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Internal factor Evaluation (IFE) of Coca Cola Company Essay

“A summary step in conducting an internal strategic- management audit is to construct an internal factor Evaluation (IFE) Matrix. This strategy formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provide a basis for identifying and evaluating relationships among those areas. Intuitive judgments are required in developing and IFE Matrix, so the appearance of a scientific approach should not be interpreted to mean this is an all-powerful technique. A thorough understanding of the factors included is more important than the actual numbers.” (David, 161-162)

Internal Audit

In order to effectively compete in the industry it is important for the company to analyze the its internal strengths and weaknesses. So that strengths should be used to take advantage of the opportunities for the company in the market and the weaknesses should be removed in order to make the strategy of the company flawless. Following are the major departments, which should be addressed in order to undertake an internal audit of a company.

Major departments of Coca-Cola (Strengths and Weaknesses):

In order to identify Coca Cola’s internal strengths and weaknesses, the following key internal functional areas will have to be analyzed: 1) Management; 2) Marketing; 3) Finance/Accounting; 4) Operations & R/D; and 5) Computer Information System and Technology.

1. Management:

a) Strengths:

“In order to maintain and refine the culture needed to enhance the Coca-Cola industry, they recruit people to train, and retrain current employees. The Coca-Cola Learning Consortium works with the management to help build the culture, systems, and processes our people need to stay comfortable while working hard and learning more efficient work habits.”(Casteleiro, J., and Garfinkel)

b) Weaknesses:

“Discrimination in Promotions: Coca-Cola’s policies are not applied uniformly or fairly. The Company’s written and unwritten policies and practices regarding promotions do not require posting of all positions, but allow “management nomination,” which amounts to little more than word of mouth recommendations, and other closed procedures, including the use of a high-potential list.” (Abdallah, Clark, Ingram & Orton)

2. Marketing:

Strength:

“Marketing activities have to do with supporting Coca-Cola’s trademarks which is done by creating consumer demand for their brands. Spending on advertisements enhances consumer awareness and preference toward the Coca-Cola brand. By conducting research they establish consumer communications, and by doing this they find out how to improve their company. In order to maximize the impact of the company’s advertising they go to individual advertising agencies. With this strategy they are able to increase global marketing.” (Casteleiro, and Garfinkel)

Brand name and unique product are the most important assets of Coca-Cola.

Weaknesses:

Old image still exists.

Inconsistent marketing message.

Finance/Accounting:

Strengths:

The company does a fairly good job of disclosing its true drivers of performance and areas of concern in the MD&A and footnotes.

Coca-Cola has a number of intangible assets, consisting of trademarks, goodwill, and franchise rights.

Weaknesses:

Coca-Cola showed a relatively low ROE as compare to its close rival Pepsi. (Mazumder, Stianchi & Perler, 4-12)

4.Operations & R&D

a) Strengths:

Coca-Cola has remained a major investor in “the further establishing production facilities, distribution networks, sales equipment, and technology. In order to make the investments the company forms business alliances with local bottlers. Then they find people with the expertise to work well with the current resources Coca-Cola provides. The investments they make also go into markets that they do not have a tight hold on, so they can try to create something out of that market in the future.” (Casteleiro and Garfinkel)

b) Weaknesses:

Relation ship with subsidiaries creates legal and territorial problems.

Lack of funds for regional bottlers to continue expansion.

5. Computer Information Systems (CIS) and Technology

“Marketing Information System, is one part of the Business System Components and, is comprised of such functions as, Strategic Planning, Product Planning, Advertising, and Sales Promotion, to name only a few. The main goal of these functions, or the Marketing Information System as a whole, is to create customers. Coca-Cola is using the Marketing Information System to create customers through many different avenues and approaches.

Coca-Cola is one of the many organizations that use SAP R/3 Enterprise Resource planning software. This software allows all members of the Coca Cola organization to access the information at anytime where ever they are in the world.” (The geographic view of Coca-Cola can be label as global)

Construction of IFE Matrix for Coca Cola:

The evaluation of the strengths and weaknesses of the Company’s performance in factors, which are significant for the analysis of company’s performance, has been resulted in shape of following IFE matrix.

Internal Factor Evaluation -IFE Matrix

Strengths
Weight
Rating
weight score
1

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Strong brand name and worldwide leadership in beverage industry.
0.10
4
0.40
2
Promotion oriented strategy
0.10
4
0.40
3
High level staff recruitment
0.10
4
0.40
4
Product Differentiation
0.05
4
0.20
5
Strong supply chain
0.05
2
0.10
6
Value retention
0.05
4
0.20

Weaknesses

1
Low ROE as compare to Pepsi
0.10
1
0.10
2
Old image still exists
0.10
2
0.20
3
Relation ship with subsidiaries create legal and territorial problems
0.10
2
0.20
4
Inconsistent Marketing message
0.10
1
0.10
5
Lack of funds for regional bottlers to continue expansion
0.10
1
0.10
6
Product, operation, service planning too complicated
0.05
2
0.10

Total
1.00
Score
2.50
(Mazumder, Stianchi & Perler, 4-12)

Coca cola has an average score of 2.5 which means that the company is on an average situation; it has some weaknesses that cause problems in the operation of the company, but as well it has some strengths that are not utilized yet in the right way.

References

Fred R. David, Strategic Management Concepts and Cases, Eleventh     Edition, pp.165-166.

Abhijit Mazumder, Rob Stianchi & Jenn Perler, (2006).  Business     Analysis Using Financial Statements, MBA 402, March 2,  2006, pp. 4-12

Casteleiro, J., and Garfinkel, A., The Story Behind the Drink,     available from http://home.att.net/~paulkorn/coke.htm

Motisola Malikha Abdallah, Gregory Allen Clark, Linda Ingram and     Kimberly Gray Orton, United States District Court, Northern     District of Georgia, Individually and as Class Representatives, Plaintiffs, v. The Coca-Cola Company, Defendant, Civil Action No. 1-98-CV-3679 (RWS) Complaint Class Action, available from     http://www.geocities.com/CapitolHill/6174/coca-     cola/complaint.html

The geographic view of Coca-Cola can be label as global, available from     http://homepages.wmich.edu/~c1thomps/FinalProject.htm

 

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