STRATEGIC MANAGEMENT REPORT

GROUP MEMBERS

NAWAL MERAJ (33)

S. AYESHA SADRUDDIN (59)

SEHRISH GHAFOOR (48)

BILAL HAMID FAROOQUI (11)

ANWAAR PASHA (69)

COCA-COLA PAKISTAN (CCBPL)SUBMITTED

TO:SIR M.

YAMMAN

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Table of Content

s

The Coca-Cola Company...........................................................................................................4

Coca-Cola’s Vision (2020).........................................................................................................

Coca-Cola’s Mission..................................................................................................................

Coca-Cola’s Values...................................................................................................................

Coca-Cola’s Goals.....................................................................................................................

Coca-Cola History.....................................................................................................................6

Coca Cola Pakistan...................................................................................................................8

Interview Session................................................................................................................... 10

Pest Analysis...........................................................................................................................12

Political Analysis.....................................................................................................................

Economic Analysis And Factors..............................................................................................

Social Analysis And Factors....................................................................................................

Technological Analysis And Factors........................................................................................

Industry Analysis (Beverage Industry)....................................................................................15

Strategic Analysis Of Coca-Cola Pakistan (Porter’s Five Forces).............................................17

Strategic Industry Analysis (Summarised)..............................................................................

Company Analysis.................................................................................................................. 21

Management Of Coca-Cola Pakistan......................................................................................

Swot Analysis (Coca-Cola Swot Analysis For The Year 2015)..................................................

Bcg Matrix..............................................................................................................................

Gap Analysis (Ansoff’s Matrix)................................................................................................

Financial Analysis...................................................................................................................

Marketing Analysis.................................................................................................................30

Coca-Cola’s Promise...............................................................................................................

Target Market........................................................................................................................

Product Range........................................................................................................................

Price Strategy.........................................................................................................................

Packaging...............................................................................................................................

Major Competitors.................................................................................................................

Sales Promotion Activities In Pakistan....................................................................................

Distribution Channels.............................................................................................................

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Additional Facilitation To Its Customers And Retailers...........................................................

Marketing Strategy.................................................................................................................32

Coca-Cola’s Marketing Strategies,..........................................................................................

Advertisement........................................................................................................................36

Competitive Analysis..............................................................................................................37

Coke’s Competitive Advantage...............................................................................................

Competitor Profile (Pepsi Co.)................................................................................................38

Organisational Difference.......................................................................................................

Product Competition..............................................................................................................

Challenges And Risks..............................................................................................................42

Corporate Social Responsibility (Pakistan).............................................................................44

Conclusion And Evaluation.....................................................................................................46

References..............................................................................................................................47

Appendix................................................................................................................................ 48

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ACKNOWLEDGEMENT

To the most High Sovereign, Allah, Who ordained this path for us, we express

our sincere thanks for the strength, wisdom, and every provision we needed to

make our efforts a reality.

Our heartfelt appreciation goes to Mr. Yamman Khan for seeing through all

the stages of this project. We wish to express thanks for your time, guidance,

critique and encouragement to press ahead with this work despite so many

conflicting pressures, without which this would not have been possible.

Lastly, but not the least, our sincere gratitude to our beloved families

for all the support, encouragement and patience they exhibited

throughout this study period.

Sincerely,

Nawal Meraj

Syeda Ayesha Sadruddin

Sehrish Ghafoor

Bilal Hamid Farooqui

Anwaar Pasha

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THE COCA-COLA COMPANY 1

Coca-Cola is one of the largest beverage producing company. It distributes and markets more than 500 non-alcoholic brands of beverages. The Coca-Cola Company is the world’s leading manufacturer, marketer and distributor of non-alcoholic beverages, concentrates and syrups. It was founded in 1886. The Company’s corporate headquarters are in Atlanta, with local operations in around 200 countries in the world. Although Coca-Cola was first created in the United States, it quickly became popular wherever it went. The real reason that Coca-Cola is a true global company is that the products meet the varied taste and preferences of consumers everywhere.

Its primary business runs around sparkling beverage brands like Coca-Cola, Diet Coke, Sprite and Fanta, but it also produces and licenses a variety of other beverages like waters, juices and juice drinks, enhanced waters, energy and sports drinks and ready-to-drink teas and coffees. The beverages being their trademarks are now currently sold in almost 200 countries worldwide.

Coca-Cola makes its beverages available to consumers around the world through its vast and efficient distribution systems. These are either company-owned or controlled bottling plants which conduct operations. Their distribution network also includes many independent bottling partners, distributors, wholesalers and retailers. Coca-Cola owns about 1.9 billion of the 57 billion serving of beverages of all types of drinks consumed worldwide every day.

The success of Coca-Cola has long and still possible because of its ability to connect with its customers in meeting their desires and lifestyle preferences by the consumption of various variety of beverages that is offers. It further is successful die to efficient teamwork of the company’s people working effectively in serving the customers every day.

1 The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/ [Accessed: 20 August, 2015]

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COCA-COLA’S VISION (2020)

“Be the outstanding beverage company leading the market, refreshing the world, inspiring moments of optimism and happiness, and adding value through excellence.”

COCA-COLA’S MISSION

“Build a sustainable and profitable business through refreshing consumers, partnering with customers, delivering superior value to shareholders and being trusted by communities.”

COCA-COLA’S VALUES

COCA-COLA’S GOALS

VALUES

PASSION

ACCOUNTABILITY

INTEGRITY

TEAMWORK

People and Organizational Leadership

Build a highly capable organization and be the employer of choice

Commercial Leadership

Profitably deliver superior value to consumers & customers at the optimal cost to serve

Supply Chain

To be the best in class consumer demand fulfillment organization that exceeds customer expectations highest in quality, lowest in cost, in a sustainable, socially responsible manner

Operational Excellence

Create a culture of Operational Excellence to support continuous improvement of our business process and systems

Sustainability

Ensure the long term viability of our business by being proactive and innovative in protecting the environment and be recognized as one of the most responsible corporate citizens by all stakeholders

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COCA-COLA HISTORY 2

During 1886, a pharmacist in Atlanta, Dr. John Pemberton, created a unique flavoured drink that could be sold at soda fountains. The flavoured syrup was mixed with carbonated water and served to the customers. Coca-Cola was sold for 5 cents per serving then and sales during the first year were on an average of servings per day. Today, daily servings of Coca-Cola beverages around the globe estimates to be 1.9 billion per day. Frank Robinson was Dr. Pemberton’s partner. He was his bookkeeper by profession but he is the one who named the famous drink as “Coca-Cola”. He also designed the script of the way the name of the brand is still showcased today3.

Dr. Pemberton passed away just two years after creating this world’s best-selling beverage in 1888. During these two years, he sold ports of his business to various businessmen, with Mr. Asa Candler, a businessman of Atlanta, having the majority interest. His leadership skills helped him to widen the distribution of Coca-Cola to soda fountain outside of Atlanta as well. By 1894, demand for Coca-Cola increased dramatically because of which Joseph Beidenharn installed a bottling machinery to make the drink more portable. He installed it just behind his soda fountain in Mississippi. In just five years, Coca-Cola’s large scale production and distribution began to take place. In 1899, three entrepreneurs, Benjamin Thomas, John Luptan and Joseph Whitehead purchased the bottling rights from Mr. Candler for $1 to exclusively sell and bottle Coca-Cola. This is when the worldwide distribution of Coca-Cola began (Mattes 1994).

The biggest challenge faced then was the duplication and imitations of the Coca-Cola by competitors who reflected inefficient packaging. Around 1000 bottling plants were operating at that time among the competitors of Coca-Cola5. In 1916, Coca-Cola bottlers decided that the unique drink needed a distinct and standard bottle and thus developed the famous contour bottle. The new bottle was easily recognizable as a distinct brand and made Coca-Cola a unique brand different from its competitors. In 1977, Coca-Cola trademarked its contour bottle (Mattes 1994).

