-Cola for most of the United States from The Coca-Cola Company. 3

Type Manufacturer Founder (s) Country of Origin Introduced Area Served Color Flavors

Soft Drink (Cola) The Coca- Cola Company John S. Pemberton United States 1886 Over 200 countries Caramel E-150d Cola, Cola Green Tea, Cola Lemon, Cola Lemon Lime, Cola Lime, Cola Orange and Cola Raspberry.

Employees Servings per Day Website

92,400 1.6 Billion www.coca-cola.com

1.3 HISTORY OF COCA COLA COMPANY It's not surprising that Coca-Cola, probably the world's most recognized product (and certainly its most popular soft drink) has spawned a wide variety of popular stories about its origin, its effects, and the ingredients used in Coke's famous "secret formula:" Most of these tales, such as the ones about Coca Cola dissolving teeth, its supposed contraceptive powers, or the assertion that 1985s New Coke debacle was a Machiavellian gambit to divert attention from a change from the original formula, are baseless. But the most frequently heard story, that CocaCola originally contained cocaine, is, technically speaking, true. Coca-Cola was invented in 1886 by John Pemberton, an Atlanta, Georgia, pharmacist. Pemberton was actually trying to concoct a headache remedy, but once he mixed his special syrup with carbonated water, and a few customers tasted the result, he realized that he had the

makings of a popular soda fountain beverage. The name Coca-Cola was coined by Pemberton's bookkeeper, Frank Robinson, who also wrote out the new name in the expressive script that has become Coca Cola's signature logo. Though the Coca-Cola Company apparently would rather not talk about the origin of its name in detail, it's clear that Robinson derived "Coca-Cola" from two of the drink's ingredients: cola from the cola nut, and extract of coca leaf, also the source of cocaine. Cocaine was a common ingredient of nineteenth-century patent medicines, and by the standards of the day Coca-Cola contained a minuscule amount that probably had no effect on its consumers. Still, by the early 1890s there was a rising tide of anti-cocaine sentiment, and Atlanta businessman Asa Candler, who acquired the Coca Cola Company in 1891, steadily decreased even the tiny amount of the drug in the recipe. There is some evidence that the only reason Candler kept putting even minute amounts of coca extract in the drink was the belief that to omit it entirely might cause Coca Cola, by then besieged by imitators, to lose its trademark. In any event, Coca-Cola was completely cocaine free by 1929. The name Coke appeared in popular usage as a short form of Coca-Cola just before World War I but was often applied as a generic term to any cola drink (and used by Coca-Cola's competitors, including the now long-defunct Koke Company) until 1940, when the U.S. Supreme Court ruled that the name Coke rightfully belongs to the Coca-Cola Company. In financial circles, Coca-Cola has been one of the strongest and most reliable trading stocks, showing a steady return in all of its years of existence but one. Warren Buffet, one of the world's richest men, has always touted Coca Cola as an essential in one's stock portfolio.

1.4 MAJOR PRODUCTS OF COCA COLA INTERNATIONAL

Product Name Coke

Image

Sprite

Fanta

Diet Coke

Minute Maid

Minute Maid Juices

Kinley Drinking Water

2.0 ELEMENTS OF STRATEGIC MANAGEMENTS

The world is changing all around us. To continue to thrive as a business over the next 10 years and beyond we must look ahead. Understanding the trends and forces that will shape our business in the future and moving swiftly will prepare us for what's to come. These are the declarations of our overall mission and goals, and the values that we are guided by as a company and as individuals. 2.1 THE COCACOLA COMPANY MISSION Our mission is: To refresh the world - in mind, body and spirit To inspire moments of optimism - through our brands and actions To create value and make a difference everywhere we engage

2.2 THE COCACOLA COMPANY VISION To achieve our mission, we have developed a set of goals, which we will work with our bottlers to deliver:

Profit: Maximising return to shareholders, while being mindful of our overall responsibilities

People: Being a great place to work, where people are inspired to be the best they can be

Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy people's desires and needs

Partners: Nurturing a winning network of partners and building mutual loyalty

Planet: Being a responsible global citizen that makes a difference

Productivity: Be a highly effective, lean and fast-moving organisation

2.3 THE COCACOLA COMPANY VALUES Our shared values that we are guided by are: Leadership Passion Integrity Accountability Collaboration Innovation Quality

2.4 STRATEGY OF COCA-COLA COMPANY Coca-Cola FEMSA seeks to provide its shareholders with an attractive return on their investment by increasing the companys profitability. The key factors in achieving profitability are increasing revenues by: 1. Implementing multi-segmentation strategies in the companys major markets to target distinct market clusters divided by competitive intensity and socioeconomic levels; 2. Implementing well-planned product, packaging and pricing strategies through channel distribution; and; 3. Achieving operational efficiencies throughout the company.

