Business Plan on "Coca Cola Company Overview Coca-Cola Enterprises"

Business Plan 7 pages (2273 words) Sources: 1+

[EXCERPT] . . . .

Coca Cola

Company Overview

Coca-Cola Enterprises is a multinational company with headquarter in Atlanta, Georgia, USA. Coca Cola produces non-alcoholic beverages and operates in several countries such as Great Britain, Belgium, France, Luxemburg, Netherlands, Sweden and Norway. Coca Cola markets world top 5 soft drinks brands and produces more than 500 beverages brands. Among the top Coca Cola, brands include Fanta, Fanta Verdia, Krest, Calypso, Schweppes, and Coke. Despite the company international operations, 72% of its operating profits are generated from the United States. Outside the United States, Coca Cola maintains ownership interests with many canning and bottling companies. (Lagos, & Smith 2001). Employed nearly 139,600 people, Coca-Cola recorded revenues of $46 billions in the 2011 fiscal year with quarterly revenue growth of 45.4%. In 2009, total assets of Coca Cola were $48.7 billions, and at the end of 2010 fiscal year, the company total assets increased to $72.9 billions.

Fundamental long-term strategy of Coca Cola is its marketing expertise and brands differentiation to increase consumer awareness. Despite the financial success recorded by Coca Cola, the company is facing several challenges, which is affecting the operation of Coca Cola.

The studies provide environmental analysis to enhance greater understanding on the challenges that the Coca Cola is facing.

Environmental Factors affecting Coca Cola business operations

In a contemporary business environment, there are several environmental factors affecting business operations. Among the environmental factors are demographic, socio-cultural, regulatory/political, technological, and natural trends.

Political: Food and Drug Administration (FDA) categorizes beverages under food category. In the United States and other countries where Coca Cola is operating, governments play important roles in regulating quality of products. Governments set regulations that companies should follow in the manufacturing of products, and there are fines that government levy in case of non-compliance. There could also be a change in laws and regulations, which include accounting standard, new tax law and environmental law, and these could affect the operations of the Coca Cola. In the United States, beverage industry is subject to Federal Food, Drug, and Cosmetic Act and health and safety laws.

When the U.S. government enacted the Sarbanes-Oxley Act in 2002, Coco Cola structured its Board of Directors in order to comply with the new law. SOX Act 2002 is designed to ensure that companies such as Coca Cola comply with the Section 404 which is the most important aspect of SOX Act. Equally important, political conditions of the countries that Coca Cola is operating could also affect the operations of Coca Cola.

Socio-Cultural: In the United States, many people have decided to practice healthier lifestyle and this issue have affected the non-alcoholic and beverage industry because many people are switching to bottled water instead non-alcoholic beverages. More importantly, people aged between 37 and 55 are increasingly concerned about their nutrition. People within these age range prefer bottled water rather than non-alcoholic deinks. The issue will continue to affect the sales of non-alcoholic beverage industry.

Technological: Technological improvement creates opportunity for the development of new products, and has a special effect on the advertising technique. Advanced technological development in the United States and other countries in Europe enhance the development of new non-alcoholic beverage products. With rapid increase in technological development, Coca Cola has increased tremendously in size than it was in the last few years. In Britain, Coca Cola has employed the latest technology to develop the state-of-art soft drinks. Innovation in the new technology has made Coca Cola to produce can drinks faster than imagine. Unlike the developed countries, emerging economies and other developing have limited technological development, and non-alcoholic beverage firms may not have opportunity to develop new sophisticated products in these countries.

Demography: Demographical factors always affect the business operation of Coca Cola. Younger generations are the category of people who usually buy Coca Cola products. Moreover, population distribution could also affect the demand for the non-alcoholic products. Presently, there is an exodus of people migrating from developing countries to advance countries in search of greener pasture. Thus, decline in the population of developing countries due to the migration effect might have affect on the sales of Coca Cola in developing countries. Population movement from the rural areas to urban areas also affects the market demand for Coca Cola products.

