Running head: COMPANY ANALYSIS Company Analysis Pallavi Bhardwaj Capella University Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. 1 COMPANY ANALYSIS 2 Company Background and Industry Structure The Coca-Cola Company, also known as Coca-Cola, is a leading non-alcoholic beverage company. Its journey toward being the market leader began in 1886 in Atlanta, Georgia. John S. Pemberton, an American pharmacist, developed a formula for a syrup, later called Coca-Cola, and served it at Jacob’s Pharmacy. Jacob's Pharmacy was not a regular drug store. It was more a general store that also sold medicines. The drink he served soon became popular and caught the attention of Mr. Asa Candler, an American business magnate. In 1888, Asa Candler acquired the rights to use the formula from Pemberton (The Coca-Cola Company, 2011b). By 1891, Candler had acquired the sole ownership of the company at $2,300, and in 1892, he established The Coca-Cola Company as a Georgia corporation (The Coca-Cola Company, 2012a). Over time, two beverage companies have come to dominate the soft drink industry, The Coca-Cola Company and PepsiCo. There are other companies in the industry, too, but they form a very small portion of the market share. The presence of a few big sellers is one of the features of an oligopoly. An oligopoly is “a market structure in which only a few sellers offer similar or identical products” (Mankiw, 2012, p. 349). Both The Coca-Cola Company and PepsiCo sell almost identical carbonated soft drinks, but they each have managed to secure a loyal customer base. Another feature of an oligopoly is high barriers to entry. The production, distribution, and marketing of soft drinks require huge amounts of investment. This makes it difficult for new firms to enter the market. A distinctive feature of an oligopoly is that firms engage in non-price competition. Decades of rivalry between The Coca-Cola Company and PepsiCo have witnessed intense competition between these firms where each firm has attempted to outdo the other through concentrated advertising and marketing efforts. Neither of them has competed with each other on pricing. Few dominant players, high barriers to entry, and non-price competition make Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 3 the soft drink industry an oligopoly. The Coca-Cola Company has successfully established its presence globally and is the most dominant player in this oligopolistic industry. The economic environment of The Coca-Cola Company is affected by a variety of factors, namely the disposable income of consumers, competition, emerging markets, economic crises, and so on (Ottonello, 2015). The sales of the company depend largely on the disposable income of consumers. A higher disposable income implies an increase in the purchasing power of consumers, which in turn will have a positive impact on the sales of Coca-Cola. The market share availability of Coca-Cola is threatened by the presence of strong competitors, such as PepsiCo and Dr Pepper Snapple Group (Ottonello, 2015). The Coca-Cola Company constantly devises innovative strategies to retain its position as a market leader. It has adopted popular strategies such as mergers and acquisitions, product diversification, market segmentation, and so on. For example, in March 2009, it tried to acquire China Huiyuan Juice Group Limited in a bid to expand its juice business in China (Ottonello, 2015). The soft drink market in the United States has become saturated, making it necessary for Coca-Cola to seek less saturated markets. Asia Pacific and the Middle East provide lucrative markets for the company. Economic downturns adversely impact production, consumption, and the overall health of economies (Ottonello, 2015). During an economic slowdown, there is a shortage of money available for capital formation. The investment and expansion activities of Coca-Cola were affected by the global shortage of funds. The Coca-Cola Company has successfully faced the challenges posed by these economic factors through its strategies. The success of its strategies has helped Coca-Cola establish its presence in the global market. Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 4 Coca-Cola’s Global Presence Coca-Cola’s global presence can be analyzed by examining its organizational structure, economies of scale, economies of scope, the effects of trade on its business, and competition faced by it in the international market. Organizational Structure of The Coca-Cola Company An organizational structure is defined as a hierarchy that explains the delegation of duties and workflow within an organization. Every business organization, irrespective of its shape and size, follows an organizational structure. Being a company that operates worldwide, Coca-Cola follows a streamlined international structure that perfectly aligns its business units across all continents. James Quincey, President and Chief