Business Environment of Coca-Cola - Case Study Example

Business environment of Coca Cola Business environment of Coca Cola Introduction Coca Cola company history dates back to 19th century in 1886 when Pharmacist Dr. John Pemberton produced the first Coca-Cola syrup in Atlanta (Coca Cola 2013). The Company engages in manufacture of beverage concentrates, beverage bases and syrups in its bottling facilities and distributes its own brands (Coca Cola 2013). Coca Cola bottling partners are responsible for packaging and distribution of the final branded beverages to the vendors and final customers (Jeffs 2008). Coca Cola daily servings have increased from an average of nine servings at the inception to more than 1.8 billion daily servings per day. Coca Cola employs more than 150,000 people globally and is the leading provider of sparkling beverages, fruit juices and ready to drink coffees and teas (Coca Cola 2013). Indeed, Coca Cola is the largest global beverage company with operations and production facilities spanning six operating regions that include North America, Latin America, Europe, Eurasia and Africa, Pacific and Bottling investments. Coca Cola is geared at refreshing the world through inspiring moments of optimism through its actions and brands (Coca Cola 2013). The company aims at creating value and making a difference through its brands and activities. On the other hand, Calypso Soft Drinks Ltd is committed to the produce and supply of fruit juices and soft drinks in the United Kingdom and offers a variety of beverages such as ice lollies, mineral water ice cubesm, aqua juices, juicy aids, juicy waters, and freezepops (Coca Cola 2013). Calypso Soft drinks aims at satisfying its wide range of clients that include wholesalers, supermarkets, caterers and schools in the UK. The goals, mission and objectives of Calypso Soft Drinks Ltd is to create delicious soft drinks and freeze products that refresh and are tasty to the consumers (Calypso Soft Drinks 2013). The company aims at ensuring high customer satisfaction through providing high quality drinks that are healthy to the consumers especially drinks demanded by the schools. In my opinion, I believe that Coca Cola Company has a clear mission, goals and objectives that Calypso Soft Drinks ltd especially in its strategic mission and objectives in the market (Calypso Soft Drinks 2013). Coca Cola vision 2020 acts as the framework for creating the long-term destination of the business operations through understanding market trends and forces that will shape the nature of business operations in the future (Coca Cola 2013). The vision of Coca Cola is to attain sustainable and quality growth through meeting the needs of the stakeholders (Coca Cola 2013). For instance, the company is committed to creating a great workplace and empowering the employees through constant employee engagement, excellent training and development opportunities and open and inclusive employment policies (Sadler and Craig 2003). Coca Cola is committed to nurturing mutual relationships and creating value for its network of partners while at the same time remaining a lean and profitable organization. The company is committed to environmental conservation through helping ensure sustainable communities and minimizing environmental degradation through pollution (Sadler and Craig 2003). Impact of UK economic system on Coca Cola Company The UK economic system is favorable for Coca Cola business operations. The UK is currently experiencing economic recovery from the adverse economic and financial crisis that were experienced after the collapse of the housing boom in 2008 (Langdana 2009). The UK is a mixed economy with both state and private sector contributing to the overall growth and prosperity of the economy (Sadler and Craig 2003). The UK is the seventh largest economy in the globe in terms of purchasing power parity and nominal gross domestic product. Some prominent economic sectors include livestock industry, agriculture, pharmaceutical, and oil and gas industries (Bamford and Grant 2000). The UK enjoys the financial services of the London stock exchange that provides investment capital to more than 400 firms in the economy (Bamford and Grant 2000). Accordingly, UK has a population of 63.244 million people with about 65 percent of the citizens being capable of providing labour in the economy (Bamford and Grant 2000). The manufacturing industry contributes about 21 percent of the UK’s GDP while the agriculture industry is highly subsidised in terms of chemicals, cheap agricultural machinery and food processing equipments. The UK has low inflation rate and stable exchange rate thus making the economy favorable for Coca Cola Company operations. As a member of the EU, the UK is part of an economic single market that guarantees the free movement of people, goods and services across the European Union member states. The UK is committed to use of the Sterling Pound as the national currency thus making the economy more safe from the adverse impacts of debt crisis that have been experienced by other EU member countries that use the Euro as their transaction national currency. In this case, Coca Cola is capable of accessing the European market easily and enjoying subsidies in the agricultural and food processing industries. Accordingly, Coca Cola has a wide access to qualified labour force and stable currency thus facilitating efficient production and high demand for its brands in the market (Bamford and Grant 2000). The UK government fiscal and monetary policies and Coca Cola Company The UK government has implemented several fiscal and monetary policies that affect the