Analysis of Coca Cola. Coca-Colas vision serves as the framework for their Roadmap and guides every aspect of their business by describing what they need to accomplish in order to continue achieving sustainable, quality growth.

University Degree Business and Administrative studies

Bohyuk Lee

Hanyang Univ.

Contents

Ⅰ. About Coke

1. History of Coca-Cola

2. Mission, Vision, Values

3. Major Goal

4. CEO, Muhtar kent

5. Stage of lifecycle & SWOT

6. 5 Forces analysis & 4 Building blocks

Ⅱ. Strategies

1. Coca-Cola product’s differentiation

2. Glocalization strategy in Coca-Cola

3. Vertical integration of Coca-Cola

4. Related diversification of Coca-Cola

5. Unrelated diversification of Coca-Cola

Ⅲ. Implementing Strategy

1. Corporate Performance, Governance, and Business Ethics

2. Implementing Strategy

Ⅰ

About Coke

1. History of Coca-Cola

In May, 1886, Coca Cola was invented by Doctor John Pemberton a pharmacist from Atlanta, Georgia. John Pemberton concocted the Coca Cola formula in a three legged brass kettle in his backyard. The name was a suggestion given by John Pemberton's bookkeeper Frank Robinson.

Being a bookkeeper, Frank Robinson also had excellent penmanship. It was he who first scripted "Coca Cola" into the flowing letters which has become the famous logo of today.

The soft drink was first sold to the public at the soda fountain in Jacob's Pharmacy in Atlanta on May 8, 1886. About nine servings of the soft drink were sold each day. Sales for that first year added up to a total of about $50. The funny thing was that it cost John Pemberton over $70 in expenses, so the first year of sales were a loss.

Until 1905, the soft drink, marketed as a tonic, contained extracts of cocaine as well as the caffeine-rich kola nut.

By the late 1890s, Coca-Cola was one of America's most popular fountain drinks. With another Atlanta pharmacist, Asa Griggs Candler, at the helm, the Coca-Cola Company increased syrup sales by over 4000% between 1890 and 1900. Advertising was an important factor in Pemberton and Candler's success and by the turn of the century, the drink was sold across the United States and Canada. Around the same time, the company began selling syrup to independent bottling companies licensed to sell the drink. Even today, the US soft drink industry is organized on this principle.

Until the 1960s, both small town and big city dwellers enjoyed carbonated beverages at the local soda fountain or ice cream shop. Often housed in the drug store, the soda fountain counter served as a meeting place for people of all ages. Often combined with lunch counters, the soda fountain declined in popularity as commercial ice cream, bottled soft drinks, and fast food restaurants became popular. On April 23, 1985, the trade secret "New Coke" formula was released. Today, products of the Coca Cola Company are consumed at the rate of more than one billion drinks per day.

2. Mission, Vision, Values

The company’s roadmap starts with their mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. Three missions are a) to refresh the world, b) to inspired moments of optimism and happiness and c) to create value and make a difference.

Coca-Cola’s vision serves as the framework for their Roadmap and guides every aspect of their business by describing what they need to accomplish in order to continue achieving sustainable, quality growth. They decided what the vision is in six words.

People: Be a great place to work where people are inspired to be the best they can be.
Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs.
Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.
Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.
Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.
Productivity: Be a highly effective, lean and fast-moving organization.

The values of Coca-Cola serve as a compass for their actions and describe how they behave in the world.

Leadership: The courage to shape a better future
Collaboration: Leverage collective genius
Integrity: Be real
Accountability: If it is to be, it's up to me
Passion: Committed in heart and mind
Diversity: As inclusive as our brands
Quality: What we do, we do well

3. Major goal

To continue to thrive as a business over the next ten years and beyond, Coca-Cola is going to look ahead, understand the trends and forces that will shape their business in the future and move swiftly to prepare for what's to come. Coca-Cola is getting ready for tomorrow today. That's what Coca-Cola 2020 Vision is all about. It creates a long-term destination for their business and provides them with a "Roadmap" for winning together with their bottling partners.

4. CEO, Muhtar kent.

Coke’s CEO is Muhtar Kent, born in the U.S. of Turkish parents. He left Coke to run a large Turkish-based beverages company before returning to Coke in a senior roles and ultimately being named CEO. He is also co-chairman of the Board of Directors in GBC (The Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria). By making this core business philosophy an integral part of the company's vision, The Coca-Cola Company creates sustainable communities, and by extension, a sustainable business. Mr. Kent has championed the concept of deeply embedding the philosophies (the health and success of his employees and the communities around the world) in the culture of the entire Coca-Cola system as a critical component of good business practices.

