Introduction
The Coca Cola Company’s flagship brand is valued highly in the international markets and well recognized too. In 2013, the multinational company commanded a 42.2% market share in the international non-alcoholic beverages industry (The Coca-Cola Company 2016). It has however been experiencing strong headwinds in the past ten or so years resulting from falling sales revenues and figures as more of the world’s populace sought to indulge in healthier lifestyles. Such dynamics in the international market compelled the Coca Cola Company to formulate novel long term objectives. Some of the objectives set forth included doubling revenues by the year 2020 as well as developing or acquiring scalable and more so innovative brands for the premium end markets (The Coca-Cola Company 2016). This paper presents a case study on the company and seeks to discuss its external environment, internal profile as well as present a SWOT analysis on the organization.
Overview
The Coca Cola Company has a production portfolio which boasts over 3,500 products retailed in over 200 nations (The Coca-Cola Company 2016). Its flagship brand is Coca Cola with other internationally brands being products like Fanta, Sprite, Dasani, Diet Coke, Coke Zero, Power Ride, Minute Maid, Fresca, Simply Orange and Vitamin Water. It operates a uniquely franchised bottling and distribution system. Though this system, the company has been able to realize symbiotic partnerships with about 250 bottling firms worldwide. The company’s major competitors include Pepsi, Dr. Pepper Snapple and Nestle.
The past couple of years have been relatively difficult for the company as evident from the decline in net income. In 2014, it registered about 15.4% net income from collected revenues which represented a 2.9% drop from the previous year (The Coca-Cola Company 2016). It is important to clarify that this does not by any means imply that the company is dire straits, this is merely an indication that the international carbonated drinks market is dwindling. In an effort to conform to the projected consumer preferences and by extension, re-establish its position as the foremost non-alcoholic drinks manufacturer, retailer and distributor, the company has embraced a novel strategy (The Coca-Cola Company 2016). The strategy involves acquiring and more so, making entry into consumer markets for healthier beverages options like Vitamin Water.
External Environment
The Coca Cola Company’s external environment can be aptly analyzed through briefly employing a PEST analysis as well as Porter’s Five Forces.
Pest Analysis
A PEST analysis on this organization allows for greater insights as to how political, economic, technological and social factors in its external environment affect it.
Political Factors
Given that Coca Cola is a global organization; the international political environments as well as that of individual countries tend to affect its operations internationally and among the individual nations (The Coca Cola Company, 2016). Such factors include the political atmosphere in the international arena and in individual countries. Other factors include the outcomes of global pressure groups and national lobby groups as well as government positions concerning the industry and more specifically, the industry. For instance, in 2014, Israel took to aggression against Palestinians in Gaza leading to retailers in Mumbai and Turkey to shun offering the Coca Cola Company’s products (Ladda, 2012). Similarly, this particular industry’s performance and by extension, the performance of the Coca Cola Company is set to be negatively impacted upon by the prevalence of terrorist activities in the global arena and in specific countries in North and West Africa and the Middle East.
Economic factors
Regardless of industry, each business enterprise is in some way or another impacted upon by economic dynamics. A growth or otherwise decline in the national or international economy can either favorably or unfavorably impact on industry performance. (Ladda, 2012) As such, when the world economies perform well, incomes across nations tend to improve favorably impacting on consumers as incomes increase. By extension, this results in increases in sales revenues from rising sales of products from the company as well as benefits the entire industry (Ladda, 2012). When the economic outcomes on a national or international scale are unfavorable, the entire industry suffers and by extension the Coca Cola Company’s sales revenues decrease.
In 2015, global growth was expected to rise by 3% though real figures indicated only a 2.4% growth as major economies were expected to recover from the previous economic recession (The Coca-Cola Company 2016). A lot of economic factors played a role into this outcome such as economic slowdowns in the larger markets like China. On the same note, developing countries experienced low growth rates contrary to earlier projections. All in all, this lead to lower revenues for the Coca cola companies and as much as 2016 is projected to witness marginal growth (The Coca-Cola Company 2016). This particular entity’s performance will be pegged on the economic performance of individual nations and the overall global economy’s performance.
Technological Factors
The Coca Cola Company has strategically embraced technology towards cementing its status as industry leader in the non alcoholic beverages industry (The Coca-Cola Company 2016). Through interactive marketing campaigns, advertisements and promotional enterprises, the company has sought to embrace social media marketing as the most potent tool to drive up sale (The Coca-Cola Company 2016). Through these avenues, the company is well positioned to exploit the advantages of technology to its advantage especially in countries which are technologically advanced.
Porter’s Five Forces
Threats from New Entrants
For this industry, barriers to entry are relatively small as the consumer switching costs and capital requirements are significantly low (Ladda, 2012). As such, there are numerous brands which are all new commonly found in the same market dominated by the Coca Cola Company. The novel brands offer similar product attributes to other Coca Cola brands at relatively lower prices. As much as this may pose a significant threat to the market leader, Coca Cola’s brands are renowned and well respected for its Century old continuity in the industry (Ladda, 2012). The company boasts millions upon millions of loyal customers which new entrants cannot possible achieve. Thus it only experiences between mild and low pressures from new entrants into its markets.
Substitute Products as Threats
Given that there are numerous and diverse non alcoholic beverages in this particular market, the threat from these products can be considered as ranging from medium to high (Ladda, 2012). For instance, past exercises to determine whether Coca Cola as a brand presents a unique taste and flavor has shown that consumers barely correctly differentiate between Pepsi and Coca Cola.
