The purpose of this report is to provide an environmental analysis of the Coca Cola Company. To get this done, we shall develop a SWOT analysis of the company, examine your competition which the company faces through using 'Porter's Generic Strategies', and determine how it would be possible to improve the strategic fit of Coca Cola.
Firstly we analysed Coca Cola through the use of a SWOT analysis, in which we used both a LONGPEST analysis and a 'Porter's Five Forces' analysis as part of the SWOT. We first analysed the strengths of Coca Cola, one strength being that of the exceedingly strong brand image that Coca Cola has generated up since it started in 1886, this means it is currently very well known worldwide, for sale in over 200 countries. An additional strength of Coca Cola, is that the company can benefit from its huge economies of scale as suppliers don't want to reduce the custom of such a major company so offer discounts in order to keep up their custom (low bargaining power of suppliers). Another strength of Coca-Cola is that there is little risk of new entrants because although in the carbonated drinks industry the barriers to entry are reasonably low, it would be very hard for a fresh entrant to rival Coca Cola because of the high experiences levels needed and the high costs involved. There are however, weaknesses of Coca Cola, one weakness being that they have high advertising expenses as they continue to promote their popular brand. An additional weakness is that whenever considering Coca Cola globally, in THE UNITED STATES, the PepsiCo Company is popular, which is something Coca Cola will want to improve.
There are numerous opportunities available for Coca Cola to capitalise on. One opportunity available to Coca Cola will there be is potential to gain market share on PepsiCo in the North American soft drinks market. A further opportunity for the business is the actual to be more environmentally friendly, after reducing their carbon emissions by 5. 5% between the years 2007 and 2010. Another opportunity available is as their employees globally are just 28% female workers, you have the opportunity to increase this to have more gender equality within the company. However, Coca Cola does face threats from other sources. For example, there is the threat of substitute products from companies such as Pepsi and Dr Pepper. Another threat is that coca cola is not part of a healthy lifestyle, as people have become more health conscious, they could commence to change to healthier drinks. An additional threat is when in a recession like Europe has been facing, people are more likely to be buying necessities rather than spending money on soft drinks.
The Coca-Cola Company: Basis of Competition
For starters, Coca-Cola has achieved very high economies of scale since its beginning in 1886. High economies of scale allow businesses to create more, at a lower cost, because average costs fall when buying in bulk. This then allows the business to lower its prices, that may obviously instigate an increase popular and potentially, profits. Then, with an increase of profits, businesses can boost the barriers to entry within a market and deter other companies from entry.
Furthermore, within the CARBONATED DRINKS Industry, the bargaining power of buyers is incredibly high due to low switching costs, and the overall ease of which consumers can switch; but due to them amassing a huge degree of customer loyalty over the years, Coca-Cola can be an exception to the rule as its customers have become increasingly less price sensitive. That is another benefit for having a competitive advantage.
Coca-Cola's competitive advantage comes mainly from its innovation and product differentiation techniques. Coca-Cola 'spends roughly 20% of its advertising budget on maintaining its differentiation strategy' - and with justification. Through innovation comes more brand loyalty, inelastic demand (due to lack of substitute products), and the potential of the desirable 'Monopoly Power' which many businesses aim towards. An example of Coca-Cola's innovation is its 'Coke Zero' brand, which is a dieting product aimed at young men. This sort of product had never been touched after before in the soft drinks market and was a resounding success - 'its sales have regularly increased as the overall market has shrunk' (The Star - 2010).
By using Porter's "Generic Competitive Strategies" (appendix) we can determine that Coca-Cola employs the 'Overall Differentiation' approach to marketing. Coca-Cola doesn't need to give attention to low prices due to its brand loyalty, and due to is enormous size, with the ability to market its products at a far more broader market. As explained earlier (Coke Zero) Coca-Cola uses differentiation and innovation to fuel its success.
As for the strategic fit, we looked at how Coca Cola manage resources like the physical, technological and human resources, as well as intellectual capital. Having analysed these of Coca Cola, we have suggestions as to how the strategic fit for Coca Cola could be improved. You start with the physical resources, they currently have over 50 factories surrounding the world, with several being located in America. An improvement that might be suggested for this is that they could diversify to more countries to be able to reap the benefits of possible cheaper wages, therefore saving on costs. A way where Coca Cola could improve their strategic fit associated with technological resources would be to take to advantage in the foreseeable future immediately of any advances in technology that could help benefit them in some way, such as becoming better, therefore saving cash. As for human resources, this is principally the labour employed. One suggestion for increasing the recruiting is always to give all staff the best training available so they'll be in a position to work with their maximum, therefore being better members of the workforce. In connection with intellectual capital, concerning the brand, this would be almost impossible to improve due to how popular the brand is, and regarding patents, Coca Cola uses many patents to safeguard themselves from competitors.