5. Stage of lifecycle & SWOT

1) Stage of lifecycle

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. Cost management, product differentiation and marketing have become more important as growth slows and market share becomes the key determinant of profitability. Someone said. “Management has to pay special attention to products during this stage of the product life-cycle. The company must now determine whether they will stop producing Coca-Cola, change the soda, find new uses for it, seek new markets for the soft drink or if they will maintain their current strategy. Also, In soft drink (beverage) industry, market share is the most important competitive advantage. For do it, advertising and differentiation are needed.

2) SWOT

Strengths

Coca Cola is an extremely recognizable company. Popularity is one of its superior strengths that are virtually incomparable. Coca Cola is known very well worldwide. It's branding is obvious and easily recognized. Things like, logos and promos shown on t-shirts, hats, and collectible memorabilia. Without a doubt, no beverage company compares to Coca Cola's social popularity status. Some people buy coke, not only because of its taste, but because it is widely accepted and they feel like they are part of something so big and unifying. At the other end of the spectrum, certain individuals choose not to drink coke, based solely on rebelling from the world's idea that coke is something of such great power. Overwhelming is the best word to describe Coca Cola's popularity. It is scary to think that its popularity has been constantly growing over the years and the possibility that there is still room to grow. If you speak the words “Coca Cola”, it would definitely be recognized all around the world. Money is another thing that is strength of the company. Coca Cola deals with massive amounts of money all year. Like all businesses, they have had their ups and downs financially, but they have done well in this compartment and will continue to do well and improve. The money they are earning is substantially better than most beverage companies, and with that money, they put back into their own company so that they can improve.

Weaknesses

Coca Cola is a very successful company, with limited weaknesses. However they do have a variety of weaknesses that need to be addressed if they want to rise to the next level. Word of mouth is probably a strength and weakness of every company. While many people have good things to say, there are many individuals who are against Coca Cola as a company, and the products in which they produce. Another weakness that has been greatly publicized is the health issues that surround some of their products. It is known that a popular product like coke is not very beneficial to your body and your health. With today’s constant shift to health products, some products could possibly loose customers. This new focus on weight and health could be a problem for the product that is labeled detrimental to your health.

Opportunities

Coca Cola has a few opportunities in its business. It has many successful brands that it should continue to exploit and pursue. Coca Cola also has the opportunity to advertise its less popular products. With a large income it has the available money to put some of these other beverages on the market. This could be very beneficial to the company if they could start selling these other products to the same extent that they do with their main products. Another opportunity that we have seen being put to use before is the ability for Coca Cola to buy out their competition. This opportunity rarely presents itself in the world of business. However, with Coca Cola’s power and success, such a task is not impossible. Brand recognition is the significant factor affecting Cokes competitive position. Coca Cola is known well throughout 90% of the world population today. Now Coca Cola wants to get there brand name known even better and possibly get closer and closer to 100%. It is an opportunity that most companies will ever dream of, and would be a supreme accomplishment. Coca Cola has an opportunity to continue to widen the gap between them and their competitors.

Threats

This is a preview of the whole essay

Threats

Despite the fact that Coca Cola dominates its market, it still has to deal with many threats. Even though Coca Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness attitude of the market could have a serious effect on Coca Cola. This definitely needs to be viewed as a dominant threat. Another possible issue is the legal side of things. There are always issues with a company of such supreme wealth and popularity. Somebody is always trying to find fault with the best and take them down. Coca Cola has to be careful with lawsuits. Health minister could also be looked at as a threat. Again, some people may try to exploit the unhealthy side of Coca Cola’s products and could threaten the status and success of sales. Other threats are of course the competition. Coca Cola’s main competition being Pepsi, sells a very similar drink. Coca Cola needs to be careful that Pepsi does not grow to be a more successful drink. Other product such as juices, coffee, and milk are threats. These other beverage options could take precedent in some people’s minds over Coca Cola’s beverages and this could threaten the potential success it presents again.

