Coca-Cola Company Issues Analysis - Essay Example

Coca Cola Company Analysis Name Institution Date Table of Contents Table of Contents 2 Introduction 2 Pestle Analysis of the company in UAE 3 Political 3 Economic 4 Social 4 Technological 4 Legal 5 Pestle analysis of the Company in USA 5 Political 5 Economic 6 Social 7 Legal 7 Technological 7 Opportunities and challenges faced by the company in the Host Country 8 Recommendations 9 Conclusion 10 References 11 Introduction The Coca Cola Company is a multinational Corporation that specializes in the manufacture of soft drinks. The company has been in existence for decades after its establishment in the United States of America. It has branches and outlets in most parts of the world. Currently, the company manufactures more than three thousand five hundred types of beverages in the more than two hundred countries where it operates. The company also has more than two hundred thousand employees allover the world. This makes it one of the largest in terms of the workforce. Coca Cola Company is also very profitable as it has been increasing its profits in the last fifty years. It is estimated that 1.8 billion bottles of the company’s beverages are consumed worldwide on a daily basis. The Company uses advanced technological means to operate its equipment. Most machines used by the company are automated for fast delivery of services. Sustainability is also an important concept for the company and most of its equipments are eco friendly. The company relies on the services of various suppliers across the world. However the suppliers have to meet the conditions of the company before being contracted. The conditions for suppliers are laid out in the supplier’s guide manual of the company (Coca cola Company, 2012). The paper thus discusses the issues being faced in the company in its operations in the UAE as well as in the United States of America. Pestle Analysis of the company in UAE Political The government intervention in the operations of f businesses is evident in the UAE. According to Shebil, et al, (2011), most industries are regulated by the government. The beverage industry is not an exception and the government has established a number of policies in the sector. The taxes imposed by the government on the international companies are high as compared to the local companies and hence giving the local companies an advantage in the market. The price control which had been initiated by the government to protect the consumers has negative impacts on the multinationals like Coca Cola Company. The government also has a lot of control on the health issues and the standards of beverages have to meet the set standards. However, the political situation is friendly to business operations of the multinational corporations. Economic In the UAE, the economy of the country is on the upward trend, although there are restrictions placed on foreign businesses. The interest rates are low due to the laws that govern the banking system in the UAE which is a Muslim country. The inflation is also low and the per capita income is high which makes it favorable for conducting business. However, the restrictions on foreign firms affects he operations of the multinationals like Coca Cola Company. It is required that any foreign company should be owned by 51% by the locals. The board of directors should also be composed of more UAE nationals. However the exchange rates are not very high and thus friendly to multinationals. The economic situation of the country is however, not callous on the beverage industry (Armus, 2005). Social The social trends in the UAE affect the consumption of the products manufactured by Coca Cola Company. Since the UAE is a Muslim country, the consumption of alcohol is not allowed and hence the high consumption of the soft drinks which is manufactured by the company. However, due to health concerns by some people, cultural drinks are preferred. This affects the consumption rate of some of the beverages manufactured by Coca Cola. Nevertheless, the laws on employment are flexible on foreign workers and it enables the multinationals to recruit qualified personnel from their home countries. This is important for the company in terms of recruiting reliable and qualified workforce (Balding, 2008). Technological The use of modern technology in the beverage sector is improving in the United Arabs Emirates. Most companies are adopting the use of modern technology. This is important for the Coca Cola Company in terms of mass production of its products. However, most local people are not conversant with the use of the technological concepts. This is due to the education system of the country which does not place much emphasis on information technology, mathematics and sciences. The company is usually forced to recruit experts from different countries to handle the technological concepts. Legal The legal issues in the UAE are, to some extent, unfriendly to the foreign companies. The laws are incredibly strict on the operations of foreign companies as compared to the local companies. This is particularly in the areas of operations and management. The consumer laws are also severe and any form default attracts huge penalties. The Coca Cola Company is usually affected by some of the consumer laws as it manufactures soft drinks that need to undergo quality checks. The health and safety laws that guide the food ad beverages manufacture must be adhered to at all times by the multinationals. This also attracts penalties that may cripple a company incase of breaking the law. However, the employment laws are flexible and allow multinationals to recruit employees from other countries including their home countries (McIntyre, 2009). Pestle analysis of the Company in USA Political The political environment in the USA is conducive. Government policies on businesses in the USA are basically aimed at promoting free market. According to Swank (2002), the conditions for operating businesses are favorable as the government policies are not strict. This has encouraged a lot of competition in the market. Coca Cola Company faces a lot of competition at home from other companies. The taxation policies are controlled by the government and it is mandatory for any company to pay taxes. Taxation is however, dependant on the profits that the company makes. The taxation policies are very stringent on any company that fails to pay the taxes. However, it is important to note that government policies do not favor any company and thus the high rate of competition. The tax rates may however, be adjusted depending on the economic and political factors. Due to the political factors, Coca Cola Company has to compete for customers just like the other companies in the sector. Economic The economy of the USA is ranked as the best in the world due to the high per capita income. However, the economy of the USA usually fluctuates from time to time. The inflation rate may be high at some point and low at another point (Ayres et al, 2003). This greatly affects the operations of the company as the purchasing power of the customers is usually affected. On the other hand, the interest rates are at times high. The Coca Cola Company has been able to make profits despite the ever changing economic factors. This is due to he measures that the company has always put in place to avoid losses. The foreign exchange also fluctuates from time to time although not at higher rate. During the global recession, the interest rates and inflation was high impacting negatively on the consumer behavior and hence