NAME: CLEMENT MLUNGISI SIMELANE

REPORT TITLE: STRATEGIC ANALYSIS OF COCA COLA COMPANY.

TABLE OF CONTENTS
PAGES

1. General Background About The Company……………………………2.

2. Introduction……………………………………………………………2.
3. Methods………………………………………………………………..2.
4. External Environment Of The `Beverages Industry…………………2-3.
4.1 MacKinsey 7-S Framework……………………………………......3.
4.2 PESTEL Analysis………………………………………………….3.
4.2.1 Political…………………………………………………….4.
4.2.2 Economic…………………………………………………..4.
4.2.3 Social………………………………………………………4.
4.2.4 Technology………………………………………………...4.
4.2.5 Environmental……………………………………………..5.
4.2.6 Legal……………………………………………………….5.
4.3 SWOT Analysis……………………………………………………5.
4.3.1 Strength…………………………………………………….5.
4.3.2 Weakness…………………………………………………..5.
4.3.3 Opportunities………………………………………………6.
4.3.4 Threats……………………………………………………..6.
4.4 Porter’s Five Forces………………………………………………..6.
4.4.1 Threats of New Entry………………………………………6.
4.4.2 Competitive Rivalry………………………………………..6.
4.4.3 Threats of Substitution……………………………………..7.
4.4.4 Buyer Power……………………………………………….7.
4.4.5 Supplier Power…………………………………………….7.
5. Complaints of Obesity and Other health Problems……………………7.
5.1 Introduction………………………………………………………..7.
5.2 Responses to the Complaints……………………………………...8.
5.3 Applying The Strategy Diamond And Five Elements
Of Strategy To the Responses by Coca Cola To Consumers……..8.
5.3.1 Arenas……………………………………………………..8.
5.3.2 Vehicles…………………………………………………...8.
5.3.3 Differentiators……………………………………………..9.
5.3.4 Economic Logic…………………………………………...9.
5.3.5 Speed………………………………………………………9.
5.4 Applying The VRINE Model To The Strategy To
Introduce Zero or No Sugar Products……………………………10.
5.4.1 Valuable………………………………………………… 10.
5.4.2 Rarity…………………………………………………….10.
5.4.3 Inimitabilty……………………………………………….11.
5.4.4 Organization………………………………………………11.
6. Conclusions and Recommendations…………………………………..11-12.

7. References…………………………………………………………….13.
STRATEGIC ANALYSIS OF COCA COLA COMPANY.
1. General Background About the Company.

Coca Cola company was founded in 1886 by a pharmacist Dr John S Pemberton. He

originally intended to mix ingredients such as kola nuts, cola leaves and syrup. The
mixture he created was an elixir which he combined with carbonated water. He then
asked customers to taste it for free. They enjoyed it and that is how coke was born.
His book-keeper named the concoction “coca cola “and that is how the company
name was born.

Presently, Coca Cola dominates the non-alcoholic beverages industry as it operates in

more than two hundred countries selling over five hundred brands. The company has
over one hundred three hundred associates worldwide including their bottling
partners. Statistics indicate that it sells more than one billion nine hundred products
daily.

2. Introduction.
The company Coca Cola is one of the biggest corporations in the world that offers
exclusive soft drinks. Its mission is “to refresh the world, to inspire moments of
optimism and happiness and to create value and make a difference.”

This report aims at analysing briefly the strategy of the company. The point of
departure is understanding the internal structures of the company and its culture. The
study will also look at the external context at which the company operates by using
the Mac Kinsey 7-S, PESTEL model and SWOT analysis.

The company’s main competitor is Pepsi Company. The essay will trace the
competitive advantage of Coca Cola using the above models and The Porters Five
Forces. A business issue is isolated that affected the company and a strategy to deal
with it is identified and tested using the five diamond elements of strategy and
VRINE.

3. Method.
The methodology used is restating with understanding information obtained from the
course module, books, journals and publications obtained from the net all of whom
are acknowledged.