Consumer Power
This threat is particularly quite low for the Coca Cola Company based on the fact that the individual consumer exerts no pressure on the entity. However, the bargaining power possessed by customers like Wal-Mart is relatively high as the high volumes ordered enable them negotiate prices (Ladda, 2012). This bargaining power is nonetheless eroded by the aspect of consumer loyalty to the Coca Cola brands.
Supplier Power
This threat is particularly low as the essential raw materials for the production of non alcoholic beverages are artificial flavors, carbonated water, sugar and water. Supplier power is therefore low as they are easily substitutable as switching costs are very low (Ladda, 2012). Forward integration as a threat is also quite low as the manufacture of non alcoholic beverages demands huge capital investments, marketing and distribution networks.
Competitive Rivalry
The pressure on the Coca Cola Company from this threat is high. As much as Coca Cola is the dominant player in this industry, another similarly resource rich company Pepsi always gives the dominant player a run for its money (Ladda, 2012). In an effort to sustain market share, both engage in high profile marketing, and promotion campaigns which tend to eat back on revenues. Only Pepsi exerts high pressure on the Coca Cola brand though other brands such as Dr. Pepper are increasingly becoming popular as a result of inherently unique flavors.
Internal Profile
SWOT analysis
Through a SWOT analysis, one can be able to analyze the Coca Cola Company’s internal profile. After a comprehensive SWOT analysis, the company can then works towards formulating and progressively institute them towards doubling revenues by the year 2020 as well as diversifying on its healthy products portfolio (The Coca Cola Company, 2016).
Strengths
Indeed, the Coca Cola Company has unrivalled strengths in this industry stemming from the fact that its business continuity has been consistent for close to 130 years. Over the years, it has perfected its marketing strategies which have appealed to different generations of consumers with positive outcomes (Arnold, 2015). It has the ability to diversify its marketing campaigns to conform to the different world cultures, a strategy that Pepsi, its primary competitor finds challenging to emulate (Ladda, 2012).
The Coca Cola Company’s second strength is its unique brand equity such that, its product offers similar degrees of customer satisfaction in the numerous nations where it retails (Arnold, 2015). As such, this has positively contributed to its high customer loyalty parameters with regard to products sold under the Coca Cola brand. This has contributed significantly in instances where the company introduces novel products into the market. Coca Cola is also currently leading in the low calories non alcoholic beverages market (Ladda, 2012). This has enabled the company to command a growing market share concerning the market segments especially in the BRIC nations.
Weaknesses
One of the greatest weaknesses this particular entity is facing results from its failure to invest in the health conscious consumer market. The weakness is attributed to the failed UK launch of the Coca Cola Company bottled water brand, Dasani, in 2004 (Arnold, 2015). Two months later, the product was hastily recalled as the bromate levels in the bottled water were high enough to present a wide range of side effects including cancer. As a result, the company’s image concerning healthy products was compromised and this is yet to completely change. More so, all major Coca Cola brands have always been considered as being in unhealthy junk foods market segment making attempts to successfully penetrate the healthy drinks market segments a significant challenge (Arnold, 2015).
Opportunities
The coca cola Company is also presented with numerous opportunities, especially tapping into emerging markets. The consumption levels of non alcoholic beverages in Asian Nations like India and China is presently on the rise (Cheng & Sonka, 2015). More so, the demographic numbers of the two countries present the company with a vast market where opportunities abound especially if it seeks to extend its market share in the two countries. The company is also presented with an opportunity to invest into having a greater presence in the healthy drinks market segment.
Threats
The Coca Cola Company’s number one threat comes from its main industry rival Pepsi (Ladda, 2012). Pepsi has been realizing phenomenal growth trends as a result of its product diversification initiatives. These initiatives have looked away from the non alcoholic drinks market to the snacks market (Ladda, 2012). Most consumers of the Pepsi brand drinks can thus purchase snacks to enjoy while having drinks. This is not the case for Coca Cola brands.
The other threat stems from the fact that consumer preferences for healthier lifestyles has resulted in a situation where more are shunning carbonated drinks (Arnold, 2015). This threat not only affects Coca Cola but the entire industry as well.
Conclusion
The Coca Cola Company’s internal and external environments pose significant challenges towards its current objectives which call for twofold revenues by 2020 and long term sustainable presence in the healthy drinks market segments. From the SWOT analysis, it is evident that its strengths outweigh its weaknesses and on the same note, its opportunities surpass envisaged threats. The industry analysis has however shown that the external environment is one aspect the company cannot fully take advantage of. However, technology and adherence to social cultural factors can enable the company position itself strategically towards meeting its 2020 objective.
References
Arnold, P. (2015). Evidence and leading indicators of change success. Strategic Direction, 31(10), 1-5.
Cheng, C., & Sonka, S. (2015). Big Data: Alive and Growing in the Food Sector! farmdoc daily, 5(5): 216.
Frynas, J. G., & Mellahi, K. (2015). Global strategic management. Oxford University Press.
Ladda, P. (2012). A Comparative Study Of Pepsi Company And Coca Cola Company With Reference To Chatla Chowk, Solapur. Journal of Biological Chemistry, 1(10).
The Coca-Cola Company. (2016). Coca-Cola Leaders: Q3 Results Show Strategic Plan Is On Track. Retrieved from: http://www.coca-colacompany.com/coca-cola-unbottled/business/2015/coca-cola-leaders--q3-results-show-strategic-plan-is-on-track/.
