Upload
ravi-prasad
View
83
Download
0
Embed Size (px)
DESCRIPTION
comprehensive analysis
Citation preview
Strategic Management Case StudyCoca-Cola Co.
Presented by: Carter Vaillancourt, Megan Land, and Emily
Michaud
UMFK, 2013
Overview
1. Company Overview
.A brief history about Coca Cola
.Existing Mission and Vision Statement
.Existing Objectives and Strategies
.New Mission and Vision Statement
2. External Audit
.Industry Analysis
.Current Opportunities and Threats
.CPM Matrix
.EFE Matrix
3. Internal Assessment
.Organizational Structure
.Strengths and Weaknesses
.Financial Condition
.IFE Matrix
4. Strategy Formation
SWOT matrix
Space Matrix
BCG Matrix
Grand Strategy Matrix
Matrix Analysis
QSPM Matrix
5. Strategic Plan for the Future
Strategies
6. Implementation
EPS/EBIT
Projected Financials
7. Evaluation
Balanced Score Card
8. Coca-Cola Update
The Coca-Cola Bottle from the Beginning, to Present
1886-1892
1893-1904
1905-1918
1919-1940
1941-1959
1960-1981
1982-1890
1990-1999
In 1886 is when Atlanta pharmacist
created the first Coca-Cola mixture out
various ingredients,
where he
then put it
up for sale
for 5 cents
a glass
1984 is when Joseph Biedenharn was
hired to be
the first to
put the
Coca Cola
in bottles
Due to beverage companies
copying Coca-Cola they
began to manufacture the
contour bottle in 1916
In the 1928 Olympics located in Amsterdam,
Coca-Cola traveled
with the
team and
began
global
expansion
In 1943, during WWII General Eisenhower
requested 10
bottle plants
to be shipped
to them
overseas,
which then
created an
overseas business.
After 70 years, Coca-Cola added new
flavors:Fanta®, originally developed in the
1940s and
introduced in
the 1950s;
Sprite® followedin 1961, with
TAB® in 1963
andFresca® in 1966
In 1985, was the release of a
new taste for Coca-Cola, the
first change in formulation in 99
years. It wasn’t long until they
changed to their original
New beverages joined the
Company's line-up, including
Powerade®
sports drink,
Qoo®
children's
fruit drink
andDasani® bottled
water
Revenue and Cash Flow Growth 2005-2010
Existing Vision Statement
Our vision serves as a framework for our Roadmap and guides every aspect of our business by describing what
we need to accomplish in order to continue achieving sustainable, quality growth.
• People: Be a great place to work where people are inspired to be the best they can be.
• Portfolio: Bring to the world a portfolio beverage brands that anticipate and satisfy people’s desires and needs.
• Partners:Nurture a winning network of customers and suppliers, together we create mutual, enduring value.
• Planet:Be a responsible citizen that makes a difference by helping build and support sustainable communities.
• Profit:Maximize long-term return to shareholders while being mindful of our overall responsibilities.
• Productivity: be a highly effective, lean and fast-moving organization
Existing Mission Statement
Our Roadmap starts with out mission, which is enduring. It declares our purpose as a
company and serves as the standard against which we weigh our actions and
decisions.
• To refresh the world…
• To inspire moments of optimism and happiness…
• To create value and make a difference.
Existing Growth Strategy
• Driving global beverage leadership
• Accelerate innovation
• Leverage our balanced geographic portfolio
Proposed Vision Statement
Coca-Cola’s vision is to inspire moments of
happiness while refreshing the world.
Proposed Mission Statement
With six main operating segments in North America, Latin America, Europe, Eurasia,
Africa, the Pacific,(3) and bottling investments, Coca-Cola is dedicated to being a
highly effective refreshments and fast-moving organization. (5) Our mission is to
bring consumers quality refreshments that anticipate and satisfy their desires and
needs. (1)(2). As a company we strive to be responsible citizens by helping to rebuild
and support sustainable communities (8), while maximizing long-term return to
shareowners (6). Through modern technology (4) and inspiring employees to be the
best they can be (9) we know we can continue to provide the best products on the
market.
1. Customers
2. Products or Services
3. Markets
4. Technology
5. Concern for Survival
6. Philosophy
7. Self-Concept
8. Concern for Public Image
9. Concern for Employees
External Audit
Industry Market Analysis
Coca Cola Pepsi Cola Nestle Dr. Pepper Snapple0
10
20
30
40
50
60
70
Stock Price 2010
Stock Price 2010
1)Spurring demand for energy drinks, especially in the US where estimates show
about 2 billion.
2)Approximately 85% of the company’s unit case volume is delivered in recyclable
bottles and cans, and the company targets to recover at least 50% of the equivalent
bottles and cans sold worldwide.
