Management: SWOT Analysis

Posted: November 14, 2016

Introduction

The Coca-Cola Company, established in 1886 in Atlanta, Georgia, is the world’s leading non-alcoholic beverage enterprise with a worldwide production, marketing, and distribution of its products. The company operates in at least 200 countries, producing more than 500 brands of soft drinks. While facing stiff competition from other enterprises like PepsiCo, Coca-Cola has emerged as the world’s best in the sector through proper evaluation of the external and internal environmental factors. SWOT is a valuable tool for analysing a business’ outer and internal environment. It donates the strengths, weaknesses, opportunities, and threats an organisation encounter in its endeavours to achieve its objectives/mission, the epicentre upon which this paper’s discussions are anchored.

SWOT Analysis

SWOT is an abbreviation for Strengths, Weakness, Opportunity, and Threats. Whereas strengths and weaknesses are considered as internal factors that affect a business’ operations, opportunities and threats are external factors. According to Johnson & Peppas (2003), Coca-Cola Company is affected by the four named factors as discussed below:

Strengths

These are organisation qualities that propel it towards the set objectives. Coca-Cola Company, with an object of attaining globalisation milestone, has several strengths that facilitate the achievement of the latter. These include quality and favourite brand, large operation scale, and vigorous revenue growth.  The company’s original brand, the Coca-Cola, is the world’s leading according to the international branding consultant firm’s rank in 2006. Moreover, the entity owns the globe’s top four soft drink brands; Fanta, Sprite, Diet Coke, and Coca-Cola. That presents it with a greater advantage over its competitors (Johnson & Peppas, 2003).

Besides, a large scale of operations is another of Coca-Cola’s strength. It operates in more than 200 nations, with approximately fifty-two billion of its products consumed daily. Consequently, the business generates more than $1.4 billion in its global operations. Again, its services are anchored around modern infrastructure comprising at least 32 high-quality manufacturing plants across the world alongside 95 bottling plants outside the United States (US). Furthermore, the entity manufactures juice and water (Johnson & Peppas, 2003). Nonetheless, the corporation has the strength to increase its revenue and meet the high market demands.

Finally, Coca-Cola Company portrays vigorous revenue growth, doubling its growth in its market areas including Latin America, Asia, and Pacific Rim. In the year 2006, the company recorded a revenue growth of 10.6% and 20.4% in Asia/Pacific Rim and Latin America respectively. Besides, its co-enterprise, the bottling company, generated 34.8% revenue the very year (Regassa & Corradino, 2011). Therefore, the business has more potential for growth than its close competitors.

Weaknesses

These are internal factors that act as barriers, preventing an organisation from achieving its goals. Coca-Cola faces several such factors including negative publicity, declining liquidity, and slow performance in some areas. Concerning negative publicity, the company has been criticised for the technological weakness in using ingredients which are of health concern to the consumers. The brands were portrayed to harbour carbon and excess sugar (Johnson & Peppas, 2003).

Besides, the corporation has a weakness of slow performance in some regions where less of its products are supplied about the market demand. In 2006, for example, North America experienced product shortages as most of the company’s warehouses/product stores could not meet the region’s demand threshold (Johnson & Peppas, 2003). Hence, the organisation’s objective to generate more revenue is considerably affected.

Morover, declining liquidity (cash flow) also affects the company’s operations. As the entity’s annual report reflected in 2006, cash flow decline from operating activities is a notable weakness. Whereas about $6,423,000 was generated in 2005, 2006 saw a fall in revenue to $5,957,000 (7% decline) (Regassa & Corradino, 2011). Consequently, the company may be subjected to reduced financial investment rate, thus slowing down its growth and establishment.

Opportunities

These are regarded as issues of the external environment that an organisation can capitalise on to improve its profitability while stabilising customer loyalty and market base. Such opportunities include rapid population growth, the emergence of bottle water, and company acquisitions. Coca-Cola, realising that acquisition of other related industries would boost its operations, has worked towards such agreements. For example, in 2006, the company acquired China’s Kerry Beverages and operated as a joint venture to manufacture and distribute its products, attracting more consumers to the region. The same approach was noted in Germany where the company used the opportunity of the acquisition of Apollinaris (Sparkling and Mineral Water Company) to reach out more consumers.

In 2010, the organisation acquired North America’s biggest bottling company, thus enhancing quality packaging to attract more customers (Johnson & Peppas, 2003). Besides, with the modern world increasingly becoming health-sensitive, Cola-Cola Company commenced the production of bottle water. Generating as high as $15.6 billion in 2006, bottle water has over the years become a pivotal revenue earner in the beverage industry (Regassa & Corradino, 2011). In the US, for instance, Coca-Cola’s bottled water, Dasani, remains among the best-selling water brands.

Lastly, population growth has also facilitated the company to increase product output for supply to the larger number of consumers. In particular, the US is recording an increasing Hispanic population with years, from 11.6 million to an estimated 60 million by 2020 (Johnson & Peppas, 2003). Consequently, the organisation is utilising that opportunity to penetrate the market, expand its base, supply more beverages and generate more potential gains.

Threats

Threats are external factors that prevent an entity from achieving its desired objectives. Coca-Cola faces threats of high competition, health issues, and dependence on bottling industries. The business’ major competitors include PepsiCo, Nestle, and Cadbury among others. Hence, the company is regularly constrained to monitor innovation, pricing, brand quality and consumer welfare in an attempt to establish the comparative advantage over its competitors (Johnson & Peppas, 2003).

Also, the organisation has limited control over the bottling companies which package its product. The partnership constraints Coca-Cola into sharing most of the revenue generated by the partner company, hence posing a serious threat to its growth (Johnson & Peppas, 2003).

The sensitive health society also threatens the company’s growth. Hence, the nature of carbonation and sweetening in Coca-Cola brands did propagate a decrease in consumption in 2005 when only $63.9 billion was generated. Such uses are associated with obesity in the United States, prompting the organisation to redefine its brands with less sugar and carbon contents as observed in Diet Coke (Johnson & Peppas, 2003).

Conclusion

SWOT analysis is a valuable tool for analysing a business’ external and internal environment. It donates the strengths, weaknesses, opportunities, and threats an organisation encounters in the course of its operations to achieve its objectives/mission. While environmental aspects such as strengths and weaknesses are internal, opportunities and threats are external factors that affect a company’s operations. Using Coca-Cola as a case Corporation, the paper outlines its brands, service scale, and rapid revenue growth as its strengths. Besides, weaknesses include negative publicity, slow performance, and declining liquidity. Conversely, opportunities are coined around company acquisitions, bottle water, and rapid population growth. Finally, antagonising threats include high competition, health issues and dependence on bottling companies.

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