Coca Cola 2009 Case Study

8/9/2019 Coca Cola 2009 Case Study

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March2010ArabAcademyforScience&Technology&Maritime

Transport-GraduateSchoolofBusinessPresentedto:

Dr.HatemAlzuhairy

BY:

1.AmrEl-Sharkawy 2.AhmedElFar3.HossamSaber4.SalemAbdellatif5.TarekFahd

THECOCA-COLACOMPANY

STRATEGICMANAGEMENTCASESTUDY


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I -TABLE OF CONTENTS

S E C T I O N D E S C R I P T I O N P A G E

I-TableofContents 2

II-Introduction 3-4

1 StrategyFormulation 5-18

1.1 **Missionstatementevaluationmatrix 5-6

1.2 **CPM,EFE&IFE 7-11

1.3 Longtermobjectives 12

1.4 ApplyingofSWOTmatrix&IEmatrix 13-14

1.5 QuantitativeStrategicPlanningMatrix(QSPM) 15-18

2 StrategyImplementation 19-22

2.1 AnnualObjectives 19

2.2 Organizationalstructure 20

2.3 Production/Operation 21

2.4 Therewards/Incentive 21-223 StrategyEvaluation 23

3.1 BalancedScoreCard 23

4 Conclusion 24

5 References 25

6 Appendixes 26-29

AppendixA FinancialRatiosAnalysis(2009)

26

AppendixB IncomeStatementAnalysis(2009) 27AppendixC CashflowSTATEMENTAnalysis(2009)

28

AppendixD FinancialHighlights(2009) 29

**EXTRAWORK


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I I - INTRODUCTION

TheCoca-ColaCompanyHistory

TheprototypeCocaColarecipewas

formulatedattheEagleDrugandChemical

Company,adrugstoreinColumbus,

GeorgiabyJohnPemberton,originallyasa

cocawinecalledPemberton'sFrenchWine

Cocoa.Hemayhavebeeninspiredbythe

formidablesuccessofVinMariani,a

Europeancocawine.

In1886,whenAtlantaandFultonCountypassedprohibitionlegislation,Pemberton

respondedbydevelopingCocaCola,essentiallyanon-alcoholicversionofFrenchWine

Cola.ThefirstsaleswereatJacob'sPharmacyinAtlanta,Georgia,onMay8,1886.Itwas

initiallysoldasapatentmedicineforfivecentsaglassatsodafountains,whichwere

popularintheUnitedStatesatthetimeduetothebeliefthatcarbonatedwaterwas

goodforthehealthPembertonclaimedCocaColacuredmanydiseases,including

morphineaddiction,dyspepsia,neurasthenia,headache,andimpotence.Pembertonran

thefirstadvertisementforthebeverageonMay29ofthesameyearintheAtlanta

Journal.

By1888,threeversionsofCocaColasoldbythreeseparatebusinesseswereon

themarket.AsaGriggsCandleracquiredastakeinPemberton'scompanyin1887and

incorporateditastheCocaColaCompanyin1888.Thesameyear,whilesufferingfrom

anongoingaddictiontomorphine,Pembertonsoldtherightsasecondtimetofour

morebusinessmen:J.C.Mayfield,A.O.Murphey,C.O.MullahyandE.H.Bloodworth.

Meanwhile,Pemberton'salcoholicsonCharleyPembertonbegansellinghisown

versionoftheproduct.

JohnPembertondeclaredthatthename"CocaCola"belongedtoCharley,buttheother

twomanufacturerscouldcontinuetousetheformula.So,inthesummerof1888,

CandlersoldhisbeverageunderthenamesYumYumandKoke.Afterbothfailedto

catchon,CandlersetouttoestablishalegalclaimtoCocaColainlate1888,inorderto

forcehistwocompetitorsoutofthebusiness.Candlerpurchasedexclusiverightstothe

formulafromJohnPemberton,MargaretDozierandWoolfolkWalker.However,in


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1914,Doziercameforwardtoclaimhersignatureonthebillofsalehadbeenforged,

andsubsequentanalysishasindicatedJohnPemberton'ssignaturewasmostlikelya

forgeryaswell.

NewCoke

OnApril23,1985,CocaCola,amidmuchpublicity,attemptedtochangetheformulaof

thedrinkwith"NewCoke".

21stCentury

LaunchaDietCokeproductsweetenedwiththeartificialsweetenersucralose

("Splenda"),thesamesweetenercurrentlyusedinPepsiOne

March21,2005,itannouncedanotherdietproduct,CocaColasweetenedpartlywitha

blendofaspartameandacesulfamepotassium.

In2007,CocaColabegantosellanew"healthysoda":DietCokewithvitaminsB6,B12,

magnesium,niacin,andzinc,marketedas"DietCokePlus."


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1 - STRATEGY FORMULATION

1.1-MISSIONSTATEMENTEVALUATIONMATRIX

COCA-COLAMISSIONSTATEMENT:

OurRoadmapstartswithourmission,whichisenduringItdeclaresourpurposeasacompanyandservesasthestandardagainstwhichweweighouractionsanddecisions.

