Strategy of coca cola report

MINISTRY OF EDUCATION AND TRAINING HOA SEN UNIVERSITY FALCUTY OF ECONOMICS AND COMMERCE STRATEGIC Ordinal Number Name Vo Hue Van Tran Dinh Khoi Le Nguyen Thien Thanh Tran Hue Chi Nguyen Hoang Phi Van Nguyen Dang Que Tram Lý Tạ Kim Long Student’s code 2000637 200228 2001191 200637 2001151 2001131 2001478 MANAGEMENT REPORT Topic: COCA-COLA Class: QT302DE01-0200 Lecture: Mr Do Huu Anh Group: Group Ho Chi Minh City August, 2014 MINISTRY OF EDUCATION AND TRAINING HOA SEN UNIVERSITY FALCUTY OF ECONOMICS AND COMMERCE STRATEGIC Ordinal Number Name Vo Hue Van Tran Dinh Khoi Le Nguyen Thien Thanh Tran Hue Chi Nguyen Hoang Phi Van Nguyen Dang Que Tram Lý Tạ Kim Long Student’s code 2000637 200228 2001191 200637 2001151 2001131 2001478 MANAGEMENT REPORT Topic: COCA-COLA Class: QT302DE01-0200 Lecture: Mr Do Huu Anh Group: Group Ho Chi Minh City August, 2014 ABSTRACT As you know, Coca-Cola is one of the most favorable drinks all over the world, its own brandname costs about $80 billion In 1960, Coca-Cola was the first time introduced in Vietnam After that, Coca-Cola Indochina Pte Company was established officially in Vietnam on August 1995 And now, to figure out how Coca-Cola is able to achieve that reputation, meet the goals, and obtain a vital position in consumer’s demands and develop sustainably, we is going to make a research of this company and analyze the Coca-Cola’s information, statistics and ratio by using the knowledge from Strategic Management such as EFE, IFE, QSPM matrices, etc ACKNOWLEDGEMENT We honestly like to thank our lecturer – Mr Đỗ Hữu Anh for supporting us with the potential, significant information, steps, experience and knowledge to fulfill this assignment Those things we did learn from him are very practical and useful, so we can use them correctly in work CONTENT LIST OF PICTURES Figure 1: Coca-Cola Corporation’s logo Figure 2: Coca Cola can Figure 3: Mr Vamsi Mohan - General Director of Coca-Cola Vietnam and Cambodia Figure 4: Coca Cola’s values Figure5: Revenue and growth on Coca-Cola Vietnam in April, 2014 10 Figure 6: Carbonated beverage market in Vietnam in April, 2014 10 Figure 7: Competitive profit matrix between Coca-Cola Corporation and PepsiCo 12 Figure 8: Product matrix of Coca-Cola Corporation 16 Figure 9: Grand Strategy Matrix 18 Figure 10: Revenue and growth in Vietnam soft drink industry in April, 2014 .19 Figure 11: Revenue structure on products in April, 2014 .19 Figure 12: The Coca-Cola bottle through years 21 LIST OF TABLES Table 1: Annually Inflation Rate Vietnam from 2010 to 2014 Table 2: External Factor Evaluation (EFE) Matrix of Coca-Cola Corporation 12 Table 3: Internal Factor Evaluation (IFE) Matrix of Coca-Cola Corporation 14 Table 4: QSPM Analysis on Coca-Cola Corporation .25 TEACHER’S COMMENT 10 packaging Wide-spreading internet and gadgets Political stability Widen market 0.8 Vietnamese labor is 0.9 cheap in large scale Changing taste among youth Health conscious consumers Threats Tax policy for foreign companies Inflation rate Economic crisis Intense competition such as Pepsi Low-skilled labor Increasing demand for non-carbonated products e.g juices Increasing price of raw material such as sugar and metals Many smaller players are furious competitors 0.7 Widen market through 0.36 most of the provinces in Vietnam Use the widen market 0.32 effectively to distribute products Use Vietnamese labor to 0.36 reduce manufacturing cost 0.21 0.9 0.27 0.8 0.24 0.7 0.8 0.8 3 0.7 0.7 4 0.21 0.24 Effective Marketing 0.32 strategies forward High skill training 0.28 Develop more non- 0.28 carbonated products 0.8 0.6 11 0.6 0.18 0.9 Internal Factor Evaluation (IFE) Matrix Table Internal Factor Evaluation (IFE) Matrix of Coca-Cola Corporation No Factors Weight Opportunities Consumption 0.9 Expenditure Increase Increase in middle- 0.8 class consumers Rating Evidence for rating Increasing purchasing 0.36 ability among customers Increasing number of 0.32 customers in Coca Cola’s strategic segment Weighted score 24 3 0.21 0.18 High Technology in 0.7 the system of producing and packaging Wide-spreading 0.6 internet and gadgets Political