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Introduction to Business With Coca-Cola and Tesco

Task 1.

1. Coca-Cola as the leader of beverage production.

Coca-Cola Company is the world’s leader in the beverage production. The originally American company has spread its influence on all of the continents of the world. The largest number of consumers of the company’s products lives in the North America, however consumption of Coca-Cola’s products in other continents is also relatively large (Figure 1).

Figure 1. Consumption of Coca-Cola’s products.

Currently, Coca-Cola Company generates “$22.0 billion in net operating revenues in 2004. The Coca-Cola Company markets four of the world’s top-five soft-drink brands- Coca-Cola, diet Coke, Sprite and Fanta. Our beverage offerings encompass nearly 400 brands, including coffees and teas, juices and juice drinks, sports drinks and waters, as well as carbonated soft drinks.” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/annual_other_reports.html). The country provides its activities in 2000 countries of the world and offers a full range of services in those countries. Coca-Cola Company’s annual growth rate is high due to the efficient strategy of its managers. Many customers all over the world include Coca-Cola’s products in their shopping basket. For example, in the UK, “the annual table of what goes into the shopping basket of millions of

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consumers every day revealed famous names still dominate the list. And brands with the biggest and best advertising, like Coca-Cola , Walkers and Nescafe, still dominate” (Big Brands Make It All Ad Up for Shoppers; Coca-Cola Tops Sales List, 1998, p.25).

2. Tesco supermarket in the global market.

Tesco supermarket operates in a different field from Coca-Cola Company. If Coca-Cola Company produces its products and profits from the difference between the cost of production and sales price, Tesco has a different source of revenue. The supermarket obtains profits through the difference between the wholesale price which it pays for goods and the retail price which it offers in the supermarket for customers. Tesco does not deal with production. Its objectives include purchasing a large variety of products which customers are going to buy in the supermarket all at once rather than look for them in different small stores. Therefore, the power of Tesco can be measured through the number of stores which it has opened, their space and the stores’ profitability. At present, the space which Tesco stores occupy in the UK is 23.3 million square feet (figure 2). Due to the large number of stores, the company is able to profit through the large-scale sales. “In the UK we opened 64 new stores this year adding a further 1.8 million sq ft. The total number of stores in the UK, at the year end is 1,878 which includes 910 T&S stores.” (Business Strategy. Retrieved on April 20th from source: http://www.tesco.com).

Figure 2. Tesco stores in the UK.

3. Strategic goals satisfaction in Coca-Cola and Tesco.

Both Coca-Cola and Tesco consider customers’ satisfaction their major business goal. According to the Coca-Cola’s business objective, the company “strives to create value for consumers by meeting their beverage needs with diverse product offerings, and by identifying ways to connect consumers to each other, their communities and our brands.” The company has a peculiar vision of its products benefit for the mankind: “The Coca-Cola Company exists to benefit and refresh everyone it touches.” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/ annual_other_reports.html). Management of the company strives to offer the freshness to the consumers in every single activity of the company.

Tesco has a similar strategic goal: “Creating value for customers, to earn their lifetime loyalty.” (Business Strategy. Retrieved on April 20th from source: http://www.tesco.com). According to the company’s managers, this strategy implementation can be achieved through the following steps: understand customers better than anyone; be energetic, be innovative and be first for customers; use our strengths to deliver unbeatable values to our customers; look after our people so they can look after our customers. (Business Strategy. Retrieved on April 20th from source: http://www.tesco.com).

Despite the fact that both companies adapt their goals for the benefit of consumers, there is a difference between their strategies. Coca-Cola Company produces its own products; therefore it increases the variety of products according to its customers’ needs. It also has direct control of quality of beverages it offers. The company’s consumers are thus satisfied with its own efforts. For Tesco, this task gets more complicated to some extent. The supermarket does not participate in the production of the goods which it sells. There is no way for it to contribute to the quality of products which it offers. Tesco can only ensure all of the products it sells come from suppliers whom the company trusts. Tesco needs to provide close investigations of product control in order to ensure its business goals are satisfied. It also needs to analyze the consumers’ needs similar to the way Coca-Cola Company does. However, unlike Coca-Cola Company, Tesco managers need to look for new partners if they see consumers are not satisfied with the variety of products.

Task 2.

1. The role of management in the increase of Tesco performance.

Due to the well-planned activities which management of both companies takes, their performance during the last years has been very high. For example, Tesco has a tendency of its turnover, number of stores and selling space increasing through 2000-2004 (figure 3).