3)Bottled water drinking has increased 11%.
4)European and China market show large potential to grow by an estimated amount
of 7%.
5)Has the option, but no obligation, to assist bottlers with promotional and
marketing activities ($5 billion in 2010).
6)55 billion beverage servings are consumed worldwide each day
7)Global beverage industry is expected to grow from a valued $1.4 trillion in 2008,
to $1.6 trillion by 2013.
8)India currently only consumes 11 8oz servings of Coca Cola per person per year.
9)The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow
by 50 billion unit cases by 2020.
Opportunities
Threats
1) Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda brands category.
2) With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar sweetened beverages, impacting profitability.
3) Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for agriculture and irrigation.
4) With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic conditions in foreign countries can dramatically
decrease revenues.
5) The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea, and beer.
6) Changes in currency rates. Coca-cola uses 74 functional currencies in 2010.
7) In 2010 had approximately 18,600 associates represented by labor unions.
8) PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market
9) PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion.
KO NSRGY PEP
Critical Success factors Weights Rating Weighted Score Rating Weighted Score Rating Weighted Score
0.0 to 1.0 1 to 4 1 to 4 1 to 4
Advertising 0.08 4 0.32 3 0.24 4 0.32
Product Quality 0.12 4 0.48 3 0.36 3 0.36
Price Competitiveness 0.10 4 0.4 3 0.3 4 0.4
Finanical Position 0.10 3 0.30 4 0.40 3 0.30
Customer Loyalty 0.14 4 0.56 3 0.42 4 0.56
Global Expansion 0.11 4 0.44 3 0.33 3 0.33
Market Share 0.07 3 0.21 4 0.28 3 0.21
Organization Structure 0.06 4 0.24 3 0.18 3 0.18
Customer Service 0.08 4 0.32 3 0.24 3 0.24
Production Capacity 0.10 4 0.40 3 0.30 4 0.40
Employee Dedication 0.04 3 0.12 4 0.16 3 0.12
Totals 1.00
3.79 3.21 3.42
CPM
Key External Factors Weights Rating Weighted Score
0.0 to 1.0 1 to 4
Opportunities
This is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is about 2 billion 0.06 4 0.24
Approximately 85% of the company’s unit case volume is delivered in recyclable bottles and cans, and the company targets to recover at least 50%
of the equivalent bottles and cans sold worldwide
0.04 3 0.12
Bottled water drinking has increased 11%. 0.04 2 0.08
European and China market show large potential to grow, growing into these divisions more will help the revenue sales 0.04 2 0.08
Has the option, but no obligation, to assist bottlers with promotional and marketing activities ($5 billion in 2010). 0.05 2 0.1
55 billion beverage servings are consumed worldwide each day 0.06 3 0.18
Global beverage industry is expected to grow from a valued $1.4 trillion in 2008, to $1.6 trillion by 2013 0.05 3 0.15
India currently only consumes 11 8oz servings of KO per person per year 0.04 2 0.08
The non-alcoholic ready to drink(NARTD) beverage industry is expected to grow by 50 billion unit cases by 2020 0.05 3 0.15
Threats 0
Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5% volume declines respectively in the carbonated soda
brands category
0.06 3 0.18
With rising obesity rates of 35.7% for adults and 17% for youth in the U.S. alone, health concerns may cause reduced consumption of sugar
sweetened beverages, impacting profitability.