Operating Officer (COO), believes that an efficient organizational structure, strong talent succession, and recognition of the next generation leaders are vital to ensuring the long-term viability of the company (The Coca-Cola Company, 2016b). The Coca-Cola Company’s organizational structure comprises four major groups and its bottling partners. The four major groups are Europe, Middle East, and Africa; Latin America; Asia Pacific; and North America. Each group is headed by a president who reports to James Quincey, COO (“Operations Leadership,” n.d.). The Coca-Cola Company manufactures concentrates and syrups, which it sells to the bottling companies, and carries out marketing and promotional activities. The bottling partners, such as FEMSA, are responsible for packaging, merchandising, and distributing the final product to the vending partners. The vending partners then sell the final product to the consumers. The bottling partners of Coca-Cola strive to establish a relationship with the customers, namely grocery and convenience stores, restaurants, movie theaters, and so on, in every Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 5 operating country. By establishing strong local relationships, they help in expanding the company’s global reach. For years, Coca-Cola has relied on independent bottlers for its bottling operations. Bottling companies face problems such as lack of funds, limited technical know-how, and so on. To help solve their problems, Coca-Cola formed the Bottling Investments Group (BIG) in 2006. Forming BIG has ensured that all bottlers become a part of The Coca-Cola Company. BIG is present in four continents and has a workforce of 40,000 people. By registering a whopping revenue of over $20 billion in 2015, BIG has proved to be a huge success for the company (“The Coca-Cola System,” n.d.). Cost Structure and Factor Markets The cost structure of Coca-Cola is a combination of both fixed costs and variable costs. Coca-Cola’s fixed costs include loan payments, insurance premiums, rent, and so on. Its variable costs include the prices of raw materials, packaging expenses, the wages of workers directly involved in production, and so on. Land, labor, capital, and raw materials comprise the main inputs in the production process at The Coca-Cola Company. Having established itself in the United States, the company now ventures into countries with high growth prospects. It acquires land for setting up offices and manufacturing plants and hires labor for its operations in these countries. The company heavily invests in plant and machinery to efficiently carry out production. The main raw materials used by Coca-Cola are nutritive and non-nutritive sweeteners. High fructose corn syrup (HFCS) is the principal nutritive sweetener used in the United States. Outside the United States, sucrose, another form of sugar, is used as a nutritive sweetener. The company procures both HFCS and sucrose from numerous sources. Coca-Cola Bottlers’ Sales & Services Company is responsible for the procurement of raw materials, including HFCS, in the United States. The Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. Comment [N1]: You did analyze the global presence of a company and explains the factors that affect its global presence. COMPANY ANALYSIS 6 company procures orange juice concentrate from the Southern Hemisphere (mainly from Brazil) for the production of juice and related products. Apart from sweeteners and juice concentrates, the company also procures plastic, glass bottles, cartons, aluminum and steel cans, and so on, from multiple suppliers across the globe. The Coca-Cola Company has never experienced shortages of any raw material in the past (The Coca-Cola Company, 2011a). Economies of Scale Coca-Cola is a perfect example of a company that has achieved economies of scale. Economies of scale are achieved when a company is able to reduce its per unit cost by carrying out large-scale production. In order to meet consumer demand in more than 200 countries, CocaCola has been carrying out massive production in its numerous manufacturing plants, thereby reducing its average cost. However, before realizing the advantages of economies of scale, a company has to create a huge demand for its products so that it can expand its scale of production. If there is no demand in the market, the company will have large amounts of unsold stock. Hence, Coca-Cola heavily invests in its branding and marketing activities to ensure that there is sufficient demand for its products. Economies of Scope The Coca-Cola Company has also benefitted from economies of scope. Economies of scope can be realized when a company diversifies its portfolio. Diversification allows the company to lower its average cost by distributing the overall costs among the various products. Being a leading player in the non-alcoholic beverage industry, Coca-Cola offers more than 500 sparkling and still