4. External Environment Of The Beverages Industry.

The beverages industry is generally highly competitive yet it faces challenges of costs
of manufacturing, distribution costs, changing consumer spending, severe economic
conditions, decreasing water levels, consumer preferences, inflation, hostile political
climate, unpredictable local laws and regulations, currency fluctuations, escalating
fuel prices, hostile weather patterns and Covid-19 effects ( Grant Robert, 1991.)
The 2021 annual report do however reflects that Coca Cola recorded a consolidated
income, in millions of $9,804 as net profit in 2021 whereas it recorded $7,768 in the
year 2020 and it recorded $8,985 in the year 2019.The decrease in 2020 was largely
as a results of the effects of Covid-19.

The success of the company is determined by the context, practice and content of its
strategy. The structure of the company has attributes of multinational and
transnational therefore unique. This study applies different methods to understand the
structure within the context of strategic management theories. First will be the Mac
Kinsey 7-S framework. Secondly, will be the PESTEL analysis that will help us
understand the company’s external environment and thirdly, will be the SWOT
analysis to understand its internal and external conditions. The study will then
investigate the competitive advantage of the company using the Five Porter’s Forces.

4.1Mac Kinsey 7-S Framework.

The Mac Kinsey 7-S framework studies the strategy, style, structure, systems,
shared values, skills and staff in order to understand the operations of the
company. The Coca Cola company trades in no-alcoholic and alcoholic beverages.
Our focus in this study will be the non-alcoholic beverages. As stated earlier, the
company leads in the beverages industry. The company owns or licenses and
markets numerous beverages brands such as coca cola, sparkling flavors,
hydration drinks, sports drinks, coffee, tea, nutrition juices and daily and plant-
based beverages. The products are made available to consumers through
independent bottling partners, wholesalers and retailers.

The company has created its own culture and context within which it implements
its strategy and this culture and context is duplicated in all its businesses over the
world. All the partners, associates, suppliers, independent contractors, even their
employees are enjoined to the culture of the company and its standards. The
uniformity has ensured that the strategy of the company is fully realized.

The structure of the organization is internal yet external meaning that it is a

mixture of organizational structures yet multinational in nature. The company is
primarily based in Georgia in the United States of America where its corporate
offices are located with a fully-fledged operating company with all levels, that is,
manufacturing, distribution, wholesaling and retailing. The company has however
segments divided into bottling partners, distributors and wholesalers in Europe,
Middle East and Africa, Latin America, North America, Asia Pacific.

The company’s systems and structures internally include revenue management,

supply chain strict management, cash flow generation and strong marketing
platforms. Highly skilled personnel are employed, trained and retained to drive the
strategies of the company. The company makes it their strategy to invest in skill
and knowledge and the welfare of their workers.

Coca cola integrates and coordinates its many communication channels such as
mass media advertising, personal selling sales promotion, publication relations
and direct marketing strategy to deliver a clear, consistent and compelling
 message directly to the consumers. On average, the company spends $2 billion a
year worldwide on marketing (Hu F & Chuang CC, 2009.)

The head office maintains the standards of the company and invest its capital to
maintain and transfer knowledge of these standards at all level of the organization.

4.2. PESTEL Analysis.

4.2.1 Political.

Coca cola receives most of its revenue from international sales of their
products. In the nations the company trades, there are territorial laws, rules
and regulations that must be followed some of which are against the
strategy and therefore frustrate the strategic goals of the company. Such
laws may relate to tax, branding, advertising. It therefore depends on the
governments of the time, how they respond to international trade.
Moreover, regions that are prone of conflicts create an unpredictable
environment for future business forecast therefore risky. Certain
govenments in the world have faced economic sanctions from the United
States of America and that means Coca Cola is likely to meet antagonistic
governments that are being sanctioned by the company’s nation.

4.2.2 Economic.

The economic impact of the company in the world is immeasurable.

Where the company is established or where its bottlers are located or its
distributors are, the working class attached are paid high salaries. This is
according to the strategy of the company to retain its employees. The
company business as a whole fortifies job creation and retention of staff in
the entire value chain. Staff is employed locally where the company does
business and there is skill transfer with the global network of the company.
Quite often, the state of the economy of the country where the business of
the company is done does not impact the company because preparations are
done even before the set up.

