The Coca-Cola Company: Global Market Leader and Challenges, Summaries of Business Accounting

Download The Coca-Cola Company: Global Market Leader and Challenges and more Summaries Business Accounting in PDF only on Docsity! Running Head: COCA-COLA 1 The Coca-Cola Company Nick White Lourdes University COCA-COLA 2 Table of Contents Introduction ……………………………………………………….………………………...3 Domains …………………………………………………………...…………….………......5 Management …………………………………………………………....…………...5 Legal Environment ………………………………………………………………….8 Economic Environment …………………………………………………………….11 International Business ……………………………………………………………...14 Summary …………………………………………………………………………………...17 References ………………………………………………………………………………….18 COCA-COLA 5 Management The management domain covers many different areas of business from how a company hires employees to how it is structured and led and what kind of culture it strives to achieve. This domain affects businesses on every level and can easily determine if a company will rise or fall. How a company is managed sets the direction of the company and the strategies it will employ to achieve a competitive advantage. If a company is managed well, it can thrive even in the most difficult environments. If it is managed poorly, the best conditions may not be able to help it survive. Coca-Cola’s system is not a single entity from a management perspective like other corporations, as the company does not own, control, and/or operate all of its bottling partners. Despite often being viewed simply as “Coca-Cola,” the primary way it reaches the marketplace with its products is through starting with itself and manufacturing and selling concentrates, beverage bases, and syrups of ordered products. The bottling operations that place the order of these concentrates then waits for the arrival of the shipped products to produce and bottle the final products. Since Coca-Cola owns its brands and is responsible for the marketing initiatives for the consumer brand, its bottle partners are a part of the entire supply chain in terms of manufacturing, packaging, merchandising, and distributing the final branded beverages to customers and vending partners, who then also sells Coca-Cola’s products (The Coca-Cola System, 2018). For the bottling operations the company owns, Coca-Cola’s management decided in January of 2006 to form the Bottling Investment Group, or BIG. The leaders of the company’s management decided to form BIG to ensure bottling operations received funding, appropriate investments, and expertise to solidify the bottling operation's long-term success. Moreover, the COCA-COLA 6 goal of strategically investing in the select bottling operations through temporarily taking control of them was to allow the leadership to see and use the resources Coca-Cola has to offer. This, in turn, was done to allow BIG to drive long-term growth in crucial markets and address and fix major structural and/or investment challenges (Levy, A.,2017). Besides investing in outside groups and management to improve relations and functions of those it partners with, Coca-Cola is also dedicated to those it employs and is committed to creating a positive corporate culture within the work environment. For 2018, Coca-Cola employed roughly 62,600 employees worldwide (Conway, J., 2019). With such a large and diverse workforce, finding common ground in terms of the work environment and what the company strives for, is not always easy. However, Coca-Cola was able to find common goals and express its core ideas, goals, and what it hopes to achieve through its Mission Statement, which states “To refresh the world, To inspire moments of optimism and happiness, and To create value and make a difference” (Mission, Vision & Values, 2017). Its Vision within its Mission is to use the “Six Ps” as a guide of how to be sustainable and grow. The “Six Ps” are People, Portfolio, Partners, Planet, Profit, and Productivity. These “Six Ps” cover all areas in which a business traditionally focuses and are seen through its values of Leadership, Collaboration, Integrity, Accountability, Passion, Diversity, and Quality (Mission, Vision & Values, 2017). Through providing a stable platform for employees to understand the expectations of their work ethic and how to grow both personally and with the company, it is to no surprise that Coca-Cola won the 'Large Corporations' awards for "Best Company for Diversity" and "Best Company for Compensation" in 2018 (The Coca-Cola Company Awards, 2018). Coca-Cola’s culture defines and cultivates these attitudes and behaviors to better serve consumers, vendors, shareholders, and the environment. The company uses these values and its COCA-COLA 7 focus to its advantage in promoting and using four other policies that are focused on. These groups include Focus on the Market, Work Smart, Act Like Owners, and Be the Brand. Coca- Cola has been able to grow itself and its people through setting positive goals and enforcing that working for Coca-Cola is a fulfilling career rather than just a typical 9-5 job where employees usually just want to work, get paid, and be done for the day. This attitude lowers morale and, in turn, productivity and Coca-Cola has been able to successfully avoid this hindrance. COCA-COLA 10 circumstances. Moreover, it shows consumers that Coca-Cola is an honest company and it sticks to its word when it comes to whom it advertises its products towards and how it markets its products. COCA-COLA 11 Economic Environment The economy that a company seeks to do business within will also have a vast impact on it. An economy is made up of all the buyers and sellers of products and services within a given region and understanding what affects the economic decisions that are made will not only give a company a competitive advantage, but a lack of understanding of market triggers may very well lead to its demise. A growing economy is an excellent place to do business since it supports increased output. Knowing how much to produce at different times and for whom to produce it are essential to capitalize on different factors of an economy. Government policies, natural disasters, and social unrest can all affect an economy as well. All these things must be taken into consideration and analyzed before making key business decisions. Coca-Cola is a very sizeable company with a niche in the beverage producing industry. Coca-Cola is considered to be part of an Oligopoly in the non-alcoholic beverage