Strategic management can be defined as the formulation as well as the implementation of the chief goals and initiatives taken by the top management of a company pr a corporation on the basis of resources and after accessing the external and internal environment in which the organization or a business unit of the corporation competes. The chief roles of strategic management involve providing a proper direction to the organization, specifying the objectives of the organization and helping the management to develop plans and policies so that the overall objective can be gained. Along with that SBU helps the managers to allocate resources so that the plans can be implemented efficiently. In this report, the strategic management analysis of the Coca-Cola Corporation has been done.
The term corporation can be defined as a group of organizations or individual who acts as a single entity. Unlike the companies that are owned by a specific founder, a corporation is owned by a group of stakeholders, who shares both profit and loss faced by the corporation (Allen 2017). Corporations can be considered as one of the most powerful as well as profitable business entities due to their public control and high influence over the government (Perlmutter 2017).
A product portfolio can be defined as the collection of all products that are offered to the consumers by an Organization. Effective analysis o a product portfolio can provide a clear view of the stock type, profit margin drivers, growth prospects, income contribution and operational risks of a company (Schuchmann and Seufert 2015). The service portfolio, on the other hand, can be defined as the core repository for all services and information of an organization. In a service portfolio, each of the services provided by the company is listed along with its current status as well as history (Fernhabe and Patel 2012).
A Strategic business unit can be defined as a fully functional business unit of a corporation that posses its own set of goals, vision and direction. In spite of the fact that a strategic business unit operates as a unit separate from an organization, the performance of each strategic business unit is highly crucial for the overall growth and development of the organization. All the business units are subjected to report to the headquarter about their operational status (Williamson et al. 2013).
A product line can be defined as a group of products that are sold by a specific company. Organizations are found be selling several numbers of products under their various brands. Similarly, service line s defined as a series of services delivered by a particular division of business (Bilbiie, Ghironi and Melitz 2012).
Revenue in business can be defined by the amount of money earned by an organization on a yearly or monthly basis (Li and Yao 2013). Revenue includes the discounts as well as the deductions for returned products. In order to determine the net profit, costs are subtracted from revenue (Armstrong et al. 2015).
PESTLE sands for Political, Economic, Social, Technological, Legal and Environmental analysis. The political analysis includes determination of the degree to which the government the economy of a country. Economic analysis access the economic growth, exchange and interest rates, inflation and disposable income of the consumers residing in a specific country. Social factor includes the attitude and shared beliefs of the populations. Technological factor determines the degree of technological advancement of a country (Newton 2014). Legal factors include the regulation related to product levelling and safety, consumer rights and advertisement standards. Finally, the environmental factor includes laws of regulation of a company associated with the environment of the company.
The four factors of SDA are valuables resources, rare resources, imperfectly imitable resources and non-substitutable resources. While valuable resources are resources that allow the company to gain competitive advantage, rare resources enable the company to sustain it (Hillary 2017). Imperfectly imitable resources are too costly to duplicate and non-substitutable resources can be defined as resources that possess the quality of all the three above mentioned resources.
Operating environment can be defined as the internal and external factor that impose an impact on the overall revenue of a company (Finlayson et al. 2012)
Strategic direction can be defined as a course of action that leads the company towards the achievement of its goal (Bilbiie, Ghironi and Melitz 2012).
One of the most popular corporations across the world is the CocaCola Company, an American Multinational Beverage Corporation. The business of the company chiefly includes manufacturing, retailing and marketing non alcoholic beverages and syrup to the global consumers. When it comes to product portfolio of the mentioned corporation, CocaCola offers more than 350 brands in about 200 countries apart from the name of Coca-Cola beverage. Some of the globally celebrated soft drinks manufactured by the coca cola company include Sprite, Fanta, 7 Up and Valpre. Apart from manufacturing soft drinks, the company also manufactures healthy beverages that includes Minute Maid, Powerade sports beverage, Nestea flavored tea, Frutopia fruit drink and Vio which is flavored milk. Apart from the food assets, the mentioned organization also owns the Columbia Pictures as a part of its non-food assets.
.Being a vast corporation, CocaCola has divided its business into 5 strategic business units across the world. The five business units of the mentioned company are North America, Pacific, Latin America, Europe, Eurasia and Africa. Among the five business units of the Coca-Cola Corporation, the discussion about the business unit in North America will be performed in this report (The CocaCola Company 2018).
In North America, the Coca-Cola Company has two product line, one of soft drinks and another of juices. Some of the popular soft drink products of the company include Fanta, Powarade, sprite and flavoured coke, some of the popular product of the juice product of the company include Minute Maid, Bacardi Mixers Fruitopia and Splice.
The largest revenue created by the Coca-Cola business unit situated in North America is 183.08 billion dollars in 2017 (Shenkar Luo and Chi 2014). Considering the fact that in North America, the company holds 222 present of the market share, I 2017, CocaCola has beat its major competitor Pepsi Co. by refranchising its retail operations.
.in order to understand the external environment of the Coca-Cola business unit situated in North America, PESTLE analysis is performed below:
Considering the fact that the government of US has decided to impose tax over artificially sweetened beverages, the Beverage companies situated in the US are currently embroiled in a battle with the US Government. The soda tax was first imposed in 2015 at Berkeley and by 2017 several states of North America has adopted it. According to researchers, if by 2018, the majority of the states accept the soda tax, the tax will be imposed by the government permanently (Newton 2014). This will impose negatives impact on the company since the consumption of soft drinks will get reduced. Already, a drop of 26 percent in the consumption of carbonated drink has been evidenced in Berkeley. Besides that, the ban of Muslim travel in early 2017 by the US Prime Minister Donald Trump has imposed a negative impact on the company’s policy which values mobility and diversity of its consumers as well as its employees.
