CASE Study- corporate governance question and answer portion PDF

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CASE STUDYCOCA- COLACoca Cola is the largest beverage company in the world with over 550 brand names. They produced everything from Coca Cola, teas, orange juice, bottled water, energy drinks and diet drinks. Its Mission Statement states that “Coca-Cola products include various brands that supply ca...

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CASE STUDY COCA- COLA Coca Cola is the largest beverage company in the world with over 550 brand names. They produced everything from Coca Cola, teas, orange juice, bottled water, energy drinks and diet drinks. Its Mission Statement states that “Coca-Cola products include various brands that supply carbonated beverages, diet/low calorie soft drinks, water, teas, juices and energy drinks. Coke is a universal company, serving geographic regions across the world. Coca-Cola’s area of distinct advantage is in its unmatched globalization, thus making it the biggest selling soft drink in history, as well as the best known brand in the world.” Coca- Cola started in 1902 and in the last 112 years, become the largest producer of beverages in the world with over 500 brands. It includes among others Coca-cola, Minutemade orange juice, special teas, monster beverages, glacier waters. Here is the SWOT Analysis of Coca-Cola. STRENGTHS         

The best global brand in the world in terms of value World’s largest beverage company that offers approximately 500 still and sparkling products Strong marketing and advertising Customer Loyalty Bargaining power over suppliers Extensive diversified range of products Well known sports team sponsorships Brand is featured in many movies/TV spots – last 50 years. Coke and its bottlers are among the world’s top purchasers of citrus juice, coffee and sugar

WEAKNESS        

Competition with Pepsi Product diversification is low Absence of health beverages Water management High debt level due to acquisition Negative publicity Brand failures : insignificant amount of revenues New Coke formula lead to a backlash which resulted in a bad image of Coca Cola Co.

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o Eighty-three (83) years after its founding, Coke received a greatest competition from its biggest competitor Pepsi decided to change their formula and roll out New Coke in 1985. o Stoke price dropped overnight; people picketing and rioting outside their headquarters in Atlanta, Georgia. o Pepsi saw these opportunity and started promoting the “Taste Challenge” in mid1980. o In the mid-90’s, Pepsi used Britney Spears for its advertising and cut Coke’s market share by 15%. Coca Cola discontinued many of its products due to bad publicity

OPPORTUNITIES Took advantage of financial resource and health benefiting opportunities              

Coca Cola invested $2.15 billion in Monster, a 16.7% stake Investing in water replenishment plants to make products through water replenishment strategies Intends to drop sugar levels by 2020 Invest into other brands, still beverages & soda alternatives Coca Cola stock “Share a Coke” marketing strategy High gross-profit margins Emerging markets for different bottled beverages, both sparkling and healthy options Consistently growing cash flows = rising dividends for investors Global market = increase in Coca Cola’s economic system Expand supply chain network = opportunity to gain a more competitive advantage over its competitor Pepsi. Coca Cola scholarships New bottling/ new distribution market Promised to reduced US beverage calorie consumption( i.e. smaller size bottles = less sugar, calorie awareness, etc)

THREATHS      

The changing health-consciousness attitude in the market Saturated carbonated drinks market Competition ( also with indirect competitors) Globalization’s “removal of barriers” Difficulty in complying with different government regulations and norms in different countries Raw material sourcing (water scarcity etc.)

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Legal requirements to disclose negative information on product labels. Decreasing gross profit and net profit margins

PROBLEM STATEMENT How can Coca-Cola sustain economic growth in an evolving market? Although Coca Cola is known universally in the soft drink market, they are currently struggling to find ways to compete in the evolution of beverage market. They need to be updated to the evolving nature of the market. In this case study, Coca Cola intends to find the changes they can make to sustain economic growth in the evolving market that has now placed importance on greener practices and healthier living. ALTERNATIVE SOLUTIONS 1. Corn Syrup/Sugar vs. Stevia - substitute 2. Water Renewal- Maintain water resources renewal effort 3. Recycling – explore bottling alternatives that increase the recyclable value of the products’ packaging 4. Healthy Snacks- branch out on healthy snacks market 5. Invest – invest in beverage company that has already served strong market 6. Marketing – shift all marketing efforts to show how Coca Cola cares for the quality of life for its community and the society 7. Combination of alternatives 1, 2, 3, 5. In the Criterion Chart Analysis, all the alternatives are graded using equal weights in these criteria: Feasibility, Effectiveness, Efficiency, Profitability, Cost, Risks, Time and Ethical Correctness, having 1 as the lowest degree of desirability and 5 as the highest degree of desirability. In total, alternative no.7 got the highest weight with 27 overall points, followed by alternative no. 2 and 5 in the second spot and alternative no.3 in third spot. Alternative no. 3 got the lowest score of 13 in the overall criterion. Importance is given to the criterion Profitability since in order to have a solution that could address the current problem in maintaining economic growth, that solution must be profitable to Coca Cola Company. Alternative No.4 got the lowest chance of profitability and Alternative No. 7 got the highest chance of profitability. Aside from having a high score of 5 in the Ethical Correctness criterion for promoting healthy eating habits, alternative no.4 got a very low score in the following criteria: Feasibility, Effectiveness, Efficiency, Profitability, Cost, Risk and Time. Expanding into Health Snacks alternative got the lowest rating among the alternatives because of these following reasons: 