6. 5Forces analysis & 4Building blocks

1) 5Forces analysis

Bargaining Power of Buyers

The bargaining power of Coca-Cola’s buyers varies widely. Since they typically only carry a single type of Cola Beverage (usually either Pepsi or Coke), very large restaurant chains have the highest amount of bargaining power, and this is where Coca-Cola’s margins are thinnest. Although authorized bottlers purchase concentrate in large volumes, this is where Coca-Cola makes its largest profit margins. There are several reasons for this; one being that for many of the bottlers, Coca-Cola is their largest (or sometimes only) customer. There is also the risk of forward integration if the bottlers try to capture too much of the profit. Historically, overall bargaining power has been strong, allowing Coca-Cola to realize a 28% ten-year average operating margin.

Bargaining Power of Suppliers

The raw materials for the company’s beverages are generally readily available from many sources, giving Coca-Cola good bargaining power with suppliers. The exceptions are several artificial sweeteners that are sourced from only a few companies. The fact that Coca-Cola’s gross margins are high (65%) and very stable indicates a low risk of supplier bargaining power impacting profitability. Although some employees are unionized, the company’s high ($110,000) pre-tax earnings per employee indicate a relatively low sensitivity to changing labor costs. To date, collective bargaining has not led to a significant pension liability.

Barriers to Entry

Coca-Cola in combination with its bottling partners has an extraordinary global distribution network that through economies of scale creates a formidable barrier to competition. Coca-Cola also has a large economy of scale in advertising spending, and the company’s strong brands provide a barrier to competition. The industry is very concentrated, with Coca-Cola and PepsiCo being the largest companies.

The barriers to entry are lower for generic products sold in grocery stores under private labels. Here, due to the higher margins on private label sales, the store will be willing to allocate some shelf space to its private label products, and it is possible that if these are sold at a low profit margin and are well-received by consumers, then Coca-Cola’s bottlers may need to price their products cheaper, with the eventual result that Coca-Cola will need to drop its concentrate prices so that the bottlers can stay in business.

On the other hand, even if a consumer develops a taste for the private label product, it will likely only be available at that particular grocery chain, and the consumer will likely stick with Coke elsewhere. Since these private label brands are not available at restaurants, and the brands are not reinforced through advertising, they will most likely gain share slowly due to the low level of exposure of their product to consumers as compared to Coke and Pepsi. Looking in my local grocery stores, products by Coca-Cola and Pepsi dominate the shelf space, with minimal space allocated to private label drinks.

Intensity of Competition

The economic growth of developing countries will allow the company’s penetration of many emerging markets (as measured by beverages consumed per capita per year) to approach that of developed countries. Consequently, volume growth will likely exceed global GDP growth over the next several decades. This should keep rivalry controlled, as companies will be able to grow volume without gaining market share. The strong brands of the industry incumbents should also reduce rivalry.

Threat of Substitutes

The largest risk of substitution stems from Coca-Cola’s most profitable product, Coke, and its other sweetened carbonated beverages. The risk is that as people become more health conscience, they will drink less of a product that contains “empty calories”, or calories without much health benefit, and replace this consumption with juice, bottled water, and sports drinks, which currently account for a smaller percentage of Coca-Cola’s revenues.

however, Coca-Cola is addressing this risk (which today is primarily in developed countries) by rolling out Coca-Cola Zero, which has (according to reviews) the taste of Coke without any calories. Coca-Cola’s expansion into juices, sports drinks, and bottled water should also dampen the effect of an increasingly health conscience customer base.

To date, sales of Coke are still holding up well in North America and Europe, and over the next twenty years most of Coca-Colas growth will be in emerging markets, where Coca-Cola classic should continue to sell well.

The economics of the most likely substitutes (juice, water, and energy drinks) are similar to that of sweetened carbonated beverages. Moreover, the customers and distribution channels are the same, as are the margins. This means that Coca-Cola has a good chance of following any substitution to these types of beverages and still maintain its high return on capital.

Demand for Coca-Cola’s products has historically remained fairly stable through the economic cycle, even during severe recessions (like now).

2) 4Building blocks

Superior efficiency

In 1995, Coca-Cola completed their strategy-based restructuring and re-engineering which enhanced their operational efficiency and effectiveness. The aggressive acquisition strategy in 1992 and the subsequent restructuring program, such as consolidating production facilities and reducing inventory points, have created a consolidated bottling system across Canada. This results in reducing operation costs and increasing efficiencies in production. In addition, by using their Beverage Provider Model, a process to re-engineer the business practices and the information technologies, they are able to improve the flexibility in operations and reduce costs.
The company's Vision 2000 initiative focuses on measuring how they will become the best beverage company in the world by the year 2000. This builds on the progress that was started with the restructuring and re-engineering in 1993. Vision 2000's ultimate objective is to increase shareholder value. This goal will be achieved through improving the link between strategy and operations, improving competitive advantage, removing unnecessary complexity from the business area, and improving productivity.