Early marketing efforts of Coca-Cola were put to action through the distribution of coupons which promoted free samples of the Coca-Cola. As this type of promotion was innovative during the late 1880s, following this, newspaper advertising and promotional items were also distributed containing the Coca-Cola script to various participant pharmacies.

By 1970s, Coca-Cola started promoting its brand to reflect its connection with friends, fun and good times. In 1971, Hilltop Singers performed “I’d like to buy the World a Coke” and in

2 The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/ [Accessed: 20 August, 2015]3 The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/ [Accessed: 20 August, 2015]

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1979 the commercial featured a young fan giving Pittsburg Steeler a bottle of Coca-Cola with the slogan “Have a Coke and a Smile.” (Mattes 1994)

By the 1980s, memorable slogans like “Coke Is It!” and “Can’t Beat the Feeling” were featured. In 1993, when computers became popular, Coca-Cola launched a campaign featuring animated polar bears under the name of “Always Coca-Cola”. A series of these ads were launched in which each animated ad took around twelve weeks to produce from start till end. Polar bears were used in this ad to define the characteristics like mischief, innocence and fun, which was also an attribute of Coca-Cola beverage. Consumers were also engaged in this activity by giving them a chance to have their photos snapped with the seven-foot tall Coca-Cola Polar Bear at the World of Coca-Cola. The most famous of the advertising slogans in Coca-Cola’s history was “The Pause That Refreshes” which appeared in the Saturday Evening Post in 1929.

In 2009, Coca-Cola launched its “Open Happiness” campaign globally which denoted the main message of pausing to refresh with a bottle of Coke and then continuing to enjoy life’s little pleasures. This message was displayed through all advertising tools; it was seen on billboards, stored, TV spots and print advertising. It was also featured in the digital and music aspects, especially a single song by Janelle Monae of 1980 called “Are You Getting Enough Happiness?” (Mattes 1994)

The theme of Open Happiness also extended to games with “Open the Games”. In 2010, the Winter Olympics in Vancouver featured this and this also extended in the social media under the name of “Expedition 206”. In this three ambassadors of happiness traveled to 206 countries around the globe in 365 days with a mission of determining the reasons that make people happy. This journey has been shared around social media through blogs, tweets, pictures and videos.

Since many years, Coca-Cola is believed to be a brand signifying a bond between happiness and wellness. Coca-Cola has been successful in sharing happiness around the globe at many occasions through is Coca-Cola beverages.

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COCA COLA PAKISTA N 4

Coca-Cola established its facilities in Pakistan in 1953. It operates locally within Pakistan. Its products are produced locally, thus providing employment to hundreds of Pakistani residents. The company focuses its marketing and advertising specifically to Pakistani tastes and cultures. Coca-Cola Beverages Pakistan Limited’s (CCBPL) major shareholder is Turkey’s Coca-Cola Icecek (CCI). CCI is currently bottling and distributing alcohol-free beverages in Pakistan along with 9 other countries.

With Coca-Cola’s introduction, the following products of the company came along:

Fanta

1965

Sprite

1972

Diet Coke2001

Fanta Lemon 2001

4 The history of Coca-Cola Pakistan; Available at: http://www.coca-colajourney.com.pk/our-company/ [Accessed: 20 August, 2015]

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Besides these, Sprite Zero, Rani Float and Kinley Bottled water are also in company’s product portfolio. The company’s bottling plant is located in Pakistan in different regions, including Karachi and Islamabad. Its local office is also engaged in the marketing and advertising activities related to its products across Pakistan.

After arriving in Pakistan, Coca-Cola was bottles and distributed via independent franchisees. In 1996, Coca-Cola took the initiate to consolidate and acquire all the bottling plants and operate hem under the company’s own supervision. This process of acquisition was completed in 2006 and CCBPL became the only organisation responsible to bottle and distribute Coca-Cola products across Pakistan. CCBPL ensures that quality products are

delivered to its customers. This includes investment in the market, customer development, timely order and cash collections. By 2013, CCBPL has 6 bottling plants and 13 warehouses operating across Pakistan thereby serving its 180 million population via its vast distributors and retailers.

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Figure 1: Source: Coca-Cola Icecek

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PEST ANALYSISThe PEST analysis is an important mean to determine and study the market growth and decline in a given political and economic conditions, opportunities and barriers. It helps to evaluate the position, potential and direction for a business. Despite being a strong brand, Coca-Cola is influenced by the factors in which the business is operated. PEST Analysis appraises the existing fundamentals of a business in strategic context and effect.

POLITICAL ANALYSIS

The political factor is the degree of political intervention in the economy, for example the terms and conditions, laws and regulations, taxation policies, trade barriers and quality check and control are some important dimensions for business support and survival. The following factors affect the operations of the company in one way or another:

Political Instability and Strikes

CCBPL claims to have warehouses that stores cokes suffice to meet the demand in case of series of strikes and political disruption for 1-3 months.

Effect of Labour Laws

The union of CCBPL possess a detailed past of struggle. It started in early 2000 when the labour union was discouraged by the unfit management worthless negotiations. It was thus banned. Later with the revival of the labour union since 2010, the management guaranteed the effective social dialogue with the factory workers and took initiatives towards a procedural and institutional framework. However, despite of these efforts, we observed the unhealthy and unsafe working environment at Karachi plant. We found labours with no eye-wears in the glass bottling area moreover; the noise was too much to bear. It can be said that the management is nearly failed to attempt its procedural obligations.

Consumer Laws

It’s an essence of consumer law that a company should let its consumer know the content and nutritional information of their product. Many preservatives like ascorbic acid, aspartame and saponins are used in the manufacturing of the carbonated drinks, despite the fact that most of the proportion of the drinks is composed of carbonated water and sugars. The Coca Cola Company doesn’t reveal the composition of the concentrate it imports from USA and hence, is in vulnerable position in this regard.

Ability to penetrate emerging and developing markets

The ability to penetrate in the market or discover new market has direct relation with the political conditions, such as civil conflict and governmental changes. Coca-Cola's ability to form an efficient strategic business alliance with local bottlers is a crucial approach in this

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regard, along with its capacity to enhance their production amenities, distribution networks, sales equipment, and technology.

ECONOMIC ANALYSIS AND FACTORS

Economic Factor is composed of the variables like inflation rates, interest rates, taxation changes, GDP and exchange rates. Economic change have a major impact on a firm’s objectives and revenues for example, higher inflation stimulates employees to demand high wage. It also increases the costs of production. Similarly, a strong currency may hinder the country to successfully export its products worldwide.

Job Creation

Though its value cycle, Coca-Cola claims to boost job creation. It acts as a responsible organisation by contributing to the society by paying taxes, hiring local individuals, paying suppliers on time and engaging in community welfare projects.

Changes in Non-Alcoholic Business Era

CCPBL has come up with the competitive pricing policy and ability to maintain or earn share of sales in local market in order to compete its rivals specifically Pepsi.

SOCIAL ANALYSIS AND FACTORS

Social factors include the aspects like the reordering in social trends. Such amendments in wants, lifestyles and even some of the values can impacts on the demand and therefore, consumption for a firm’s product or any organization services and also the availability and willingness of people to consume that product. Social factors that affect the sales of Coca-Cola's products include the following:

Healthy Lifestyle Concerns

Media today, is fostering interest in healthy lifestyles. That has strongly influenced the sales within non-alcoholic beverage sector as many customers switch to mineral water bottles and fresh juices. In this regard, CCBPL has successfully come up with the products such as Coca-Cola Light or Zero that addresses the healthy diet concerns. However, the attitude of this segment of people towards the harmfulness of carbonated drinks doesn’t seem to be altered for the diet cokes either.

Also, as the baby boomers are aging, they are getting more conscious and more concerned about diet choices that will influence their life expectancy. This contributes to the increasing demand for healthier drinks on the non-alcoholic beverage sector.

