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March2010ArabAcademyforScience&Technology&Maritime
Transport-GraduateSchoolofBusinessPresentedto:
Dr.HatemAlzuhairy
BY:
1.AmrEl-Sharkawy 2.AhmedElFar3.HossamSaber4.SalemAbdellatif5.TarekFahd
THECOCA-COLACOMPANY
STRATEGICMANAGEMENTCASESTUDY
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I -TABLE OF CONTENTS
S E C T I O N D E S C R I P T I O N P A G E
I-TableofContents 2
II-Introduction 3-4
1 StrategyFormulation 5-18
1.1 **Missionstatementevaluationmatrix 5-6
1.2 **CPM,EFE&IFE 7-11
1.3 Longtermobjectives 12
1.4 ApplyingofSWOTmatrix&IEmatrix 13-14
1.5 QuantitativeStrategicPlanningMatrix(QSPM) 15-18
2 StrategyImplementation 19-22
2.1 AnnualObjectives 19
2.2 Organizationalstructure 20
2.3 Production/Operation 21
2.4 Therewards/Incentive 21-223 StrategyEvaluation 23
3.1 BalancedScoreCard 23
4 Conclusion 24
5 References 25
6 Appendixes 26-29
AppendixA FinancialRatiosAnalysis(2009)
26
AppendixB IncomeStatementAnalysis(2009) 27AppendixC CashflowSTATEMENTAnalysis(2009)
28
AppendixD FinancialHighlights(2009) 29
**EXTRAWORK
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I I - INTRODUCTION
TheCoca-ColaCompanyHistory
TheprototypeCocaColarecipewas
formulatedattheEagleDrugandChemical
Company,adrugstoreinColumbus,
GeorgiabyJohnPemberton,originallyasa
cocawinecalledPemberton'sFrenchWine
Cocoa.Hemayhavebeeninspiredbythe
formidablesuccessofVinMariani,a
Europeancocawine.
In1886,whenAtlantaandFultonCountypassedprohibitionlegislation,Pemberton
respondedbydevelopingCocaCola,essentiallyanon-alcoholicversionofFrenchWine
Cola.ThefirstsaleswereatJacob'sPharmacyinAtlanta,Georgia,onMay8,1886.Itwas
initiallysoldasapatentmedicineforfivecentsaglassatsodafountains,whichwere
popularintheUnitedStatesatthetimeduetothebeliefthatcarbonatedwaterwas
goodforthehealthPembertonclaimedCocaColacuredmanydiseases,including
morphineaddiction,dyspepsia,neurasthenia,headache,andimpotence.Pembertonran
thefirstadvertisementforthebeverageonMay29ofthesameyearintheAtlanta
Journal.
By1888,threeversionsofCocaColasoldbythreeseparatebusinesseswereon
themarket.AsaGriggsCandleracquiredastakeinPemberton'scompanyin1887and
incorporateditastheCocaColaCompanyin1888.Thesameyear,whilesufferingfrom
anongoingaddictiontomorphine,Pembertonsoldtherightsasecondtimetofour
morebusinessmen:J.C.Mayfield,A.O.Murphey,C.O.MullahyandE.H.Bloodworth.
Meanwhile,Pemberton'salcoholicsonCharleyPembertonbegansellinghisown
versionoftheproduct.
JohnPembertondeclaredthatthename"CocaCola"belongedtoCharley,buttheother
twomanufacturerscouldcontinuetousetheformula.So,inthesummerof1888,
CandlersoldhisbeverageunderthenamesYumYumandKoke.Afterbothfailedto
catchon,CandlersetouttoestablishalegalclaimtoCocaColainlate1888,inorderto
forcehistwocompetitorsoutofthebusiness.Candlerpurchasedexclusiverightstothe
formulafromJohnPemberton,MargaretDozierandWoolfolkWalker.However,in
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1914,Doziercameforwardtoclaimhersignatureonthebillofsalehadbeenforged,
andsubsequentanalysishasindicatedJohnPemberton'ssignaturewasmostlikelya
forgeryaswell.
NewCoke
OnApril23,1985,CocaCola,amidmuchpublicity,attemptedtochangetheformulaof
thedrinkwith"NewCoke".
21stCentury
LaunchaDietCokeproductsweetenedwiththeartificialsweetenersucralose
("Splenda"),thesamesweetenercurrentlyusedinPepsiOne
March21,2005,itannouncedanotherdietproduct,CocaColasweetenedpartlywitha
blendofaspartameandacesulfamepotassium.
In2007,CocaColabegantosellanew"healthysoda":DietCokewithvitaminsB6,B12,
magnesium,niacin,andzinc,marketedas"DietCokePlus."
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1 - STRATEGY FORMULATION
1.1-MISSIONSTATEMENTEVALUATIONMATRIX
COCA-COLAMISSIONSTATEMENT:
OurRoadmapstartswithourmission,whichisenduringItdeclaresourpurposeasacompanyandservesasthestandardagainstwhichweweighouractionsanddecisions.