Over the past few years, the company established various cost saving and revenue enhancing programs. In 1993, the company cut costs by closing some bottling plants and decreasing the work force. As the result, the company reduced a significant among of net loss in 1994 and achieved a net income in 1995. In 1995, the company launched a revenue enhancing campaign, called Operation RED. It was designed to grow per capita
consumption in all of the company's product lines. These strategies resulted in significant growth in gross profit and a decrease in operating expenses.

Superior quality

Through Total Product Management, which emphasizes quality in every stage of the operations, and through data codes, which help ensuring optimum taste for products, the company can achieve and maintain excellence in quality.

They ensure the quality and safety of their beverages through The Coca-Cola Quality System (TCCQS), their integrated approach to managing quality, environment, health and safety. They continuously review TCCQS to ensure it meets the most stringent and up-to-date global requirements related to food safety, as well as quality management methods, industry best practices and marketplace conditions.

In their ingredient evaluation laboratories, for example, The Coca-cola performs precise analyses of fruit juices and other ingredients sent to them by their suppliers, to ensure and to improve product quality. The processes also undergo constant scrutiny to safeguard the water they use in their products and the packaging that carries them to consumers. They inform and educate their business partners about the Coca-cola’s standards so that they meet the highest quality requirements. Under TCCQS, quality is their highest business objective and enduring obligation.

Superior innovation
Coca-Cola continues to produce new products and improve their existing lines. Their mission is to be the best beverage company in the world. They are in a good position because of their wide range of products to satisfy all of their customers.
In 1995, the company continued to capture new markets and respond to changing consumer tastes by introducing new flavors of their Fruitopia line, Powerade sports drinks, and adding Evian and Volvic bottled water to their product line.

Superior customer responsiveness
Through 1995, the company developed a multi-year initiative, Project MAX, that pursues superior customer responsiveness, quality and efficiency altogether. The company is focused on flexibility, reliability, quality and costs. Its task is to increase the responsiveness of the customers' needs, while producing the highest quality products at the lowest cost.
Through the advance Electronic Data Interchange (EDI) technologies which are implemented into the company's information system, the employees can easily access to the operational information, such as consumer information, sales, and promotions. This enhances the employees' knowledge and increases their responsiveness to the customers.
The company's Billing and Accounts Receivable quality initiative enhances the quality of their invoicing and collection process which will in turn improve customer satisfaction and reducing operating expenses.

Ⅱ

Strategies

1. Coca-Cola products’ differentiation

Until now, Coca Cola is operating in North America, Africa, East, South Asia and Pacific Rim, Europe, Latin America and North Asia, Eurasia and Middle East – Sold more than 200 countries.

Coca Cola Company spends round about 20% of their total advertisement budget for maintaining its differentiation strategy. Coca Cola has more than 3,300 beverages, from diet and regular sparkling beverages to still beverages such as 100 percent fruit juices and fruit drinks, waters, sports and energy drinks, teas and coffees, and milk-and soy-based beverages. Their brand name of over 3,300 beverages has from A to Z and divided by “region”, “drink type”, “location” and “brand of beverages”. There are many kinds of products as water, juice and even coffee, gum, game program celebration.

Until now, Coca Cola is launching many different products and also activities program in many countries. 2009 in North American, they sell “90 calorie “mini can” . In Africa, they provide $30 million commitment to provide access to safe drinking water and sanitation to at least 2 million Africans by 2015.

November 2009, Coca Cola introduced plant bottle, a new 100% recyclable plastic bottle from up to 30% plant-based, renewable material. They are being piloted with Dasani and Coca-Cola products in Denmark, Japan and North America.

Coca created more than 3,000 local to distribute Coca-Cola products in Africa, and make up 13,500 employments. In Japan, Coca Cola sell “Georgia Green Planet Café Au Lait”. Every bottle sold will purchased 1 kilogram of carbon dioxide, offsetting an estimated 2,900 metric tons of them emissions in Japan in 2009. Coca-Cola strategy is not only open wide coca cola differentiation products but also make their products and company images better in their consumer everywhere in the world.

2. Glocalization strategy in Coca-Cola

What glocalization means?

