External and Internal Environments of the Coca Cola Company - Case Study Example

? External and Internal Environments number Introduction The Coca Cola Company is one of the largest organizations in the world in the beverages industry. The company stared its journey in Atlanta in the year 1886 with the initiative of founder John Pemberton. By 1895 the drink became popular among all the states in the United States of America (Coca-Cola, 2011). Currently the company is one among the fifty most admired companies in the world and ranks 3rd in the list of most powerful brands after apple and Microsoft (Forbes, 2013a). The Company ranks 59 in the list of Fortune 500 companies. Total revenue earned by the company in the last year (2012) was 46,542 USD and profit was 8,572 USD (CNN, 2013). According to some reliable news reporting agency, the Coca Cola Company is one of the biggest public companies in the world at present (Forbes, 2013b). This paper aims at studying the environment in which the company operates, evaluating its core competencies. Recommendations have been made on the basis of the results obtained from the study. General environment The macro environment in which a company operates puts significant effect on the company’s management and its performance in the market. It is external to the company and refers to the forces that influence the organization from outside. External environment is of two types; specific environment and general environment. While specific environment is directly related to the goals and business objectives of the organization, general environment affects the organization on a broader aspect, such as its economic, political or legal, technical, socio-cultural points of view and the environmental or natural conditions that are related to the activities of the company (Daft, 2011, p. 71). Economic factors Economic factor is one of the most important factors that influence business enterprises. On one hand it affects business decisions, while, on the other hand it affects performance level of the company in the local and international market. The global economic slowdown has not left Coca Cola untouched. The developed market in the United States is recovering slowly. The company has followed positive pricing strategy in this scenario. This has lead to rise in revenue in the North American segment. However, due to appreciation of dollar, there has been fall in exports to the other international operating groups of the company, such as, Asia, Europe, Africa, Latin America and the Pacific region. It has cast a negative impact on the net operating revenue for the country (Coca-Cola Company, 2012a). In the last quarter of 2012 the company shares incurred loss of 2 percent (The value investor, 2012). Socio cultural aspects Sales and revenue is affected significantly by the socio cultural conditions prevailing in the society in which the product is sold. The lives of the people in the developed country like the United States is fast paced and hectic. Hence carbonated drinks, such as the Coca Cola products, are well accepted within the population in both the young population and the older generation. However, in recent times, health conscious of the common mass is rising. Sugar-sweetened drinks are considered to be the cause of health problems, such as obesity (Coca-Cola Company, 2012a). People, particularly, youngsters are becoming concerned of these issues, which is in turn affecting their consumption rate. Reduction in consumption is leading to drop in revenue. Forces of competition There are five forces of competition that helps in making industry analysis. The most important forces of competition that affect Coca Cola Company have been described below: Bargaining power of suppliers The basic ingredients used for the manufacturing of the beverages by the Coca Cola Company are sugar, water, caramel and fruit juice and essence. In the USA there are many suppliers of these raw materials. Hence the company can choose the best supplier for each product and make a tie up with that company. Bargaining power of suppliers is low; the company can utilize this fact to its benefit. Bargaining power of buyers The beverage industry is throbbing with existing firms and also new firms are entering the industry at a rapid pace. Therefore there are a large number of products in the market that customers might choose from. Bargaining power of buyers is high, which puts pressure on the Coca cola Company to maintain its position in the society in terms of product quality, attractiveness of packaging and price. The company should utilize its resources and exploit its capabilities so as to cater to the evolving preferences of customers. Threats and opportunities Threats The Coca Cola Company faces strong external treat from the industry in which it operates. The beverages industry offers profitable business opportunity to existing and new entrepreneurs. Hence existing companies are in a quest to expand their business further and new firms are entering the market. The Coca Cola produces a wide variety of products. However, since the past decade the company is facing a strong debate regarding the healthy attribute of some of the beverages it produces. The population is becoming concerned about their health and propagation by the government and other social organizations is further increasing common awareness about the ill effects of the drinks. Besides, some beverage products have been identified by international food quality control organizations that have been found to violate quality standards. This has earned a bad name for the company in the industry and has lead to fall in demand by a small percentage. High competition combined with risk of losing customers’ confidence poses the most seriou8s threat. The company has to innovate marketing strategies so that its products can be distinct recognized by the target customers. It might opt to follow the blue ocean strategy in order to develop its own market and break away from the existing competition. Additionally, the company should take serious steps to oversee its quality control polices in order to gain trust of the customers. Opportunities The Coca Cola Company enjoys high brand value in the international market. This provides a good platform for the company to increase its sales. Besides, due to the huge turnover and the sustainability of the company the investors are inclined in investing this company by buying its shares. The company also has the opportunity to make a joint venture with several other profit making companies. Due to the immense popularity of the Coca Cola Company