Coca Cola Company Operations And Strategies Business Essay

Coca Cola was invented by Doctor John Pemberton a pharmacist from Atlanta, Georgia in May, 1886. John Pemberton invented the Coca Cola formula in a three legged brass kettle in his backyard. The name was a suggestion given by John Pemberton’s bookkeeper Frank Robinson. The soft drink was first sold to the public at the soda fountain in Jacob’s Pharmacy in Atlanta on May 8, 1886. About nine servings of the soft drink were sold each day. Sales for that first year added up to a total of about $50. But it cost John Pemberton over $70 in expanses, so the first year of sales were a loss. Until 1905, the soft drink, marketed as a tonic, contained extracts of cocaine as well as the caffeine-rich kola nut. In 1887, another Atlanta pharmacist and businessman, Asa Candler bought the formula for Coca Cola from inventor John Pemberton for $2,300. By the late 1890s, Coca Cola was one of America’s most popular fountain drinks, largely due to Candler’s aggressive marketing of the product. With Asa Candler, now at the helm, the Coca Cola Company increased syrup sales by over 40% between 1890 and 1900.

On April 23, 1985, the trade secret “New Coke” formula was released. Today, products of the Company are consumed at the rate of more than one billion drinks per day. Now company produces more than 300 beverage brands. The corporate headquarters are in Atlanta, with local operations in over 200 countries around the world. More than 70 percent of the income comes from outside the U.S, but the real reason they are a truly global company is that the products meet the varied taste preferences of consumers everywhere. But the Company has several issues that influence its profits and position in the market. Such as still producing its Coca Cola Classic product, which contains high levels of sugar and caffeine which is negatively impact costumers’ health.  And it may reduce the demand for some of their products and impact customers’ trust or loyalty.  

The second one is banned sales of Coke in its cafeteria by the Indian parliament. When coca cola was tested, it was found that it includes high concentrations of pesticides and insecticides, including lindane, DDT, malathion and chlorpyrifos. Some samples tested showed the presence of these toxins to be more than 30 times the standard allowed by the European Union. But the same drinks were found to be safe in US.

The third issue is boycott against the company’s using huge amount of water from the common groundwater source. And as a result of its operations the scarce water has been polluted by Coca Cola (case study Coca Cola’s strategy, www.thecoca-colacompany.com).

Mission and Vision Statement

Mission Statement

Coca Cola Company’s mission statement is to maximize shareowner value over time. In order to achieve this mission, they are creating value for their consumers, bottlers, and their communities. The Coca Cola Company creates value by executing comprehensive business strategies (mission & vision & values, (2009) www.thecoca-colacompany.com).

Vision Statement

To achieve sustainable growth, Coca cola has established a vision with clear goals:

Profit: Maximizing return to shareholders;

People: Creating great place to work where people are inspired to be the best they can be. Thomson, Gamble, and Strickland (2006) suggest that Coca Cola believes a reputation for workforce diversity makes recruiting employees easier (talented employees from diverse backgrounds often seek out such company);

Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples desires and needs;

Partners: Nurturing a winning network of partners and building mutual loyalty;

Planet: Being a responsible global citizen that makes a difference (mission & vision & values, (2009) www.thecoca-colacompany.com).

Company’s Strategies

Brand development Strategy. P.Kotler and K.L.Keller (2009) suggest that brands signal a certain level of quality so that satisfied buyers can easily choose the product again. So Coca Cola Company to far reach and to manage remaining in the limelight it created Brand development strategy. This strategy is effective as it has been able to construct, manage as well as maintain its brand image since yesteryears. As Kotler et. al., (2009) argue, brand loyalty provides predictability and security of demand for the company and creates barriers to entry that make it for other firms to enter the market. The brand loyalty is the instrumental in keeping up company’s brand image. Over the years, Coca Cola has passed several tests of brand enhancement and the company makes it a point that the products under the banner Coca Cola continue to invade the minds of the consumers. It involves 4000 customers to test 20 brand attributes every month.

With regard to the brand development of Coca Cola Zero, the company came out with an advertisement, which was quite different from the conventional ones. In this regard, (no calorie beverage), it has shelled out three types of products:

Coca Cola Classic;

Diet Coke;

Coca Cola Zero.

There are few experts who believe that when Coca Cola had the tag line of “The Real Thing”, it was really that but with the invention of various categories of coke, the “real thing” changes to “many things”, and the original flavor is usually lost. Hence, the brand building strategies should be such that it does not confuse people and is able to retain consumers despite the fact that several new non alcoholic beverage firms are on the (development strategy of Coca Cola, finance.mapsofworld.com).

Business Intelligence Strategy. In order to know what consumers prefer it intends to use Information technology (IT) to monitor the pulse of its customers.   According to Information Week article titled “Coke’s RFID-Based Dispensers Redefine Business Intelligence”, Coke plans to roll out the Freestyle drink dispenser nationwide which is taking the concept of customer choice to new heights, and the most interesting aspect is the technology it’s built on. According to Rainer and Turban (2009), business intelligence (BI) is applications and technologies for consolidating, analyzing and providing access to vast amounts of data to help users make better business and strategic decisions. Freestyle will become Coke’s front-line robotic army for BI, sending massive amounts of consumption data back to the beverage company’s Atlanta headquarters. The dispensers collect data on what customers are drinking and how much, and transmit that information each night over a private Verizon wireless network to Coke’s SAP data warehouse system in Atlanta. Unique byproduct of this BI enabled dispenser is that Coke can try out new flavors and get back almost real time feedback on the viability of its success.   With a competitive advantage like this, I think it’s a good idea Coke store its IT details to develop its recipe formula.

