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External Environment Analysis: Coca Cola Company - Research Paper Example

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External Environment Analysis: Coca-Cola Company Insert Grade Course Insert 5 December 2011  External Environment Analysis: Coca-Cola Company Since its creation, the Coca-Cola Company has remained to be the largest beverage company in the world…
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External Environment Analysis: Coca Cola Company
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Download file to see previous pages Besides developing its products, the company is also responsible for marketing them. Their mission is to refresh people, provide inspiration to moments of optimism, create value, and make a difference (SlideShare, 2008). However, as the company strives to achieve its goals and maintain its status quo, it is faced with a number of challenges, which it must overcome to stay at the top of the beverage industry. For example, the company faces stiff competition from its rivals, and thus, to stay at the top of the game, it must evaluate and improve its business strategies. Therefore, this paper provides an external analysis of the factors that affect the coca-cola company. The analysis is provided with reference to Porter’s five Forces model and PEST analysis. Porter’s Five Forces Analysis of Market Structure This model is often used to analyze the competitive structure of an industry. It analyses the attractiveness of a company or the ability of a company to make profits by considering five forces or factors within a market (Tutor2u, 2011). The five factors include: Threat of New Entrants New entrants to an industry often increase competition level and thus lowering the attractiveness of the industry. The danger of new entrants marjory depends on the barriers to entry (Tutor2u, 2011). In the soft drink industry where the Coca-Cola Company operates, new entrants are not a strong competitive pressure because the industry is completely saturated and growth is little (Deichert, 2006). The only companies that dominate the industry are the Coca-Cola Company and the Pepsi Co, which have strong brand names and enormous distribution channels. In addition, the high fixed costs for warehouses, labor, transport, and economies of scale bar new entrants into the industry. Therefore, with the high capital requirement and operation costs involved, companies find it very difficult to enter the soft drink industry (Gaudet, 2008). Threat of Substitute Products The availability of substitute products lowers a company’s attractiveness and profitability by limiting its price levels. For coca-cola company, the substitute products are those products that are produced by competitors who are not in the soft drink industry, for example bottled water, coffee, juice, sports drinks and tea (Gaudet, 2008). Consequently, with the growing health concerns, the risk of substitute products has become a very strong challenge for the coca-cola company (Deichert, 2006). People have become health conscious and have started drinking less of the products that contain empty calories but instead consume juice, bottled water and sports drinks which have health benefits. Subsequently, this has threatened the market position of coca-cola company and although it has tried to address this risk by coming up with healthier drinks such as bottled water and juices, it is yet to maximize on it. Bargaining Power of Suppliers The suppliers are the people or businesses that provide the industry with raw materials and other products. A company’s profitability depends on the bargaining power of suppliers (Tutor2u, 2011). The raw materials required for the production of Coca-Cola products are sugar and packaging. Sugar is readily available; therefore, the company has good bargaining power and can easily switch the suppliers of the product. The company also has greater bargaining power on its packaging supplier as it is the largest shareholder of Coca-Cola Enterprises ...Download file to see next pagesRead More
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