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Adaption and cultural borrowing

Adaption plays a significant role in capturing the international markets. And willingness to adapt is a crucial attitude. Adaptation is a key concept at smaller as well as bigger levels of market accommodation. The Coca-Cola Company recognizes the need of affirmative action, that is, open tolerance to concept of being different and equal. The company realises that these differences exist and tries to understand and cope with them in a proper manner. The advertisement campaigns focus on relationships, family events and gatherings, festive occasions like Eid and music.

TECHNOLOGICAL ANALYSIS AND FACTORS

Following factors affect the company’s actual results which include:

Coke’s Marketing, Advertising, and Promotional Programs

The most evolving media for promoting the company’s products are through the TV, websites, and social media. CCBPL possess mind-blowing strategy to effectively promote their products through these channels that enhances its sales. It is reported that Coke Studio Session 8 raised the company’s sales by 42%. Its “Share a Coke” campaign in which customized bottles was introduced with various popular names created a buzz among consumers.

Access to the Internet

With the ease to access internet, social media has become a great mean to provide huge growth in consumer awareness, brand identity, promotions and direct-to-consumer Communication.

Packaging design

As the cans and plastic bottles were introduced, the sales volume increased with a great margin for the company because of the ease in carrying and disposing the containers.

New Equipment

Because the technology is continuously advancing, new equipment is constantly being introduced by CCBPL. Because of these new technologies, Coca-Cola's production volume has increased sharply compared to that of a few years ago.

Reduced Cost of Production

With the up gradation of technology and high levels of automation in manufacturing, volume production is being done that has reduced the cost of production.

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INDUSTRY ANALYSIS (BEVERAGE INDUSTRY)

The highlights of Pakistan’s beverage industry analysis is summarized below:

Pakistan’s beverage industry is emerging as a progressive sector About 170 units operating in this sector The beverage industry includes many divisions: Carbonated drinks, tea, milk-based

drinks, coffee, bulk water, juices and sports and energy drinks. Players in the beverage industry dominate different categories of these drinks based

on their specialization and target market. Based on gender classification, females are more inclined to consuming multiple

beverages than male5

Tea is more preferred among the adult male segment in terms of higher consumption.

Energy drinks are least consumed among both genders Healthy drinks (milk-based and fruit juices), which are regarded as ‘healthy’ are more

demanded by females Men (both age groups), consume greater quantities of soft drinks than females Tea is the most dominant sector in the beverage industry in Pakistan among all

socio-economic classes (Pakistan: 1kg per capita consumption compared to world’s 0.75 kg per capita)6

Serious competition is expected from emerging local players like Amrat and Gourmet due their competitive pricing strategies

Unlike tea, carbonated drinks like Pepsi and Coca-Cola are becoming a part of Pakistan’s festivities and celebrations

Fruits juices are emerging as a competing demand, as consumer are becoming more health conscious. The removal of customs duty and local quality fruit production has contributed to its growth. Majors players in this sector are Nestle Pakistan Ltd., Mitchells Fruits and Benz Industries

5 Pakistan Online Research Panel introduced by Dynamic Research Consultants; primary age groups-young adults (aged 16-22 years) and mature adults (aged 22 years above)

6 http://www.maverickpakistanis.com

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Opportunities in the Beverage Industry

No doubt, there is a bundle of opportunities and scope in Pakistan for the growth and development especially in the beverage industry.

Certain sectors that have revealed computable growth and the increased escalation in consumer markets are more likely to persist in the future as well.

Thriving consumer aspects and establishment of stronger brands with innovative and better-quality products has contributed towards the augmentation of beverage industry.

New competitors and local players can make use of the available aspects of the market (i.e. energy drink and juice) by strategically positioning their products and by going through innovative and effective marketing strategies.

By and Large, the coffee business remains idle.

Threats in the Beverage Industry

Like every business, Beverage Industry also has some major threats. The most intimidating threats are Political unsteadiness and unremitting militant movement because these are not only creating hindrances in foreign direct investment but also generating negative impacts in this industry.7

Competitive Landscape

The Pepsi and Coca-Cola are continuously investing in Marketing and promotional campaigns across Pakistan but if we talk about distribution network, as compared to Coca-Cola, Pepsi has the very strong distribution network. It is extensively available not only in the supermarkets or large grocery stores but also available in local shops, the Coca-Cola has a weak distribution network as compared to Pepsi, and this is the main reason that Pepsi is the largest soft drinks brand with a retail value sales share of 28%. Pepsi is the largest player in carbonates in Pakistan with the off-trade value sales share of 46% in 2014.

7 A recent report on Pakistani Food and Beverage Industry, dated January 20th 2014.

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STRATEGIC ANALYSIS OF COCA-COLA PAKISTAN (PORTER’S FIVE FORCES)

Porter’s Five Forces Model is used to scrutinize the exterior aggressive pressure to the Coca-Cola in this section. The five forces suggested by Porter that determine the profitability of the industry are:

1. New entrants to the industry2. Competitive rival sellers within the industry3. Strong threat of substitutes4. Low threat of suppliers5. Bargaining power of buyers.

A firm’s competitive actions and competitive responses are directly influenced by these five factors.

PORTERS' FIVE FORCES

LOW Threat of

New Entrants

STRONG Threat of

Subtitutes

LOW Threat of Suppliers

MODERATE Bargaining Power of

Buyers

STRONG competitive

Rivalry

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Low Threat of New Entrants8

There is backward integration in Coca-Cola and PepsiCo, therefore new entrants can’t locate bottlers to distribute soft drinks. The soft drink industry has low threat of new entrants because the cost of production including the cost of warehouses, trucks, labour and marketing activities is very high. The existing bottlers who have privileges in a certain geographic area in eternity are forbidden to captivate on new entrants in the soft drink industry because the existing bottlers have made agreements with the Coca-Cola and PepsiCo that they will not provide the bottles to the new entrants. The Coca-Cola and PepsiCo offered retailers the major margin of 15% to 20% to place their product in the front of the shelf. It is very difficult for the new entrants to persuade retailers to place their products in the shelf. Also the Coca-Cola and PepsiCo invests heavily in advertising from decades, so this is nearly impossible for a new entrant to advertise such heavily.

Strong Threat of Substitutes

There are various substitutes for Coca-Cola products including bottled water, sports drinks, coffee and tea. As in present, consumers are more conscious about their health, bottled water and sport drinks are becoming more demandable. This trend is exemplified in the beverage consumption pattern of the ageing baby boomers.

Low Threat of Suppliers

Commodity ingredients providers and bottlers are the major suppliers of Coca-Cola. The bargaining power of commodity ingredients suppliers is low. Moreover, the profitability of the Coca-Cola’s products are directly affected with an increasing rates of sugar and packaging material.

Coca-Cola is outsourcing the services of the independent bottlers in spite of bottling itself. The Coca-Cola Enterprises is the largest bottlers in the world. In the earlier 2010, the Coca-Cola Enterprises is incorporated by the Coca-Cola. As the company keeps up with the changing taste of people, it can have an enhanced distribution network and more rapidly marketing of products. Over the next four years, the Coca-Cola expects to save $1400 million. Therefore the suppliers have weak bargaining power.

Moderate Bargaining Power of Buyers

The buyers of coca cola have a larger bargaining power. The company sales its products to the large grocery stores such as Metro, Makro, Imtiaz, Naheed, Chase etc. Convenience stores, restaurants in bulk for reselling purpose. Therefore the buyers have strong bargaining power. As grocery stores, supermarkets, convenience stores, restaurants buy the soft drinks in larger quantity therefore they bargain at lower price.

Strong Competitive Rivalry9

8Brand Keys, Inc. (2010), Brand Keys Customer Loyalty Leaders 2010. http://www.brandkeys.com/awards/leaders.cfm

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The greatest challenge that Coca-Cola face is the competitive pressure from rival sellers. PepsiCo is the main competitor for Coca-Cola and these two brands have been in a power struggle for more than a century.