beverages to its customers. According to Interbrand, a global brand agency, Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 7 Coca-Cola has been ranked the world’s third most valuable brand with an estimated brand value of $73.1 billion (McWilliams, 2016). The Coca-Cola Company is the proud owner of 20 billion-dollar brands. (The Coca-Cola Company, n.d.). The company offers a multitude of products to its customers, for example, Coca-Cola, Fanta, Sprite, Minute Maid, and so on. Apart from carbonated drinks, the company has diversified by selling non-carbonated bottled water (Ciel), flavored water (Glacéau Vitaminwater), sports drink (Powerade), and so on. The diversification of its portfolio provides a safety net to the company in case one product line fails. The Effects of Trade and Taxes on Coca-Cola Free trade enables companies to extend their business across the globe. Globalization and liberalization have revolutionized international trade and unified the world. Coca-Cola is based in Atlanta, but it has marked its presence in more than 200 countries, offering more than 3,800 products worldwide. In 1994, the North American Free Trade Agreement (NAFTA) was signed by the United States, Canada, and Mexico to spur trade between these countries. NAFTA proved to be a boon for Coca-Cola in spurring its sales, especially in Mexico. The proponents of NAFTA believed that it would generate massive employment opportunities in the North American countries as a result of increased trade. On the contrary, it led to the transfer of jobs from the United States to Mexico. Unlike the United States, Mexico provides an abundant supply of labor at low wages. Therefore, many big American companies, including Coca-Cola, have shifted their manufacturing and assembly plants to Mexico to reduce their costs of production. NAFTA benefitted the Mexican workers, but raised unemployment levels in the United States. Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 8 The average consumption of sugary drinks by a Mexican is 163 liters per year, which is 40% more than the average consumption by an American (Watson & Treanor, 2016). In January 2014, the government of Mexico imposed a tax on sugary drinks because of the alarming rise in obesity and diabetes levels in the country (Cohen, 2016). The per capita consumption of CocaCola took a hit after the imposition of the tax. However, the representatives of Coca-Cola were confident of reviving their business in Mexico. The Coca-Cola Company increased their investment in advertising, and this strategy brought positive outcomes for the company. The surprise element was that the sales of soda across Mexico increased despite the tax imposition. The Mexican beverage industry association, Anprac, reported that soda volumes increased by 2% in 2016 between the months of January and April (Cohen, 2016). Competition Faced by the Company Coca-Cola’s biggest competitor is PepsiCo. The rivalry between the two companies is popularly referred to as “Cola Wars.” The Cola Wars started in 1975 when PepsiCo launched the “Pepsi Challenge” at various public locations. People were asked to drink from two white cups, without revealing the contents to them. The results were in favor of Pepsi as a majority of the people preferred its taste to Coke’s. Since then, there have been many instances where both companies have competed against each other on various fronts, such as advertising, branding, volume of sales, and so on. Apart from PepsiCo, Coca-Cola faces competition from Dr Pepper Snapple Group and many other small players in the soft drink industry. However, statistics show that Coca-Cola captured 48.6% of the global soft drink market share in 2015. In contrast, PepsiCo accounted for 20.5% of the market share, and all other competitors combined accounted for 30.9% of the soft Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 9 drink market (“Market Share of Carbonated Beverages Worldwide as of 2015, by Company,” n.d.). To continue to be recognized as a market leader, The Coca-Cola Company must build an image of a socially and ethically responsible company. The company can build this image through corporate social responsibility and following environmentally friendly practices. Ethics and Business Code of Conduct To maintain long-term viability, business organizations must also focus on ethical behavior and corporate social responsibility apart from achieving their organizational goals. However, Coca-Cola has been in trouble with allegations of unethical practices several times. For instance, in 2003, the Centre for Science and Environment (CSE), a public interest research and advocacy organization, published a report accusing The Coca-Cola Company of exceeding the permissible levels of pesticides in its drinks as per the European standards. The company denied the allegation for three years, but the CSE reported the same results in 2006. Coca-Cola’s