Torefreshtheworld...(1)and(3) Toinspiremomentsofoptimismandhappiness... Tocreatevalueandmakeadifference.(6)
COMPONENTS Existinmissionstatement
1. Customers YES
2. ProductsServices NO3. Markets YES
4. ConcernforSurvival,Growth,Profitability NO5. Technology NO
6. Philosophy YES
7. Self-Concept NO
8. ConcernforPublicImage NO
9. ConcernforEmployees NO
* *PEPSICOMISSIONSTATEMENT:
Ourmissionistobetheworld's(1)(3)premierconsumerproductscompanyfocusedonconvenientfoodsandbeverages(2).Weseektoproducefinancialrewardstoinvestors(4)asweprovideopportunitiesforgrowthandenrichmenttoouremployees(9),ourbusinesspartnersandthecommunitiesinwhichweoperate.Andineverythingwedo,westriveforhonesty,fairness(6)
andintegrity(8).
COMPONENTS Existinmissionstatement
1. Customers YES2. ProductsServices YES
3. Markets YES4. ConcernforSurvival,Growth,Profitability YES5. Technology NO
6. Philosophy YES
7. Self-Concept NO8. ConcernforPublicImage YES9. ConcernforEmployees YES
**EXTRAWORK
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* *COCA-COLAnewproposedmission:
AtCocaColawebelieveourmainresponsibilityisprovidingcustomers(1)with
refreshingbeveragesincludingsoftdrinks,water,energydrinks,juices,andtea(2)
tofitanyoccasionintheirday-to-daylives(6).Oursignatureproduct,Coke(7),isa
favoritearoundtheworldandawidevarietyofourproductsaresoldinover200
nations(3).Weusetheonlythemostsophisticatedequipment(4)toprocessand
makeourproductstoensureeachglassofCokeproductisasgoodasthelast(5).
Ouremployees(9)arefairlycompensatedandwepracticefairtradeinallmarkets
wecompete.Wevalueourresponsibilitytoallcommunitiesweserveandsupport
manyeducationalandleadershipprograms(8).
COMPONENTS Existinmissionstatement
1. Customers YES
2. ProductsServices YES
3. Markets YES
4. ConcernforSurvival,Growth,Profitability YES
5. Technology YES
6. Philosophy YES
7. Self-Concept YES
8. ConcernforPublicImage YES
9. ConcernforEmployees YES
*ASSUMPTION**EXTRAWORK
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1 . 2 C P M , E F E A N D I F E M A T R I X E S
1.2.1-**CPMCOMPETITIVEPROFILEMATRIX
CPMCompetitiveprofilematrix isanessentialstrategicmanagementtooltocomparethefirm
withthemajorplayersoftheindustry.Competitiveprofilematrixshowstheclearpicturetothe
firmabouttheirstrongpointsandweakpointsrelativetotheircompetitors.
CocaCola PepsiCo CadburySchweppes
CriticalSuccess
Factors*Weight *Rating
Weighted
Score*Rating
Weighted
Score*Rating
Weighted
Score
MarketShare
Price
FinancialPosition
ProductQuality
ProductLines
CustomerLoyalty
Marketing
Total
0.15
0.10
0.12
0.15
0.15
0.15
0.07
1.00
40.60
30.30
30.36
30.45
30.45
40.60
30.21
3.44
30.45
30.30
40.48
30.45
40.60
40.60
30.21
3.56
20.30
30.30
30.36
30.45
30.45
30.45
20.14
2.78
*ASSUMPTION**EXTRAWORK
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1.2.2-EFEMATRIXES
ExternalFactorEvaluation(EFE)matrixmethodisastrategic-managementtooloftenusedforassessmentofanactualbusinessconditions.Itisagoodtooltovisualizeandprioritizetheopportunitiesandthreatsthatabusinessisfacing.
ExternalfactorsassessedintheEFEmatrixaretheonesthataresubjectedtothewillofsocial,economic,political,legal,andotherexternalforces.
KeyExternalFactors*Weight
(../1)
*Rating
(../4)
Weighted
Score
A-Opportunities:
1-In2008,bottledwaterwasthesecondlargestselling
drinkintheU.S.market0.06 4 0.24
2-AccordingtotheDonkeyRecyclingInstitute,salesof
flavored,noncarbonateddrinksareexpectedto
surpasssodasalesby2010
0.1 3 0.3
3-Moderatecaffeineconsumptionappearedbeneficial
inreducingriskofdeath0.05 2 0.1
4-Today's24/7lifestylesisdrivingthesalesofenergy
drinks,withvolumehavingincreasedbyanimpressive75%andvaluebysome71%since2000.
0.1 4 0.4
5-Doingbusinesswithpoorpeoplebringstheminto
themarketplace.
UseofManualDistributionCenters
0.1 3 0.3
6-Inaconditionwheremarketsshiftandcustomers
preferencesbecomesmoreunpredictableand
complex,adoptingCSRstrategycouldbeapowerfultoolforsurvival.
