Coca-cola

Table of Contents
Task 1.....................................................................................................................................................3
Task 2.....................................................................................................................................................4
Task 3.....................................................................................................................................................5
Task 4.....................................................................................................................................................8
Task 5...................................................................................................................................................11
APPENDIX............................................................................................................................................13
Market Share of Coca-cola..............................................................................................................13
Financial Data..................................................................................................................................14
Reference List..................................................................................................................................15
Plagiarism Report............................................................................................................................16
 Task 1

Name and describe your chosen company including the industry within which it operates,
whether it is a national or multinational organization and where it has a base or bases, its
main aims and objectives, products, and services.

One of the most prosperous and enduring companies in the history of the beverage industry is
Coca-Cola. Since its founding in 1886, the business has developed into a powerful multinational
selling its signature drink all over the globe (Pereira, 2023). Coca-Cola has 48 offices spread out
across the United States, with its headquarters in Atlanta.

Sprite, Fanta, Caffeine Free Coca-Cola, Diet Coke/Coke Light, Coca-Cola, Dasani, Minute Maid,
Dr Pepper, Coca-Cola Energy, Coca-Cola Zero Sugar, and Nestea are just a few of Coca-Cola's
top-selling non-alcoholic beverage and syrups. There are around 500 items of the company
which are sold in more than 200 nations around the world.

Coca-Cola's goals, objectives, and values (which are given below) are centered around its
mission statement, which reads, "To refresh the world, inspire moments of optimism and
happiness, create value, and make a difference."

 Their first aim focuses on how they strive to make their drinks have a refreshing taste.
 Coca-Cola genuinely intends to uplift the feelings of optimism and joy, as evidenced by
their new "Share a Coke" campaign.
 Coca-Cola actively promotes recycling of beverage containers and works with well-known
charitable organizations in order to fulfill its final stated goal, which is to "create value
and make a difference."
Word count: 208

Task 2
Explain how your chosen company generates revenues and profits and compare its size and
influence with others in the same industry.

The company uses several ways to make money such as:

 Selling its products to customers

The company’s flagship product, Coca-Cola, is one of the most bought beverages in the
world accompanied by Diet Coke, Sprite, and Fanta which are available in supermarkets,
convenience stores, restaurants, and vending machines.

 Licensing its brand and products

Coca-Cola has been able to license its brand and products to other companies such as its
bottling and distribution partners to generate additional income.

 Investing in other companies

The business has an extensive portfolio of investments across several industries, including
the food and beverage, healthcare, and technology businesses.

 Sponsoring events and partnerships

Some historical events such as Olympic Games and the FIFA World Cup, were sponsored by
Coca-cola. These sponsorships help to promote the brand to a global audience and
generate significant revenue for the company.

There are other rivals striving for supremacy in the market such as PepsiCo, Keurig Dr. Pepper,
Nestle, RedBull and StarBucks. Coca-Cola is well ahead with nearly 45% market share making it
a market leader (David, 2022). Refer to Appendix for the market share of the industry. Coca-
Cola successfully enters new markets with a cheap pricing approach and has a broad
distribution network that makes its product available worldwide, boosting revenues by
lowering costs and gaining market share.

Word count: 220

 Task 3

From the financial data provided and your calculation of ratios, identify trends and other
relevant measures of financial performance relevant to the health and progress of your
chosen company. Suggest reasons for the company’s performance eg profitability has
improved due to reduced operation costs and increased sales. Try to set your analysis in the
context and industry in which your chosen business operates.

Profitability Ratios

1. Coca-cola’s gross profit margin has increased in the second year from 42.3% to 46.6%
which clearly indicates that the business is making more money. The ratio suggests that
Coca-cola has effectively converted its direct costs into profits. The company is known for
persuasive advertisement which has resulted in higher sales and good distribution
network decreasing its cost of sales, thus increasing the gross profit.
2. Coca-cola’s operating profit margin has increased from 9.3% to 9.7% in second year
which is a positive change. As per the financial data, although the company has suffered
more expenses in the second year on distribution and administration but because of
higher sales and gross profit, the operating profit remained higher.
3. The third profitability ratio analyzes how effectively the company is using its capital to
make money. The decrease in ROCE from 16.1% to 14.5% is because of higher capital
employed in Year 2. The change in capital employed (23%) is more than the change in
operating profit (11%) causing this fall. Coca-cola has large cash reserves from issuing
equity; these reserves are included in capital though they might not yet be employed
overstating the capital and reducing ROCE.

