Assignment
Principles Of Management
Submitted To Mr. Ghulam Ahmad Rana By
Wajid Ali
Roll No.3335
MBA 1st Semester
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Assignment Principles of Management
Boston Consulting Group Matrix (BCG) on Coca-Cola. Introduction of Coca-Cola: Coca-Cola (also known as Coke) is a popular carbonated soft drink sold in stores, restaurants and vending machines in over two hundred countries. It is produced by The CocaCola Company, which is also occasionally referred to as Coca-Cola or Coke. It is one of the world’s most recognizable and widely sold commercial brands. Coke's major rival is Pepsi. Although Coke has been the target of urban legends decrying the drink for its supposedly copious amounts of “acid”, or the "life-threatening" effects of its carbonated water but still it is the most in-style soft drink. About its safety and the ethics of the company that produces it, it is widely accepted as the most dominant soft drink in the world today. Originally intended as a patent medicine when it was invented in the late 19th century, Coca-Cola was bought out by shrewd businessman Asa Griggs Candler, whose aggressive marketing tactics led Coke to its dominance of the world soft drink market throughout the 20th century. Although faced with accusations of perverse side-effects on the health of consumers and monopolistic practices by its producing company, Coca- Cola has remained a popular soft drink well into the first decade of the 21st century.
Mission Statement: Our Roadmap starts with our 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
BCG Growth Matrix Analysis The BCG matrix approach is based on the product life cycle concepts which can be utilized to identify what priorities should be given in the product portfolio of a business level. To make sure that the company is creating long-term value, an industry should have a portfolio of products which contains both high-growth products in need of cash inputs as well as low-growth products which establishes a lot of profit or cash. BCG matrix relies on 2 dimensions: market growth and market share. The basic notion behind it is that the higher the market share of a specific product has or the faster the product’s marketability grows, the better it is for the industry. Placing appropriate products in the BCG matrix, results in 4 categories, in the business portfolio of an industry. The four categories include the Stars, cash cows, dogs, question marks.
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Assignment Principles of Management
STARS: HIGH GROWTH, HIGH MARKET SHARE • Stars are leaders in business. • They require heavy investment to maintain its large market share. • It leads to a large amount of cash consumption and cash generation. • Attempts should be made to hold the market share otherwise the star will become a cash cow. The star products of Coca-Cola are Thumbs up, Maaza, Kinley
CASH COWS: LOW GROWTH, HIGH MARKET SHARE • They are foundation of the company and often the stars of yesterday. • They generate more cash than required. • They extract the profits by investing as little cash as possible. • They are located in an industry that is mature, not growing or declining. The products which are Cash cows are Limca, Coca Cola
QUESTION MARKS: 3
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Assignment Principles of Management
HIGH GROWTH, LOW MARKET SHARE • Most businesses start of as question marks. • They will absorb great amounts of cash if the market share remains unchanged • Question marks have potential to become star and eventually cash cow but can also become a dog. • Investments should be high for question marks. The question marked products of Coca-Cola are Fanta, sprite
DOGS: LOW GROWTH, LOW MARKET SHARE • Dogs are the cash traps. • Dogs do not have potential to bring in much cash. • Business is situated at a declining stage. The products which are at Dogs are Diet Coke, Minute maid
Conclusion •
Star Strategy: Invest profits for future growth and for earning more of market share and profits. • Cash Cow Strategy: Use profits to finance new products and growth elsewhere. • Question Mark Strategy: Either invest heavily in order to push the products to star status, or divest in order to avoid it becoming a Dog. • Dog Strategy: Either invest to earn market share or consider disinvesting. Thus the BCG matrix is the best way for a business portfolio analysis. The strategies recommended after BCG analysis help the firm decide on the right line of action and help them implement the same.
Porter’s Five Forces Model: Sample Analysis of Coca-Cola Since its introduction in 1979, Michael Porter’s Five Forces has become the de facto framework for industry analysis. The five forces measure the competitiveness of the market deriving its attractiveness. The analyst uses conclusions derived from the analysis to determine the company’s risk from in its industry (current or potential). The five forces are (1) Threat of New Entrants, (2) Threat of Substitute Products or Services, (3) Bargaining Power of Buyers, (4) Bargaining Power of Suppliers, (5) Competitive Rivalry Among Existing Firms. The following is a Five Forces analysis of The Coca-Cola Company in relationship to its CocaCola brand.
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Assignment Principles of Management
Threat of New Entrants/Potential Competitors: Median Pressure
Entry barriers are relatively low for beverage industry: there is almost 0 consumer switching cost and very low capital requirement. There are more and more new brands appearing in the market with usually lower price than Coke products However Coca-Cola is seen not only as a beverage but also as a brand. It has a very significant market share for a long time and loyal customers are not very likely to try a new brand beverage.
Threat of Substitute Products: Median to high pressure
There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t tell the difference between Coca-Cola coke and Pepsi coke.
The Bargaining Power of Buyers: Low pressure
The individual buyer has little to no pressure on Coca-Cola The main competitor, Pepsi is priced almost the same as Coca-Cola. Consumer could buy those new and less popular beverages with lower price but the flavor is different and the quality is not guaranteed. Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is lessened because of the end consumer brand loyalty. There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t tell the difference between Coca-Cola coke and Pepsi coke. People are getting concerns of negative effects of carbonated beverages. Increasing number of consumers begin to drink fruit juice, lemonade and tea instead of soda products.
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The Bargaining Power of Suppliers: Low pressure
The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers are not concentrated or differentiated. Any supplier would not want to lose a huge customer like Coca-Cola.
Rivalry Among Existing Firms: High Pressure
Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages and commit heavily to sponsoring outdoor festivals and activities. As Coca-Cola has a longer history, it is advertised in a more classical approach while Pepsi tried to attract younger generation by using pop stars as brand ambassadors. Currently Coca-Cola slightly topped Pepsi as the possessor of the most U.S market share. There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique flavors.
PORTER’S GENERIC STRATEGIES Michael Porter is a professor in the Harvard Business School and also the president of the Institute for Strategy and Competitiveness. His simple diagram of competitive strategy became very popular in the 1980s, and it is even more popular in today’s competitive world.
They outline the three main strategic options open to organization that wish to achieve a sustainable competitive advantage. Each of the three options is considered within the context of two aspects of the competitive environment: Sources of competitive advantage - are the products differentiated in any way, or are they the lowest cost producer in an industry? Competitive scope of the market - does the company target a wide market, or does it focus on a very narrow, niche market? The generic strategies are: 1. Cost leadership, 2. Differentiation, and 3. Focus.
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Strategy adopted by Coca-Cola: Altough this company’ products does not have a lower cost compared to other companies, this uses another strategy from the Porter’s Diagram, which is Differentiation. Branding is what makes people to recognize the products of this company. The hand writing of Coca Cola is of the brilliantly chosen logo.
Wajid Ali
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Assignment Principles of Management
