External and Internal Environments Assignment

Subject: Strategic Management
Pages: 5
Words: 1625
Reading time:
6 min
Study level: Bachelor

Building a sustainable development model requires a careful assessment of the conditions that affect the operational process and market success. By using the Coca-Cola Company as an example of a global business, the key segments of the general environment and the main forces of competition will be reviewed. Strengths, weaknesses, opportunities, and threats will also be assessed, and future improvements will be analyzed from the perspective of leveraging available resources and capabilities, as well as strategic decisions.

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General Environment

The general environment that includes different dimensions determines in which direction a particular company develops and what efforts it makes to grow successfully. Hitt distinguishes several segments that influence the characteristics of work and the corresponding trends that businesses follow (1). By following this classification, one can note that in relation to Coca-Cola, two segments influence the corporation most strongly – the demographic segment and the sustainable physical environment segment.

Demographic Segment

The demographic segment is one of the most significant ones defining Coca-Cola’s general environment. The corporation is known for its targeted marketing campaigns and projects designed to address the interests of the public in different regions. Deshpande provides the example of the company’s business expansion in India and Malaysia and notes that respondents from these countries rate Coca-Cola’s offerings positively (2). Tailoring to specific markets is an essential aspect of the corporation’s flexible development policy and allows it to address consumers’ distinctive interests, including segmentation by age, gender, and other characteristics. Therefore, this direction of development can be assessed as a critical component of the growth strategy.

Sustainable Physical Environment Segment

This segment of the general environment largely affects not only the activities of Coca-Cola but also the beverage business as a whole. Due to growing concerns about environmental pollution with plastic or other harmful substances, the corporation is promoting production principles based on the use of renewable materials (3). According to the official report, when planning bottling operations, the factories of the enterprise also have to take into account the water quality in specific regions and take measures to protect water bodies from contamination (3). Following an eco-friendly developmental strategy allows the corporation to position itself as the one concerned about the ecological issues of modern time, which increases its credibility in the target market.

Five Forces of Competition

Achieving the sustainability of Coca-Cola’s business largely depends on how successfully the corporation overcomes the competitive barrier. Despite the fact that today, the organization is a leader in its market segment, it has to withstand competition from companies operating in the same industry. One can review the Five Forces model that, as Hitt states, is an important internal analysis tool (1). As the forces that are the most significant for the corporation, the threat of substitutes and competitive rivalry should be mentioned.

Threat of Substitutes

The threat of substitutes is critical in relation to Coca-Cola’s business. According to the company’s official report, the management mentions several important competitors, particularly Nestle and Dr Pepper, and singles out Pepsi Co. as the most serious rival (3). As Geng argues, at the end of spring 2020, Pepsi’s market capitalization exceeded that of Coca-Cola by $5 billion, which was the result of an active innovation policy promoted by the former brand (4). Both businesses operate in a soft drinks environment, and like Coca-Cola, Pepsi has a broad product line (4). In the past, Coca-Cola used its marketing resources to overcome the competitive barrier and retain loyal customers through targeted advertising strategies. However, today, corporations have to use all available resources, including partnerships with other brands, to maintain their leadership positions.

Competitive Rivalry

Competitive rivalry is another force significant to Coca-Cola’s business operations. As per the report data, the corporation has to regularly compete with some other market participants on such aspects as pricing, promotion programs, production techniques, and some other factors (3). According to Geng, competitors’ capabilities, particularly those of Pepsi, encourage Coca-Cola to pursue an active diversification strategy (4). In the past, the company built an extended network of coverage, including not only traditional markets but also online space, to retain the target audience (3). This method of dealing with rivalry has proven to be effective, but the company needs to constantly expand its presence and develop its production bases to meet high competition.

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Future Improvements

In the future, Coca-Cola may take some important measures to address the aforementioned forces successfully. To date, the corporation has already taken several significant steps, in particular, has reduced the number of core brands by almost half to focus on those products that have the greatest growth potential (5). In addition, as a workable solution, the management can expand the company’s network of partnerships to meet competition barriers more effectively through broader market interventions. As one of the most sustainable global brands, Coca-Cola is entitled to lucrative collaborations with other major market participants. Moreover, continuous performance monitoring with a focus on regional sales can help identify optimal improvement changes, such as expanding individual beverage lines, to meet customer demand successfully.

