Ife, Efe, and Space Matrix of Coca-Cola Essay
Ife, Efe, and Space Matrix of Coca-Cola
Coca-Cola, the product that has given the world its best known taste was born in Atlanta, Georgia on May 8, 1886. Coca-Cola Company is the world’s leading manufacturer, marketer and distributor of non-alcoholic beverage concentrates and syrups, used to produce nearly 400 beverage brands. They have a strong management and marketing team, and they produce products that people want and in some cases need. Examples of well-known brands they own include Coke, Sprite, Fanta, Vitamin Water, Minute Maid, Bonaqua and Powerade. Although, even a successful company can come tumbling down, and in order to stay ahead of the competition and to continue revenue growth, we would advise the company to seek out additional business strategies in which will explain in depth in the following sections (our company, 2014). CURRENT MISSION, GOALS AND STRATGIES:
Coke’s mission is to, “refresh the world, inspire moments of optimism and happiness, and to create value and make a difference.” Coca-Cola believe that they main responsibility is providing customers with refreshing beverages including soft drinks, water, energy drinks, juice and tea to fit any occasion in their daily lives. Coca-Cola signature product, Coke, is a favorite around the world and a wide variety of products are sold in over 200 countries. They use the only the most sophisticated equipment to process and make the products to ensure each glass of coke product it as good as always. Besides, employees are fairly compensated and we practice fair trade in all markets we compete. Coca-Cola values their responsibility to all communities to serve and support many educational programs.
Furthermore, The Company’s goals include maximizing growth and profitability to increase shareholders’ wealth and to be globally known as a business that conducts business responsibility and ethically and to accelerate sustainable growth to operate in tomorrow’s world. The strategies that The Coca-Cola Company is currently pursuing to achieve these goals include: product innovation; creating well planned packaging and pricing schemes; and increasing operating efficiencies. The Company often reviews and evaluates their business plans and performance to improve their earnings and analyze their competitive positioning the market. They make decisions in realigning their business models to match the objectives of the Company by using strategies and tactics in the analysis of their performance (our company, 2014).
INTERNAL ANALYSIS: (See attached IFEM)
The Coca-Cola Company has an IFEM score of 2.82, which is an indication of a strong internal position. It can also be observed that there are much more internal strengths than the weakness which is why also the company has a strong internal position. FINANCE: Coca-Cola has consistent financial operating results and compared to their competition, they are much better financial shape. For the year ending 2013, the company generated a whopping $48 billion in revenue, an increase over the past two years. According to the company’s 2013 Income Statement, net income, operating income, and gross profit resulted in a positive year-over-year percent change. Coca-Cola has a Quick Ratio of 0.92% and a Current Ratio of 1.03%, thus having a low projected risk of delinquency and a low risk of failure. Coca-Cola has the total debt to asset ratio of 41.17 and profit margin of 18.22%.
The company meets its goal of maximizing shareholders’ wealth as the company’s stock (KO) price plus reinvested dividends continue to trend upwards. MANAGEMENT: There are a lot to say for a company that is been in business for 127 years and it’s evident that the management structure is strong, the company also has a global employee workforce of 150,900 that contributes to the overall success of the organization. The company strives to make a positive impact in the world and intends for their core values to display not only inward but also outward toward the customer. Some of those core values are: diversity, collaboration, passion, accountability, and integrity. RESEARCH AND DEVELOPMENT: With the proper qualitative research, the company can gauge what type of beverage the consumers want and whether or not their products taste good to the consumer.
The company offers over 91 products worldwide, but in order to stay ahead of competition, the development of new products, product packaging, and product diversification is essential. MARKETING: Coca-Cola is a marketing giant, which proves to be an internal strength for the organization. Through effective marketing strategies, 98% of the world’s population recognizes the famous white and red Coca-Cola logo. Over the years, Coca-Cola has had many creative slogans such as “Open Happiness” and “It’s the real thing”. Consumers also enjoy the yearly Coca-Cola Super Bowl commercials that often promote happiness with the Clydesdale horses or Polar Bears. In addition, Coca-Cola is taking advantage of social media sites to communicate with their customers. In summary, The Coca-Cola Company yielded a positive internal analysis.