Although Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite), PepsiCo dominated North America with sales of US$22billion, while Coca-Cola only had about US$7billion, However, Coca-Cola has higher sales in the global market than PepsiCo.

If we consider brand loyalty, Pepsi has more loyal customers than Coca-Cola. Diet Pepsi has highest ranking in diet soft drinks. Pepsi coke has highest ranking in regular coke. Whereas diet coke which is the highest ranking brand of Coca-Cola has very low ranking as compare to Pepsi according to the Brand Keys Customer Loyalty Survey.

9 Interbrand (2010). Best Global Brands 2010. http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/bestglobal-brands-2010.aspx

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STRATEGIC INDUSTRY ANALYSIS (SUMMARISED)

Competitive Firms: Pepsi Co, Gourmet (Emerging)

Barriers to Entry and Success: High fixed costs of warehousing, production, marketing and distribution; supplier contracts.

Industry Concentration Level: Very concentrated; global market share dominated by Pepsi Co, and Coca-Cola.

Influence of Industry Capacity on Pricing: Very little. Pricing of Coca-Cola’s products are not determined by their level of production, rather their level of advertisement and the strength of their brands,

Industry Stability: Stable; market share adjusts gradually.

Business Life Cycle: The industry is in maturity stage; population change contributes to increasing growth of the company.

Level of Competition: Pepsi remains the strongest competitor to Coca-Cola’s brands.

Government Influences: Not much. Prices and delivery of products remain mostly stable;

Social Influences: Consumers are becoming more health conscious and are becoming aware of consuming excessive amounts of carbonated drinks. Inclination towards healthy juices and drinks is expected.

Influence of Technology: Moderate; Continuous supply chain upgrading and tracking mechanisms will keep the company on top of the competition.

Sensitivity of the Business Cycle: Non-cyclical. Demand for Coca-Cola’s products are stable.

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COMPANY ANALYSISStakeholder Participation in Management

Coca-Cola’s stakeholders are defined any person or group that if affected by the operation and activities, decisions and policies of the company. Several platforms have been establishes by the company to take its stakeholders’ opinions into considerations when making important decisions.

Table 1 : Source: Coca-Cola Pakistan (CCBPL)

Stakeholders Dialog Platforms

EmployeesEmployee Engagement and Satisfaction Survey, press reports, training programs, leadership development trainings,

Distributors/SellersDistributor meetings, Process improvement studies, regular visits, training programs, plant visits, Distributor portal, Call Centre

ShareholdersPublic Disclosure Platform (PDP), General Assemblies, website

CustomersTrainings, support programs, regular visits, plant visits, Coca-Cola Customer Road Show, Customer Satisfaction Survey, CCI Call Centre, Focus group studies

SuppliersTraining programs, improvement audits, plant visits, supplier days, supplier performance scores, supplier surveys, cooperation portal

InvestorsAnnual report, investor conferences, analyst meetings, website, webcast, e-mail distributions, feedback forms

UnionUnion representation, collective labour agreements, visit to plants

Media regular visits, website, plant visits

ConsumersCoca-Cola Call Centre, website, informative publications, plant visits, product labels

Society

Donations, website, plant visits, support programs, voluntary practices, Coca-Cola Call Centre mass communication, product labels, advertisement and marketing activities, environmental training sessions.

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Human Resources Policy

Building of highly capable organization is the main aim and policy of CCI human resource. It also aims to become the employer of choice. Due to continuous development of CCI Human Resources Policy, it lies in the below mentioned strategic priorities:

Building of key organizational capabilities systematically Encourage the development of high performance of workforce Develop a nursery of highly talented and skilled workforce in order to fulfill future

leadership bench strength Building of one company culture in an inclusive way

Possible Role Assumed by HR Function

Figure 2: Strategic Role of HR at Coca-Cola

By doing analysis with the help of above diagram Coca-Cola places themselves in the quadrant of change agent. They are initiators, rather than followers. They are highly focussed and aimed on their employees in the strategies which they have made in order to sustain their growth in the market.

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MANAGEMENT OF COCA-COLA PAKISTAN

Figure 3: Organizational Structure of Coca-Cola

The whole Pakistan has been divided by CCPBL in two regions. First one is southern business unit (SBU) and central business unit (CBU). SBU General Manager monitors Karachi, Rahimyar khan and Multan plants while CBU General Manager aims to monitor Lahore, Gujranwala, Rawalpindi and Peshawar plants.

The whole Pakistan is divided on the basis of its geographical regions and both the units including SBU and CBU are controlled and monitored by a Country Manager.

Supply Chain

In order to be the best in class consumer demand CCPBL tries to deliver highest in quality with lowest cost in a most socially responsible and sustainable way.

Operational Excellence

CCPBL tries to develop a culture of operational excellence in order to support continuous improvement in their business system and process.

Sustainability

Coca Cola is listed in New York Stock Exchange with the abbreviation of “KO”.

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CCPBL also ensure the reliability of their business by acting proactively and implement innovative ideas in protecting environment and tries to recognise their brand name as one of the most responsible corporate citizen by all stake holders.

In New York Stock Exchange Coca Cola company is listed with the name of “KO”.

CCBPL CAPABILITY DEVELOPMENT WING

One of the main pillars of CCI’s Vision 2020- People and organization Leadership is the CCBPL capability development. This capability development wing of CCBPL focuses on the organizational competencies in order to meet the requisite bridge of skill and talent which aims to create superior performance and also to create training and design such type of plans for their employees which enhance their development, experience and required skills.

Figure 4: CCBPL Capability Development

TYPE OF ORGANISATION

A top down approach is followed in Coca Cola in order to maintain a quick communication among the members.

Formal Communication

At all levels of organization there lies a proper flow of information in a systematic way

Top-Down Communication

Downward flow of information is maintained in Coca Cola

Top Management Makes the Decision

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All important and necessary information is passed among the group member through the head of department.

(SWOT ANALYSIS (Coca-Cola SWOT Analysis for the Year 2015)

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1. It is the number one beverage in terms of distribution and sales and value ($77,389 billion).

2. Its portfolio comprises of famous brands like Coca-Cola, Kinley, Fanta, Minute Maid, Limca, Maaza, etc.

3. Globally present and has reach in almost 200 countries.

4. It has more than 500 brands to offer

5. Employees almost more than 150,000 people globally

6. Coca-Cola carries an effective and strong supply chains which ensures that its products are delivered and available even in the most remote places.

7. Financially strong

8. Maintains strong brand recall by associating their brands with brand ambassadors and celebrities through advertising and marketing.

9. Socially responsible: Taken CSR initiatives in the avenues of education, recycling and water conservation, health, etc.

10. Gives emphasis recycling and reusing through its efficient and effective packaging and disposing techniques.

11. The brand has long been associated with scholarships, donations and international sports.

12. Customer Loyalty

13. Bargaining power over suppliers

1. Traces of pesticides found in the cola beverages had damaged the image of the brand.

2. PepsiCo is a strong competitor in the aerated drinks industry and thus constant competition runs between them for market share.*

3. Absence in the food and snacks industry.

4. Negative publicity

STRE

NGH

TSW

EAKNESSS

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The SWOT analysis of Coca-Cola highlights the company’s major strengths, weaknesses opportunities and threats. A critical reason for conducting a SWOT analysis is to observe in one go the strengths of the business that it can utilize effectively to manage the opportunities in the environment. In addition to this, a company can gauge its weaknesses and try to work on them to make it their strengths. Threats highlight the areas where a business needs to take careful measures when making business decisions.

*How Coke Pushed Rivals Off the Shelf, New York Times, Aug 6, 2000.

**Coke Adds Life to Sales, Profit after Losing Fizz in Late ’90s; Outlook for drink company brightens with restructuring and U.S. economic recovery. The Los Angeles Times, Apr 10, 2002.