4.2.3 Social.

In the communities where the company’s products are consumed

especially in the developed countries, the medical community has noted
increases in the number of diabetes and obesity aiming children and
adults. The negative publicity surrounding this issue threatens the
profitability and sustainability. Consumers are generally changing eating
habits and are inclined to healthy lifestyles that involves drinking pure
water therefore putting the beverages industry at risk.

4.2.4 Technology.

The advent of online shopping and paper in financial transactions poses

a threat to the beverages industry in particular segments of the Coca Cola
company such as distribution, retail stores and vending machines. People
 are running away from bricks and walls of malls and shopping centers,
therefore making the conventional marketing strategies such as branding
inside shops and merchandising inside the supermarkets unnecessary. The
change means that there must be a change to adapt to the new order of
social platforms. The shift demands capitalization and may affect the cash
flow and balance sheet of the company.

4.2.5 Environmental.

Clean Water is a very important raw material of the company yet water is
becoming a scarce resource in the world. The has been great concerns by
environmentalists about the water waste in the manufacturing units of the
company that poses a risk of being shut down or engaged in costly legal
battles with government agencies.

The introductions of green energy that is environmentally friendly in order

to deal with carbon emission means that the company cannot continue to
use the conventional methods of generating power. The company has
started transforming its energy sources.

Climate change has brought a lot of natural calamities like tsunamis and
droughts that present an obstacle to the operations of the company.

4.2.6 Legal.

The ever-changing tax laws of the different national agencies where the
company is doing business pose an unstable operating environment for the
international company. The company is currently locked in tax litigation
with the United States Tax Agencies. Anti- trusts laws in trade law may
pose a threat to the company therefore affecting the value supply chain of
the company. Health practitioners are petitioning international bodies
concerning the sugar levels and amounts of calories of coca cola substance
and that means health laws might change to accommodate complaints
related to healthiness of the products. The change of these laws may
demand change on the ingredients and the re-branding of the company.

4.3SWOT Analysis.

4.3.1 Strengths.

The fact that the company enjoys the largest share of the market gives it
security and sustainability. The relations built by the company in
partnerships, supplier agreements, bottling agreements, distribution
agreements make it easier for the company to retain its market share and
to introduce new products.

4.3.2 Weaknesses.

There is a heavy reliance of the company on carbonated soft drinks to

generate most of the company’s revenue. There are complaints from
 health practitioners that the company’s products contribute to the number
of obese and diabetic people. Obesity and diabeties are major causes of
many disease that are uncurable and deadly. Whether or not these claims
are true does not matter if they change the perception of customers and
affect sales.

4.3.3 Opportunities.

The petitions and complains advanced by health activists about the sugar
and calories in the coca cola products has created an opportunity for the
company to introduce new products that have less sugar or no sugar. This
move ensures that the company’s loyal customers stick with the brand by
just changing products to more healthier products. The company has also
diversified its business by acquiring full ownership or having equity and
partnership in firms that produce tea, coffee, juice and energy drinks. The
company is also taping into the savory snack market.

4.3.4 Threats.

The shortage of water brought about by droughts caused by climate

change is a serious threat to the business. Natural disasters like droughts,
tsunamis are serious threats yet they are now prevalent. The prevalence
of pandemics that are deadly disrupt the lives of customers of the
company socially, economically and politically such as Covid-19 who are
supposed to buy the products of the company. Troubled people do not
spend on comfort foods or luxurious foods bout on basic needs.

4.4Porter’s Five Forces.

4.4.1 Threats on New Entry.

It is claimed that Coca Cola is together with Pepsi Company oligopolies

in the non-alcoholic beverage industry( Grispy-Duff L Cameroon, 2022.)
Coca Cola is however dominating three-fourths of the market followed
by Pepsi. An oligopoly is when two firms dominate therefore making it
hard for a new entrant to come in especially in the global market. The
loyalty of consumers to the company’s brands cannot be easily destroyed.

