Business Analysis During this research work, Coca-Cola Company will be studied in order to review: 1.-Company Background 2.-Company Mission 3.-Company Vision 4.-Coca-Cola Business Environment 5.-Income Statement (Comparisons between Coca-Cola vs. P epsiCo). 6.-Balance Sheet (Comparisons between Coca-Cola vs. PepsiCo). 7.-Cash Flow Statement (Comparisons between Coca-Cola vs. P epsiCo). 8.-SWOT Matrix 9.-Economic trends and influence to Coca-Cola Company 10.-Strategies used by Coca-Cola Company 11.-Technological Advantages 12.-Coca-Cola and Globalization 13.-Coca-Cola’s Human Resource Management 14.-Management Decisions 15.-Conclusion
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2 Company Background
So the first let’s find out who is Coca-Cola, where it’s come from, how big is this
company, where you can find its products, since when is the market, who are the principals competitors from this company to have a better understanding who is this company.
What is Coca-cola and where it’s come from?
Coca-Cola is a beverage which is carbonated soft drink, was invented by Doctor John Pemberton who was a pharmacist form Atlanta, Georgia in May 1886, then 1887 Asa Candler bought the formula from John. By late 1890s, Coca-Cola was one of America’s most popular fountain drinks, because of a very aggressive marketing campaign; as a result the syrup sales went over 4000% at that time, then by 1960’s the soda fountain consumption declined its popularity and bottled soft drinks and fast food restaurants became popular, but was until April 1985 when the trade secret formulas was released, let it passed the product everyone knows and huge amount of the market consume until now.
Main competitors
The main competitors of this company in importance order are: PepsicoCo, is usually second to coke, RC Cola, which now owned by Dr Pepper Snapple Group, is the third largest soft drink manufacturer.
Coca-cola Ranking
Coca-Cola Company is at 70 position from Fortune 500 company ranking according with “CNNMoney”, that’s why has been chosen to be analyzed assuming the role of a mutual fund
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3 manager deciding whether to invest in this company as a result of this analysis, (http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/index.html, para. 7). Coca-Cola is a company which produces different kind of carbonated soft drinks which generally are sold in stores, restaurants and also through vending machines in around 200 countries. According with Wikipedia it is produced by The Coca-Cola Company of Atlanta, Georgia. (en.wikipedia.org/wiki/Coca-Cola, para. 1). First let’s review, Coca -Cola’s Mission and Vision:
Mission
To refresh the world To inspire moments of optimism and happiness To create value and make a difference
Vision
Serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.” (www.thecoca-colacompany.com/ourcompany/mission_vision_values.html, para. 2). Once has been reviewed the Mission and Vision of Coca-Cola Company, is important to go over the Company Values: Leadership Collaboration Integrity Accountability
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4 Passion Diversity Quality The Stakeholders represent any person, group, organization which affect or can be affected by Coca-Cola Company in this case according with answer bag, the main internal Coca-Cola stake holders are : “with 15% of the shares held by insiders (former and current executives plus
the families of those who built up the company) and 9% SunTrust Bank. Coca-Cola largest individual shareholder is Berkshire Hathaway (holding 8% / 11 billion). Atlanta's Emory University
has
Coca-Cola
holdings
amounting
to
$3
billion”
(www.answerbag.com/q_view/603161, para. 1)., also we have to mention the people who works for this world wide company, with the last one has been covered the main internal stakeholders, in regard the main external stakeholder has to be mentioned the vendors who supply all raw materials that Coca-Cola use to produce Coca-Cola products and the final customers which are anyone who buy this product.
Coca-Cola Business Environment
As is observed in other situations, we can find two different kinds of Business Environment, the internal Business Environment and the External Business Environment. Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise. External Environment: Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-
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5 Cultural Factors, Demo-Graphical factors etc.” (www.thegeminigeek.com/what-is-businessenvironment/, para. 1) Now with this information let’s review Coca-Colas data: The information that will be shared next, is based on Coca-Cola Pakistan, but once read it, you can assume and found out that can be applicable to the majority of the regions. In regard Coca-Cola External Environment, the main items involved on this topic are: Income and Income per Capita Inflation Consumption Behavior Income Distribution Payment Mod Employment Opportunities Aggregate Demands Aggregate Supply Economic Policies-Situation Fiscal Policy Monetary Policy Price Policy Income Policy Technological Dimension Socio cultural Dimension Political-Legal Dimension The International Dimension
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6 The International Competition Customers Suppliers Strategic Partners Just per mention the most important, now referring to to Coca-Cola’s Internal Environment, the same source shows the next items related to this, like: Owners Employees Physical work Environment And it is from this internal view where this evaluation will be taken place and will be reviewing the Coca-Cola’s income statement, balance sheet, and cash flow to determine the financial health.