these companies find it beneficial for them to set up association with this company. Governments in the countries in the segments other than the North American segment also show interest in taking steps to allow expansion of this company to their countries. Lowering of corporate tax is one step forward to invite the company to start operating in these countries. Coca Cola should grab this opportunity of international expansion and tread into those places that are still not exploited by its competitors. Strengths and weaknesses Strength The company manufactures several products that it sells under several sub brand names. It sells different liquid drinks, such as, sparkling beverages, juice, packaged drinking water and other juice drinks. Some of the brands that sell these products are Coca Cola, Coca Cola Light, Coca Cola freestyle, Fresca, Minute Maid, ciel, Simply Orange, Smart water, vitamin water and some others (Coca-Cola Company, 2012b). This caters to a wide customer base. Besides, the company is financially strong. In terms of market value this company ranks 26 in the international beverage industry. Its market value is $173.1 billion (Forbes, 2013b). Forbes has named Coca Cola as one of the biggest public companies in the world possessing assets worth of $86.2 billion and holding the 79th rank in this list (Forbes, 2013b). It has a strong marketing team and a talented R&D team that helps the company to retain the position of a market leader. The company should utilize this benefit in order to innovate at lower cost of production and market them in the target market. This would help them to overcome the effects of recession and capture new markets that are emerging out of such effects. Weakness The Coca Cola Company has diversified its products and introduced energy drinks in the beginning of the twenty first century. This has been a late initiative than the competitors of the company. Red Bull has been the biggest seller of energy drink and Coca Cola’s ‘Burn’ or ‘Full Throttle’ looked very much similar to Red Bull products in terms of packaging, price and even taste. Besides, many brands of Coca Cola are not popular (Wordemann, Buchholz & Wiley, 2010, p. 45). In order to cover up for the lag the company has to establish its own rules of the game and make these products as a market place reality and not merely substitutes of Red Bull. The company should embrace aggressive marketing strategies to develop likening for this product among the target group and integrate the idea that it is an energy drink and not just soda loaded with extra caffeine. Value chain analysis The value chain analysis helps in understanding the capabilities that are internal to a business organization (Hitt, Ireland & Hoskisson, 2010, p. 51; Overbeck, 2009, p. 26). Primary Activities Inbound Logistics Availability of products depends heavily on the suppliers that transport goods to the outlets. The company has strong agreement with 250 bottling operations that are responsible for the delivery of its products to the restaurants, retail outlets, movie theatres, and street vendors (Coca Cola, 2013). Operations Bottling operations are made by the associated companies that pack the beverages and create a linking platform for individual customers and retailers. Marketing The company has a strong marketing team. It makes celebrity endorsement for its products. It also makes advertisement on the television, magazines and the social media. Customer Service The Coca Cola company offers good customer service. It has also introduced low cost customer service facilities. It takes feedback from its customers through online polls and caters to the needs of the customers. Secondary Activities Procurement The company obtains sugar, juice extracts and caramel from its suppliers to manufacture high quality soft drinks. Human Resources Management Employees are the most important part of the company and it has good employee polices that are aimed at enhancing their technical and soft skills. Technology/R&D The company highly depends on technological advancement for manufacturing the carbonated beverages and energy drinks. Infrastructure The company has a well built infrastructure facility that consists of owns advanced manufacturing and well connected distribution networks. Conclusion The Coca Cola Company is one of the most well known brands in the consumerist world. It is one of the most admired companies and makes a high annual turnover. This paper shows that the company enjoys several benefits owing to its position in the market. However, simultaneously, it also faces a steep competition from other large beverage manufactures in the industry. The company has adopted diversification strategy in order to improve its performance and maintain its position as the market leader. Recommendations made in this paper are aimed at helping the firm utilize its strengths and opportunities, overcome its weakness and deal with threats so as to emerge successful in the long run. References CNN. (2013). Fortune 500. Retrieved from http://money.cnn.com/magazines/fortune/fortune500/2012/full_list/ . Coca Cola. (2013). Suppliers. Retrieved from http://www.coca-colacompany.com/our-company/suppliers/ . Coca-Cola Company. (2012a). United States Securities and Exchange Commission Washington, D.C. 20549: FORM 10-K. Retrieved from http://www.coca-colacompany.com/annual-review/2012/pdf/form_10K_2012.pdf . Coca-Cola Company. (2012b). Brands. Retrieved from http://www.coca-colacompany.com/brands/the-coca-cola-company/ . Coca-Cola. (2011). The Coca Cola Company heritage timeline. Retrieved from http://heritage.coca-cola.com/ . Daft, R. L. (2011). Management. Connecticut: Cengage Learning. Forbes. (2013a). Coca-Cola. Retrieved from http://www.forbes.com/companies/coca-cola/ . Forbes. (2013b). The world’s biggest public companies. Retrieved from http://www.forbes.com/global2000/list/#page:1_sort:5_direction:asc_search:Coca_filter:All%20industries_filter:All%20countries_filter:All%20states . Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2010). Strategic management: Competitiveness and globalisation, concepts. Connecticut: Cengage Learning. Overbeck, S. (2009). Supply chain management - A critical analysis. Munchen: GRIN Verlag. The value investor. (2012). Coca Cola - Global economic slowdown and strong dollar are hurting. Retrieved from http://seekingalpha.com/article/937991-coca-cola-global-economic-slowdown-and-strong-dollar-are-hurting . Wordemann, W., Buchholz, A. and Wiley, N. (2010). The impossible advantage: Winning the competitive game by changing the rules. New Jersey: John Wiley & Sons. Read More