Coca Cola has been referred to as one of the most popular product all over the globe. It has been referred to as one of the largest selling soft drinks from the past. Coca Cola was introduced as a soda fountain beverage which is made by amalgamating Coca Cola syrup with carbonated water. In today’s scenario, Coca Cola provides its customers with more than 400 brands in more than 200 countries making it one of the largest soft drinks company all across the globe. In 2001, Coca Cola is ranked 41st amongst top 100 strong economic entities. Some of the brands offered by Coca Cola are Fanta, Coca Cola zero, Diet Coke, Minute Maid, Sprite, Oasis, Five alive, and Roses & Schweppes.
Coca Cola has been rendered to as one of the most successful companies all over the globe. Coca Cola has survived itself & grown day by day by adopting various marketing and innovative strategies. The main purpose of Coca Cola is to provide happiness, value creation to make a difference & refresh the world. The vision of Coca Cola is to be highly effective and earn high amount of profits. The other vision of Coca Cola is to provide portfolio of beverage brands which anticipates & satisfy the needs of the people (Njonjo, 2015).
PESTLE analysis has been referred to as strategic tool which is used to analysis the macro environment or the external factors which might affect the organization such as trade barriers, government change policy, trade barriers & new laws. The PESTLE analysis of Coca Cola has been discussed as follows:
(Source: Zanoni, 2012)
Political Factors: It has been seen that, Coca Cola is highly impacted by the political factors in US and other countries. The government regulates the manufacturing procedures for these firms. It has been seen that, companies to fail to meet the expectation set by the government are subject to fines (Zanoni, 2012). Some of the factors which might affect the operations at Coca Cola are changes in law & regulations (i.e. changes in the tax rates, modification of tax law interpretations, changes in accounting standards & entrance of new tax laws), changes in non - alcoholic business model (i.e. competitive pricing & product and the ability to maintain or earn share of sales worldwide), penetration of the emerging & developing markets (i.e. Coca Cola has made alliance with the local bottlers which will help them to have better production, distribution network and technology) and effect of political conditions in the international markets (i.e. changes in the government policies, ability to relocate capital across the borders and civil conflict).
Economic Factors: The sales of Coca Cola is impacted by a set of economic factors which are beyond the control of the company. Some of the factors are interest rates, labor costs & tax rates. It shall be seen that, during the time of recession the businesses were greatly impacted by the various economic factors associated with the same. Though, the crises has impacted Coca Cola to a lesser extent as compared to other FMCG companies (Warner, 2010).
Social Factors: Some of the social factors which have an adverse effect on Coca Cola is that majority of people have shown interest in healthy lifestyles therefore more and more people are opting for fresh juices as compared to this aerated drink. People now have become more aware about the ill effects of carbonated drinks. This has had strong influence on the sales number of Coca Cola. People are switching from Coca Cola to Diet Cola, Zero Coke or mineral water. It has been seen that, customers ranging from 30-55 years are concerned with nutrition. There is large section of population who are baby boomers. As the target audience become elder in terms of age they are concerned about their lifestyle or choices which will help to improve its life expectancy (Vrontis & Sharp, 2003).
Technological Factors: Technology plays a vital role in soft drink industry. Technological advancements play an important role in packaging of the product. It has been seen that, Coca Cola relies upon various bottling partners for majority of its business. Hence, it is an important task for Coca Cola to have healthy relations. The advancements in technology in the company has led to various innovative changes in Coca Cola. One of the technological advancements which has taken place at Coca Cola is the use of vending machines all over the world. In case of products advancements, Coca Cola has developed various new products such as Diet Coke, Coke cherry, etc (Sheehan, 2011). In case of technical advancements, Coca Cola has introduced recyclable & non - refillable bottles, introduction of cans as compared to bottle for the youngsters.
Legal Factors: Legal factors consists of discrimination law, antitrust laws, employment laws & health and safety laws. In case Coca Cola, the business is subject to various types of laws and regulation in which they do their business. The laws include product safety, advertising, competition, environment protection & labor practices. In US, the company is subject to Food & Adulteration Act, Drug & Cosmetic Act & Occupational safety and health act and advertising of the products are subject to various laws and regulation (Warner, 2010).
Environmental Factors: The environmental factors consist of range of factors such as the weather conditions and the most apt seasons for customers to by the aerated beverages. It shall be taken into consideration that, Coca Cola must imbibe the various environmental issues based on its product, manufacturing, distribution & packaging followed amongst various countries. One of the environmental measures taken up by Coca Cola is to use reusable plastic PET bottles.
PESTLE analysis refers to a strategic tool which will help the company to assess as well as take into consideration the various factors which might affect the company at large. This analysis will help Coco Cola to have a bigger picture for forces of change as well as take advantage of the opportunities that are present in front of them. PESTLE analysis will help Coco Cola to spot the business opportunities and provide advanced warning of threats. This analysis will also help Coco Cola to break free the assumptions when one enters the country or region or a particular market. PEST analysis also helps to avoid the projects which are likely to get fail in the long run.
Porter’s five forces model refers to a tool which helps in carrying out industry analysis. The competitiveness of the market is analyzed by the five forces of Porter’s model. The current along with potential risks that the company might have from the associated industry is concluded by employing this model. The five factors covered under this Porter’s five forces model are bargaining power of buyer, bargaining power of supplier, competitive rivalry, threat from substitutes & threat of new entrants.
