A story of global success
No study of business success in the twentieth century would be complete without mentioning Coca-Cola. Coca-Cola is the product which perhaps best exemplifies global marketing. The Coca-Cola trademark is recognised by 94 per cent of the earth’s population and Coca-Cola is the second most universally understood phrase after OK. It is not only instantly recognisable but it can be found almost anywhere from petrol stations and shops in Central Africa, to small villages in mountainous areas on all five continents.
The first Coca-Cola was developed according to legend, by Dr John Styth Pemberton in a three-legged brass pot in his backyard. If you look at the first outdoor advertisement for Coca-Cola which appeared in the nineteenth century you can see that the company is based on a core strength which has an enduring quality. Coca-Cola is ‘delicious and refreshing’. This theme has been a key feature of advertising for the drink ever since and more recently the message was that ‘Coke is the real thing’ i.e. anything else which purports to be similar, is at best, simply a pale imitation.
The Coca-Cola Company has a number of important soft drinks products the most well known of which are:
- Diet Coke
Key aspects of Coca-Cola´s business
The Coca-Cola Company’s business policy provides an object lesson in many important principles of business. For example:
- Focus on the best lines – Coca-Cola concentrates on its most profitable lines. In 1984 77 of Coca-Cola’s operating income came from soft drinks. Today the figure is 97 By selling off businesses not sharing the same attractive financial fundamentals as the soft drink business Coca-Cola now operates only in the area of high-return business.
- Reinvestment – Re-investing profits is the key to ongoing business development. If profits are made today it is important to make sure of a base from which profits may be made tomorrow. In the 199Os Coca-Cola concentrated its profits on re-investment. In 1983 the company’s dividend payout ratio was 65 i.e. most of its profits were paid out as dividends to shareholders. Since then Coca-Cola has been increasing dividends at a slower rate than earnings growth, so today, 6O% of profits ($66O million in 1994) were available for reinvestment.
- Focus on the consumer – All successful businesses today are based on focusing on the consumer. If a company meets the requirements of its consumers (and indeed exceeds these requirements), then you have a sure-fire recipe for success.
An important measure of success is the volume and value of sales that you make.
The worldwide success of Coca-Cola is illustrated in the chart below: