Strategic Management Case Study Coca

Report
Strategic Management Case Study
Coca-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
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
In 1943, during WWII
General Eisenhower
requested 10
bottle plants
to be shipped
to them
overseas,
which then
created an
overseas business.
Due to
beverage
companies
copying CocaCola they
began to
manufacture
the contour
bottle in 1916
18861892
19051918
18931904
1984 is when
Joseph Biedenharn
was hired to be
the first to
put the
Coca Cola
in bottles
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
19411959
19191940
In the 1928 Olympics
located in
Amsterdam, CocaCola traveled
with the
team and
began
global
expansion
19821890
19601981
After 70 years, Coca-Cola
added new flavors:
Fanta®, originally
developed in the
1940s and
introduced in
the 1950s;
Sprite® followed
in 1961, with
TAB® in 1963
and Fresca® in 1966
19901999
New beverages
joined the
Company's
line-up,
including
Powerade®
sports drink,
Qoo®
children's
fruit drink
and Dasani®
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 longterm 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
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
2.
External Audit
Industry Market Analysis
Stock Price 2010
70
60
50
40
Coca Cola
Pepsi Cola
Nestle
30
Dr. Pepper Snapple
20
10
0
Coca Cola
Pepsi Cola
Nestle
Dr. Pepper Snapple
Opportunities
1)
2)
3)
4)
5)
6)
7)
8)
9)
Spurring demand for energy drinks, especially in the US where
estimates show about 2 billion.
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.
Bottled water drinking has increased 11%.
European and China market show large potential to grow by an
estimated amount of 7%.
Has the option, but no obligation, to assist bottlers with
promotional and marketing activities ($5 billion in 2010).
55 billion beverage servings are consumed worldwide each day
Global beverage industry is expected to grow from a valued $1.4
trillion in 2008, to $1.6 trillion by 2013.
India currently only consumes 11 8oz servings of Coca Cola per
person per year.
The non-alcoholic ready to drink(NARTD) beverage industry is
expected to grow by 50 billion unit cases by 2020.
Threats
1)
2)
3)
4)
5)
6)
7)
8)
9)
Increasing preference for non carbonated healthy drinks. The Coca Cola soda saw a 5%
volume declines respectively in the carbonated soda brands category.
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.
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.
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.
The primary beverage of Coca Cola is sparkling beverages, the most popular drinks
consumed worldwide, in their respective order, are water, tea, and beer.
Changes in currency rates. Coca-cola uses 74 functional currencies in 2010.
In 2010 had approximately 18,600 associates represented by labor unions.
PEP operating income and revenues both exceeded KO's by .85 Billion and 7.67 Billion
respectively. They are strong competitors in the market
PepsiCo dominated North America with sales of US $22billion,while Coca-Cola only
had about US $7billion.
CPM
KO
Critical Success factors
Weights
Rating
0.0 to 1.0
1 to 4
NSRGY
Weighted Score
Rating
PEP
Weighted Score
Rating
1 to 4
Weighted Score
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
EFE
Key External Factors
Weights
Rating
0.0 to 1.0
1 to 4
Weighted Score
Opportunities
This is spurring demand for energy drinks, especially in the US which
according to the latest industry estimates is about 2 billion
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
0.06
4
0.24
0.04
3
0.12
Bottled water drinking has increased 11%.
European and China market show large potential to grow, growing into
these divisions more will help the revenue sales
Has the option, but no obligation, to assist bottlers with promotional and
marketing activities ($5 billion in 2010).
0.04
2
0.08
0.04
2
0.08
0.05
2
0.1
55 billion beverage servings are consumed worldwide each day
Global beverage industry is expected to grow from a valued $1.4 trillion
in 2008, to $1.6 trillion by 2013
0.06
3
0.18
0.05
3
0.15
India currently only consumes 11 8oz servings of KO per person per year
The non-alcoholic ready to drink(NARTD) beverage industry is expected
to grow by 50 billion unit cases by 2020
0.04
2
0.08
0.05
3
0.15
Threats
Increasing preference for non carbonated healthy drinks. The Coca Cola
soda saw a 5% volume declines respectively in the carbonated soda
brands category
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.