sales volume dropped in the aftermath of the CSE report (“Pesticides in Soft Drinks,” n.d.). The Coca-Cola Company has also been accused of water pollution. There have been reports of overextraction of groundwater in Kerala, India, leading to water scarcity in the region. The image of the brand was tarnished by these allegations. When the allegations received worldwide attention, the reputation of the company suffered. Many universities in the United States and Europe banned the sale of Coke on their campuses, thereby affecting the sales of the company. The controversies it faced over the years pushed the company to take necessary steps to revive its image globally. According to The Coca-Cola Company, “our sound business principles and practices foster our strong, innovative and collaborative culture, which is committed to ethical behavior, Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 10 accountability and transparency” (The Coca-Cola Company, 2016d, para. 1). The company has formulated a 49-page Code of Business Conduct that acts as a guideline for ethical behavior to be exhibited by the company and its employees. The company’s corporate matters are managed by the Public Policy and Corporate Reputation Council. The Council is responsible for identifying risks faced by communities and recommending appropriate measures to address those risks. In addition to the sustainability reports published by the company every year, Coca-Cola also produces an annual water report which details the various water-saving initiatives undertaken by the company. The Coca-Cola Company was the first Fortune 500 company to meet its 2020 Water Replenishment Goal five years ahead of time. According to The Coca-Cola Company, “the Coca-Cola system has achieved its water replenishment goals through 248 community water partnership projects in 71 countries focused on safe water access, watershed protection and water for productive use” (The Coca-Cola Company, 2016c, para. 5). On its way to becoming an ethically-driven company, Coca-Cola collaborated with many organizations like the Global Environment & Technology Foundation (GETF), United Nations Development Programme (UNDP), World Wildlife Fund (WWF), and so on, on various projects that focus on environmental protection and sustainable development. Factors affecting the Macroeconomic Environment of Coca-Cola PESTEL analysis can be used to analyze the macroeconomic environment that affects a company. It is a tool used by researchers to examine how political, economic, social, technological, environmental, and legal factors affect a company’s economic and strategic decisions. Political Factors Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. Comment [N2]: You did analyze the global presence of a company and explains the factors that affect its global presence. COMPANY ANALYSIS 11 A company has to comply with the government regulations of the country in which it operates. Coca-Cola’s business operations are spread in more than 200 countries. Therefore, it has to meet the respective legal requirements of each country it operates in. There have been several instances where Coca-Cola’s business operations were affected by a country’s government policies. In 1977, Coca-Cola decided to exit the Indian market despite a huge customer base in India. This was because of the Foreign Exchange Regulation Act (FERA) being passed by the Indian government in 1974. FERA stipulated that foreign equity should be limited to 40% in every company. Coca-Cola refused to dilute its holding and decided to stop its business operations in India. However, in the wake of India’s liberalization efforts in the 1990s, the company returned to India in 1993 (Panchal, 2014). Coca-Cola faced another political setback when its sales fell in the Middle Eastern countries. During the Iraq War, in a show of support to the Iraqi soldiers, the citizens of the Middle Eastern countries stopped buying the company’s products. Coca-Cola also has to comply with the taxation system of the countries in which it operates. The government of South Africa recently proposed a 20% tax raise on sugary drinks. This proposal will come into effect from April 1, 2017 (“Coca-Cola Faces the Sugar-Tax Problem in South Africa,” 2016). The tax raise is expected to reflect in the prices of the company’s products. Because of this proposal, Coca-Cola faces the risk of a decrease in its sales volume. Therefore, it has to formulate strategies to protect itself from such a situation. Economic Factors Economic conditions in a country reflect the ease and profitability of doing business. Various economic factors, like interest rates, inflation rates, exchange rates, and so on, affect a Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 12 company’s performance. Hence, companies prefer to undertake their business activities in countries with a stable economic environment. The recession of 2001 in the