The company is in good financial shape and continues to improve and produce positive year-over-year profits. As long as the company can keep its debt under control, they will continue to be in good financial health. The management team and global workforce at Coca-Cola are strong and their core values reflect positively though their commitment to social responsibility. The company should continue to research what type of beverages best suit consumer’s needs in order to stay ahead of the competition. Lastly, the company excels with their marketing campaigns and should continue with aggressive and creative marketing to maintain market share.
EXTERNAL ANALYSIS (See attached EFEM)
Company Coca-Cola appears to be competing in a hostile environment as indicated by the EFEM score of 2.39. It can be seen in the External Factor Evaluation matrix that the industry is facing more threats than the opportunities and the priority of the threats are also more than the opportunities. This means that the industry is more vulnerable to the effects of threats than opportunities. DEMOGRAPHIC: Coca-Cola is the most well-known product throughout the world. The demographics used to segment those users of Coca-Cola located in the United States are as follows: age, race, income, education, employment, household size, gender and lifestyle. Coca-Cola was originally created as syrup to be sold to soda fountains, where it would be mixed with soda water and served to patrons, typically teenagers and young adults. And just as it was created for the younger generation, that’s where it’s popularity has remained, with the 18-24 year-old age demographic.
However, Coca-Cola’s volume potential is highest for 25-34 year-olds. In the adult population, Coca-Cola is most popular among men, and more specifically, single men. However, there is significant volume potential for married persons, and Coca-Cola could therefore prospectively increase their sales volume by marketing more towards married persons ages 25-34. COMPETITION: Existing Rivalry in the soft drinks industry is between Coca Cola PepsiCo and Dr Pepper Snapple. However, Coca Col a remains to be the market leader and has maintained the leadership through its intensive marketing campaigns, innovation in introducing brands which captures the evolving customer needs and the wider presence of its brands in many countries across the world. This combined by the significant market experience for the many years the business has been in the industry gives the Coca Cola a competitive edge over competitors. New entrant’s new entrants: Coca cola as the leading soft drink seller in the industry has a large network which gives it economies of scale and wide presence all over the world.
The economies of scale makes Coca Cola’s average cost to be too low for new entrants to be able to enter the market since they cannot afford to produce at such low cost hence the market has low entrant. The cost of entering the soft drinks industry is also high due to the much research needed for the brands development, equipment and expertise involved which also keeps away many potential entrants in the market. This gives Coca Cola a competitive edge against any potential entrants. ECONOMIC: Inflation rate rise which is the general rise of the price level reduces the consumer’s purchasing power reducing demand for the business’s products while its reduction increases purchasing power increasing demand. Next, Emerging markets are increasing business operations in international market l. This can be demonstrated by the significant performance of the company with the earnings before interest in markets outside US representing 80% of the company earnings. Interest rate determines the cost of borrowing for investors in the market.
Thus a rise of the rate increases the cost of investment which reduces competition in the market while a fall of the rate reduces the cost of capital increasing competition in the market. Unemployment rise affects the amount of disposable income available to the consumers with its rise reducing the income hence reducing demand. On the contrary, an increase in employment increases the disposable income increasing demand for goods boosting the business performance. Economic growth rate and performance determines the level of income in the economy which determines the aggregate demand in the market. Thus a positive economic growth increases demand in the market while a negative growth reduces demand. SOCIAL: Lifestyle change in the market changes demand for products, calling for the business to introduce products that meet the new demand while phasing out the old products with no demand; this has promoted innovation of the company in introducing relevant products like the diet brands and low or Zero calories brands.
Aging population and population composition change and diversified products preference in the market as different age groups have different tastes and preferences, with the elderly becoming more concerned with their health hence having their demand change to healthy products reducing demand for some of the businesses products. The consumers health concern and age preferences has resulted to Carbonated drinks being much preferred by and commanding a large youthful market segment who care less about carbon health effect which has been the concern. There has also been a significant growth of healthier soft drinks due to their branding image that they are natural but the carbonated brands consumption among the children and the adults has reduced.