0.06 2 0.12
Water is the main and most significant ingredient in beverages, quality and abundance of water is scarce worldwide, where 70% is used for
agriculture and irrigation
0.09 2 0.18
With $24.5 billion in net operating revenue generated from international markets, and operating in over 200 countries, unstable economic
conditions in foreign countries can dramatically decrease revenues
0.07 3 0.21
The primary beverage of Coca Cola is sparkling beverages, the most popular drinks consumed worldwide, in their respective order, are water, tea,
and beer
0.07 4 0.28
Changes in currency rates. Coca-cola uses 74 functional currencies in 2010 0.04 2 0.08
In 2010 had approximately 18,600 associates represented by labor unions 0.05 2 0.1
PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion respectively. They are strong competitors in the market 0.05 4 0.2
PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only had about US $7billion 0.08 4 0.32
Totals 1 2.85
EFE
Internal Audit
Financial InformationIncome Statement
Financial InformationBalance Sheet (1)
Financial InformationBalance Sheet (2)
Coca-Cola Worth Analysis for 2010 (in millions)
Shareholder's equity - Goodwill - Intangibles 4,094
Net Income * 5 59,045
(Stock Price/EPS) * NI 71,177
# of Shares Out * Stock Price 71,225
Four Method Average 51,385
Ratio Analysis
Ratio (2010) Coca-Cola Pepsi Nestle
Liquidity Ratios
Current 1.17 1.11 1.29
Quick 1.02 0.89 1.03
Leverage Ratios
Debt to total assets 0.57 0.68 0.44
Debt to equity 1.35 2.19 0.78
Long-term debt to equity 0.45 0.94 0.12
Times-interest-earned ratio 20.43 9.23 41.25
Activity Ratios
Fixed Assets Turnover 2.38 3.03 5.12
Total Assets Turnover 0.48 0.85 0.98
Inventory Turnover 13.25 17.15 13.84
Profitability Ratios
Gross Profit Margin % 63.86 54.05 58.21
EBT Margin % 40.56 14.23 34.69
Net Profit Margin % 33.63 10.93 31.2
Return on total assets % 19.42 11.7 27.56
Return on Stockholder's equity % 38.09 33.27 49.17
Price-earnings ratio 6.03 15.35 5.43
Growth Ratios
Sales Growth (5-years) 8.74% 12.18% 3.80%
Net Income Growth (5-years Average) 19.37% 9.16% 32.08%
Earnings per share Growth (5-year Average) 19.92% 10.35% 37.77%
Strengths
1)With revenues of $35,119,000 million, Coca-
Cola is one of the largest beverage
manufacturers globally.
2)Coca-Cola owns four of the world’s top five
nonalcoholic sparkling beverage brands
including Coca-Cola, Diet Coke, Sprite
andFanta.
3)Sold 25.5 billion cases of products in 2010
4)Accounted for 51% of U.S. unit case volume,
and 50% of non-U.S. case volume for 2010
5)Has ownership interest in its
bottling/distributing partners; 23% in Coca-
Cola Hellenic, 32% in Coca-Cola FEMSA, and
30% in Coca-Cola Amatil.
6)Acquired Coca-Cola Enterprises, Inc., one of
the major bottlers for Coca-Cola in North
America which had $3.6 billion in revenues
7)In Eurasia and Africa, unit case volume
increased 12% in 2010
8)Coca-Cola has more than 500 brands and
3,500 beverages and products.
9)Coca-Cola sells 1.7 Billion servings of
beverages per day in over 200 countries.
10)Coca-Cola generated 9.5 billion in cash
from operations in 2010, up 16% over 2009.
Weaknesses
1)Weak performance in Europe achieving a 0% growth in 2010
2)Does not hold number 1 spot for either the water brand or the
leading sports drink
3)Currently does not hold a snacks segment, where Pepsi Co. has a
food division which creates for 60% of their total revenue.
4)Does not perform best in North America, only accounting for
31.7% in total revenue in 2010
5)Has a high number of current liabilities accounting for 18,508
million
6)Acquiring Coca-Cola Enterprises (CCE) resulted in assuming
additional $7.9 billion in debt
7)Operating income for Europe operations decreased by $50 million
in 2010
8)Interest expense increased $378 million mainly due to premiums
paid on repurchasing long term debt
9)Common Stock Market Prices decreased between the first and
second quarter in 2010 from $52.23 and $49.47
10)Other operating expenses grew to $5,959 million in 2010 from
$5,699 million in 2009
Key Internal Factors Weights Rating Weighted Score
0.0 to 1.0 1, 2, 3 or 4
Internal Strengths 3 or 4
With revenues of $35,119,000 million, Coca-Cola is one of the largest beverage manufacturers globally 0.07 4 0.28
Coca-Cola owns four of the world’s top five nonalcoholic sparkling beverage brands including Coca-Cola, Diet Coke, Sprite and Fanta 0.08 4 0.32
Sold 25.5 billion cases of products in 2010 0.07 3 0.21
Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case volume for 2010 0.06 3 0.18
Has ownership interest in its bottling/distributing partners; 23% in Coca-Cola Hellenic, 32% in Coca-Cola FEMSA, and 30% in Coca-Cola Amatil 0.05 3 0.15
Acquired Coca-Cola Enterprises, Inc., one of the major bottlers for Coca-Cola in North America which had $3.6 billion in revenues 0.09 4 0.36
In Eurasia and Africa, unit case volume increased 12% in 2010 0.04 3 0.12
Coca-Cola has more than 500 brands and 3,500 beverages and products 0.06 4 0.24
Coca-Cola sells 1.7 Billion servings of beverages per day in over 200 countries 0.05 3 0.15
Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16% over 2009 0.06 3 0.18