United States prompted the Federal Reserve to take corrective actions to revive the economy. The Federal Reserve reduced interest rates on loans to stimulate the economy. Coca-Cola capitalized on this opportunity and took loans at low costs in 2001 to finance its business operations in the following years. The financial crisis of 2008 that shook the global economy did not have much of an impact on Coca-Cola. Amid depressed economies and falling stocks, Coca-Cola emerged a strong survivor. Though the crisis decreased the disposable income of people, Coca-Cola managed to increase its unit case volume by 5% (Parker, 2012). According to the 2008 Annual Review, the company had $4.7 billion in cash reserves and $2.6 billion of available credit (The Coca-Cola Company, 2009). According to Jonathan Mildenhall, former Chief Marketing Officer of the Coca-Cola Company, Coke emerged as a symbol of happiness in a time of distress. Social Factors A company has to continuously adapt to the cultures, traditions, demographics, and trends prevailing in a country to maintain sustainability and profitability of its operations. CocaCola has always been proactive in satisfying diverse consumer demands. Lately, following a healthy lifestyle has become a trend across the globe. People have become conscious of their diet. They are substituting soft drinks with water and other healthy alternatives to fight obesity, which is a widespread problem, especially among the youth. Coca-Cola realized that they had to come up with a healthier alternative to their classic black drink to cope with changing consumer preferences. On August 9, 1982, the company launched Diet Coke, a sugar-free drink for people who wanted to avoid high sugar-content beverages. Diet Coke was a success. In 2005, the Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 13 company returned to the global front with yet another successful product, Coke Zero (The CocaCola Company, 2016e). In 2007, AOL, a popular mass media corporation, named Coke Zero the second-hottest product of the year after iPhone (Moye, 2015). Given its presence in more than 200 countries, Coca-Cola has to formulate advertising and marketing strategies keeping in mind the diverse cultures of the countries. Technological Factors Improvements in technology and constant innovation are two key factors that are essential for a company to survive in a dynamic world. To maintain its position, Coca-Cola has introduced various improvements in packaging, marketing, and distribution of its products. Following the Tohuku earthquake and tsunami in March 2011, Japan faced a serious energy crisis. The Japanese government formulated stringent policies on electricity usage across the country. The use of vending machines was banned because they required huge amounts of electricity to function. To prevent their sales from dropping, Coca-Cola collaborated with Fuji Electric and developed an energy-saving vending machine, “Apollo,” capable of dispensing chilled Coke even after being shut down for 16 hours. In this way, Coca-Cola ensured that their sales were not affected (Bruce, 2012). Moving forward with their “Stay Extraordinary” tagline, Coca-Cola Israel used an innovative printing machine that printed unique designs on 2 million Diet Coke bottles. The motive behind this strategy was to let each Coke fan know that they are one-of-a-kind, and the message was successfully conveyed by the company (Prlselac, 2014). Environmental Factors Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 14 Being the world’s largest non-alcoholic beverage company, Coca-Cola has always been committed to providing a safe work environment to its employees, reducing its footprint on the environment and contributing to environmental sustainability. In 2012, Coca-Cola was placed in the third spot in the Environmental Protection Agency’s list of on-site green power generators. The company uses biofuel and solar energy in its facilities. It has also installed a landfill-gas-to-energy system, which is among the largest biogas projects in the United States (The Coca-Cola Company, 2012b). Coca-Cola has launched a variety of PET bottle recycling programs in many countries. For instance, Coca-Cola collaborated with Vanguard Supermarket in China and launched a PET bottle recycling initiative in which any consumer could send used PET Coke bottles to any Vanguard store for recycling (“Packaging: Recycling,” n.d.). Coca-Cola has invested more than $1 billion in various initiatives that deal with the treatment of wastewater. To achieve its goal of reducing carbon dioxide emissions by 25%, Coca-Cola has installed 1.4 million HFC-free coolers across various countries (“Infographic: Our 2020 Environmental Goals,” n.d.). Legal Factors A company must comply with the regulations of the countries it operates in. Coca-Cola has been in a number of legal troubles over the years. In 1999, Coca-Cola was accused of racial discrimination in the workplace. It was alleged that compared to Caucasian employees, African American employees were paid less and had limited promotion opportunities. The employees filed a lawsuit against the company. Though the management initially denied the allegations, they eventually ended up paying $193 million in settlement (Ferrell, O.C., Fraedrich & Ferrell, L, 2013). Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 15 In 2009, Coca-Cola again found itself in a controversy when it faced a lawsuit for making misleading claims about the health benefits of its Glacéau Vitaminwater drinks (Spitznagel, 2013). The label on the Vitaminwater bottles read “vitamin + water = all you need” and boasted of preventing various chronic diseases, reducing the risk of eye diseases, and promoting a healthy lifestyle. After years of legal battle, Coca-Cola agreed to add “with sweeteners” in two places on the label of Vitaminwater bottles. It also agreed to remove the label “vitamin + water = all you need” and stop making false claims of the health benefits of Glacéau Vitaminwater (Stempel, 2015). In addition to the factors discussed in the PESTEL analysis, macroeconomic policies and tools also affect a company’s macroeconomic environment. The two main macroeconomic policies are fiscal policy and monetary policy. Governments and central banks use macroeconomic tools, namely, taxes, government spending, and interest rates, to execute macroeconomic policies. Fiscal Policy Fiscal policy is a macroeconomic policy formulated by the government to influence economic growth. The government can either increase or decrease its spending and taxation levels to execute fiscal policy. An increase in government spending will lead to an increase in the aggregate demand in an economy (Heakal, 2016). Consequently, it will have a positive impact on the sales of The Coca-Cola Company. In contrast, a decrease in government spending will lead to a decrease in the aggregate demand in an economy. The governments of developing and less developed countries try to stimulate the economy by increasing spending. As the market for carbonated drinks in the United States was already saturated, The Coca-Cola Company decided to expand its business in the emerging markets. For instance, Coca-Cola has expanded its Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 16 operations in countries such as China, India, and Vietnam. It experienced an increase in the unit case volume of all its products by 29% in China and by 28% in India (Hirsch, 2010). Taxation is another tool of fiscal policy. The government can either increase tax rates to restrict economic activities or decrease tax rates to stimulate economic activities. An increase in taxes reduces the disposable income of people, which means people will have less money to spend (Heakal, 2016). In contrast, a decrease in taxes increases the disposable income of people, which means people will have more money to spend. An increase in the disposable income of people will positively affect Coca-Cola’s sales. British chancellor George Osborne announced a two-tier levy on sugary drinks in his budget speech of 2016 (Campbell, Smithers, & Butler, 2016). This levy will come into effect from April 2018. Analysts have predicted that this move is expected to increase the price of a can from 6 pence to 8 pence. Ultimately, the increase in prices will persuade consumers to buy non-sugary drinks. Coca-Cola’s business is expected to be largely affected by the imposition of the levy. However, Coca-Cola official Den Hollander does not support the imposition of the tax. In his opinion, an increase in taxes cannot reduce the calorie intake of people (Butler, 2016). To offset the negative effects of taxes, The Coca-Cola Company could aim to reduce the sugar content in its drinks. It could also introduce more lowsugar drinks like Coke Zero and Diet Coke. Monetary Policy Monetary policy is a macroeconomic policy formulated by the central bank of a country to regulate the money supply in the country. Changes in the money supply affect interest rates. The central bank can regulate the money supply using three tools: open market operations, the discount rate, and the required reserve ratio. Open market operations involve the buying and selling of government securities to regulate the money supply. When the central bank buys Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 17 government securities, it increases the money supply in the economy. When the central bank sells government securities, it decreases the money supply in the economy. An increase in the money supply reduces the interest rates in the economy (Tarver, 2015). Low interest rates enable The Coca-Cola Company to borrow at a low cost. This will encourage the company to further invest in its operations. The reserve ratio is a tool of the central bank that requires commercial banks to maintain a portion