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
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
The primary beverage of Coca Cola is sparkling beverages, the most
popular drinks consumed worldwide, in their respective order, are water,
tea, and beer
Changes in currency rates. Coca-cola uses 74 functional currencies in
2010
In 2010 had approximately 18,600 associates represented by labor
unions
PEP operating income and revenues both exceeded KO's by .85 Billion
and 7.67 Billion respectively. They are strong competitors in the market
PepsiCo dominated North America with sales of US $22billion,while
Coca-Cola only had about US $7billion
Totals
0
0.06
3
0.18
0.06
2
0.12
0.09
2
0.18
0.07
3
0.21
0.07
4
0.28
0.04
2
0.08
0.05
2
0.1
0.05
4
0.2
0.08
4
1
0.32
2.85
Internal Audit
Financial Information
Income Statement
Financial Information
Balance Sheet (1)
Financial Information
Balance 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
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
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
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
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%
Leverage Ratios
Activity Ratios
Profitability Ratios
Growth Ratios
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 and Fanta.
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)
2)
Weak performance in Europe achieving a 0% growth in 2010
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
IFE
Internal Strengths
With revenues of $35,119,000 million, Coca-Cola is one of the largest
beverage manufacturers globally
Coca-Cola owns four of the world’s top five nonalcoholic sparkling beverage
brands including Coca-Cola, Diet Coke, Sprite and Fanta
Weights
Rating
0.0 to 1.0
1, 2, 3 or 4
Weighted Score
3 or 4
0.07
4
0.28
0.08
4
0.32
0.07
3
0.21
0.06
3
0.18
Has ownership interest in its bottling/distributing partners; 23% in CocaCola 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
0.04
3
0.12
0.06
4
0.24
0.05
3
0.15
3
0.18
Sold 25.5 billion cases of products in 2010
Accounted for 51% of U.S. unit case volume, and 50% of non-U.S. case
volume for 2010
In Eurasia and Africa, unit case volume increased 12% in 2010
Coca-Cola has more than 500 brands and 3,500 beverages and products
Coca-Cola sells 1.7 Billion servings of beverages per day in over 200
countries
Coca-Cola generated 8.5 billion in cash from operations in 2010, up 16%
over 2009
0.06
Internal Weaknesses
1 or 2
Weak performance in Europe achieving a 0% growth in 2010
Does not hold number 1 spot for either the water brand or the leading
sports drink
Currently does not hold a snacks segment, where Pepsi Co. has a food
division which creates for 60% of their total revenue
Does not perform best in North America, only accounting for 31.7% in total
revenue in 2010
0.02
1
0.02
0.06
2
0.12
0.07
1
0.07
0.03
1
0.03
Has a high number of current liabilities accounting for 18,508 million
Acquiring Coca-Cola Enterprises (CCE) resulted in assuming additional $7.9
billion in debt
0.02
2
0.04
0.07
1
0.07
Operating income for Europe operations decreased by $50 million in 2010
Interest expense increased $378 million mainly due to premiums paid on
repurchasing long term debt
Common Stock Market Prices decreased between the first and second
quarter in 2010 from $52.23 and $49.47
Other operating expenses grew to $5,959 million in 2010 from $ 5,699
million in 2009
0.03
1
0.03
0.03
2
0.06
0.02
2
0.04
0.02
2
Totals
1
0.04
2.71
Strategy Formation
SWOT Matrix
ST
Strengths
ST
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)
WO
1. Increase sports drink product
sales through sponsorship of
collegiate sports. (W2, W4, O1, O6,
O9)
1. Diversify beverage line by offering
alcoholic beverages. (S1, S8, S9, T5)
2. Increase marketing in Europe.
(W1, O4, O6)
2. Increase R&D spending to research
production methods to ensure that
we are utilizing resources in the most
efficient manner. (S1, S10, T3)
WT
Threats
Opportunities
1.Create a lower calorie sports drink line to
promote healthy drinking habits while still
providing the essential electrolyte balance.
