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The Six Ps Of The Coca Cola Company

Paper Type: Free Essay Subject: Business
Wordcount: 2395 words Published: 17th Apr 2017

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According to the Vision 2020 of Coca Cola the emphasis is placed on six P’s they are, People, Partners, Portfolio, Productivity, Planet and Profit. The report discuss about the resources and financial allocation to achieve the six P’s. Each of the six P’s will be discussed separately so as to arrive at the overview of the Coca Cola’s 2020 vision and the road map laid by the company to materialize the vision. Coca Cola has established world largest distribution system with consumers distributed in more than 200 countries. The source of revenue for the Coca Cola in the beverage business is through the distribution of syrup and concentrate to the bottling partners. The Coca Cola distribution system ranges from mini markets, road side vendors to big supermarkets besides the beverages it also strengthens the source of revenue through complementary products like lays, etc. In order to have assured flow of cash and revenue Coca Cola is continue to expand through innovative marketing and products both in developed and developing economies.

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Staff and Productivity

According to 2009 annual report to achieve the Vision 2020 the importance is to encourage and develop people in the environment which is diverse and in the places where the company operates so as to deliver the superior results. The workforce at the Coca-Cola Enterprise is dispersed and it is clearly reflected from the following numbers, as of 2008 the Coca-Cola Enterprise had 72,000 staff spread across 430 facilities and half of this constitutes mobile workforces who travel across the regions in trucks to replenish the coolers amounting to 2.4 millions. Staff plays crucial role in the success of organization therefore to reduce the overhead cost at the same time devise policies that are intended for the overall welfare of the staff and one such policy is the Pension plan. The proposed plan is divided into two parts with one part accounting for the fixed cost while the other part is devised to account for the age, service, etc. These changes are meant to reward the employ who serve the organization for long time at the same time reduce the cost of by $21million.

Marketing Strategy:

Since the world’s leading manufacturer and distributor of non-alcoholic drinks, coca-cola is definitely no foreigner to worldwide marketing. They are constructing their primary strengths in marketing and innovation, driving amplified competence and efficiency in communications with their arrangements and generating new power throughout the interior brands that focus on strength, health and wellness. They have enlarged the yearly marketing resources significantly, introduced numerous fresh products, and improved a representation to assist their retail consumers exploit their sales while they persist to arrange for the subsequent one, 5 & 10 years in industry. “Coca-cola has also introduced an innovative method of appliance to endorse its Sprite brand, presenting that mobile marketing has become an essential element of its marketing strategy. Coca-cola is now concentrating at mobile phone spectators in meticulous and this is the foremost major program of this sort of activity and that the soft drink huge has introduced in the U.S. This particular action made by coca-cola and it confirms that mobile phone marketing is the subsequently major thing for large, conventional companies are pleasing benefit of. Mobile marketing has been rather admired and familiar all across Asia and Europe and it gradually but indisputably gaining an occurrence in the U.S. markets.”

– January 4, 2010

(DBase Media’s Blog)

Role of Technology

There exists a need to create a unifying work force so as to improve the productivity. To facilitate this East Sezer CIO of Coca-Cola Enterprise had invested in prominent projects that were targeted to unify the work force through the implementation of the improved communication and coloration among the employee especially at the operational l level thereby paving the way for improved productivity. For centralized platform in order to facilitate the promotion of initiatives by the Coca-Cola Enterprise the organization has partnered with Microsoft to roll out a communication platform which would deliver video and audio messages. The connectivity through the improved communication and information technology meant that apart from the benefits due to connectivity it also saves cost for the organization as it would reduce the travel expenses.

According to East Sezer, in 2007 around 90% of the company internal resources are used to maintain the day to day operations but as on date (2008) the figure has dropped down to 60% due to the concept of shared services. CIO says,” Our financial activities and HR services used to be handled by local business units in the countries where we operate. Today, however, they are consolidated in a shared services model that we created for both financial transactional activities and HR activities.” In order to improve the productivity and improve the decision making process the company invested in my SAP a single platform that would facilitate the sharing of financial data and information at a single source which would help the executives to take decision at much rapid space and improve the overall productivity. To improve the market productivity Coca Cola Design Machine was set up which would facilitate the customization of the print add and photography by the associate thereby reducing the role of external agency to develop advertisement and promotion campaign. The tool since the introduction in 2005 had saved about $ 50 million in cost.

Sustainable Partnership

Plan talks about being a responsible citizen by building up resources that would make the environment sustainable while making difference to the community. According to the press release by Coca Cola (2010), Coca cola had partnered with R -Mart the leading retailer in China to encourage more than 10,000 employees in the system to switch of the light in order to drive home the point that the small changes can lead to community with sustainable future. Coca Cola has used equipments with EMS technology for 100% HFC free drink during the Olympics in China. From 1993 the bottling partners and the parent company have donated more than RMB 70million to the project called “HOPE”. The company has organized training and enabled the migrant workers in China to become employable. The Coca-Cola entered into agreement with United States Agency for International Development (USAID) to undertake biggest water program in South Central Africa by a private sector organization. To the project Coca Cola had allocated US$249,781 to the project while USAID is contributing US$221,743 to the project by the end of April. Through this initiative Coca-Cola and its partners are entering into a project to maximize the resource utilization and to implement water programs that would go long way in changing the life of the people. The proposed initiative would go in long way to set up institutions and process that would pave way for long term sustainability of integrated water management.