After examining the current soft drink market, we can ascertain that it is in a mature state, suggesting that there surely is not much room for growth. Even as we can easily see from the existing products, leading companies have exploited most ideas to be able to improve sales, using Coca-Cola as an example, they have got created products directed at being healthier like Diet Coke and Coke Zero, as well as products experimenting with flavour; Vanilla Coke, Cherry Coke, Coke with Lime and Coke with Lemon.
Results from the SWOT analysis indicate that there is a gap searching for environmentally friendly product. Coca-Cola could take advantage of this opportunity by introducing container deposit legislation, to be able to help the surroundings. Now-a-days, glass bottles have grown to be obsolete; Coca-Cola could bring them back, consequently reducing waste and enhancing their carbon footprint. In addition to this, there have been concerns over the quantity of water being found in the production of Coca-Cola's soft drinks. Depletion of the local ground water-table poses serious issues for local farmers and their livelihoods. In Plachimada, India, the Coca-Cola plant used about 900, 000 litres; Indian environmental experts have mentioned that it takes seven to ten litres of water to make a litre of Coke. Therefore for taking full good thing about the opportunities, Coca-Cola should make their water usage more effective to produce their drinks.
Besides making their product more green, Coca-Cola may possibly also target a new audience altogether. Healthier drinks are steadily on the upsurge in the United Kingdom. From 2008 to 2010, sales of 'healthy' drinks increased 21%, with value sales rising to over 1billion. The success of these drinks along with the brand loyalty and status that Coca-Cola has means that they could possibly enter the children's soft drink industry. This industry is becoming popular, "Juice, juice drinks, bottled water and milk are now chosen twice more frequently such as 1993". Parents are increasingly worried about the wellbeing of their children, and focus on buying healthy products for these people. To expand their audience, a still, fruity drink without any sugar would be popular with children and parents. Coca-Cola could invest in this market, manufacturing an upmarket children's drink which they could sell because of their status and which parents would buy because of their affinity for their children's health, doing this means they can compete with Tropicana which is owned by PepsiCo.
In conclusion, by analysing Coca Cola through a SWOT analysis, considering Porter's competitive strategies and exactly how Coca Cola could improve its strategic fit, they have enabled us to create suggestions for a new product and service for the Coca Company.
LoNGPEST of Coca Cola
We viewed the local, national and global issues that face coca cola about the Political, Economical, Social and Technological issues.
At a Coca Cola factory in Plachimada, Kerala, residents from the village are angry that Coke's indiscriminate mining of groundwater has dried up many wells.
Have to add the VAT charge set by the federal government to their products.
When Coca Cola export their goods beyond the UK, they must comply with export and international trade regulations.
It must adhere to the Advertising Standards Authority and the Committee of Advertising Practice code - for example, one part of these code is the fact that 'Advertisements must not materially mislead or end up like to do so'.
Coca cola have to do around they can in order to help the surroundings - E. g. recycling, reducing packaging and water management.
In the united kingdom, they have reduced their carbon footprint. This year 2010, they produced 476, 000 tonnes of CO2 emissions, a 5. 5% reduction from 2007.
Coca Cola has to adhere to the minimum wage regulations within each country they operate in and continue thus far with any changes to the minimum wage within these countries.
Coca cola factories help to reduce local unemployment where their factories are based.
A rise in interest rates would affect Coca Cola as people will be spending less and saving more, so they could change to substitute products for coca cola e. g. supermarket own cola.
A reduction in rates of interest could affect Coca Cola as it might mean they are more likely to invest in the business as borrowing money would be cheaper.
Unemployment in the united kingdom was 2. 51 million in 2012. As this figure is high, this leads to less consumer spending as households have lower disposable income.
If Inflation rates were to rise, this might mean Coca Cola would need to increase their profits in order to keep their current profit levels.
Also as there is fairly high unemployment, this can be an opportunity for Coca Cola because as there's a greater supply of labour, there is certainly potential for lower wages as staff want to keep their jobs.
'The Real Business Challenge' setup by Coca Cola in 2006, is a competition tackling a business task for year 10 students to help them develop their business skills.