0.05 3 0.15
*ASSUMPTION
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KeyExternalFactors*Weight
(../1)
*Rating
(../4)
Weighted
Score
B-Threats:
1-Bottledwaterprocessedwithdistillationorreverse
osmosislacksfluorideionswhicharesometimes
naturallypresentingroundwater.Thedrinkingof
distilledwatermayconceivablyincreasetheriskof
toothdecayduetoalackofthiselement.
0.05
2
0.1
2-costofenergyisincreasing. 0.05 3 0.15
3-Overallcarbonateddrinksaleshavebeenflatdueto
linksofsugartoobesityandhighfructosecorn
syruptoheartdisease.
0.07 3 0.21
4-Risingcostofrawmaterialsuchascorn,orange 0.09 3 0.27
5-Waterscarcityandpoorqualitycouldnegatively
impacttheCoca-Colasystemsproductioncostsand
capacity.
0.05 3 0.15
6-Changesinlawsandregulationsrelatingto
beveragecontainersandpackaging0.05 2 0.1
7-Unfavorableeconomicandpoliticalconditionsin
internationalmarkets0.03 2 0.06
8-Significantadditionallabelingorwarning
requirements0.06 4 0.24
9-Changesincommercialandmarketpracticeswithin
theEuropeanEconomicArea0.04 2 0.08
10-Changesinaccountingstandardsandtaxation
requirements 0.05 2 0.1
TOTAL 1.00 2.95
*ASSUMPTION
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1.2.3-IFEMATRIXES
InternalFactorEvaluation(IFE)matrixisastrategicmanagementtoolforauditingor
evaluatingmajorstrengthsandweaknessesinfunctionalareasofabusiness.IFEmatrix
alsoprovidesabasisforidentifyingandevaluatingrelationshipsamongthoseareas.
KeyInternalFactors *Weight(../1)
*Rating(../4)
WeightedScore
A-Strengths
1-Productlinesof400Brands 0.05 4 0.2
2-StrongManpowerresources(71,000)people 0.05 4 0.2
3-7differentsegmentsallovertheworld(Africa,
Asian,Europe,.)0.1 3 0.3
4-LongHistory,Establishedsince1885(Brand
Namereputation).0.05 4 0.2
5-AfricaSectorisverystrong55,000outof
71,0000.05 2 0.1
6-Acquiringdifferentmineralwaterco.inmany
placesintheworld.0.05 4 0.2
7-HasStrongdigitalmarketingplatformlocated
inLatinAmerica0.05 4 0.2
8-Industryleaderinmarketcapitalizationwith
$112billion0.1 4 0.4
9-Topsellerinnonalcoholicmarketbeveragesin
Russia0.05 3 0.15
10-HasformedastrongapartnershipwithMcDonalds,biggestcustomer
0.1 4 0.4
11-JointventurewithNestleresultedin
establishingbeveragespatternsworldwide0.05 4 0.25
*ASSUMPTION
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KeyInternalFactors*Weight
(../1)
*Rating
(../4)
Weighted
Score
B-Weaknesses
1-Productlinesislimitedtobeveragesonly 0.05 1 0.05
2-Afailed$16billionacquisitionofQuakerOatshinderslong-termgrowth.
0.1 1 0.10
3-NegativepublicityinIndiabecauseofwaterissues,hasledtopoorbrandimageandhinderedgrowththere.
0.05 2 0.10
4-Marketingdeficienciesduetoturnoverinleadershipanda16percentdecreaseinadvertisingspending.
0.05 2 0.10
5-RevenuesforUSmarketsegment
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1.3-*COCACOLALONGTERMOBJECTIVES
1- Increasethecompanyrevenueby50%intwoyears(currentrevenue24bill).
2- Increasethebookvalue/shareby25%inthreeyears(currentvalue$8.52).
3- Generatecashflowby1billintwoyears(currentvalue2,320bill).
4- Increasethenetincomeby30%inthreeyears(currentvalue6,824bill).
*ASSUMPTION
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1 . 4 - A P P L Y I N G O F SW O T M A T R I X & I E M A T R I X
1.4.1SWOTMATRIX
SWOTMatrix:AtoolthatidentifiestheStrengths,Weaknesses,OpportunitiesandThreats
ofanorganization.Specifically,SWOTisabasic,straightforwardmodelthatassesseswhat
anorganizationcanandcannotdoaswellasitspotentialopportunitiesandthreats.ThemethodofSWOTanalysisistotaketheinformationfromanenvironmentalanalysisand
separateitintointernal(strengthsandweaknesses)andexternalissues(opportunitiesand
threats).Oncethisiscompleted,SWOTanalysisdetermineswhatmayassistthefirmin
accomplishingitsobjectives,andwhatobstaclesmustbeovercomeorminimizedto
achievedesiredresults.
Strengths(S) Weaknesses(W)
Opportunities(O) SOStrategies
1. LaunchnewproductsinthelocalmarketssuchasHellenicCocaCola
(S11,O2).
2. Marketnewproductsthatishealthierandsuitableforthenewgeneration
(S8,O4).