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7 Income Statement
An Income statement, is a accounting document where you can find information relative to income’s and expenses related to certain period, generally referred to a fiscal year and also show
that this document can be called like earnings statement or statement of Operations. (www.moneychimp.com/articles/financials/income.htm, para. 1)
Net Income Applicable To Common Shares The Coca-Cola Company
$11,809,000 $12,000,000
Pepsico, Inc.
$10,000,000 $8,000,000
$8,572,000 $6,824,000 $5,946,000
$6,320,000
$6,443,000
$6,000,000 $4,000,000 $2,000,000 $0 12/30/2009
12/30/2010
12/30/2011
1.1.-Net Income Chart Performing a Benchmark analysis between Coca-Cola Company and PepsiCo, Inc, as is shown in the 1.1.- Net Income Chart, a positive earnings can be observed in both companies, but PepsiCo, Inc shows a positive trend during the last three years, in the other hand, Coca-Cola during those three years has been maintained a better income than PepsiCo, Inc, just during the last year the gap is 33% in favor to Coca-Cola, something that has to be pointed is the Ups and Downs showed in Coca-Cola’s performance, this effect could be caused because of the economic impact. If this statement is true, maybe Coca-Cola has to develop a better strategy to avoid
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8 futures impacts like this, because this kind of effects could result in losing market share, something that could be useful for PepsiCo, Inc. Balance Sheet
A Balance Sheet, shows information about assets, liabilities and shareholders’ equity, based on this statement, “A company's assets have to equal, or “balance," the sum of its liabilities
and shareholders' equity” ( www.sec.gov/investor/pubs/begfinstmtguide.htm, para. 9), so in deep way, assets can be founded in three different forms in a company. The first one are the Current Assets, which are composed by those assets that you can exchange in cash in short term in a liquid nature like: Cash, Marketable Securities, Short-term investments, accounts receivable, prepaid expenses and inventory. The second one is the Fixed Assets, which are those assets which can be exchanges in long term in a liquid nature like: Equipment, building, furniture’s, fixtures and land. And the third one, are other assets: Which are those who are not classified in either one of the prior categories, like security deposits to your land lord. The next items are shown in a Balance Sheet are the Liabilities which are composed by Current Liabilities and Long Term Liabilities. Current Liabilities: Are represented by short term agreements you have to take care like: Accounts payable or Taxes payable. And the Long Term liabilities are as described Long term payable duties like: Mortgage p ayable or Loan to bank. Finally the last term that has to be reviewed in a Balance Sheet is the Stockholder’s
equity or also called the net worth, in other words is the result of assets minus liabilities.
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9
Balance Sheet (Total Stockholder Equity) $35,000,000
$31,003,000
$31,635,000
The Coca-Cola Company Pepsico, Inc.
$30,000,000
$24,799,000 $25,000,000
$21,273,000 $20,000,000
$20,704,000
$16,908,000
$15,000,000
$10,000,000
$5,000,000
$0 12/30/2009
12/30/2010
12/30/2011
1.2.-Balance Sheet Chart In the 1.2 Balance Sheet Chart can be observed the Stockholder Equity performance during the last 3 years, positive numbers are shown in both cases, although PepsiCo, Inc show positive numbers, during the last year the amount has been reduced in almost 3%, in regard Coca-Cola, a positive trend it’s showed in the last chart, and also as in the Net Income Chart Coca-Cola shows better performance than PepsiCo, Inc, in this case the difference is more less 53%.
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10 Cash Flow Statement
A Cash Flow Statement reflects, or shows how the Changes made on Balance Sheet and on Income Sheet, affect the Cash and Cash equivalents. “The Cash Flow Statement shows how the company is paying for its operations and future
growth, by detailing the "flow" of cash between the company and the outside world; positive numbers represent cash flowing in, negative numbers represent cash flowing out ”, (www.moneychimp.com/articles/financials/cashflow.htm, para. 1)
Cash Flow (Change In Cash and Cash Equivalents) The Coca-Cola Company
$5,000,000
$4,286,000 Pepsico, Inc.