The company has invested massively in plant, machinery, knowledge,

distribution and networks that it would be difficult for a new entrant to
infiltrate.

The trade secrets and patents registered in favour of the company do not
invite new entrants into the industry.

4.4.2 Competitive Rivalry.

Coca cola’s only competitor on carbonated soft drinks is Pepsi. Both

companies have diversified into other products however these products
are being produced by other big players such as Nestle.
 4.4.3 Threats of Substitution.

The substitution of carbonated drinks is fruit drinks, water, tea, coffee,

milk, therefore the threat is high. The company is however tapping into
these products directly and through new acquisitions.

4.4.4 Buyer Power.

Buyers of coca cola brands have minimal power to bargain concerning

prices mainly because they are products of choice. If the buying power
of consumers lowers it is expected that those who still can afford the
products would demand price reduction. The economic meltdown
currently prevailing may affect the buyer power of the company’s
products .

4.4.5 Supplier Power.

The company forms strategic partnership and agreement with suppliers

that have been maintained over a long period of time. It can only be the
unpredictability of weather, tsunamis, famine that can affect supply.

5. Complains of Obesity and Other Health Problems.

5.1Introduction.

The annual financial reports of the company of 2021 reports that the
success of Coca Cola largely depends on the company’s ability to maintain the
brand image it has of its existing products and the corporate reputation and social
license to operate. Product safety or quality issues actual or perceived, or
allegations of product contamination is a high risk that tarnishes the brand image
and also affects consumer preferences.

There is a growing concern among consumers, public health professionals and

government agencies about the health problems associated with the company’s
products, that the products contribute to obesity. Increasing public concern about
obesity, other health related public concerns about sugar – sweetened beverages
pose a great threat to the company.

Consumers lifestyle is changing, emphasis now on healthy living therefore

reducing or doing away with sweets, or sweetened substances. These consumer
preferences cause continuous harm to the profitability of the company and surely
many meetings have been held to deal with it.

These complaints against the company by activist concerning these issues and
other human right issues damage the brand of corporate image.
5.2Responses To The Complaints Concerning Consumers’ Health.

In response to the concerns of sugar, the company has introduced other products
that have zero or no sugar. This decision came with capital investment in order to
meet the needs and expectations the section of consumers that complain. The
company now offers reduced flow and low calories beverages across its brands.

The marketing strategy has changed to exclude children under twelve years old.
The advertising now provides transparent nutrition information featuring the
quantity of calories on the front of most of the packages on a range of packaging
size.

The marketing budget has been increased in order to do outreach to increase

awareness of the companies products. The company is the budget spender with a
fat budget for marketing.

On the company’s website the following information is reflected 900,000+ tons of

sugar has been removed from the global portfolio cumulatively; 18500 tons of
sugar removed on an annual basis through recipe changes in 2021. 96 recipe
changes to reduce added sugar in 2021. 242 low or no sugar products launched in
2021; 19 of top 20 brands are reduced sugar or zero sugar or have a zero -sugar
option, 28% of it’s volume sales in 2021 was low or no calorie.

5.3Applying The Strategy Diamond And The Five Elements Of Strategy

To Coca Cola Responses To The Complaints By Consumers.

The response of the company to petitions, complaints, activities and health

practitioners is well captured under the company’s strategy of innovation.
Whether or not this strategy will work can best be analysed using the five
elements of strategy.

5.3.1 Arenas.

The product catagories for zero or no sugar have already been rolled out in
Coke and fanta. The company has used the same bottling companies, same
partners, same distribution channels to sell these products. On top of this
change, the company has acquired full ownership of companies producing
other products such as tea, coffee, hydration products, sports liquids that
combines sport drinks and natural caffein. The company BODYARMOR
and its range of products has been acquired fully by the Coca Cola
company.

The new products are meant to appeal to a different customer base the
company struggled to appeal to before. The geographic areas of impact are
still the same however it is expected that these new products give an
advantage to the company to tap into new markets that ordinarily were not
responsive.
5.3.2 Vehicles.

