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

External and Internal Environments of Coca Cola Company Q One of the most significant factors affecting theorganization is the social segment as many view carbonated drinks as lifestyle-related and capable of affecting one’s health. Recently, there have been calls for a shift to more healthy purchases especially in western markets where the product has a large consumer base. This has put the organization under pressure to create new products that meet this new demand; health experts warn that soft drinks are quite unhealthy. Sports drinks like Powerade and Minute Maid signify this emerging trend even though many buyers still associate the company with its large portfolio of carbonated drinks. Alterations in the demographic attributes of most buyers in the West may also affect outcomes as an aging population does not necessarily buy Coca Cola’s products in large quantities, and this implies fewer sales for the company (Jurevivius, 2013). Technology is also another critical area in the general environment as the organization’s key arms largely depend on developments and changes in this area. For instance, advancement in new marketing technology allows the company to use different platforms like the internet to advertise its products. Methods of production are also highly dependent on new changes in technology, and they provide the company with ample opportunities to increase their production volume as well as minimize the time it takes to produce a certain batch of products. A case in point is the opening of a factory in Yorkshire, UK where the company has built a factory that creates cans at the speed of a moving bullet. Through the adoption of new logistics systems, it has been possible for Coca Cola to regain more control over its supply chain. Q.2 The degree of rivalry is particularly high within the soft drink industry, but in terms of carbonated drinks, Coca Cola’s main rival is Pepsi. The organization has almost identical products to Coca Cola’s portfolio and has also engaged in several sponsorships for sporting events and activities. The organization has thus put in a lot of resources to build its brand to a recognizable level, and this affects revenues for Coca Cola especially in its western markets. A few other carbonated drinks companies have tried to market themselves but have not reached Pepsi’s or Coca Cola’s level. In order to counteract efforts made by Pepsi in increasing market share in the industry, Coca Cola has decided that it will invest huge sums in its marketing and promotional activities. It has carried out massive advertising campaigns that are recognized all over the world; in fact, many consumers stay loyal to the company, because they know its brand. Pricing has not been a main point of focus for the company because competing on this basis would create unnecessarily low prices for its products. Therefore, one might say that the organization has done a fantastic job of dealing with the high degree of rivalry between itself and Pepsi Company (Henry, 2007). The threat of substitutes is also relatively high within this industry as it is relatively easy to come up with a different formula or drink in this area. Juices, energy drinks, sparkling water, tea, coffee, and several other alternatives are available for consumers who want a non-alcoholic drink or simply need to quench their thirst. It has been established that switching costs are quite low within the industry, so customer may change from one brand to another with minimal consequence. Additionally, because the value and the prices of most non alcoholic drinks is also relatively low, buyers feel that most of these products are the same; it is marketing that tells them apart. Coca Cola has coped with the problem of substitutes by first diversifying its portfolio in order to minimize the need to look elsewhere for these products. For example, Minute maid is a brand under the organization’s name and so are several other sports drinks, sparkling water that are produced by the company. This has ensured that the company dominates the non-alcoholic industry regardless of which segment or product type one may be considering. It has also dealt with this problem by advertising its new products which happen to have the different qualities that consumers are looking for. Therefore not only has the organization diversified its portfolio, it has also gone a long way in letting the public know about these new brands that are in the market. Q.3 It is likely that if the threat of substitutes or rivalry continues to increase, the organization might consider engaging in more alliances and buyouts of companies that seem formidable. Currently, Pepsi is the only organization that is large enough to shake Coca Cola’s market share, but this may not always be the case in the future. Therefore, the organization might go out of its way to have an ownership stake in the production of a rival product that may be doing relatively well (Comeford & Callaghan, 2011). Such buy outs have been common in other industries like the technology industry, so this should not be a distant reality for the soft drink industry as well. In order to curb the challenge of rivalry within the industry, the company will use new media platforms like social media to connect with its clients. It might choose to handle traditional marketing messages through this avenue and thus generate a massive following from buyers of the product. Some organizations have used YouTube in order to carry out enormous campaigns about certain products, and this has caused them to retain their clients or even garner new ones in the face of competition. Q.4 Some of the greatest threats that the company must deal with include declining sales volumes within the industry, health interests and more rivalry from Pepsi. Several health researchers have shown that consumption of sweet soft drinks leads to the development of obesity and other health complications like diabetes. Even though Coca Cola responded by creating diet drinks or low-calorie alternatives, health experts still warn that obese children would find no nutritional value in the drinks so many of them would remain unhealthy. Additionally, now several buyers have a greater preference for natural or organic drinks rather than the ones that have been made using artificial sweeteners as is the case with Coca Cola’s products. PepsiCo will continue to be a problem for Coca Cola in the future if the latter organization continues with its current product mix. PepsiCo enjoys greater market capitalization than Coca Cola because it has a greater product offering than Coke, so it is more diversified. Even though Coca Cola is the most recognizable brand, this has not translated into superior sales especially as seen through higher profit reports from Pepsi than Coke; it is likely that this market domination may continue in the future. There is also a problem