industry, as its main competitors are only PepsiCo, Dr. Pepper, and Monster. With such few producers that have such a large output, this gives these companies an upper hand in making decisions in the industry. Between Coca-Cola and PepsiCo alone, the two companies account for 60% of the total market share, with Coca-Cola holding around 40% and PepsiCo having around 20% (Quincy, J. R., & Waller, K. N., 2019). This said, it is clear both companies have sizable shares in the market, meaning each has a decent size of power and influence in this sector. Having this control allows for pricing power, which is why PepsiCo and Coca-Cola are not only able to continuously compete with each other, but each company can influence not just the price of its products, but the price of its competitors’ products. With power comes responsibility, which is why continuously offering products at reasonable prices is important to keep customers retention rates high and satisfaction levels and an-above standard level. COCA-COLA 12 Besides being a considerable player in this industry and having to compete with competition, Coca-Cola has two other major economic challenges it must face. The first challenge revolves around consumers and the social influences that constantly change based on a population’s thinking. With the recent “health craze” that has hit a large portion of the U.S.’s consumer population base, there are many individuals who are becoming more concerned with personal health and what is consumed into his or her body. With this concern, less consumers are drinking sugary and sweetened beverages and switching to alternatives, such as unsweetened or lightly sweetened teas or naturally flavored waters to try and live a healthier lifestyle. In addition to health having a major influence on consumers’ decisions that affect the economy, governmental influences also play a lead role and, recently, have added an additional challenge for Coca-Cola. Major progressive cities, such as Philadelphia and San Francisco for example, have attempted and successfully passed soda taxes on sweetened beverages on the grounds of it being in the name of public health. The added taxes are a setback to Coca-Cola, along with competitors, because these taxes increase the final price on the shelf of the product these companies produce, making it more expensive for consumers. For consumers, whenever there is a price increase, it traditionally turns off consumers from wanting to buy the more expensive product and results in the promotion and search of alternatives. Between both of these factors, the soda industry has declined in the U.S. for the last eight consecutive years and, since Coca-Cola holds the largest market share in this industry, it has certainly felt the hardest hit in terms of revenues and final profits (Kell, J., 2017). As you can see in the figure below, while Coca Cola has been able to continue to maintain a steady stream of revenue, the overall decline that can be seen in the graph has been due to the reduced demand and consumption of soda products within the U.S. Since Coca-Cola has the ability to sell so COCA-COLA 15 having some flavors that are more popular in one country than another and often finding different ingredients in different countries. Further than personalizing drinks to certain groups, Coca-Cola is also committed to helping the environment and reducing its carbon footprint through the promotion of recycling the product’s bottles and cans that it uses for its products. By reducing this plastic, glass and metal waste, Coca-Cola is working towards not only being more sustainable itself, but it also wants to see other care for the Earth by not letting its products contaminate it. Coca-Cola also works on ensuring drinking water is sustained, especially in areas where there are manufacturing plants. The company does this through the attempt to ensure the water it uses in production is replenished and replaced at the source. In addition to helping out the environment, Coca-Cola is committed to helping people globally as well. Although Coca-Cola directly employs 62,600 employees, between it and its bottling partners, more than 700,000 people are employed worldwide, which brings economic opportunities to local communities all over the globe. This is not limited to just employment either, as Coca-Cola is dedicated to giving back to local communities and through ensuring its business practices are ethical for both employees and the environment. Global sales are also an important area of discussion and higher sales are what results in the opportunity for Coca-Cola to give back. According to Statistica, roughly 36.7% of global sales come from the North American market and 22.8% come from Europe, Africa, and the Middle East. As it can be seen from the table below, much of Coca-Cola's revenues come from outside of the U.S., further showing its presence in the international marketplace and its ties to world markets. COCA-COLA 16 Net Revenues for Fiscal Year 2018 Revenue distribution share Bottling Investments 12.1% Europe, Middle East & Africa 22.8% North America 36.7% Asia-Pacific 15.4% Latin America 12.7% Corporate 0.3% Figure 2 Coca-Cola's net revenues breakdown by segment, by J. Conway, 2019, https://www.statista.com/statistics/271136/coca- colas-revenue-distribution-worldwide-by-operating-segment/. COCA-COLA 17 Summary There is a sizable amount of knowledge that can be obtained from The Coca-Cola Company, as it is a very strong and influential corporation. Between the magnitude of the company, the recognizable red and white logo of Coca-Cola, combined with its reputation of producing many great products and being an ethical and transparent company, it is no wonder why it has been so successful since its beginning in 1886. Moreover, this company displays what it means to be an “ethical” and “worldly” company and demonstrates how, in the world of business, there are no boundaries or restrictions that cannot be overcome. In the ever-changing world of trends and expectations of business, whether that is a social trend or new governmental regulations and restrictions, Coca-Cola has displayed how honesty and transparency, combined with not losing sight of goals and building a strong foundation, allows any corporation to grow and prosper. All of these facts combined, credit needs to be given to Coca-Cola because these reasons are why it is now the largest, non-alcoholic beverage producer in the world.