The company uses the same structures in its new ventures. This means that
the new acquired companies and partnerships join a large network that is
already in existence thus enlarging sales and revenue. The portfolio is
extended to dairy products, nutritious juices, plant-based beverages and
sparkling water. The company may invest capital to their distributing
partners in order to enlarge its distribution of the new products as a decline
is expected of the normal range of products. This is the model the company
has been using all along, to empower its partners through capitalization,
systems upgrade and other assistance.

5.3.3 Differentiators.

The image of the packaging is constantly changed to appeal to different

generations almost constantly. The new products have been introduced
with a changed look in terms of colour and package designs. The
inscriptions ‘no sugar” or “zero sugar” are boldly printed on the face of the
products in order to be differentiated easily from the other products. The
packaging has also been changed to be made of material that is
environmentally friendly. These developments are widely published in
order to appeal to that sector of society that is concerned about sugary
drinks and the environment.

5.3.4 Economic Logic.

Failure to adapt to consumer preferences and the demands of the world

such as environmental concerns would be detrimental to the sustainability
of the company therefore the company has swiftly dealt with change. It is
economically viable for the company to continue to invest in its new
products that are accommodative of consumer preferences based on health
consciousness. It is also economically sound to adapt to causes of climate
change that affect the company’s raw material in water. The company has
spent $1.9 billion in social responsibilities.

The company is also capitalizing its green energy in solar energy in order
to curtail carbon emissions. Such investments are logically sound and
ensures the sustainability of the company.

Reduction of sugar levels in the company’s products does not entail

additional expenses but a decrease in production costs therefore
economically viable. It is however expected that the company will
continue to spend on research and innovation in order to continue to satisfy
its customer base with products that are needed.

The expenses incurred in improving the packaging of the new products is

recoverable from decreased productions costs therefore the company does
no incur a loss as a result of the introduction of zero or no sugar products.
 5.3.5 Speed.

The speed at which the company is responding to consumer needs seems

to be immediate. The company has already rolled out its new products and
there is an annual budget allocated towards its social responsibilities that is
ever increased

5.4Applying The VRINE Model To The Company’s Strategy To

Introduce Zero Or No Sugar Products.

Will the company be able to exploit its resources and characteristics in order to
continue growing and be competitive on the face of these challenges? We answer
this question using the VRINE model.

5.4.1 Valuable.

The available opportunities to diversify its products or add its production

lines by innovation or acquisition of new companies that are a going
concern, already producing and established is a valuable endeavor.
Marketing these products is not burdensome to the company because it
afford it. The company allocates the biggest budget than its competitors to
marketing in all the countries its products are consumed. The competency
of the marketing department or the company’s partners doing its marketing
is measured against the volume of daily sales the company makes.

The strategy of the company to recruit highly skilled labour and the
existing strategy of the company to retain staff ensures that knowledge is
controlled and that it benefits the company for many years of the life span
of its work force.

The social responsibility programs undertaken by the company amounted

to $109.2 million in the year 2021 across all countries where the company
does business. The company is dealing with issues of climate change
monetary and structurally thus increasing the value of their brands and the
value of the company for years to come.

The value of the brand is enormous therefore able to withstand tithing

problems that may be encountered in their new acquisitions and in the
introduction of new products. The relations that the company has over a
long period of time and the investments made in them makes the company
more valuable not only to end users of its products but to other businesses.
The company therefore is able to raise the necessary capital to fund its
research and innovation, to expand its portfolio and to strengthen its
production and distribution lines.

5.4.2 Rarity.

The amount of knowledge possessed by the company’s executives, senior

management and staff over decades the company has been in operation, its
 custom and proven success of its marketing strategies gives the company
an advantage that is rare from its competitors. The trade secrets protected
through registered patents ensures that the company’s products are
difficult to imitate or produce.

The company’s global inheritance of the market, its associations,

partnerships, distributions channels and global presence in all the
continents of the world means that it operates in multiplicity of revenue
streams, culture and acceptance. This is a rare resource that would allow
the company to adapt to consumer demands easily without being affected.

