MGT 3170 STRATEGIC MANAGEMENT

Module Leader Prof. Kieran Ross

Assignment III Slide Deck Presentation

Group Members:

Anmol Nashani M00378207

Christina Mandody M00338182
Nova Joseph M00379575
Saeed Mirahmadi M00385756
 “To refresh the world...
To inspire moments of
optimism and happiness...
To create value and make a
difference."

(The Coca-Cola Company, 2014)

General Environment

SOURCE: MARKETLINE 2014

The competitive advantage of the
firm is its brand loyalty, reputation,
high market share in the sector of
CSD globally, global coverage,
marketing capabilities, diversification
of the CSD sector. The competitors
include PepsiCo. and Dr Pepper but in
greater terms, the industry has overall
declined in sales and popularity Market Leaders in the Soft Drink Manufacturing Industry,
(MarketLine, 2014, pp. 4-6). % share, by volume, 2012: see Appendix for financials
 Issue One: Declining Sales in Carbonated
Soft Drink (CSD) Sector in US
A drop in the level of sales of sodas in the North American market in addition to low sales growth
globally is not a positive sign. Early 2014 shares fell over 4 percent and overall, shares have
dropped nearly 7 percent, which is the highest it has ever been for the firm (Stewart, 2014). In
US, which is Coca-Cola’s main market, the volume sale of carbonated soft drink dropped more
than 8% in 5 successive years, from 2005 to 2009, with 0.2% in 2005, 0.6% in 2006, 2.3% in 2007,
3% in 2008 and 2.1% in 2009. It is likely that the volume will keep declining.

(Wong, 2014)

(Nytimes.com, 2014)
Issue One: Declining Sales in Carbonated
Soft Drink (CSD) Sector (2)
Even though marketing has increased,
sales of carbonated soft drinks fell by
three percent in 2013, which is
speculated to be the lowest since 1995.
This was the ninth year that this sector
has declined. Although Coca-Cola
performed better than their competitor
PepsiCo., with 42.4 percent of the U.S.
market, sales still declined by 2.2% in
2013 (Esterl, 2014). Coca-Cola has 42.4
percent of the U.S. fizzy drinks market. In
2013, the company performed better
than its competitor PepsiCo. Coca-Cola’s
sales fell by 2.2 percent in 2013, (which is
half of Pepsi’s 4.4 percent drop). The third
in the market, Dr. Pepper
Snapple declined by 2.4 percent.
Nevertheless, Coca-Cola increased its
market share (Esterl, 2014).
The constant decrease in sales will later
turn out to be a long term issue if not
tackled presently. (Esterl, 2014)
Issue Two: Government Regulations Affect
Sales United States
2014 Michelle Obama as part of her Let’s Move
Coca-Cola’s biggest soda consumers, US and
Mexico are facing problems because of
expanding waistlines, which is a cause of
concern for regulatory authorities who in turn
are giving more attention to the consumption of
Coke products for improving the well-being and
health of the public especially children. As per
industry estimates, over 20 million children and
adolescents in the US are either obese or
overweight ('The Coca-Cola Company SWOT
Analysis' , 2014, pp.1-9).
(Gulati and Ahmed, 2014)
campaign placed ban on advertising sugary
drinks such as Coca-Cola carbonated soft drinks in
schools. Start of 2015, these rules would be
incorporated throughout schools in U.S (Nicks,
2014).
New York
Mayor Bloomberg brought a common vote to
“cap the size of sugary drinks to no more that
16-ounces at movie theaters, restaurants, mobile
food carts, and sports arenas”. The ban started on
the 12th of March 2012. It excludes “fruit juices,
milkshakes, diet sodas or alcoholic drinks”
(Arumugam, 2012).
Mexico
January 2013 “Fat” tax of one peso or eight
cents is placed on every liter of sugary
drinks that are sold in the country (The Guardian,
2013). This has already resulted in reduced sales
volume by more than 5% (Guthrie, 2014).
These regulations that restrict the largest consumer segment consisting of school children would
definitely impact the growth of the company. Taxes being placed on carbonated soft drinks after
having looked at the response by governments and consumers towards the marketing, packaging,
labeling and sale of Coke beverages which will furthermore reduce demand for carbonated soft drinks
and in turn, affect the company’s profitability. However, Coke shall still be able to sell water and still
beverages in schools ('The Coca-Cola Company SWOT Analysis' , 2014, pp.1-9). Government
regulations are a barrier to entry for future potential beverages the company may release, the strict
rules could force Coke to change their staple sugary regular Coca-Cola drink.