Torefreshtheworld...(1)and(3) Toinspiremomentsofoptimismandhappiness... Tocreatevalueandmakeadifference.(6)

COMPONENTS Existinmissionstatement

1. Customers YES

2. ProductsServices NO3. Markets YES

4. ConcernforSurvival,Growth,Profitability NO5. Technology NO

6. Philosophy YES

7. Self-Concept NO

8. ConcernforPublicImage NO

9. ConcernforEmployees NO

* *PEPSICOMISSIONSTATEMENT:

Ourmissionistobetheworld's(1)(3)premierconsumerproductscompanyfocusedonconvenientfoodsandbeverages(2).Weseektoproducefinancialrewardstoinvestors(4)asweprovideopportunitiesforgrowthandenrichmenttoouremployees(9),ourbusinesspartnersandthecommunitiesinwhichweoperate.Andineverythingwedo,westriveforhonesty,fairness(6)

andintegrity(8).


1. Customers YES2. ProductsServices YES

3. Markets YES4. ConcernforSurvival,Growth,Profitability YES5. Technology NO

6. Philosophy YES

7. Self-Concept NO8. ConcernforPublicImage YES9. ConcernforEmployees YES

**EXTRAWORK


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* *COCA-COLAnewproposedmission:

AtCocaColawebelieveourmainresponsibilityisprovidingcustomers(1)with

refreshingbeveragesincludingsoftdrinks,water,energydrinks,juices,andtea(2)

tofitanyoccasionintheirday-to-daylives(6).Oursignatureproduct,Coke(7),isa

favoritearoundtheworldandawidevarietyofourproductsaresoldinover200

nations(3).Weusetheonlythemostsophisticatedequipment(4)toprocessand

makeourproductstoensureeachglassofCokeproductisasgoodasthelast(5).

Ouremployees(9)arefairlycompensatedandwepracticefairtradeinallmarkets

wecompete.Wevalueourresponsibilitytoallcommunitiesweserveandsupport

manyeducationalandleadershipprograms(8).


1. Customers YES

2. ProductsServices YES

3. Markets YES

4. ConcernforSurvival,Growth,Profitability YES

5. Technology YES

6. Philosophy YES

7. Self-Concept YES

8. ConcernforPublicImage YES

9. ConcernforEmployees YES

*ASSUMPTION**EXTRAWORK


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1 . 2 C P M , E F E A N D I F E M A T R I X E S

1.2.1-**CPMCOMPETITIVEPROFILEMATRIX

CPMCompetitiveprofilematrix isanessentialstrategicmanagementtooltocomparethefirm

withthemajorplayersoftheindustry.Competitiveprofilematrixshowstheclearpicturetothe

firmabouttheirstrongpointsandweakpointsrelativetotheircompetitors.

CocaCola PepsiCo CadburySchweppes

CriticalSuccess

Factors*Weight *Rating

Weighted

Score*Rating

Weighted

Score*Rating

Weighted

Score

MarketShare

Price

FinancialPosition

ProductQuality

ProductLines

CustomerLoyalty

Marketing

Total

0.15

0.10

0.12

0.15

0.15

0.15

0.07

1.00

40.60

30.30

30.36

30.45

30.45

40.60

30.21

3.44

30.45

30.30

40.48

30.45

40.60

40.60

30.21

3.56

20.30

30.30

30.36

30.45

30.45

30.45

20.14

2.78

*ASSUMPTION**EXTRAWORK


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1.2.2-EFEMATRIXES

ExternalFactorEvaluation(EFE)matrixmethodisastrategic-managementtooloftenusedforassessmentofanactualbusinessconditions.Itisagoodtooltovisualizeandprioritizetheopportunitiesandthreatsthatabusinessisfacing.

ExternalfactorsassessedintheEFEmatrixaretheonesthataresubjectedtothewillofsocial,economic,political,legal,andotherexternalforces.

KeyExternalFactors*Weight

(../1)

*Rating

(../4)

Weighted

Score

A-Opportunities:

1-In2008,bottledwaterwasthesecondlargestselling

drinkintheU.S.market0.06 4 0.24

2-AccordingtotheDonkeyRecyclingInstitute,salesof

flavored,noncarbonateddrinksareexpectedto

surpasssodasalesby2010

0.1 3 0.3

3-Moderatecaffeineconsumptionappearedbeneficial

inreducingriskofdeath0.05 2 0.1

4-Today's24/7lifestylesisdrivingthesalesofenergy

drinks,withvolumehavingincreasedbyanimpressive75%andvaluebysome71%since2000.

0.1 4 0.4

5-Doingbusinesswithpoorpeoplebringstheminto

themarketplace.

UseofManualDistributionCenters

0.1 3 0.3

6-Inaconditionwheremarketsshiftandcustomers

preferencesbecomesmoreunpredictableand

complex,adoptingCSRstrategycouldbeapowerfultoolforsurvival.