(W2, W4, T1, T2)
2. Diversify products by entering the
healthy snack/snack food market. (W3, T2)
3. Take advantage of the increasing
demand for bottled water by
creating flavored water drops. (W2,
O3, O6, O9)
Weaknesses
Space Matrix
Financial Strength
Ratings
1 Cash Flow
5.0
Price Earnings
2 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
1 Profit Potential
2 Financial Stability
Resource
3 Utilization
Productivity, Capacity
4 utilization
5 Market Entry
6 Growth Potential
7 Extent Leveraged
Industry Strength Average
Rating
6.0
7.0
FS
6
Aggressive
Conservative
4.0
5
4.0
6.0
3.0
2.0
4.6
4
3
2
1
Environmental
Stability
Rating
Rate of
1 Inflation
-5.0
Barriers to Enter
2 the Market
-4.0
Competitive
3 pressure
-2.0
Price
4 Elasticity
-4.0
Demand
5 Variability
-4.0
Price Range of Competing
6 Products
-4.0
Ease of Exit from
7 Market
-6.0
Environmental
Stability Average
-4.14
Competitive
Advantage
1 Market Share
Product
2 Quality
Customer
3 Loyalty
Capacity
4 Utilization
Technologically
5 Advanced
Global
6 Expansion
Product Life
7 Cycle
Competitive
Advantage Average
C
-1.0 S
Rating
-6
-5
-4
-3
-2
-1
1
2
3
4
5
1
2
-3.0
3
-2.0
4
-2.0
-3.0
5
Defensive
6
Competitive
ES
-1.0
-3.0
-2.14
X Coordinate
Y Coordinate
2.43
1.00
6
IS
BCG Matrix
Segments
North America
Revenue
$11,205.00
%rev
39.45%
profit
$1,520.00
%pft
15.31%
$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%
$28,402.00
100.00%
$9,929.00
100.00%
Pacific
Total
Relative Market Share Industry Growth Rate (%)
1.00
4.40%
BCG Continued
Grand Strategy Matrix
Rapid Market Growth
Quadrant I
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Related diversification
Quadrant II
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration
5. Divestiture
6. Liquidation
Weak Competitve
Position
Quadrant IV
1. Related diversification
2. Unrelated diversification
3. Joint ventures
Quadrant III
1. Retrenchment
2. Related diversification
3. Unrelated diversification
4. Divestiture
5. Liquidation
Slow Market Growth
Strong Competitive
Position
Matrix Analysis
Alternative Strategies
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
Unrelated Diversification
x
Retrenchment
Divestiture
Liquidation
IE
2
1
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 different countries prior to
2010
Unrelated or Related Diversification
• We don’t offer a food segment (Unrelated)
• None of our main competitors offer an alcoholic
beverage (Related)
QSPM
Create a lower
calorie sports
drink line/
while still
providing
essential
electrolyte
balance.
Quantitative Strategic Planning Matrix-QSPM
Key factors
External
Opportunities
1. There is spurring demand for energy drinks, especially in the US which according to the latest industry estimates is 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, growing into these divisions more will help the revenue sales.
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 KO 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.
Weigh
t
AS
1 to 4
TAS
4
0.24
2
4
4
2
0.1
0.24
0.2
0.08
0.06
2
0.12
0.06
2
0.09
1
0.06
0.04
0.04
0.04
0.05
0.06
0.05
0.04
0.05
Diversify
Diversify beverage line
products by by offering
entering the
alcoholic
healthy
beverages.
snack/snack
food market.
AS
1 to 4
TAS
3
AS
1 to 4
TAS
0.12
3
0.12
0.12
4
0.24
0.09
4
0.36
3
4
4
2
4
0.15
0.24
0.2
0.08
0.2
1
0.09
4
0.28
2
2
0.1
0.16
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.
total should be 1.0
0.07
0.07
0.04
0.05
0.05
0.08
1
1
1
0.05
0.08
4
4
0.2
0.32
QSPM (2)
Create a
lower
calorie
sports
drink line/
while still
providing
essential
electrolyte
balance.
Strengt
hs
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 and Fanta.
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 generaged 8.5 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.
total
should
be 1.0
0.07
0.08
0.07
0.06
0.05
0.09
0.04
0.06
0.05
0.06
0.02
0.06
0.07
0.03
0.02
0.07
0.03
0.03
0.02
0.02
Diversify
products
by
entering
the
healthy
snack/sna
ck food
market.
1
0.07
2
2
4
Diversify
beverage
line by
offering
alcoholic
beverages
.