stability 0.9 Widen market 0.8 Vietnamese labor is 0.9 cheap in large scale Changing taste among youth Health conscious consumers Threats Tax policy for foreign companies Inflation rate Economic crisis Intense competition such as Pepsi Low-skilled labor Increasing demand for non-carbonated products e.g juices Increasing price of raw material such as sugar and metals Many smaller players are furious competitors 0.7 Widen market through 0.36 most of the provinces in Vietnam Use the widen market 0.32 effectively to distribute products Use Vietnamese labor to 0.36 reduce manufacturing cost 0.21 0.9 0.27 0.8 0.24 0.7 0.8 0.8 3 0.7 0.7 4 0.21 0.24 Effective Marketing 0.32 strategies forward High skill training 0.28 Develop more non- 0.28 carbonated products 0.8 0.6 25 12 Produce a BCG Matrix Figure Product matrix of Coca-Cola Corporation • Stars: high growth, high market share - Stars are leaders in business - They require heavy investment to maintain its large market share - It leads to a large amount of cash consumption and cash generation - Attempts should be made to hold the market share otherwise the star will become a cash cow  The star products of Coca Cola are Coca Cola, Diet Coke, Sprite They are the leading soft drink in current market share and have a high growth rate, defeat all the competitors, especially is Pepsi Co • Cash cows: low growth, high market share - They are foundation of the company and often the stars of yesterday - They generate more cash than required - They extract the profits by investing as little cash as possible - They are located in an industry that is mature, not growing or declining  The products which are Cash cows are Schweppes, Nutri Boot, Fanta, Teppy Both Schweppes and Nutri Boot are not invested much in marketing and PR, however, we can identify them 26 easily on the market The Soda (carbonated mineral water) market does not have many competitors Therefore, Coca Cola Company quickly realized this to take the market which has a little interest from competitors About Nutri Boot, this is a breakthrough in the market when they are the first and the only one who create a new fruit juice made from fresh orange and milk while other competitors squirming in the war of bottled orange juice Conversely, with Fanta and Teppy, in the first stage, Coca Cola has launched a lot of ad campaign to promote for these two products Until now, these products are not the best products on the market in bottled orange juice; however, we cannot ignore the revenue that they have brought • to Coca Cola every year Question mark: high growth, low market share - Most businesses start of as question marks - They will absorb great amounts of cash if the market share remains unchanged - Question marks have potential to become star and eventually cash cow but can also become a dog - Investments should be high for question marks  The question marked products of Coca-Cola is Dasani This is a new bottled water high quality product of Coca Cola Danisa has a lightweight, environmentally friendly Specially, the bottle is easy to twist into a small piece in the palm of your hands after using Although until now, it still cannot defeat the other big competitors such as Lavie, Aquafina Dogs: low growth, low market share - Dogs are the cash traps - Dogs not have potential to bring in much cash - Business is situated at a declining stage  The products which are at Dogs are Samurai and Splash With many orange juice product • lines such as Fanta, Teppy; the appearance of Splash cannot impress the customers although this product has a new advanced in orange juice product lines: the orange cloves Besides, the reason why Samurai is arranged in Dogs is because of their scandals in the quality and advertising The only one thing that reminds the customers about Samurai is the offensive and deput 27 13 Produce a Grand Strategy Matrix Figure Grand Strategy Matrix Soft drink in Vietnam is estimated as an industry with high growing rate in defiance of world economic crisis Demographic explosion in countries with the young population and the growing up of average per capita income make a lever for soft