Coca-Cola Company’s External and Internal Environments

Subject: Company Analysis
Pages: 4
Words: 1500
Reading time:
5 min
Study level: Bachelor

Coca-Cola Company

Coca-Cola is a multinational beverage company established in America that offers many brands worldwide. The company focuses more on its products’ quality to achieve differentiation from competitors. The paper will assess two segments that influence Coca-Cola from the general environment. Besides, it will explore the corporation’s forces of competition, external threats, and strengths focusing on how they can be addressed. The company’s core competencies, capabilities, and resources will also be examined based on their relevance.

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General Environment

Several aspects can influence Coca-Cola’s operations in the general environment. However, the political and economic segments are ranked the highest in influencing this company. The economic segment entails aspects such as gross domestic product, inflation rates, and other elements within which companies operate (Michael, 2020). On the other hand, the political segment focuses on the government’s role in shaping organizations, such as changes in tariffs, tax policies, and trade restrictions.

Economic Segment

Coca-Cola’s success is heavily influenced by the nations’ economies where it functions since it is a multinational corporation. Expansion of the international economy brings more revenue for the company. On the other hand, a drop in economic growth could put the corporation at risk of losing money. The global economic crisis witnessed between 2007 and 2008 caused a slowdown in the global economy, affecting international corporations’ earnings (Jones & Comfort, 2018). Furthermore, in recent years, the economies of developing countries have been rapidly increasing, while those of developed countries have appeared to have slowed. As a result, the company’s earnings in wealthy countries may suffer while its revenues in developing nations rise. Coca-Cola has adapted to this shift by investing in developing countries to maximize its profits.

Political Segment

Coca-Cola needs to also cope with political aspects that affect its business, in addition to the economic ones. The diversity of laws in the nations where the company operates is a political factor that Coca-Cola needs to handle (Jones & Comfort, 2018). Each country is associated with its political component, and politically elected officials significantly influence the established laws. Politicians prefer to implement laws centered on their interests in this regard. To operate successfully on a worldwide scale, Coca-Cola must understand each nation’s regulations. Previously, the company has faced legal issues in countries where politicians have enacted legislation restricting the soft drinks business.

Five Forces of Competition

Coca-Cola’s business is affected by several forces of competition, which should be addressed for the realization of improved performance. Substitutes and buyer bargaining powers are the two forces that are the most significant for the company. Coca-Cola faces many substitutes while the buyer’s bargaining power is very high.

Buyer Bargaining Power

Coca-Cola’s customers have a lot of negotiating power that can be linked to the intense competition in the beverage market. Competition is stiff in this industry, with rivals vying for a large share of the potential market. For example, Pepsi, its competitor, creates brands identical to Coca-Cola’s (Jones & Comfort, 2018). Particularly, this implies that customers can easily switch their loyalties from Coca-Cola to its competitors if they are dissatisfied. The corporation has previously invested in innovation and technology to increase consumer satisfaction to counteract this threat. For instance, the company studies the potential customers’ preferences and utilizes technology to ensure the developed products fit their needs.

Substitutes

Coca-Cola also faces another significant force, which is the availability of substitutes linked to the presence of competitors. Remarkably, there are already established beverage companies that are likely to substitute the company’s products and services. The rivals’ items are similar to those offered by Coca-Cola, resulting in increased substitutes. The corporation has previously used its large purchases to bargain with its raw material suppliers for discounts to overcome this force. Outstandingly, this approach has enabled Coca-Cola to reduce its production costs allowing for the implementation of a low-price strategy to combat competition.

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Future Improvements

Due to the significant bargaining power of buyers and the presence of substitutes in the market, Coca-Cola should engage heavily in research to explore the expectations of its consumers. Customers should be interviewed about their general satisfaction with the corporation’s products as part of this research. For instance, this could be accomplished by conducting online surveys to get data on the consumers’ needs. The company should use the collected information to devise measures to close the gap in customer satisfaction. Besides, Coca-Cola should implement ongoing staff training programs to provide its personnel with extra abilities and skills. One of the businesses experiencing huge shifts in client preferences and tastes is the beverage sector. In this sense, the corporation must be diligent in producing products that meet the consumers’ preferences. Competent employees could be hired to enable Coca-Cola to achieve this aspect.