As more women are now in work, we can see this with a rise to 68% of female personnel in the Coca Cola company in the united kingdom in 2010 2010.
28% of Coca Cola staff across the world are female staff which ultimately shows that globally, there is not as much opportunities given to women in other countries compared to the UK.
Part of the Coca Cola 'Commitment 2020' programme, is to make a positive contribution to the local communities it operates in.
Adverts impact the united kingdom population such much like the Christmas advert each year, how everyone understands it and enjoys it.
Coca Cola have a goal with their 'Active Healthy Living' programme, to improve standards of physical fitness globally through encouragement and grassroots programmes.
With there being a growing knowing of health lately, this could affect the sales of Coca Cola as people are starting to opt for healthier options.
The latest technology is more costly so therefore in the short term, the expenditure on technology could slightly dent profits before new technology becomes effective and starts to save lots of Coca Cola profit the future.
Advancements in technology allow Coca Cola to work with better machinery making them a far more efficient company so lowers their costs.
Technology has allowed Coca Cola to build 'Planetbottles' which also help the surroundings. This may appeal to individuals who are environmentally conscious and could be more like choose this product over competitors due to environmental aspect.
Porter's five forces
Porter's five forces consists of competitive rivalry, the risk of substitute products, the threat of new entrants, the bargaining power of suppliers and the bargaining power of buyers.
The main rivals for the Coca Cola Company in the carbonated drinks industry are PepsiCo and Dr Pepper Snapple Group. All three reap the benefits of huge economies of scale, and are able to invest a large sum of money into advertising.
The carbonated drinks business can be an oligopolistic market, so the companies involved don't engage in price wars as it would not benefit them (kinked demand curve). Instead, they need to be impressive - and this increases competition. They make an effort to differentiate themselves from the competition, by for example creating a USP; (Coke is advertised as the 'original' or 'the real thing' and that its recipe is regarded as secret). PepsiCo advertises mainly to a younger generation and tries to increase brand loyalty by sponsoring events and/or dealing with charities to generate an emotional appeal (Coca Cola partners with WWF and the Paralympics).
Coca Cola is obtainable just about everywhere exclusively, and is seen as the initial, making customers more loyal.
PepsiCo, Dr Pepper Snapple Group and undoubtedly Coca Cola have virtually identical products across the board e. g orange - Fanta - tango, lemon sprite - 7up, energy drinks etc. These products are cheap, and the switching costs are extremely low, meaning the threat of substitution would be quite high, was it not for the superior convenience and availability of Coca Cola's products.
However, in a blind taste test, people couldn't tell the difference between Coca-Cola coke and Pepsi coke - this shows that there may be a high risk of substitution.
Entry barriers are low for the soda market, but to be as successful as Coca Cola or PepsiCo, the costs and experience levels are very high. With regards to costs, because of the low costs of producing soft drinks, entry barriers are relatively low.
In order to be as big as one of the three main opponents such as Coca Cola, an organization would have to invest a considerable amount of money on R&D and advertising, so because of this, the risk of new entry is low - to the larger companies at least. New companies would also lack the knowledge of existing companies, and may be at the mercy of the threat of retaliation, which could deter entry of new organizations in the foreseeable future. Brand loyalty also contributes to the low threat of new entry in the carbonated drinks industry. Coca Cola isn't only a beverage, but a brand, basically with PepsiCo, it has had an extremely significant market share for a long time and loyal customers are not more likely to swap brands if they're content with their current choice of beverage.
Bargaining power of suppliers
The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers aren't concentrated or differentiated. No bargaining power on price as its basic merchandise and common to every producer. Any supplier would not want to reduce a huge customer like Coca-Cola. Switching cost to the suppliers is very low; manufactures can certainly shift towards other suppliers.
Bargaining power of buyers
The individual buyer has little to no pressure on Coca-Cola. The primary competitor, Pepsi is priced almost the same as Coca-Cola. Consumer could buy those new and less popular beverages with cheap however the flavour differs and the product quality is not guaranteed.
Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, however the bargaining power is lessened as a result of end consumer brand loyalty. There are many varieties of energy drink and soda products on the market. Coca-cola doesn't genuinely have a special flavour. Inside a blind taste test, people couldn't tell the difference between Coca-Cola coke and Pepsi coke. Folks are getting concerns of unwanted effects of carbonated beverages. Increasing variety of consumers start to drink juice, lemonade and tea rather than soda products.
Porter's generic strategies
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