International Business Robust Analysis and Discussion †Sample

Question: Discuss about the International Business for Robust Analysis and Discussion? Answer: Introduction: This assignment is about robust analysis and discussion of an esteemed organization which regularly features in business journals and documents. The report is all about illustrative and comprehensive write-up about The Coca Cola Company and its financial details. The author has extensively researched about financial as well as non-financial data of the Coca Cola Company. Coca Cola is a leading consumer goods company in UK. The company is highly famous for the flagship product Coca Cola. The branding strategy and formula of the company were bought by Asa Griggs Candler, who created the Coca Cola company is the year 1892. The organization manufactures syrup content which has extensive territory regarding bottling and marketing. The performance graph of the company is laid below (coca-colacompany.com, 2015). A comparative graphical analysis stated above reflects on the performance of the Coca Cola with regard to players or competitors namely, Archer Daniels Midland Company, Brown-Forman Corporation, Campbell Soup Company, ConAgra Foods, Inc., Constellation Brands, Inc., BG Foods, Inc., Dean Foods Company, Dr Pepper Snapple Group, Inc., Darling Ingredients Inc., Herbalife Ltd., The Hershey Company, Hormel Foods Corporation, Kellogg Company, The J.M. Smucker Company etc. Rationale for selection: Coca Cola has been on the forefront in the industry and a major player in the domain of consumer goods for over an extended period. The overall business operations of Coca Cola define simplicity and easiness. The company has never deviated from its core ethos and business values as promulgated by the founders of the organization (Aula and Heinonen 2016). Throughout the decades, Coca Cola has managed to sustain the values and ethics in the industry. Coca-Cola has remained consistent when communicating one robust and powerful message: enjoyment. Persisting with simple slogans the likes of Enjoy and Happiness never fades out of style and attracts attention of masses quickly across the length and breadth of the world. Measurement of Cola Cola's achievement can be simply done (Ir.cokecce.com 2016). Their success is reflected by the product quality and figures are reflected in sales. Currently, Coca Cola has lead the industry by having the most popular and consumed soft drinks in world (Ba ah 2015). Critically speaking, Coca Cola had its share of unsuccessful times. In developed markets, the growth of the booming drinks industry from the 1970s to the 1990s came to a standstill. At that period, the competition was intensifying from players other players. Adding to that, consumers were becoming more health conscious and wary of health drinks. Other environmental issues cropped up then (Balmer 2012). Coca Cola devised a strategy of modifying its core product line. It launched Diet Coke or Coke Light thereby adding to revenue and growth. First, growth can be found in mature or stable categories. The success of the organization underlines that. Second, companies should be flexible concerning their business model and functions. Hence, it is indeed worth learning from Coca Cola about how to do business in keeping with various issues and concerns yet flourishing the way it has (Pendergrast 2013). Performance Analysis: For analysis of the performance of Coca Cola of Ratios has been made asunder. Profitability Ratios 2015 2014 2013 2012 2011 Return on capital employed Net Operating Income/ ( Total Assets - Current Liabilities) 13.81% 16.22% 17.24% 18.95% 14.87% Return on Equity Net Income / Equity 28.77% 23.41% 25.88% 27.51% 27.37% Net Profit Percentage Net Income / Net Sales 16.60% 15.45% 18.38% 18.76% 18.42% Gross Profit Percentage Gross Profit / Net Sales 60.54% 61.20% 60.88% 60.25% 60.86% Operating Profit Percentage Operating Income / Net Sales 19.71% 21.07% 22.97% 23.00% 21.82% Liquidity Ratios Current ratio Current Asset/ Current Liabilities 1.24% 1.02% 1.13% 1.09% 1.05% Quick Ratio Quick Assets/ Current Liabilities 0.72% 0.81% 0.90% 0.77% 0.78% Working Capital Management Ratio Working Capital Turnover Ratio Working capital turnover = Net operating revenues Working capital 60.42% 75.16% 13.41% 19.15% 38.34% Capital Structure Inventory Turnover Ratio Cost of Goods Sold/ Inventory 5.80% 5.77% 5.62% 5.84% 5.89% Stock Holding Period ( Days) 365/ Inventory Turnover 12.58% 11.77% 11.14% 11.18% 12.01% Stock Market Performance Price/ Earnings ratio EPS/MPS 0.04% 5.07% 5.23% 5.76% 5.53% Dividend Yield Dividend per share / Current Share Price 3.13% 3.29% 2.97% 2.95% 3.02% A SWOT analysis will demonstrate the performance of Coca Cola Company last few years is laid below: Strengths Quality of product offered to the customers is high. Coca-Cola has strong