drink industry in Vietnam Figure 10 Revenue and growth in Vietnam soft drink industry in April, 2014 28 In the world, soft drink has many kinds: carbonated beverage (soft drink with gas), soft drinks without gas, fruit juice, green tea, mineral water, etc In the recent years, the trend of soft drink market is the decreasing of carbonated beverage (decrease 5%) and the increasing of soft drink without gas (increase 10 %) because Vietnam consumers choose soft drinks which come from natural sources, have more vitamin, mineral, less chemical Figure 11 Revenue structure on products in April, 2014 In general, carbonated beverage market is going down but market share of Coca Cola and PepsiCo are also highest In 2013, according to Nilsen, the Coca Cola has 28% in market share (more than Pepsi, just 24%) Coca Cola had its firm over 200 countries and became the fastest selling brand over the world Coca Cola sold over billion drinks, consume over 10.450 drink’s bottle every second In 2003, Coca Cola’s revenue is 4.347 million USD Up to now, Coca Cola still the best drink’s company in drink industry of American, defeated many competitors Besides selling activity, Coca Cola always spend money on PR strategy for their products So that Coca Cola become a “giant person” in soft drink 13.1 Market penetration For example: In Vietnam, Coca Cola penetrated Vietnam market by association of companies This is a trend of companies in Vietnam at market opening period Coca Cola cooperated with domestic companies in Vietnam to share the technology and develop product But within years, Coca Cola M&A these companies and Coca Cola becomes an official foreign company which has 100% foreign budget 29 13.2 Market expanding Globalization is an opportunity for companies to develop The main purposes of expanding market are increasing revenue, reducing risks, and making the company’s value more valuable, finding more consumers, etc When Coca Cola established, it had its firms over 200 countries and became the fastest selling brand over the world At first, Coca Cola concentrates on developing countries, which has high GPD, GNP such as Europe, North America Then Coca Cola expands its brand to other countries like Vietnam or Philippine, etc Africa is a potential market Nowadays, Coca Cola successes in expanding its market with variety of drink such as carbonated beverage, fruit juice drink, tea, etc 13.3 Product development/Related diversification Coca Cola has products in drink without alcohol About eelated diversification, Coca Cola (Coke) is a carbonated beverage, it has a good assumption so beside the original product is Coke, Coca Cola makes variety of drink and shape such as Diet Coke, Vani Coke, Coke Zero, Sprite, Fanta Recently, Coca Cola has had more products such as fruit juice, water, etc to serve consumers Coca Cola’s packing has changed year to year Figure 12 The Coca-Cola bottles through years 13.4 Forward integration Forward integration (choose this form because Coca Cola uses franchise) Product distribution franchise: Coca Cola, Goodyear Tires, Ford, etc are the examples for product distribution franchise This is a form that franchisor allows franchisees to distribute 30 products and services in the certain range and time, use the brand, icons, the trade mark, logo, slogan… but not business method Some industry use Product distribution franchise such as fast food industry, petroleum industry, vehicle industry, etc In reality, this kind of franchise is not common in business Coca Cola uses product distribution franchise for multiple corporations in many countries Coca Cola holds most of shares in many corporations such as Coca-Cola Enterprises, Coca-Cola Amatil, Coca-Cola Hellenic Bottling Company (CCHBC) and Coca-Cola FEMSA 14 14.1 SWOT Matrix SWOT Analysis Strengths (S) One of the best brand in the world in term of value: The Coca Cola Company’s in the top 10  - of the band having the highest value in the world In 2014 the most valued is $80,68 billion - The number proves that the reputation and the high value of Coca Cola in the world market World’s largest market share in beverage: Coca Cola holds the