Internal Weaknesses 1 or 2
Weak performance in Europe achieving a 0% growth in 2010 0.02 1 0.02
Does not hold number 1 spot for either the water brand or the leading sports drink 0.06 2 0.12
Currently does not hold a snacks segment, where Pepsi Co. has a food division which creates for 60% of their total revenue 0.07 1 0.07
Does not perform best in North America, only accounting for 31.7% in total revenue in 2010 0.03 1 0.03
Has a high number of current liabilities accounting for 18,508 million 0.02 2 0.04
Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9 billion in debt 0.07 1 0.07
Operating income for Europe operations decreased by $50 million in 2010 0.03 1 0.03
Interest expense increased $378 million mainly due to premiums paid on repurchasing long term debt 0.03 2 0.06
Common Stock Market Prices decreased between the first and second quarter in 2010 from $52.23 and $49.47 0.02 2 0.04
Other operating expenses grew to $5,959 million in 2010 from $ 5,699 million in 2009 0.02 2 0.04
Totals 1 2.71
IFE
Strategy Formation
SWOT Matrix
Strengths
Weaknesses
Opportunities
Threats
1. Diversify beverage line by offering alcoholic beverages. (S1, S8, S9,
T5)
2. Increase R&D spending to research production methods to ensure that
we are utilizing resources in the most efficient manner. (S1, S10, T3)
1.Create a lower calorie sports drink line to promote healthydrinkinghabits while still
providing the essential electrolyte balance. (W2, W4, T1, T2)
2. Diversify products by entering the healthy snack/snack food market. (W3, T2)
1. Create a line of energy drinks to meet a growing demand of those products. (S8,
S9, S10, O1, O9)
2. Increase marketing in Latin America. (S8, S9, S10, O6, O7, O9)
1.Increase sports drink product sales through sponsorship of
collegiate sports. (W2, W4, O1, O6, O9)
2.Increase marketing in Europe. (W1, O4, O6)
3. Take advantage of the increasing demand for bottled water by
creating flavored water drops. (W2, O3, O6, O9)
ST
ST
WO
WT
Space Matrix
Financial
Strength
Ratings
1 Cash Flow 5.0
2 Price
Earnings
Ratio
3.0
3 Earnings
per Share
5.0
4 Working
Capital
7.0
5 Liquidity 6.0
6 Net
Income
6.0
7 Return on
Assets
4.0
Financial
Strength
Average
5.14
Industry
Strength
Rating
1 Profit
Potential
6.0
2 Financial
Stability
7.0
3 Resource
Utilizatio
n
4.0
4 Producti
vity,
Capacity
utilizatio
n
4.0
5 Market
Entry
6.0
6 Growth
Potential
3.0
7 Extent
Leverage
d
2.0
Industry
Strength
Average
4.6
Envir
onm
ental
Stabi
lity
Ratin
g
1 Rate of Inflation -5.0
2 Barriers to Enter
the Market
-4.0
3 Competitive
pressure
-2.0
4 Price Elasticity -4.0
5 Demand
Variability
-4.0
6 Price Range of
Competing
Products
-4.0
7 Ease of Exit from
Market
-6.0
Envir
onme
ntal
Stabil
ityAv
erage
-4.14
Comp
etitiv
e
Adva
ntage
Ratin
g
1 Market Share -1.0
2 Product Quality -3.0
3 Customer Loyalty -2.0
4 Capacity
Utilization
-2.0
5 Technologically
Advanced
-3.0
6 Global Expansion -1.0
7 Product Life Cycle -3.0
Comp
etitiv
e
Adva
ntage
Avera
ge
-2.14
FS
CS
ES
IS-1-2-3-4-5-6 654321
ConservativeAggressive
CompetitiveDefensive
1
2
3
4
5
6
-6
-5
-4
-3
-2
-1
X Coordinate 2.43
Y Coordinate 1.00
BCG Matrix
Segments Revenue %rev profit %pft Relative Market Share Industry Growth
Rate (%)
North America $11,205.00 39.45% $1,520.00 15.31% 1.00 4.40%
Pacific $5,271.00 18.56% $2,048.00 20.63% 1.00 5.60%
Europe $5,249.00 18.48% $2,976.00 29.97% 1.00 5.30%
Latin America $4,121.00 14.51% $2,405.00 24.22% 1.00 6.00%
Eurasia & Africa $2,556.00 9.00% $980.00 9.87% 1.00 6.50%
Total $28,402.00 100.00% $9,929.00 100.00%
BCG Continued
Grand Strategy Matrix
Rapid Market
Growth
Weak Competitve
Position
Strong
Competitive
Position
Slow Market
Growth
Quadrant II
1. Market development
2. Market penetration
3. Product development
4.Horizontal integration
5. Divestiture
6. Liquidation
Quadrant III
1. Retrenchment
2. Related diversification
3. Unrelated diversification
4. Divestiture
5. Liquidation
Quadrant IV
1. Related diversification
2.Unrelated diversification
3. Joint ventures
Quadrant I
1. Market development
2. Market penetration
3. Product development
4.Forward integration
5. Backward integration
6. Horizontal integration
7.Related diversification
Matrix Analysis
Alternative Strategies IE SPACE GRAND BCG COUNT
Forward Integration x x X 3
Backward Integration x x X 3
Horizontal Integration x x X 3
Market Penetration x x X 3
Market Development x x X 3
Product Development x x X 3
Related Diversification x x 2
Unrelated Diversification x 1
Retrenchment
Divestiture
Liquidation
Strategy Evaluation
Integration Strategies
•We have integrated into many
suppliers prior to 2010
•We recently purchased CCE which
helps integrate our bottling and
marketing
Product and Market Development
•We are highly established worldwide
prior to 2010
Market Penetration
•We are currently in 200
differentcountries priorto2010
Unrelated or Related Diversification
•We don’t offer a food segment
(Unrelated)
•None of our main competitors offer an
alcoholic beverage (Related)
Quantit
ative
Strateg
ic
Planni
ng
Matrix-
QSPM
Create a
lower
calorie
sports
drink
line/
while
still
providin
g
essential
electroly
te
balance.