5.4.3. Inimitable.

The Coca Cola company is closely linked to non-substitutability by all

standards to any of its competitors. Its competencies in terms of skills,
systems, culture, standards, marketing, distribution and the trade marks it
has over its products makes it very difficult to imitate. It would be very
expensive and almost impossible to copy the products if their production is
the best kept secret as currently prevails.

5.4.3 Organization.

The structure of the company, culture, systems and methods have

outperformed the other competitors’ sales and share of the market. The
company enjoys a reputation of its name separate from the brand strength
and this is an asset to the company when its ventures into new productions
lines. Even if the new products are unknown, consumers would be willing
to try them because of the goodwill of the company.

The financial strength of the company enables it to explore markets that

were a preserve of the other competitors, like Pepsi territories. It is
expected that the company continues to strengthen its marketing strategy,
to improve its technology and innovation to the level of it strategic
ambitions. As the company makes new acquisitions it would not be
surprising to learn that Coca Cola is venturing into products that were
ordinarily a stronghold of other companies for instance the purported
venture into savory nuts is completely out of the normal.

6. Conclusion And Recommendations.

Using the different analytical tools for assessing coca-cola's strategy especially in
addressing the challenges of obesity and health concerns we realise that the
organisation is a very successful organisation that is highly valuable, its company
name and brands. We understand that the company has many competitive advantages
over its rivals. In fact, there is currently no other company that is able to match it's
record sales and it's vibrant marketing strategy that leads to astronomical profitability.
The only major rival, Pepsi Company is doing well in sharing some of the company’s
market.
The products the company sells are in the truest sense not rare however the company
holds secrets of production that may not be known by any other, if the company
continues to seal this information as it does now. The company’s trade marks and
patents rights are valuable assets to the company for its sustainability. To challenge or
overcome this advantage by competitors is very difficult. On the face of this
advantage, new entrants to the market would only reduce the market share but not
challenge directly the unique products of the company.

In order to strengthen this competitive advantage or position, the company may invest
more on its research and innovation to introduce more products that are unique to its
brand. Moreover, the company may strengthen it's hold of the trademarks and the
patterns it has over its products by improving its employee benefit schemes to
proprietorship or equity participation.

Further improvements may be made to the company’s supply chain system which
seems to be heavily reliant on the partners and distributors yet these relations are
independent in their operations. There is therefore a threat that if these relations were
to be strained the supply chain and its value would be disturbed. Competitors may use
this disadvantage to infiltrate the market and gain a market share that is not presently
available to them. The company may consider exacting more control on its
distribution channels.

There is a need to maintain and strengthen the strategic advantage of the company in
the market and that means the company should continue to invest in market research
and value addition of its products.

The responses that the company have offered in order to address concerns of medical
practitioners and the consumers of the sugar levels and the calories contained in their
products is positive. The company has responded swiftly by introducing products that
are zero or no sugar additions therefore retaining the brand value and consumer
loyalty. The much talked about threats as a result of climate change has instigated the
company to go green. The company’s campaign that was launched in 2010 is putting
the company on the map of responsible global citizens. The company's decision to
reduce its carbon emission by 15% annually is producing good rewards in terms of
brand value and consumer loyalty. The company's decision to invest in recyclable
material for its containers is highly recommended. The companies investment in
corporate social responsibility and the budget it allocates is well received however
there is room for improvement.

This study was limited in so far as tracing the usage of the budget allocated for social
responsibilities if it is allocated geographically according to business association with
the company or by any other criteria. It is of particular interest and perhaps a subject
for further research if the communities that do not hosts any part or major part of the
company but only consumers of the products are beneficiaries of the funds. I will
proceed on the basis that communities where the company’s businesses are not hosted
are excluded from benefitting.

The recommendation would be that the budget for social responsibility focuses on
social ills of the world and that allocation be done in consideration of not only factors
connected with the business of the company but to consider also other factors such as
general society ills. Poverty, access to medication, high death rates, lack of education,
oppression of vulnerable members of certain societies are some problems experienced
where the products of the company are consumed. It follows therefore that there are
continents that would benefit more from this budget such as Africa and parts of Asia.

WORD COUNT: 4597

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