Coca-Cola Company risk

Risk in Business

Risk is the potential for loss. It is the chance of losing something important. Risk in business is the likelihood that an organization will suffer losses as a result of or as a result of its activities and surroundings. A company’s potential for underperforming and having low profitability is increased by risk. Risk is brought on by things like competition, governmental rules, and per-unit cost. One of the businesses that is always exposed to risk is Coca-Cola. It is a multinational business with operations in more than 200 nations. It produces, sells, and markets syrups and concentrates for nonalcoholic beverages. Atlanta, Georgia serves as the location of its headquarters (Coca-Cola, 2017). Some potential risks that Coca-Cola faces include competition, health, economic, and regulatory risks all of which threaten to hamper the company’s operations.

Competition

Coca-Cola is facing intense competition from other established brands such as Pepsi, which is the company’s largest competitor. These competitors are manufacturing and marketing beverage products that are competing with Coca-Cola’s products in either quality or price (Moniruzzaman, 2015). With this competition, the market for Coca-Cola’s products is reducing which leads to a reduction in profit made by the company. Coca-Cola is aiming to expand to another profitable sector of the nonalcoholic beverage industry and rejuvenate their market and innovation to maintain their brand loyalty and share and manage the risk of competition (Coca-Cola, 2017).

Health Concerns

Coca-Cola also faces the risk posed by health concerns among its consumers. There have been increased government and public health awareness campaigns that aim to sensitize consumers on the health problems caused by high sugar intakes (Assy, et al., 2008). In turn, this gives rise to the possibility of people foregoing Coca-Cola products. In fact, it has led to the reduced demand for the company’s beverages. The company aims at manufacturing new beverage products with less sugar and calories to reduce the health concerns among the people (Coca-Cola, 2017). Also, it is partnering with the government in providing health and nutrition education.

Economic Risks

Also, Coca-Cola, being an international company, faces several economic risks such as fluctuation in commodity prices, foreign exchange rates, and interest rates. Irregular commodity prices affect the sales revenue of the company. When the cost of raw materials increases the cost of beverages also increase, and therefore this leads to a decrease in sales. Earnings and costs incurred by the company are recorded in the currency of the state that company operates from but later consolidated and reported to the headquarter and thus converted to U.S. dollar. The fluctuation of the U.S. dollar, therefore, affects the company’s value of balance sheet and net income (Moniruzzaman, 2015). The political instability of a state where Coca-Cola is operating from is another political risk as the demand reduces.

Conclusion

In conclusion, Coca-Cola Company faces a lot of possible risks both in the market and in its operations. Many of these risks affect the net income of the company and also reduces the profit made by the company. These risks are such as economic risks, health risks and awareness of consumers, evolving customer preferences and increased competition and capabilities in the marketplace. Coca-Cola tries to manage these risks by creating more beverages to meet consumers’ needs, partnering with the government to educate consumers and maintaining steady prices for their products to safeguard their brand and increase the net income.

References

Assy, N., Nasser, G., Kamayse, I., Nseir, W., Beniashvili, Z., Djibre, A., & Grosovski, M. (2008). Soft drink consumption linked with fatty liver in the absence of traditional risk factors. Canadian Journal of Gastroenterology and Hepatology, 22(10), 811-816.

Coca-Cola. (2017). Investors Info: Financial Reports and Information. Retrieved November 28, 2017, from http://www.coca-colacompany.com/investors/investors-info-reports-and-financial-information

Moniruzzaman. L. M. (2015). Audit Risk Analysis of the Coca-Cola Company. Audit Planning, 183-203. doi: 10.1002/9781119201175.ch6