0.05 3 0.15

*ASSUMPTION


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KeyExternalFactors*Weight

(../1)

*Rating

(../4)

Weighted

Score

B-Threats:

1-Bottledwaterprocessedwithdistillationorreverse

osmosislacksfluorideionswhicharesometimes

naturallypresentingroundwater.Thedrinkingof

distilledwatermayconceivablyincreasetheriskof

toothdecayduetoalackofthiselement.

0.05

2

0.1

2-costofenergyisincreasing. 0.05 3 0.15

3-Overallcarbonateddrinksaleshavebeenflatdueto

linksofsugartoobesityandhighfructosecorn

syruptoheartdisease.

0.07 3 0.21

4-Risingcostofrawmaterialsuchascorn,orange 0.09 3 0.27

5-Waterscarcityandpoorqualitycouldnegatively

impacttheCoca-Colasystemsproductioncostsand

capacity.

0.05 3 0.15

6-Changesinlawsandregulationsrelatingto

beveragecontainersandpackaging0.05 2 0.1

7-Unfavorableeconomicandpoliticalconditionsin

internationalmarkets0.03 2 0.06

8-Significantadditionallabelingorwarning

requirements0.06 4 0.24

9-Changesincommercialandmarketpracticeswithin

theEuropeanEconomicArea0.04 2 0.08

10-Changesinaccountingstandardsandtaxation

requirements 0.05 2 0.1

TOTAL 1.00 2.95

*ASSUMPTION


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1.2.3-IFEMATRIXES

InternalFactorEvaluation(IFE)matrixisastrategicmanagementtoolforauditingor

evaluatingmajorstrengthsandweaknessesinfunctionalareasofabusiness.IFEmatrix

alsoprovidesabasisforidentifyingandevaluatingrelationshipsamongthoseareas.

KeyInternalFactors *Weight(../1)

*Rating(../4)

WeightedScore

A-Strengths

1-Productlinesof400Brands 0.05 4 0.2

2-StrongManpowerresources(71,000)people 0.05 4 0.2

3-7differentsegmentsallovertheworld(Africa,

Asian,Europe,.)0.1 3 0.3

4-LongHistory,Establishedsince1885(Brand

Namereputation).0.05 4 0.2

5-AfricaSectorisverystrong55,000outof

71,0000.05 2 0.1

6-Acquiringdifferentmineralwaterco.inmany

placesintheworld.0.05 4 0.2

7-HasStrongdigitalmarketingplatformlocated

inLatinAmerica0.05 4 0.2

8-Industryleaderinmarketcapitalizationwith

$112billion0.1 4 0.4

9-Topsellerinnonalcoholicmarketbeveragesin

Russia0.05 3 0.15

10-HasformedastrongapartnershipwithMcDonalds,biggestcustomer

0.1 4 0.4

11-JointventurewithNestleresultedin

establishingbeveragespatternsworldwide0.05 4 0.25

*ASSUMPTION


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KeyInternalFactors*Weight

(../1)

*Rating

(../4)

Weighted

Score

B-Weaknesses

1-Productlinesislimitedtobeveragesonly 0.05 1 0.05

2-Afailed$16billionacquisitionofQuakerOatshinderslong-termgrowth.

0.1 1 0.10

3-NegativepublicityinIndiabecauseofwaterissues,hasledtopoorbrandimageandhinderedgrowththere.

0.05 2 0.10

4-Marketingdeficienciesduetoturnoverinleadershipanda16percentdecreaseinadvertisingspending.

0.05 2 0.10

5-RevenuesforUSmarketsegment


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1.3-*COCACOLALONGTERMOBJECTIVES

1- Increasethecompanyrevenueby50%intwoyears(currentrevenue24bill).

2- Increasethebookvalue/shareby25%inthreeyears(currentvalue$8.52).

3- Generatecashflowby1billintwoyears(currentvalue2,320bill).

4- Increasethenetincomeby30%inthreeyears(currentvalue6,824bill).

*ASSUMPTION


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1 . 4 - A P P L Y I N G O F SW O T M A T R I X & I E M A T R I X

1.4.1SWOTMATRIX

SWOTMatrix:AtoolthatidentifiestheStrengths,Weaknesses,OpportunitiesandThreats

ofanorganization.Specifically,SWOTisabasic,straightforwardmodelthatassesseswhat

anorganizationcanandcannotdoaswellasitspotentialopportunitiesandthreats.ThemethodofSWOTanalysisistotaketheinformationfromanenvironmentalanalysisand

separateitintointernal(strengthsandweaknesses)andexternalissues(opportunitiesand

threats).Oncethisiscompleted,SWOTanalysisdetermineswhatmayassistthefirmin

accomplishingitsobjectives,andwhatobstaclesmustbeovercomeorminimizedto

achievedesiredresults.

Strengths(S) Weaknesses(W)

Opportunities(O) SOStrategies

1. LaunchnewproductsinthelocalmarketssuchasHellenicCocaCola

(S11,O2).

