Balanced Scorecard Case Study
1. History
2.
Growth strategy Driving global beverage leadership Accelerate innovation Leverage our balanced geographic portfolio
3. Mission Statement Our Roadmap starts with out mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. • To refresh the world… • To inspire moments of optimism and happiness… • To create value and make a difference.
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4. Vision Statement Our vision serves as a 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. • 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 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 shareholders while being mindful of our overall responsibilities. • Productivity: be a highly effective, lean and fast-moving organization
5. Proposed mission With six main operating segments in North America, Latin America, Europe, Eurasia, Africa, the Pacific,(3) and bottling investments, Coca-Cola is dedicated to being a highly effective refreshments and fast-moving organization. (5) Our mission is to bring consumers quality refreshments that anticipate and satisfy their desires and needs. (1)(2). As a company we strive to be responsible citizens by helping to rebuild and support sustainable communities (8), while maximizing long-term return to shareowners (6). Through modern technology (4) and inspiring employees to be the best they can be (9) we know we can continue to provide the best products on the market. 1. Customers 2. Products or Services 3. Markets 4. Technology 5. Concern for Survival 6. Philosophy 7. Self-Concept 8. Concern for Public Image 9. Concern for Employees
6. Proposed Vision Coca-Cola’s vision is to inspire moments of happiness while refreshing the world
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7. External Assessment 7.1. Industry market analysis
7.2. Opportunities 1. Spurring demand for energy drinks, especially in the US where estimates show about 2 billion. 2. Approximately 85% of the company’s unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50% of the equivalent bottles and cans sold worldwide. 3. Bottled water drinking has increased 11%. 4. European and China market show large potential to grow by an estimated amount of 7%. 5. Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 6. 55 billion beverage servings are consumed worldwide each day 7. Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013. 8. India currently only consumes 11 8oz servings of Coca Cola per person per year. 9. The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020.
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7.3. Threats Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category. With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability. Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation. With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically decrease revenues. 3
5. The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer. 6. Changes in currency rates. Coca-cola uses 74 functional currencies in 2010. 7. In 2010 had approximately 18,600 associates represented by labor unions. 8. PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market 9. PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion. 7.4. Revenue distribution
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7.5. Stock price history
Stock Price 2010
70 60 50
Coca Cola
40
Pepsi Cola 30
Nestle Dr. Pepper Snapple
20 10 0 Coca Cola
Pepsi Cola
Nestle
8. Internal Assessment 8.1. Strenghts 1. With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally. 5
2. Coca-Cola owns four of the world’s top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta. 3. Sold 25.5 billion cases of products in 2010 4. Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010 5. Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil. 6. Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues 7. In Eurasia and Africa, unit case volume increased 12% in 2010 8. Coca-Cola has more than 500 brands and 3,500 beverages and products. 9. Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries. 10. Coca-Cola generated 9.5 billion in cash from operations in 2010, up 16% over 2009. 8.2. Weaknesses 1. Weak performance in Europe achieving a 0% growth in 2010 2. Does not hold number 1 spot for either the water brand or the leading sports drink 3. Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue. 4. Does not perform best in North America, only accounting for 31.7% in total revenue in 2010 5. Has a high number of current liabilities accounting for 18,508 million 6. Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt 7. Operating income for Europe operations decreased by $50 million in 2010 8. Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt 9. Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47 10. Other operating expenses grew to $5,959 million in 2010 from $5,699 million in 2009 8.3. Income statement
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8.4. Balance Sheet
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9. Strategy
9.1. Recommendation Integration Strategies • We have integrated into many suppliers prior to 2010 • We recently purchased CCE which helps integrate our bottling and marketing Product and Market Development • We are highly established worldwide prior to 2010 Market Penetration • We are currently in 200 different countries prior to 2010 Unrelated or Related Diversification • We don’t offer a food segment (Unrelated) • None of our main competitors offer an alcoholic beverage (Related)
9.2. Objectives In 3 Years - Acquire ownership of Kellogg Company by the end of 2013 - Expand Healthy Food choices through acquisition Year 1: Begin Acquisition Process with Kellogg Company Year 2: Attain Ownership of Kellogg Company Year 3: Begin Marketing and Sales with Kellogg Company
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9.3. Assumption
Capital needed
10,000,000,000
Debt needed
6,000,000,000
Cash Used
4,000,000,000
Interest (estimate)
4%
Tax Rate
16%
Stock Price (Dec. 31, 2010 - year end)
30.86
Additional Interest
240,000,000
Dividends Paid $1.83 per share
4,223,640,000
Kellogg's pays off own liabilities Kellogg's shareholders are paid off
Questions: Develop the Strategy Map and the Balanced Scorecard for the Coca-Cola Company
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