(Esterl, 2014) (Esterl, 2014)

Issue 3: Lack of Diversification of
Product Range
There has been a drop in the U.S. Consumption
of carbonated soft drinks. Mrs. Nooyi, CFO and
president of PepsiCo has been creating an
emphasis and focused on its various drinks. She
claims, “lifestyles have changed and we have to
modify our products“ (D’altorio, 2012). This is a
problem for Coca-Cola considering the fact that
Pepsi’s strength is in its differentiated products.
When it comes to the market share, Coca-Cola
has been overlapping Pepsi, however, Pepsi’s
strength is in its differentiated products. (Blog.thomsonreuters.com, 2013)
PepsiCo’s expansion into other beverages such as
bottled water, juices and sports drinks gives them
leverage over Coca-Cola in a declining CSD Coca-Cola has already began the process of diversification out of
market. the CSD market, however it is not commonly known and the name
Coca-Cola leaves connotations of its main product(s) of fizzy drinks.
This is stronger when it comes to their market capital and P/E ratio,
but PepsiCo has higher revenue because of their expansion into
other beverages and different food products provides them a better
chance to overcome Coca-Cola in the long run. However, their
expansion may possibly hinder the famous and successful recipe.
Coke has tried to overcome this issue in the past by venturing into
tea, energy drinks and bottled water but hasn’t been very successful
(Treehugger, 2014) in being the leader in such markets (Team, 2013).
 Issue 3: Lack of Diversification of
Product Range
United States carbonated soft drinks market
category segmentation: $ million, 2012
SOURCE: MARKETLINE 2014
Dr. Pepper, currently placed third in the market, has
similarly tried improve through scientists researching
and developing the scheme of the ‘Dr. Pepper Ten’.
This was launched initially to target men, later
moving to women. To give direct competition to the
current Diet Carbonated Drinks available, Dr. Pepper
introduced the Ten calorie strategy which was similar
to diet drinks but with lesser ingredients .
This strategy focused on individuals who were not
satisfied with the taste of current diet drinks. In
addition, the strategy includes diversification into the
other drinks, namely 7 Up, Canada Dry, A&W, Sunkist
and RC Cola. Larry Young, president and CEO of Dr
Pepper Snapple Group told in a CNBC article that
research and feedback from retailers indicated “more
than half of the individuals who purchased the TEN
sodas had entirely left the carbonated drinks
category.” (Long, 2013). In the long-term, if Coke does
not diversify in a focused manner, as their competitors
have done, they could stand to lose market share and
sales revenue as a result of failure to meet changing
consumer trends.
Issue 4: Health and Awareness Trends Affect
Consumption of CSD Globally, higher concerns about health and
how sugar and artificial sweeteners are
unhealthy for consumption deter the
reputation of Coca-Cola products. Sugar levels
in Coca-Cola are 39 gms in 355ml bottles.
Energy drinks like Red Bull and Monster
increased in popularity in 2014. Consumers
have started opting for what are deemed
‘healthier options’ like flavored water, tea and
juice drinks (Bond, 2014). Recent research
claimed sugar drinks make people gain
weight. Sugar drinks also interact with genes
affecting weight and increasing risk of obesity
(Batty, 2013). As a result, it can be seen that
sales are in fact declining. In terms of the ‘low
calorie’ drinks, these saw a decline too
because of links to cancer and lack of
(Combating Obesity, 2014)

nutritional value (aspartame – artificial

sweetener). In schools, it can be seen that
trends of health awareness mean that ‘Coke’
drinkers are likely to suffer scrutiny on
campuses (Jacobsen, 2014).This issue must be
focused on greatly to keep with changing
consumer demands in the long run.
 Strategic Issue: Concentrate on Health Concerns
Coke has to concentrate on health concerns that is increasingly growing over its
carbonated soft drinks as well as the demand for beverages that are not carbonated
colas.
Why does Coke need to look into this subject?
• Most importantly, because the long term trends show decline in demand for the current
company products, failure to diversify and cater to consumer preferences at the earliest
may result in reduced income and damage to company brand, therefore, overall growth.

(MarketLine, 2014, pp.8-40)

• By 2017, the carbonated soft drinks market in U.S is set to have a value of $59,825.5
million, a decline of 2.4% from 2012.
• The compound annual rate of change of the market, the rate at which this market shall
grow over the period of 6 years from 2012–17 is predicted to be -0.5% (MarketLine,
2014, pp.8-40).
 What Do We Recommend
Diversification
Taking an example from the book of PepsiCo who recently struck a deal with O.N.E Organic Coconut
Water called “America’s healthiest beverage” (ABS-CBN News, 2014) which is gaining popularity by
the second, Coca-Cola must concentrate more into healthier, refreshing drinks. The two
competitors against O.N.E. are Zico and Vita Coco (the latter being the first to have originally
invested in the idea).Striking a partnership with either of the two would give the beverage giant
leverage to gain an upper hand in the rising demand for coconut water.