STRATEGIC OPTION ANALYSIS: See the I/E, SPACE, TOWS and QSPM I/E MATRIX: The I&E Matrix plot depicts a strategy area of 2.56 which indicates that the company should “hold and maintain. Suggested strategies for this position on the I&E Matrix are market penetration, market development, and product development. This is not a large problem for the company as they are in a very strong financial position to hold and maintain the current market position. Elimination of the major problems of Coca-Cola in term of production and marketing will strengthen the company internally and facilitate the adoption of a broader range of strategies.
Coca-Cola must also consider to creating products for market niches in order to make it less vulnerable to competition (Product Development).One of the threat in the market is customer are changing health-consciousness attitude, the company have to develop products that can satisfy the need of customer and that are perceived as being clearly superior to the competition.
SPACE MATRIX: The SPACE matrix shows a borderline plot in the AGGRESSIVE quadrant, which correlates with the result from the IE matrix as well. The plot ensure the company’s strong financial position (FS+5) with a great competitive advantage (CA-1.50). The industry itself is strong (IP+5.2) but the Coca-Cola finds itself in an unfavourable environment (CP-1.80). Due to these factors, it is best that Coca-Cola be aggressive and cautious at the same time. The plot suggests that Coca-Cola needs to use their internal strengths to develop a market penetration and market development strategies to stay ahead of the competition. Some of the factors that afforded Coca-Cola with a competitive rating are their large percentage of market share, consumer loyalty to the brand, and their high-quality product offerings. TOWS MATRIX: The TOWS Matrix Yielded Ten Strategies.
Two of the strategies were functional strategies and the remaining eight were Business/Corporate strategies. These functional strategies deal with the organization structure and sales force of Coca-Cola.
Ten distinct B/C strategies were identified to include product development, concentric diversification, market penetration, horizontal integration, management, market development and joint venture.
The QSPM and the QSPM score Summary Sheet: The eight distinct B/C strategies were evaluated by the QSPM.
The tentative priorities established in the analysis of the BMS matrix were somewhat revised based on QSPM scores. All scores were at least moderate-above 50% of Max Possible Score (MPS) overall. Strategy #2 had a high overall score- 80% with an extremely high external argument score of 79%. It appears that the strategic thrust inferred in the I/E and BMS analyses and their supporting strategies are generally sustained by the QSPM analysis.
RECOMMENDED STRATEGIC THRUST AND SUPPORTING STRATEGIES
Coca-Cola should adopt a strategic thrust, which is aimed at positioning the company as a company that owns the innovative products. Aside from that, Coca-Cola should become a creative and memorable leader in the food and beverage industry. Coca-Cola should seek to at least maintain, but preferably increase its market share. Major emphasis should be placed on further penetrating foreign markets, with emphases on our marketing which able to tap into the psyche of the public, especially the teenagers (Hoistein, 2014). It should, as soon as possible, enter the teenagers market by bringing the wonderful products that could catch the teenager’s mind. Coca-Cola must make its products more attractive and tasty to fulfill the customer’s expectation. FUNCTIONAL STRATEGIES
The following functional strategies should be carried out in the time frames indicated. F/MG: Create new department to research and develop nutrition products. Product life cycles are shortening because of the people’s preference and trends are changing rapidly. Develop a “Market need” products for consumers in order to compete with other competitor. For instance, Coca-Cola must develop the right pricing and packaging, with small packs, large packs, or take-home packs (Hoistein, 2011). This need is pressing and paramount. SHORT RANGE, but will be an ongoing need.
F/MG: Develop talent human capital in sales team. The organization’s structure must be redesigned to be more responsive to the field and unpredictable nature of the competitive environment. A talented sale leaded is needed to lead their team in order to provide the best in town services for the customers. SHORT-MID-LONG RANGES.