Diversif
y
product
s by
enterin
g the
healthy
snack/s
nack
food
market.
Diversify beverage line by offering alcoholic beverages.
Key
factors
Weight AS TAS AS TAS AS TAS
External 1 to
4
1 to 4 1 to 4
Opport
unities
1.
There is
spurring
demand
for
energy
drinks,
especiall
y in the
US
which
accordin
g to the
latest
industry
estimate
s is
about 2
billion
0.06 4 0.24
2.
Approxi
mately
85% of
the
company
’s unit
case
volume
is
delivere
d in
recyclabl
e bottles
and
cans,
and the
company
targets
to
recover
at least
50% of
the
equivale
nt
bottles
and cans
sold
worldwi
de.
0.04
3.
Bottled
water
drinking
has
increase
d 11%.
0.04
4.
Europea
n and
China
market
show
large
potential
to grow,
growing
into
these
divisions
more
will help
the
revenue
sales.
0.04 3 0.12
5. Has
the
option,
but no
obligatio
n, to
assist
bottlers
with
promotio
nal and
marketin
g
activities
($5
billion
in
2010).
0.05 2 0.1 3 0.15
6. 55
billion
beverage
servings
are
consume
d
worldwi
de each
day
0.06 4 0.24 4 0.24
7.
Global
beverage
industry
is
expected
to grow
from a
valued
$1.4
trillion
in 2008,
to $1.6
trillion
by 2013.
0.05 4 0.2 4 0.2
8. India
currently
only
consume
s 11 8oz
servings
of KO
per
person
per year.
0.04 2 0.08 3 0.12 2 0.08
9. The
non-
alcoholi
c ready
to
drink(N
ARTD)
beverage
industry
is
expected
to grow
by 50
billion
unit
cases by
2020.
0.05 4 0.2
Threats
1. Incre
asing
preferen
ce for
non
carbonat
ed
healthy
drinks.
The
Coca
Cola
soda
saw a
5%
volume
declines
respectiv
ely in
the
carbonat
ed soda
brands
category.
0.06 2 0.12
2. With
rising
obesity
rates of
35.7%
for
adults
and 17%
for
youth in
the U.S.
alone,
health
concerns
may
cause
reduced
consump
tion of
sugar
sweeten
ed
beverage
s,
impactin
g
profitabi
lity.
0.06 2 0.12 4 0.24
3.
Water is
the main
and
most
significa
nt
ingredie
nt in
beverage
s,
quality
and
abundan
ce of
water is
scarce
worldwi
de,
where
70% is
used for
agricultu
re and
irrigatio
n.
0.09 1 0.09 4 0.36 1 0.09
4. With
$24.5
billion
in net
operatin
g
revenue
generate
d from
internati
onal
markets,
and
operatin
g in over
200
countrie
s,
unstable
economi
c
conditio
ns in
foreign
countrie
s can
dramatic
ally
decrease
revenues
.
0.07
5. The
primary
beverage
of Coca
Cola is
sparklin
g
beverage
s, the
most
popular
drinks
consume
d
worldwi
de, in
their
respectiv
e order,
are
water,
tea, and
beer.
0.07 4 0.28
6. Cha
nges in
currency
rates.
Coca-
cola
uses 74
function
al
currenci
es in
2010.
