Introduction
Organizations use strategic management to assess their external and internal environments to develop their strategic objectives, directions and strategies as well as how to implement them (Canella, Pettigrew and Hambrick, 2001). The strategic management of the organization that has been analyzed is Coca Cola Amatil Australia. The corporation is one of the largest bottlers of non-alcoholic beverages in Asia Pacific region and has its headquarters based in Sydney, Australia and is listed on the Australian Stock Exchange. Apart from bottling beverages, the company also produces, distributes and sells a diverse product range. The most prominent products that it distributes include Fanta, Sprite, Coca Cola, Diet Coke and Coke Zero (Coca Cola Amatil, 2012). The business also states that it employs approximately 15,000 people, has over 265 million consumers and is a leading shareholder in Coca Cola since it holds 30 percent of its shares (Annual Report, 2011).
Evaluation of Strategic Analysis Tools
A number of tools are available for organizations to determine their external and internal capabilities, opportunities and threats. One such famous tool is Porter’s Five Forces Model. Michael Porter has designed this simple but powerful tool to help organizations understand where power lies in a business situation since it helps the companies to understand the strength of their competitive positioning and the position that the company is thinking of moving into (Kotler, 2009). This particular tool assumes that there e five important forces which determine company’s competitive power in a certain situation. These five forces are: supplier power that is how easy or difficult is it for suppliers to drive up the prices, buyer power which reflects how easy is it for buyers to force prices down, the number and capability of competitors in the industry or competitive rivalry, threat of substitution that is the presence of alternates which consumers might purchase and lastly, threat of new entrants depending on how easy is it to enter the market.
The other famous tool that is used by companies to understand the external environment and their capabilities is the PEST analysis. This model helps companies to understand various aspects of the environment that they are going to operate in so that the company can decide the best strategies that it can use (Drummond and Ensor, 2005). Four factors are taken into regard in these particular tool namely political factors, economic factors, social factors and technological factors. Political factors cover the formal and informal rules under which companies must operate like the employment laws, tax policy, environmental regulations and political stability whereas economic factors take into regard the economic growth and different economic indicators that determine the purchasing power of consumers (Stimpson, 2002). Social factors include population growth rate, attitudes and beliefs whereas technological factors help the companies understand how technologically advanced the society is and technological incentives that it offers (Kotler, 2009).
Other tools that are present to help organization in strategic management are balanced scorecards. These have been used mostly to learn about four aspects: finances to find out high level financial goals customers that are how they see the company internal business processes and lastly learning and growth (Daft, 2008). Balanced scorecards have been criticized, however, due to technical flaws.
Strategic Analysis of Coca Cola Amatil Australia
Internal Analysis of the Company
The company’s internal analysis is important to conduct since it will give an insight of the company’s finances, its workplace management, business process and technological developments.
As shown in the Annual Report (2011) of the organization, Coca Cola Amatil has portrayed commendable financial performance in the fiscal year 2011. The company had generated revenues of 4801.2 thousands in Australian Dollars but the cost of goods sold increased by 4 percent in the same year due to change in inflation rates and exchange rates.
The company has created a number of competitive advantages for itself which includes a large customer database and efficient processes that are cost effective and up to date. Along with that, the company also has taken great care to invest in corporate social responsibility since it produces packaging for its products that can be re-used so that damage to the environment is eliminated (Coca Cola Amatil, 2012). Along with that, the company has also taken up an initiative to reduce carbon footprint of the company by 22 percent by marketing PET plastic beverages (Malhotra, 2012). Another strong competitive advantage that the company has created itself is that it is investing in new technologies and is introducing them within the workplace like the fact that the company switched to SAP technologies when the need arouse for them (Coca Cola Amatil, 2012).
Coca Cola Amatil is performing within an industry where large spaces and warehouses are required by companies to store the bottles and different packages before they are dispatched (Coca Cola Amatil, 2012). The organization currently has the best stores and warehouses for its products since it has collaborated with Swisslog. Swisslog was able to provide the company with excellent spacious warehouses keeping intact the health and safety necessities that the company has to maintain according to the FIFO quality and delivery requirements (Leo, 2010).
