Global Financial Strategy Report: Coca-Cola's Financial Performance

This report presents a comprehensive analysis of Coca-Cola's global financial strategy. It begins with an executive summary and introduction, outlining the company's profile, segmental analysis, and global footprint. The report then delves into PEST and industry analyses, assessing political, economic, social, and technological factors, along with Porter's Five Forces to understand the competitive landscape. A detailed financial analysis follows, evaluating profitability, liquidity, and sales volume compared to competitors like PepsiCo. The report also covers Coca-Cola's risk management strategies and corporate strategies. Finally, it offers recommendations and a conclusion, summarizing key findings and providing insights into the company's financial performance and strategic approach in the global market. The report is based on the academic year 2017-18 module UMADF8-15-M Global Financial Strategy.

Global Financial Strategy
1

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................4
Company profile including segmental analysis and global footprint:....................................4
PEST and Industry analysis:...................................................................................................5
Competitors rivalry:................................................................................................................7
Financial Analysis:.................................................................................................................8
Coca- Cola Risk Management..............................................................................................10
Corporate strategies of coca cola:.....................................................................................13
RECOMMENDATIONS...............................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17
2

3

EXECUTIVE SUMMARY
This report is based on the global financial strategy which ultimately assist an organisation
to gain competitive advantage over the rivals. Although, this report is made on the Coca-Cola
company which ultimately assist the firm to attain its pre-set objectives. Basically, it is rightly
said that the beverage industry is having the tough cut throat competition and rivals in the
international and local market adversely hit the strategy of an organisation
4

INTRODUCTION
In this era, there is a tough competition in every sector. For this, it is rightly said that each
company is trying hard to gain the competitive advantages over the others. This is the business
report, which is made on the Coca- Cola. Which is itself a huge soft drink company which is
having their businesses around the globe. However, due to its effective strategy, it could lead to
the world in non-alcoholic beverage segment (Rey, 2015).
Company profile including segmental analysis and global footprint:
Company profile
Coca-Cola is the multinational company which have a great brand value. This specially
deals in the producing in the market of non-alcoholic beverage industry and sells in the global
markets their products cover waters, fruit juices, ready to drink tea and coffee, and diverse kinds
of energy and sport drinks.
At the time of inception, Coca-Cola was completely relied upon the franchise model,
whereby Coca- Cola will able to sell concentrates to its bottling alliances throughout the planet.
Coca- Cola effectively managed its brand strategy, its manufacturing, bottlers production the
final goods and managed the distribution process in an effective manner.
This company was incorporated by the John S. Pemberton in 1886 in Atlanta. It sells its
first cold drink as fountain beverage at Jacob’s Pharmacy by combining Coca- Cola syrup in the
United States (Shiller, 2012).
During 1899, it had started its franchised bottling operations in the US and gradually these
bottling operations expanded globally. There are some of its most renowned products which
have made the company proud: Sprite, Fanta, Diet coke, coca cola zero, coca cola life, minute
maid and much more.
This has been observed that the Coca- Cola becomes highest corporation which offers
diverse refreshment in kind of soft drinks. But apart from that, this can be said that the company
needs to make certain tools that can be adopted and during similar time affects diverse kinds of
communities. Coca- Cola have 48.6% global market while on the other hand, PepsiCo reach to
20.5%. which makes the company most effective.
Geographical analysis:
5

The Coca Cola This runs via following segments: Eurasia and Africa, United States of
America, and Asia pacific. Coca-Cola is the world largest selling cold drink along with the
highest recognisable brand throughout the world.
Segmental analysis: According to this, segmentation is done on the basis of Age, Gender,
Income and others. these are defined in details.
Age: Coca- Cola company mostly targets the teenagers and adults who are within the range
between 15-40 years (Chor and Manova, 2012).
Gender: Coca-Cola company targets male and female throughout the planet.
Income: Company targets to overall all income group people. As this makes company
more effective and efficient.
PEST and Industry analysis:
PEST analysis is the tool which is used by the company in order to know the macro factors
which ultimately assist the organisation to make effective strategy. PEST strategy is defined in
details:
Political factor: This factor affects the business operations in a negative or positive manner.
However, if political constraints would arise then this would create problems for the
organisation. Under this case, this can be said that products that can be rendered by the Coca-
Cola are due to the FDA. Henceforth, Coca- Cola is requiring to adhere all the norms and
policies which are rendered by the government so that they can sell their products in an effective
manner. There are various laws which imposed that will probably lead to stop Coca- Cola from
dispensing their soft drinks. In this factor, accounting, inner advertising, adjustment in labour
laws, and taxes brutally affect the company (Milesi-Ferretti and Tille, 2011).
Economic Factor: At the time of recession during 2001, USA government took
destructive actions to reflect the economy in around the manner of 2002. Coca Cola considered
this matter, and find out that loan interest charges can be overcome by implementing effective
strategy. Although, the cited company takes the loan for studies and enhancement on the new
and advanced goods to capitalise in an effective manner.
Social Factor: Various majority of Coca- Cola’s drinks are distributed in various urban
areas under which they can provides the requirements of individuals. Coca- Cola introduced
around 30 new opportunity flavours in Japan in order to draw its Japanese clients. They
incorporate same efforts in China. While on the other hand, in US, individuals give extra
6