2. Marketnewproductsthatishealthierandsuitableforthenewgeneration

(S8,O4).

WOStrategies

1. MarketinternationalbeveragestoAmericanconsumers

(W1,O1,O4).

2. Increasemarketingeffortsforbottledwater

(W1,O1).

Threats(T) STStrategies

1. AcquirekrispykremedoughnutsInc(KKD)forthediversificationofproducts(S6,T3).

2. Establishajointventurewithothercompanies(i.e.illycoffee)forReadyToDrink

beverages(RTD)(S8,T3)

WTStrategies

1. AcquireGoldenEnterprises(GLDC)tohelpdiversifytheproductline

(W1,T3).

2. PartnershipwithUNDPinEveryDropMatterprojectineasternEurope

(W3,T5)


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1.4.2IEINTERNAL-EXTERNALMATRIX

TheInternal-External(IE)matrixisanotherstrategicmanagementtoolusedtoanalyzeworkingconditionsandstrategicpositionofabusiness.TheInternalExternalMatrixorshortIEmatrixisbasedonananalysisofinternalandexternalbusinessfactors

whicharecombinedintoonesuggestivemodel.TheIEmatrixisacontinuationoftheEFEmatrixandIFEmatrixmodels.

CocaColahaveStrongIFE&MediumEFE(Zone4)soGrow&Buildstrategieswillbeused:

Integration(forward):Useofmanualdistributioncenters

MarketPenetration:Increasemarketingbudget(i.e.createdigitalprogramwith

iTunes;targetingaudiencesundertheageof12&mainsponsorofworldcup2010)

andmorefocusonNorthUSmarket

MarketDevelopment:energyandhealthydrinks

ProductDevelopment:Foodindustry,InnovationinProducts(i.e.Jianchimeans

"stronginnerenergy"inChinese.Thedrink,madewithfruitjuicesandplant

extractsandavailableinthreeflavors,isinspiredbyancientChinesewisdomto

enhancetheinnerbalance.Jianchiproductsarenowavailableinmorethan100

pharmaciesandherbalshopsinMilan.)

TheIFETotalWeightedScore=3.05

Strong Average Weak

3.0to4.0 2.0to2.99 1.0to1.99

High I II III

3.0to3.99

Medium IV V VI

2.0to2.99

Coca-Cola

Low VII VIII IX

TheE

FETotalWeightedScore=2

.95

1.0to1.99


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1.5-QUANTITATIVESTRATEGICPLANNINGMATRIX(QSPM)

QuantitativeStrategicPlanningMatrix(QSPM)isahigh-levelstrategicmanagement

approachforevaluatingpossiblestrategies.QuantitativeStrategicPlanningMatrixora

QSPMprovidesananalyticalmethodforcomparingfeasiblealternativeactions.

AcquireKKD

andGLDC

(Diversifyfood

productslines)

Producenewdiet

drinksthathavehealthiersugar

substitutes

Increase

marketingeffortsfor

bottledwater

KeyExternalFactors

WeightedScore

(FromEFE)

*AS TAS *AS TAS *AS TAS

Opportunity

1-In2008,bottledwaterwasthesecondlargestsellingdrinkintheU.S.market

0.06 - - -

2-AccordingtotheDonkeyRecyclingInstitute,salesofflavored,noncarbonateddrinksareexpectedtosurpasssodasalesby2010

0.1 3 0.3 4 0.4 2 0.2

3-Moderatecaffeineconsumptionappearedbeneficialinreducingriskofdeath

0.05 3 0.15 4 0.2 2 0.1

4-Today's24/7lifestylesisdrivingthesalesofenergydrinks,with

volumehavingincreasedbyanimpressive75%andvaluebysome71%since2000.

0.1 - - -

5-Doingbusinesswithpoorpeoplebringsthemintothemarketplace.

UseofManualDistributionCenters

0.1 - - -

6-Inaconditionwheremarketsshiftandcustomerspreferencesbecomesmoreunpredictableand

complex,adoptingCSRstrategycouldbeapowerfultoolforsurvival.

0.05 - - -

*ASSUMPTION


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AcquireKKD

andGLDC

(Diversifyfood

productslines)

Producenewdiet

drinksthathave

healthiersugar

substitutes

Increase

marketing

effortsfor

bottledwater

KeyInternalFactors

WeightedScore

(FromIFE)


Threats

1-Bottledwaterprocessedwithdistillationorreverseosmosislacksfluorideionswhicharesometimesnaturallypresentingroundwater.Thedrinkingofdistilledwatermayconceivablyincreasetheriskoftoothdecayduetoalackofthiselement.

0.05

2 0.1 3 0.15 4 0.2

2-Costofenergyisincreasing. 0.05 - - -

3-Overallcarbonateddrinksaleshavebeenflatduetolinksofsugartoobesityandhighfructosecornsyruptoheartdisease.

0.07 3 0.21 4 0.28 2 0.14

4-Risingcostofrawmaterialsuchascorn,orange

0.09 - - -

5-WaterscarcityandpoorqualitycouldnegativelyimpacttheCoca-Colasystemsproductioncostsandcapacity.