Profit and Portfolio

Coca Cola is investing around $2 billion over the next three years in China as part of the growth strategy for emerging markets (Annual Report, 2010). The funds are directed towards setting up new plants, fund the programs for innovation and bring in more coolers so as to enhance the consumption on the go. The management feels the next phase of the growth would be from the emerging markets where the money available in the hands of the people would double so the company is planning to expand the portfolio beyond the developed markets to drive the growth, as the emerging market are expected to contribute about half the volume by growth by 2020. Coca Cola brand has annual retail sales about $one billion which had yielded higher profits for the company. These profits will also help the bottling partners to expand their distribution by investing in the marketing initiatives that would fuel the growth by volume and thereby driving profits.

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Source of Finance

The source of finance for the growth is through the issue of Notes and commercial paper in the US market and in Europe. The Coco Cola through its subsidiary Coca-Cola HBC Finance B.V. issued $900 in United States with full registration rights. In 2002 the company also established a fund of one billion Euro through the global commercial paper programmed and this issue not only enabled the company to diversify the source of short term funding but also ensured funding. The program assures the investor the money would be repaid in 1 to 365 days. Again in 2009 the company issued commercial paper worth one billion in Euro. In December 2009 , the company had entered an agreement with a syndicate of 12 banks to set up revolving credit facility of about 500 million Euro which would replace the existing 600 million Euro facility. The floating interest for the 500 million Euro would be based on the EURIBOR and LIBOR. The company operates in 69 functional currencies and fluctuation in the currencies would significantly impact the revenue and hence the financial revenues. In order to protect itself from the fluctuations of the foreign currency the company is using derivative financial instruments.

Debt Financing

The coca cola maintains the debts to the level that would be safe and reliable based on the cash flows, interest coverage ratio and percentage of debt capital. In order to lower the cost of capital the company uses debt financing for the growth and expansion plans. According to the 2009 Annual report the cash used in activities like merger and acquisition was estimated to be $759 million in 2009 the data is taken from the cash flow from investing activities. The company also received cash inflow by selling 49% equity in Vonpar and generated about $238 million. While the sale of portion of stake in Coca Cola Amatil generated the cash inflow of $143 million besides the cash also generated y selling the real estate assets in Spain and United States which generated cash about $106 million. The company raised about $427 million by selling the portion of shares in Coca Cola -FEMSA to FEMSA, besides generating $198 million by selling the shares through initial public offering of Coca-Cola Icecek.

Risk Factors

The Annual report of 2009 clearly points that the future growth of the coca cola may be severely affected if the company is unable to expand in the developing and emerging markets. The expansion also depends upon the political and economic situation of the market.

Forex Risk

The financial results could be impacted by the fluctuations in the foreign currency exchange as the company as revenue generated from 69 functional currencies like US dollar, Euro, Japanese Yen , the Brazilian real, etc. And due to the presence in United States it is necessary for them to translate the revenue and income from other currencies into US dollar.

Credit Risk and Joint Venture Risk

The company employs suitable financial instruments so as to tackle the risk that would rise due to the exposure to the interest rate. The credit rating has a role to play determining the interest rates. While evaluating the credit rating the agencies account for the capital structure and financial polices not only the company but also the bottling companies. In the event the credit rating agency changes the methodology used to evaluate the rating it would have the severe impact on the financial credulity of the bottlers and the company. The change in credit rating would significantly impact the interest rates. The company depends upon the bottling partners for the revenue and any deterioration of the financial performance of the bottlers would significantly impact the profitability of the company. The financial impact could be due to the raising labor cost as the company and the bottling plants have associates who have entered into collective agreement in a situation where these collective agreements is not renewed then the likely impact of increased labor cost. The unfavorable economic conditions like the recession in United States may force the consumers to look for the products that are lower in cost and may use substitute products rather than the beverages. Reduced consumer demand for the beverages in United States and other countries may impact the profitability of the company as well impacting the financial performance. Vision 2020 financial targets may be impacted by the accounting standards that would be enforced from time to time and the changing income tax jurisdictions in various countries. The products are also subjected to the import and excise duties any increase in taxes would significantly affect the operating revenues


Thus the Coca Cola in order to maintain the competitive advantage at the market has invested in the resources that are crucial to the success of organization and according to the Resource Based View (RBV) model the organization will have competitive advantage at the market if the resources are inimitable and rare. In the words of Porter to achieve competitive advantage at the market it is essential to recognize threat from supplier so in order to tackle the threat of suppliers Coca Cola has entered into partnership with the bottling company in some cases it has acquired the bottling partners, the threat of consumers in this case of beverage the switching cost is less for the consumers and Coca Cola retains besides attracting new customers through marketing and promotions. In order to strengthen the position it has entered into cross selling of the products like the case of Lay’s along with Coke. The financial resources allocation for the Vision 2020 had been discussed under the six P’s as laid out by the company. The company had invested funds to achieve sustainable growth, by involving all the key stake holders, entering into partnership wherever possible investing in technology to drive the growth at the same time reducing the cost while improving productivity.


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