Liquidity Ratio

1. Current Ratio is an evaluation of current assets and current liabilities which has
impressively jumped to 1.2 from 1.1 proving that it has increased its liquid assets.
Although the data reflects the increase in both current assets and current liabilities but in
year 2, the company has successfully increased its assets with a higher proportion.
 2. Short term liquidity of a company is determined by Acid test ratio by excluding inventory.
The remaining current assets have increased from £27000 to £41000 which is an
enormous rise. This increase has caused the ratio to go up from 0.8 to 0.9 proves that
Coca-cola is experiencing top line growth, quickly converting its trade receivables into
cash and achieving its financial goals.

Efficiency Ratios

1. For Coca-cola inventory turnover period has increased from 78 to 80 days now. This
means that previously it took 78 days to turn its inventory into sales but in year 2 the
days increased by 2. This is because of unchanged inventory value for 2 years whereas a
fall in cost of sales in year 2.
2. Generally settlement period for trade receivables should be low. However for Coca-cola,
as per the financial data, the period has increased by 30 days(from 83 to 113) which is
not a poor performance because in year 2 trade receivables have also increased by
£10,000 (from £22000 to £32000). This means that Coca-cola’s credit sales increased,
expanding its debtors. And as your customers grow you grant them more time to settle
their payments.
3. The opposite rule is applied for settlement period for trade payables. For the company
these days have increased from 137 to 159 days. An increase by 22 days is a good sign
which reflects that in year 2, despite buying more materials on credit from suppliers,
Coca-cola has more days to arrange money and settle its payments. This is because of the
vast image and brand.

Leverage Ratios

1. Debt-to-equity similar to gearing ratio measures the structure of capital of a company i.e;
how the operations are financed though loan or investment. The company’s ratio has
fallen by 0.1 which means that Coca-cola believes in less borrowing and more in
investment as a source of finance. The company has taken £3000 more loans in year 2
but has also increased its equity by more than double of the value £8000. It can be
 assumed by this that the company’s management is conservative who doesn’t like to
take risks.
2. The last leverage ratio measures how quickly and easily a company can pay interest on
the loan borrowed. The interest cover for Coca-cola has fallen from 4.5 to 2.5 which is
because of the additional loan borrowed by the company in year 2. The more the loan,
the more interest the company has to pay. The loans have increased by £3000 whereas
the interest on debt has likewise increased by £2000. This ratio advices Coca-cola to
increase sales and reduce interest expenses to meet interest obligations.

Cash-flow Analysis

Cash-flow statement is an essential report for a company as it is used by stakeholders to check

the performance of a company. Coca-cola’s statement shows that net cash-flow from
operations and financing activities both have increased in year 2, from 0 to £2000 and from 0
to £4000 respectively. However its cash-flow from investing activities have further decreased
from -2000 £ to -4000 £, this can be assumed because of the capital employed which has
increased. Nevertheless overall the company has been successful in changing its cash-outflow
of -2000£ to cash-inflow of +4000£ which shows a big achievement as proves that Coca-cola is
going in a right direction.

Word count: 808

 Task 4

Explain the core concepts of economics which your chosen company may use to help its
decision making. Discuss the microeconomic and macroeconomic factors which affect
demand for its products or services in the short and medium term. Describe the influence
that your company has on the pricing of its products.

While making decisions, Coca-cola can look onto these core concepts of economics.

