Coca Cola Company: Strategic Analysis and Choice

Introduction

For any firm to succeed in its operations the compliance to industry norms is very important that is it must adhere to the rules of competition for market share within a particular industry. This always avoids unfair competition between firms in the same industry. However, sometimes a firm may break the industry competition norms through its policies of a strategic choice to increase its market share and maintain its survival and growth in the industry. Firms strive to remain international in scope and these businesses are faced with many challenges in their current business undertakings and there is a need for them to fight for their survival that results from global events and competition which affects them either positively or negatively.

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Discussion

Every organization aims to be a market leader in a particular industry and this study significantly looks at the analysis of internal and external influences in modern business and with particular regards to Coca Cola Company based in the U.S. This will entail a thorough analysis of political, economic, socio-cultural, technological factors. Also, strengths, weaknesses, opportunities, and threats that Coca-Cola Company undergoes in line with the ever-increasing ambiguity and uncertainty that may come up due to the effects of globalization and the ever-changing business environment will be discussed. This report will also discuss the feature of globalization and how it has impacted the policies and decision-making about business transactions of Coca Cola Company. This study will also critically evaluate the effectiveness of this organization’s response to globalization in the marketplace. (Philip, 1996).

PESTLE analysis

PESTLE analysis is very crucial to any business that wishes to go international and COCA Cola Company has utilized this concept to expand its market share. This analysis simply involves understanding the organizational business environment and the company has paid attention to the following factors:

Political factors whereby the company has to deal with the political interferences that may be practiced by the foreign government. According to research political systems of nations affect the conduct of businesses, for example, some countries practice collectivism while others practice capitalist political systems. Many foreign governments practices capitalism in that it allows factors of production to be privately owned and the government performs only limited duties that the private sector cannot perform unlike in collectivism and communism that stresses collective goals. So Coca Cola Company has no restrictions and hence we can conclude that it enjoys a good external political environment. (Kotare and Helena, 2004).

Economical factors are factors that mainly deal with financial forces in the economic environment. Such factors include foreign exchange rates, currencies, and global monetary systems like the use of Euro currency, inflation, countertrade, the balance of payments, monetary policies, and fiscal policies among others. After carrying out a careful analysis of these factors Coca Cola Company did not face a lot of these challenges but only it was subjected to a few of them like inflation and the balance of payments.

Social factors are other factors that the company has to consider before going international. Forces within the society such as religion, family, social structure, and education may impact positively or negatively the way Coca-Cola Company will market its products. Social factors affect our attitude, opinions, and interests on the way we view products from certain companies. (Baker, 2000).

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Technological factors are another key factor to be put into consideration before going global. Advanced technologies are now being experienced by many companies as a result of the concept of globalization. Globalization has taken center stage and now use of e-commerce or internet marketing has been increasingly utilized by many firms. Coca-Cola Company should not be left behind and the management should consider the utilization of such techniques in maximizing the benefits brought about by globalization. The use of advanced technologies for example in their production department should be utilized to produce more syrups for sales.

Legal factors are another factor that must be analyzed before going international. The way the company operates in terms of operating rules of law for example how Coca-Cola Company will cope with the legal rules in foreign countries is more important because it avoids conflicts and will enhance the success of the organization. The company is engaged in the legal business practice of marketing its syrup products in form of drinks that include Coke, Fanta, Sprite, and Krest among other drinks which are permitted by many foreign countries laws. (Knight, 2007).

SWOT Analysis

Strength is said to be a particular ability or distinguishing proficiency that a company has and can utilize to perform better than its competitors and hence attainment of its strategic goals effectively without much difficulty. Coca-Cola Company has a strong brand name for its products which helps the company to have a competitive advantage over its competitors like the Softa Company. It is reported that this company has many outlets nearly all over the world Coca Cola Company has over two hundred thousand employees worldwide in its all investments. The company has diversified much because of the best marketing strategies that the company uses. For example, Coca-Cola has around a hundred thousand employees in the sales department that have enabled the company to do well globally. The employees are said to be competent enough to perform their marketing responsibilities, for example, the sales staff are constantly trained to adapt to changes brought about by globalization. (Sparrow and Hilltop, 1994).

The company has the best distribution channels in the industry which has been a strength that has significantly helped the company to cope with completion and thus dominate the industry. The other strength associated with Coca-Cola Company is, it can identify the market segments and hence the competitive position of the company and has in the process developed workable marketing strategies. The amount of revenues generated which is estimated to be fifty-three billion dollars with almost twenty billion pounds net profit annually has been attributed to the success of the company in coping with competition in the local market and the international market. Indeed, Coca-Cola Company is quoted in both London and the New York stock exchanges which have helped the company to strive better than its other competitors. (Anthony, 1998).