Price strategy. Sometimes Coca Cola Company changes their product prices according to the season. Summer is supposed to be a good season for beverage industry in Pakistan. So in winter they reduce their prices to maintain their sales and profit. But normally they reduce the prices of their pet bottles or 1 litter glass bottle.

Promotion strategy. They get or purchase shelves in big departmental stores and display their products in those shelves in that style which show their product clearer and more attractive for the consumers (Coca cola’s business intelligence strategy, www.itstrategyblog.com).

SWOT Analysis

Strengths:

1. Brand equity

2. Product distribution and worldwide network

3. Solid financial performance

4. One of the world’s most recognized brand.

5. Innovation

Weaknesses:

1. Credit rating

2. Customer concentration, particularly in the US (Wal-Mart accounts for more than 10% of Coca Cola’s business in the US)

3. Does not enjoy the number one position in India, Pakistan.

Opportunities:

1. Possible growing demand.

2. Expansion – reaching all segments.

3. Globalization

4. Catering to Health Consciousness of People

5. Bottled water growth

Threats:

1. Health Drinks – Fruit Juice Companies

2. Key competitors (Pepsi, etc)

3. Commodity prices growth

4. Image perception in certain parts of the world (case study Coca Cola’s strategy, www.thecoca-colacompan).

Driving Forces

I think the first driving force for the company is customer demand. If there is no demand it is meaning in producing the product. So for the Coca Cola, driving force is customer demand.

The second one is innovation. Nowadays companies have to be able to survive and grow in an ever-changing market. In order to achieve these they should systematically innovate and deliver new products.  According to Company’s late 90s’ earnings growth of 15-20% per year, turned in three straight years of falling profits.  It was apparent that the market was changing and for keeping up these changes, Coca-Cola had to move from a single core product to a total beverage company.  This was a major change because their past success was base on having one successful core product. Now Coca-Cola offers nearly 400 different products in and is still dominating the beverage industry. 

The third driving force is globalization. Today’s big business takes place on a global scale, and Coca-Cola is no exception.  Technology is continually changing business, and these constant changes have been making it more feasible and profitable for businesses to expand their operations globally in order to serve all different types of diverse markets around the world.  Coca-Cola is taking advantage of the large revenue opportunities made possible by participating in a global market and now offers products in 200 countries around the world. 

Issues

In my opinion the main issue of the Coca Cola Company is still producing its Coca Cola Classic product, which contains high levels of sugar and caffeine is causing a recent uproar on our increasingly health-conscience world.  There is a possibility that obesity concerns may reduce demand for some of their products.  In addition, the most amounts of its products are selling in the schools so this puts the pressure on Coke to provide healthier alternatives to their drinks if they want to keep selling in schools.

The next problem is the Indian parliament has banned the sale of Coke products in its cafeteria. The ban came as the result of tests, including those by the Indian government, which found high concentrations of pesticides and insecticides, including lindane, DDT, malathion and chlorpyrifos, in the colas, making them unfit for consumption. Some samples tested showed the presence of these toxins to be more than 30 times the standard allowed by the European Union. Tests of samples taken from the US of the same drinks were found to be safe.

As we know water is rare resource and today one of the main problems of the world is water shortage. This creating the problems in most company’s operations and Coca Cola is no exception. The Company’s bottling operations are facing severe shortages of water as a result of the cola major sucking huge amounts of water from the common groundwater source. To add insult to injury, the scarce water that remains has been polluted by Coca-Cola as a result of its operations. It is resulting thousands of Indian people protesting against the company.

Conclusion and recommendations

Though Coca Cola is performing well and gaining trust of its consumers and obtaining new consumers trust every day, it should act even better to keep its current position in beverage industry and keep on growing. The Company should increase its shareholders wealth by increasing its sales and decreasing the costs which will result higher earnings and net profit.

As conclusion of analysis I have done, I suggest the following recommendations for the Coca Cola Company:

Today everything is rapidly changing and companies for surviving should go step by step with those changes. The innovation gives the company key advantage among its rivals. So Coca Cola Company can introduce a new product, which many people will want to try.

Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and differentiate itself from its competitors, in order to maintain its strong market position.

Reason of not being popular in India is the utilization of rear water resources. This put negative effect on the brand image, because of cola plant water level in the area decreases which makes the resident life miserable. If the Company wants a number one position in India they have to follow following criteria:

– Environmental due diligence before acquiring land or starting projects;

– Environmental impact assessment before commencing operations;

– Ground water and environmental surveys before selecting sites.

Another major asset to a company of this size and clout is maintaining continuity among the workforce.  This is essential to keep the company in a positive direction, accomplishing common goals and constantly setting new goals.