(Source: Winer, 2000)
Bargaining power of buyers: The bargaining power of buyers in case of Coca Cola is very low. It has been seen that, Pepsi which is one of the main rivals of Coca Cola also enjoys same market share. There are various products available in the market which hare priced at a low level as compared to Coca Cola. In today’s scenario, people are becoming health conscious this is the reason they prefer fresh juice as compared to Coca Cola or Pepsi. Customers these days are aware of the adverse impact of carbonated beverages (Winer, 2000).
Threat of new entrants: In case of soft drink beverage industry, the threat of new entrants is very low. This is because the switching cost of the customer is zero with low capital requirements. It shall be seen that, various new products have been launched in the market at a relative low price as compared to the prices opted by Coca Cola & its products (Vrontis & Sharp, 2003).
Threat from substitute: The threat from substitute in case of Coca Cola is medium to high. Some of the substitutes of Coca Cola are mineral water, fresh juice, coconut water & other energy drinks. It is an open fact that, Coca Cola products lack any specific flavor as compared to its main competitor i.e. Pepsi. This was seen in a blind taste test that, the customer was unable to recognize Coca Cola versus Pepsi (Winer, 2000).
Bargaining power of sellers/ suppliers: The bargaining power of suppliers in case of Coca Cola is very less. It has been seen that, Coca Cola is one of the major suppliers all over the globe and the suppliers are not at all concerned about the ill effects attached along the carbonated or aerate drinks.
Competitive rivalry: The rivalry amongst the competitors are very high in case of Coca Cola. Pepsi has been referred to as the biggest competitor of Coca Cola with almost same market price and share. Pepsi or Coca Cola are rated on the same scale all over the globe. The main target audience of Coke is the adult section and the main target audience for Pepsi is the young population. However, the market share of Coca Cola in the United States (U.S.) has a competitive edge over Pepsi. On the other hand, other beverages such as Dr. Pepper is also becoming popular in the US due to its unique flavors associated with the same (Sheehan, 2011).
Some of the strategic recommendations to Coco Cola has been discussed in this section of the report. They are as follows:
Health & Wellness Trend: Health and wellness trend refers to one of the main trends in the beverage market. Based upon the medical journal, it is seen that daily serving soft beverage will increase the risk of obesity amongst the youngsters. Though, diet soft drinks can also be replaced with carbonated drinks but it shall also be not taken in large quantities as it has no nutritional value. It has been seen that, soft drinkers are switching from carbonated drinks to other drinks which possess high nutritional value. Coca Cola shall provide leadership in health and wellness area. Coco Cola shall market different products for different segments of the society. For example, in baby boomer market Coca Cola shall focus more on tea, coffee & water segment as it contains less sodium and sugar. Whereas in younger generation market, Coca Cola shall focus more on organic beverages rather than sports or energy drink (FoodQualityNews, 2004).
Increased competition from Pepsi Co: Pepsi Co. and Coca Cola have been in cold war for the past many years now. Whereas, Pepsi Co. has diversified itself in various other profiles i.e. healthy food, etc and it over tool Coca Cola’s market share in the year 2006. It was calculated that, Pepsi Co. had high gross profit by the end of 2010 as compared to Coca Cola US$99 billion. It has been seen that, Pepsi Co. has huge investment to be done in research and development (R&D) on the beverage. Therefore, Pepsi Co. will always remain a major threat for Coca Cola in the long run. Though Pepsi Co. has horizontal expansion on the other hand, Coca Cola shall focus on vertical expansion. Apart from the soft beverage Coca Cola shall also focus upon other related businesses such as sugar plantation, bottled water & recycling business (Datamonitor, 2005). It shall be kept in mind that, these days environmental change is rapid therefore, Coca Cola shall be aware of new trend in order to have a competitive advantage over its competitors.
Decline in Sales volume: Based upon the survey conducted by William Pecoriello a leading beverage industry analyst, there has been a decline in the soft drink beverage industry by more than 10% in the past 5 successive years (Beverage World, 2007). Therefore, for Coca Cola if it focuses only carbonated drink it will weaken the position of Coca Cola in the market. For Coco Cola to maintain its market share & image in the minds of the customer, it shall focus upon bottled water, noncarbonated beverages & other energy drinks. Energy drinks & healthy drinks shall be the main focus for Coco Cola as the new or young generation are health conscious.
Goal oriented sales: The main challenge for any soft drink beverage company is the rise in health concerns amongst the target audience. In the year 2000, more than one third of schools and more than three fourth of senior high school had contracts with Coca Cola company to provide the beverage at their school canteen. Whereas, in the late 2000 based upon a medical report on rise in obesity epidemic. There was debate on high consumption of junk food amongst the youngsters. Therefore, US per capita consumption of soft drink reduced from 1990 – 2005 (Beverage Daily, 2007). Therefore, it would be recommended to Coca Cola to invest in diet oriented programs and promote diet soft beverages in order to regain the young market.
Hence, it can be concluded that Coca Cola is one of the most successful companies in soft drink beverage market. It has been referred to as one of the largest selling soft drinks from the past. The two strategic tools i.e. PESTLE analysis and Porter’s five forces model will help Coca Cola to know about the factors which might affect the company in the long run. Based upon the tools, four strategic recommendations have been made for Coca Cola.
Beverage Daily (March 12, 2007). Energy Drinks Boost US Beverage Market. http://www.beveragedaily.com/Markets/Energy-drinks-boost-US-beverage-market
Beverage World (March 15, 2007). Word from Wall Street. http://www.beverageworld.com/index2.php?option=com_content&do_pdf=1&id=33014
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FoodQualityNews. (March 26, 2004).Coke Admits Defeat in Dasani Rollout. http://www.foodqualitynews.com/Public-Concerns/Coke-admits-defeat-in-Dasanirollout
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