1. Takeover and acquire other companies to enter other industries.

2. Reach untapped markets and countries where Coca-Cola has not been introduces yet.

3. Market and promote the less known products of the portfolio.

4. Diversify into other industries like snack market to beat PepsiCo.

5. Lower threat of forward integration due to the strong supply chain network, high-cost manufacturing machineries required.

6. Advance technological progression

1. Health reports claim Coke is harmful to health; Consumers have become health conscious.**

2. Compliance with regulations and laws of various countries in which they operate and distribute.

3. Economic slowdown, inflation, currency instability, etc.

4. Head-to-Head competition with PepsiCo.

OPP

ORT

UN

ITIE

STHREATS

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BCG MATRIX

STAR

RANI FLOAT

QUESTION MARK

SPRITE 3G, KINLEY

CASH COW

COKE, SPRITE (RGB), FANTA ORANGE

DOG

MINUTE MAID TROPICAL, MINUTE

MAID NIMBU, FANTA CITRUS

BCG MATRIX

“RELATIVE MARKET SHARE”

“MARKET GROWTH RATE”

HIGH

HIGH

LOW

LOW

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GAP ANALYSIS (ANSOFF’S MATRIX)

Market Penetration

Regular Glass Bottle (RGB)

Product Development

Kinley

Market Extension

Diet Coke

Diversification

Rani Pulpy, Rani Float

ANSOFF'S MATRIX

“PRODUCTS” NEW

“MARKETS”

EXISTINGNEW

EXISTING

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FINANCIAL ANALYSIS

Coca-Cola believes in its strategic initiatives to create consistent value. The key value drivers for the company are: Growth profitability, efficient leveraging of marketing and operating expenses, and efficient capital structure.

Growth Profitability

Coca-Cola focuses on its marketing and innovativeness to support its strong brands in the markets targeting to the huge numbers of customers base for promising growth. The company is on continuous improvements to increase its brand portfolio matching to its relevant markets. The company aims to achieve both volume and value growth to create profitable margins in the lower-margins countries. But partnering with its bottlers, Coca-Cola aims to harness its tailored channel, brands, prices and packaging strategies to achieve profitable growth.

Efficient Leverage of Marketing and Operating Expenses

Efficient leveraging of marketing and operating expenses by Coca-Cola will be achieved by efficiently harnessing its supply chain. With the implementation of its integrated supply chain system in 2003, by partnering with its bottlers, Coca-Cola centralized its logistics and production activities and realized efficient procurement in Japan, China and North America by 2004. The lower costs incurred due to supply chain efficiencies improved the companies supply economics. The company is focused on the future to consolidate its operations, thereby reducing redundancy in its efforts and transactions, and improving in-market executions. This will simply its decision making procedures thereby increasing its reactions to market changes.

Efficiency of Coca-Cola’s Capital Structure

One of the strategic objectives of the company is also to efficiently utilize its cost of capital. Being a well-recognized company since more than 100 years, the company gains from low transactions costs when it comes to raising additional funds and borrowing. The increase in the company’s cash flows enables it to increase its frequency of share repurchases. The company intends to promise increase in dividends in the future as well.

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MARKETING ANALYSIS

COCA-COLA’S PROMISE

Coca-Cola’s main theme is to live on the concept of togetherness which brings families and friends close to each other, celebrating festivals and rejoicing. It focuses on relationships and friendships, creating bonds of love and togetherness.

TARGET MARKET

Coca-Cola’s main target customers are families units and individuals enjoying their time with friends.

PRODUCT RANGE

In Pakistan, Coca-Cola offers eight products namely, Coke, Sprite, Sprite Zero, Diet Coke, Fanta Orange, Fanta Lemon, Rani Pulpy and Ran Float.

It offer its products in the following quantities:

1 and 1.5 liter Plastic bottles and

Standard sized glass bottles (returnable)

Disposable or non-returnable bottles

Cans (330ml)

PRICE STRATEGY

When the company commenced, it followed “cost-based pricing”. Currently, Coca-Cola’s pricing strategy is “competitive pricing”.

PACKAGING

Coca-Cola offers its customers various packing sizes for different quantities of the drink: 1.5 liter bottles in packs of 6 Pack of 24 cans Pack of 12 bottles (600 ml- disposable) 24 regular bottles pack

MAJOR COMPETITORS

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In Pakistan, Pepsi Co. is the only large scale competitor against Coca-Cola. Product to product competition is witnessed among them. For example, Coke competes with Pepsi, Sprite with 7UP, and Marinda with Fanta.

SALES PROMOTION ACTIVITIES IN PAKISTAN

Coca-Cola caries out extensive promotional activities across the country. These include concerts, cricket, Food Mela, Basant Festival, Ramzan Campaign, Shopping Festival and a lot more. It also includes joint-promotional campaigns with Nokia, McDonald’s, OPTP and Maaza.

DISTRIBUTION CHANNELS

The Coca-Cola Company operated its distribution in two ways: Direct selling and indirect selling. Through selling, the company uses its own transportation facilities to distribute its products to its customers. Currently, 450 registered vehicles are operating on Coca-Cola’s distribution channels. Through indirect selling, the company hires its own agencies and wholesalers to reach far-off localities. Company’ major earnings are derived from direct selling.

ADDITIONAL FACILITATION TO ITS CUSTOMERS AND RETAILERS

The company also provides additional facilitates to it retailers and customers to enjoy refreshingly cold beverages:

The facilities include:

Shells and free empty bottles Cooling freezers Faculty of display racks Visi Coolers

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MARKETING STRATEGY

Coca-Cola’s local marketing strategy is to create the essence in the minds of consumer to recall Coke’s soft drinks for every occasion and which satisfies a range of taste buds. Consumers look for personification; a brand that reflects who they are, their lifestyle, where they exist and their mediums of relaxation. Coco-Cola’s motive is to make best quality beverages and along that, also contribute towards the societies through its commitment in wellness, education, health and fitness.

Coca-Cola’s marketing budget made up 15.2% of the total revenues in 2014. This accounted for one of the largest budgets compared to its competitors4. PepsiCo, however, used its marketing budget very effectively as it generated $66.4 billion in revenue from only $3.4 billion expenditures in marketing7. The following table shows the marketing expenses of major beverage producing companies in 2014:

Marketing expenses for major beverage companies in the year 2014

Company Marketing expenses

Total revenue % of total revenue

The Coca Cola Company $7 billion $45.998 billion

15.2%

PepsiCo Inc. $3.9 billion $66.683 billion

5.8%

Dr. Pepper Snapple Group Inc.

$3.7 billion $6.121 billion 60.4%

Nestlé S.A. $19.8 billion $92.3 billion 21.5%

The company, however, faces several challenges in terms of its products being not healthy. Obesity has been a major problem among its consumers. Consumers are becoming more health conscious and carbonated beverages are causing obesity among consumers. This is causing a serious threat to Coca-Cola’s sales and future production as a major portion of Coca-Cola’s production is based on carbonated beverages. Coca-Cola has also faced several lawsuits due to vast amount of water consumption to produce Coke in water-deficient areas. Furthermore, the company has also faced opposition and accusation from the public for mixing pesticides in the waters to decontaminate it.

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COCA-COLA’S MARKETING STRATEGIES10,11

Marketing places a major role in getting the product from the manufacturing shelves to the retailers’ shelves. It is to transfer the right product to the right consumer and at the right place and time. In creating a proper marketing mix strategy, Coca-Cola has always been successful.

Coca-Cola’s journey dates from being a cocaine-infused medicine in 1886 to a unique sugary drink by 1929. Having being recognized as brand reflecting fun, friends and good times, Coca-Cola has adopted several design and marketing strategies from the 1920s onwards.