attention to their health (Cetorelli and Goldberg, 2011). There is a need to understand by the
Coca-Cola company’s top level executives so that they could make favourable strategy and make
their products socially beneficial.
Technological Factors: Technology and the innovation are the main components of any
enterprise. In addition to this, Coca- Cola company requires devastative tools which is
advantages in producing better products in excessive quantities. Coca- Cola has its factories in
UK along with advanced equipment in order to assure that their goods are added on time.
In order to promote its goods, Company used social media tools in order to let consumers know
about the products (Mishkin, 2011).
Porters Five Forces:
Threats of New Entrants: This level of advanced organisations is calculated via various
factors covering: emblem loyalty, advertisement potential, get admission to various distribution
channels, and render availability. These kinds of components form a low to mild chance of
current entrants.
Consumers and the logo loyalty incorporate it complex for the brand new contenders in
order to come into the non-alcoholic industry. Coca-Cola is the most recognised emblem at
diverse stage in this arena, which incorporate possible via marketing and advertisement.
Marketing is the only tool by which the product and the company can be introduced among
the potential consumers (Wu, 2011). But, those issues need high quantities of funding in order to
render wide scale advertising campaigns for attaining the popularity that had to fulfil with
industry leaders, along with Coca- Cola.
Coca- Cola company and diverse industry leaders have strict bottling contracts in whole of
their sales regions. These contracts block bottling companies from having operations along with
the organisation which manufactures comparable products. The main alternative for the brand
new firm is to convene bottling themselves, that needs high quantities if capital (Jüttner and
Maklan, 2011).
Threat of Substitute Products: In this non-alcoholic beverage industry, there are so many
substitute for each category of Beverage. This enables consumers to assist from what retailers
can put. Pepsi products would be the highly substitute products of Coca Cola company. Hence
there is a high risk incidence.
7

Bargaining power of Buyers: Consumers or buyer plays a most crucial part for
organisation’s success or failure. If the bargaining power of buyers are strong then this is
assumed that the company is bound to decide their product prices according to the company’s
wishes. On the other hand, this can be said that if the buyer’s powers is low then the company
can charges on their products according to its will. Here are some of the well-known buyers of
Coca-Cola soft drinks: Fast food restaurants, local stores and super markets and others (Riasi,
2015).
Bargaining Power of Suppliers: This is the thing which means that if the bargaining
power of supplier is low then the suppliers can charge prices according to their wishes. On the
other hand, this can be said that if the bargaining power of the supplier is low then in that case,
company can purchase raw material from their suppliers at the prices which company would
want to pay. In this case, the bargaining power of the suppliers are low as the factors are
implemented to form these drinks which are highly accessible (Riles, 2011).
Various fundamental components which are used in order to incorporate Coca- Cola goods
are found with various providers. Via ease of access offers a high gain to Coca- Cola as
enterprise could frame their own expenditure along with the suppliers.
Exchanging costs highly low, henceforth capacity for the makers in order to vary providers
is effortlessly done.
Competitors rivalry:
The depth of conflict among contenders differs by industry. Within the industry, level of
rivals is moderate. The main reason for this is the quantity of the crucial gamers controlling the
marketplace proportion. Those players are the Coca-Cola and Pepsi Company.
Brand loyalty is the identification among contenders. Ultimately, buyers pick out the
goods, henceforth, competition emerges in the shape of marketing tools in order to advantages
marketplace costs (Peng, 2013).
Goods inside the organisation are quite different. This kind of differences lowers the extent
of rivalry due to the fact each firm is trying to form subsequent goods along with the view to
have more consumer reviews.
Capacity for consumers in order to manipulate marketplace highly boosts competitors’
competitions. As, outlets due to the fact each organisation is trying to form subsequent goods
along with a view to have more consumer review.
8

Emergence of opportunities are one of the most fundamental components which affects the
competition. In an effective manner, market proportion is to go into a marketplace which is not
always occupied via effective competition (Ghosh, 2010).
Financial Analysis:
Financial evaluation is the major concern which is totally relied upon the consolidated
audited Financial reports of 2016. Coca- Cola organisation and the comparison are formed in
opposition to one in each of its main contenders PepsiCo. The statements had been formed as per
USA GAAP of the Public Company Accounting Oversight Board (Lardy and Subramanian,
2011).
Figure 1 Sales volume of Coca-Cola
 Profitability: the firm’s profitability reflects that whether the firm is able to make certain
profits or not. There is various profitability margin which assist the investors or other
person to take decisions on the basis of under mentioned ratios. There are few ratios
which covers under profitability:
9