0.04
7. In
2010
had
approxi
mately
18,600
associate
s
represen
ted by
labor
unions
0.05
8. PEP
operatin
g
income
and
revenues
both
exceede
d KO's
by .85
Billion
and 7.67
Billion
respectiv
ely. They
are
strong
competit
ors in
the
market
0.05 1 0.05 4 0.2 2 0.1
9.
PepsiCo
dominat
ed North
America
with
sales of
US
$22billi
on,while
Coca-
Cola
only had
about
US
$7billio
n.
0.08 1 0.08 4 0.32 2 0.16
total should
be 1.0
1
QSPM
Strengt
hs
1. With
revenue
s of
$35,119
,000
million,
Coca-
Cola is
one of
the
largest
beverag
e
manufac
turers
globally.
0.07 1 0.07 4 0.2
8
2 0.14
2. Coca
-Cola
owns
four of
the
world’s
top five
nonalco
holic
sparklin
g
beverag
e brands
includin
g Coca-
Cola,
Diet
Coke,
Sprite
and
Fanta.
0.08 2 0.16
3. Sold
25.5
billion
cases of
product
s in
2010
0.07 2 0.14 3 0.21
4.
Account
ed for
51% of
U.S.
unit
case
volume,
and
50% of
non-
U.S.
case
volume
for
2010
0.06 2 0.12 3 0.18
5. Has
ownersh
ip
interest
in its
bottling/
distribut
ing
partners
; 23%
in Coca-
Cola
Hellenic
, 32% in
Coca-
Cola
FEMSA
, and
30% in
Coca-
Cola
Amatil.
0.05
6. Acq
uired
Coca-
Cola
Enterpri
ses,
Inc.,
one of
the
major
bottlers
for
Coca-
Cola in
North
America
which
had
$3.6
billion
in
revenue
s
0.09
7. In
Eurasia
and
Africa,
unit
case
volume
increase
d 12%
in 2010
0.04
8. Coca
-Cola
has
more
than
500
brands
and
3,500
beverag
es and
product
s.
0.06 3 0.18 4 0.24
9. Coca-
Cola
sells 1.7
Billion
servings
of
beverag
es per
day in
over
200
countrie
s.
0.05 3 0.15 3 0.15
10.
Coca-
Cola
generag
ed 8.5
billion
in cash
from
operatio
ns in
2010,
up 16%
over
2009.
0.06 2 0.12 4 0.2
4
2 0.12
Weakn
esses
1. Wea
k
perform
ance in
Europe
achievin
g a 0%
growth
in 2010.
0.02 3 0.06
2. Does
not hold
number
1 spot
for
either
the
water
brand or
the
leading
sports
drink.
0.06 3 0.18
3. Curr
ently
does not
hold a
snacks
segment
, where
Pepsi
Co. has
a food
division
which
creates
for 60%
of their
total
revenue.
0.07 4 0.2
8
4. Does
not
perform
best in
North
America
, only
accounti
ng for
31.7%
in total
revenue
in 2010.
0.03 3 0.0
9
2 0.06
5. Has
a high
number
of
current
liabilitie
s
accounti
ng for
18,508
million
0.02
6. Acq
uiring
Coca-
Cola
Enterpri
ses
(CCE)
resulted
in
assumin
g
addition
al $7.9
billion
in debt
0.07
7. Oper
ating
income
for
Europe
operatio
ns
decrease
d by
$50
million
in 2010
0.03
8. Inter
est
expense
increase
d $378
million
mainly
due to
premiu
ms paid
on
repurch
asing
long
term
debt
0.03
9.
Commo
n Stock
Market
Prices
decrease
d
between
the first
and
second
quarter
in 2010
from
$52.23
and
$49.47.
0.02
10.
Other
operatin
g
expense
s grew
to
$5,959
million
in 2010
from $
5,699
million
in 2009.
0.02
total
should
be 1.0
1
2.28 2.2
5
2.8
2
Create a
lower calorie
sports drink
line/ while
still providing
essential
electrolyte
balance.
Diversify
products by
entering the
healthy
snack/snack
food market.
Diversify
beverage
line by
offering
alcoholic
beverages.