Greatest External Threat

Competition from companies such as Red Bull, Pepsi, and Monster Beverage Corporation is the most significant external threat that Coca-Cola faces (Guo & Wen, 2021). The available competitors are equally global, which indicates that they are well established to realize success from economies of scale. Therefore, these companies pose Coca-Cola a great threat that underscores it to research new approaches to enhance its competitive advantage. Although the company faces other threats, such as health concerns linked to its products, they are not greater than the potential competition. Coca-Cola’s profitability may be affected in the long run if the available competition is not addressed. Investing in technology and innovation should be ensured in Coca-Cola for the realization of increased competitive advantage. Such approaches will enable the corporation to develop quality products to differentiate it from its competitors.

Greatest Opportunity

Globalization is the greatest opportunity for Coca-Cola because it will enable it to maximize its profits by exploring several global markets. The company should identify emerging markets and invest heavily in them because they are associated with speedy growth. Previously, Coca-Cola focused on developed nations and overlooked the developing ones (Jones & Comfort, 2018). However, taking additional investments in emerging markets and developing countries will enhance the company’s profits. In this case, Coca-Cola can partner with retail shops and hospitality firms worldwide to achieve effective investment. The company can also utilize internet marketing to reach more customers and reduce the cost of product advertisements. Although the internet has been embraced recently, globalization offers Coca-Cola more benefits than internet marketing. The company can address the rivalry faced in the industry by investing in emerging markets and developing nations resulting in improved profits.

Strengths and Weaknesses

Strong brand equity is one of the major strengths of Coca-Cola, which indicates that its items are widely accepted and known. The corporation is among the innovation leaders in the beverage industry. A positive reputation and high embracement of Coca-Cola’s products have been achieved through innovation. The strong brand equity influences customers to purchase the company’s beverages. Another strength of Coca-Cola entails its financial stability. Based on its financial statement, the company realizes huge annual profits from the sale of beverages (Guo & Wen, 2021). Besides, it rarely uses borrowed money to finance its assets. Coca-Cola’s financial stability should be applied to reduce its operating costs. Firms that focus on debt capital are likely to record increased operational costs because of the incurred annual interest.

The most significant weakness associated with the corporation is the lack of product diversity. For example, Coca-Cola markets several drinks, which are limited to soft drinks or beverages (Guo & Wen, 2021). Exceptionally, this is the greatest weakness because the company’s rivals are already offering non-beverage products. As a result, Coca-Cola is likely to lose its customers to other companies, such as Starbucks, that produce different food products in addition to beverages and non-beverages.

Strategy or Tactic

Coca-Cola should utilize its strong brand equity to enter emerging and new markets to increase its profits. Besides, it can apply its financial investment more and plow back revenue to avoid relying on debt capital in the future. If the maximum advantage of these strengths is taken, the corporation will realize increased performance and growth. The weakness involving the lack of various products can be addressed by investing in innovation to develop new items based on the market needs. Instead of focusing on beverages only, Coca-Cola can establish food products and non-beverages in its stores.

Resources, Capabilities, and Core Competencies

Coca-Cola has competent and adequate human resources that can be used to achieve increased competitive advantage. Information from the company’s website indicates that highly qualified individuals are recruited and offered continuous training (Guo & Wen, 2021). However, Coca-Cola should invest more in human resources to ensure the increased competency of its employees. The company is associated with strong financial status, which makes it not rely on borrowed money. Coca-Cola is linked with a strong financial background that enables it to explore more business opportunities.

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Sources

Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization 13th ed. Cengage Learning.

Guo X. and Wen M. 2021. Research on Competitive Strategy of Coca-Cola Company. p. #2879-2885. Web.

Jones P. and Comfort D. 2018. The Coca Cola Brand and Sustainability. P. #34-46. Web.