WOStrategies
1. MarketinternationalbeveragestoAmericanconsumers
(W1,O1,O4).
2. Increasemarketingeffortsforbottledwater
(W1,O1).
Threats(T) STStrategies
1. AcquirekrispykremedoughnutsInc(KKD)forthediversificationofproducts(S6,T3).
2. Establishajointventurewithothercompanies(i.e.illycoffee)forReadyToDrink
beverages(RTD)(S8,T3)
WTStrategies
1. AcquireGoldenEnterprises(GLDC)tohelpdiversifytheproductline
(W1,T3).
2. PartnershipwithUNDPinEveryDropMatterprojectineasternEurope
(W3,T5)
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1.4.2IEINTERNAL-EXTERNALMATRIX
TheInternal-External(IE)matrixisanotherstrategicmanagementtoolusedtoanalyzeworkingconditionsandstrategicpositionofabusiness.TheInternalExternalMatrixorshortIEmatrixisbasedonananalysisofinternalandexternalbusinessfactors
whicharecombinedintoonesuggestivemodel.TheIEmatrixisacontinuationoftheEFEmatrixandIFEmatrixmodels.
CocaColahaveStrongIFE&MediumEFE(Zone4)soGrow&Buildstrategieswillbeused:
Integration(forward):Useofmanualdistributioncenters
MarketPenetration:Increasemarketingbudget(i.e.createdigitalprogramwith
iTunes;targetingaudiencesundertheageof12&mainsponsorofworldcup2010)
andmorefocusonNorthUSmarket
MarketDevelopment:energyandhealthydrinks
ProductDevelopment:Foodindustry,InnovationinProducts(i.e.Jianchimeans
"stronginnerenergy"inChinese.Thedrink,madewithfruitjuicesandplant
extractsandavailableinthreeflavors,isinspiredbyancientChinesewisdomto
enhancetheinnerbalance.Jianchiproductsarenowavailableinmorethan100
pharmaciesandherbalshopsinMilan.)
TheIFETotalWeightedScore=3.05
Strong Average Weak
3.0to4.0 2.0to2.99 1.0to1.99
High I II III
3.0to3.99
Medium IV V VI
2.0to2.99
Coca-Cola
Low VII VIII IX
TheE
FETotalWeightedScore=2
.95
1.0to1.99
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1.5-QUANTITATIVESTRATEGICPLANNINGMATRIX(QSPM)
QuantitativeStrategicPlanningMatrix(QSPM)isahigh-levelstrategicmanagement
approachforevaluatingpossiblestrategies.QuantitativeStrategicPlanningMatrixora
QSPMprovidesananalyticalmethodforcomparingfeasiblealternativeactions.
AcquireKKD
andGLDC
(Diversifyfood
productslines)
Producenewdiet
drinksthathavehealthiersugar
substitutes
Increase
marketingeffortsfor
bottledwater
KeyExternalFactors
WeightedScore
(FromEFE)
*AS TAS *AS TAS *AS TAS
Opportunity
1-In2008,bottledwaterwasthesecondlargestsellingdrinkintheU.S.market
0.06 - - -
2-AccordingtotheDonkeyRecyclingInstitute,salesofflavored,noncarbonateddrinksareexpectedtosurpasssodasalesby2010
0.1 3 0.3 4 0.4 2 0.2
3-Moderatecaffeineconsumptionappearedbeneficialinreducingriskofdeath
0.05 3 0.15 4 0.2 2 0.1
4-Today's24/7lifestylesisdrivingthesalesofenergydrinks,with
volumehavingincreasedbyanimpressive75%andvaluebysome71%since2000.
0.1 - - -
5-Doingbusinesswithpoorpeoplebringsthemintothemarketplace.
UseofManualDistributionCenters
0.1 - - -
6-Inaconditionwheremarketsshiftandcustomerspreferencesbecomesmoreunpredictableand
complex,adoptingCSRstrategycouldbeapowerfultoolforsurvival.
0.05 - - -
*ASSUMPTION
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AcquireKKD
andGLDC
(Diversifyfood
productslines)
Producenewdiet
drinksthathave
healthiersugar
substitutes
Increase
marketing
effortsfor
bottledwater
KeyInternalFactors
WeightedScore
(FromIFE)
*AS TAS *AS TAS *AS TAS
Threats
1-Bottledwaterprocessedwithdistillationorreverseosmosislacksfluorideionswhicharesometimesnaturallypresentingroundwater.Thedrinkingofdistilledwatermayconceivablyincreasetheriskoftoothdecayduetoalackofthiselement.
0.05
2 0.1 3 0.15 4 0.2
2-Costofenergyisincreasing. 0.05 - - -
3-Overallcarbonateddrinksaleshavebeenflatduetolinksofsugartoobesityandhighfructosecornsyruptoheartdisease.
0.07 3 0.21 4 0.28 2 0.14
4-Risingcostofrawmaterialsuchascorn,orange
0.09 - - -
5-WaterscarcityandpoorqualitycouldnegativelyimpacttheCoca-Colasystemsproductioncostsandcapacity.