 Gross Margin: Coca-Cola is earning a handsome amount of profit margin in past years.
but during 2015 and 2016, the gross profit margin was remarkable. From 2015 to 2016 it
raised to 61% which is more than tits main contender PepsiCo, which Gross Profits
margin was in 2015 and 2016 was 54% to 55%.
 Operating Margin: The operating margin of Coca-Cola organisation is 21% which is
better than PepsiCo which operating margin is 16%. Coca- Cola revenue is less than
PepsiCo. But the Coke profit margin is more than the PepsiCo. This is because PepsiCo
cost of sales is more than Coca-Cola company (Gregory, 2012).
 Liquidity: This represents the company’s current viability. Which ultimately assist the
firm to know whether the firm is able to pay its current liabilities by using their current
assets or liquid assets.
 Current ratios: This represents whether the company is able to pay its current liabilities
via using current assets. The ideal ratio is 2:1 which represents that the company’s
currents assets is much enough to pay its current liabilities.
Current ratio of Coca-Cola and Pepsi are the same in 2016. Which ultimately has the
capacity to pay its liabilities. Higher the ratio, more than ability of organisation to pay their
current debts.
Quick ratio:
This is the ratio which represents the liquidity of the firm. this is ideally be treated as the
1:1 which simply means that the company liquid assets is well enough to pay its debts. In 2016,
Coca-Cola company is having enough amount of liquid assets in order to pay its current
liabilities. Quick ratio of Coca- Cola is having more than PepsiCo. Coca- Cola organisation is the
huge in the soft drink market, ratio leads to believe that Coca- Cola is somewhat risky
organisation as they are not able to pay their current liabilities without inventory (Govindarajan
and Ramamurti, 2011).
10

Efficiency Ratio:
Stock Turnover ratio:
RATIOS - 2016 Coca-Cola PepsiCo
Inventory Turnover 5.9 10.37
In 2016, Coca-Cola had a ratio of 5.90 while on the other hand, PepsiCo had 10.37. which
represents to sell its inventory. This refers that Coca- Cola offers its inventory more than
PepsiCo.
Asset Turnover:
RATIO - 2016 Coca-Cola PepsiCo
Asset Turnover 0.47 0.87
In 2016, assets turnover of Coca- Cola organisaiton was 0.47, which simply means that the
organisation produced higher revenue per doller of asset investment. Although, Pepsi produced
higher than the Coca-Cola which is 0.87 revenue per doller of asset investment.
Coca- Cola Risk Management
Coca- Cola as international business enterprise which is exposed to diverse marketplace
risks that covers constraints in the Forex prices, commodity prices, hobby costs which might
affects the organisation frequently in its overall economic performance. Subsequently, firm
exercises few spinoff economic units to lower those discloses and lowering the marketplace risks
by implementing hedging an underlying economic publicity. Although, organisation does not
make these derivatives goods for trading aims. In addition to this, hedging units are normally
implemented up to 36 months in advance and can lead to expire within 14 months or lower. The
disclose to these economic marketplace dangers which may be controlled the implementing of
diverse objectives dimension layout covering of sensitivity assessment (Cavusgil and et. al.,
2014).
Foreign Currency Exchange rate:
Forex exposure emerge from varying in costs, in addition to this, foreign money
devaluation in aggregate along with capital controls, that limits movement of funds and enhanced
the risks of asset impairment.
Coca- Cola handle trade charge disclosures by implementing a consolidated basis which
enables management to get positive disclosures and form benefits from natural offset. Firm
11

implements derivative units like forward exchange contracts and purchases forex alternatives,
specifically in eastern yen and euros, to limit organisation the employer’s publicity to foreign
forex volatilities, most essential, this undertakes collars to hedge specific part of estimated cash
flows that additionally denominated in diverse currencies.
There are seventy- three aim currencies fee that produced revenues of $21,964 million
outside the US in 2016. Foreign Forex derivatives have value of $14,464 million along with
derivatives goods that could be allocated for hedge accounting with truthful fee in an asset of
$336 million by implementing the cease of 2016.
Future Strategy and Growth
Business model:
Coca-Cola organisation manufactures and distributes coke, diet coke and various soft drink
throughout the globe. Main aim of the company to offers non-alcoholic beverages, covering
sparkling beverages and still beverages. Its sparkling beverages covers non-alcoholic drink
beverages along with carbonation like carbonated energy drinks, and carbonated waters and
flavoured drinks. Coca-Cola still beverage covers non-alcoholic beverages which does not covers
carbonation and covering non-carbonated energy drinks, juices and juice drinks, ready to drink
teas and coffees, and sports drinks. This likewise renders flavouring ingredients, sweeteners,
beverage ingredients, and fountain syrups. Business model of Coca-Cola comprises:
12