A combination of globalization and localization; it means a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

The change of strategy

At the first time, Coca-cola pursued the standalization strategy based on globalization. In standalization, Coca-cola used franchise system and the same strategies from head office. This strategy could give Coca-cola good change to get economies of scale, but there was some limitations ; they didn’t consider what consumers in each country need. So, Coca-cola changed their standalization strategy to localization. In localization, Coca cola tried to combine brand image with local culture and characterized the number one brand image. Moreover, coca cola implemented marketing strategy that focus on each country’s market and handle conditions and environment flexibly because it is very important to meet what consumers need. So, active localization strategy based on “Think Local, Act Local" was a great success.

The Benefits of glocalization from another perspectives

Strategic positioning

First of all, coca cola could deal with some crises and situations properly by understanding and changing the strategic status. This graph is about the setting of goal considering cost and value. So, the point can be changed according to what companies pursue.

Coca cola gave up its reduction of cost by localization, but it didn’t get a great success. So, it can increase its profit by compromising two strategies: globalization and localization.

The application of glocalization to China ( Example )

Coca cola with the best brand value is waging all-out-war to seize the opportunities not only city but also the countryside in china. This is because coca-cola thought Korea, Japan, Hongkong in asia are saturated. Now, although we can say that it was successful to enter china’s market, it was not easy at first.

Localization of brand name

The Coca-Cola company did a great job in seeking the best Chinese trademark. To get a good Chinese brand name is not an easy task and there are many ways to do it, which largely depends on the name of a company. The approach for the naming in the Coca-Cola case is to search the nearest phonetic equivalent. To achieve this, it will need a separate Chinese character for each of the four syllables, Coca-Cola. The closet meaningful match found was Ke3 Kou3 Ke3 Le4, 可口可樂.

Products for chineses

Sprite Tea is the combination of China's two most popular beverages as it blends local green tea flavors into a sparkling beverage and creates a remarkable mashup of extraordinary tastes and sensations. The launch of Sprite Tea shows that Sprite is an innovative leader in setting trends in the beverage industry in China. Sprite Tea is set to breathe new life in the China beverage market. With Chinese consumers enduring love for tea, ready-to-drink tea consumption in China has increased over 30% annually in recent years, and in general, tea and sparkling beverages make up over 20% of the entire Chinese beverage sector. Mashing up local green tea flavors with the most well-known lemonade sparkling beverage, Sprite Tea is anticipated to directly impact the competition in both the sparkling beverage segment and the tea flavor beverage segment in China.

Package based on chineses’ sentiment

A growing segment of the population worldwide and in China dislikes products using too much waste material for the packaging directly due to environmental concerns. In order to be successful in China, foreign brands need to reinterpret their identity through the eyes of Chinese consumers to truly understand how colours, patterns, images, typeface and material choices can contribute build a meaningful product experience. For example, when Pepsi which was in competition focused on internationalization, coca-cola adopted sinicization. Coca-cola launced new product wrapped by china’s traditional pattern, gilt-bronze jade or Chinese zodiac sign. coca-cola appealed to chieses consumers with more futher strategy than original Chinese brand.

Purchasing ingredients from local market

When coca cola entered Chinese market at first, it imported ingredients of cola, but nowdays most of the ingredients are purchased from local markets and farms. So, it enabled to contribute to finances directly of indirectly.

Localization of labor

Coca cola tried to have a sociability through the employment of natives . Moreover, they could improve the power of understandings about local culture and market and reduce the cost of labor. At the same time, coca cola developed the human resources in china by making the training system.

Localization of advertisement

Coca cola used localization strategy in advertisement. The commercial of coke was based on American culture in the past, but it was replaced by subjects related to chinese culture. Especially, it implemented the commercial strategy for young people by appointing popular chinese stars. starring Liu Xiang, Pan Weibo and Zhang Shaohan.

Improvement of company’s image

Coca-cola has overhauled their image with the slogan "Live Positively" to reflect their plans to ensure that all aspects of their business are geared towards sustainability. The company will also get more active on a local level. It plans to introduce environmental, education, and active living programs that will benefit more Chinese people. As part of this new campaign, Coca-Cola system has introduced a range of programs in different areas of the business that address healthy living, water resources, packaging, climate, community and the workplace. As well as its commitment to environmental protection, Coca-Cola makes contributions to charity. "Coca-Cola has sponsored WWF since June 2007 to help protect the world's seven most important fresh water river basins," said Zhu Chunquan, conservation operation director of the World Wildlife Fund. Coca-Cola has also built 61 schools, 100 libraries, 30 online learning centers and 55 multimedia classrooms in 27 provinces, benefiting 60,000 children to date. Coca-Cola delivered 3.6 million bottles of water to the southwest of China in the past few weeks to help ease the severe drought.