of their deposits with the central bank. The central bank can decrease the reserve ratio to increase the money supply and increase the reserve ratio to decrease the money supply (Tarver, 2015). The Coca-Cola Company will benefit if the central bank reduces the reserve ratio. A low reserve ratio leads to low interest rates. Consequently, Coca-Cola will be able to borrow money at a low cost. A decrease in the cost of borrowing enables the company to raise finance for investment and expansion (“Coca Cola - Monetary Policy and Its Affects,” n.d.). The third tool used by the central bank is the discount rate. The discount rate is the rate at which commercial banks borrow from the central bank. The central bank can lower the discount rate to increase the money supply and raise the discount rate to reduce the money supply (Tarver, 2015). A low discount rate leads to an increase in the money supply, which in turn reduces interest rates. Low interest rates encourage companies to borrow more at a low cost. The interest rates in Europe are lower than the interest rates in the United States. Therefore, many American companies, especially The Coca-Cola Company, have started issuing corporate bonds in Europe. Coca-Cola has issued bonds worth 8.5 billion euros in the European market. It is reported to be one of the largest euro-denominated bond transactions by an American company. Lately, Europe and Japan have become favorable destinations for corporations to raise funds to reduce their interest expenses (Xuan, 2015). Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 18 The Coca-Cola Company has faced many challenges and yet continues to dominate the soft drink industry. To maintain its dominance and long-term growth in the industry, it has to continuously formulate innovative growth and marketing strategies. Strategies to Tap Long-Term Growth In a world full of uncertainties, a company has to be extremely proactive in facing the challenges of being a global leader. In order to maintain its position in the industry, Coca-Cola has to continuously adapt to the dynamic nature of the world of business. The following three strategies could ensure long-term stability for the company to remain a market leader. Product diversification can help Coca-Cola maintain the long-term viability of its business operations. Product diversification is a business strategy that involves modifying the product base of a company by expanding the existing product range and/or including new products to the company’s product line. Currently, the product base of The Coca-Cola Company includes only beverages. In contrast, its archrival, PepsiCo, has a strong food-and-beverage product base. As part of its strategy for future expansion, the company can plan to enter the food segment. Considering the popularity of its brand, it may not be difficult for the company to create demand for any new product. Coca-Cola’s strong and deep-rooted supply chain in the beverage industry will assist in reaching out to potential customers in the food sector. Brand positioning is a simple yet powerful tool for a company to create a brand image in consumers’ minds. In other words, a company, through its efforts, can control how consumers perceive its product. Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 19 Carbonated drinks are associated with an unhealthy lifestyle, and the brand “Coca-Cola” has often been targeted for promoting obesity among the youth. Given the ongoing trend of following a healthy lifestyle, Coca-Cola has to make extensive efforts toward brand positioning. In 2016, Coca-Cola’s Chief Marketing Officer, Marcos de Quinto, announced a “One Brand” marketing strategy in which all the products offered by the company will be brought within the ambit of one brand, “Coca-Cola.” The global campaign of the “One Brand” strategy is called “Taste the Feeling,” and it reflects how people can live and enjoy everyday moments with Coke (The Coca-Cola Company, 2016a). However, the “One Brand” strategy falls short in the sphere of brand positioning. The strategy could have focused on establishing the brand “CocaCola” as a symbol of good health and happiness. On the contrary, the entire campaign focusses primarily on marketing low-calorie drinks offered by the company. To an extent, the company has been unsuccessful in positioning its brand in the minds of its consumers. Coca-Cola can be motivated by the strategies of some other companies. Google Inc., by far, serves as the best example of brand positioning. From an analysis of its advertisements and promotional activities, one can easily infer that Google sells an idea, not the products and services it offers. It has wonderfully created an image in consumers’ minds as being a company that makes information available on a single platform, which can be accessed by all consumers irrespective of their location. Coca-Cola has been successful in marketing its