Natural Trend: Natural trends such as natural disaster may have impact on the business of Coca Cola. Outbreak of fire disaster in California and volcanic eruption in Japan were the natural trends that affected the business process of Coca Cola. Typically, Coca Cola recorded a decline in the sales in these two regions due to the occurrence of natural disaster during these periods. Natural occurrence also affected the overall sales of soft drink and beverage industry in California and Japan.

Part B: Industry Analysis

"The global soft drinks and beverage industry, which consists of soft drinks, beers, ciders, spirits and wines, was valued at $1.4 trillion USD in 2008 and is expected to rise at a CAGR of 2.6% to $1.6 trillion USD by 2013." ( IMAP (2010 Appendix a-i). Soft drink and beverage industry is among the fastest growing industry in the world. At the end of 2008, the global value of non-alcoholic and food market is increasing by more than 5% annually. United States is the world largest consumers of soft drinks with approximately 24% global consumption. In 2011, U.S. sales for non-Alcoholic beverage drinks reached USD 9 Billion. However, decline in the world economy has made soft drink and beverage industry to record 2% decrease in the market performances in 2009. With recovering economy, the growth rate of soft and beverage industry increased in 2010 because of the considerable increase in the demand for soft drinks. Driven by recent wellness trends, market for non-alcoholic beverage will provide single-digit growth rate till 2014. In many countries of the world, the increase in the spending on food and beverages will boost revenue of non-alcoholic and beverages sector. With increase in the preference for the healthy lifestyle option in the U.S. And European countries, non-alcoholic and beverage market are likely to increase from $4.134 trillions in 2011 to $4..546 trillions in 2014 revealing grow rate of 3.5%.. In Asia, China is contributing to the growth of the non-alcoholic beverage industry, and it is estimated that there will be increase in the market performance in the sector in 2012 and is likely to reach $5.073 in 2014. Additionally, Latin America market is also recording a market increase in the last few years

Based on the industry analysis, there would be an increase in the growth rate in non-alcoholic and beverage industry in Latin America reaching $2.217 trillions by 2014. In the Middle-East and Africa, "a compound annual growth rate (CAGR) of 5.8% from 2009 to 2014 to exceed $3.283 trillion in 2014." (Frost and Sullivan Research 2011 P1).

Industry Attractiveness

Porter Five Forces is used to explain the attractiveness of the non-alcoholic and beverage industry. Michael Porter model is used to postulate the intensity of competition within an industry.

Rivalry: Non-alcoholic and beverage industry is characterized by intense competition. Despite the rivalry characterized in the industry, soft drink market is characterized by oligopoly. However, there is an intense competition between Coca Cola and Pepsi Cola. Despite the rivalry in the industry, revenue is extremely concentrated within the industry with Coca Cola and Pepsi Cola commanding more than 70% in market shares of soft drinks.

Substitutes: There is wide range of substitutes in the industry allowing consumers to switch from one brand to the other. In the United States, consumers could switch from Pepsi Cola to Coca Cola since both soft drinks provide the same satisfaction. To retain the customer base and increase customer loyalty towards the products, Coca Cola is using branding technique to differentiate its product in the industry. Presently, Coca Cola has established over 500 brands across the world, and the company uses different advertising strategies to publicize its brands to consumers as well as enhancing the market share.

Power of Suppliers: Major products that firms are using in the production of soft drinks are sugar and packaging. Typically, sugar is available from many sources in the open market and if sugar becomes too expensive, it is possible for Coca Cola to switch to corn syrup. Thus, suppliers do not have a bargaining of power against Coca Cola. Presently, there are abundant of aluminium globally, and aluminium companies are competing among one another to secure contract with firms in the non-alcoholic and beverage industry. Thus, Coca Cola has power over suppliers of aluminium companies, and Coca Cola has been able to negotiate a favourable contract agreement with suppliers thereby reducing power of suppliers.

Power of Buyers: Firms within soft drinks industry sell their products to consumers through four principal channels:

Food stores

Convenience and gas

Fountain

Mass merchandisers

Supermarkets are the principal sellers of soft drinks and they are highly fragmented and the stores count on the soft drinks to generate consumer traffic towards their stores. However, due to their… READ MORE

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