bottling system

Coca-cola bottler means the company that have the right to produce and distribute and sell all products including the coca-cola brand. So, coca-cola produce only syrup and then, this syrup can be sold to bottlers all over the world who sale finished products with coca-cola trade mark. A lot of bottling plants are being owned and operated by local people. It is not the example of China, but in Korea, it is not true that typically global corporation, Coca-cola is a subsidiary company of LG. But, when Coca-cola is about to enter Korea, Coca-cola can be a asset of LG because LG House hold & Health Care took over Korea Coca-Cola bottling.

3. Vertical integration of Coca-Cola

Bottlers and Coca-Cola

Coca-Cola produces concentrate to sell to bottlers. Then bottlers mix drink ingredients, fill up bottles with the drink. They hold exclusive rights for producing finished product, selling, distributing and merchandising Coke to retail stores.Through the 1980s and 1990s, Coca-cola preferred a set-up in which they maintained minority stakes in bottlers worldwide and used them as intermediaries in favorable deals to acquire smaller bottlers.

Acquiring Bottlers

Nowadays, Coca-cola is trying to follow the trend of vertical integration by acquiring the largest bottler in the US, Coca-Cola Enterprises(CCE). There are several reasons for the acquisition.

First, little is advantage of the bottling now. In the past, there were hundreds of local bottlers in a country, as Coca-Cola was reluctant to take on the responsibility of running so many different facilities. Plus, in the pre-interstate-highway days, transportation systems were shakier and the expenses of moving liquids, especially when they were in glass containers, from centralized plants were too much. Coca-Cola’s original strategy was to separate out Coke from the low-margin, high-capital-cost bottling business, an enterprise that was dragging down Coke's stock price. Second, there has been a tectonic shift in the consumers’ tastes over the past decade and Americans began shying away from high-calorie carbonated soft drinks in favor of juices, bottled water, teas and sports drinks. The production and marketing of such offerings typically requires far closer coordination between the formula owner and the bottler and can be burdensomely costly for the latter, ending up with friction in the supply chain. Third, frictions between bottlers and Coca-Cola were aggravated as the increasing size and presence of bottlers has caused tension. Here is an example of the conflict before the acquisition. In 2006, 50 bottlers have sued Coca-Cola in the US to stop the soft drinks group distributing its Powerade sports drink directly to Wal-Mart supermarkets. They have alleged that an agreement negotiated in 1994 between the bottlers and Coca-Cola specifically prohibits warehouse delivery of PowerAde to retailers like Wal-Mart. However, Coca-Cola didn’t keep the contract to maximize its profit. This lawsuit shows how much tension has been worsened between them.

4. Related diversification of Coca-Cola

Joint Venture of Coca-Cola & illycaffè

Coca-Cola has today finalized details of its ready-to-drink (RTD) coffee joint venture with illycaffè in a bid to further diversify its non-carbonated portfolio of brands. illycaffè is an Italy-based coffee brand which produces only one blend in three roast variations: normal, dark roast or decaffeinated. Coca-Cola says it will work in cooperation with Coca-Cola Hellenic (CCH) bottling company, a leading manufacturer of the group's products, in a three-way agreement to initially produce and distribute three coffee-based drinks. Muhtar Kent, President of the Coca-Cola Company, said that the joint venture was expected to be expanded through its bottling network across Europe, Asia, North America and the Pacific region throughout the remainder of this year and into 2009.

Expected Advantage of the Related Diversification

First, related diversification can satisfy the customers’ responsiveness. Increasing commodity costs and consumer health concerns among consumers have led Coca-Cola to diversify into more value-added and nutritious products. Coca-Cola's decision to expand into ready-to drink coffee production comes at a crucial time for the company and its international bottlers, which are having to keep up with changing consumer demand in recent years. Second, a ready-to-drink (RTD) market in the beverage industry has been bigger nowadays. Coca-Cola claims that the current market for RTD coffee has grown by 10.1 percent over the last five years to $16billion, a pattern expected to continue in the future.