A weakness can be defined as any feature of the company which may deter the company from achieving its objectives or goals. Usually, it covers the firm’s assets, resources, and capabilities. The latest research indicates that Coca-Cola company is faced with few weaknesses which if not taken care of it may hinder the company’s success. Coca-Cola Company’s set of laws, measures, and policies are said to be unworkable in some markets, a reason which has seen the company’s performance deteriorate in some of its markets. For example in African countries, Coca-Cola products have performed poorly in the market due to a lack of vigorous advertisements by responsible departments. (Cox and Blake, 1991).

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On the other hand, external environment analysis reveals the organization’s opportunities and threats which are either current or potential. External factors may include; economic, technological, competition, political/legal, and social-cultural factors. However, the external environment of a company may be explicitly explained when opportunities and threats of the firm are considered. An opportunity is an attractive venture for a company’s operations which if exploited will lead to a significant upward change with desired results such as an increase in profits margins and growth. (Bowker, 1991).

There are many opportunities that exist for Coca-Cola Company in relation to pharmaceutical up-and-coming markets all over the world. Because of successful exploration of new markets for example in Africa and Australia, America among other nations the company has an opportunity to divest to these markets without much difficulty. The products especially the drinks offered by this company are on-demand are widely known and have taken the advantage of by increasing their production. Coca-Cola Company has an established financial base as compared to its competitors because of its large market share. The company has therefore used its surplus funds in building new markets and thus they have experienced an opportunity for higher profit returns. Coca-Cola Company has fully utilized this opportunity because to be realistic enough the company has increased its market dominance by serving many nations through opening subsidiaries in the respective host countries. (Sparrow and Hilltop, 1994).

The company also has an opportunity for technological advancements as a result of globalization and the organization’s response to the change in technology has been reported to be excellent. For example, Coca-Cola Company has responded well to selling its products electronically. The company has fully utilized the use of the internet by adopting a policy of e-commerce which has helped the company to access many new markets of its drinks/syrups. The company also enjoys a good political/legal relationship in its various markets with the host governments. This is because the company has fully complied with licensing activities and its products have been approved by the respective bureau of standards in those countries. This opportunity has presented the company with a chance of diversification within those markets and thus it has witnessed a significant increase in the company’s revenues. (Maund, 2001).

A threat can be termed as an existing environmental feature that will cause problems that are likely to deter the accomplishment of managerial objectives. Threats can manifest themselves in the form of, stiff competition, escalating interest rates, government laws and rules related to business, decreasing real income among others. Coca-Cola Company is now facing stiff competition from its main rivals like the Softa Company, which has seen the company drop some of its markets in order to concentrate on some other markets in which the company does not encounter stiff competition. Coca-Cola Company has been subjected to pressures of government legislation and legal restrictions. Research indicates that in some countries, the company has been threatened to be deregistered by the host governments because of the nature of competition that they are engaged in with the local companies. This threat has affected the business undertakings of Coca-Cola Company in that it has lead to the reduction of profits because the company does not enjoy a good business environment. (Cinchona and Ronkainen, 2005).

Generic Matrix

The management of any company including that of Coca-Cola Company must identify the way in which it will cope with other companies and what it perceives as a basis for competitive advantage. The business strategy adopted by a firm is essentially a method for creating and sustaining a justifiable position in a particular market. Usually, a firm’s profit depends on the nature of the strategy and on the inherent profitability of the industry in which it operates. Any company may perform poorly in a profitable industry if it employs unsuitable marketing strategies. (Hoyer, 2001).

A business competitive strategy requires the company to make a decision whether to compete across the entire market or only in certain segments of the industry and also whether to compete through low costs and prices or through offering differentiated product change. Coca-Cola Company has chosen to adopt the strategy of competing across the entire market as they have focused on many foreign countries and not all European countries. This has proved to be successful as it does not require a lot of funds. Developing of portfolio plan is very important for any business and Coca-Cola Company can either adopt the Boston Consulting Group (BCG) matrix or the General Electric (GE) matrix. However, the best for Coca-Cola to develop a portfolio plan is the BCG matrix method.

BCG Matrix

This system attempts to classify the organization’s strategic business units (SBUs) in terms of market share relative to major competitors and the annual growth rate of the industry. The main assumption of this matrix is that the higher the market share of an SBU the higher the profitability. There is also another assumption which firms are likely to make money in large and growing markets. (Dale, 2006).

It can be illustrated in the diagram below;

Relative Market Share

HH
STAR
LH
QUESTION MARK/PROBLEM CHILD
HL
CASH COW
LL                                                                  DOG/ CASH TRAP

The star

This is considered to be the most important SBU with a high market share in a growing industry. The basic objective can be to maintain the firm’s cutthroat advantage as rivalry increases in the marketplace. A star is said to be making considerable profit but needs a large number of assets to finance the prolonged growth of the company. Market share can be sustained or augmented through further promotion and enhanced distribution channels. As industry expansion slug down a star eventually becomes a cow.

