Coca-cola Company is leading manufacturer, distributor, and marketer of non alcoholic drinks in the United States of America and all over the world. It is a multinational Giant company that has market presence in almost all countries of the world. The company has also diversified from its initial soft drinks to manufacture fruit juices and other non-soda drinks. Its objective has been to maintain its global leadership in supply of beverages and other non-soda drinks through maintaining high quality production methods that ensure the name and products remain a household brand.
Resource based view approach has been a method most managements have used to formulate their companies’ strategies (Barney, 1991). This is because Resource Based View regards a company’s internal environment rather than the external environment. The advantage of using internal environment as a source of strategy formulation is that the company is able to consider factors which are within its controls; which constitute its strengths and weaknesses (Connely, 2010). This paper presents an internal analysis of Coca cola Company with specific regard to the Economic value of the company, its resources and capabilities that make it distinct from other companies giving it competition through provision of similar soft drinks.
Economic value Added
In 2010, The Coca Cola Company posted an increase in revenues as compared to the previous year. The profits came to $6.48 billion. The cost of capital for Coca cola Company is estimated to be 8.7% and the capital totaled $72.929 billion. Ensuing is the EVA calculation for the company.
Net Operating Profit After Tax (NOPAT) – (capital * cost of capital) = 4.08 – (72.929*.087) billion. This comes to $0.2 billion. The company’s EVA comes to $0.2 billion.
Coca cola Company Resources
Being a global leader in production of beverages and soft drinks, Coca Cola Company has various resources that play a major role in every production stage to ensure that the production and delivery of its various product and subsequent client services are of high standards. The company has both tangible and intangible resources that help it in the various production stages and subsequent delivery of the products to the targeted consumers.
The tangible resources include physical, human and Financial Resources. Coca Cola Company has many physical resources it possesses and manages. These physical resources include buildings and equipment. Coca cola has managed to construct buildings in almost all regions. The presence of self owned production plant means that the cost of production is maintained low. This enables the company to offer high quality products at low prices. The presence of self owned equipment ensures that the company does not lease or rent any equipment and thus managing to cost of production low.
The company’s strong financial position ensures that it has stable financial resources to carry out the production process without major problems in terms of cash shortages. The positive cash flows usually ensure that a company has cash available for any activity that needs cash (Lawton, 2006). This position enables it to avoid unnecessary debt financing. The company also maintains a motivated work force. This has been a major force in driving its products into shelves and subsequently into the shopping lists of consumers. The company has highly invested in employee training and development as this is an important factor in ensuring that the workers involved in the production deliver a high quality work, and those that are concerned with marketing ensure that the products are bought by consumers. This has come through realization that the coca cola products do not fall under the necessity class but rather fall under impulse products.
The Company’s intangible resources include the technical resources, intellectual and goodwill. Coca cola company has for a long time enjoyed technical resources that have helped the company has technical expertise in production of some products that have been of great use fostering the company’s goals. The company has been able to come up with numerous flavors in their soft drinks such as such as , Orange flavor, Pineapple, black currant, lemon, Ginger and so on. These productions are a clear indication that the company has great expertise knowledge that it uses as an advantage of other companies offering similar products, the company also enjoys intellectual property of the brands that they provide. This is because once a company does research and development and comes up with a product, it has the option of patenting that particular product thus maintaining the exclusive rights to supply that particular product (Edvinsson & Malone, 1997). The company has also enjoyed a goodwill and customer loyalty over a long period of time this has been an internal strength that it has used to its advantage since the coca Cola brand and its products have enjoyed an undying loyalty from consumers. The brand visibility of the company has also ensured that many people access the products really in time.
Coca Cola Company enjoys distinctive capabilities that enable it to carry out productions in a manner that is superior to other competitors. Distinctive capabilities that Coca Cola Company has are Innovation, reputation, and architecture. The company has been able to introduce new products into the market. This has been a major competitive edge over the competitors since they lack the innovation capability to come up varied new products. Its production methods and the ingredients mixture have remained a strong contributor to the unique and high quality products that have enabled the products enjoy a superior status over the competitors’. The company has also managed to command strong reputation in relation to its competitors. This reputation has earned it goodwill and ensured that it remains a favorite brand among the consumers. The company’s architecture plans ensure that the company daily running is congruent with the objectives. The company has instituted a structure system where it outsources product distribution from individual distributors and this has enabled it to manage its operations without dealing with many market dynamics.
An analysis of the Coca Cola Company’s internal analysis through considering the Resource based View provides insightful knowledge on the company’s management practices with regard to strategy formulation using the internal environment approach. The company should therefore keenly look into the areas of internal environment as this is where much strategy formulation ought to originate. The company will continue to be a global leader in supply of non-alcoholic beverages because it has successfully employed the use of its internal analysis to formulate successful strategy. It will however have to improve on its sluggish performance in northern America which is its major market. The internal resources and capabilities of Coca-cola Company will continue to provide a secure foundation for formulation of long term strategy and ensure it maintains a strong reputation.
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