To achieve these goals the company continues its efforts in: working with the Coca-Cola Company to develop a business model to continue exploring new lines of beverages, extend existing products, participate in new beverage segments and effectively advertise and market the companys products; Developing and expanding the non-carbonated beverage portfolio organically and through strategic acquisitions together with the Coca-Cola Company; Implementing packaging strategies designed to increase consumer demand for the companys products and to build a strong returnable base for the Coca-Cola brand selectively; Replicating the companys successful best practices throughout the whole value chain; Rationalizing and adapting the companys organizational and asset structure in order to be in a better position to respond to a changing competitive environment; Strengthening the companys selling capabilities and selectively implementing pre-sale system, in order to get closer to clients and help them satisfy the beverage needs of consumers; Evaluating the companys bottled water strategy, in conjunction with the Coca-Cola Company, to maximize its profitability across its market territories; Committing to building a strong collaborative team, from top to bottom; and Seeking to expand the companys geographical footprint.

2.5 COMPETITIVE ADVANTAGE

Managerial expertise.

FEMSA and the Coca-Cola Company provide the company with managerial experience. Coca-Cola FEMSA also offers management training programs designed to enhance executives abilities and exchange experiences, know-how and talent among an increasing number of multinational executives from the companys new and existing territories. Innovative business partnerships.

Coca-Cola FEMSA is working together with the Coca-Cola Company to develop more advanced joint business models and to increase shared incentive to capture important growth opportunities- including the evident opportunities presented by Latin Americas non-carbonated beverage category. Joint-ventures.

Coca-Cola FEMSA and the Coca-Cola Company agreed to acquire Jugos del Valle, one of the leading juice manufacturers in Mexico and Brazil, through a new joint-venture company. Beyond the potential synergies, this transaction will considerably increase the companys presence in Latin Americas fast-growing, but under-developed non-carbonated beverage segment. Innovative, collaborative customer relationships.

As an organization, Coca-Cola FEMSA continually looks to deepen its customer relationships. In Mexico, the company is working closely with its largest clients to develop stronger multi-faceted relationships. Among the companys initiatives, are tailoring its extensive portfolio of products and packages for their stores - based on the local markets socioeconomic demographics and the stores distinctive characteristics. Innovative market segmentation model.

The company is better able to serve the distinct needs of its customers and consumers and to differentiate its brands across the franchise territories by segmenting markets according to their regional and socioeconomic characteristics. As a result, the company is managing to capture more growth, adjusting its portfolio to better fit every consumption occasion. Innovative go-to-market strategies.

Coca-Cola FEMSA constantly tailors the way to market to better serve the particular needs of clients - from traditional mom-and-pop retailers to modern hyper and supermarkets. Innovative, strong brand portfolio.

The company offers a powerful portfolio of beverages to its customers and consumers, and continuously explores promising beverage categories to capture growth in its different markets. To get closer to its customers and help them to satisfy consumers expanding needs, Coca-Cola FEMSA has become a one-stop shop for its retailers in Brazil by offering a complete beverage portfolio including carbonated soft drinks, bottled water, packaged juices, and beer.

10

Innovative organizational, production processes.

Coca-Cola FEMSAs versatile team of people enables it to adapt its organizational and production processes to address changing competitive, economic, and sociopolitical environments. Innovative raw-materials management.

The efficient use of raw materials throughout the Coca-Cola FEMSA franchise territories has enabled the company to maintain relatively stable costs in spite of pressures and preserve its environmental resources. Continuing portfolio innovation.

To stimulate and satisfy consumer demand throughout its market territories, Coca-Cola FEMSA continues to work closely with The Coca- Cola Company to explore new lines of beverages, extend existing brands, and participate in new beverage segments. Collaborative customer relationships.

The objective is to change the transactional buy-sell paradigm to collaborative, multifunctional relationships with clients. To this end, Coca-Cola FEMSA is partnering with customers in the modern sales channel on multiple fronts-from knowledge management and capabilities development to go-tomarket and point-of-sale execution-to ensure each and every shoppers trip counts. Adaptive go-to-market strategy.

Coca-Cola FEMSA continually evolves the way it goes to market in its franchise territories. Advanced information management.

State-of-the-art market intelligence systems enable the company to execute and refine its channelmarketing and multi-segmentation strategies, consistent with customers and consumers purchasing patterns and preferences. Inventive business solutions.

More with less is a key part of the Coca-Cola FEMSA corporate culture. The company continually seeks to optimize manufacturing and distribution capacity to maximize operating efficiency. Flexible organizational structure.

11

In response to the challenge of higher costs and expenses across the industry value chain - from procurement to manufacturing and distribution - the company rapidly assembled a diverse, multifunctional task force of executives from multiple countries and organizational levels. Pioneering people.

Talent management is a key element of Coca-Cola FEMSAs growth strategy; the company is committed to fostering the development of quality people at all levels of the organization. Coca-Cola FEMSA shares knowledge and managerial experience with FEMSA and the Coca-Cola Company. The company also offers ongoing management forums and training programs to enhance the executives abilities and to exchange best practices and capabilities from a growing pool of multinational talent.