largest beverage market share - in the world (about 40%) and have a large share in the Viet Nam beverage market Old-famous brand: Coca Cola penetrate in Viet Nam in 1994 and now it’s nearly hold a dominant share of the Viet Nam beverage market This brand’s too familiar with Vietnamese - and popularity in the North Brand recognition: following the research about 94% population in over the world awareness - Coca Cola brand Strong, impressive marketing and advertising: Coca Cola’ advertising cost accounted for more than $3 billion in 2012 to increased firm’s sales and build brand recognition Beside that, Coca Cola’s advertising very impressive by print name on the can, this is a recent strategy to - attract customers, especially is young people and print lucky word on the can in Tet holiday Suitable price with almost social class: Vietnamese buy Coke regularly as their habits Moreover, Coke has been bought with the suitable price in Vietnamese Market, just 7-10 - thousand VND for a small 500ml Coke Various soft-drinks: Coca Cola has about 500 other soft- drink products in 200 countries Some of other product in Viet Nam as Sprite, Fanta, Schweppes Tonic, Lemon Soda, Minute - Maid, Dasani mineral water, Nutriboost fruit –milk Customer loyalty: Coca Cola capturing a large number people who’s always loyal with Coca Cola, in Viet Nam has a big fan in both the north and the south, especially in the north  Weaknesses (W) 31 - Unhealthy issue: as you know if you drink a lot of carbonated water, it’ll be harm your health and get fat, because of contenting high sugar, calories And now the world is fighting obesity and is moving towards consuming healthier food Some people recognize this problem, so - they refuse to use carbonated drink, this is a weak point that Coca Cola’s considering Undiversified product portfolio: Unlike other soft- drink company, Coca Cola is still focusing only on selling beverage, but don’t invest in other line product, which puts the firm at a disadvantage Coca Cola’s competitor is Pepsi, they’re not only developing soft-drink - products, but they also release some kind of snack, to be diversity their product portfolio Controlling taste and quality: if someone tries to drink Coca Cola in other countries, the taste is clearly different Vietnamese trend to adore sweet drink, but Coca Cola in Viet Nam isn’t - sweet enough So some people use other alternative product  Opportunities (O) The 6th population country in the world: It takes advantage to develop image and products - Besides that, it attracts other consumers to use and emphasizes their brand value in the world Young population and emerging market: Consumption of soft drinks is still significantly growing in emerging markets, where Coca Cola could increase and maintain its beverage market share In Viet Nam, a majority of youth adores drinking Coke because of its taste and - the suitable price Abundant resources and cheap resource: the labor in Viet Nam very cheaper and higher level - than other countries, so it’s easy to train and reduce cost for hiring Technological advance: with high technology, Coca Cola can cut down some cost in packaging, producing, increase productivity and apply technical machines in the production - chain Fast food store’s appearance: in the recent time the appearance of many fast food stores created a great chance for Coca Cola cooperate with these stores as McDonalds, KFC, Lotteria, Burger King to increase sale and attract more consumer It’s such a partner and - alliance strategy to expand the scope of market  Threats (T) Competition from PepsiCo: PepsiCo is fierce competing with Coca Cola over market share It is a pioneer in the Vietnam market and hold a large market share And up to now, Pepsi has so much success, especially in the South Viet Nam Apart from PepsiCo, there are some - competitors in Viet Nam as Tan Hiep Phat, Tribeco, Wonderfarm, etc Development alternative product: Consumers in Vietnam become a more healthy concern and reduce their consumption of carbonated drinks that have large amounts of sugar, calories and fat This is the most serious threat as Coca Cola is mainly serving