0.05 - - -
6-Changesinlawsandregulationsrelatingtobeveragecontainersandpackaging
0.05 - - -
7-Unfavorableeconomicandpoliticalconditionsininternationalmarkets
0.03 - - -
8-Significantadditionallabelingorwarningrequirements
0.06 - - -
9-ChangesincommercialandmarketpracticeswithintheEuropean
EconomicArea
0.04 - - -
10-Changesinaccountingstandardsandtaxationrequirements
0.05 - - -
SUBTOTAL 1.00 0.88 1.15 0.88
*ASSUMPTION
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AcquireKKD
andGLDC
(diversifyfood
productslines)
Producenewdiet
drinksthathave
healthiersugar
substitutes
Increase
marketing
effortsfor
bottledwater
KeyInternalFactors
Wei
ghtedScore
(FromIFE)
*AS TAS *AS TAS *AS TAS
Strengths
1-Productlinesof400Brands 0.05 2 0.1 4 0.2 3 0.15
2-StrongManpowerresources(
71,000)people0.05 4 0.2 3 0.15 2 0.1
3-7differentsegmentsalloverthe
world(Africa,Asian,Europe,.)
0.1 - - -
4-LongHistory,Establishedsince
1885.0.05 2 0.1 3 0.15 4 0.2
5-AfricaSectorisverystrong
55,000outof71,0000.05 - -- -
6-Acquiringdifferentmineral
waterco.inmanyplacesinthe
world.
0.05 3 0.15 3 0.15 4 0.2
7-HasStrongdigitalmarketing
platformlocatedinLatin
America
0.05 - - -
8-Industryleaderinmarket
capitalizationwith$112billion0.1 4 0.4 3 0.3 3 0.3
9-Topsellerinnonalcoholic
marketbeveragesinRussia0.05 - - -
10-Hasformedastronga
partnershipwithMcDonalds,biggestcustomer
0.1 - - -
11-JointventurewithNestle
resultedinestablishing
beveragespatternsworldwide
0.05 - - -
*ASSUMPTION
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AcquireKKD
andGLDC
(diversifyfood
productslines)
Producenewdiet
drinksthathave
healthiersugar
substitutes
Increase
marketing
effortsfor
bottledwater
KeyInternalFactors
Wei
ghtedScore
(FromIFE)
*AS TAS *AS TAS *AS TAS
Weaknesses
1-Productlinesislimitedto
beveragesonly0.05 4 0.2 3 0.15 2 0.1
2-Afailed$16billionacquisitionofQuakerOatshinderslong-termgrowth.
0.1 - - -
3-NegativepublicityinIndia
becauseofwaterissues,hasledtopoorbrandimageandhinderedgrowththere.
0.05 - - -
4-Marketingdeficienciesduetoturnoverinleadershipanda16percentdecreaseinadvertisingspending.
0.05 - - -
5-RevenuesforUSmarket
segment
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2 - STRATEGY IMPLEMENTATION
2.1-*ANNUALOBJECTIVES:
R&DFUNCTION:
1. Developtwonewproductsinthefoodindustry.2. Developonenewhealthybeverageproduct.
PRODUCTIONFUNCTION:
1. Increasetheinventoryturnoverto7.2. Implementanewqualitycontrolsystemforfoodindustry.3. Decreasetheproductionunitcasecostby5%.4. Implementnew3foodproductionlinesinEurope.5. Implementnew3foodproductionlinesinNorthAmerica.
6. Increasethebeverageproductionby5%.7. Increasethebottledindustryproductionby10%.
MARKETINGFUNCTION:
1. Increasethebeveragemarketshareby2%(from54to56)2. Increasethesalesvolumeby4%
FINANCINGFUNCTION:
1. Reducethecompanyliabilitiesby5%annually2. Financenew6foodplants.
HUMANRESOURCESFUNCTION:
1. Hiringspecializedstaffforfoodindustry1200employees.2. Developemployeesby15daystraining.3. Decreasetheemployeesturnoverby50%.
*ASSUMPTION
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2.2-*ORGANIZATIONALSTRUCTURE
Tohandletheenormouscapacityofitsbusiness,theCocaColaCompanyhasdividedup
intosixoperatingunits
Therefore,CocaColaispredominantlyorganizedintoaninternationalareastructure
consideredasaglobalproductdivisionalstructure.
Tomeetandmatchtheorganizationstructurewiththeformulatedstrategies,newfoodindustrydirectorwillbeaddedtostructuretomanagethenewfoodsector.
Newhealthybeveragewillbemanagedlikethesoftdrinksbeverages.