Coke remained with its distinct flavour, although cocaine was removed from the Coke in 1903. Besides the “New Coke” mistake that took place, the recipe remains a secret and unchanged still. This is the reason consumers prefer Coke due to it long connection from that time till today.

Coca-Cola’s logo stays with the enduring fancy font. The Spenserian script, which was used by accountants back then, distinguishes the Coke from its competitors. The logo was finalized and standardized in 1923 and was decided that it remained unchanged. The packaging, however, has changed with the passing time. The logo is still imprinted on the minds of consumers since 100 years till today.

Coca-Cola differentiated itself from the competition by selling its beverage in a unique-shaped bottle. The shape of the bottle was inspired from the shape of the cocoa plant. Coca-Cola promotes the design of the bottle as much as the logo and the product itself.

10 Staff J. (2015) “Responsible Marketing” Available at: http://www.coca-cola.co.uk/about-us/responsible-marketing/11 The Coca-Cola Website (2015). “Programs and Promotions” Available at: http://www.cokesolutions.com/MarketingTools/Pages/Site%20Pages/Programs%20and%20Promotions.aspx

Figure 5: The "New Coke" mistake of 1903

Figure 6: Evolution of Coke glass bottle

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The Coca-Cola Company effectively incorporates the efforts of its entire supply chain to bring the best product to its customers. It educates its retailers to serve the drink at not more than 36-degrees. This is an attempt to make Coke a premium product and thus attract more consumer attention.

Coca-Cola associated its product more closely into people’s lives. The brand developed a personality which spoke for itself. The company provided its retailers with posters, pamphlets, and imprinted its designs on calendars and decorations and giveaways. This was a technique of word-of-mouth marketing.

The company adopted a franchise model approach to penetrate the market and eventually go global. It issued bottling rights to bottling plants which then further added soda water and sweetener to the drink. Today, more than 250 independent bottlers are operating around the globe. The company claims itself as a system of small companies rather than one big giant company.

The latest marketing strategy unveiled by Coca-Cola in for 2015 was its shift from producing brand-specific ads to promoting all its variant products under one brand name. It is planning to bring all its four distinct brands under one marketing label: Coca-Cola. The four distinct brands are Classic Coke, Coke Zero, Coke Life and Diet Coke. With this strategy, the portfolio of Coca-Cola will tend towards unification rather than diversification of brands. The reason behind this shift in marketing strategy is more towards raising the sales of Coke’s low calorie and less-sugared brands. Instead of spending a separate amount of the budget to market these products, if brought under a single roof of Coca-Cola’s marketing label, all four brands can be promoted at once. Coke is in way to increase the brand equity for its other related low sugar beverages as well.

Figure 7: Unification of Coca-Cola's Brands

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Since May 2015, Coca-Cola’s advertising campaigns have started featuring all four products of its portfolio. In the adverts, the final frames display the lower and no sugar variants of Coca-Cola, while the tagline of “Open Happiness” has also been replaced by “Choose Happiness.” This campaign has been launched in Great Britain to increase consumers’ awareness about the complete range that Coca-Cola offers to them. This strong association of the four brands under one master umbrella of Coca-Cola will help to boost sales and increase shareholder wealth in the coming periods.

Coca-Cola has successfully implemented its “Share a Coke” campaign around the globe. The company distributed bottles of coke having names of people printed on the label to share with one another. This was a great way of engaging customers towards buying Coke for one another. The common names included Mom, Dad, Father, Mother, Brother, Sister, Husband, Wife, BBF, John, Susan, Albert, Joseph, Brian, etc. This was launched all around the world with great response received for the public. A recent television commercial in Pakistan is featuring the same “Share a Coke” campaign but with lines of songs printed on the bottle. The mission behind this is to say what the heart has to say through songs.

Coca-Cola has based its business functioning from the beginning on a universal strategy which is based on three underlying principles of acceptability, affordability and availability. Acceptability principle guide Coca-Cola to effectively market its brands and make them a part of the daily lives of people and make Coca-Cola the most preferred beverage around the globe. Coca-Cola, under its affordability principle, promises that it offers the best price to its consumers for the value they deliver. Under the acceptability principle, Coca-Cola ensures that its brands and products are available wherever people want to feel refreshed and share happiness among one another. This type of strategy can be termed as pervasive penetration strategy for the marketplace.

Figure 8: "Share a Coke" Campaign (Pakistan)

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ADVERTISEMENT

One of the greatest strengths of Coca-Cola are its marketing and advertising capabilities. The annual spending of Coca-Cola on advertising in 2014, 2013 and 2012 was $3.499 billion, $3.266 billion and $3.342 billion respectively. Coca-Cola put up as the largest advertiser in the beverage industry for the year 2014 around the world. It advertising expenses accounted for 6.9% of the total revenues each year12.

The following tables compares the advertising budgets of largest beverage producing companies:

Yearly advertising budget for major beverage companies during the years 2012 to 2014 13

Company 2014 2013 2012

The Coca Cola Company $3.499 billion $3.266 billion $3.342 billion

PepsiCo Inc. $2.3 billion $2.4 billion $2.2 billion

Dr. Pepper Snapple Group Inc. $473 million $486 million $481 million

Coca-Cola’s huge advertising budget gives the company an edge over its competitors in the following ways:

Promotion of brands and products can be done more effectively

New products can be brought to the market and company can develop greater reach

New product features can be communicated to the consumers via various marketing and promotional mediums

Company’s brand message reaches the public efficiently and accurately

Sales increase progressively

The company uses various mediums to carry out its advertising activities; Billboards and holdings, regular television commercial, POS materials, Give-Aways, and Print Media (posters, stickers and banners).

12 Investopedia. (2015) “A Look At Coca-Cola's Advertising Expenses”. Available at: http://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-expenses.asp

13 http://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-expenses.asp

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COMPETITIVE ANALYSISThis section explains the Coca-Cola Company’s competitive analysis with its competitors which includes internal competitive analysis and external analysis as well.

COKE’S COMPETITIVE ADVANTAGE

The unique features that a company’s product may have or any set of skills or abilities in the form of technology or other factor that are perceived by the target market as significant and superior to the competition is termed as competitive advantage. It is the reason behind brand loyalty and why consumers prefer one product or service over another. Companies may be enjoying one of the three different types of competitive advantages. These are product or service differentiation and cost advantages.

Coca-Cola enjoys sustained competitive advantage in terms of its innovativeness and huge business model. It also includes its integrated wide distribution networks. Even after 120 years of survival, Coca-Cola’s stocks are most traded and sought stocks that are listed on the New York Stock Exchange.

Key factors that can be considered as the company’s competitive advantage are listed below:

Coca-Cola’s secret recipe tastes better than most carbonated drinks. The company has 500 brands operating in almost 200 different markets. Its vast

reach and continuous products improvements and developments retain customers. Its wide and extensive network to distribute products to billions of people. The data

and supply remains well integrated. High profits margins due to efficiency production techniques applied.

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COMPETITOR PROFILE (PEPSI CO.)ABOUT PEPSICO

PepsiCo started its operations in Pakistan in 1967. By 1980s, it was dominating Pakistani taste buds with successful, brands such as Pepsi, Mountain Dew, Mirinda and 7-UP. Today, Pakistan is consider to be the sixth largest global platform for its brands. PepsiCo’s Frito-Lay introduction in 2006 made the company the leader in potato snacks production and distribution as well by adapting to the country’s local flavours like Chaat Masala, Kurkure Chutney Chaska, Red Chilli, etc.