operations of Coca Cola Company. The fiscal policies comprise of government spending and taxation while the monetary policies aim at regulating the money supply and interest rates in the economy. The UK has implemented a fairer tax system that aims at ensuring efficiency in business operations and supporting growth (Langdana 2009). The UK has both direct and indirect taxation. The taxes that are relevant to Coca Cola Company include the value added tax (VAT), excise duty and corporation tax. The value added tax is at an high of 17.5 percent and increases the costs of Coca Cola brands thus leading to low demand in the market (Langdana 2009). The UK government spending is mainly geared at enhancing the welfare of the citizens through provision of several social services like unemployment benefits, education and other major types of income support services (Langdana 2009). Additionally, the government provides special assistance to certain businesses through initiatives like regional selective assistance that aims at assisting businesses to create high employment and enterprise zones that aim at attracting new businesses in the inner cities (Langdana 2009). The UK Chamber of Commerce will help Coca Cola Company with the latest information on market opportunities. The Bank of England Monetary Policy Committee has engaged in asset purchase of 375 billion pounds in order to maintain the inflation rate at the target of 2 percent. Competition policy The UK has a comprehensive and internationally recognised competition policy that aims at promoting market efficiency and competition in the economy. The Office of Fair Trading and Competition Commission aims at ensuring price competition among the competitors, wide variety of consumer choice and technological innovations that foster market efficiency. Some critical pillars of the policy anti-trust and cartels, merger control, state aid control and market liberalisation (Bamford and Grant 2000). The competition policy forbids collusive and abusive market behaviours through eliminating agreements that seek to fix prices and restricting competition in the industry. The regulatory bodies ensure that large corporations like Coca Cola Company do not use their monopoly power in charging excessive prices (Langdana 2009). Accordingly, the competition policy aims at encouraging more market penetration through removing market entry barriers and controlling predatory pricing tactics that hinder fair competition in the market. Coca Coca Company has not territorial exclusivity and cannot refuse to supply goods to particular retailers (Langdana 2009). Accordingly, the competition policy prevents Coca Cola from engaging in mergers or competitor takeovers that aim at reducing the level of competition in the industry. However, Coca Cola Company can engage in mergers or joint ventures that aim at strengthening competition and ensuring efficiency of operations in the market. The enterprise and regulatory reform Act 2013 aim at restoring economic growth while promoting market-based competitive practices across all industries in the UK. Regulatory policies The UK has implemented strict beverage regulatory policies that may negatively affect the profitability and operations of Coca Cola Company. For instance, the regulatory policies aim at promoting health diets due to the rising cases of obesity and other diet-related diseases. The Food Standards Agency (FSA) has issued strict guidelines on labeling of the beverage products and honest clarification of the beverage nutrients in the labels. Accordingly, the regulatory policies aim at ensuring hygienic beverage processing, packaging and distribution to the final consumers (Langdana 2009). In this case, Coca Cola Company must adhere with the laid regulatory framework regarding the nutritional content of its beverage brands, labeling and processing policies in order to survive in the market. The Company will incur high legal costs and penalties if its products do not comply with the food safety standards and other regulatory requirements. In this case, Coca Cola may attain negative reputation if the consumers perceive the brands as unhealthy (Gabriele, Kuenzel and Springbett 2012). Market structure and pricing decisions Market structure refers to the interconnected characteristics of the market such as the relative strength of sellers and buyers, the degree of competition, the barriers of entry and extent of product differentiation in the market. Coca Cola Company operates in an oligopoly market in the United Kingdom (Langdana 2009). Oligopoly refers to a market that is controlled by few dominant firms that enjoy high economies of scale and the decisions of one firm are influenced by the decisions or actions taken by the other firms. Some other dominant players in the soft drinks industry in UK include PepsiCo, Danone, GlaxoSmithKline, Cott Corporation, Nestle and Red Bull. Coca Cola used market-based techniques in its pricing decisions. For instance, Coca Cola ensures profitability through constant prices regardless of the changes in production output. The marginal revenue (MR) must be equivalent to Marginal Cost (MC). Accordingly, Coca Cola engages in market penetration pricing through offering discounts and lowering its profit margins for the new brands (Langdana 2009). All the dominant firms in the industry engage in price wars with the aim of increasing market share and thus Coca Cola must lower its prices depending on the pricing strategy selected by the leading competitors (Langdana 2009). Market forces The greatest market force that faces the company is the high degree of competition and rivalry among the leading players