Figure 3. Tesco performance during 2000-2004.

The major contribution to Tesco performance was done by its management. There are many actions which were taken by the company’s management to increase its performance during the last 4 years. First of all, the management devoted many efforts to building the channels of distribution of the company. In supermarket industry, it is very important to pay enough attention to the distribution channels. The quality of buildings in which the good are being sold, the variety of production and its high quality are building-blocks for the company’s success in the market. Tesco management has ensures logistics specialists employed by the company are very knowledgeable and are able to control the distribution very carefully. The management of the company has also done a very good job in signing contracts with suppliers for the stores. Tesco has contracts with many suppliers who offer the goods of the highest quality. However, the managers need to check the goods arriving even from suppliers with whom the company already has steady relationships. The strategic goal of the company which consists in satisfying the needs of consumers is achieved through quality control on all the stages of the planning process.

The company’s management also devotes very much attention to expanding its activities into different countries in order to obtain a large share of market there. The strategic goal of satisfying the consumers in other countries is more difficult to achieve because people in different countries require different variety of products and oftentimes have different requirements for the quality of products. For example, in those countries where the quality of goods is very high, it is particularly important to monitor the quality of the products. In European countries quality control needs to be much more severe than in Middle East for example. However, the goods offered by the supermarket in the Middle East might be very different from the goods offered in Europe due to different needs of people.

Besides quality control, the company also does its best to provide very efficient pricing strategy in order to attract customers. The pricing strategy which is applied by the company deals with offering the best possible price for the goods which are being offered. The supermarket realizes that by making the prices too high for the customers, they are not going to increase the number of their consumers. Therefore, it is much more efficient to make sales prices just a bit higher than prices which the supermarket had to pay to the supplier. The large-scale sales are going to bring large profits to the company in a long-run. Tesco has applied this pricing strategy many times and it always worked.

The compensation policy which the company offers also serves its business objectives. In order to achieve the best customer satisfaction, it is necessary to ensure the employees of the company offer the highest level of services. It is not easy to achieve a high level of services if the employees do not get adequate compensation. The company has been very efficient in the recent years in giving all kinds of bonuses to its employees. The people who work for the company know that they need to have the highest level of skills. However, they also know that they are always guaranteed adequate compensation for the services which they are offering. The environment in the company is very beneficial for the employees because they are allowed to express their ideas and often even make improvements in their activities according to their own needs. The strategy of empowerment used by the company’s management is very efficient for the performance of the company.

It is possible to conclude that Tesco management has been very efficient in ensuring the strategic goals of the company are met on all levels of the planning process. The management has taken into consideration all of the major highlights which it needed to maintain in order to make the company profitable. The strategic goals of the company are currently implemented to the fullest with the help of activities which the company provides.

2. Coca-Cola and its major financial indicators.

Coca-Cola Company had very high performance during the last years. For example, in 2004, its unit case volume reached 19.8 billion is comparison with 17.1 billion in 2000 (Figure 4). This indicator speaks for the high performance of the company.

Figure 4. Unit case value of Coca-Cola Company in 2000-2004.

The Coca-Cola Company has raised the larger part of its income in Europe, Eurasia and Middle East in 2004, according to the data in figure 5. The European market is becoming more and more important for the company in the recent years. The reason why the management has made emphasize on the European market is that the market in North America can hardly be expanded anymore. The problem is that most people in North America who could make a choice for Coca-Cola products have already made it. There is no chance to significantly increase the number of customers. At the same time, the market in Europe and Middle-East Asia is very large. Besides, there is not as much competition in it as it is in the market in North America. It was a very wise decision of Coca Cola management to expand its activities to the Europe, Eurasia and Middle East market. However, it is necessary to note that it is not easy for the company to keep its existing share of the market due to the differences in European and Eastern traditions in comparison with American traditions. In order to keep the share as large as it is now, it is very important to make sure all of the marketing analysis in those countries is done on the highest level.

Figure 5. Operating revenues and income of Coca Cola in 2004.

The major goals of the company are achieved through building Coca-Cola brand as the most unique brand in the market. With the help of this policy, loyalty of customers can be guaranteed. “As we have expanded over the decades, our company has benefited from the various cultural insights and perspectives of the societies in which we do business. Much of our future success will depend on our ability to develop a worldwide team that is rich in its diversity of thinking, perspectives, backgrounds and culture. Coca-Cola is the world’s most inclusive brand, and Coca-Cola must also be the world’s most inclusive company.” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/annual_other_reports.html).

