Swot Analysis Essay On Coca Cola

Coca-Cola SWOT Analysis

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Coca-Cola SWOT Analysis

SWOT stands for Strengths Weakness Opportunities Threats. SWOT analysis is a technique much used in many general management as well as marketing scenarios. SWOT consists of examining the current activities of the organisation- its Strengths and Weakness- and then using this and external research data to set out the Opportunities and Threats that exist.

Strengths:
Coca-Cola has been a complex part of world culture for a very long time. The product's image is loaded with over-romanticizing, and this is an image many people have taken deeply to heart. The Coca-Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable branding is one of Coca-Cola's greatest strengths. "Enjoyed more than 685 million times a day around the world Coca-Cola stands as a simple, yet powerful symbol of quality and enjoyment" (Allen, 1995).
Additionally, Coca-Cola's bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and operated by independent business people who are authorized to sell products of the Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers.

Weaknesses:
Weaknesses for any business need to be both minimised and monitored in order to effectively achieve productivity and efficiency in their business’s activities, Coke is no exception. Although domestic business as well as many international markets are thriving (volumes in Latin America were up 12%), Coca-Cola has recently reported some "declines in unit case volumes in Indonesia and Thailand due to reduced consumer purchasing power." According to an article in Fortune magazine, "In Japan, unit case sales fell 3% in the second quarter [of 1998]...scary because while Japan generates around 5% of worldwide volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35% of Coke's volume and none of these markets are performing to expectation.
Coca-Cola on the other side has effects on the teeth which is an issue for health care. It also has got sugar by which continuous drinking of Coca-Cola may cause health problems. Being addicted to Coca-Cola also is a health problem, because drinking of Coca-Cola daily has an effect on your body after few years.

Opportunities:
Brand recognition is the significant factor affecting Coke's competitive position.

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Coca-Cola's brand name is known well throughout 94% of the world today. The primary concern over the past few years has been to get this name brand to be even better known. Packaging changes have also affected sales and industry positioning, but in general, the public has tended not to be affected by new products. Coca-Cola's bottling system also allows the company to take advantage of infinite growth opportunities around the world. This strategy gives Coke the opportunity to service a large geographic, diverse area.

Threats:
Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea, coffee, juices, milk, and hot chocolate. Even though Coca-Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into these markets, allowing them to have further significant market shares and offset any losses incurred due to fluctuations in the market. Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produce a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the competition. Furthermore, consumers can easily switch to other beverages with little cost or consequence.

Product Life cycle:

When referring to each and every product or service ever placed before the consumer i.e. in the long term all the existing products and services are dead. For e.g.:- Replacement of Ford Cortina ( a highly successful car) by Ford Sierra, the replacement of sierra by the Ford Mondeo and the replacement of the old Mondeo by the new Mondeo in 2001. So every product is born, grows, matures and dies. So in the commercial market place products and services are created, launched and withdrawn in a process known as Product Life Cycle.
To be able to market its product properly, a business must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers.
Furthermore, cost management, product differentiation and marketing have become more important as growth slows and market share becomes the key determinant of profitability. In foreign markets the product life cycle is in more of a growth trend Coke's advantage in this area is mainly due to its establishment strong branding and it is now able to use this area of stable profitability to subsidize the domestic Cola Wars.
Insert the picture of the product lifecycle

Marketing Objectives

The objective is the starting point of the marketing plan. Objectives should seek to answer the question 'Where do we want to go?'. The purposes of objectives include:

-> to enable a company to control its marketing plan.
-> to help to motivate individuals and teams to reach a common goal.
-> to provide an agreed, consistent focus for all functions of an organization.

All objectives should be SMART i.e. Specific, Measurable, Achievable, Realistic, and Timed.

Specific - Be precise about what you are going to achieve
Measurable - Quantify you objectives
Achievable - Are you attempting too much?
Realistic - Do you have the resource to make the objective happen (men, money, machines, materials, minutes)?
Timed - State when you will achieve the objective (within a month? By February 2010?)

1.Market Share Objectives:
To gain 60% of the market for soft drink industry by September 2007.

2.Profitability Objectives:
To achieve a 20% return on capital employed by August 2007

3. Promotional Objectives
To increase awareness of the product on the market.
4. Objectives for Survival
To survive the current market war between competitors.

5. Objectives for Growth
To increase the size of the worldwide Coca Cola enterprise by 10% .



Coca Cola is the leading manufacturer and retailer of non-alcoholic beverage in the world. The company is best known for its flagship product, Coca-Cola, a non-alcoholic carbonated drink, loved throughout the world by kids and adults alike. Coca-cola or Coke as it is known by people around the world can be found in more than 200 countries with 1.8 billion drinks being served each day. Here is a SWOT and PESTEL analysis of the soft-drink giant.

External Analysis

  1. The drink was originally manufactured as a patent medicine by John Pemberton who got addicted to morphine after being wounded in the civil war and was looking for a substitute drink.

  2. The drink was originally developed as a cocoa wine and was registered as a non-alcoholic version of Pemberton’s other famous invention, French Cocoa Wine Tonic. He claimed that the drink had medicinal properties and could cure a host of diseases.

  3. In 1892, the Coca-Cola company was formed which started manufacturing the drink on a commercial basis.

  4. Outdoor advertising started in Georgia in 1894. Since then advertising has played a major role in the promotion of Coke.

