Friday, July 13, 2012

Coca Cola Acquisition Essay

Coca Cola Acquisition Essay

Capital projects, being the important part of every organization’s business, always accompany the key steps and processes within it. Oftentimes the company needs certain acquisitions in order to perform successfully on the market sector. Whether it is new equipment, new product, or advertising campaign, new acquisitions very often are related to definite risk. Let us look at the Coca-Cola Company in order to identidy any problems related to its capital projects.
Coca-Cola is one of the most popular brands nowadays, with long history of development and success. Operating on the market for 115 years for now, Coca-Cola Company underwent many challenges on its way to global recognition. The number of capital projects this company accomplished is truly enormous. Most of the decisions made on high corporate level were tightly connected to certain percentage of risk. Therefore, almost any serious acquisition of Coca-Cola Company was analyzed from the standpoint of possible problems it may cause. To my mind, the most significant and risky acquisition of the Coca-Cola Company was launching new product line in 1985. Being already a popular brand all over the world, the company decided to change the recipe of its major product, Coca-Cola drink (Allen, 1995, p. 82).

This decision could lead to multiple problems for the company and its brand while getting it funded, as such a significant step as new product line demands much time, research, and funds. It was made as a response to the company’s major competitor, Pepsi, which included more sweet ingredients in Pepsi-Cola. Although the volume of sales of Coca-Cola drink were similar to Pepsi, the company still decided to change the recipe in spite of problems related to this decision. First and major risk, to my mind, was a possibility of losing customers. Many people all over the world enjoyed the taste of Coca-Cola drink, and they may not have liked the taste of new one. This could decrease sales of product and lead to major losses for the company. Moreover, according to Hays (2005), this problem could result in privileged position of Coca-Cola’s main competitor, Pepsi-Cola, on the world market of beverages. However, despite all funding problems related to the company’s decision, Coca-Cola launched the New Coke drink with a new advanced formula.

Unfortunately, the release of New Coke became a failure. The managers could not predict all the problems this acquisition has brought. Most of the customers claimed that changing Coca-Cola taste was equal to rewriting the American Constitution, demonstrating affection and nostalgia to the old Coke recipe. This campaign even caused several law suits demanding the Old Coke recipe to be promulgated. The Coca-Cola Company had to return to the old formula of drink, suffering from certain funding problems. However, this mistake has given a precious experience for the Coca-Cola Company, demonstrating the importance of careful evaluation of risks and problems while considering new acquisitions.

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