Coca-Cola Company’s management has also developed a very efficient dividend policy for its investors. Due to the efforts of the managers, the value of the company’s stock continues to rise. This attracts many new investors in stock. During the last year, some decline in stock value has occurred but it is a temporary phenomenon (figure 6).

Figure 6. Year-end market value of common stock.

In order to stop the tendency of stock value decline in the company, management has decided to concentrate on the activities which have always brought the largest revenues to the company Coca-Cola Company offers a large number of products which are different from its original products (for example, Vanilla Coke versus original Coke). However, in order to destroy the declining tendency of stock value, the company has decided to focus on the original products more. Coca-Cola Company has come across this problem many times in the past. It was discovered by the management that concentration on new products was not efficient. They were good to attract some new customers, but in order to keep the company’s existing customers, it was important to keep producing the same original products. Only by focusing on loyal customers, it is possible for the company to maintain its large success in the world market. Focus on new customers is also important but the highest priority is keeping the old customers. The management of the company also states that integrity is particularly important for their success and increase in stock value: “nothing is more important to our success than integrity. This begins with insisting on absolute quality for every one of our products, and acting with a strong sense of accountability in everything we do.” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/annual_other_reports.html).

3. Coca-Cola Company and its strategic goal implementation.

In order to achieve all of the company’s goals, its management has set the following priorities to be followed by all of the company’s employees:

o“We will actively cultivate a diverse, rewarding culture that encourages our people to develop to their fullest potential, assuring enjoyment and satisfaction in the Coca-Cola workplace.

oWe will intensely promote innovation as an explicit priority in every aspect of our business, including the structures of our business.

oWe will seek genuine, trusting relationships with all our constituents. We will focus especially on the people who buy our brands, appealing not only to their shared values, but also to their differences.

oWe will rejuvenate the basic brand-building nature of our company, with focus on brand Coca-Cola.

oAt the same time, we will broaden our historical portfolio of brands, products and services.
We will work with our bottling partners with clear respect for the interdependent nature of our relationship, actively supporting their efforts to evolve business structures that work best for them.

oWe will collaborate creatively with those who sell our products in the marketplace, developing relationships built on mutual success, not only from our brands, but also from our services” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/annual_other_reports.html).

The company also achieves its strategic goals through the employment of loyal and skilful employees. They make the company as profitable as it is now. They help it to serve the interests of the consumers. As the company’s management states, “the heart and soul of our enterprise has always been our people. Over the past century, Coca-Cola people have led our success by living and working with a consistent set of ideals. While the world and our business will continue to change rapidly, respecting these ideals will continue to be essential to our long-term success.” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/annual_other_reports.html). The company has ensured employees working in it received adequate compensation for their work.

It is also made sure by the management that employees of the company have strong connections with employees of all the Coca-Cola’s partners. Besides, warm relations need to be established with consumers. The strategic goal of the company to satisfy the interests of consumers and offer them a refreshing taste in the products in all of their activities can be achieved only through the establishment of firm relationship among employees and consumers. “Coca-Cola people have always known that building and nurturing our relationships with other people and the world around us is an essential part of our work. No matter how big or complex our business becomes, we must always demonstrate complete respect for each other. As the world becomes more interconnected, yet more firmly rooted in local pride, recognition of our interdependence with our stakeholders becomes even more essential.” (The Coca-Cola Company. 2004 Annual Report. Retrieved on April 20th from source: http://www2.coca-cola.com/investors/annual_other_reports.html).

4. Evaluation of Coca-Cola and Tesco achievement of their strategic goals.

It is possible to conclude that Coca-Cola Company’s strategic goal of satisfying the needs of its customers has been implemented with the help of activities which the company provides. The managers of both Tesco and Coca-Cola Company have contributed very much to the development of their companies. The current situation in the companies show that they have increasing sales and profits. This tendency means that the customers of the companies are very satisfied with the products which they obtain. The loyalty of the customers is particularly important for both companies. As it was discovered, the strategic goals of both companies are based on the consumer orientation. Both companies consider consumers’ reaction to their products particularly important for the success of the company. Due to the fact that consumers remain loyal to both Tesco and Coca-Cola Company and annual sales of both companies increase, it is necessary to evaluate the strategic goal implementation as very successful. In order to continue the positive tendency in the future, it is very important for both companies to maintain the quality of products they offer at the highest level. For Coca-Cola Company, it is necessary to combine traditional products with new brands. For Tesco, it is important to maintain the quality of products received from suppliers and distribution channels.


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