$4,000,000
$3,000,000
$2,320,000 $1,879,000
$2,000,000 $1,496,000
$2,000,000
$1,000,000
$0 12/30/2009
12/30/2010
12/30/2011
-$1,000,000
-$1,876,000
-$2,000,000
1.4.-Cash Flow Chart According with 1.4.-Cash Flow Chart, PepsiCo, Inc trend is not good, and it is showing how the cash provided by operations is no sufficient to cover cash used for investing even when financing numbers are negatives, in the other hand Coca-Cola Company it is showing a very 09-Feb-2013
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11 good performance, it means that it has a “healthy” cash flow, in other words, the cash provided
by operations is more than enough to cover cash used for investing. It’s actually even better than that, because the financing numbers are negative. This performance keeps the Company value in high level.
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12 SWOT Matrix
A SWOT matrix consist of examining the activities of an organization, Strengths and Weakness are referring since internal point of view and Opportunities and Threads are analyzed since external point of view.
Coca-Cola SWOT Analysis Internal
External
Strengths
Opportunities
Excellent Distribution
Advertise less popular products
Excellence Marketing
Buy competitors
World Wide Brand
Increase Brand Recognition
Customer Loyalty Cost Beverage Experience Customer Service
Weakness
Threads
Negative Publicity
Competitors
Health issues
Health Consciousness
Lack of popularity of other Coca Cola’s
brands World’s leading brand
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13 Now that you have a very good understanding about Coca-Cola position, it is time to review the strategic initiatives taken by the company relative to organizational and operational adaptation to changing markets, like: Economic trends and influence to Coca-Cola’s Company Ok, now other term to talk about, but what it is an economic trend? According with business dictionary an economic trend is “The overall direction in which a nation’s economy is moving” (www.businessdictionary.com/definition/economic-trend.html,
para. 1) Once economic trend meaning is known, let’s review the main general economic trends
that can be observed around the world during this 2012 (vitalsigns.worldwatch.org/trends/globaleconomy-resources?gclid=CP3-8ZH4v7ECFQZ5hwod61UAfw, para. 1-18) Metal Production Recovers: Emerging Co-operatives Worlds Forest Continue to Shrink Global Output Stagnant Unemployment and Precarious Employment Grow More Prominent Materials Use Up. Round wood Production Plummets Ad Spending Slumps in 2008, Projected to Decline Significantly in 2009. Growth in World Economic Output Slows World Labor Force Growing at Divergent Rates World Metals Production /surges Microfinance Surging
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14 Jobs in Renewable Energy Expanding Informal Economy Thrives in Cities. Carbon Markets Gain Momentum, despite challenges Global Economic Growth Continues at Expense of Ecological Systems Strategies used by Coca-Cola Company But what Strategies have been implemented by Coca-Cola Company, to face those economics trends which impact more directly to this Company? According with the Speech of Muhtar Kent, Chairman and Chief Executive Officer, the Coca-Cola Company during the 7th World Chamber Conference the main Economic Trends that will be affecting Coca-cola business are: Global Inflation China Global climate change Resource scarcity and Demographic shifts. In regard about what this company has been doing to face those economic trends, some activities will be sharing in the next paragraphs. The level of research and development activity in this beverage company has shrunk. New brand acquisition rather than organic brand creation. Coca-Cola has been putting emphasis on packaging. (I.e. an update on plastic bottle made from less PET resin in more less 30% on consumption reduction). This development has maintained Coca-Cola public image as an environmentally conscious company. But as we viewed on the accounting information, these main strategies has been enough to deal in good
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15 shape the economic trends this company has been faced until now but could be no enough for the future, let’s keep an eye on this company to see what it is coming in the future and how it will
face it. Technological Advantages
During the next paragraph, Coca-Cola’s Technological Advantages will be reviewed, in regard this topic is evident that Coca-Cola handle in better manner this topic than Pepsico, Inc but also is valid to say that difference is not to big, because if you review the amount of market share each one owns then the difference will not be more than 15%, also this research put in evidence how Coca-Cola Company constantly innovate to look for new ways to gain advantage, when it is implementing new technologies like in advertises for example, but let’s go over the most impacting terms since this research point of view: Greener Bottles: Coca-Cola is always innovating about the way they provide the bottles and the packaging, in regards this in 2009 this Company provided bottles with less petroleum and this practice has been so successful that other brands has been adopted the same practice. Another point is Social Networking: This company is widely recognize in the most popular networks like twitter as an example, where Coca-cola encourage their followers to play games and something that to highlight is that good feelings are associated with this company through games, advertises, sports as is showed it in this social network. On Line Advertising: This Company explodes in very useful way the online advertising making you feel you like its products. This means that this company has good control over who sees their ads and when they see them.