carbonated drinks Thus, 32 more and more healthy product as an alternative soft drink for responding to consumer demand Unstable economics and policy in Viet Nam: the rate, tax and inflation are a serious issue for - any company in Viet Nam The economic environment will affect on consumer expenditure and business cooperation In addition, because of high rate in Viet Nam, it influences on investment loans Polluted environment: Waste disposal is a big problem for Coca Cola, most of waste made - from plastic, classic mental, it’s difficult to decompose and recycle So friendly packaging production is to love and to belief Global environment: the fluctuation in global economic will impact on cost material import - Perhaps, increasing cost will influence on business cooperation and increase other cost lead to lose down the profit 14.2 • Strategic in SWOT SO (strengths-opportunities) Strategies - Expand many retail channels through stores or shops and supermarkets (Market - penetration and expansion) - S2S3O3 Enhance amazing advertising programs – S1S5O1 Develop new functional products which have potential growth (related diversification) – S6S7O2O5 - Enhance new beverage following the trendy healthy – S7O1O2 • WO (weaknesses-opportunities) Strategies - Improve and provide the products with high qualification and taste (product - development) - W3O2O4 Diversified product portfolio – W2O2O4 Improve technology to create new products and compete with other competitors – W1O2O3O4 • ST (strengths-threats) Strategies - Enhance building reputation and image in community channels – S1S3T1 - Keep creating differentiation advantages – S5S7T1 - Analyze economic market before giving strategies and plans – S2S3T3 • WT (weaknesses-threats) Strategies - Establish protecting environment program to reduce waste – S1S3T4 - Control resource and saves material to reduce cost - W3T5 - Develop healthy product and use natural material to meet consumer needs – W1W3T2 33 15 Produce a QSPM analysis Table QSPM Analysis on Coca-Cola Corporation KEY FACTORS Strengths Consumption expenditure increase Suitable price with almost social class The best global brand in the world in terms of value Weaknesses Significantly focus on carbonated drinks Undiversified product portfolio High debt level due to acquisitions Decreasing gross profit and net profit margins Opportunities High technology Growing beverages consumption in emerging markets Threats Changes in consumer tastes Waste disposal Legal requirements to disclose negative information on product labels Competition from PepsiCo Sum weights Sum Total Attractiveness Scores ALTERNATIVE STRATEGIES Diversified product portfolio, Bargaining with the besides carbonated drinks to suppliers with suitable care the healthy consumers price (backward with amazing advertising integration) programs Weight AS TAS Weight AS TAS 0.1 0.4 0.05 0.1 0.07 0.21 0.05 0.1 0.1 0.3 0.1 0.2 0.15 0.45 0.1 0.2 0.1 0.2 0.12 0.36 0.1 0.1 0.15 0.6 0.08 0.08 0.1 0.4 0.05 0.1 0.05 0.1 0.05 0.1 0.05 0.1 0.03 0.02 0.09 0.02 0.01 0.1 0.01 0.4 0.05 0.05 0.02 0.02 0.1 100% 0.3 0.1 100% 0.2 2.4 2.79 Analysis: 34  For the 1st strategy: Diversified product portfolio, besides carbonated drinks to care the healthy consumers with amazing advertising programs - Consumption expenditure increase and suitable price with almost social class: Vietnamese buy Coke regularly as their habits Moreover, Coke is bought with the suitable price in Vietnamese Market, just thousand dong for a small 500ml Coke - The best global brand in the world in terms of value: The Coca Cola Company is the most valued ($77,839 billion) brand in the world, the key to affect Vietnamese consumers - Significantly focus on carbohydrate drinks: The business is still focusing on selling Coke, Fanta, Sprite and other carbonated drinks This strategy works in short term as consumption of carbonated drinks will grow in emerging economies but it will prove weak as the world is fighting obesity and is moving towards consuming healthier food and drinks - Competition from PepsiCo: PepsiCo is fiercely competing with Coca Cola over market share Although Coke