2.6 STRATEGIC CAPABILITY OF COCA-COLA COMPANY

Strategic capability is being able to think imaginatively regarding the direction of the organization or the part of the organization might go. This is usually concerned in taking for the long term view of the organization or what will be the future of the organization for its continuing success. As defined by Rosemary Harrison, the strategic capability is involve in choosing for the most of the appropriate long run goals, vision, and the objectives for the enterprise. This is also involves in managing and determining the allocation and courses of action which are necessary in achieving the goals. This strategy also ensures and selects the strategic development assets for the assurance of the continued business profitability. In this manner, this organizational strategic capability mainly depends to the ability of the managers (Armstrong, 2004, p. 176). In this global strategy, the company had face circumstances when bringing the American product to the world which can lead to the disaster for the company. This move can lead to the imperialism and colonialism for the other country that can wage for the American corporation in threatening the homogenous entity. In these scenarios, the company begun to think of the strategy that will support by most of the consumers around the globe and that was to localize the product. This going native move can tailored the drinks in every individual country. This had also been pared down by CEO Douglas Draft which can recognized the demand in breaking the traditional way of service and expand the product line of the company beyond the carbonated drinks. Draft had learned in shifting the line of products of the company as in the teas, juices and waters so that coca cola can be more responsive in the local markets. The think local, act local motivates Draft

12

in diversifying the business and goes into the flow of innovation. The strategy also lead to the satisfying the consumers choice and wants in meeting the competition from the juices, sport drink and to the water. In the said move, for the year 2001 alone, the company made 15 new drinks for the entire 45 Asian markets and the localization can be the key for engaging into diversification and to the emergent marketplace. In this global invasion, the company had recognize its products not just for American product but for the localize product as well. This also led of having the higher income return and can make the business to be globally competitive for the long term manner. The other strategic capability of the company manger is innovation for the products, the acquisition and emerging, and better marketing (Amis and Cornwell, 2005, p. 73-75). The companys benchmarks are to have the competition in the greater market and to have a market of globalization with the reduction of entry barriers. It has also benchmarks on labor productivity

2.7 THE RESOURCES OF COCA-COLA COMPANY

Value The company also owned 33 operated beverage concentrate and syrup manufacturing plants which are located in the entire world. It has also hold majority interests under the accounting rules of 34 operations and 80 primary beverage canning and bottling plants which are located outside the United States. The company has also 4 facilities of bottled water and leases also the same facility to United States. The company also owned the Fifth Avenue in New York which has approximately 315,000 square feet. The other additional leased and owned real estate in the whole world are using by the company in bottling operations, to office space, retail operations to the warehouse. The management is optimistic that the facilities are enough to the production and can utilize to the past experience. On the other hand, they are also open for the additional facilities and personnel as needed for the expansion. The company also generates income, revenues, and cash flow through selling and manufacturing the beverage syrups and concentrates and some of the finished goods (Coca-Cola Company Corporate Site, 2008). Robustness Including in the tangible assets of the company are the authorized canners and bottlers that had been combined by the syrup and to the concentrated sweeteners so that it will have to produce soft drinks. The soft drink which had been finished are packaged to the authorized containers that had bears its

13

trademarks as the cans and the refillable and non-refillable plastic and glass bottles which followed in selling to the retailers. The major materials of the business of the company are non-nutritive and nutritive sweeteners. It has also no experience of any difficulties in acquiring the nutritive sweeteners. The high fructose corn syrup had purchase with the assistance of the Coca-Cola Bottlers Sales & Services Company. In general, the raw materials are available readily from the numerous sources which is also the reason for the company of not to experience any trouble in obtaining the sweeteners. This will build the strong foundation of the company in achieving its goals and in competing globally.

Parity Coca-Cola is an active member of business community which works personally to the local individuals, governments, and merchants in order to improve the prosperity and health of the local environment and economy. The company also has the responsible marketing that can recognize about the concern of the nutrition of the child which is a global policy. The company also supports the schools in the communities which can help in encouraging the students to have healthy lifestyle. Non- Substitutability The companys intangibles are the trademarks which are being annually tested and determined so that it can have the indefinite useful. The trademark is also unique for the company and can also serve as one of its key competencies. The goodwill and impairment value are measured which includes the analysis of cash flow, independent appraisal and the estimation of the sales of proceeds where the company had been recorded $84 million of intangible assets in the year 2005 and are being related to the trademarks sold in the Philippines. In 2004 the company charges of related intangible assets of $374 million that relates to the franchise of CCEAG of the operating segment of European Union (Ibid).

14

2.8 LEVELS OF STRATEGIES

There are three levels of strategies followed by Coca-Cola Company. This may be stated as the following:

Corporate level strategy Corporate level strategy attempts to define the domain of business the firm intends to operate. Corporate level strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses. A firm might adopt any of three forms of corporate strategy: A single business strategy Related diversification strategy Unrelated diversification strategy

Coca-Cola Company follows related diversification strategy that is calls for the firm to operate in several different but fundamentally related businesses. Each of its operations linked to the others CocaCola characters, logo and a theme of wholesomeness and a reputation for providing high quality family products. Coca-Cola Company follows this strategy because it has several advantages. At first, the firm depends less on a single products so it is less vulnerable to competitive or economic threats. Secondly, related diversification may produce economies of scale of a firm. Thirdly, related diversification may allow a firm to use a technology or expertise developed in one market to enter a second market more cheaply and easily. Corporate level strategies of Coca-Cola Company are following:

15

Corporate Level Strategy of CocaCola Company

Marketing Strategy

System Strategies

Reward System Strategies

Financial Strategies

R&D Strategies

Business unit level strategy (SBU)

A strategic business unit may be a division, product line or other profit center that can be planned independently from the other business units of the firm. Corporate strategy deals with the overall where the business strategy focuses on specific business, subsidiaries or operating units within the firm. Business seeks to answer the question on how should we compete in each market we have chosen to enter the firm develop unique business strategy for each of its strategic business units, or it may pursue the same business strategy for all of them. The three basic business strategy are differentiation, overall cost leadership and focus. Coca-Cola Company uses the differentiation strategy effectively. Functional level strategy The functional strategy attempts to answer to questions How we manage the function. The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level strategies I marketing, finance, operations, human resources through whom business unit level strategies can be executed efficiently and effectively. Functional units of an organization are involved in higher levels strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher level strategy is developed, the functional units translate it into the discrete actions plans that each department or division must accomplish for the strategy to succeed.

