Executive Summary

In this paper, beverage giant, the Coca-Cola Company, has been analyzed. An internal as well as external analysis of the company has been undertaken using the following analytical tools: PESTEL, SWOT and Porter’s Five Forces. The 5-factor analysis has revealed: medium threat of new entrants, medium to high threat of substitute products, low supplier and buyer bargaining power, and high level of rivalry with its chief competitor, PepsiCo.

SWOT analysis results were as follows: Strengths: Brand Equity; Company valuation; Extensive international presence; Greatest market share; Brilliant marketing plans; Customer Loyalty and Distribution system. Weaknesses: Competition with Pepsi; Low Product Diversification; Lack of a health beverage offering and Water management. Opportunities: Diversification; Focusing on developing countries; Packaged drinking water; Supply chain improvement and Market lesser selling offerings. Threats: Sourcing of Raw Materials and Indirect competition.

Lastly, PESTEL analysis results were as follows: Political and Legal Factors potentially impacting the company: trade restrictions, tax policy, labor laws, environment policy, FDA certification, etc.; Economic factors: gross domestic product, interest rates, forex rates, disposable income, retail price index, demand and supply conditions, and unemployment rates; Social factors: trends, practices, traditions, wants, population, educational qualifications, aspirations, income distribution, corruption, customer awareness and education, standard of living, religious values, and family structure; and technological factors.

Introduction

Key Facts

Name: The Coca-Cola Company

Industries served: Beverage (more than 600 brands)

Geographic areas served: Worldwide (more than 200 countries)

Headquarters: Atlanta, Georgia, United States

Current CEO: James Quincey

Revenue (US$): 41.863 billion (2016) 5.5% decrease over 44.294 billion (2015)

Profit (US$): 6.527 billion (2016) 11.2% decrease over 7.351 billion (2015)

Employees: 100,300 (2017)

Main Competitors: PepsiCo Inc., Dr. Pepper Snapple Group, Inc., Unilever Group, Mond?lez International, Inc., Groupe Danone, Kraft Foods Inc., Nestlé S.A. and several other beverage manufacturers.

The Coca-Cola Company’s business overview from the company’s financial report (Coca Cola Company, 2011):

The biggest global beverage manufacturer, Coca-Cola, owns, licenses and markets over six hundred brands of non-alcoholic beverages (chiefly sparkling beverages), besides numerous still ones including waters, juice drinks, enhanced waters, coffees, teas, juices and sports and energy drinks (Coca Cola Company, 2011).

The company owns and markets four out of the most popular 5 global brands of non-alcoholic sparkling beverages, namely: Coca-Cola, Fanta, Sprite and Diet Coke. Trademarked company beverages, marketed in America since the year 1886, can now be seen in over two hundred nations’ markets (Coca Cola Company, 2011).

The company’s branded beverages are accessible to customers worldwide via Coca Cola’s extensive network of self –owned or –supervised distribution and bottling facilities, besides independent bottling firms, distributors, retailers and wholesalers, making the biggest global beverage distribution network (Coca Cola Company, 2011).

Coca Cola-trademarked products make up 1.9 billion (roughly) of 59 billion (roughly) of every kind of beverage serving consumed daily across the globe (Coca Cola Company, 2011).

Coca Cola claims its success hinges on its capability of connecting with customers through offering them a broad array of product choices for suiting their lifestyles, wants and requirements and on its workforce’s capability of efficiently executing daily tasks (Coca Cola Company, 2011).

The company aims at utilizing its assets (i.e., its fiscal strength, brands, unparalleled distribution network, worldwide reach, and its managers’ and partners’ firm dedication and skill) for increasing its competitiveness and accelerating progress for ensuring value creation for its shareowners (Coca Cola Company, 2011).