Cash cow

This is said to be a leading SBU with a high market share in a comparatively decreasing industry. It has a reliable and well-known client base. Because sales are moderately stable devoid of soaring marketing costs, a cash cow produces additional revenues or profits than is necessary to keep hold of its market share in the marketplace. Profits and revenues from such SBUs may be used to sustain the expansion of further SBUs considered to be low performers and requiring more resources in order to gain a large market share. Under such circumstances, the organization’s marketing plan is directed towards constant prompt promotion, intermittent price discounts, and preserving high-quality distribution channels. (Maund, 2001)

Question mark/problem child

This is said to be an SBU that has made less impact in the marketplace in a growing industry. According to research, this problem child requires considerable resources in form of finance in order to increase market share if rivalry is high in the industry. The organization’s management has to make decisions on whether to augment the advertising budget, enhance product quality, trim down prices of the products or even discard the branch market in question.

Dog/cash trap

This is considered to be an SBU with a small market share in a mature industry and it is difficult to salvage its collapse. Regardless of sufficient time given in the market position a dog will not be capable of drawing a large number of consumers and is at the back of rivalry with particular reverence to product sales, reputation or picture of the company, outlay composition, and growth.

After carefully conducting portfolio analysis, the organization has the options of strategy below to manage its SBUs or businesses: Build strategy which is considered appropriate for a star and maybe problem child e.g. the management of Coca Cola Company can decide on to continue building its successful branches and those that are potential to become a star. Another strategy is that of hold whereby it is considered suitable for the cash cow in order to utilize the constant revenues collected. An example is that of Coca-Cola Company maintaining its branches that are doing well in terms of revenue collection. (Mark, 2001).

Another strategy is that of harvest which is considered suitable for all SBUs except the star. For example, the company should harvest from its branches that have high revenues and those that are deemed to fail in the failure. The other strategy that should be considered is that of divesting which is considered suitable for problem children and dogs. This is because they are no longer profitable and cannot be tolerated. For example, Coca-Cola Company should do away with branches that are not profitable despite committing enough time and resources.

The concept of globalization has taken center stage in modern businesses and firms have viewed this concept to be bringing prosperity while other firms view it to be bringing impoverishments. Globalization can be defined as a trend towards a more integrated global economic system that occurs with increased disregard for national borders. Globalization may apply to the world, country, industry, business, or even a function within an organization or company. (Lovelock, 2006).

Advancement in technology including communication efficiency and better international relations has contributed to the promotion of international trade. Competition has however become a great challenge to the success of global business management but most companies are rising to the challenge. To take advantage of the world being a global village and to achieve greater investments and better market opportunities in the international market, Coca-Cola Company has undertaken primary and secondary market research which have ensured that information regarding the target markets in countries desired is obtained. Coca-Cola Company has diversified in many countries because of the aspect of globalization. Globalization has led to both prosperity and impoverishment of this Company. In addition, the advantages of globalization in respect to Coca-Cola Company have outweighed the disadvantages. The aspect of globalization in relation to the company has affected the company’s policies and decision-making both positively and negatively.

The Company’s structure has been affected greatly by globalization immensely. For example, because of the increase in competition, the management of the company has had to come with decisions that can create a good environment for business transactions that will help the company maintain its customers and thus sustains its growth. The entire management of Coca-Cola Company has had the task of applying plans of actions that include policies designed to respond to the threat of new entrants to the market, bargaining power of buyers, bargaining power of other suppliers, threats of substitute products, and rivalries among existing firms. (Mowery and Rosenberg, 1989).

Decisions regarding employees, operations management, and marketing decisions have been constantly revised by the management of the company in order to match international standards that will foster success in a global environment. For example, employees have been trained to cope with new changes like introduction in technology, marketing strategies developed ensures fair competition in the industry, and the products of the company have been developed and designed to meet required international standards. However, many companies who deal with the sale of drinks have also diversified and fight for market share with Coca Cola company, a development which has given the company a rough time in coming up with viable marketing strategies

For any firm to know that it is on the right path of attaining the set objectives organizational effectiveness concept should be clearly emphasized in order to know the position of the firm in that particular industry. Organizational effectiveness can be defined as the extent to which an organization has achieved its set objectives. Coca-Cola Company’s organizational effectiveness is reported to be good and it is argued that the main reason for its success is because of the measures taken by the entire management in response to changes in the modern world of business. For any organization to be effective, human resource is a very crucial asset that requires much attention in an organization. (Hill, 2005).