ADVANTAGESOFTHISDIVISIONALSTRUCTURE:
Workflowperdivision
LowlevelofCentralization
Flexibleandinnovative
Sensitivetosubtledifferencesacrossproducts,regions,andclients
*ASSUMPTION
Chairman
/ CEO
EVP
& P BI/SC
EVP
& CFO
EVP
& P MKT
President
& COO
SVP
& GC
SVP
& HRD
SVP
& PAD
P of
Eurasia
P of
Pacific
P of
Latin
America
P of
Africa
P of
Europe
*FOODINDUSTRY
DIRECTO
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2.3PRODUCTION/OPERATIONS
CostControl,oneofthemanagementissuesinoperationsiscostreductionorcost
optimization.ItisclearintheCocaColaincomestatementsthatCocaColapractices
costreductionin2009from11,374,000,000$to11,088,000,000$andtheRevenue
decreasedfrom31,944,000,000$to30,990,000,000$socostcontrolshouldbe
donethroughoptimizetheprocessofoperation(Rawmaterial,powerconsumption,
fuelconsumption),costofunitcasemustbemonitored.
Inventory/InventoryControlisthemainforoperationmanagementconcerns,itis
calculatedfromthebalancesheetthattheCocaColainventoryturnoverratiois4.9
whichislessthantheindustryaverage7.1,andsoCoca-Colashoulddevelopand
revisetheinventorycontrolsystemtoreachtheindustryaverage.
Plantsize,foodandsnakeswillbeanewindustryforCocaCola,sonewproduction
linesintheexistingplantsshouldbeestablishedforfoodindustry,capacitywillbe
basedonthemarketingforecast,sositelocationanalysisisveryimportant.
Forfoodindustry,Purchasespecializedequipmentandaddspecializedpeople(humanresources).
ForFoodindustry,applythequalitycontrolsystemtomeetthecustomer
satisfaction.
2.4-THEREWARDS/INCENTIVESYSTEM
1-THEANNUALINCENTIVEPROGRAM
Salesofcompanyproducts(volume)andeconomicprofit(profit).Thesetwo
objectivesbecomethetargetforthedivisionforannualincentivepurposes.Forcorporateassociates,thetargetforincentivepurposesistheobjectiveforthetotalcompany.
Attheendoftheyear,theperformanceofeachdivisionisassessedversusits
objectivesfortheyearrelativetoafundingmatrix.Thematrixweightsvolumeandprofit
equally.Ifdivisionsmeettheirobjectivesexactly,thenincentivesarefundedat100%of
target.Iftheyexceedobjectives,theyarefundedatgreaterthan100%,andiftheyfall
short,theyarefundedatlessthan100%. Thetargetedpoolitselfissimplythetotal
amountrequiredtoawardeachparticipantintheplantheirexacttarget,whichis
expressedasapercentofbasesalary(e.g.,10%,15%)basedonjobgradelevel.
Oncethepoolforthedivisionisfunded,thendivisionmanagementdecideshowtheexactpoolwillbedistributed.Eachdivisionhastheresponsibilitytosetspecificteamand
individualobjectivesthatlinkintothetotaldivisionobjectives.Basedonindividualandteamperformanceagainstthoseobjectives,eachparticipantthenreceivesaspecificannual
incentiveaward,whichfallswithinabroadrangefromnoawardtothemaximumaward.It
istheresponsibilityofeachdivisiontomakesurethattotalincentiveawardsdonotexceed
theamountallocatedandthatthetotalawardsbalanceagainstthepool.
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2-THESTOCKOPTIONSPROGRAM
Theprocessforstockoptionawardsissimilartothatofannualincentives:Option
poolsarefundedbasedonperformanceagainstunitcasesalesandeconomicprofit
objectives,andindividualoptiongrantsaredeterminedbasedonspecificcontributionto
thoseobjectives.
Stockoptionawardsareconsideredannuallyandfallwithinaminimumtomaximumofaspecifiedrange,whichvariesbygradelevelandisdrivenbytargetedtotal
compensationlevelsversusthemarketplace.Divisionmanagementconsiderseacheligible
associateeachyearforanappropriategrantandthenrecommendsthatamountfor
approvalbythecompensationcommitteeoftheboard.Forbothannualincentivesand
stockoptions,awardsforcorporateassociatescomefromandmustbalanceagainstthecorporatepool,whichisbasedontotalcompanyperformance.
IMPACTOFTHEPROGRAMS:
Theeffectonthebusinessoftheclearlinkageofincentiveandstockoptionawards
toeconomicprofithasbeenverypositive.Someofthebenefitsincludethefollowing:
1.Moreattentionisgivenintheplanningprocesstotheamountandcostofcapital
requiredtodelivervolumeandprofitresults.
2.Managersandassociatesnowfocusmoredailyattentionthanevernotonlyon
generatingvolumeandprofit,butdoingsoinawaythatcoverscapitalcostsandenhances
shareownervalue.
3.Thecommunicationeffortssurroundingtheimportanceofvalue-basedmanagementare
reinforcedfinanciallytwiceayearthroughincentiveandstockoptionawards.
4.Theeconomicprofitlevelsofthecompanyandtheresultingincreaseinshareownervaluecontinuetogrowathealthyrates.Figure3-1showsthataseconomicprofitgrewan
averageof20.2%peryearfor10yearsendingwith1997,stockpricegrewanaverageof
30.2%peryearforthesameperiod.