position in the UK market. It has been able to sustain a healthy financial state of affairs, and pays high dividends to the investors. Coca Cola holds world's largest market share in beverages which amounts to about 40%. The company enjoys having one of the most loyal consumer groups across the globe. Coca Cola being the largest beverage manufacturer in the world has significant powers over its suppliers to attain the lowest price. Coca Cola is increasingly aiming its operations on Customer Social Responsibilities through varied initiatives like energy conversation, recycling, and packaging which boosts the firm's social image and provides an edge over its competitors in the industry. Weakness Lack of diversification in products and services is an important shortcoming. Coca Cola offers only syrup based items as products. It should introspect over the introduction of new products to diversify its business operations (Bes-Rastrollo et al. 2013). Sometimes, the firm is accused of adverse publicity by drawing criticism from various quarters over the high level of water usage in the products. Opportunities The consumer goods business in UK has the high rate of growth in the future. Individuals of different culture reside in UK. The firms or MNCs in UK showcase an increase in number of customers each year. This has increased the business for the same domain. Due to several awareness of demand to fight obesity and health issues, the need for nutritious food products has considerably risen (Nguyen and Nguyen 2015). Therefore, Coca Cola has enormous opportunities for the introduction of food items and calories which are low fat in nature. Consumption of soft drinks and beverages is still on a high as far as BRIC nations are concerned. The firm could have inroads into the market of those countries. Threats 1. Coca Cola company operates in a highly competitive market. It has heavy competition from other FMCG industry. The players namely, PepsiCo and others are fast catching on Coca Cola. Hence, its imperative for the firm to devise new strategies and plans and work out the plan subsequently. Consumers across the globe are becoming health conscious and mainly avoid soft drinks which are carbonated in nature. The problem here is that the firm primarily serves carbonated items. Few of Coca Colas products have adverse health concerns. Hence, some governments of respective nations are contemplating to pass legislations which would mean that the firm would have to provide information disclosing health information on its label. The financial performance of Coca Cola has exposed strong growth in terms of profitability index. Growth has been witnessed in the EPS of shareholders. The rate of divided has also demonstrated steady and stable growth over the said time. The Summary and break-up of analysis of ratios above is discussed below: Profitability Ratios Years 2015 2014 2013 2012 2011 Return on capital employed Net Operating Income/ ( Total Assets - Current Liabilities) 13.81% 16.22% 17.24% 18.95% 14.87% Return on Equity Net Income / Equity 28.77% 23.41% 25.88% 27.51% 27.37% Net Profit Percentage Net Income / Net Sales 16.60% 15.45% 18.38% 18.76% 18.42% Gross Profit Percentage Gross Profit / Net Sales 60.54% 61.20% 60.88% 60.25% 60.86% Operating Profit Percentage Operating Income / Net Sales 19.71% 21.07% 22.97% 23.00% 21.82% The profitability position of an organization can be derived from profitability ratios. It include return on the capital employed, Net Profit margin , return on equity, , Gross Profit margin, and operating profit Margin. Here, key indicators as far as profitability ratios are concerned are Net Profit Percentage, Return on Capital Employed, G/P Percentage and Operating Profit Percentage respectively. Coca Cola has experienced a steady and reasonable growth regarding profitability. Amongst all, G/P rate achieved the best reading (Thomas 2014). Liquidity Ratios Years 2015 2014 2013 2012 2011 Quick Ratio Quick Assets/ Current Liabilities 0.72% 0.81% 0.90% 0.77% 0.78% Current ratio Current Asset/ Current Liabilities 1.240% 1.02% 1.13% 1.09% 1.05% Liquidity ratios state the ability of the organization to repay its current liabilities. Current ratio and the quick ratio are the two liquidity ratios which portray information regarding the liquidity position of organization (Financials.morningstar.com 2016). The quick ratio excludes the inventory. The liquidity position of the organization has been sound. The company has not being able to repay the current liabilities in an efficient manner with the current assets. It reveals that firm has used its inventory effectively. Working Capital Management Ratio Years 2015 2014 2013 2012 2011 Working capital turnover Ratio Net operating revenues Working capital 60.42% 75.16% 13.41% 19.15% 38.34% The working capital turnover has been deducted on dividing net operating revenues by the working capital. In Coca Cola, the working capital turnover of the company has been impressive in the year 2014 (Kraft and Schwartz 2015). However, the same had a decline which lasted between 2011 till 2013. The preceding year has seen a fair result which is better than years of 2011 to 2013. Capital Structure Years 2015 2014 2013 2012 2011 Inventory Turnover Ratio Cost of Goods Sold / Inventory 5.80% 5.77% 5.62% 5.84% 5.89% Stock Holding Period ( Days) 365/ Inventory Turnover 12.58% 11.77% 11.14% 11.18% 12.01% The capital structure consists of Inventory turnover and stock holding period. The capital structure of Coca Cola provides with a sound picture of both. The inventory is computed by dividing Cost of goods sold (CGS) by stock. It has experienced a steady run over the period of five years (Hwang et al. 2015). The stock holding period has been impressive in the year 2015. Otherwise, the remainder of years has witnessed a moderate performance. Stock Market Performance Years 2015 2014 2013 2012 2011 Price/ Earnings ratio EPS/MPS 0.04% 5.07% 5.23% 5.76% 5.53% Dividend Yield Dividend per share / Current Share Price 3.13% 3.29% 2.97% 2.95% 3.02% The stock market performance or activity of a firm is figured out by results of price earnings ratio and dividend yield (Gardner et al. 2012). Price earnings ratio is attained by dividing earning per share by market price of the share. Whereas, the dividend yield has experienced a stable growth for over five years. Nonfinancial performance indicators: Employee Satisfaction- Coca Cola can use the following nonfinancial performance indicators. The firm has to maintain its worthiness amongst the employees. They put strong value to meet the objectives of the employees (Reddy et al. 2016). The company has maintained healthy relation with investors. It has recruited quality employees. The same have been trained via graduate programs thereby maintaining a pool of efficient human resources. The organization is spending funds for training of the employees. Despite adverse economic climate, the company has invested in training the employees. The company has come up with innovative solutions to increase their effectiveness in decision making. It has led to enhancement of its collaboration with the supply chain in order to deliver better quality product to customers. The company has special custom in place to uphold the culture of the organization. The group is boasts of maintenance of its health and the safety standards within its ranks. It will manage issues by the innovative policy. Corporate governance: The organization understands the importance of corporate governance. Coca Cola has never entered into any kind of unethical practices with other organizations (Morrison and Humlen 2015). It has placed definite value on distribution of the rights amongst various participants in group. The various decisions-making process of the organization is governed by rules of corporate governance (Russell et al. 2016). The objectives of the groups are laid by the norms of corporate governance. The company has individual ethos and values. Various mechanisms are followed for monitoring performance and actions of the organization. CSR: The corporation has focused on nonfinancial area i.e. enhancement of its image in the public domain (Strand 2013). This will increase the confidence of the company in the realm of interested parties, and customers and others will build healthy relationship with the community. The objectives of the organization will enable it to sustain its brand image (Karnani 2013). All the activities should generate positive and encouraging feedback from the media and others by and large. Limitations of Ratio Analysis: Ratio analysis can be used for a comparison of financial health in a quantifiable manner and other financial data of the company along with other firms and helps the researcher to gain an overview of cash flows, results and financial statements. Nevertheless, there are certain limitations which are laid as follows. All the figures obtained from ratio analysis results from the actual historical results. There may be deviation of the results in future. However, ratio analysis can be used onpro formainformation and make a comparison the same to historical results for internal uniformity. In the event of change of rate of inflation during the period, this means that the numbers cannot be compared across diverse periods. For instance, if the rate was 100% in a year, then the sales would have revealed to have doubled in the next year, whereas in reality there is no change in sales. This offers erroneous reading going forward (Van Calster et al. 2016). The information obtained from a partic ular financial statement line item might be computed in a different manner earlier so that ratio analysis on the trend line does not give