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MBA 599 SLU Coca Colas Major Strengths and Weaknesses Discussion

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Part 1(a)

This exercise will give you experience in developing an IFE Matrix and using Financial Ratios. Identifying and prioritizing factors to include in an IFE Matrix fosters communication among functional and divisional managers. Preparing an IFE Matrix allows managers to articulate their concerns and thoughts regarding the business condition of the firm. This results in an improved collective understanding of the business.

Challenge

Prepare      IFE and Financial Ratios for the Coca-Cola Company. For the Financial      Ratios make sure to use the Coca-Cola revenue statement and balance sheet.      There are additional resources found in Table 4-8, find as many Coca-Cola      financial ratios as possible. Record your sources.

What       strategies do you think would allow Coca-Cola to capitalize on its major       strengths?

What       strategies would allow Coca-Cola to improve on its major weaknesses?

Part 2(a). This is a student discussion response. 

When firms are auditing their internal functions, one of the analytical tools they use is an Internal Factor Evaluation (IFE) Matrix. An IFE Matrix analyzes strengths and weaknesses of a company; in order to better execute on strengths and mitigate weaknesses (David et al.,2019). The IFE Matrix is a great analytical tool to help companies see if the strategies they are implementing or not implementing affect the company. Another way to look at the finances of a company is to look at a summary of key financial ratios. Summary of key financial ratios breakdown finances using five different types of ratios liquidity, leverage, activity, profitability, and growth (David et al.,2019). 

From the outside looking in most would say Coca-Cola is a successful brand and their strategies work. I believe the reason most consumers would think this is because most people know the brand, but like any company Coca-Cola has its own problems as well. Focusing on the company’s internal factors and strategies, there are a couple things you notice are certain areas key factors revolve around; shareholders, product, marketing, and finances. After picking you 20 internal factors, 10 strengths and 10 weaknesses, and weighing and rating these factors, the IFE Matrix shows that Coca-Cola is close to above the average. The IFE Matrix revealed a weighted score of 2.96, but I believe that this weighted score is trending downward based on finances and market competition.  

Based on the summary of key financial ratios and IFE matrix I believe one strategy that Coca-Cola could implement would a one focused on diversifying their portfolio. This strategy would help with their reach, which would improve finances for the company and shareholder.  

Part 2(b). This is a student discussion response.

Coca-Cola Company IFE & Financials

           In order to develop a strategy that builds on the strengths of the Coca-Cola Company and mitigates, or overcomes, the company’s weaknesses, an internal factor evaluation (IFE) matrix was develop (see the IFE spreadsheet below). Within the spreadsheet are 20-factors, 10-strengths and 10-weaknesses. The 20-factors identified were developed through research, primarily taken from the The Cohesion Case and The Coca-Cola Company SEC filings. Weights were applied to each factor, higher weights for factors of importance and lower rates for factors with less importance. Ratings were given to each factor, a “4” if the response to the factor is superior and a “1” if the response is poor. The three factors with the highest weight are ‘brand equity’, ’21 different billion-dollar brands’, and ‘lack of product diversification’. Clearly, the Coke brand has equity because of the company’s history and longevity. Also, having 21-billion-dollar brands puts Coca-Cola in a competitive position. One weakness identified was the lack of product diversification as it pertains to food/snack products. The total IFE score for the company is 2.47, which is below the average 2.50. Two strategic considerations for the company based on this matrix is to explore developing a food/snack product line emphasizing the Coke brand, increasing R&D to develop healthier drinks, and assessing whether to decrease producing of the diet soda line of drinks.

           The financial condition of Coca-Cola is best determined by conducting a financial analysis. A financial analysis will indicate the company’s strength and weaknesses in the investment, financing, and dividend areas (David, 2019, pg. 108). In the “Key Financial Ratio” matrix below, you will find a comparison of the financials between Coca-Cola and their strongest competitor PepsiCo. The information within this table was found in the S&P Net Advantage using ‘Key Statistics’ and ‘Ratios’ under both company names (accessed through the Saint Leo Library, under ‘databases’ and S&P NetAdvantage). Four areas within the financials I would like to highlight (red font), the Quick Ratio, Total Debt to Ratio, Net Income Margin, and Revenue Growth over the Prior Year. The quick ratio from 2021 through 2023 indicate that Coca-Cola is in a better position to cover current liabilities with liquid assets should it be necessary. The total debt to equity ratio indicates that PepsiCo is carrying much more dept then Coca-Cola. The net income margin is lower for PepsiCo indicating their operating expenses, and other expenses, are high. Revenue growth has steadily declined for Coca-Cola (although gross profit has stayed the same), where PepsiCo was able to recover from a decline in 2022. Coca-Cola financials are currently strong in that the company has lower debt, is better positioned to liquidate quick assets to pay debt, if need be. However, Coca-Cola cannot sustain a steady decline in revenue year after year. Coca-Cola should likely take on some short-term debt to raise business development capital in order to develop a food/snack product and a more healthier beverage product line.