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Strategic Management Analysis for Coca-Cola

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Strategic Management Analysis for Coca-Cola

Coca-Cola is a beverage company whose main product is Coke. The company mainly manufactures carbonated soft drinks. At the moment, the company has been able to set up distributors across the globe. The strategy has enabled them to gain the needed competitive advantage and stay afloat in business. They face stiff competition from companies such as Pepsi, which is equally a beverage company. Determining the financial worth of the company will provide insights into its performance and capabilities. For instance, knowing the company’s assets can be influential in determining the company’s capabilities to pay off its debt. Four methods can be used to determine Coca-Cola’s fiscal worth. The following information obtained from section 10-k, which shows the various financial documents, will assist in the determination of financial worth. The vital information includes

  1. Net Income = $6,434,000,000
  2. Goodwill = $10,236,000
  3. Intangible Assets = $7,007,000
  4. Equity = $16,981,000
  5. Earnings Per Share = $1.51
  6. Stock Price = $54.51
  7. Outstanding Shares = $4,299,000

Step 1

The Net Worth Method

Net Worth = Shareholders Equity – (Goodwill + Total Intangibles)

= $16,981,000 – ($10,236,000 + 7,007,000)

= $289,000

Net Income Method

Net Income = Total Revenues – Total Expenses

= (6,434,000,000*5)

= $32,170,000,000

The Price – Earnings Ratio Method

Price – Earnings Ratio = Market Price per share/Earnings per share * Net Income

= ($54.51/$1.51) *6,434,000,000

= 232,263,139,072.00

The Outstanding Share Method

Outstanding Share = Issues Stock – Treasury Stock OR

Number of Shares Outstanding * Stock Price

= $4,299,000 * $54.51

=$234,338,490

Step 2

Average = Summation of the Outcomes of all Methods/4

= (289,000 + 32,170,000,000 + 232,263,139,072 + 234,338,490)/4

= $66,166,941,640.5

Step 3

The net worth method is beneficial to the company as it indicates the level of debt. Also, it is possible to compare the debt and the assets that have Coca-Cola. From the outcomes of the calculation, the company has more assets than debt. This is a good indication that Coca-Cola can effectively pay off both its short- and long-term debt. From the net worth method, it is evident that the intangible value of the goods and assets surpasses the equity value (Fred and David, 2017). Therefore, in the process of attracting market value, the method will not be the most effective. The use of the income method will be more appropriate. That is because the method shows an increase in the income value by approximately five times. Therefore, the income method will be the most effective while indicating the value of the market (Fred and David, 2017). It is of great interest for the managers to implement the second method when compared to the first. That is because the method is more promising than the first one.

However, the first method is still beneficial to the company. The main gain is that it can be used to effectively compare the level of debt in the company and the assets that are present. From the computation, it is evident that Coca-Cola has more assets than debt. That indicates that the company can pay its liabilities both in the short- and long-run (Ramirez and Hal, 2019). That is because the outcomes of the calculation are positive. A positive outcome indicates that the company is performing well. When the figure is much higher, it is an indication that the company can effectively create a balance between the debts and the assets.

The information obtained from the calculation is very crucial to the management and executive team of Coca-Cola. Coca-Cola utilizes an active portfolio strategy to maximize its wealth. In the portfolio strategy, the organization’s managers take advantage of the prediction techniques to ensure the organization’s performance level increases and is high compared to the classified portfolio. For instance, in the case of an active joint stock, some of the strategies included are the per-earnings ratio and the way of predicting the company’s future earnings (Shaukat and Shahzad, 2019). For the bonds that are actively managed, the components will entail predicting the future spread within the sector and the interest rates. The strategies used in the portfolio will include a prediction of the exchange rates in the security market and the local interest rates.

Executive-level management will be in charge of providing information that will guide the financial performance of the organization. They are also in charge of achieving non-fiscal goals, including conducting various corporate social responsibilities and creating images that will brand the organization’s products (Ramirez and Hal, 2019). Defining a basis of measurement is essential in measuring the sensitivity of the value of a corporation through the various fiscal prices. The flow can be within a single period, such as the maturity analysis or stock, where several periods capitalize on the value, such as the duration of the investment and portfolio. Also, the idea of the significant production cost is vital in ensuring the company is against losses from the various risks. The purchase of insurance can increase the value of the stockholders through;

  1. The prevention of underinvestment. That is a problem faced by many companies that have issues with their financial solvency or liquidity. The threat is the number of unlimited losses.
  2. There is a risk of making transfers from non-owners’ stakeholders in the company, such as the managers and the employees. The strategy is an issue in the bearing of risk.
  3. The reduction of taxes.
  4. The efficiency of assessing losses is achieved by claiming the process and preventing the risk from taking place.
  5. Also, all the required requirements for regulation are met.

After determining the most suitable method, it will be easy to create a portfolio strategy for Coca-Cola. The first step is to select a financial tool that will be included in the portfolio. The various financial instruments are also known as securities. To have an effective and efficient portfolio, one needs to assess each of the securities. Coca-Cola believes that an active portfolio will create good returns based on the level of risk. The creation of a portfolio starts with an assessment of some of the company’s factories in the past to determine the return index (Ramirez and Hal, 2019). Once the factors have been identified, the index will be decomposed into strategies that managers can use to identify the risk profile. The identification is made based on the index factor. In a passive portfolio, the manager will have to decide to craft a portfolio different from the risk profile that will allow the company to be exposed to more factors.

References

Fred, R. & David, F. (2017). Strategic Management: A comparative advantage approach. Pearson. Print.

Ramirez, V. & Hal, M. (2019). Net Worth Calculator: Find Net Worth. Retrieved from Net Worth Calculator: Find Your Net Worth – NerdWallet.

Shaukat, Z. & Shahzad, A. (2019). Impact of Portfolio Strategies on Portfolio Performance and Risk. International Journal of Business Administration, 10(1): 73-86.

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Question 

Strategic Management Analysis for Coca-Cola

Assignment Details:

Step 1: Calculate the financial worth of Coca-Cola based on four approaches:

Strategic Management Analysis for Coca-Cola

Step 2: Get an average of the four methods. In a dollar amount, how much is Coca-Cola worth?

Step 3: Write an analysis of findings.

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