rise to the same information throughout the entire leaning period. A company might modify the basic operational structure to an extent that the ratio will be computed previously and if it is compared to the same ratio today would offer an ambiguous results. For example, if one had implemented constraint analysis system, this may result in reduction in the investment in the fixed assets whereas a ratio analysis might conclude that the company is letting its fixed asset base become excessively matured (Leibold 2015). Different organizations have different strategies for recording a same transaction amount. For example, in Coca Cola, one may applywritten down value method of depreciationwhile the other company uses straight-line of depreciation. Hence it may be hazardous to conduct a ratio analysis for comparison between two firms that have different strategies. For example, Coca-cola might be follow low-cost strategy, and it has willingness to acknowledge lowergross margin level in exchange for market share (Marketwatch.com 2016). Conversely, a company belonging to the same industry may focus on a better customer service strategy where the prices are much higher, and gross margins are much higher, but it will not attain the levels of revenue of first firm. Various companies operate in different industries each having different environmental conditions such as market structure, regulation etc. These factors turn out to be significant that comparing two separate organizations from different industries could be misleading. Hence following a uniform ratio analysis structure for Coca Cola along with its players can be misleading. Financial accounting information is influenced by the estimates and the assumptions. Accounting standards provide allowance to different policies of accounting , which plagues comparability and hence the r atio analysis is not that useful for situations.. Conclusion and recommendation: PepsiCo and Coca-Cola are reputable organizations with reasonable outlook which is positive, but PepsiCo has been enjoying a firm growth. Towards the end of June 2015, Coca Colas income decreased by 1.8%. The net income over the same period fell by 17%. PepsiCos income upped by 4.0% during the time period of June 2015, while rise in net income was 8.6%. Coca Cola showcased delivery of 7.7% CAGR than the last decade, which has been superseded by PepsiCo's 8.6%. The researchers assume that Coca Cola's income to rise by 5.8% in the year 2016, by 4.22% amounting to CAGR during the next 5 years. The analysts estimate around 8.6% growth in EPS for PepsiCo, followed by a 5.9% CAGR over the next 5 years (al and Adams 2014). Coca cola and PepsiCo cannot be considered to experience high rate of growth, but PepsiCo has seen definite edge in the historical as well as the expected growth in case of top line and profits (Yan and Mei 2015). On the other hand, Coca Cola has seen higher margins in comparison to that of PepsiCo. The cost of equity capital is lower than the cost of debt capital. Various investors plead with high debt capital structures for stable firms. Leverage ratios do not specify that which company is superior to the other, but investors and other interested parties should be conscious that PepsiCo carries more debt than Coca Cola (Omar et al. 2014). (For stock related graph, please refer to Appendix 1). The performance of Coca Cola is better than that of PepsiCo in terms of liquidity position, although both companies function with same liquidity and none are mainly uncertain. Coca Colas current ratio is maintained at a higher level than that of PepsiCos and both perform efficiently. Coca Colas quick ratio somewhat higher than PepsiCos quick ratio. Risk-averse investors do not find the indicators attractive. Financial risk is not seen in any of the cases. Both companies can be said to be financial healthy position , and Coca-Cola has enjoyed a slightly better position in the financial state of affairs detailed structure. This overall, lays the fact that. While the numbers of challenges facing Coca-Cola are profuse, this group does have a good deal of assurance for the future. Its overall size, force and fiscal resources have it well situated to take advantage of important possession targets. Plus, the companys brand appeal and underwriting will see it remain as a top-tier beverage pr ovider in near future. Overall, the business has great prospects References: Aula, P., and Heinonen, J., 2016. The Power of Corporate Purpose. InThe Reputable Firm(pp. 83-98). Springer International Publishing. Baah, S., 2015. The Coca-Cola Company.Strategic Management. Balmer, J.M., 2012. Corporate Brand Management Imperatives.California Management Review,54(3), pp.6-33. Bes-Rastrollo, M., Schulze, M.B., Ruiz-Canela, M. and Martinez-Gonzalez, M.A., 2013. 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