Since Coca Cola Amatil is in close asoociation with the giant Coca Cola Company, its marketing techniques are excellent. One such marketing tool that Coca Cola Amatil adopted was “Share a Coke Campaign” where the company enabled people to share Cokes across borders, an innovative idea that has never ever been introduced globally before (Malhotra, 2012).
Lastly, Coca Ciola Amatil is a great advocate of promoting diversification within its workforce. The company has not only set quotas for gender and disable people but has also taken into regard the need to include indigenous population in its workforce since it set 150 job targets for them separately (Annual Report, 2011).
Coca Cola Amatil has hence made sure that internally the business is strong and competitive so that it can achieve its strategic objectives.
Porter’s Five Forces Model
Coca Cola Amatil is one of the most highly recognized brands of the world (Annual Report, 2011). Its Porter’s Five Forces is as follows:
a) New Market Entrants: Entrance is considered easy for new companies in an industry if the barriers to entry are low (Kotler, 2009). However, in the industry where Coca Cola Amatil operates, the barriers are high. This is because the cost of setting up a bottling and distribution company is expensive and the companies also need to heavily invest in technologies which further increases the cost of setting up a business. Along with that, the barriers to exit the market are also high since closing a large company with such investments is difficult and may result in losses.
b) Threat of Substitutes: A number of substitutes are present in the market since Coca Cola Amatil only produces and distributes the product range of Coke Company. These substitutes range from juices to coffee and tea.
c) Buyers’ Power: It has been noticed that consumers try to search for most cost effective products as possible (Azam, 2009). Similar is the case in this scenario. If the company increases its process, the consumers will switch to other brands easily.
d) Supplier Power: The supplier power within the industry is low since Coca Cola Amatil is a large company and it is providing large businesses to its suppliers. Along with that, the company can switch to other suppliers if a single supplier increases its costs since CCA has the capacity to do so.
e) Capability of Competitors: The number of competitors that exist in the industry is low since it is not easy to enter into a business like this. However, the competitors that are present like Pepsi Co. do pose a huge threat to the company as it is a large corporation with up to date technical facilities present.
PEST Analysis
It has been further observed that Australians are now becoming more health conscious than ever before since the consumers are not only following healthy diets but have also reduced the quantity of food and drinks that they consume (Export Guide, 2012). Additionally, Coke as a brand has matured within the Australian market resulting in loss of consumers for the company and it has been further predicated that food and beverage industry will slow down to a CAGR of 5.3 percent (Barclay and Brand-Miller, 2011; Export Guide, 2012).
PEST analysis and Porter’s Five Forces have given clear indication of where Coca Cola Amatil stands in the Australian market. The company is a recognized brand that has established its operations firmly within Australia and has little or no threat from any new competitors. However, consumers are pulling out of this particular industry and switching to healthier alternatives which Coca Cola Amatil does not provide and the company is also incurring high costs while conducting business within Australia.
Strategic Recommendations
Coca Cola Amatil is one of the leading brands in Australia. The company has created a number of competitive advantages which can be reflected in its financial performance and customer data base. It should nevertheless consider some of its strategic options since they are not in sync with the changes in the external environment. The areas where the company should work are that it should control its increasing costs, prevent consumers from switching to other substitutes and take into regard the changing economic indicators.
Prior developing the strategic recommendations, understanding the company’s vision is essential. The vision statement of Coca Cola Amatil is “to be the leading company in the industry”. This means that the organization is aiming for not only a large customer database but is also determined to provide quality products (Daft, 2011).
Coca Cola Amatil has proven that it understands consumer needs and wants since it has introduced product ranges in the past that have been immensely liked by its consumers (Annual Report, 2011). The company therefore has created a competitive advantage for itself since it the potential to reach out to its consumers. The first strategic recommendation therefore, proposed is that the company should aim to bank the changing customer needs. The consumers within Australia are demanding healthier drinks as discussed earlier. CCA therefore should introduce products that are healthier and attract this particular market segment. The company owns the right to distribute and manufacture a number of Coca Cola’s products. Nonetheless, it does not possess the right to distribute or manufacture Minute Maid, one of the leading brands in the world owned by Coca Cola. Minute Maid is considered healthy and has been liked by consumers worldwide (Minute Maid, 2012). Including a brand like that in its product range will be beneficial for the company.