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4 - CONCLUSION
Tosurviveinthemarketyouhavetocompete,tocompeteinthemarketyouhaveto
grow.
CocaColaalwayscompeteswithPepsi,soCocaColashouldlookforitscompetitive
advantagestobemarketleader.
CocaColashouldintegrateitsbusinessinthehealthyandenergybeveragesto
competewiththecompetitors.
CocaColashoulddiversifyitsbusinessbyfoodindustrytoincreasethebeverages
marketshareandreducetheriskprobabilities.
CocaColashouldavidtobethefollowerinthemarkettodiscoveritscompetitive
advantages.
CocaColaleadsthedigitalmarketingphilosophyinthebeverageindustry.
CocaColaandApplealliancesupportCoca-colainthecompetitionasanew
innovatedmarketingidea.
CocaColamustontheroadbysustainableindustrialdevelopmentoverthelong
term.
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5 - REFERENCES
1-http://www.marketresearchworld.net
2-http://www.thecoca-colacompany.com
3-http://en.wikipedia.org
4-http://www.maxi-pedia.com
5-www.wilsongroup.com
6-http://moneycentral.msn.com/investor/invsub/results
7-http://www.pepsico.com/index.html#/flash/investormeeting_banner.swf
8-StrategicManagementconceptsandcasesbyFredDavid12edition
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6 - A P P E N D I X E S
APPENDIXA-FINANCIALRATIOSANALYSIS(2009)
GrowthRates% CocaCola IndustrySales(Qtrvsyearagoqtr) 5.40 5.10
NetIncome(YTDvsYTD) 17.50 29.40
NetIncome(Qtrvsyearagoqtr) 55.10 72.70
Sales(5-YearAnnualAvg.) 7.35 8.59
NetIncome(5-YearAnnualAvg.) 7.08 8.69
Dividends(5-YearAnnualAvg.) 10.40 10.15
PriceRatios CocaCola IndustryCurrentP/ERatio 18.7 18.4
P/ERatio5-YearHigh NA 2.8
P/ERatio5-YearLow NA 0.9
Price/SalesRatio 4.07 3.13Price/BookValue 5.08 5.27
Price/CashFlowRatio 15.50 13.70
ProfitMargins% CocaCola IndustryGrossMargin 64.2 57.7
Pre-TaxMargin 28.9 22.0
NetProfitMargin 22.3 17.0
5YrGrossMargin(5-YearAvg.) 64.6 58.0
5YrPreTaxMargin(5-YearAvg.) 27.1 20.3
5YrNetProfitMargin(5-YearAvg.) 20.7 15.3
FinancialCondition CocaCola IndustryDebt/EquityRatio 0.48 1.29
CurrentRatio 1.3 1.4
QuickRatio 1.1 1.2
InterestCoverage NA 2.5
LeverageRatio 2.0 3.4
BookValue/Share 10.77 11.06
InvestmentReturns% CocaCola IndustryReturnOnEquity 30.2 37.6
ReturnOnAssets 15.5 12.3
ReturnOnCapital 22.4 17.5
ReturnOnEquity(5-YearAvg.) 29.8 22.4
ReturnOnAssets(5-YearAvg.) 15.7 11.9
ReturnOnCapital(5-YearAvg.) 23.0 17.2
ManagementEfficiency CocaCola IndustryIncome/Employee 74,418 59,283
Revenue/Employee 333,944 321,203
ReceivableTurnover 9.1 10.2
InventoryTurnover 4.9 7.1
AssetTurnover 0.7 0.8
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APPENDIXB-INCOMESTATEMENTANALYSIS(2009)
2009 2008 2007 2006 2005
PeriodEndDate 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/200
PeriodLength 12Months 12Months 12Months 12Months 12Months
StmtSource 10-K 10-K 10-K 10-K 10-K
StmtSourceDate 02/26/2010 02/26/2010 02/26/2010 02/21/2007 02/28/2006
StmtUpdateType Updated Reclassified Reclassified Updated Updated
Revenue 30,990.0 31,944.0 28,857.0 24,088.0 23,104.0
TotalRevenue 30,990.0 31,944.0 28,857.0 24,088.0 23,104.0
CostofRevenue,Total 11,088.0 11,374.0 10,406.0 8,164.0 8,195.0
GrossProfit 19,902.0 20,570.0 18,451.0 15,924.0 14,909.0
Selling/General/Administrative
Expenses,Total 11,358.0 11,774.0 10,945.0 9,431.0 8,739.0
Research&Development 0.0 0.0 0.0 0.0 0.0
Depreciation/Amortization 0.0 0.0 0.0 0.0 0.0
InterestExpense(Income),NetOperating 0.0 0.0 0.0 0.0 0.0
UnusualExpense(Income) 313.0 350.0 0.0 185.0 85.0
OtherOperatingExpenses,Total 0.0 0.0 254.0 0.0 0.0
OperatingIncome 8,231.0 8,446.0 7,252.0 6,308.0 6,085.0
InterestIncome(Expense),NetNon-Operating
0.0 0.0 0.0 0.0 0.0
Gain(Loss)onSaleofAssets 0.0 0.0 0.0 0.0 0.0
Other,Net 40.0 39.0 219.0 195.0 -93.0
IncomeBeforeTax 8,946.0 7,506.0 7,919.0 6,578.0 6,690.0
IncomeTax-Total 2,040.0 1,632.0 1,892.0 1,498.0 1,818.0
IncomeAfterTax 6,906.0 5,874.0 6,027.0 5,080.0 4,872.0
MinorityInterest -82.0 -67.0 -46.0 0.0 0.0
EquityInAffiliates 0.0 0.0 0.0 0.0 0.0
U.S.GAAPAdjustment 0.0 0.0 0.0 0.0 0.0
NetIncomeBeforeExtra.Items 6,824.0 5,807.0 5,981.0 5,080.0 4,872.0
TotalExtraordinaryItems 0.0 0.0 0.0 0.0 0.0
NetIncome 6,824.0 5,807.0 5,981.0 5,080.0 4,872.0
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APPENDIXC-CASHFLOWSTATEMENTANALYSIS(2009)
2009 2008 2007 2006 2005
PeriodEndDate 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005
PeriodLength 12Months 12Months 12Months 12Months 12Months
StmtSource 10-K 10-K 10-K 10-K 10-K
StmtSourceDate 02/26/2010 02/26/2010 02/26/2010 02/21/2007 02/28/2006StmtUpdateType Updated Reclassified Reclassified Updated Updated
NetIncome/StartingLine 6,906.0 5,874.0 6,027.0 5,080.0 4,872.0
Depreciation/Depletion 1,236.0 1,228.0 1,163.0 938.0 932.0
Amortization 0.0 0.0 0.0 0.0 0.0
DeferredTaxes 353.0 -360.0 109.0 -35.0 -88.0
Non-CashItems
255.0 1,584.0 -109.0 589.0 277.0
ChangesinWorkingCapital
-564.0 -755.0 -40.0 -615.0 430.0
CashfromOperatingActivities 8,186.0 7,571.0 7,150.0 5,957.0 6,423.0
CapitalExpenditures
-1,993.0 -1,968.0 -1,648.0 -1,407.0 -899.0
OtherInvestingCashFlowItems,Total
-2,156.0 -395.0 -5,071.0 -293.0 -597.0
CashfromInvesting
Activities-4,149.0 -2,363.0 -6,719.0 -1,700.0 -1,496.0
FinancingCashFlow
Items0.0 0.0 0.0 0.0 0.0
TotalCashDividendsPaid
-3,800.0 -3,521.0 -3,149.0 -2,911.0 -2,678.0
Issuance(Retirement)ofStock,Net
-856.0 -493.0 -219.0 -2,268.0 -1,825.0
Issuance(Retirement)ofDebt,Net
2,363.0 29.0 4,341.0 -1,404.0 -2,282.0
CashfromFinancing
Activities-2,293.0 -3,985.0 973.0 -6,583.0 -6,785.0
ForeignExchangeEffects 576.0 -615.0 249.0 65.0 -148.0
NetChangeinCash 2,320.0 608.0 1,653.0 -2,261.0 -2,006.0
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APPENDIXD-FINANCIALHIGHLIGHTS(2009)
Financial Highlights
Sales 30.99 Bil
Income 6.82 Bil
Net Profit Margin 22.28%Return on Equity 30.15%
Debt/Equity Ratio 0.48
Revenue/Share 13.31
Earnings/Share 2.93
Book Value/Share 10.77
Dividend Rate 1.76
Payout Ratio 56.00%
Revenue - Quarterly Results (in Millions)
FY (12/09) FY (12/08) FY (12/07)
1st Qtr 7,169.0 7,379.0 6,103.0
2nd Qtr 8,267.0 9,046.0 7,733.0
3rd Qtr 8,044.0 8,393.0 7,690.0
4th Qtr 7,510.0 7,126.0 7,331.0
Total 30,990.0 31,944.0 28,857.0
Earnings Per Share - Quarterly Results
FY (12/09) FY (12/08) FY (12/07)
1st Qtr $0.58 $0.65 $0.55
2nd Qtr $0.88 $0.61 $0.80
3rd Qtr $0.82 $0.82 $0.72
4th Qtr $0.67 $0.43 $0.52Total $2.95 $2.51 $2.59
Qtr. over Qtr. EPS Growth Rate
FY (12/09) FY (12/08) FY (12/07)1st Qtr 35% 25% ---
2nd Qtr 52% -6% 45%
3rd Qtr -7% 34% -10%
4th Qtr -18% -48% -28%
Yr. over Yr. EPS Growth Rate
FY (12/09) FY (12/08)1st Qtr -11% 18%
2nd Qtr 44% -24%
3rd Qtr 0% 14%
4th Qtr 56% -17%
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