products, but has lacked in branding. There is still potential for the company to take the necessary steps in the future for efficient brand positioning. Tapping emerging markets can prove to be a profitable strategy for Coca-Cola. Developing economies are lucrative avenues for multinational corporations to expand their business. Governments in developing economies often undertake fiscal expansion to spur growth Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 20 and development. Fiscal expansion entails increasing either government spending or reducing taxes, or both, thereby increasing the disposable income of people and hence the aggregate demand in the economy. Companies operating in these economies can expect an increase in sales. Though Coca-Cola has successfully entered emerging markets like Africa, Egypt, Thailand, and so on, it could focus more on extending its business into untapped areas (“CocaCola Gulps up Growth in Emerging Markets,” 2013). The Coca-Cola Company should continuously strategize to meet the challenges posed by political, economic, social, technological, environmental, and legal factors. Comment [N3]: Recommends strategies based on macroeconomic principles, theories, models, and tools that a company could use to maximize longterm profits and supports recommendations with relevant evidence Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 21 Executive Summary From being served at a small drug store in a small town to being served in almost every household across the globe, Coca-Cola has had a glorious journey since 1886. It has emerged a leading player in the non-alcoholic beverage industry. The company boasts of having over 500 still and sparkling beverages in its portfolio. The Coca-Cola Company, along with its bottling partners, has successfully expanded the company’s presence in more than 200 countries. The competition between The Coca-Cola Company and PepsiCo has been one of the most longstanding corporate rivalries. Despite the competition, Coca-Cola has captured the majority of the market share in the soft drink industry. Over the years, the company has been embroiled in numerous controversies and legal troubles. Its most profitable and well-known product, Coke, has been publicized as being an unhealthy drink. Moreover, the company has often been questioned on charges of water pollution and over-extraction of groundwater. Coca-Cola has taken extensive steps to counter these allegations and revive its image. It has become the first Fortune 500 company to meet water replenishment goals. It has collaborated with various organizations to work toward achieving sustainable development. To maintain its top position in the long-term, The Coca-Cola Company has to shift its focus away from its high-calorie drinks to low-calorie drinks. Considering rising health concerns, Coca-Cola has to introduce healthy products for its consumers. The Coca-Cola Company has always been innovative and proactive in formulating various business strategies. It is considered one of the most valuable brands globally. The company has enormous potential to grow and retain its position as the market leader in the soft drink industry. The company has been successful in making consumers “Taste the Feeling.” Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS 22 References Bankman, J. (2013, July 17). Mexico: Public health, rising obesity and the NAFTA effect. Retrieved from http://civileats.com/2013/07/17/mexico-public-health-rising-obesity-andthe-nafta-effect/ Bruce, C. (2012, October 24). How the Japanese earthquake launched the ‘impossible’ vending machine. Retrieved from http://coca-colacompany.com/stories/how-the-japaneseearthquake-launched-the-impossible-vending-machine Butler, S. (2016, March 17). Coca-Cola and other soft drinks firms hit back at sugar tax plan. Retrieved from https://theguardian.com/business/2016/mar/17/coca-cola-hits-back-atsugar-tax-plan Campbell, D., Smithers, R., & Butler, S. (2016, March 17). Sugar tax: Osborne’s two-tier levy brings mixed response. 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Coke to change Vitaminwater labels to settle U.S. consumer lawsuit. Reuters. Retrieved from http://reuters.com/article/coca-cola-vitaminwatersettlement-idUSL1N1211HX20151001 Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. COMPANY ANALYSIS Tarver, E. (2015, May 22). How is money supply used in monetary policy? Retrieved from http://investopedia.com/ask/answers/052215/how-money-supply-used-monetarypolicy.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186 Xuan, L. (2015, March 31). Multinational companies grab opportunities to borrow at bargain rates. Retrieved from http://news.medill.northwestern.edu/chicago/multinationalcompanies-grab-opportunities-to-borrow-at-bargain-rates/ Copyright ©2016 Capella University. Copy and distribution of this document is prohibited. 27 
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