The economic indicators for Australia have clearly indicated that due to high inflation rates, high unemployment rates and changes in income tax rates, the disposable income of a common man in Australia has reduced (Australian Bureau of Statistics, 2012; Tax Rates, 2012). Coca Cola Amatil should thus, come up with strategies that work even in an economy like this. The first smart strategy that the company can adopt is that it alters its packaging. It has been proposed by Greenleaf and Raghubir (2006) that particularly for drinks, juices and snacks, consumption levels have been noticed to increase if the company redesigns its packaging or increases the packaging sizes that it previously offered. Large packaging sizes have been observed by consumers to provide more quantity as compared to the prices that have been charged which encourages them to purchase the bigger packets as compared to the smaller ones. Introducing such a strategy will therefore work for Coca Cola Amatil in an economy like Australia. Another strategy that the company can use to attract consumers is through acknowledgment of high inflation rates by providing discount offers where the company cuts up the prices of its products to match consumers’ expectations (Kotler, 2009).
A strategy that has worked well for companies worldwide is co-branding (Daft, 2008; Daft, 2011; Kotler, 2009). Co-branding has a number of advantages, one of which is that the companies share their consumers with each other thereby increasing the number of consumers for themselves. Apart from that, through co-branding, companies also share costs and risks (Rueket, Qu and Lou, 1999). Coca Cola Amatil is suggested to co-brand one of its products with another company for instance its Diet Coke with a company like Nike. By doing so it will be emphasizing that Diet Coke is a better alternative for health conscious people who want to remain active in their work and lives.
Supply and distribution network is essential for an organization like Coca Cola Amatil since it manufactures and distributes products both. By maintaining its supply chain, the company will also ensure that its costs are reduced. One such method is adopting lean production since it will help the company to not only cut down its costs but will also improve its delivery times and reduce the waste that it produces (Meredith and Shafer, 2009). Along with that, since the company purchase raw materials, it should closely inspect inbound logistics to eliminate problems in future.
Since the company is going through a phase whereby its consumers are switching to other substitutes, it should thus, find those markets or segments that are still untouched and where the company has not reached out yet; in other words, the company should adopt market development strategy (Lynch, 2003).
Since the company is operating in several countries, a number of risks are present in the external environment that can affect the company’s profitability. One such risk is change in laws in different countries, political instability, recession or unavailability of workforce due to different reasons (Stimpson, 2002). Another prominent risk that the company can encounter is cross communication risk. Planning for this type of risk has not been mentioned in the Annual Report (2011). Cross communication risk is such that can range in different perspectives like non verbal communications, language and dialects. The company should therefore, plan a risk management plan thoroughly and this particular blue print should be communicated to its workers and especially to different Heads in different countries so everyone is prepared if this exacting risk strikes the company (Banks, 2006).
Bottling and beverages industry requires technological innovations throughout to stay in competition, to reduce costs and in the recent times to meet environmental regulations. Such a changing environment means that the employees of Coca Cola Amatil should be trained to adjust to the changes in the company’s internal and external surroundings. This is because a rigid and inefficient workforce will fail to easily operate the new machines or alter their attitudes when required. CA should facilitate these changes by providing training and mentoring sessions and encouraging open communication within the workplace (Daft, 2008).
Conclusion
Importance of strategic management has been outlined throughout the report since a company was analyzed so that better strategic recommendations can be provided in the current situation if necessary. Coca Cola Amatil is a company that has been almost successful in its strategic management. The areas where the company lacked is that it has not taken initiative to fulfill changing consumer demands and it has not been able to curtail its costs despite being such a large organization. Nevertheless, the company has still maintained its brand image, is an advocate of both corporate social responsibility as well as introducing new technologies within the workplace keeping in mind the health and safety of its employees. The strategic recommendations have been proposed keeping in mind the company’s ability to invest in new strategies and its popularity in the market.
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