Coca-Cola Company has been credited with building a strong human resource relationship with its entire workforce who has enhanced the success of the organization. The company recruits its employees based on their qualifications and their competence. They have achieved effectiveness and efficiency because they have developed their staff through training and adopted proper compensation systems that have in turn motivated the employees to work. Such competent employees have been able to cope with the effects of globalization and thus maintain the company’s profits level.

The organization has also responded well in terms of new technologies that come up as a result of globalization. The company has utilized the use of online marketing and also incorporated the use of new technologies in production and operations activities which have seen a significant increase in productivity and thus attaining the company’s goals. The company generally has responded to globalization by opening subsidiaries in many countries thus increasing its market share and hence profitability of the company. (Mark, 2001).

Nevertheless, there has been considerable criticism that Coca-Cola Company management has failed to be effective and efficient in its business activities because they have practiced unacceptable managerial activities of planning, organizing, directing, and controlling. The company has not ensured that the respective managers of respective departments are well equipped with human, technical, and conceptual skills that give them an opportunity to integrate the managerial activities above in order to produce results expected from their departments. The absence of such skills by managers has led to the company’s performance decreasing in some of its potential markets.

For Coca-Cola Company to remain competitive in the market and particularly international it has to improve on some areas of its managerial activities. Even though Coca-Cola Company is accredited with success in its business undertakings there are various improvements that the organization needs to embark on so that it can enhance its continuity and survival in modern business. The company needs to understand clearly the aspect of management science. Coca-Cola Company should integrate the planning, organizing, directing, and controlling functions of the organization in order to boost the company’s organizational effectiveness. Proper training for all managers and employees should be conducted in order to avoid any conflicts that may arise in the course of the business activities of the company. The respective managers with the executive officers should work together especially in the areas of decision making in order to improve the company’s effectiveness in its business activities. (Hoyer, 2001).

The company should also utilize the opportunity of its strong financial base to explore more markets. The amount of revenue that the company collects presents an opportunity for the development of unique products that will give a competitive edge over its competitors. In order for the company to get access to more new markets, the company should encourage the use of e-commerce that is; the company should fully utilize the use of internet technology in selling its products online. Online transactions will not present a lot of difficulties to the company in terms of legislation required because the staff needs not to travel to the new markets. (Thomson and Rampton, 2003).

Conclusion

The main objective of any business is to maximize profits in order to give the best feasible proceeds to owners for the funds they have invested in the company. Therefore business organizations including Coca-Cola Company depend on their internal and external aspects or components for efficient and effective operations. According to the latest research an organization should critically manage and monitor the key external and internal elements which include; physical facilities and equipment, financial stability, human resources, production and operations, and market capability. Research shows that there are many things a company does but it should always focus on what it can produce best.

Reference

Anthony C. (1998): SWOT Analysis; An explanation of the S.W.O.T. Analysis process; New York; Macmillan Press.

Baker, M. (2000): Marketing Management and Strategy, 3rd Edition: London. Macmillan Business.

Bowker, R.R. (1991): “Environmental Abstracts” New York, Bowker A and I publishing.

Cox, H. & Blake, B. (1991): Managing cultural diversity: implications for organizational competitiveness. Academy of Management Executive Vol. 5.

Cinchona, M.R., Ronkainen, I.A, (2005): International Marketing, 7th Edition, Thomson.

Dale, M. (2006): The Art of Marketing: Developing Management Skills, Vol. 3, Crest Publishing House, New Delhi.

Hill C. (2005). Global business today, 4th Edition, New York: McGraw/Irwin.

Hoyer. S (2001): HRM concepts, Practices and Strategies- 4th European Edition. Houghton Mifflin, Boston.

Kotare M and Helena K., (2004): Global Marketing Management, 3rd Edition, New York.

Knight, F (2007). The Ethics of Business Competition and Other Essays. University of Chicago Press.

Lovelock, J. (2006): Services Marketing, People, Technology, and Strategy. New York, Prentice-Hall.

Mark, D. (2001): Human Resource Management and organizational performance; 3rd Edition of the Institute of Management, Washington, U.S.

Mowery, D. C and Rosenberg, N. (1989): Technology and the Pursuit of Economic Growth, Cambridge: Cambridge University Press.

Maund, L. (2001): An Introduction to Human to Human Resource Management: Theory and Practice: Macmillan, Palgrave.

Philip, K. (1996): Principles of Marketing: Stages of customer relationships. 4th European Edition, Prentice Hall Harlow (UK).

Sparrow, P. and Hilltop, J. (1994): European Human Resource Management in Transition: New York, Prentice Hall.

Thomson, C. and Rampton, L. (2003): Human Resource Management. Melbourne press, New York.

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