• Use Capabilities
Coca-Cola has capabilities such as a
strong brand portfolio, dominance in
the beverage market, strong bottling
(Sales Swell for Coconut Water, 2012)

partnerships, wide distribution

network, marketing capabilities as
well as a strong global footprint. This
enables Coke to enter any market as
well as diversify easily (MarketLine,
2014, pp. 4-6). In the next slide, other
product segments are discovered
wherein Coca-Cola can concentrate.
What Do We Recommend (2)
• Remain Proactive
Yes, Coca-Cola has a big reason why it has to be
proactive: The beverage giant does not trail
behind competition which is seen in the case of
fast-growing ready-to-drink tea category, where
Coke’s Fuze has not made much of an
impression. Consumers opt for competing
brands such as Arizona, Lipton and Dr Pepper
(Zmuda, 2012).
(Zmuda, 2012)
• Market Extensively
By using extensive marketing brand campaigns,
Coca-Cola can promote Fuze in markets in U.S.
and Japan where demand has consistently
been on the rise as suggested by Euromonitor
Intl in its reports that consumers would shift
from Starbucks and Costa if they found hot
beverages at a reasonable price (Some Like it
Hot, 2013, pp. 14-16)
(Dawson and Bauerlein, 2014)
Why Do We Recommend (Canadean.com, 2013)

As coconut water is quickly growing

in terms of demand in the U.S.
(“estimated to reach $1bn soon”)
because of speculate health
benefits due to its (“natural
hydrating qualities, great taste and
nutritional benefits, not to mention
the large number of celebrities from
film to music to sports”) endorsing
(Arnold, 2012).

(Villegas-Morán, Carranza and Antún, 2006)

‘Ready To Drink’ tea was deemed an
‘affordable luxury’ when the
recession occurred. It was not
deterred from ‘macroeconomic
pressures on demand’. The industry
revenue is speculated to rise by an
“annualized 6.1% over the five e
years to 2014, including a 3.3%
jump in 2014 to 5.3 billion U.S.
dollars” (PRWeb, 2014).
 References
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<http://www.pepsistore.com/history.asp> [Accessed 20 Apr. 2014].
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1 Apr 2014].
• Datamyne. 2012. [online] Sales Swell for Coconut Water. Available at: <http://www.datamyne.com/imports/sales-
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<http://online.wsj.com/news/articles/SB10001424052748704062604576106890517824326> [Accessed 20 Apr. 2014].
 References
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 References
• Jacobsen, M. 2014. Coke, Pepsi Face Schools' Sugary Drink Squeeze. [image online] Available at:
http://www.businessweek.com/videos/2013-07-16/coke-pepsi-face-schools-sugary-drink-squeeze [Accessed: 1 Apr 2014].
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<http://www.dailymail.co.uk/news/article-2593728/Fizzy-drinks-fall-flat-soda-sales-decline-U-S-faster-expected.html>
[Accessed 16 Apr. 2014].
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and New Brunswick: National Policy & Legal Analysis Network, pp. 1-104.
• Nicks, D. 2014. White House Sets New Limits on Junk Food Ads in Schools | TIME. [online] Available at:
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1 Apr 2014].
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APPENDIX
• Core Competencies
• Key Financials
• Consumer Segments
• P.E.S.T.L Analysis
• S.W.O.T Analysis
• Porter’s Five Forces
• Competitive Rivalry
• Competitor’s Analysis
Core Competencies
Dominant market presence all over the world
Customer loyalty to the brand
Strong brand portfolio which allows recalling of customers as well as enter new
markets and consolidate its presence in existing markets
Strong geographical footprint even in emerging countries
Strong bottling partnerships
Extensive distribution network
Ability to diversify across various beverage markets
Equity investments allow for efficiency in production, distribution and marketing
capabilities
(MarketLine, 2014, pp. 4-6)

(Enjoycareers.com, 2014) (National Policy & Legal Analysis Network, 2014, p. 5-7)
Key Financials: United States

(MarketLine, 2014, pp. 24)

 Consumer Segments
The Gender graph indicates that although only
Purchase of Cola among Gender
58.5% of the U.S. population were found to
(% of U.S. Population) drink coke in 2013, women were found to be
60 more likely at 59.7% (women in the U.S.) to
59.5
59 purchase the drink compared to the 57.2% of
58.5 59.7 men in the U.S. Among age groups, it can be
58
57.5 Gender
seen that Cola is more popular in children aged
57 10-15, women and adolescents aged 20-24
56.5 (Keynote, 2013, pp.52-55).
56 57.2
55.5
Women Men

