Summary of the case
Coca-cola is the largest beverage company in the world and employs about 71,000 people in over 200 countries. It has a range of products which includes: diet coke, coca cola, sprite and fanta. There is concern from coke that the move towards healthy eating and drinking will affect her sales in her traditional sugar and sugar based drinks negatively (Badal, n.d, p.1). Coca-Cola was founded in 1886 and its headquarters are based in Atlanta Georgia.
In the year 2006 Coca-Cola reported $2.4 billion revenues which was 4.2 percent increase from 2005. Coca-Cola reported it’s earning as estimates in the third quarter of 2007, the price increase was attributed to the rise in price of aluminum and the cut in cost of sweetener in North America. In the third quarter coke reported a net income of $268 millions compared as to $2132 millions the previous year. The net operating income went up to $5.41billion.There was decline in the cases shipped by 2.5 percent as compared to the proceeding year, while there was six percent rise in cost and four percent rise in price per case (Badal, n.d, p.2).
Would you recommend Coca Cola to enter the snack business from which PepsiCo derives so much revenue?
I would recommend Coca Cola to venture in snack business first the Coca-cola products and snacks are complimentary goods. This shows that a consumer is likely to use both products at the same time. This shows that this will boost the Coca-Cola sales directly, and also the demand for both products is tied together, an indication that the snacks will have ready market as it will capture the already existing consumers of the coco-cola beverages (Coke facts, 2000, p, 6). The Coca Cola Company will also be able to take advantage of its existing distribution channels and facilities. This will reduce the operating cost of the snack business and also enhance quick market penetration. This means the logistics of venturing in snacks business will be simple. Due to the increased competition in the beverage industry Coca-Cola can supplement the possible decline in sales. This will ensure continued profitability and the future of the company will be secure. This will also provide a good competitive edge to Coca-Cola against its competitors, (Ezine articles, 2009, p, 5,). The coca-cola company will be able to increase sales and this will boost the long term profitability of the company. This will also enable full utilization of her human resources.
The snacks business will also enable the company to compete well with PepsiCo which is their main competitor in a level playing ground. This is because the PepsiCo is getting most of their profits from their snacks business. This shows they will have countered the strength of its competitors hence improving their market position as the market leaders.
What are some of the potential challenges and how can the negative impact be minimized?
The Coca Cola Company will have divided attention such that it may lose touch with its core business. The company will have to divert some of its financial and human resources into the snack business. This may end up compromising some of its competencies in beverage production (Ezine articles, 2009, p, 5). The Coca Cola Company may face the challenge of competing with already established snacks producing companies. This is because some of these companies have well established products which command a big market share.
The first problem of divided attention can be minimized by the company forming a department that is autonomous which will deal with the snacks business. Both range products will utilize the same distribution channels in order to cut on cost. The company should try to market its snack products by relating the products with its already existing brands. This will enable the consumers to identify with the new products. The company should use the already set logistic network (in the company it serves) to distribute and market the snacks products. This will enable the company to coordinate the snacks business cheaply. The company should gather adequate information that will convince the shareholders to invest their money in the snacks business
Reference List
Alen, Badal. (n.d.). Coca-Cola Company- 2007 case, The union institute.
Coke facts, (2000). The truth about Coca-Cola company around the globe, Web.
Ezine articles, (2009). Building a Brand Growth Strategy, Web.