0.05 - - -

6-Changesinlawsandregulationsrelatingtobeveragecontainersandpackaging

0.05 - - -

7-Unfavorableeconomicandpoliticalconditionsininternationalmarkets

0.03 - - -

8-Significantadditionallabelingorwarningrequirements

0.06 - - -

9-ChangesincommercialandmarketpracticeswithintheEuropean

EconomicArea

0.04 - - -

10-Changesinaccountingstandardsandtaxationrequirements

0.05 - - -

SUBTOTAL 1.00 0.88 1.15 0.88

*ASSUMPTION


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AcquireKKD

andGLDC

(diversifyfood

productslines)

Producenewdiet

drinksthathave

healthiersugar

substitutes

Increase

marketing

effortsfor

bottledwater

KeyInternalFactors

Wei

ghtedScore

(FromIFE)


Strengths

1-Productlinesof400Brands 0.05 2 0.1 4 0.2 3 0.15

2-StrongManpowerresources(

71,000)people0.05 4 0.2 3 0.15 2 0.1

3-7differentsegmentsalloverthe

world(Africa,Asian,Europe,.)

0.1 - - -

4-LongHistory,Establishedsince

1885.0.05 2 0.1 3 0.15 4 0.2

5-AfricaSectorisverystrong

55,000outof71,0000.05 - -- -

6-Acquiringdifferentmineral

waterco.inmanyplacesinthe

world.

0.05 3 0.15 3 0.15 4 0.2

7-HasStrongdigitalmarketing

platformlocatedinLatin

America

0.05 - - -

8-Industryleaderinmarket

capitalizationwith$112billion0.1 4 0.4 3 0.3 3 0.3

9-Topsellerinnonalcoholic

marketbeveragesinRussia0.05 - - -

10-Hasformedastronga

partnershipwithMcDonalds,biggestcustomer

0.1 - - -

11-JointventurewithNestle

resultedinestablishing

beveragespatternsworldwide

0.05 - - -

*ASSUMPTION


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AcquireKKD

andGLDC

(diversifyfood

productslines)

Producenewdiet

drinksthathave

healthiersugar

substitutes

Increase

marketing

effortsfor

bottledwater

KeyInternalFactors

Wei

ghtedScore

(FromIFE)


Weaknesses

1-Productlinesislimitedto

beveragesonly0.05 4 0.2 3 0.15 2 0.1

2-Afailed$16billionacquisitionofQuakerOatshinderslong-termgrowth.

0.1 - - -

3-NegativepublicityinIndia

becauseofwaterissues,hasledtopoorbrandimageandhinderedgrowththere.

0.05 - - -

4-Marketingdeficienciesduetoturnoverinleadershipanda16percentdecreaseinadvertisingspending.

0.05 - - -

5-RevenuesforUSmarket

segment


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2 - STRATEGY IMPLEMENTATION

2.1-*ANNUALOBJECTIVES:

R&DFUNCTION:

1. Developtwonewproductsinthefoodindustry.2. Developonenewhealthybeverageproduct.

PRODUCTIONFUNCTION:

1. Increasetheinventoryturnoverto7.2. Implementanewqualitycontrolsystemforfoodindustry.3. Decreasetheproductionunitcasecostby5%.4. Implementnew3foodproductionlinesinEurope.5. Implementnew3foodproductionlinesinNorthAmerica.

6. Increasethebeverageproductionby5%.7. Increasethebottledindustryproductionby10%.

MARKETINGFUNCTION:

1. Increasethebeveragemarketshareby2%(from54to56)2. Increasethesalesvolumeby4%

FINANCINGFUNCTION:

1. Reducethecompanyliabilitiesby5%annually2. Financenew6foodplants.

HUMANRESOURCESFUNCTION:

1. Hiringspecializedstaffforfoodindustry1200employees.2. Developemployeesby15daystraining.3. Decreasetheemployeesturnoverby50%.

*ASSUMPTION


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2.2-*ORGANIZATIONALSTRUCTURE

Tohandletheenormouscapacityofitsbusiness,theCocaColaCompanyhasdividedup

intosixoperatingunits

Therefore,CocaColaispredominantlyorganizedintoaninternationalareastructure

consideredasaglobalproductdivisionalstructure.

Tomeetandmatchtheorganizationstructurewiththeformulatedstrategies,newfoodindustrydirectorwillbeaddedtostructuretomanagethenewfoodsector.

Newhealthybeveragewillbemanagedlikethesoftdrinksbeverages.