ORGANISATIONAL DIFFERENCE

Table 2: Source: Coca-Cola Pakistan

COKE PEPSIParent Company Coca Cola Company Pepsi CoTotal Sales 450 Million (globally) 324.58 million(globally)Products Coca Cola, Fanta, etc. Pepsi, 7 Up, etc.Distribution Through retail malls,

grocery shopsThrough retail malls, grocery shops

Sponsorship Various events such as cricket matches, movies, festivals

Various events such as cricket matches, movies, festivals

Production Company produce syrup concentrate which it sells to bottlers throughout the world

Contains carbonated water, high fructose corn syrup, sugar, calories, phosphorus acid and natural flavors

Founder Originated in 1886 in US by Dr. John S. Pemberton

Caleb Bradham, a pharmacist and industrialist from New Bern, North Carolina

Market Share14 36% 60%

14 Estimated.

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Figure 9: Brand Wars

PRODUCT COMPETITION

Table 3: Source: Coca-Cola Pakistan

Features COKE PEPSIBar weight 10 Fl OZ (200ml) 10 Fl OZ (200ml)Calories 121.5 150Carbohydrates (gm) 33.75 34.5Flavors 2 2Price/Bottles Rs. 25, 35 etc. Rs. 25 , 35, etc.Product Claims All foods and beverages can

fit into the healthy balanced diet when consumed in appropriate proportion

Offers beverages that resorts to the customer’s expectations and make it more enjoyable for them to lead healthier lives

Target Consumer Children, adults, younger generation and sports personality and celebrities

People from younger generation, sports personalities and celebrities

Distribution Grocery stores, shops, malls, etc.

Grocery stores, shops, malls, etc.

Brand Positioning Refreshing, family togetherness.

Freedom, individualism.

Source: Coca-Cola Pakistan

Results for 2015

In fiscal year 2015 PepsiCo is expecting growth of 7% constant-currency core earnings-per-share. It has been a trend in PepsiCo over the past years of understating its growth. In 2013 PepsiCo expected a growth of 7% in constant-currency core earnings-per-share as well but in 2014 company earned growth of 9% in constant-currency core earnings-per-share.

PepsiCo did well in growing its revenue per share and dividends per share at around 9% over the last decade. We believe on the base of its 2015 Guidance of PepsiCo (which is likely understated) will continue to grow at around 9% a year.

There are 22 brands of PepsiCo which generate over $1 billion per year in sales. If we divide these brands then they will fall in 3 categories.

1) Carbonated beverages

2) Non- Carbonated beverages

3) Snacks

The following tables shows each of PepsiCo’s billion dollar brands by category.

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Carbonated BeveragesNon-Carbonated

BeveragesSnacks and Food

Pepsi, Mirinda Gatorade Lay’s

Mountain Dew Lipton Doritos

Diet Pepsi Aquafina Cheetos

7 Up Fritos

Almost 50% of the revenue that Coca-Cola generates comes from its snacks and foods and while the rest from its beverages sector. PepsiCo owns the markets most recognizable and marketed brands within the snacks sector. PepsiCo has partnered with several brands to jointly sell its products in the market. The company occupies large shelves at many locations, including gas stations, convenience stores, supermarkets and groceries.

Efficient Capital Structure

Keeping in mind the popularity of PepsiCo’s snack brands in emerging markets, this company is surely positioned for growth in the future. PepsiCo’s total shareholder returns are expected to increase by 11.6% per annum of which shareholder value and dividend yield will be around 9% and 2.6% per year respectively.

While everything may seem good regarding PepsiCo’s shares, its valuation is a drawback. The share value is not extremely high, but the price-earnings ratio (21.6) is greater as compared to its historical average. At current, shares of PepsiCo are being traded at roughly 10% premium to the whole S&P 500. This is perhaps why PepsiCo experiences robust growth and a low amount of risk.

The two biggest corporations in the beverage industry (non-alcoholic) are PepsiCo and Coca-Cola. PepsiCo has a market capitalization of $147 billion while Coca-Cola has that of $186 billion. The focus of PepsiCo is on both food items and beverages while Coca-Cola completely concentrates on selling beverages.

2014 Results

The growth of PepsiCo can be defined as constant currency with 9% adjusted earnings-per-share in 2014 where as Coca Cola constant – currency adjusted earnings-per share 7.9% in 2014.

In 2014 both the companies took similar initiatives and mainly focussed on efficient running of operations. As a result both the companies grew in developing and emerging markets of the world.

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Due to Frito-Lay chips brands of PepsiCo it has an edge over its competitor Coca-Cola. The volume of company’s chips brands of PepsiCo has increased constantly in stagnating developed markets.

But this growth of chips brands is in contrast with the growth of trends in drinks. Surveys depicts now consumers are slowly approaching towards healthier beverages rather than consuming unhealthy sodas. For instance, every morning a consumer may switch from Coca-Cola soda to an honest tea. Either way, he is still buying from the same company. Interestingly, health logic has not yet applied by the consumers which is causing soda sales to remain constant than to chip brands. In 2014 the volume of PepsiCo’s Frito-Lay division grew 2% in North America.

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CHALLENGES AND RISKS

Being a global company there has been significant opportunities for Coca-Cola but at the same time it has risks and challenges. We have discussed around 5 key risks and challenges in the Management and discussion analysis (MD&A).

Obesity and Inactive Lifestyles

Concerns on the increasing health problems have been associated with obesity and inactive lifestyles resulting in significant challenge to the beverage industry as a whole. However Coca-Cola can present its point quite smartly that it possess a very broad portfolio containing beverages that match every calorific and hydration need. Those consumers whose health concerns are related to obesity and inactive lifestyle can choose low or no- calorie beverages from a vast expanding portfolio of more than 800 beverages which are around 25% of Coca-Cola's global portfolio.

Water Quality and Quantity

WATER is considered as the main ingredient in all of the entity’s products and is also essential in producing the agricultural ingredient on which its business relies. But water is a limited natural resource and it’s facing serious challenges due to huge demand, pollution, climate change and poor management. Coca-Cola has now started a management program in order to improve water use efficiency and is working towards attaining the goal of replenishing the water that it and its bottling partners’ source and use it in the best possible form as their finished products.

Evolving Consumer Preferences

Like other companies Coca-Cola has been affected by shifting its consumer need and demographics ageing populations in developed markets, on-the-go lifestyles, and also those consumers who possessed more information than ever. However, they are more committed to generate new ways for growth and development through their core brands with a high focus on sugar-free, light products and also through innovative packaging. They are also committed to continue expanding the variety of choices for their consumers in order to meet their needs, desire, value and lifestyle choices.

Increased Competition and Capabilities in the Marketplace

Many global companies and local participants are a major threat for Coca-Cola and they face a strong competition from them. Therefore Coca-Cola has understand the importance of strengthening its capabilities in innovation, value creation and marketing in order to maintain and continue to build its brand loyalty and market share. Coca-Cola also aims to expand selectively into other profitable segments of the soft drink beverage industry.

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Food Security

Problems such as decrease in agricultural productivity and increased demand for commodities in certain regions of the world as a result of global warming and acid rain may limit the availability or increase in the cost of important key agricultural commodities such as sugarcane, corn ,tea and coffee all of which are important ingredients for Coca-Cola's products. However, Coca-Cola is focussed on implementing such programs based on economic opportunity and environmental sustainability by which it helps in addressing these agricultural challenges.

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CORPORATE SOCIAL RESPONSIBILITY (PAKISTAN)In Pakistan, Coca-Cola has undertaken several CSR initiatives for the prosperity and sustainability of the country. The company has been proactively engaged in strategically identifying existing needs of the population and society and empowering lives of its stakeholders.

Farming Certifications to Farmers (2014)

Coca-Cola has been undertaking many developmental projects within Pakistan. The Coca-Cola Foundation partnered with International Relief and Development (IRD) to issue certificates to farmers for the produce they release to the market. This initiative was taken to support farmers in Sargodha, Pakistan to become certified with the Global GAP (Good Agricultural Practice) certification by providing best quality citrus fruits in the market using minimal pesticide techniques. The farmers’ supply chain is effectively monitored from the sowing of the seed to the harvesting of the fruit, including the use of sustainable methods of production, water conservation, food safety and plant propagations materials. This certification was initiated for Pakistani farmers to produce and sell best quality fruits in the international and domestic markets at higher prices.

