Risk management is crucial, and the main reason is that it helps identify, control, and assess threats. Thus, allowing the maximization of profits. Coca-Cola is a public listed company, and its headquarter is located in Atlanta, Georgia, United States. The company has more than five significant risks that impact the company’s business performance, cash flow, and financial condition. The risks include; changing consumer mindset, continuously evolving competitive and commercial landscape, financial risk, strategic stakeholder, and quality and food safety. Managing the risk properly determines the success of Coca-Cola company. The paper will provide an in-depth discussion on how the risks are essential to the company and how they can be managed.
A change in consumers’ mindset is one of the risks Coca-Cola company faces. The company faces the risk of changes in consumer mindset and preferences on the type of beverage they manufacture (Chua et al.,2020). Coca-Cola beverage contain sugar and thus, there have been a great concern on the amount of sugar it contains and the effect it may have on the body. Hence, there have been increased health awareness concerning the beverage.
The risk of change in consumers’ preferences has a potential impact on Coca-Cola. The company may lose the trust of consumers. In addition to that, in some countries, the company may face discriminatory taxation to minimize the production of the beverage. Nevertheless, the company has used the risk to its advantage. The risk is significant to the Coca-Cola company because it has focused on product innovations. In addition to that, the company has invested largely in strengthening of low calories hence increasing product consumption.
To mitigate or overcome the risk, I would introduce consumer engagement programs. It involves creating a strong relationship with the consumers. Engaging consumers not only help in adding value to the brand and helps to keep the brand at the front of the consumer’s mind. Thus, through engagement, the customers will be loyal, and the company will experience high revenue.
Financial risk may also have a great impact on the company. It involves the risk of deportation in the financial conditions of the company. The financial risk may lead to loss of stakeholders’ trust. In addition to the loss of confidence among the stakeholders, it may also lead to increased cost-based. Financial risk has significant importance to the company; due to the high financial risk, the company has established a pension governance committee that helps strengthen and monitor all the functions and retirement benefits. Thus, through the pension governance committee, the Coca-Cola company can retain stakeholders’ trust. To mitigate the risk, I would promote the growth of cash flow. The change can be achieved by increasing sales activities. Hence, the company will have strong creditworthiness, thus reducing financial risk.
A strategic stakeholder relationship is another risk the company faces (Zhang, 2019). A stakeholder relationship is the practice in mutual benefits between third party groups and individuals who are having stakes in the company are forged. Stakeholder relationship is very important, and the main reason is that allied stakeholders from a third party can provide critical information by educating decision-makers, hence helping to neutralize the company’s main competitors. The potential impact the risk may pose to the company is the decrease in sales that may result from suspension in any of the trademark rights due to the decline in support for sales promotion. The risk is very high, meaning that it is imperative to the company; the main reason is that the company will have to maintain and improve the cooperative relationship with all the strategic stakeholders. To mitigate the risk, I would significantly increase management focus and implement a partnership model. In addition to that, I will also increase joint partnership projects with the various strategic stakeholders.
The continuous evolving commercial and competitive landscape is also another risk (Nsomba, 2021). Evolving commercial landscape entails risk of changes in the retail market. The changes may be caused by the development of private brands that offers alternative beverages drinks. The risk may have an impact on the company by leading to the loss of the consumer base (Nsomba,2021). Thus, by reducing consumers, the company may experience a reduction in sales and consequently loss in revenues. To mitigate the risk, I would ensure that products that meet the standards of consumers are produced. Thus, enhancing the consumer base. In addition to that, I would ensure the expansion of online channels because the commercial landscape has evolved so fast that most people prefer internet mail orders. Hence, creating online channels will help meet the consumers’ preferences.
Coca-Cola also faces quality and food safety risks (Panigrahi, 2020). The risk involves the quality of the products and their safety to consumers. The risk may have a significant impact on the company, such as losing trust from consumers, resulting in a decline in earnings. The mass disposal of the product may cause deterioration due to poor quality. Employees’ awareness of high quality is very important to overcome the risk. The understanding will enable them to process and produce high-quality products.
As truly depicted above, Coca-Cola faces various risks that have a significant impact on its operations. Quality and food safety risks may result in loss of trust from consumers, resulting in a decline in earnings. In addition to that, the financial risk may also result in a financial breakdown, and proper risk management is significantly required to mitigate them.
Chua, J. Y., Kee, D. M. H., Alhamlan, H. A., Lim, P. Y., Lim, Q. Y., Lim, X. Y., & Singh, N. (2020). Challenges and solutions: A case study of Coca-Cola company. Journal of the Community Development in Asia (JCDA), 3(2), 43-54.
Nsomba, G. (2021). The Coca-Cola Company/Coca-Cola Beverages Africa Merger: Lessons for Robust Regional Competition Enforcement. The Antitrust Bulletin, 0003603X211045436.
Panigrahi, V. (2020). An Organisation Study On The Coca-cola Company (Doctoral dissertation, CMR Institute of Technology. Bangalore).
Zhang, Z. (2019). Risk Analysis of Two Leader Drink Company: PepsiCo and Coca-Cola. Asian Business Research, 4(3), 42.