5. Unrelated diversification of Coca-Cola

Acquisition of Columbia Motion Pictures

Coca-Cola also tried to have unrelated diversification by acquiring Columbia Motion. Unrelated diversification involves the addition of new businesses that have no relationship with to the current business, bottling. Its strategy was to buy a potential company and have a huge profit by selling it again, so Coca-Cola sold Columbia Motion Pictures to Sony at a large profit while Columbia performed rather well. It has less profitable in the long run than related diversification but is inspired by top management’s attempt to enhance their power base. That’s the reason why Coca-Cola sold it to Sony within a few years.

Ⅲ

Implementing Strategy

1. Corporate Performance, Governance, and Business Ethics

1) Corporate performance : Coca cola with Avata

Coca cola partnered with Twentieth Century Fox on a global promotion campaign for Coca Cola Zero® and director James Cameron’s epic adventure and blockbuster film Avata.

Coca cola zero's digital team has developed 'www.AVTR.com, which provides exclusive film content such as reports from the planet Pandora, as well as other sought-after special goodies like Avatar news, wallpapers, games, applications and images.

And perhaps most uniquely of all, a web-based app will enable users to interact with the 3D motion graphics. By a number of inventive ways(for example, scanning an Avatar-branded Coke Zero product before a webcam), users can get stuck into the onscreen action, flying helicopters, shooting missiles or firing guns all through a touch of a button on their computer keyboard.

Add to this limited edition Real 3D glasses, cinema concessions and a TV/cinema ad which brings both Coca cola zero and Avatar together (watch it below)and we've got on potent partnership.

* The evaluation of this from the perspective of 4 main stakeholders of company

- Stockholders : If a movie ‘AVATA’ gains a success, the profit of coca cola would increase. As a result, the price of stock or the dividend will be higher or the dividend. It would be very good for stockholders.

- Suppliers : If a coca cola get more worldwide reputation through this promotion, the sale of coke would be higher. Therefore, suppliers in each region could gain benefit.

- Employees : Basically, coca cola is a stockholders-friendly company. The increased profit of company will go to stockholders as a dividend. Therefore, the benefit to employees is relatively lower.

- Customers : Same as the situation of employees. Also, the design, flavor and price of coca cola tends to keep long. (It is a kind of classic.) So they could not get evident profit.

→ Ultimately, it is very flexible. It depends on the success of the movie.

2) Business ethics : Coca cola in China

On 14th December 2008, social investigation in China, consisted of 9 Chinese university students makes public ‘The report of Coca cola in China’. This report points out that Coca cola in China violates human rights of temporary employees in China.

These students are very interested in social issues. Therefore, in 2008, they decided to understand the reality of working people by working with them where there are so many processing industry plants. At that time, they heard that Coca cola plant in Sansi makes the payment overdue and they have mutual understanding to investigate there.

And they finally found that Coca cola in China has serious problems. The most serious problem is that they hire a number of temporary(dispatched) employees in the long term. They mainly do the most dangerous and difficult thing and have the longest working hour but the lowest pay.

According to labor contract law in China, Temporary working usually implements in working temporarily and substitutionally. However, Coca cola in China hired temporary workers in the long term to reduce costs and in some plants, 90% of whole workers is them. Even they cannot be provided meals.

Through this, Whole China concentrates on the Coca cola. Netizen are carrying this issue from their blog to other blogs. And they plead ‘Yao Ming’ who is the advertising character of Coca cola with quitting the represents of Coca cola. And the Ministry of labor in China started to investigate.

From the perspective of the company, seeking the profit is very right and natural. However, It have to be done within law and ethics. Most of all, it should not happened to violate human rights under the pretense of gaining profits.

2. Implementing Strategy

1) Organizational Structure : Multidivisional Structure

45 Executives, 12 Directors, 1 Chief Administrative Officer, 1 Vice President (in charge of Strategic Planning), 1 Senior Vice President also President of North America Group, 1 President also Chief Executive Officer, Chief Operating Officer and Director, President of Latin America Group, 1 President of European Union Group, 1 Chief Financial Officer also Executive Vice President, 1 Chief Customer and Commercial Officer also Senior Vice President, 1 Vice President (in charge of Corporate Social Responsibility), 1 Executive Vice President (in charge of Investments and Supply Chain)

- Characteristics : In the last years, the Coca-Cola pursued centralization for faster decision making and complete control over overseas markets. However, due to abruptly changing market, the need for faster responsiveness and flexibility arose. From 1990’s, Coca-Cola chose to decentralize some divisions, only remaining Atlanta’s headquarters for critical decisions. The organization’s divisional managers run company operations with greater autonomy, around the globe. The functions of each vice president are divided into HR, innovation, marketing, public affairs and communications and more. The company puts greatest emphasis on innovation/research and development department, and divisions like HR, marketing, sales are run by regional directors.