Purchase of Cola among Families Purchase of Cola among different

With/Without children Age Groups
90 78.3 79.5 80 74.1 71.4 70.4
80 70.2 70 66.2 66.8
70
60 52.9 60
49.9
50 50
40 With/Without 40
30 24.1 Age
children 30
20 20
10
10
0
0
Aged 0-4 Aged 5-9 Aged 10- No
15 children 16-19 20-24 25-34 35-44 45-54 55-64 65+
(Keynote, 2013, pp.52-55)
P.E.S.T.L Analysis
POLITICAL FACTORS
Governments place restrictions on
marketing sugary drinks in schools
One of the challenges being faced in soft drink
industry is increasing pressure from
government and advocates to reduce or
remove advertising directed towards children
under age 12. Within the soft drink industry,
companies spend over $474 million alone
targeting 12-17 age group and $116 million
targeting children (National Policy & Legal
Analysis Network. 2014).
SOCIAL FACTORS
Rising obesity epidemic globally
New York City’s Mayor Bloomberg placed
ban on sugary drinks larger than 16 ounces,
the reason because of the country’s
expanding waistlines (McKay, 2014). Even
across Latin America in Mexico, government
has placed a sugar tax on every liter sold
within the country to combat obesity (The
Economist, 2014).
ECONOMICAL FACTORS
U.S. market saturation for CSD causes
decline in growth rate
Datamonitor (2005) stated, “Looking ahead,
despite solid growth in consumption, the
global soft drinks market is expected to slightly
decelerate, reflecting stagnation of market
prices.” This is because of the shift to other
growing sectors such as tea, coffee (11.8%) and
bottled water (9.3%). Sports and energy drinks are
also on the rise as competitors have started to
adopt new product lines (Deichert, et al, 2006) .
TECHNOLOGICAL FACTORS
Scarcity and poor quality of water
Manufacturing and processing of soft drinks
begins with water, which has to be treated and
cleansed for meeting quality-control standards.
This process is mandatory for all companies for
attaining high product quality and consistent
taste profiles. Due to increasing scarcity of
water, this could prove detrimental to all soft
drink manufacturers (Ilo.org, 2014).
S.W.O.T Analysis
STRENGTHS
Market presence
Globally Coca-Cola is the largest beverage
manufacturer
Brand portfolio
Coca-Cola owns world top five non-
alcoholic brands and 12 other billion dollar
brands such as Coca-Cola, Diet
Coke, Sprite, Fanta, Coca Cola Zero, Minute
Maid, Minute Maid Pulpy and Dasani
(MarketLine, 2014, pp. 4-6).
OPPORTUNITIES
Rise in demand for healthy
beverages
Change in consumer preferences for more
healthy and “functional” beverages have led
to beverage manufacturers in producing
foods or drinks that help reduction in
cholesterol levels as well as increase energy.
The obesity epidemic has also caused
consumers to shift from drinking sugary
drinks to much more healthier beverages
(MarketLine, 2014, pp. 4-6).
WEAKNESSES
Product recalls
These past years Coca-Cola has been subjected
to frequent product recalls because of possible
contamination in its Minute Maid dairy drink.
Also in 2011, Coca-Cola had to remove cans
and 2 liter bottles because customers sensed
metallic taste in them; a similar product recall
happened in 2010 for bottled water as industry
standards were not met for proper packaging
(MarketLine, 2014, pp. 4-6).
THREATS
Laws and regulations by U.S
Government
Due to increasing obesity in U.S, the government
has placed bans on promotion of sugary drinks
within schools as well as selling more than 16
ounces of sugary drinks is prohibited (MarketLine,
2014, pp. 4-6). In Mexico, tax of one peso is placed
on every liter of sugary drinks sold in the country
(The Economist, 2014).
Porter’s Five Forces
Buyer Power MODERATE
The retailers constitute as buyers in the soft drinks market. For manufacturers like Coca-Cola and
Pepsi, they make soft drinks that can be readily consumed and supplied to retailers directly.
Power of retailers lies in the majority of retail operations sprawled across the country with
supermarkets and hypermarkets being the highest. Majority of the consumers are loyal to the
brands, this decreases the power of buyers as retailers must stock brands that are in demand by
consumers.
Supplier Power MODERATE
Manufacturers require access to range of ingredients like sweeteners, aspartame, and sucrose
etc. These are available from more than one supplier and market prices tend to fluctuate because
of availability. Substitutes for certain ingredients like aspartame decreases supplier power.
However, a large amount of advertising and marketing is outsourced as multinationals heavily
rely on such agencies which strengthens supplier power inadvertently.
New entrants LOW
Stringent regulations, need for bottling partners as well as huge amounts of money spending on
marketing campaigns restrict newcomers from entering the soft drink industry. Also over the
years this market is seen to be declining which makes it less attractive for potential entrants.
Threat of Substitutes MODERATE
Substitutes are many in the market of soft drinks such as tea, coffee and juice etc. Since
multinationals have diversified into most of these segments, it reduced the threat of substitutes.
However, change in consumer preferences towards healthier choices may cause retailers to stock
on healthier alternatives. Even though the threat of substitutes is increasing, it remains moderate
for now (MarketLine, 2014, pp. 8-40).
Competitive Rivalry MODERATE
In US, Coca-Cola and Pepsi account for 73.7% of the carbonated soft drinks market .
Firms that work with the addition of extensive fixed costs, as a result of specialist production services
and marketing strategies, do not have the ability to ‘scale down’ when growth is slow. Similarly, because
of the market, economies of scale are linked to bulk manufacturing and thus, lead to expansion. Firms
are therefore forced into competing when the number of consumers does not match. Outsourcing to
third party companies also takes place for later stages of the production process.
To overcome these issues, firms
can lower the possibility of ‘its
market exit’. It is not likely
possible for firms who own most
of their manufacturing
resources. When there are less
players in the market, there is
less competition as they gain
experience and security aided by
strong branding and product
differentiation. The size of these
players adds to increase the
rivalry in the market.
Nevertheless, the recent market
declines worsen rivalry. The US
carbonated soft drink market
has a moderate degree of rivalry
(MarketLine, 2014, pp. 8-40).