  5. According to 2005 report, the beverage is currently sold in 200 countries with 1.8 billion drinks being sold every day.

  6. According to the 2007 report of the company, almost 50 percent of the sales come from USA, followed by Third World countries of India, Mexico and China which contribute 37 percent of the sales and finally by the rest of the world which accounts for about 20 percent of the sales.

  7. The company is a publicly traded company and is listed in New York Stock Exchange and Dow Jones Industrial Average. Coke stocks are considered to be one of the most important stocks in the world and their performance at the markets usually determines the performance of the stock markets as well. Holding a stock of the company is considered to be a lucrative enterprise with a single stock brought with 40 dollars way back in 1919 being valued at 9.8 million dollars at the current market rates.

  8. Coke is the top selling aerated beverage in the world. However, it is not unrivalled. Its main competitors are Pepsi-Cola or simply Pepsi owned by the Pepsi Company and RC Cola owned by Dr. Pepper Snapple Group. In some markets, Pepsi outsells Coke.  

Internal Analysis

  1. Besides the iconic Coke brand, the company sells almost 500 branded products in more than 200 countries. Some of the important varieties are Diet Coke (low calorie drink directed towards the female population), Fanta (a product originally developed in Germany during the war years), Sprite (Coke’s answer to the highly popular 7 Up), flavored cokes (vanilla, cherry etc) and Coke Zero (another version of diet coke directed primarily targeting the male).

  2. Advertising is the principal channel through which the company reaches out to its customers. Coke Ads have left a profound impact on American culture and the company is credited with introducing the red and white Santa.

  3. The company has been associated with a number of sporting events and the iconic Coke bottles have featured in numerous films and other cultural representations. This is how the company has build up its legendary public image.

SWOT Analysis

Strength

 

1.    It is the best global brand in the world in terms of revenue, profits, stock market performance and brand image.

2.    The company holds the largest market share (almost 40 percent) of the cola industry.

3.    It has the most extensive marketing and distribution network in the world with presence in more than 200 countries with 1.8 billion drinks being sold every day.

4.    Strong advertising presence with more than 3 million dollars being earmarked every year.

5.    It can exert significant power over the suppliers.

6.    The company is increasing focusing on CSR programs like energy conservation, water recycling, packaging etc. This has helped it to build a socially responsible image of the company.

 

Weakness

 

1.    The principle focus of the company is aerated beverages like Coke, Sprite and Fanta. However, this limited focus might prove detrimental for the company if the world is moving towards healthier drinks.

2.    The product portfolio of Coke unlike that of Pepsi is highly undiversified. While Pepsi has diversified in both food and beverages, Coke has concentrated only on drinks. This singular focus on carbonated drinks may cost the company if markets for such drinks shrink in future.

3.    The company has 8 billion dollars of debt in the market which is another negative point.

4.    Coke has faced flak from experts who have criticized the water consumption policy of the company in regions with water scarcity.

5.    Finally although Coke sells more than 500 types of product; yet only a few products result in more than 1 billion dollars sales.

 

Opportunities

1.    Consumption of packaged drinking water and aerated beverages is expected to grow every year in Third World countries.

2.    With the new trend of fitness and health gaining grounds, the company will benefit a lot from the promotion of low calorie and low sugar drinks like Diet Coke and Coke Zero.

3.    Another significant way the company can expand its market is to acquire companies already existing in the Third World and BRICS nations.

4.    Entry into packaged food is another way the company can expand its markets.

 

 

 

 

Threats

1.    One of the serious threats comes from the popular perception that sugar based drinks lead to various health problems. The company will not prosper if this perception battle is not won.

2.    More than 60 percent of the revenue comes from foreign markets. Weak currency performance of other countries will hamper the sales of the company.

3.    Water resources continue to be a problem.

4.    Rising raw material cost may lead to higher production costs and low profit ratios.  

5.    Pepsi and RC cola have given stiff competition in emerging markets.

6.    Finally markets in developed countries are already saturated.

 

 

PESTLE Analysis

Political

The boycott of Coke, the most potent symbol of American capitalism, by the Arab League in wake of the Iraq war declined the company’s sales in Middle Eastern countries.

Economic

Economic recession can have the greatest negative impact on the company. People tend to cut back on non-essential items like carbonated drinks. As such recession of 2008-2010 had a deep impact on the sales of Coco Cola.

Social

As mentioned before, the perception battle is the hardest which Coke has to fight. More and more people are turning to healthier food and drinks and Coke being a high sugar and high calorie drink is fast losing the support of health conscious people. 

Technological

Technological advancement in television and the internet means that the company can reach more people than before by using these innovative channels of communication. On the other hand, recycling plastic bottles and tin cans can lower the cost of production.

Legal

Coca Cola was sued for racial discrimination in the late 1990s when it was found out that the black employees were discriminated against in the company. This led to a massive face loss.

Environmental

Two of the most significant environmental factors are pesticides and the water problem. It has been alleged that Coca Cola’s products in India contains toxins such as Lindane, DDT, Malathion and Chlorpyrifos. These toxins have been associated with cancer and breakdown of the immune system. Use of water for distillation and processing in areas of acute water shortages have been criticized by environmental activists.

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