Due to various social as well as economic trends, the soda consumption in the beverage market of US is decreasing since 2010. In 2016, the company has recorded its lowest revenue of 41 billion dollars in the US market. Two of the chief reasons behind this drastic change is the health consciousness of the citizens of North America and the decision of the company to cut 1,200 jobs in the year 2016. As a result of this decision, the percentage of employees in the Coca-Cola North America business unit has reduced by 22 percent.
Considering the fact that North America is a developed nation, the majority of the citizens are inclined towards the healthy lifestyle. The high concern about health is the result of increased amount of obesity rate along with diabetes type 2 among the consumers. This factor is imposing a negative impact on the business of the mentioned company since carbonated soft drink and juice contains a lot of fats. Majority of the consumers are found to be substituting high-fat juices and soft drinks with healthy beverages. However, consumption of bottled water seems to rise since the year 2014. It can be predicted that within the year 2020, bottled water overtake soda water market and will become the largest beverage category by volume.
Being a developed nation, the states of North America are highly technologically advanced. This imposes a positive impact on the Coca-Cola Company since the availability of technological facilities enables the company to use modernized machines for manufacturing and packaging purposes (Rumelt 2012). Not only that, the company enjoys all the facilities associated with digital marketing in North America. Usage of social media allows the company to gain a more competitive advantage by enhancing their consumer loyalty. Highly advanced communication technology enables the Coca-cola Company to seamlessly operate retail channels.
Unfortunately, the mentioned business unit is currently under a lawsuit filed by the California Court. The company is alleged of deceiving its consumers by misleading them about health risks associated with their carbonated drinks and sugared juices. This has imposed a high negative impact on the yearly revenue of the company and if the lawsuit is successful the company will be highly fined which in turn will result in a further decrement in the revenue.
In order to reduce environmental issues, the governments of a majority of states in North America have imposed environmental regulation related to waste management. Considering the fact that the Coca-Cola business unit in North America generates more than 100bn plastic bottles per year, the company has recently implemented waste recycling to cope up with current environmental trends.
Two of the chief sources of sustainable competitive advantages of the CocaCola Company include its Brand value and its distribution network in North America.
Being a highly popular brand in the global beverage industry the position of coca cola is pretty high and firm in the beverage market of North America compared to its competitors like PepsiCo. However, the management of the Company in North America needs to develop effective strategies to maintain the brand value (Shenkar, Luo and Chi 2014).
Considering the fact that in North America, Coca-Cola Company owns an unrivalled distribution network that connects all the major states of North America, the distribution network of the company is definitely a major source of the sustainable Competitive advantage of Coca-Cola (Bilbiie, Ghironi and Melitz 2012). The infrastructure of Coca-Cola’s distribution network is highly costly and is nearly impossible to be imitated by new entrants in the North American Beverage market.
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Tangible resource of CocaCola |
Intangible resource of CocaCola |
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Market value: 158.8 billion dollars |
Technological Resources |
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Brand Value |
Conclusion and recommendation
From the above discussion, it can be clearly understood that being a globally celebrated beverage company, the market value of CocaCola in North America is pretty high. Moreover, in developed nations like North America, the company also gain some added advantages due to highly advanced technology and a vast distribution network. However, recently the company is suffering from certain downfalls due to health consciousness of the consumers in North America and huge production of plastic bottles. In order to eradicate these issues, CocaCola business unit in North America must follow the bellow mentioned strategic directions.
Reference List
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education, 12-14
Bilbiie, F.O., Ghironi, F. and Melitz, M.J., 2012. Endogenous entry, product variety, and business cycles. Journal of Political Economy, 120(2), pp.304-345.
Fernhaber, S.A. and Patel, P.C., 2012. How do young firms manage product portfolio complexity? The role of absorptive capacity and ambidexterity. Strategic Management Journal, 33(13), pp.1516-1539.
Finlayson, R.D., Mitsumori, N.M. and Reddington, F.X., International Business Machines Corp, 2012
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business imperatives. Routledge, 12-16
Li, X. and Yao, A.C.C., 2013. On revenue maximization for selling multiple independently distributed items. Proceedings of the National Academy of Sciences, 110(28), pp.11232-11237.
Newton, P., 2014. What is the PESTLE Analysis?, 23-25
Rumelt, R.P., 2012. Good strategy/bad strategy: The difference and why it matters. Strategic Direction, 28(8).
Schuchmann, D. and Seufert, S., 2015. Corporate learning in times of digital transformation: a conceptual framework and service portfolio for the learning function in banking organisations. International Journal of Advanced Corporate Learning (iJAC), 8(1), pp.31-39.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge, 12-23
The CocaCola Company 2018. North America. [online] The Coca-Cola Company. Available at: https://www.coca-colacompany.com/profiles/north-america [Accessed 31 Mar. 2018].
Williamson, D., Cooke, P., Jenkins, W. and Moreton, K.M., 2013. Strategic management and business analysis. Routledge, 123-125
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