in the soft drinks industry in the market (Langdana 2009). PepsiCo, and other leading manufacturers of soft drinks present high competition due to same size of operations, and some undifferentiated brands. PepsiCo and Red Bull have dominated the market for energy drinks in the UK (Langdana 2009). The bargaining power of buyers is high since there are several alternative producers of soft drinks in the market. The consumers bargain for cheap prices and healthier drinks due to low switching costs and low customer loyalty in the market. The largest buyers are the restaurants, airlines, grocers and discount stores that demand for discounts and lower prices (Blenkhorm 2005). Accordingly, the bargaining power of the suppliers of raw materials is high due to numerous consumers and ability to control the source of the raw materials. The industry is saturated with many small firms that offer alternative markets for the suppliers of raw materials while the retailers can offer their distribution services to other firms (Langdana 2009). However, Coca Cola Company owns about 36 percent of the Coca Cola Enterprises thus controlling the purchasing power of the supply of carbonated coke syrup (Gabriele, Kuenzel and Springbett 2012). In addition, the threat of substitutes in high due to low switching costs, price-quality trade-off and diminishing customer loyalty in the soft drinks industry (Blenkhorm 2005). There are other small firms like sports drinks, water, teas and coffee in the market. Coffee and tea are favorite substitutes for the consumers who want to lose the sugar, carbonation and keep the caffeine. Specialty coffees that are distributed by Starbucks are increasingly appealing to more consumers in the market (Langdana 2009). However, the market is attractive due to the high barriers of entry in to the market. The leading companies in the industry have high economies of scale and global operations thus creating high costs of entering the market. Coca Cola and other dominants players have absolute cost advantage, easy access to inputs and credit, brand identity, access to efficient distribution channels and learning experience in the market (Blenkhorm 2005). Generally, the market forces will facilitate the operations and productivity of Coca Cola in the UK market. The company must aim at creating brand loyalty and differentiating the products in order to ensure high brand awareness and customer switching costs (Blenkhorm 2005). Business and cultural environment Coca Cola operations are shaped by the business and cultural environment. The political environment in the UK is stable due to low government interventions in the market thus fostering Coca Cola’s business activities. The social environment is also favorable for operations due to increasing population, but the ageing population has forced the company to shift focus to moiré healthy brands (Coca Cola 2013). The economic environment is favorable for the operations since the UK economy is currently experiencing low interest rates, economic growth and stable exchange rate. The company must comply with the legal environment such as the employment laws, minimum wages and food safety laws (Langdana 2009). The technological environment will foster the company activities due to advancement of superior bottling technologies and e-commerce that enables global market access and strengthening of relationships with supply chain partners. However, Coca Coca is facing a harsh ecological environment due to the need to minimize air pollution, recycle waste materials and minimize the industrial effluent. The company engages in social responsibility activities like contributing to social initiatives like building schools, volunteering in cleaning the cities, and assisting in education of disadvantaged children (Coca Cola 2013). The cultural environment of Coca Cola is positive for the operations since the company aims at nurturing relationships with business partners (Coca Cola 2013). The company culture is committed to quality brands and excellent customer service in refreshing the world. The culture focuses on empowerment through creating value and difference in communities and focusing on the needs of the employees (Coca Cola 2013). The company has several informal communication channels like weekly departmental meetings, monthly team meetings, surveys and consultative groups that aim at communicating the shared norms, values and beliefs of the company (Thompson and Martin 2010). Significance of international trade to UK organizations International trade is significant to UK organizations like Coca Cola. International trade stimulates the growth in the national gross domestic product thus enabling local companies to increase their production due to increased consumer demand. International trade assists in the transfer of essential technology thus enabling companies like Coca Cola to attain efficiency in their production (Gabriele, Kuenzel and Springbett 2012). International trade allows for cross-border access to markets thus increasing the sales and profitability of the companies. This type of trade increases the market competition thus leading to high quality goods and services to the consumers. UK companies are capable of attaining profitability stability even during seasonal demand fluctuations in the domestic market. UK companies will be capable of attaining global brand recognition and expanded market share even after the saturation of the domestic market. International trade facilitates foreign exchange investments thus allowing the UK firms to access global capital markets and form strategic alliances with other regional players in the industries (Gabriele, Kuenzel and Springbett 2012). Impact of global factors on UK businesses There are numerous global factors the impact on the UK businesses. One of the factors is the formation of regional trading blocs such as the EU and NAFTA that impose new regulations on market access and regulation. The regional trading blocs aim at fostering trade between the member countries. Another global factors affecting UK businesses and Coca Cola is the internalization of human and employment rights that require companies to pay fair wages and provide safe working environment. The human rights movements have forced many companies to adhere to strict laws of the International labour organization on the provision of equal employment opportunities and other employment-related benefits (Steers and Nardon 2006). Accordingly, global warming has forced many companies to invest extra funds towards environmental conservation, reduction of air pollution and assisting communities with basic amenities (Gabriele, Kuenzel and Springbett 2012). The rapid technological innovations and shifts in consumer tastes has forced companies to invest in research and development activities, rebrand the products and implement advanced technologies in customer relationships management and e-commerce (Steers and Nardon 2006). Another factor that is affecting businesses is the removal of capital exchange controls thus allowing for cross-border investments. In addition, emerging markets such as China and South American markets have forced UK businesses to export and establish operations in those countries (Steers and Nardon 2006). Impact of EU policies on UK businesses The EU has outlined several policies that aim at regulating trade between the member countries. The EU policies have allowed easy access of entire European markets by UK companies and free movement of labour across the countries. The small UK businesses are negatively affected by the UK regulation due to high costs of compliance on product quality standards (Geyer, Lehmann and Mackintosh 2005). The businesses must comply with regulations and directives relating to use of renewable energy sources and competition in the market. Accordingly, the UK government must comply with directives relating to inflation, education and taxation of EU trade. The EU policy will widen the market access through reduction of trading costs among the EU member countries, but the UK firms must comply with policies relating to product quality and competition (Geyer, Lehmann and Mackintosh 2005). Conclusion Coca Cola Company has attained a high market share and profitability in the UK market. The economic system is favorable for its operations due to stable economic recovery from recent financial crisis, stable interest rates and exchange rates. The Company enjoys highly skilled workforce and superior bottling technology in the UK market. The mission of the company and strategic goals is to refresh the world through brands and actions and at the same time create value and difference in all areas of its operations. The company is committed to meeting the interests of stakeholders such as the employees, business partners, communities and customers. The company provides excellent employment opportunities that entail personal and professional growth and development opportunities and assists the employees in attaining their personal career goals. The company provides superior and quality brands to the customers and conserves the environment. In addition, the company has maintained and nurtured the relationships with business partners. The UK monetary and fiscal policies promote the business operations of Coca Cola through ensuring tax incentives, stable inflation and high economic growth. Coca Cola must adhere with the competition policy that restricts cartels, antitrust behaviours and other market abuse practices. In addition, the company must comply with the food safety laws and regulations on the labeling and nutritional content of the brands. Coca Cola operates in an oligopoly market that is dominated by few large firms such as PepsiCo, Nestle and Cott Corporation and must consider the pricing decisions of the competitors. The political, social, economic and technological environment is conducive for business operations due to high population growth, shifts to healthier drinks and advancements in brewing technology. The culture of the company fosters empowerment, customer service and quality products in all business activities. International trade is significant to UK organizations since it leads to technology transfer, wide market access and increased profitability. Coca Cola must comply with global factors such as global warming issues, labour issues, and legal issues pertaining business activities. The company will adhere with EU policies on product quality standards, competition and employment. Reference list: Bamford, G and Grant, Susan. (2000). The UK economy in global context. Oxford: Heinemann. Blenkhorm, David. (2005). Competitive intelligence and global business. Westport, CT: Praeger. Calypso Soft Drinks. (2013). “About us”, Available from http://www.calypso.co.uk/about-us. (28th August, 2013). Coca Cola. (2013). “Coca-Cola’s mission, vision and values”, Available on 30th August, 2013 from http://www.coca-cola.co.uk/about-us/coca-cola-mission-vision-statement.html. Gabriele, Giudice, Kuenzel, Robert and Springbett, Tom. (2012). The UK economy: the crisis in perspective. New York: Routledge. Geyer, Robert., Lehmann, Kai and Mackintosh, Andrew. (2005). Integrating UK and European social policy: the complexity of Europeanisastion. 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