16

2.9 SWOT ANALYSIS

Strengths Internal Popularity Well known Branding obvious and easily recognized A lot of finance Customer loyalty International Trade

Weaknesses Word of mouth Lack of popularity of many Coca Colas brands Most unknown and rarely seen Result of low profile or nonexistent advertising Health issues

Threats External Changing consciousness attitude Legal issues Health ministers Competition (pepsi) health-

Opportunities Many pursue Advertise products Buys out competition. More brand recognition its less popular successful brands to

Strengths

Coca Cola is an extremely recognizable company. Popularity is one of its superior strengths that is virtually incomparable. Coca Cola is known very well worldwide. It's branding is obvious and easily recognized. Things like, logos and promos shown on t-shirts, hats, and collectible memorabilia. Without a doubt, no beverage company compares to Coca Cola's social popularity status. Some people buy coke, not only because of its taste, but because it is widely

17

accepted and they feel like they are part of something so big and unifying. At the other end of the spectrum, certain individuals choose not to drink coke, based solely on rebelling from the world's idea that coke is something of such great power. Overwhelming is the best word to describe Coca Cola's popularity. It is scary to think that its popularity has been constantly growing over the years and the possibility that there is still room to grow. If you speak the words Coca Cola, it would definitely be recognized all around the world. Money is another thing that is strength of the company. Coca Cola deals with massive amounts of money all year. Like all businesses, they have had their ups and downs financially, but they have done well in this compartment and will continue to do well and improve. The money they are earning is substantially better than most beverage companies, and with that money, they put back into their own company so that they can improve. Another strength that is very important to Coca Cola is customer loyalty. The 80/20 rule comes into effect in this situation. Eighty percent of their profit comes from 20% of their loyal customers. Many people/families are extremely loyal to Coca Cola. It would not be rare to constantly find bottles and cases of a product such as coke in a house. It seems that some people would drink coke religiously like some people would drink water and milk. This is an improbable feat. Customers will continually purchase these products, and will probably do so for a very long time. If two parents were avid Coca Cola drinkers, this will be passed down do their children as they grow loyal to the company. With Coca Colas ability to sell their product all over the world, customers will continue to buy what they know and what they likeCoca Cola products.
Weaknesses

Coca Cola is a very successful company, with limited weaknesses. However they do have a variety of weaknesses that need to be addressed if they want to rise to the next level. Word of mouth is probably a strength and weakness of every company. While many people have good things to say, there are many individuals who are against Coca Cola as a company, and the

18

products in which they produce. Word of mouth unfortunately is something that is very hard to control. While people will have their opinions, you have to try to sway their negative views. If bad comments and views are put out to people who have yet to try Coca Cola products, then that could produce a lost customer which shows why word of mouth is a weakness. Another aspect that could be viewed as a weakness is the lack of popularity of many of Coca Colas drinks. Many drinks that they produce are extremely popular such as Coke and Sprite but this company has approximately 400 different drink types. Most are unknown and rarely seen for available purchase. These drinks do not probably taste bad, but are rather a result of low profile or nonexistent advertising. This is a weakness that needs to be looked at when analyzing their company. Another weakness that has been greatly publicized is the health issues that surround some of their products. It is known that a popular product like coke is not very beneficial to your body and your health. With todays constant shift to health products, some products could possibly loose customers. This new focus on weight and health could be a problem for the product that are labeled detrimental to your health.
Opportunities

Coca Cola has a few opportunities in its business. It has many successful brands that it should continue to exploit and pursue. Coca Cola also has the opportunity to advertise its less popular products. With a large income it has the available money to put some of these other beverages on the market. This could be very beneficial to the company if they could start selling these other products to the same extent that they do with their main products. Another opportunity that we have seen being put to use before is the ability for Coca Cola to buy out their competition. This opportunity rarely presents itself in the world of business. However, with Coca Colas power and success, such a task is not impossible. Coca Cola has bought out a countless number of drink brands. An easy way to turn their profit into your profit is too buy out their company. Even though this may cost a vast amount of money initially, in the long run, if all goes to plan, it results in a large profit.

19

Also, the company will no longer need to worry about this product being part of the competition. Brand recognition is the significant factor affecting Cokes competitive position. Coca Cola is known well throughout 90% of the world population today. Now Coca Cola wants to get there brand name known even better and possibly get closer and closer to 100%. It is an opportunity that most companies will ever dream of, and would be a supreme accomplishment. Coca Cola has an opportunity to continue to widen the gap between them and their competitors.