Coca-Cola is a beverage company – it should focus more in its product rather than expanding because it takes time and fund to have the an established healthy snack line.

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Requires huge investment (marketing, etc.) Bigger costs (New department/factories) Inconceivable Risk Incredible Amount of Time

On the other hand, the best solution for the problem at hand is alternative no. 7: Combination of Alternatives 1, 2, 3, and 5. It gives solution to the various areas of concern; health, environment, economic and financial areas. This alternative address the current health issues by reducing sugar, continue water renewal/ recycling efforts, merging with/invest in other strong established beverage. They need to balance these following alternatives without sacrificing the quality (taste) of their products. IMPLEMENTATION OF THE BEST SOLUTION 1. Invest in Companies that already serve a strong market They need to thirst for more acquisitions and strategic partnerships like what they did in Monster. They need to find possible investment options: Starbucks or SodaStream. Steps for taking the “all natural” approach that appeals to organic grocers and high-end markets such as Reid’s, Premal Water should be done. 2. Substitution of Sugar by Stevia as a natural sweetener They need to find the appropriate formula through multiple testing and sampling. If they find that stevia is the best alternative they have to look for stevia suppliers. They also need supplier test groups for them to hear the consumers comments to make the desired improvements. They need to modify the manufacturing processes and have a huge advertising fund to support the improvements. 3. Water Renewal Resource Efforts They need to team up with environmental groups in order to restore the creek in New Mexico that flows into Rio Grande. They also need to help from these groups to repair the damages in Osborne Creek in Michigan. A watershed restoration project located in Sierra Neveda mountains, restoration of Colorado’s Trail Creek watershed are also two of there resource efforts that could address environmental problems. Coca Cola has spent $660,000 on USDA projects so far. 4. Bottling Alternative/ Increase Recycling To decrease the carbon footprint brought by Coca Cola company, they need to look for lightweight recyclable, paper based cartons instead of using chemically produced bottles that could harm the environment and the health of the consumers. They need to work with packaging

designers/specialists to mobilize various packaging types. They also need to utilize novel shapes and smart graphics that could still attract the consumers (shelf appeal of the products). Segmenting the market and using focus groups for objectives feedback can also help them attain this goal. FEEDBACK If sugar levels are dropped and plastic levels are reduced, there will be feedback from the top the chain all the way down. The consumers will give feedback on the taste, cost, and presentation of the product change. The clerk has to listen to what the customer has to say and relays that information to the Store Manager, then the store manager will relate that information to the delivery drivers then to the sales department/representative, then to the corporate directors and then lastly to the CEO.

RISK MANAGEMENT – CHALLENGER Risk is always present in every situation. We cannot (sometimes) control the way things move but we can anticipates the situations that may arise and therefore have an alternative or back up measures that can solve the problem. What happened to space shuttle Challenger in the morning of January 28, 1986 in North America, Florida was very drastic and unfortunate. It was mentioned in the video, that the key engineer had a haunch that something bad might happen if they continue to launch the space shuttle that morning. He was right. Seventy-three seconds after the launching of the space shuttle, a horrendous event happened. Seven astronauts who boarded the space shuttle died because of the explosion witnessed by their family members, live audience and television viewers. The question is: Could this disaster be prevented at that time? Could the shuttle and its crew could have made it to space safely? The answer is Yes. Risk Management is an effective way of measuring or assessing the risk and developing strategies to manage it. The reports state that 30 minutes before the lift off, a commercial jet flew above the launch site. It was hit by a headwind over 300 km/h. This means that the space shuttle could have passed the same layer of air that is comparable to hurricane Katrina. The Kennedy Space Center could have gathered the information because they should have monitored the environment/ the condition of the air that time. Given that a commercial jet was hit by a 300 km/h wind, they could have stop or postponed the launching of the space shuttle until the disturbance disappear. I think that, the lack of preparations and monitoring in the last moment before the launching is the cause of the said disaster....