Financial and Value Review
1) Size of firm
Net worth of $16.92billion
2) Financial condition with a weighted current ratio of 0.94 Coke falls below the required 2, therefore they fail this test.
3) Earnings stability there has been positive net income for the past ten years and they 8pass this test.
4) Earnings growth
Earnings are greater than five years ago. Pass. Overall we would not suggest Coke being placed in the defensive investor’s portfolio at this time.
Opinion: Seeing that currently Coke is trading at a much higher price than our internal valuation we would be sceptical to purchase this security at this time. However, Coke is an excellent firm with great management, products, dividend history, and earnings. This stock we would place on our review list and periodically watch the share price to see if it dips and falls more in line with what we would be comfortable paying.
Summary in points:
- Leading brand value and a strong brand portfolio
- Coca-Cola, Diet Coke, Sprite and Fanta
- Large investments in brand promotions
- sells its products in more than 200 countries
- Company also owns bottled water production and still beverage facilities as well as a facility that manufactures juice concentrates.
- These three segments are Latin America, ‘East, South Asia, and Pacific Rim’ and Bottling investments
- Return on total assets increases over the period consistently 2005, 06, 07 15.47%, 16.55%, and 16.95% respectively.
- Negative publicity in India
- Inventory turnover decreased by 13.29%
- Return on equity decreased by 40.50%
- Sluggish performance in North America Coca-Cola’s performance in North America was far from robust
- Collection form debtors decreased by 15.68%
Internal Factor Evaluation Matrix (IFE) of Coca Cola Co
KEY INTERNAL FACTORS Weight Rating Total Score
|Possible growing demand.||0.09||4||0.36|
|Expansion – Reaching all segments.||0.11||3||0.33|
|Catering to Health Consciousness of People||0.09||3||0.27|
|Bottled water growth||0.06||1||0.06|
|Acquisitions of smaller players.||0.07||2||0.14|
|Health Drinks – Fruit Juice Companies||0.14||3||0.42|
|Key competitors (Pepsi, etc)||0.12||4||0.48|
|Commodity prices growth||0.1||2||0.2|
|Image perception in certain parts of the world.||0.05||2||0.1|
|Smaller, more nimble operators/players||0.1||2||0.2|
SWOT Analysis of COCA COLA Company
SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats inside a company, project, or a business venture. It involves identifying the internal and external factors that are favorable/unfavorable for business to succeed
1. Brand equity/image & recognition
2. Product distribution and worldwide network
3. Solid financial performance
4. One of the world’s most recognized brand.
5. Product diversification (water, juices, soft drinks, sport drinks, etc)
6. Co-operate identity.
1. Possible growing demand.
2. Expansion – Reaching all segments.
4. Catering to Health Consciousness of People
5. Bottled water growth
6. Acquisitions of smaller players.
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. A lot of loyal Pepsi customers are not enough loyal Coca Cola customers
4. Does not enjoy the number one position in India, Pakistan.
1. Health Drinks – Fruit Juice Companies
2. Key competitors (Pepsi, etc)
3. Commodity prices growth
4. Image perception in certain parts of the world.
5. Smaller, more nimble operators/players
Suggestion To Stay ahead Of Competition
The three main ways are through innovation, relations or reputation.
- First of all innovation can be used. This may certainly give coca cola competitive advantage because it introduces a new product, which many people will want to try. People will like to purchase the commodity even though price is high because no substitutes are available. It may also give coca cola brand loyalty which means customers will stay loyal to them no matter what happens.(S1,S2,S4,S5,S7,T1,T2,T3)
- Another factor is marketing. This is a very important factor for coca cola. In order for the company to maintain its strong market position, Coca Cola needs to continuously strengthen its brand to maintain brand loyalty and positive responses and differentiate itself from its competitors.(W2,W3,W4,O1,O2,O3,O4)
- If coca cola used strong marketing with environment friendly attitude it may raise barriers to entry, thus decreasing the threat of new entrants to the industry.(T1,T4,T5,S2,S4,S5,S6)
- Coca Cola’s brand represents quality, taste and excitement to the market, qualities that remain unmatched by the company’s competitors, thus severely reducing any threat of being substituted. (S1,S4,S2,O1,O2,O3)
- Reason of not being popular in India is the mis-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 Cola 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
- Compliance with all regulatory environmental requirements
- Ban on purchasing CFC-containing refrigeration equipment
- Waste water treatment facilities with trained personnel at all company-owned
- bottling operations
- Energy conservation programs
- They should installed hi-tech water recycling system so that they can save 50% water savings of its operations. (W3, W4, T4)
- Many of coca cola’s plastic bottles are recycled and as a result less resources are lost and costs decrease. Through diversification & innovation in water & juices business supported with aggressive advertising strategy Coca Cola Company can attracts a new market segment. This will mean they will have a higher revenue increasing long term profitability and improve credit rating.(W1,W4,T1,T3,T4)
SPACE MATRIX STRATEGIC MANAGEMENT METHOD
The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake. The Strategic Position & Action Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization.
The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix).
The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X and Y coordinates.
The following are a few model technical assumptions:
- By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.
-CA values can range from -1 to -6.
-IS values can take +1 to +6.
- The FS and ES dimensions of the model are plotted on the Y axis.
– ES values can be between -1 and -6.
– FS values range from +1 to +6.
Space Matrix of Coca Cola Co
24- QSPM OF COCA COLA
From our Strategic Alternatives evaluation, we see that it is more attractive to outsource our distribution networks rather than launch a diet line of products. This is in line with their current strategic direction, and will allow Pakola to fortify their market reach before introducing new products that will be harder to push through the distribution channels.
The Coca Cola Company has a very rich history and spread over the world, the study in this report specially the particular SPACE matrix tells us that Coca Cola Company should pursue an aggressive strategy. Coca Cola Company has a strong competitive position in the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This includes focus on Water and Juices products, and catering to health consciousness of people through introduction of different coke flavor and maintaining basic coke flavor. Further company should integrate with other companies, acquisition of potential competitor businesses, innovation in branding and aggressive marketing strategy can bring long term profitability.