ADVANTAGESOFTHISDIVISIONALSTRUCTURE:

Workflowperdivision

LowlevelofCentralization

Flexibleandinnovative

Sensitivetosubtledifferencesacrossproducts,regions,andclients

*ASSUMPTION

Chairman

/ CEO

EVP

& P BI/SC

EVP

& CFO

EVP

& P MKT

President

& COO

SVP

& GC

SVP

& HRD

SVP

& PAD

P of

Eurasia

P of

Pacific

P of

Latin

America

P of

Africa

P of

Europe

*FOODINDUSTRY

DIRECTO


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2.3PRODUCTION/OPERATIONS

CostControl,oneofthemanagementissuesinoperationsiscostreductionorcost

optimization.ItisclearintheCocaColaincomestatementsthatCocaColapractices

costreductionin2009from11,374,000,000$to11,088,000,000$andtheRevenue

decreasedfrom31,944,000,000$to30,990,000,000$socostcontrolshouldbe

donethroughoptimizetheprocessofoperation(Rawmaterial,powerconsumption,

fuelconsumption),costofunitcasemustbemonitored.

Inventory/InventoryControlisthemainforoperationmanagementconcerns,itis

calculatedfromthebalancesheetthattheCocaColainventoryturnoverratiois4.9

whichislessthantheindustryaverage7.1,andsoCoca-Colashoulddevelopand

revisetheinventorycontrolsystemtoreachtheindustryaverage.

Plantsize,foodandsnakeswillbeanewindustryforCocaCola,sonewproduction

linesintheexistingplantsshouldbeestablishedforfoodindustry,capacitywillbe

basedonthemarketingforecast,sositelocationanalysisisveryimportant.

Forfoodindustry,Purchasespecializedequipmentandaddspecializedpeople(humanresources).

ForFoodindustry,applythequalitycontrolsystemtomeetthecustomer

satisfaction.

2.4-THEREWARDS/INCENTIVESYSTEM

1-THEANNUALINCENTIVEPROGRAM

Salesofcompanyproducts(volume)andeconomicprofit(profit).Thesetwo

objectivesbecomethetargetforthedivisionforannualincentivepurposes.Forcorporateassociates,thetargetforincentivepurposesistheobjectiveforthetotalcompany.

Attheendoftheyear,theperformanceofeachdivisionisassessedversusits

objectivesfortheyearrelativetoafundingmatrix.Thematrixweightsvolumeandprofit

equally.Ifdivisionsmeettheirobjectivesexactly,thenincentivesarefundedat100%of

target.Iftheyexceedobjectives,theyarefundedatgreaterthan100%,andiftheyfall

short,theyarefundedatlessthan100%. Thetargetedpoolitselfissimplythetotal

amountrequiredtoawardeachparticipantintheplantheirexacttarget,whichis

expressedasapercentofbasesalary(e.g.,10%,15%)basedonjobgradelevel.

Oncethepoolforthedivisionisfunded,thendivisionmanagementdecideshowtheexactpoolwillbedistributed.Eachdivisionhastheresponsibilitytosetspecificteamand

individualobjectivesthatlinkintothetotaldivisionobjectives.Basedonindividualandteamperformanceagainstthoseobjectives,eachparticipantthenreceivesaspecificannual

incentiveaward,whichfallswithinabroadrangefromnoawardtothemaximumaward.It

istheresponsibilityofeachdivisiontomakesurethattotalincentiveawardsdonotexceed

theamountallocatedandthatthetotalawardsbalanceagainstthepool.


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2-THESTOCKOPTIONSPROGRAM

Theprocessforstockoptionawardsissimilartothatofannualincentives:Option

poolsarefundedbasedonperformanceagainstunitcasesalesandeconomicprofit

objectives,andindividualoptiongrantsaredeterminedbasedonspecificcontributionto

thoseobjectives.

Stockoptionawardsareconsideredannuallyandfallwithinaminimumtomaximumofaspecifiedrange,whichvariesbygradelevelandisdrivenbytargetedtotal

compensationlevelsversusthemarketplace.Divisionmanagementconsiderseacheligible

associateeachyearforanappropriategrantandthenrecommendsthatamountfor

approvalbythecompensationcommitteeoftheboard.Forbothannualincentivesand

stockoptions,awardsforcorporateassociatescomefromandmustbalanceagainstthecorporatepool,whichisbasedontotalcompanyperformance.

IMPACTOFTHEPROGRAMS:

Theeffectonthebusinessoftheclearlinkageofincentiveandstockoptionawards

toeconomicprofithasbeenverypositive.Someofthebenefitsincludethefollowing:

1.Moreattentionisgivenintheplanningprocesstotheamountandcostofcapital

requiredtodelivervolumeandprofitresults.

2.Managersandassociatesnowfocusmoredailyattentionthanevernotonlyon

generatingvolumeandprofit,butdoingsoinawaythatcoverscapitalcostsandenhances

shareownervalue.

3.Thecommunicationeffortssurroundingtheimportanceofvalue-basedmanagementare

reinforcedfinanciallytwiceayearthroughincentiveandstockoptionawards.

4.Theeconomicprofitlevelsofthecompanyandtheresultingincreaseinshareownervaluecontinuetogrowathealthyrates.Figure3-1showsthataseconomicprofitgrewan

averageof20.2%peryearfor10yearsendingwith1997,stockpricegrewanaverageof

30.2%peryearforthesameperiod.