B/C (BUSINESS/CORPORATE STRATEGIES)
SHORT RANGE-INITIATE IMMEDIATELY AND IN PRIORITY:
Strategy #2 and #3 – Research and development to create innovative products that appeal to the health conscious consumers and Capitalize on their strong brand name and expand operations to include food (SO) and (WO): Coca-Cola should employ more creative and innovative worker and gain several new attractions for the products Hire more creative and innovative worker able to generate more new ideas for Coca-Cola and Coca-Cola could increase the level of satisfaction of customers. For instance, Coca-Cola must understand the culture of every country before enter into the international market in order to increase the competitive advantage. For example, Coca-Cola has announced plans to launch a new version of its best-selling soft drink with a third less sugar and a third fewer calories in the market (Smithers, 2014).
New green cans and bottle labels will feature alongside its range of drinks from the iconic 330ml red tins with 139 calories to Coke Light and Zero with no calories (Sayid, 2014). It can help Coca-Cola increase the market share. Both strategies have the highest priority. Strategy #4 – Increase marketing efforts for bottled drinks (WO): Coca-Cola should do research on the bottled drinks. Coca-Cola has to make the bottled drinks that the customer feels attractive and purchase us. According to Fox (2014) Coca-Cola will personalize its bottled drinks with 250 of the nation’s most popular names among teens and millennial. Nowadays, most of the people likes fresh and new the products, which able to grab their attention. This trend had brought an opportunity for Coca-Cola to generate more customers.
MID RANGE – BEGIN PLANNING IMMEDIATELY FOR IMPLEMENTATYION IN 2 TO 3 YEARS
Strategy #1 – Improve environment awareness with community involvement (SO): To achieve environmental awareness Coca-Cola should organize seminars for the public in order to share the information and knowledge of the company. Aside from that, every bottled drink should print the information about environmental awareness to remind the customer regards the crucial of it. LONG RANGE-BEGIN PLANNING NOW FOR IMPLEMENTATION IN 4 TO 5 YEARS.
Strategy #5 Increase advertising to maintain competitive edge (ST): Concentrate on every single advertisement able to maintain a competitive edge. Coca-Cola should target all audiences when advertise for its products. If the advertisement able to grab the attentions of consumer it means the advertisement was a good advertisement. Zmuda (2014) said increase the effectiveness of our marketing investment by transforming our marketing and commercial model to redeploy resources into more consumer facing marketing investments to accelerate growth. It proves that a good marketing will plan a good advertisement and it could maintain the competitive advantage.
Strategy #6 – Acquire Golden Enterprises (GLDC) to help diversify the product line (ST): Coca-Cola should diversify its product line for market development and GLDC is required for this strategy. Coca-Cola must do research and development to achieve this goal. NOT RECOMMENDED:
Strategy #8 – Advertising on encourages consumers to lead a healthy lifestyle (WT): Coca-Cola should not advertise a healthy lifestyle advertisement, products of Coca-Cola not a drink that can drink for healthy purpose. It seems to increase the risk of failure if advertise healthy lifestyle advertisement.
(2014), Our Company. Retrieved from http://www.coca-colacompany.com/our-company/ David, F. (2013). Strategic Management A Competitive Advantage Approach. 14th ed Pearson Education, Inc. Fox. (2014). Why you may see your name on a bottle of Coca-Cola. Retrieved from http://www.myfoxorlando.com/story/25742524/why-you-may-see-your-name-on-a-bottle-of-coca-cola Hoistein, W. J. (2011). How Coca-Cola Manages 90 Emerging Markets. Retrieved from http://www.strategy-business.com/article/00093?pg=all Ruddick, G. (2014). Coca-Cola to launch new stevia-flavored drink. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10890702/Coca-Cola-to-launch-new-stevia-flavoured-drink.html Sayid, R. (2014). Coca-Cola Life to launch in UK as new low calorie alternative to classic brand. Retrieved from http://www.mirror.co.uk/news/uk-news/coca-cola-life-launch-uk-3672697 Smithers, R. (2014). Coca-Cola Life: Coke with fewer calories and less sugar to tackle obesity. Retrieved from http://www.theguardian.com/business/2014/jun/11/coca-cola-fewer-calories-less-sugar Zmuda, N. (2014). Coca-Cola Boosts Media Spending as Demand Slows, CEO Muhtar Kent Defends the Importance of Marketing. Retrieved from http://adage.com/article/news/coca-cola-boosts-marketing-spend-demand-slows/291747/