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16 Coca-Cola and Globalization
The Globalization has been affected in both companies in tough way, because as you can see in those three years that were exposed in each accounting statement that has been reviewed in the last topics, in past three years both companies has been suffer economic contraction, and as a result the earnings has been affected and also the operation cash is affected, in Pepsico, Inc position this term has suffered with a negative trend, but in the other hand Coca-Cola has been dealing with this in very good way, showing that Coca-Cola understand in best manner how to face the economic situations, and actually could be useful for Pepsico, Inc to try to look to do a Bench mark in regard this point in order to learn about how to deal in better way with this changing economic environment.
Coca-Cola’s Human Resource Management
Human Resources as every department in Coca-Cola Company has an important role, in this case is making sure that they have just the very best people. Coca-Colas Human Resource department knows that the key of its success is their people. According with them, they maintain the same idea since day one. Coca-Cola has one of the most robust Human Resource Department that is the reason you can find them around anywhere. This Department develops policies and procedure according with company needs, also this department focuses on four main tasks and duties of Human Resource Management (Performance Management, Compensation, career development, Training and succession planning). The opportunities per mention some of them are: Generalist, Staffing, Training, Compensation and Benefits, just in HR department, employee relations and compliance and occupational Health, actually they have a slogan that says “If you can keep our people out in front, we can offer you a career with endless potential”. With the
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17 information provided, Human Resource department has to react in prompt manner accordingly with the environment changes, because has to provide the right people, in the right moment to maintain running every facility in the way they are. Its performance is evaluated every single day in the work field, and is widely visible that they are doing an amazing job so far.
Management Decisions
This research reinforce the decision taken on Individual Business Analysis Part I and Part II, with the information reviewed about, those research together, this study conclude that CocaCola company is a very wealthy company which deserve to receive this investment, the high lights about each particular stamen were reviewed in previous pages, but something was observed during y those research was the Coca-Cola’s wealthy in each stamen and, with this information, the study can conclude also that the strategies that this Company are implementing, is giving results and also guaranty the success of this company in short, medium and long term.
Conclusion
As was shown in the previous studies, the accounting statements like, Balance Sheet, Income Statement, Net tangible Statement and the Cash Flow Statement are very useful to take managerial decisions, and has to be pointed also that if someone pretends to use those statements per separate, just one a portion of the picture will be saw it, is strongly recommended to analyze all the statements as a universe, in order to take smart decisions that help wherever company to maintain, improve or sustain its performance in this changing environment ,which will let participate just enterprises which are enough good to adapt in good manner to the constant challenges that comes in a day by day situations in this continuous improvement world.
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18 Also you can conclude after conducting a review of the SWOT matrix and taking the role of a mutual fund manager which is deciding to invest or not in this company, this research conclude that Coca-Cola company is a very wealthy company which deserve to receive this investment, this conclusion was taken based on the analysis who took in consideration the External and internal issues that Coca-cola has, so as an Investor can summarize that Coca-Cola is in compliance with its Mission and Vision and the strategies that it is implementing guaranty the success of this company in short, medium and long way. Also this research conclude as an output that there is no doubt that Coca-Cola will change the Threads in Strengths in a no long future and this can of success do not happen by lucky is based on very good work environment, team working and on an excellent team leadership.
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19 References Writing Lab website: money.cnn.com/magazines/fortune/fortune500/2011/full_list/index.html www.thecoca-colacompany.com/ourcompany/mission_vision_values.html www.answerbag.com/q_view/603161 en.wikipedia.org/wiki/Coca-Cola www.thegeminigeek.com/what-is-business-environment/ www.scribd.com/doc/45913110/External-And-Internal-Environment-Of-Coke www.sec.gov/investor/pubs/begfinstmtguide.htm www.moneychimp.com/articles/financials/cashflow.htm www.businessdictionary.com/definition/economic-trend.html vitalsigns.worldwatch.org/trends/global-economy-resources?gclid=CP38ZH4v7ECFQZ5hwod61UAfw
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