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4 - CONCLUSION

Tosurviveinthemarketyouhavetocompete,tocompeteinthemarketyouhaveto

grow.

CocaColaalwayscompeteswithPepsi,soCocaColashouldlookforitscompetitive

advantagestobemarketleader.

CocaColashouldintegrateitsbusinessinthehealthyandenergybeveragesto

competewiththecompetitors.

CocaColashoulddiversifyitsbusinessbyfoodindustrytoincreasethebeverages

marketshareandreducetheriskprobabilities.

CocaColashouldavidtobethefollowerinthemarkettodiscoveritscompetitive

advantages.

CocaColaleadsthedigitalmarketingphilosophyinthebeverageindustry.

CocaColaandApplealliancesupportCoca-colainthecompetitionasanew

innovatedmarketingidea.

CocaColamustontheroadbysustainableindustrialdevelopmentoverthelong

term.


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5 - REFERENCES

1-http://www.marketresearchworld.net

2-http://www.thecoca-colacompany.com

3-http://en.wikipedia.org

4-http://www.maxi-pedia.com

5-www.wilsongroup.com

6-http://moneycentral.msn.com/investor/invsub/results

7-http://www.pepsico.com/index.html#/flash/investormeeting_banner.swf

8-StrategicManagementconceptsandcasesbyFredDavid12edition


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6 - A P P E N D I X E S

APPENDIXA-FINANCIALRATIOSANALYSIS(2009)

GrowthRates% CocaCola IndustrySales(Qtrvsyearagoqtr) 5.40 5.10

NetIncome(YTDvsYTD) 17.50 29.40

NetIncome(Qtrvsyearagoqtr) 55.10 72.70

Sales(5-YearAnnualAvg.) 7.35 8.59

NetIncome(5-YearAnnualAvg.) 7.08 8.69

Dividends(5-YearAnnualAvg.) 10.40 10.15

PriceRatios CocaCola IndustryCurrentP/ERatio 18.7 18.4

P/ERatio5-YearHigh NA 2.8

P/ERatio5-YearLow NA 0.9

Price/SalesRatio 4.07 3.13Price/BookValue 5.08 5.27

Price/CashFlowRatio 15.50 13.70

ProfitMargins% CocaCola IndustryGrossMargin 64.2 57.7

Pre-TaxMargin 28.9 22.0

NetProfitMargin 22.3 17.0

5YrGrossMargin(5-YearAvg.) 64.6 58.0

5YrPreTaxMargin(5-YearAvg.) 27.1 20.3

5YrNetProfitMargin(5-YearAvg.) 20.7 15.3

FinancialCondition CocaCola IndustryDebt/EquityRatio 0.48 1.29

CurrentRatio 1.3 1.4

QuickRatio 1.1 1.2

InterestCoverage NA 2.5

LeverageRatio 2.0 3.4

BookValue/Share 10.77 11.06

InvestmentReturns% CocaCola IndustryReturnOnEquity 30.2 37.6

ReturnOnAssets 15.5 12.3

ReturnOnCapital 22.4 17.5

ReturnOnEquity(5-YearAvg.) 29.8 22.4

ReturnOnAssets(5-YearAvg.) 15.7 11.9

ReturnOnCapital(5-YearAvg.) 23.0 17.2

ManagementEfficiency CocaCola IndustryIncome/Employee 74,418 59,283

Revenue/Employee 333,944 321,203

ReceivableTurnover 9.1 10.2

InventoryTurnover 4.9 7.1

AssetTurnover 0.7 0.8


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APPENDIXB-INCOMESTATEMENTANALYSIS(2009)