Threats

Despite the fact that Coca Cola dominates its market, it still has to deal with many threats. Even though Coca Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness attitude of the market could have a serious effect on Coca Cola. This definitely needs to be viewed as a dominant threat. In todays world, people are constantly trying to change their eating and drinking habits. This could directly affect the sale of Coca Colas products. Another possible issue is the legal side of things. There are always issues with a company of such supreme wealth and popularity. Somebody is always trying to find fault with the best and take them down. Coca Cola has to be careful with lawsuits. Health minister could also be looked at as a threat. Again, some people may try to exploit the unhealthy side of Coca Colas products and could threaten the status and success of sales. Other threats are of course the competition. Coca Colas main competition being Pepsi, sells a very similar drink. Coca Cola needs to be careful that Pepsi does not grow to be a more successful drink. Other product such as juices, coffee, and milk are threats. These other beverage options could take precedent in some peoples minds over Coca Colas beverages and this could threaten the potential success it presents again.

20

3.0 FACTORS AFFECTING THE STRATEGIC MANGEMENT ISSUES

3.1 EXTERNAL ANALYSIS AT THE COCA-COLA COMPANY
Coca-Cola's products are consumer products, and as such are somewhat sensitive to consumer's disposable income. Coca-Cola's management report two trends that serve to shape its planning related to this factor. First, Coke consumers view soft drinks as inexpensive pleasure. As such, even in a temporary environment of steady or slightly declining disposable income, Coca-Cola's research suggests that consumers are unlikely to forgo soft drinks. Second, Coca-Cola monitors disposable income in over 200 countries where it sells soft drinks. In 1993, this information suggests that disposable income is generally rising around the world. Coca-Cola interprets this to mean more purchases of consumer products, particularly in countries where consumer product purchasing has been minimal. Coca Cola Company performs/ operates their business unit in different country based on the developing of the PEST analysis. The PEST analysis of Coca Cola Company is as following:

Political/legal factors

It is one of the significant parts of a company where, in which country they operate their business unit. Political factors include government regulations and legal issues and define both formal amd informal rules under which the firm must operate, some examples include tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability.

Changes in laws and regulations relating to beverage containers and packaging could increase company costs and reduce demand for the products. Coca-Cola Company and their bottlers currently offer no refillable, recyclable containers in the United States and in various other markets around the world. Legal requirements have been enacted in various jurisdictions in the United States and overseas requiring that deposits or

21

certain Eco taxes or fees be charged for the sale, marketing and use of certain no refillable beverage containers. Other beverage container-related deposit, recycling, Eco tax and/or product stewardship proposals have been introduced in various jurisdictions in the United States and overseas and we anticipate that similar legislation or regulations may be proposed in the future at local, state and federal levels, both in the United States and elsewhere. If these types of requirements are adopted and implemented on a large scale in any of the major markets in which the company operate, it could affect company costs or require changes in company distribution model, which could reduce our profitability or revenues. In addition, container-deposit laws, or regulations that impose additional burdens on retailers, could cause a shift away from the products to retailer proprietary brands, which could impact the demand for the products in the affected markets.

Unfavorable political conditions in international markets could hurt business. Coca-Cola Company derives a significant portion of the net revenues from sales of the products in international markets. In 2005, the operations outside of North America operating group accounted for approximately 71 percent of company net operating revenues. Unfavorable political conditions in these markets, including civil 15 unrest and governmental changes, could undermine consumer confidence and reduce the consumers purchasing power, thereby reducing demand for the products. In addition, product boycotts resulting from political activism could reduce demand for the products, while restrictions on company ability to transfer earnings or capital across borders that may be imposed or expanded as a result of political and economic instability could impact our profitability.
Economic factors

Another most imperative element for PEST analysis is economic factors. Economic factors affect the purchasing power of potential customers and the firms cost capital. The following are examples of factors in the macro-economy economic growth, interest rates, exchange rates and inflation rate.

22

The company global business stimulates job creation throughout their value cycle. The company contributes to the economic success of each community by employing local people; paying taxes to governments; paying suppliers for goods, services and capital equipment; and supporting community investment programs. Past independent studies on the economic impact of the business in Asia, Africa and Eastern Europe have consistently shown that for every job in the Coca-Cola system, an average of 10 more jobs are supported in local communities. The companies have some 20 million customers around the world. These are the retailers, convenience stores, theaters, kiosks and vendors who sell their beverages to their consumers. Small, independent retailers form the backbone of the business. The system helps these small retailers and vendors build their businesses and become the company business partners. Coca-Cola company also often help small businesses get off the ground with an initial injection of support in the form of equipment and training and then they work with them as business partners and suppliers. From the pushcart programs in Vietnam, which have helped more than 4,000 retailers establish their businesses to date, to our Manual Distribution Centers in East Africa (see case study), we continuously work to provide local economic opportunity. However economy is relatively uniform in domestics country bur outsides, it faces wide variation among countries and among region within country. In case of Coca-Cola Company the market research data is easy to collect but when it goes to foreign sometimes face difficult and expensive to collect data. At least we see that government interference in case of domestically, it is minimal and reasonably predictable but in international operation it is often expensive and subject to rapid change.
Social factors

Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors are health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Consumption of soft drinks has long been inversely correlated with a person's age. In other words, as you age you drink fewer soft drinks, while younger people drink most soft