0.14
0.12
2
2
3
3
0.14
0.16
0.21
0.18
3
3
2
0.18
0.15
0.12
4
3
2
0.24
0.15
0.12
3
0.06
3
0.18
2
0.06
4
4
3
0.28
0.24
0.28
0.09
1
2.28
2.25
2.82
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
Kellogg Company Net Worth Analysis
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
EPS/EBIT
Assumptions
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
Common Stock Financing
Recession
EBIT
Normal
Boom
7,000,000,000
10,000,000,000
15,000,000,000
-
-
-
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
1.99
2.84
4.26
Interest
EPS
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
EPS/EBIT Continued
Assumptions
Stock needed
5,400,000,000
Stock needed
600,000,000
Debt needed
600,000,000
Debt needed
5,400,000,000
Interest
24,000,000
Interest
216,000,000
CS shares needed
174,983,798
CS shares needed
19,442,644
90% Stock - 10% Debt Financing
Recession
Normal
EBIT
7,000,000,000 10,000,000,000
Boom
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
EBIT
7,000,000,000 10,000,000,000
Boom
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
Projected Financial Assumptions
Capital needed
10,000,000,000
Debt needed
6,000,000,000
Cash Used
4,000,000,000
Interest (estimate)
Tax Rate
Stock Price (Dec. 31, 2010 - year end)
Additional Interest
Dividends Paid $1.83 per share
Kellogg's pays off own liabilities
Kellogg's shareholders are paid off
4%
16%
30.86
240,000,000
4,223,640,000
Projected Financials
Income Statement
Projected Income Statement (in millions)
Total Revenue
Cost of Revenue
Gross Profit
Operating Expenses
Research and Development
Selling General & Administrative
Nonrecurring
Others
Total Operating Expenses
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expense Net
EBIT
Interest Expense
Income Before Tax
Income Tax Expense
Consolidated Net Income
Less: Non-Controlling Interests
Net Income
Basic EPS
Diluted EPS
Basic Average Shares Outstanding
Diluted Average Shares Outstanding
Dividends Per Share
2009
30,990
11,088
19,902
11,671
8,231
289
9,301
355
8,946
2,040
6,906
82
6,824
2010
35,119
12,693
22,426
13,977
8,449
5,502
14,976
733
14,243
2,384
11,859
50
11,809
2011
52,784 15% increase, plus Kelloggs 12,397
21,324 % of revenue, plus Kelloggs 7,108
31,460
17,276 Add Kelloggs 3,299
14,184
6,052
10% increase
20,236
1,221
Add Kelloggs 248, add 240 from financing
19,015
3,042
16% tax rate
15,973
50
Same
15,923
2.95
2.93
2,314
2,329
5.12
5.06
2,308
2,333
6.90
6.82
2,308
2,333
1.64
1.76
1.83
Same
Same
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, plus Kelloggs 1,056
Other Current Assets
2,226
3,162
4,336
30% increase, plus Kelloggs 225
17,551
21,579
21,933
Long-term Investments
6,755
7,585
9,861
Property Plant & Equipment
9,561
14,727
21,537
25% increase, plus Kelloggs 3,128
Goodwill
4,224
11,665
15,876
5% increase, plus Kelloggs 3,628
Intangible Assets
8,604
15,244
Accumulated Amortization
-
Total Current Assets
Other Assets
1,976
Deferred Long-term Asset Charges
-
Total Assets
48,671
18,696
30% increase
10% increase, plus Kelloggs 1,456
2,121
72,921
2,989
90,892
7% increase like previous year, add Kelloggs
720
Projected Financials Balance Sheet (2)
LIABILITIES
Current Liabilities
Accounts Payable
Short-term Debt
Other Current Liabilities
Total Current Liabilities
Long-term Debt
Other Liabilities
Deferred Long-term
Liability Charges
Minority Interest
Negative Goodwill
Total Liabilities
STOCKHOLDERS' EQUITY
Misc. Stock Opt Warrants
Redeemable Pref. Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholders' Equity
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
6,921
6,800
13,721
5,059
2,965
1,580
547
23,872
-
9,132
9,376
18,508
14,041
4,794
4,261
314
41,918
-
10,045
11,176
21,221
18,241
5,033
4,261
314
49,070
10% increase
Add 30% of $6 billion from financing
Add 70% of $6 billion from financing
5% increase
Same
Same
-
880
880
880
41,537
49,278
60,977
(25,398)
8,537
(27,762)
10,057
(27,762)
10,057
Same
Same
(1,450)
41,822
90,892
Same
(757)
24,799
48,671
(1,450)
31,003
72,921
Increases from Net Income, Dividends paid
out
Projected Financial Ratios
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
Strategic Evaluation
Balanced Scorecard
Measure or Target
Time
Expectation
Primary
Responsibility
Industry reports/Market Cap.
Customer Survey
Yearly
Yearly
Marketing Officer
Marketing Officer
Survey
Yearly
2 Service Training # of seminars
Operations
1 Diversify product
line
Acquire Kelloggs Company
Business Ethics
1 Ethics Training # of ethics training sessions
2 Recycling
Recycle 50% of total wastes
Financial
1 Revenues
Increase by 50% each year
Better than
2 Ratio Analysis competitors/industry Avg.
Yearly
People Officer
Administrative
Officer
Yearly
Administrative
Officer
Yearly
People Officer
Yearly
Financial Officer
Yearly
Financial Officer
Area of Objectives
Customers
1 Brand Identity
2 Satisfaction
Employees
1 Employee Moral
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

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