Give the the Coca-Cola Company Financial Results Analysis……….
The Coca Cola Company is one of the earliest firms in the non alcoholic drinks market having been established more than 125 years ago in the United States of America. It has continued to expand and its drinks are today consumed in more than 200 countries worldwide. Its dominance in the market has been driven by elaborate and efficient marketing strategies coupled with good quality products that has seen it edge out most of its rivals in this market. It has a commanding market share in almost all the countries where it operates. It has continued to make very impressive profits and this has continued to drive its revenue base to very impressive levels.
2011 4th QUARTER COMPANYS FINANCIAL PERFORMANCE
In the company’s reports for the fourth quarter of the year 2011, the company reported very encouraging results. Revenue increased by 5% compared to the previous quarter. Also the operating income rose by 68% to further indicate the strength of this company. The earnings per share increased by 10%. The comparative currency neutral net revenue rose by 6%. This net revenue growth was greatly influenced by the acquisition of the Coca cola enterprises who were a strategic partner in the North American market. The North American market has continued to show great growth potential. This is because majority of the population in this region are switching to non alcoholic drinks and also it is estimated that by the year 2020, North America will have the third largest teen population after India and China. The teenage population is estimated to be 30 million teenagers by that year (Douglas, P5). This will be a very huge market in terms of sales volumes and market share growth.
DRIVERS OF PROFITABILITY
There are the main factors that led to the continued impressive results by the company and key among them is the strong brand image of the company’s products. They have made their products be known in very many countries through aggressive marketing strategies by their marketing teams throughout the world. Their products are known and recognised trademarks every where. They have also continued to make very good quality products which have very few competitors in the market place. This has led to brand loyalty among the customers who want to be associated with the product. They have also benefited from flexible and fair labour laws in the United States which is their main market. Flexible laws ensure that it’s easy to operate in the market because the number of regulations that must be complied with are less and therefore market penetration is easy. The US market has also been very stable with very low inflation levels which guarantee market stability. The low costs of entry to the market makes the company invest heavily on other areas like advertising through sales promotions and branding. The company is also able to higher more employees for the execution of its mandate. Due to good performances in its home market the company is able to venture into other markets where it seeks to introduce its products. They will be able to increase their market share and this will eventually lead to dominance of its products over any competing brands in those new markets. The company has also adopted good pricing mechanisms for their products. The packages of the various brands are in complement with their pricing; this ensures affordability to the majority and portability. Most of the consumers of these drinks take them when outdoors and therefore portability will greatly increase their uptake.
These key initiatives will continue to push the performance of these brands to even higher levels in the long run. The company will be meeting most of its targets in all the areas of operations because they will continue to employ optimal management and production procedures which are very important in their operations. This will ensure high profit returns and big market share of their products compared with competitors.
EARNINGS PER SHARE RESULTS
The consecutive earnings per share in every quarter for the year 2011 showed good growth perspectives. The results indicated a consecutive growth of 19%, 18%, 8% and 10% for the first to fourth quarter respectively (Thomson, Investor highlights). All these growth results were above the company’s target. However this is in contrast to 2009 when the earnings were low and were not registering consistent growth. This shows that those who have invested in the company are getting a good return for their investment. A company that posts such good results will continue attracting investors who will want a share of its profitability. Continuous investment in the company by many will increase its capital base. This will make it have enough money to carry out its operations like expansions in to other markets and even seeking mergers and acquisitions. The investors are happy with its performance and are assured of a return on their investment.
The company is very keen on expanding to markets which were previously impenetrable. Markets like Egypt and Pakistan are showing potential growth (Holstein.J, P.1).This is due to the company’s persistence on having a global presence in the non alcoholic beverages market.
As Alan (P.1) asserts, the original markets in the US normally rely on these emerging markets to drive growth. However most of these emerging markets have very unstable currencies and stringent import control regimes. This has been experienced in countries like Brazil although stability is slowly returning (Fayard, P.3). The company should continue investing in these markets through establishing local franchises. This will continuously push their sales volumes and make them realise their targets. They will also have new investors in these markets and their earnings will increase. There should be delegation of decision making to the managers in these regions to meet market timelines and the prices also should be set in comparison to the input costs in those markets. This will cover the company from inflation which ranges from country to country. This will be reflected as more profitability and higher earnings per share.
The Coca Cola Company is a global leader in the soft drinks market and this leadership is clearly shown by its wide presence in many countries. They should make sure they guard this global presence and market leadership through production of quality products and competitive pricing of their goods. This will enhance their dominance and continued presence in many markets. The protection of these markets is key because 80% of their sales volumes come fro outside the US. Therefore these external and upcoming markets will be key determinants of the company’s performance in the future. Any decisions that are made must be arrived at with these markets in mind.
Alan, R (2012) “Coca-Cola confident of Emerging Markets” (Online). Available from http://www.financialtimes.com/ (Accessed on 15th April 2012)
Fayard,P(2011) Market Stability, Winston Publishers Ltd,P.3
Holstein,J (2012) “How Coca-Cola Manages Emerging Markets” (Online ). Available from http://www.strategybusiness.com/ (Accessed on 16th April 2012)
Thomson R (2012) “The Coca-Cola company: Investor Webcasts” (Online) Available from http://www.irthecoca-colacompany.com/ (Accessed on 16th April 2012)
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