affecting the profits of the company. Social The social factors in the USA play an important role in the beverage industry. The coca cola company is popular in the country due to its origin. The people are used to the brands manufactured by the company and hence its popularity. During the social events and holidays, the consumption of the products of the company is usually high in the USA. It is for this reason that the company usually sponsors a number of events and hence promoting its products. The cultural trend has very little influence on the purchase of the products of the company in the USA and thus registering high sales. Legal Some of the laws in the USA have direct impacts on the business operations (Pascale, 2001). The Company has internal laws which guide the operations of the business. Ethical laws are responsible for the internal operations of the business and they form a basis of the operations of the Company and customer satisfaction. In the beverage industry, the consumer laws, safety laws and labor laws are applicable. The consumer laws are enforced by the government agencies in a bid to protect the consumers according to Alocilja, et al (2003). The government agency has set the minimum standards that the companies must observe. The safety laws and labor laws are also for the purpose of protecting the employees. Coca Cola Company has to observe all the laws to avoid penalties. These laws have a direct impact on the Company as the failure to observe them leads to huge penalties that may lead to negative financial implications. Technological The use of modern technology concepts is very helpful in the beverage industry in USA. Technology plays an important role in the development of the industry as more innovations are made. The use of technology in the USA is quite high as population is quite conversant with the technological concepts (Ashurst, 2005). The Coca Cola Company has fully embraced the use of technology in its operations. This has positively impacted on the operations of the company. Due to the high understanding of technological concepts, the company does not have any difficulties during the recruitment of personnel in the department. The company always encourages innovations and technological concept which have positive impacts on the operations of the company. Opportunities and challenges faced by the company in the Host Country The company is faced by various challenges in the host country. This includes competition from the local beverage companies. This is because of the policies and regulations which favor the local companies over the foreign companies (Rugman et al, 2001). The Company also faces challenges during the recruitment of employees in the technological sector. This is due to the shortage of local experts in the sector and hence forcing the company to hire foreigners. This has an impact on the cost as well as the innovations in the Company. Some locals prefer consuming their local products as well as the traditional products which are alternative products. Other local consumers do not trust some of the products of the company as they believe that it may impact their health negatively. This perception greatly affects the consumption of the products made by the company. These challenges act as barriers to the development and expansion of the company in the host country. Although the company is faced with challenges, it also has other opportunities in the host country. The company may form a joint venture with the local companies for the purpose of building its brand image as well as increasing the sale of its products. The brand of the company is also popular and the management should take advantage of it. This can be done by producing other products that are popular in the UAE. The financial capability of the company is also a major factor in terms of expansion of the company in the UAE. More retail outlets should also be established as some of the products of the company are on high demand in the UAE. Recommendations Based on the analysis of the company at home and the host country in the UAE, the company should consider a joint venture in the host country so as to win the trust of the local people. This will increase the popularity of the products of the company in the UAE. Advertisements also play an important role in building the brand of a company. Intensive advertisement should be conducted in the UAE with the participation of the local people so as to establish a sense of recognition of the company by the local people. The use of advertisements will also enable the customers to be fully aware of the contents and ingredients of the Company and hence deal with the perception of the people towards the products. More investments should also be injected to the company in its home country. This is due to the high demand of the products of the company. It will also increase the profits of the company and hence more revenue generation. In order to encourage the mass production of the products, the company must fully embrace the use of modern technology in the host country. It is also recommended that the company should fully abide by the laws and regulation of the government in the host country as well as the home country. This is for the purpose of avoiding any penalties. Conclusion In conclusion, it is evident that the company faces a number of challenges in the host country. Nevertheless, opportunities are also available both in the host country and at home. The rules and regulation of the sector also differ in both countries. However, it is evident that the policies in the host country favor the local companies as opposed to the multinationals. The economic policies in the two countries also differ and they affect the industry together with the company directly. It is evident that the company has a good performance index in both countries despite the challenges. Some of the challenges that the company faces in the host country are due to unfavorable government policies and is beyond the control of the Company. Some of the challenges can however, be solved in the company. It is also evident that conducting a business in a host country has more challenges as compared to the native country. References Alocilja, E. C., & Radke, S. M. (2003). Market analysis of biosensors for food safety. Biosensors and Bioelectronics, 18(5), 841. Armus, S. (2005). Coca-Cola Company. France and the Americas: Culture, Politics, and History: a Multidisciplinary Encyclopedia, 2, 273. Ashurst, P. R. (Ed.). (2005). Chemistry and technology of soft drinks and fruit juices. Blackwell Publishers. Ayres, R. U., Ayres, L. W., & Warr, B. (2003). Energy, power and work in the US economy, 1900–1998. Energy, 28(3), 219-273. Balding, C. (2008). A portfolio analysis of sovereign wealth funds. Available at SSRN 1141531. Coca Cola Company, (2012). Our company, Retrieved on 25 October 2012 from, . McIntyre, J. R. (2009). Multinational enterprises and the challenge of sustainable development. Edward Elgar Publishing. Pascale, R., Milleman, M., & Gioja, L. (2001). Surfing the edge of chaos: The laws of nature and the new laws of business. Crown Business. Rugman, A., & Hodgetts, R. (2001). The end of global strategy. European Management Journal, 19 (4), 333-343. Shebil, S. A., Rasheed, A. A., & Al-Shammari, H. (2011). Coping with boycotts: An analysis and framework. Journal of Management & Organization, 17(3), 383-397. Swank, D. (2002). Funding the welfare state: globalization and the taxation of business in advanced market economies. Political Studies, 46(4), 671-692. Read More