23

drinks. The average age of the populations in the United States and most European countries is increasing. Outside the United States and Europe, Coke management observes: "The world is getting younger and young people are the most enthusiastic purchasers of consumer products".
Technological factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include R&D activity, automation, technology incentives and rate of technological change. The world is getting smaller and smaller. Ease of travel and increasingly sophisticated, instantaneous worldwide communication capabilities drive this phenomenon. Coca-Cola's management views this as favorable: "As the world has gotten smaller, a 'global teenager' has emerged. In Germany and around the world, these teenagers share similar tastes in music, clothing, and consumer brands. With its global scope and the power of the world's most ubiquitous trademark, the Coca-Cola system is uniquely equipped to market to this group"

24

4.0 FACTORS IN THE INDUSTRY ENVIRONMENT

4.1 FIVE FORCES ANALYSIS
The industry environment includes the key forces shaping and influencing competition in that industry. The purpose of an industry environmental analysis is to assess how the forces of the organization immediate environment affect the attractiveness or profitability potential of the firm. These forces include the threats posed by new entrants, the bargaining power suppliers and buyers, substitute products and the intensity of rivalry among competitors. There are also known as Michael Porters Five Forces Model (1980).
Threat of new entrants

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.
Bargaining power of suppliers

The principal raw material used by the soft-drink industry in the United States 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 the United States 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.

25

Coke managers have long held 'power' over sugar suppliers. They view the recently expired aspartame patents as only enhancing their power relative to suppliers.
Bargaining 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 the 'conduit' 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. Until 1980, Coke and Pepsi were somewhat restricted in owning bottling facilities, which was viewed as a restraint of free trade. Jimmy Carter, a Coke fan, 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 vending. In 1987, supermarkets accounted for about 40% of total U.S. soft drink industry sales, fountain sales represented about 25%, and vending 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.
Substitute products

Numerous beverages are available as substitutes for soft drinks. Citrus beverages and fruit juices are the more popular substitutes. Availability of shelf space in retail stores as well as advertising and promotion traditionally has had a significant effect on beverage purchasing behavior. Overall total liquid consumption in the United States in 1991 included Coca-Cola's 10% share of all liquid consumption.

26

4.2 INTERNAL ANALYSIS AT THE COCA-COLA COMPANY 4.1 FINANCIAL ANALYSIS

Income statement for Coca Cola Company 2010 Period End Date Period Length Stmt Source Stmt Source Date Stmt Update Type Revenue Total Revenue Cost of Revenue, Total Gross Profit Selling/General/Administrative Expenses, Total Research & Development Depreciation/Amortization Interest Expense (Income), Net Operating Unusual Expense (Income) Other Operating Expenses, Total Operating Income Interest Income (Expense), Net NonOperating Gain (Loss) on Sale of Assets Other, Net Income Before Tax Income Tax - Total Income After Tax Minority Interest Equity In Affiliates U.S. GAAP Adjustment Net Income Before Extra. Items Total Extraordinary Items 2009 2008 2007 2006 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12 Months 12 Months 12 Months 12 Months 12 Months 10-K 10-K 10-K 10-K 10-K 02/28/2011 02/28/2011 02/28/2011 02/26/2010 02/21/2007 UpdatedReclassifiedReclassifiedReclassified Updated 35,119.0 35,119.0 12,693.0 22,426.0 7,199.0 0.0 0.0 0.0 559.0 6,219.0 8,449.0 0.0 0.0 5,185.0 14,243.0 2,384.0 11,859.0 -50.0 0.0 0.0 11,809.0 0.0 30,990.0 30,990.0 11,088.0 19,902.0 5,659.0 0.0 0.0 0.0 313.0 5,699.0 8,231.0 0.0 0.0 40.0 8,946.0 2,040.0 6,906.0 -82.0 0.0 0.0 6,824.0 0.0 31,944.0 31,944.0 11,374.0 20,570.0 6,079.0 0.0 0.0 0.0 350.0 5,695.0 8,446.0 0.0 0.0 39.0 7,506.0 1,632.0 5,874.0 -67.0 0.0 0.0 5,807.0 0.0 28,857.0 28,857.0 10,406.0 18,451.0 10,945.0 0.0 0.0 0.0 0.0 254.0 7,252.0 0.0 0.0 219.0 7,919.0 1,892.0 6,027.0 -46.0 0.0 0.0 5,981.0 0.0 24,088.0 24,088.0 8,164.0 15,924.0 9,431.0 0.0 0.0 0.0 185.0 0.0 6,308.0 0.0 0.0 195.0 6,578.0 1,498.0 5,080.0 0.0 0.0 0.0 5,080.0 0.0

27

Net Income

11,809.0

6,824.0

5,807.0

5,981.0

5,080.0

Total Adjustments to Net Income Basic Weighted Average Shares Basic EPS Excluding Extraordinary Items Basic EPS Including Extraordinary Items Diluted Weighted Average Shares Diluted EPS Excluding Extrordinary Items Diluted EPS Including Extraordinary Items Dividends per Share - Common Stock Primary Issue Gross Dividends - Common Stock Interest Expense, Supplemental Depreciation, Supplemental Normalized EBITDA Normalized EBIT Normalized Income Before Tax Normalized Income After Taxes Normalized Income Available to Common Basic Normalized EPS Diluted Normalized EPS Amortization of Intangibles
Financial data in U.S. Dollars Values in Millions (Except for per share items)