QSPM (2)
Strategic Fit
Competitive Risks
• Pepsi Co. and Nestle currently have market share in the Food Industry
Funding Aggressive Growth
• Market Capitalization of 190 billion
• Current Assets exceed current liabilities by over 3 billion
Strong Brand Utilization
• Moving into the food industry and having very strong customer loyalty,
customers will be drawn to new products
Kellogg Company
• Currently located in 180 different countries
• Sales totaled 12.4 billion in 2010
• Includes brands such as: Special K, Cheez-It, Pringles, Keebler, Austin,
Famous Amos, and Townhouse Crackers
• Food Consumer Products Industry Kellogg's is ranked number 2, behind
Pepsi Co. and ahead of General Mills
3-Year Goals
In 3 Years
-Acquire ownership of Kellogg Company by the end of 2013
- Expand Healthy Food choices through acquisition
Year 1: Begin Acquisition Process with Kellogg Company
Year 2: Attain Ownership of Kellogg Company
Year 3: Begin Marketing and Sales with Kellogg Company
Strategic Implementation
Kelloggs Worth Analysis for 2010 (in millions)
Shareholder's equity - Goodwill - Intangibles (2,930)
Net Income * 5 6,235
(Stock Price/EPS) * NI 17,849
# of Shares Out * Stock Price 17,868
Four Method Average 9,755
Kellogg Company Net Worth Analysis
EPS/EBIT
Capital Needed 6,000,000,000
EBIT Range $7 bil. - $15 bil.
Interest Rate 4%
Tax Rate 16%
Stock Price (Dec. 31, 2010-year end) 30.86
Current Shares Outstanding (Basic) 2,308,000,000
CS Shares needed 194,426,442
Assumptions
Common Stock
Financing
Recession Normal Boom
EBIT 7,000,000,000 10,000,000,000 15,000,000,000
Interest - - -
EBT 7,000,000,000 10,000,000,000 15,000,000,000
Taxes 2,030,000,000 2,900,000,000 4,350,000,000
EAT 4,970,000,000 7,100,000,000 10,650,000,000
# of Shares 2,502,426,442 2,502,426,442 2,502,426,442
EPS 1.99 2.84 4.26
Debt Financing
Recession Normal Boom
EBIT 7,000,000,000 10,000,000,000 15,000,000,000
Interest 240,000,000 240,000,000 240,000,000
EBT 6,760,000,000 9,760,000,000 14,760,000,000
Taxes 1,960,400,000 2,830,400,000 4,280,400,000
EAT 4,799,600,000 6,929,600,000 10,479,600,000
# of Shares 2,308,000,000 2,308,000,000 2,308,000,000
EPS 2.08 3.00 4.54
Stock needed 5,400,000,000
Debt needed 600,000,000
Interest 24,000,000
CS shares needed 174,983,798
Assumptions
Stock needed 600,000,000
Debt needed 5,400,000,000
Interest 216,000,000
CS shares needed 19,442,644
90% Stock -
10% Debt
Financing
Recession Normal Boom
EBIT 7,000,000,000 10,000,000,000 15,000,000,000
Interest 24,000,000 24,000,000 24,000,000
EBT 6,976,000,000 9,976,000,000 14,976,000,000
Taxes 2,023,040,000 2,893,040,000 4,343,040,000
EAT 4,952,960,000 7,082,960,000 10,632,960,000
# of Shares 2,482,983,798 2,482,983,798 2,482,983,798
EPS 1.99 2.85 4.28
10% Stock -
90% Debt
Financing
Recession Normal Boom
EBIT 7,000,000,000 10,000,000,000 15,000,000,000
Interest 216,000,000 216,000,000 216,000,000
EBT 6,784,000,000 9,784,000,000 14,784,000,000
Taxes 1,967,360,000 2,837,360,000 4,287,360,000
EAT 4,816,640,000 6,946,640,000 10,496,640,000
# of Shares 2,327,442,644 2,327,442,644 2,327,442,644
EPS 2.07 2.98 4.51
EPS/EBIT Continued
Projected Financial Assumptions
Capital needed 10,000,000,000
Debt needed 6,000,000,000
Cash Used 4,000,000,000
Interest (estimate) 4%
Tax Rate 16%
Stock Price (Dec. 31, 2010 - year end) 30.86
Additional Interest 240,000,000
Dividends Paid $1.83 per share 4,223,640,000
Kellogg's pays off own liabilities
Kellogg's shareholders are paid off
Projected FinancialsIncome Statement
Projected Income Statement (in millions) 2009 2010 2011
Total Revenue 30,990 35,119 52,784 15% increase,
plus Kelloggs
12,397
Cost of Revenue 11,088 12,693 21,324 % of revenue,
plus Kelloggs
7,108
Gross Profit 19,902 22,426 31,460
Operating Expenses - - -
Research and Development - - -
Selling General & Administrative 11,671 13,977 17,276 Add Kelloggs
3,299
Nonrecurring - - -
Others - - -
Total Operating Expenses - - -
Operating Income or Loss 8,231 8,449 14,184
Income from Continuing Operations - - -