 Due to an economic problem, not enough resources are available to meet everyone's
seemingly limitless wants, is explained by scarcity. This reality forces people to select the
most efficient methods of resource allocation to make sure that their top goals are
achieved. Water is a crucial ingredient in practically every Coca-Cola product and is vital
for the company's supply chain for agricultural products. The management can therefore
construct water infrastructure in communities close to Coca-Cola plants.
 The second concept is Supply and Demand, which is the primary model for determining
prices. Demand has a negative relationship with price, whereas supply has a positive
relationship. The Coca-Cola products can be defined as "normal goods," or goods whose
demand increases as consumer income increases. The company supplies products in
accordance with demand and price is set where supply curve and demand curve meet.
 The theory of rational choice is related to the concept of costs and benefits, and it can
also be used to make decisions that have nothing to do with financial dealings. Much
human behaviour is actually extremely emotional and serve no purpose other than our
own gain, contrary to the idea of economics that people are rational. Coca-cola can use
this model in making its managerial decisions which have more benefits than the cost of
the operation.
 Incentives means to offer a reward in order to increase the chances of a particular
outcome that is expected (Beattie, 2022). When some kind of reward is given, then
workers/employees tend to be more motivated in achieving a targeted goal. Coacola
can include some practices such as profit sharing, performance bonus or employee stock
ownership in order to motivate employees.
 Microeconomic Factors affecting Coca-cola’s Demand

 The impact of Customers

As Coca-cola is a normal good, the demand for it will increase if consumer’s income rises,
keeping prices constant. Customers' desire for Coca-cola won't be affected by a price
increase if they have a very strong preference for the beverage. Customers will purchase
more Coca-Cola in advance of the price increase so they can stock up if they anticipate a
short-term increase in price. Likewise, if customers foresee a short-term decline in the price
of Coca-Cola, they will not buy to store it.
 Level of Competition
This also affects the profitability of the business as the more competition a company has in
market, the less consumer spending percentage is expected on your good. Demand of Coca-
cola is affected by the prices of other competitor’s drinks for example if price of Pepsi
increases the consumers will start buying more Coca-cola increasing its demand.
 Time
Time is another important factor which affects demand. For instance, Coca-cola demand will
rise throughout holiday and summertime and is expected to fall during winters.
 Impact of employees
This is the workforce performing for you who if are rightly hired and positioned can uplift a
company’s model with skills and innovation. It is also important that these employees are
happy and motivated to produce quality products for the company. As Coca-cola hires only
experts who bring new each day, this is the reason that the company’s advertisements,
campaigns, networks all are managed well.

Macroeconomic Factors affecting Coca-cola’s Demand

 Inflation Rate
High inflation rates can be crippling to businesses by resulting in a negative effect on
customer’s purchasing power, inventory costs and foreign exchange. As the company is a
multinational dealing in various countries it must think of strategies to reduce overseas
expense because high prices of coke means less demand.
 Demographic population
Demand is also affected by the demographics of the targeted country in which the product is
bought. Age distribution of the population is included in the country's demographic
population. If in any country there are mode middle aged and young citizens and children
then it is likely that demand of Coca-cola will increase and opposite is also true.
 Technology
Technological developments influence a company on different domains of operations. The
better the technology is used, the more aware a customer will be with your product. Coca-
Cola used eCommerce as a tactic to connect with a larger target market; it uses modern and
advanced tools to connect with customers and increase demand.
 Political, Legal and Regulatory Influence
It is important to have a support from such authorities in order to run your business
smoothly, supplying goods to targeted audience on set rates to fulfill the demand of
customers. As Coca-cola is trading in many countries, the management has to be politically
active, following the laws of every different country in order to maintain peace and produce
its products and deliver them to demanding consumers.

As price gives company revenue that’s why it is essential which should not only benefit the
business but also satisfy customer. Although Coca-cola is the market leader, still it charges
prices similar to its rival. Pepsi and Coca-Cola face fierce competition; therefore neither
company's pricing can be too high or too low.

Coca-Cola considered the following elements while deciding on their pricing approach.

➢ Demand of public.

➢ Pricing objectives

➢ Competitors price

➢ Target market

Word count: 865

 Task 5

Use your analysis of your chosen company in the tasks above, comprising the financial
analysis, and understanding of the economic concepts and factors, to recommend and justify
a business strategy for your company for the next 5 years, focused on business growth and
sustainability.

To establish a distinctive identity in a given market, a producer employs differentiation as a

marketing approach. Delivering the message clearly, establishing your brand's credibility,
making an emotional connection with your target audience, inspiring the buyer, and building
user loyalty are all goals of good branding.