0.0 2,308.0 5.12 5.12

0.0 2,314.0 2.95 2.95

0.0 2,315.0 2.51 2.51

0.0 2,313.0 2.59 2.59

0.0 2,348.0 2.16 2.16

2,333.0 5.06 5.06

2,329.0 2.93 2.93

2,336.0 2.49 2.49

2,331.0 2.57 2.57

2,350.0 2.16 2.16

1.76 4,068.0 733.0 1,204.0 10,314.0 9,008.0 14,802.0 12,324.43 12,274.43

1.64 3,800.0 355.0 1,023.0 9,630.0 8,544.0 9,259.0 7,147.63 7,065.63

1.52 3,521.0 438.0 1,012.0 9,862.0 8,796.0 7,856.0 6,147.9 6,080.9

1.36 3,149.0 456.0 958.0 8,243.0 7,252.0 7,919.0 6,027.0 5,981.0

1.24 2,911.0 220.0 920.0 7,431.0 6,493.0 6,763.0 5,222.87 5,222.87

5.32 5.26 102.0

3.05 3.03 63.0

2.63 2.6 54.0

2.59 2.57 33.0

2.22 2.22 18.0

28

Coca cola financial 1. Liquidity Ratio Current ratio 2010 2009 Measures In 2009 more better different with 2010. It is because current liability in 2009 less compare in 2010. In 2009, inventory less different with in 2010. In 2009, total debt less compare in 2010. In 2010 it must decrease total debt. In 2010, it more better good compare with in 2009, it is because total shareholder in 2010 increase from 24,799 to 31,003. The balance between debt and equity in a firms long- term capital structure. The extent to which earning can declines without the firm becoming unable. A firm holds excessive stocks of inventory and whether a firm is slowly. Sales productivity and plants and equipment utilization. A firm is generating a sufficient volume of business for the size.

Quick ratio

2. Leverage Ratios Debt-to-asset ratio

Debt-to-equity ratio

Long-term debt-toequity ratio

Time-interest-earned ratio

3. Activity Ratio Inventory turnover

Fixed asset turnover

Total assets turnover

4. Profitability Ratios The total margin available to cover

29

Gross profit margin

operating expense and yield a profit. Profitability without concern for taxes and interest. After-tax profits per unit currency of sales. Return on investment. After-tax profit per unit currency of stock-holders investment in the firm. Earnings available to the owners of common stock.

Operating profit margin

Net profit margin

Return on total assets

Return on stockholder equity

Earnings per share

4.3 OPERATIONS
Over the last 10 years, Coca-Cola has moved to a regional operating strategy with centralized concentrate production facilities that reduce manufacturing costs. Coke's main manufacturing activities relate to elaboration of syrup, which is then distributed to bottling companies.

4.4 SALES AND MARKETING

Overall, Coca-Cola has sustained an overall domestic market share lead versus Pepsi, with 41% versus 31%. Internationally, Coke is always ahead of Pepsi Pepsi's main strength is in the supermarket area, but Coke maintains a virtually equal portion of this market. Pepsi has strong sales through the restaurant chains it owns (Pizza Hut, Kentucky Fried Chicken, Taco Bell) although a recent decision by Burger King to leave Pepsi for Coke, plus McDonald's continued relationship with Coke, seem to confirm Goizueta's long-

30

held policy that Coke will not compete with its customers, such as restaurants, by entering their industry. Brand loyalty is another major strength for Coca-Cola. In the United States, Coke's mid198O's debacle -withdrawing regular Coke in favour of New Coke only to have consumers react so negatively that regular Coke, the "Coke Classic", was brought back to head off consumer law suits and other demands- showed Coke the depth of brand loyalty it had engendered. The net result was greater market share and profitability for Coke as it realized the depth of its brand loyalty.

4.5 DISTRIBUTION
As we mentioned above, 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. In general, Coke seeks total automation of distribution activities. Consider Coca-Cola Enterprises (CCE), the U.S. bottling company in which Coca-Cola holds a 49% interest. It has 1.800 salespeople selling over 150 products to 560.000 outlets along 6.500 routes, delivering over 2,5 million cases daily. Those sales people now carry handheld computer terminals, which unload orders to a central dispatch computer, which decodes addresses and allows CCE dispatchers to experiment with alternate routes, and, in one third the time previously spent, create routes for the next day that have dropped distance travelled by 8%, total hours spent on delivery by 13%, and the number of vehicles and delivery people needed by 14%.

4.6 PROCUREMENT
Coca-Cola has followed a strategy of increased ownership of bottling operations worldwide as a way to make its operations more efficient and also to improve product availability as well as marketing focus. In some cases, investments represent minority shares in the bottling company, wherein Coca-Cola is able to help focus and improve sales and marketing programs, assist in the development of effective business and information systems, and lend operating expertise. Situations where the current bottler is not competitive with current

31

competition or system wide sales standards, Coke frequently moves in to acquire the franchise and quickly turn the situation around. Coke was weak relative to Pepsi in the early 1980s in terms of the strength of franchisee bottlers. Coke's bottlers were second- and third-generation family businesses that had been with Coke from its very early days. Pepsi's franchises, led by what was then world's largest soft-drink bottler -General Cinema Corporation- had better capitalized and more sophisticated bottlers in many key urban areas in the United States. But Coke recognized this and, over the 1980's, became more aggressively involved with its bottlers, including over $2 billion in investment, which makes its bottling network, particularly abroad, a relative advantage in the 1990s.