(Coca-colahellenic.com, 2014)
Competitor Analysis
Coca-Cola
Coca Cola founded by
Origins Doctor John Pemberton
a pharmacist from
Atlanta, Georgia in 1886
(Bellis, 2014)
Global Coverage Available in over 200
countries (Investors et al,
2014)
• To refresh the world
Mission Statements • To inspire moments of
optimism and
happiness.
• To create value and
make a difference
(Investors et al, 2014)
Corporate Level Diversification into other Diversified into other
Strategy beverages (Cokecce.com, food products
2014)
Pepsi Dr. Pepper Snapple
Started as a drug store Founded by Charles
on Pollock Streets in Alderton, a pharmacist
downtown New Bern, which was served at the
which was later drug store where Alderton
renamed as “Pepsi” in worked in Waco, Texas, in
1898 (2009 Trade Ideas, 1885 (Dr Pepper Snapple
2014) Group, 2014)
Available world wide Available in U.S,
(Global Business Units | Mexico and Canada
PepsiCo.com, 2014)
(Marketline, 2014, pp.8-40)
To be the world's To be the best
premier consumer beverage business in
products company the Americas (Dr Pepper
focused on convenient Snapple Group, 2014)
foods and beverages
(Our Mission and Values |
PepsiCo.com, 2014)
Diversification into
other beverages
(Pepsico.com, 2009) (Drpeppersnapplegroup.com,
2014)
 Coca-Cola Pepsi Dr Pepper Snapple
Business level strategy Cost leadership (Coca- Cost leadership Focused cost
colahellenic.com, 2014) (MarketLine, 2014, pp. 8-40) leadership
(Investor.drpeppersnapplegrou
p.com, 2014)

• Dominant market • Strong market • Strong market

presence built on position position built on
Strengths strong brand • Diverse product strong brand
portfolio. portfolio and portfolio
• Strong bottling strong brand equity • Strong focus on
partnership. • Widening presence research and
• Strong global in the emerging development
footprint markets (PepsiCo, Inc. • Wide geographic
emphasizing on SWOT Analysis, 2014) manufacturing and
emerging countries distribution
(The Coca-Cola Company coverage (Dr Pepper
SWOT Analysis, 2014)
Snapple Group, Inc. SWOT
Analysis, 2014)

• Product quality • Market • Excessive

Weaknesses issues and frequent controversies could dependence on
recalls (The Coca-Cola hamper consumer few market players
Company SWOT Analysis, confidence (PepsiCo, (Dr Pepper Snapple Group,
2014) Inc. SWOT Analysis, 2014)
Inc. SWOT Analysis, 2014)

Market share Current market share Current market share Current market share
is 45% (MarketLine, 2014, is 29% (MarketLine, 2014, is 15% (MarketLine, 2014,
pp. 8-40) pp. 8-40) pp. 8-40)