International marketing strategy means to perform on an established framework to generate

profits in different markets. This approach has a big impact on how well a global company
plans, promotes, price and distributes because an efficient marketing plan for an international
business can provide it a competitive edge.

It is known that Coca-Cola's approach is "glocal." This strategy is the combination of both
differentiation and international marketing strategies that are addressed above. Coca-Cola
appreciates having a recognizable brand image as well as establishing local practices that
enable them to generate and develop cultural diversity by achieving both features of each
strategy. Proud Coca-Cola is responsive to the needs of locals in addition to having a
recognizable brand. Different marketing tactics can be seen in different markets on the Coca-
Cola website. For instance, in Korea, a trendy young image is displayed with a photo of young
adults wearing modern clothing, in contrast to the website in Malawi, where the image
published is of a mature woman dressed traditionally (Banutu-Gomez, 2012). Coca-Cola
implied different branding and cost leadership initiatives relevant to the country it entered. For
western businesses, branding in China is a hurdle as Chinese linguistics can impact the meaning
and sound of a brand. When the company entered the mainland Chinese market, the
corporation changed its name to a phrase more ideographic than its original English name.
Peru is another case, where Coca-Cola instead of presenting itself a an American company
placed itself as a corporation run by Peruvians with headquarters in the Atlanta in order to win
trust of locals.
As the financial calculations indicate that the company has experienced low Return on Capital
employed which can be improved by either increasing operating profit or reducing expenses.
Coca-cola’s glocal strategy in its logistics can help with the utilization of independent bottling
facilities in the America and worldwide. By franchising this operation the parent corporation
can forgo capital expenditures on each of the bottling plants and hence increasing profits by
reducing costas. Additionally, it enables the use of locally sourced materials and ingredients,
which lowers the cost and enables minor alterations to be made to beverages to suit regional
tastes (Crain, 2022).

Although Coca-cola has done remarkably well in international markets still it struggles
nationwide. The company knows that Americans still prefer Pepsi over Coca-cola and is ready
to expand its name nationally through defensive measures that can maintain its loyal
customers and their purchases.

Word count: 451

APPENDIX

Market Share of Coca-cola

Financial Data

RATIOS FORMULA YEAR 1 YEAR 2

Gross Profit Margin (Gross profit/sales)×100 42.3% 46.6%
Operating Profit Margin (Operating profit/sales)×100 9.3% 9.7%
Return on Capital (Operating profit/capital employed)×100 16.1% 14.5%
Employed

Liquidity ratio Current assets/Current liabilities 1.1 1.2

Acid Test Ratio Current assets-Inventory/Current liabilities 0.8 0.9
Inventories Turnover (Inventory/cost of sales) ×365 78 Days 80 Days
Periods

Settlement period for (Debtors/credit sales) ×365 83 Days 113 Days

trade receivables

Settlement period for (Payables/cost of sales) ×365 137 Days 159 Days
trade payables

Gearing ratio Debt/Equity 1 0.9

Interest cover Operating Profit before Interest/Interest 4.5 2.5
Payable
Reference List

Banutu-Gomez, M. B. (2012). COCA-COLA: International Business Strategy for Globalization.

International Trade & Academic Research , 15.

Beattie, A. (2022, 5 28). Investopedia. Retrieved April 7, 2023, from

https://www.investopedia.com/articles/economics/11/five-economic-concepts-need-to-
know.asp#:~:text=At%20the%20most%20basic%20level,many%20decisions%20that%20humans
%20make.

Crain, P. (2022, 7 30). Cocacola as an example of Globalization. Retrieved 4 7, 2023, from study.com:
https://study.com/learn/lesson/coca-cola-globalization-business-strategies-case-study-
analysis.html#:~:text=One%20of%20Coca%2DCola's%20most,needed%20to%20produce%20its
%20products.

David, J. (2022). Competitors of Coca-Cola (Coca-Cola Competitor analysis.

Pereira, D. (2023, January). The Business Model Analyst. Retrieved April 5, 2023, from
https://businessmodelanalyst.com/coca-cola-business-model/amp/#Coca-Colas_Mission_Statement
Plagiarism Report