goes behind in the beverage field in the world, it is a pioneer in the Vietnam market And up to now, Coca-Cola has so much success in Viet Nam  For the 2nd strategy: Bargaining with the suppliers with suitable price (backward integration) - High debt level due to the acquisitions: Nearly $8 billion of debt acquired from CCE’s acquisition significantly increased Coca cola’s debt level, interest rates and borrowing costs - Decreasing gross profit and net profit margin: Coca cola’s gross profit and net profit margin was decreasing over the past few years and may continue to decrease due to higher water and other raw material costs - Waste disposal: Waste of the Coca cola is all cover, can, bottle that are metal, plastic, etc Reducing landfill is a top priority Conclusion: According to the QSPM, the sum TAS of the nd strategy is higher the 1st one (2.79> 2.4) Thus, our group is going to choose the nd one because it is able to reflect the practical Coca 35 cola’s performance these years such as the decrease in profit margins, material costs, etc Those are affecting on the sustainable development of Coca cola 36 16 Conclusion In general, carbonated water and soft drink market in Vietnam is developing rapidly and increasingly diversified products Coca Cola is one of the beverage brand is very successful and hold a large market share in Vietnam With the above models have a clear analysis of the advantages and drawbacks of Coca Cola in Vietnam In the model analysis and strategic assessment of Coca Cola, the SWOT model only has the most reasonable in terms of analysis to determine strategy Due to the nature of SWOT analysis gives the specific views about the potential of a company, because the model is mainly based on the internal factors and external factors in order to identify strengths, weaknesses, opportunities and threats of a business It's helpful to bring this model is objective view and specific adjustment to help companies determine the business strategy Thus the SWOT, strengths and weaknesses of Coca Cola has been pointed out clearly and helps us see the strategy that the company has applied to each product to conquer the market in Viet Nam 37 REFERENCE Foreign Documents • COCA-COLA • http://www.coca-colacompany.com/our-company/mission-vision-values, SCRIBD, BCG Matrix for Coco Cola, http://vi.scribd.com/doc/16655962/Bcg-Matrix- • for-Coco-Cola November 16, 2010, MBA-LECTURES, Grand Strategy - Matrix of Coca-Cola, COMPANY, Coca-cola company, Vision mission and values, http://mba-lectures.com/management/strategic-management/1106/grand-strategy• matrix-of-coca-cola.html MAXI-PEDIA, Quantitative Strategic Planning Matrix (QSPM), http://www.maxi- • • pedia.com/quantitative+strategic+planning+matrix+QPSM NetMBA, BCG Growth – Share Matrix, http://www.netmba.com/strategy/matrix/bcg/ By Vnexpress, THÀNH LẬP CƠNG TY TRỌN GĨI, Đầu tư vào Việt Nam hấp dẫn, http://www.thanhlapcongtytrongoi.vn/chu-tich-coca-cola-dau-tu-vao-viet-nam-vanrat-hap-dan/ Vietnamese Documents • May 22, 2014, DÂN TRÍ- DIỄN ĐÀN DÂN TRÍ VIỆT NAM, Top 10 thương hiệu đắt giá giới năm 2014, http://dantri.com.vn/kinh-doanh/top-10-thuong-hieu-dat-gia- • nhat-the-gioi-nam-2014-877903.htm July 20, 2014, NGƯỜI ĐƯA TIN – CƠ QUAN CỦA LUẬT GIA VIỆT NAM, CocaCola sở hữu sản phẩm thị trường Việt Nam? http://www.nguoiduatin.vn/coca-cola-so-huu-nhung-san-pham-nao-tai-thi-truong-viet• nam-a140429.html 123DOC, Chiến lược kinh doanh gia nhập thị trường quốc tế Coca-Cola, http://123doc.vn/document/463574-chien-luoc-kinh-doanh-va-gia-nhap-thi-truong-quocte-cua-coca-cola.htm 38 ... dioxide level…Diversity in kind of drinks is also a criteria of Coca cola products Market: Expand the market of Coca Cola; gain the aimed point of sales Coca cola expand their consumption investment... LIST OF PICTURES Figure 1: Coca- Cola Corporation’s logo Figure 2: Coca Cola can Figure 3: Mr Vamsi Mohan - General Director of Coca- Cola Vietnam and Cambodia Figure 4: Coca. .. Factor Evaluation (EFE) Matrix of Coca- Cola Corporation 12 Table 3: Internal Factor Evaluation (IFE) Matrix of Coca- Cola Corporation 14 Table 4: QSPM Analysis on Coca- Cola Corporation .25