According to recent announcement, Coca-Cola has chosen to decentralize even more by having two major divisions; Bottling Investments and Corporate. Also, to boost autonomy, there are different operating groups divided by different geographic regions including Africa, Eurasia, European Union, Latin America, North America, and Pacific. These are again divided on more local level such as nations and then states in order to respond quickly to changing market demands, letting higher-level management to focus on long-term strategy planning. On the other hands, certain divisions of the company such as finance, HR, innovation and strategy planning are centrally located within the Corporate divisions of the company. For better responsiveness and adaptation to local market, Corporate headquarters have allowed local divisions to make marketing decisions including promotion and advertising to appeal local consumers.

2) Control System

Upon take-over of Neville Isdell as CEO and the chairman of the Coca-Cola Company in 2004, to deal with low growth rate, he adopted Face-to-face meetings periodically at local levels. Top managers sought for solutions to organization’s most pressing problems with employees and they were informed of company’s situation. This is a part of ‘Personal Control’ mentioned in the Chapter 12 of the text book. Since the employees had more interaction with the Directors, they were more motivated and the overall competencies of the company grew.

In addition, Coca-Cola adopted two other control systems; The Code of Conduct and the Intranet. In 2007, the Intranet was overhauled to provide a source of real-time sharing of information among each division and among employees and headquarters. This was important as Coca-Cola developed into a tall and wide organization. As the organization introduced more complicated structure, it was substantial to keep a mechanism to integrate each function and share up-to-date information quickly. Moreover, introduction of Intranet was helpful in solving the problems of having a multidivisional structure; lack of communication. Now, the surveys and interviews used by the company allowed information to flow from the bottom-up, and the intranet allows better exchange of information latterly. Afterwards, for stricter behavior control of employees the headquarters made a guide book for how every employee should act. This defined disciplinary actions for the improper employees and it provided education of company’s main goal and mission. With this, employees feel more engaged and turnover has been reduced significantly.

3) Organizational Culture

The culture of The Coca-Cola organization is mission-driven; focused on refreshing the mind, inspiring optimism, and making a difference. The rich history of the organization has allowed the company to compile hundreds of stories of consumers and employees. These stories share real life examples of what Coca-Cola© means to their consumers and gives employees a sense of pride to be a part of something that means so much for so many people. They also inspire new employees to make a positive impact on the world. Stories are so important to The Coca-Cola Company that they created a museum in Las Vegas that focuses on the stories of customers. After visitors heard others’ stories, they could record their own, which the company could use in the future. As stated previously, the company has been trying to change the culture by allowing employees to essentially shape and reform the goals of The Coca-Cola Company. The positive stories that the company chooses to focus on provide a foundation to encourage employees to be not only model workers, but model citizens.

4) Strategy across Countries

The Coca-Cola Company’s strategy has changed frequently over time. At first, it settled for localization strategy until 1980’s. It was hard to control every distribution which was located in more than 200 nations, so Coca-Cola chose to grant local operations a high degree of independence. However, this resulted in falling sales in many local operations that did not have skills and know-how of effective management. Therefore the new CEO of 1981, Roberto Goizueta pushed global standardization strategy by centralizing main activities at the headquarters. The Atlanta operation, which was set as headquarters exerted more control over each local operations and pursued ‘one-size-fits-all-strategy’ ideology. Not long time later, Coca-Cola was losing against local competitors who had better suited marketing plans and product developments that attracted local consumers. In 2000, Coca-Cola went through another shift in strategy. Again, it allowed autonomy of local operations and let local directors to be in charge of all functions. Decentralization was the key idea but the falling growth rate did not soar as the board of directors had expected. Regardless of localization strategy, Coca-Cola still lacked SOMETHING. Meanwhile Neville Isdell became the new CEO of Coca-Cola and he reviewed all the strategies that were formerly implemented. He came to a conclusion that localization should be done with partial centralization of key departments and faster customer responsiveness. So it finally chose to implement transnational strategy that differed price, product offerings, and marketing but kept headquarters to be in charge of other long-term planning. In addition, Isdell stressed communication of good ideas across each division as well as each nation. Coca-Cola Company, therefore, adopted technological mechanism that is connected worldwide and were able to seek advantages of localization and global standardization.