Porter’s Five Forces in Action: Analysis of Coca-Cola

Ever since the concept was proposed in the year 1979, Porter’s 5 Forces theory has remained the de-facto industrial analysis basis, with market competitiveness gauged by deducing market attractiveness. Conclusions from this assessment help ascertain extant and imminent...
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Porter’s 5 forces are as follows: (1) Threat of Fresh Entrants, (2) Competition between Extant Companies, (3) Threat of Substitutes, (3) Suppliers’ Bargaining Power, and (4) Buyers’ Bargaining Power.
The Coca-Cola brand’s 5 Forces analysis (Valuation Academy, 2018):

Threat of New Entrants/Potential Competitors: Medium Pressure

The beverage sector has fairly low obstacles to entry owing to the lack of customer switching expense and of any need for capital. Novel brands are increasingly flooding the markets, featuring prices akin to Coca Cola’s products.

To customers, Coca-Cola is both brand and beverage. Its longstanding, highly significant share of the market implies long-time loyal clients will prove less likely to switch brands (Valuation Academy, 2018).

Threat of Substitute Products: Medium to High pressure

Market shelves display numerous types of sodas, juices and energy drinks. Coca-Cola lacks a distinctive flavor, as proven by its blind taste examination: participants were unable to differentiate Pepsi from Coke (Valuation Academy, 2018).

The Bargaining Power of Buyers: Low pressure

Individual customers have absolutely no bargaining power. While Wal-Mart and other large retail chains possess some degree of bargaining power owing to the large quantities ordered, brand loyalty of customers serves to weaken their bargaining power (Valuation Academy, 2018).

The Bargaining Power of Suppliers: Low pressure

Carbonated drinks’ chief ingredients are carbonated water, caffeine, phosphoric acid, and sweetener, whose suppliers are neither differentiated nor concentrated. After all, the company is only one (and probably the biggest) client of these supplying firms (Valuation Academy, 2018).

Rivalry among Existing Firms: High Pressure

At present, PepsiCo is Coca-Cola’s chief competitor, with its similarly broad array of beverages. Both brands are popular and dedicated strongly to sponsoring sporting and other outdoor activities and events. While other soft drink brands (e.g., Dr. Pepper) have gained some degree of popularity owing to their distinctive flavors, they haven’t come on par with Coke or Pepsi (Valuation Academy, 2018).

SWOT Analysis

Nobody is unaware of the name Coca Cola. One can find it everywhere – in homes, office premises, restaurants, shops, etc. The company boasts of numerous product offerings. Its SWOT analysis is as follows (Bhasin, 2018).

Strengths

Brand Equity – Coca Cola was the recipient of the 2011 Interbrand highest brand equity Award, which is understandable owing to its distinctive brand identity and extensive international outreach (Bhasin, 2018).

Company valuation – Among the world’s most valuable firms, it is valued at approximately $79.2 billion (covering brand value, revenues and operational expenses and its many global assets and manufacturing units (Bhasin, 2018).

Extensive international presence – Two-hundred nations worldwide market Coca Cola products. Such an extensive market presence has facilitated the development of its gargantuan brand name (Bhasin, 2018).

Greatest market share – The beverage sector has only two key competitors – Coca Cola and Pepsi, with the former enjoying the greatest global market share. Its chief growth-driving products are Coke, Fanta, Sprite, Thums up, Diet coke, Maaza and Limca (Bhasin, 2018).

Brilliant marketing plans – Contrary to its competitor, Pepsi, the Coca Cola Company strives, forever, to win the hearts of people. Pepsi’s focus is on youth, whereas Coke focuses on everyone (Bhasin, 2018).

Customer Loyalty – Its robust product offering ensures Coca Cola (particularly its Fanta and Coke) boasts an army of loyal customers. Its superior taste makes finding a substitute product to replace it tough for clients (Bhasin, 2018).

Distribution system – Coca-Cola’s immense market demand has necessitated the creation of its extensive distribution system, understandably the world’s largest. Further, its effective distribution system has ensured its superior market presence (Bhasin, 2018).

Weaknesses

Competition with Pepsi – Coca Cola has been unable to monopolize the beverage market thanks to Pepsi. Fierce competition exists between these brands (Bhasin, 2018).

Low Product Diversification – Pepsi has wisely implemented product diversification by entering the snacks market with winning…