2009 2008 2007 2006 2005

PeriodEndDate 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/200

PeriodLength 12Months 12Months 12Months 12Months 12Months

StmtSource 10-K 10-K 10-K 10-K 10-K

StmtSourceDate 02/26/2010 02/26/2010 02/26/2010 02/21/2007 02/28/2006

StmtUpdateType Updated Reclassified Reclassified Updated Updated

Revenue 30,990.0 31,944.0 28,857.0 24,088.0 23,104.0

TotalRevenue 30,990.0 31,944.0 28,857.0 24,088.0 23,104.0

CostofRevenue,Total 11,088.0 11,374.0 10,406.0 8,164.0 8,195.0

GrossProfit 19,902.0 20,570.0 18,451.0 15,924.0 14,909.0

Selling/General/Administrative

Expenses,Total 11,358.0 11,774.0 10,945.0 9,431.0 8,739.0

Research&Development 0.0 0.0 0.0 0.0 0.0

Depreciation/Amortization 0.0 0.0 0.0 0.0 0.0

InterestExpense(Income),NetOperating 0.0 0.0 0.0 0.0 0.0

UnusualExpense(Income) 313.0 350.0 0.0 185.0 85.0

OtherOperatingExpenses,Total 0.0 0.0 254.0 0.0 0.0

OperatingIncome 8,231.0 8,446.0 7,252.0 6,308.0 6,085.0

InterestIncome(Expense),NetNon-Operating

0.0 0.0 0.0 0.0 0.0

Gain(Loss)onSaleofAssets 0.0 0.0 0.0 0.0 0.0

Other,Net 40.0 39.0 219.0 195.0 -93.0

IncomeBeforeTax 8,946.0 7,506.0 7,919.0 6,578.0 6,690.0

IncomeTax-Total 2,040.0 1,632.0 1,892.0 1,498.0 1,818.0

IncomeAfterTax 6,906.0 5,874.0 6,027.0 5,080.0 4,872.0

MinorityInterest -82.0 -67.0 -46.0 0.0 0.0

EquityInAffiliates 0.0 0.0 0.0 0.0 0.0

U.S.GAAPAdjustment 0.0 0.0 0.0 0.0 0.0

NetIncomeBeforeExtra.Items 6,824.0 5,807.0 5,981.0 5,080.0 4,872.0

TotalExtraordinaryItems 0.0 0.0 0.0 0.0 0.0

NetIncome 6,824.0 5,807.0 5,981.0 5,080.0 4,872.0


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APPENDIXC-CASHFLOWSTATEMENTANALYSIS(2009)

2009 2008 2007 2006 2005

PeriodEndDate 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005

PeriodLength 12Months 12Months 12Months 12Months 12Months

StmtSource 10-K 10-K 10-K 10-K 10-K

StmtSourceDate 02/26/2010 02/26/2010 02/26/2010 02/21/2007 02/28/2006StmtUpdateType Updated Reclassified Reclassified Updated Updated

NetIncome/StartingLine 6,906.0 5,874.0 6,027.0 5,080.0 4,872.0

Depreciation/Depletion 1,236.0 1,228.0 1,163.0 938.0 932.0

Amortization 0.0 0.0 0.0 0.0 0.0

DeferredTaxes 353.0 -360.0 109.0 -35.0 -88.0

Non-CashItems

255.0 1,584.0 -109.0 589.0 277.0

ChangesinWorkingCapital

-564.0 -755.0 -40.0 -615.0 430.0

CashfromOperatingActivities 8,186.0 7,571.0 7,150.0 5,957.0 6,423.0

CapitalExpenditures

-1,993.0 -1,968.0 -1,648.0 -1,407.0 -899.0

OtherInvestingCashFlowItems,Total

-2,156.0 -395.0 -5,071.0 -293.0 -597.0

CashfromInvesting

Activities-4,149.0 -2,363.0 -6,719.0 -1,700.0 -1,496.0

FinancingCashFlow

Items0.0 0.0 0.0 0.0 0.0

TotalCashDividendsPaid

-3,800.0 -3,521.0 -3,149.0 -2,911.0 -2,678.0

Issuance(Retirement)ofStock,Net

-856.0 -493.0 -219.0 -2,268.0 -1,825.0

Issuance(Retirement)ofDebt,Net

2,363.0 29.0 4,341.0 -1,404.0 -2,282.0

CashfromFinancing

Activities-2,293.0 -3,985.0 973.0 -6,583.0 -6,785.0

ForeignExchangeEffects 576.0 -615.0 249.0 65.0 -148.0

NetChangeinCash 2,320.0 608.0 1,653.0 -2,261.0 -2,006.0


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APPENDIXD-FINANCIALHIGHLIGHTS(2009)

Financial Highlights

Sales 30.99 Bil

Income 6.82 Bil

Net Profit Margin 22.28%Return on Equity 30.15%

Debt/Equity Ratio 0.48

Revenue/Share 13.31

Earnings/Share 2.93

Book Value/Share 10.77

Dividend Rate 1.76

Payout Ratio 56.00%

Revenue - Quarterly Results (in Millions)

FY (12/09) FY (12/08) FY (12/07)

1st Qtr 7,169.0 7,379.0 6,103.0

2nd Qtr 8,267.0 9,046.0 7,733.0

3rd Qtr 8,044.0 8,393.0 7,690.0

4th Qtr 7,510.0 7,126.0 7,331.0

Total 30,990.0 31,944.0 28,857.0

Earnings Per Share - Quarterly Results

FY (12/09) FY (12/08) FY (12/07)

1st Qtr $0.58 $0.65 $0.55

2nd Qtr $0.88 $0.61 $0.80

3rd Qtr $0.82 $0.82 $0.72

4th Qtr $0.67 $0.43 $0.52Total $2.95 $2.51 $2.59

Qtr. over Qtr. EPS Growth Rate

FY (12/09) FY (12/08) FY (12/07)1st Qtr 35% 25% ---

2nd Qtr 52% -6% 45%

3rd Qtr -7% 34% -10%

4th Qtr -18% -48% -28%

Yr. over Yr. EPS Growth Rate

FY (12/09) FY (12/08)1st Qtr -11% 18%

2nd Qtr 44% -24%

3rd Qtr 0% 14%

4th Qtr 56% -17%

Coca Cola 2009 Case Study

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