Launch of Lectures Series in Pakistan- EMPOWER (2014)

The lecture series, titles “EMPOWER” started in 2014 by the company, was aimed to facilitate university students towards extra-curricular learning opportunities which will motive them through inspirational conversations and discussion what the experts from various backgrounds of the industry. These sessions were aimed at identifying and resolving issues arising among the youth related to personal and career development paths and then

Farming Certifications

to Farmers (2014)

Launch of Lectures Series in Pakistan-

EMPOWER (2014)

Coca-Cola’s

Women Empower-

ment Support (2015)

Nature Trip on World

Environment Day by Coca-Cola (2015)

Coca-Cola into

providing Flood Relief

Support (2015)

Literacy Day: Old

Book Collection

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assisting them to resolve these matter through multiple series of talks with individuals who have been successful in similar matters in the past.15 These sessions will cover a wide range of topics in the future, ranging from marketing, HR, Finance to CSR and supply-chain and self-discovery.

Coca-Cola’s Women Empowerment Support (2015)

Coca-Cola Foundation, with an approval of a grant relating to an environmental project amounting to $90,500 during 2015-16, has reinforced its success and that of WWF’s efforts to encourage environmental conservation. This has benefited local communities and has led to a major difference in the ecosystem of project zones.

Coca-Cola has also supported a women empowerment programme (started in 3 years back) by issuing a grant of $100,000 to the Kashf Foundation. Through this, more than 3,350 women have benefited themselves and their families by establishing small enterprises. Prior to this grant, Coca-Cola has already issued a total of $380,000 to Kashf Foundation in grants.

Nature Trip on World Environment Day by Coca-Cola (2015)

On the World Environment Day, June 8, 2015, Coca-Cola Pakistan organized a trip to Ayubia National Park, Nathiagali where one hundred people were accommodated. These included media representatives, nature lovers, social media activists, environmentalists and others from civil societies. This nature trip sort of connected it to the worldwide celebrations of Coca-Cola’s Contour Bottle (100 years anniversary). The participants experienced the Watershed Management Project of Coca-Cola and WWF which has been operating for the past 6 years.

Coca-Cola into providing Flood Relief Support (2015)

Pledging goods of value PKR 3 million, Coca-Cola has stepped forward to provide assistance to flood affected regions of Chitral. These goods include food items like lentils, rice and other staple and dry food items. Since 2010, Coca-Cola Pakistan has always been into providing flood relief to the affected. In fact, PKR 42 million have been donated by Coca-Cola Pakistan alone to flood affected zones in Pakistan that has benefited 50,000+ flood victims and has provided an opportunity to stress on self-employment and education through the initiation of long-term rehabilitation projects.

Literacy Day: Old Book Collection (8th Sept, 2015)

In partnership with The Citizen’s Foundation, Coca-Cola invited Pakistan’s citizens to donate their old textbooks to the less privileged students of the country. The company initiated mobile book banks which collected these books from all around the country and handed it over to The Citizen Foundation for distribution. This type of initiative was the first of its kind that was undertaken in Pakistan.

15 Fahad Qadir, Director, Public Affairs & Communications, The Coca-Cola Export Corporation, Pakistan and Afghanistan

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CONCLUSION AND EVALUATION Since 1886, when John S. Pemberton started off with selling Coca-Cola, this company has been constantly growing and has leaped forward to becoming the biggest beverage company in the world. Though Coca-Cola has not experienced a substantial rise in revenue figures in the past 10 years, yet it hits the top spot in sales of non-alcoholic beverage across the world. It seems as Coca-Cola will tend to hold this position as it successfully satisfies customer needs and specific markets. Coca-Cola has been determined to increase its revenues by 200% by the year 2020. Keeping in mind the obesity and other health concerns, Coca-Cola aims to devise a strategy that would take the company to greater heights. That strategy is to develop into an internationally recognized business.

The first area where Coca-Cola’s strategy focuses on is concerted growth. Being dominant in the beverage industry enables the company to secure a larger percentage of the non-alcoholic section. The second area is product development; Coca-Cola’s penetration in the fluid milk market in recent months reinforces this point.

This strategy of Coca-Cola is in-line with both the industry and remote environment. Within the industry environment, the company has brand equity and effective marketing strategies that enables it to control the carbonated drinks market. In the remote environment, Coca-Cola can grasp the opportunity of introducing healthier products in its portfolio considering the health trend popularity. With gradual recovery from recession and an expected 3% rise of overall global growth, Coca-Cola can follow this growth trend and magnify its revenue.

Coca-Cola’s strategies are designed carefully so as to be harmonious with its culture, leadership and structure. Since Coca-Cola’s organisational structure is a divisional one, this enables effective communication throughout the entity allowing the goal of doubling its revenue to be achieved. Muhtar Kent (CEO) believes in diversity which leads to team members communicating effectively.

The company utilized marketing and product innovation to implement its functional strategies. Campaigns such as “Share A Coke” was primarily developed to boost sales and increase customer value, leading to higher revenues.

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REFERENCES

Coke Adds Life to Sales, Profit after Losing Fizz in Late ’90s; Outlook for drink company brightens with restructuring and U.S. economic recovery. The Los Angeles Times, Apr 10, 2002.

How Coke Pushed Rivals Off the Shelf, New York Times, Aug 6, 2000.

http://www.maverickpakistanis.com

Interbrand (2010). Best Global Brands 2010. http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/bestglobal-brands-2010.aspx

Investopedia. (2015) “A Look At Coca-Cola's Advertising Expenses”. Available at: http://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-expenses.asp

Mattes R. (1994) “Dietary compensation by humans for supplemental energy provided as ethanol or carbohydrate in fluids” Physiological Behaviour; 59:179–87.

Pakistan Online Research Panel introduced by Dynamic Research Consultants; primary age groups-young adults (aged 16-22 years) and mature adults (aged 22 years above)

Shafaat A. (2014) “A Market not for Faint-Hearted” DAWN NEWSPAPER— Published Mar 10, 2014 07:40am. Available at: http://www.dawn.com/news/1092090

Staff J. (2015) “Responsible Marketing” Available at: http://www.coca-cola.co.uk/about-us/responsible-marketing/

The Coca-Cola Website (2015). “Programs and Promotions” Available at: http://www.cokesolutions.com/MarketingTools/Pages/Site%20Pages/Programs%20and%20Promotions.aspx

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APPENDIXREQUEST LETTER FOR INTERVIEW

5th October, 2015

Dear Mr. _______________

We are writing to request for an interview with your relevant representative to obtain some pertinent information regarding the strategic position of Coca-Cola Company in Pakistan.

We are 4th year MBA students at the Karachi University Business School (KUBS), Karachi. We are required to submit a project report and case study as part of the completion of our Strategic Management course.

It would be our honor and of great help if your company can assist us in providing this information for our reports. The information we require for our reports will be helpful in answering our following questions:

1. Which product in your portfolio raises the greatest amount of revenue?

2. As an assumption, if consumers become increasingly health conscious, which brands would Coca-Cola rely on to maintain its position in the market?

3. Evidence has been published about pesticide traces being found in Coca-Cola. What do you probably suggest reasons for such traces?

4. Health reports and research claim Coke to be causing obesity among consumers. What do you have to say about this?

5. If we talk about your competitor Pepsi, they primarily focus on sports theme where as your marketing perspective focuses on love, friendship, and family. Why is this so? Please define particular in reference to Karachi, Pakistan marketing.

6. What is your present market share in Pakistan and future targets?

7. What challenges does the beverage industry and in particular, your organisation face in doing business in Pakistan?

8. How do you manage your distribution services?

The information which you provide us shall be used in the strictest confidence.

We look forward to hearing positively from you soon.

Thanking you in advance.

4th year MBA Students

Karachi University Business School (KUBS)