Total Other Income/Expense Net 289 5,502 6,052 10% increase
EBIT 9,301 14,976 20,236
Interest Expense 355 733 1,221 Add Kelloggs
248, add 240
from
financing
Income Before Tax 8,946 14,243 19,015
Income Tax Expense 2,040 2,384 3,042 16% tax rate
Consolidated Net Income 6,906 11,859 15,973
Less: Non-Controlling Interests 82 50 50 Same
Net Income 6,824 11,809 15,923
Basic EPS 2.95 5.12 6.90
Diluted EPS 2.93 5.06 6.82
Basic Average Shares Outstanding 2,314 2,308 2,308 Same
Diluted Average Shares Outstanding 2,329 2,333 2,333 Same
Dividends Per Share 1.64 1.76 1.83
Projected Financials Balance Sheet (1)
Projected Balance Sheet (in millions)
ASSETS
Current Assets
Cash & Cash Equivalents 6,959 8,379 4,379 Decrease by
$4 billion for
funds
Short-term Investments 2,192 2,820 3,666 30% increase
Net Receivables 3,758 4,430 5,316 20% increase
Inventory 2,354 2,650 4,236 20% increase,
plusKelloggs
1,056
Other Current Assets 2,226 3,162 4,336 30% increase,
plusKelloggs
225
Total Current Assets 17,551 21,579 21,933
Long-term Investments 6,755 7,585 9,861 30% increase
Property Plant & Equipment 9,561 14,727 21,537 25% increase,
plusKelloggs
3,128
Goodwill 4,224 11,665 15,876 5%increase,
plusKelloggs
3,628
Intangible Assets 8,604 15,244 18,696 10% increase,
plusKelloggs
1,456
Accumulated Amortization - - -
Other Assets 1,976 2,121 2,989 7% increase
like previous
year, add
Kelloggs 720
Deferred Long-term Asset Charges - - -
Total Assets 48,671 72,921 90,892
Projected Financials Balance Sheet (2)
LIABILITIES
Current Liabilities
Accounts Payable 6,921 9,132 10,045 10%
increase
Short-term Debt 6,800 9,376 11,176 Add 30%
of $6
billion
from
financing
Other Current Liabilities - - -
Total Current Liabilities 13,721 18,508 21,221
Long-term Debt 5,059 14,041 18,241 Add 70%
of $6
billion
from
financing
Other Liabilities 2,965 4,794 5,033 5%
increase
Deferred Long-term 1,580 4,261 4,261 Same
Liability Charges - - -
Minority Interest 547 314 314 Same
Negative Goodwill - - -
Total Liabilities 23,872 41,918 49,070
STOCKHOLDERS' EQUITY
Misc. Stock Opt Warrants - - -
Redeemable Pref. Stock - - -
Preferred Stock - - -
Common Stock 880 880 880
Retained Earnings 41,537 49,278 60,977 Increases
from Net
Income,
Dividends
paid out
Treasury Stock (25,398) (27,762) (27,762) Same
Capital Surplus 8,537 10,057 10,057 Same
Other Stockholders' Equity (757) (1,450) (1,450) Same
Total Stockholders' Equity 24,799 31,003 41,822
Total Liabilities and Stockholders' Equity 48,671 72,921 90,892
Coca-Cola's Projected Ratios 2010 v. 2011 2010 2011
Current Ratio 1.17 0.97
Quick Ratio 1.02 0.83
Debt to Total Assets 0.57 0.54
Debt to Equity 1.35 1.17
Times Interest Earned 20.43 16.57
Fixed Asset Turnover 2.38 2.45
Total Asset Turnover 0.48 0.58
Inventory Turnover 13.25 12.46
Gross Profit Margin % 63.86 59.60
Return on Stockholders' Equity % 38.09 38.07
Projected Financial Ratios
Strategic Evaluation
Balanced Scorecard
Area of Objectives Measure or Target Time Expectation Primary Responsibility
Customers
1 Brand Identity Industry reports/Market Cap. Yearly Marketing Officer
2 Satisfaction Customer Survey Yearly Marketing Officer
Employees
1 Employee Moral Survey Yearly People Officer
2 Service Training # of seminars Yearly Administrative Officer
Operations
1 Diversify product line Acquire Kelloggs Company Yearly Administrative Officer
Business Ethics
1 Ethics Training # of ethics training sessions Yearly People Officer
2 Recycling Recycle 50% of total wastes
Financial
1 Revenues Increase by 50% each year Yearly Financial Officer
2 Ratio Analysis Better than competitors/industry Avg. Yearly Financial Officer
Update
Update
• Currently serving 3,500 products worldwide
• Global volume growth in the first quarter of 2013 was 4%
• On Earth Day Coca Cola donated more than 55,000 recycling bins to parks,
schools, colleges, and homes in a 115 communities across the US
• 63,290,877 likes on Facebook
• Coca Cola Rewards program is now offered
Stock Performance