Greatest External Threat

When analyzing the greatest external threat to Coca-Cola’s business, one can mention the political/legal constraints associated with the many requirements of working in the food industry. According to Hitt, in this segment, companies adapt their operating modes to tailor activities to official standards, including trading, manufacturing, and other requirements (1). This threat is significant because, in addition to the conventions associated with the production and sale of food products and beverages, consumer protection and competition laws also fall under this segment. The corporation may miss a specific flaw due to numerous aspects of the business to control, which can become a reason for the imposition of sanctions by supervisory authorities, thereby negatively affecting the brand’s reputation (3). To address the threat, the company should establish monitoring steps in all departments, including marketing, production, human management, and others, to prevent legal violations and exclude claims from supervisory authorities.

Greatest Opportunity

Introducing new products by diversifying the business segments is Coca-Cola’s greatest opportunity. As Hitt remarks, entering new markets due to effective globalization strategies is a prospect for companies adhering to continuous growth approaches (1). The continuous expansion of the product line through effective acquisitions and collaborations is not only a profitable activity for the corporation but also a chance to enter new markets and gain new customers (6). By covering as much market share as possible, the company will be able to withstand competitive barriers more successfully and allocate assets for marketing needs and promotion projects more freely. To accomplish this opportunity, Coca-Cola should continue its course of building partnerships and acquiring new brands. Identifying potentially profitable projects and investing in their development timely are objectively credible steps to reap market benefits.

Strengths and Weaknesses

Among the corporation’s greatest strengths, one should name the company’s status as a market leader in its niche, an extended product line, diverse marketing initiatives, and successful front-to-back integration. Geng also mentions the company’s sustainable green production initiatives, along with cost reduction strategies (4). Nevertheless, Coca-Cola’s business also has some weaknesses that affect its operations. Firstly, the widespread perception of the negative health effects of carbonated beverages hinders marketing opportunities, and secondly, the corporation’s innovation base leaves much to be desired, resulting in an insufficient growth rate (4). The rational addressing of weaknesses through the effective use of strengths is a significant development perspective.

Strategy or Tactic

To take maximum advantage of the identified strengths, the corporation should effectively use its intangible resources, particularly the company’s history, and search for new marketing channels to remain the leader in its market segment. Hitt highlights the importance of these initiatives as the activities aimed at enhancing brand reputation and providing high-quality customer service, respectively (1). The history of Coca-Cola’s development is a valuable factor to apply to further popularize the brand and expand the growth opportunities for the customer base. To fix the aforementioned weaknesses, the company should focus on enhancing its product quality and innovative management. According to Hitt, these courses are the practices to optimize the stagnant aspects of the operational process and create a background for the successful application of modern developments, including from the perspective of production improvement (1). Promoting green manufacturing approaches through eco-friendly initiatives can help improve the brand’s image and minimize marketing risks associated with negative health impacts.

Resources, Capabilities, and Core Competencies

The company’s resources may be assessed in the categories of tangible and intangible ones. Tangible resources refer to its current assets, including both the budget, equipment, and production facilities, while intangible ones may be characterized as the company’s reputation and history, which are crucial factors for market success (1). With regard to capabilities, Coca-Cola has maintained advanced distribution channels through logistics management, established numerous marketing campaigns through promotion and customer-oriented activities, and created a sustainable design quality base (1). Finally, as the core competencies, the corporation may be characterized by effective customer service, which is a crucial feature (1). However, despite its competitive advantage, Coca-Cola lacks proper innovation to combine both tangible and intangible resources competently.

Sources

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

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Aditya Deshpande. 2020. Influence of strategic branding in soft drink market in Indian and Malaysian context: Study on Coca Cola to remain Top of the Mind Brand (TOMB). p. 85. Web.

United States Securities and Exchange Commission. 2021. The Coca-Cola Company and Subsidiaries. Web.

Hongshan Geng. 2021. Strategic Management and Financial Analysis in the Context of Epidemic – A Case Study of Coca-Cola Company. p. 2402. Web.

Coca-Cola CEO: ‘We Continue to Focus on Winning as the World Reopens.’ 2020. The Coca-Cola Company. Web.

The Coca-Cola Company Acquires Remaining Stake in BODYARMOR. 2021. The Coca-Cola Company. Web.