4.7 HUMAN RESOURCES

Regarding with human resource management, Coca-Cola Company has a very loyal workforce, minimal turnover, and a strong tendency to promote from within. Overall, Coke provides attractive compensation; places a major emphasis on employee training and indoctrination into "the Coke way" so that employees worldwide share a similar understanding of and appreciation for what the product stands for and seeks to be in the consumer's mind. Coke places a lot of emphasis on having its people "think globally, but act locally; respond daily to competitive situations; serve customers and consumers with a passion".

32

5.0 RECOMMENDATION

5.1 RECOMMENDATION FOR HEALTH AND WELLNESS TREND

The recommendation for Coca Cola is to move forward with commitment to provide industry leadership in the health and wellness area. Coca-Cola should do a better job of staying in touch with shoppers and consumers and in the process of innovating and creating value. This is absolutely essential for value creation in the beverage industry. I think the most important driver behind the demand for beverage is population demographics. Two key segments of the market, the baby boomers and the young generation are shaping the future of beverage industry. The aging boomer generation is more focused on preventing certain health conditions, and is more likely than other generations to increase its consumptions of health food and beverage and avoid problematic ingredients such as sodium and sugar. On the other hand, the younger generation demands new age sport drink and energy drink. Coca Cola failure to understand this market needs resulting in missing the opportunity to buy Gatorade brand.

5.2 RECOMMENDATION FOR CONFLICTS WITH BOTTLERS

Some industry analysis has called the relationship with bottlers dysfunctional. Isdell, CEO for Coca Cola and former head of bottling, emphasized the need to improve bottler relations. Improving the bottler relationship is increasingly important for Coca-Cola. The recommendation is to address this through issues through senior leadership negotiations and discussion immediately because the bottlers are a critical local link to the customer.

5.3 RECOMMENDATION FOR STRATEGY MARKETING

My strategy recommendations for the new president of Coca-Colas Brazilian subsidiary are constrained by limited knowledge. And, to say that American market leaders pursue a differentiation strategy is fine, but in developing a winning strategy in Brazil, the same rules may apply. The main objective is to establish the brand name. The best strategy places product of uniform quality in every corner of Brazil. Conditionally, Coca-Cola must accept the costs and

33

logistical challenges of distributing to every conceivable market. Selling costs may be higher in remote regions, but the quality product must be available, and it must be reasonably priced. Additionally, Coke can look to the competition for clues as to what products they should phase out, so that they can utilize plant capacities for strong sellers and new innovative offerings. That said, I think that the best differentiation strategy is brand recognition, which requires promotion therefore, the sponsorship of local, regional, and national events should continue. Similarly, the sponsorship of sports teams is effective in Latin America, and product endorsement by well-known athletes is yet another way to strengthen the connection between the product and the consumer. In conclusion, the Brazilian economy presents the best possible scenario for producers given that the people enjoy increasing personal wealth. Therefore, the best strategy employs a promotional strategy that leads people to believe that Coke products are simply better.

34

6.0 CONCLUSIONS

The Coca Cola Company has a very rich history and spread over the world, the study in this report specially the particular SPACE matrix tells us that Coca Cola Company should pursue an aggressive strategy. Coca Cola Company has a strong competitive position in the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This includes focus on Water and Juices products, and catering to health consciousness of people through introduction of different coke flavor and maintaining basic coke flavor. Further company should integrate with other companies, acquisition of potential competitor businesses, innovation in branding and aggressive marketing strategy can bring long term profitability

35

7.0 REFERENCES
1. http://www.slideshare.net/Zafour/strategic-management-issues-of-multinationalcompanies-mncs-a-case-study-on-cocacola-company 2. http://www.slideshare.net/arunspeaker/strategic-management-issues-of-multinationalcompanies-mn-cs-a-case-study-on-coca-cola-company 3. http://www.scribd.com/doc/9995196/Swot-Analysis-of-Coca-Cola 4. http://coca-cola-remodel.tripod.com/id21.html 5. http://www.docshare.com/doc/8487/An-Analysis-of-The-Coca-Cola-Companys-Markets 6. http://summit.sfu.ca/item/8182 7. http://www.authorstream.com/Presentation/aSGuest58226-457468-mba-presentationcoca-cola/ 8. http://ivythesis.typepad.com/term_paper_topics/2009/08/strategic-analysis-cocacola.html 9. http://www.slideshare.net/rameshwarpatel/internal-analysis-competencies 10. http://ivythesis.typepad.com/term_paper_topics/2008/12/financial-analy.html 11. http://www.slideshare.net/ibtsam/marketing-plan-for-coca-cola-company 12. http://www.thecocacolacompany.com/ourcompany/ar/pdf/TCCC_2010_Annual_Review.pdf 13. http://dept.sfcollege.edu/business/susan.crosson/Spring2010/Annual%20Reports/BDA.C OCACOLA.pdf 14. http://moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=US%3aKO

36