with decreasing sales volumes within the soft drink industry, and it appears this is due to the decreased interest in this type of beverage form members of the younger generation. Over the last five years of the past decade, sales have dropped by 0.2%, 0.6%, 2.3% and 2.15 (Thomson Reuters, 2010). Some people feel that the current group of teens are a lost cause in terms of carbonated drinks as they have so many options or simply prefer other forms of beverages; alternatively, it could simply be saturation of the carbonated soft drink market. Water scarcity could also be a problem in the emerging economies that are now speaking out against unsustainable companies like Coca Cola, which heavily rely on water for production. One opportunity available to the organization is vertical expansion of its brand into other areas of production that relate to its business. For instance, it may opt to enter into the production of tin cans or it could also consider owning the glass recycling aspect. Most times, the firm depends on the provision of these items from different suppliers who have control over costs and thus undermine their returns. It is possible for the company to acquire other organizations that seem to be doing well in their industry instead of simply considering vertical integration. Another opportunity could be the diversification of its product portfolio especially through the introduction of healthier beverages; further, the company need not restrict itself to beverages alone, it could also sell food. Overall, the most significant threat is the move towards healthier alternatives; health campaigns could keep driving sales volumes down. This issue can be addressed by increasing the visibility of its healthier alternatives by marketing it as much as it does its healthier versions. The greatest opportunity for the company is to embrace growth by expanding its product portfolio; it is difficult to enter new markets with what the company offers. It can make new breakthroughs by buying companies that are relatively successful in their areas of production and thus dominating those areas. Q.5 The greatest strength in the company is its strong brand which has a value of about $ 77.8 billion; additionally, in the beverage industry, the company enjoys some of the greatest degrees of loyalty from buyers (Brand Keys, 2010). It is also apparent that the company has worked on its distribution channels such that the strong network continues to generate returns for the organization. Furthermore, owing to corporate sponsorships and elaborate marketing activities, the company is now respected for its corporate social responsibility especially in recycling waste, water and investment in social aspects. The company is also in a strong financial position especially after recording profits during tumultuous times where other firms were making losses. Its greatest weakness is its lack of diversification into other categories other than beverages as it has no representation in the food or snacks beverage sector. Additionally, the company has fallen prey to negative publicity when chemical pesticides were found in some of its beverages and also during strikes in parts of Europe. It also suffers from an amalgamation of too many brands which do not contribute significantly to the overall financial well being of the company. In order to take maximum advantage of its strength, which is its strong brand presence, the organization should acquire firms in new and different food and beverage sector and rebrand them under its name. This would cause the company to increase its revenue streams while at the same time leverage on its brand name to sell more products to those who wanted different varieties. On the flipside, the Coca Cola can fix its most significant weakness is the undiversified product portfolio, which can be dealt with by using acquisitions in order to sell new product types. Q.6 The tangible resources within the organization include its physical production facilities, its equipments, strong financial resources as well as its human resource personnel. Coca Cola has a series of intangible resources like its strong brand, intellectual property on all its soft drink flavors as well as expertise knowledge on how to make fast-selling beverages. Its capabilities include its innovation in the area of product development as new beverages have been introduced from the organization through this mechanism. Coca Cola’s production methods have also been helpful in building this innovative culture as they contribute towards cost-savings. Additionally, the company has the right structures needed to maintain productivity at its current levels; here it has outsourced distribution to a series of other independent business persons and thus spared itself from excess involvement in market dynamics. Finally, the company’s core competence is seen through its franchise leadership where it cooperates with different distributors in order to get them to become effective producers through fewer system flaws. It also works with retailers all over the world to market its products successful in those target nations (Ki, Yin & Kan, 2011). Q.7 Under the five primary activities of value chain analysis, inbound logistics for Coca Cola refer to those suppliers who provide ingredients, packing material and machinery like IBM and Spherion; it can add value by using its brand to ensure that the suppliers adhere to certain standards. In operations, the concentrate and syrup aspects are owned by the company but its distribution networks, bottling and sales may be carried out by different arms; sustainability can be ensured by working with partners and giving them intellectual production knowledge. In outbound logistics, the company has perfected its logistic systems by having a robust distribution system. This can be enhanced through the company’s financial revenue which may be used to ensure products are delivered. Marketing has been perfected through creative advertisements but this can grow by leveraging on ideas from various parties. Service, as the last component, of the value can be enhanced by supporting retailers to become more profitable through training. References Brand Keys (2010). “Brand keys customer loyalty leaders 2010”. Brandkeys. Retrieved from http://www.brandkeys.com/awards/leaders.cfm Comeford, R., & Callaghan, D. (2011). Environmental, industry, and internal analysis. London: Prentice Hall. Henry, A. (2007). The internal environment of an organization. London: Oxford University Press. Ki, T., Yin, C. & Kan, Y. (2011). The Coca Cola Company. Hong Kong: Chua Hai. Jurevivius, O. (2013). SWOT analysis of Coca Cola. Retrieved from http://www.strategicmanagementinsight.com/swot-analyses/coca-cola-swot-analysis.html Thomson Reuters (2010). US Carbonated Soft-Drink Volume Fell 2.1 pct in 09. Retrieved from http://www.reuters.com/article/2010/03/24/beveragedigest-idUSN2414655720100324 Read More