PNB Business Analysis ( SWOT & Pestle )

Business Strategy in the Global Environment Table of Contents Serial Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Topic Executive Executi ve Summary Introduction PEST Analysis

Organizational Business Strategy/Structure of Coca Cola Product Diversification Environmental Scanning Effects of External Environmental Factors Economic Factors Political Factors Technological Technological Factors SWOT Analysis

Recommendation of Coca-Cola's Future Generic Business Strategy Conclusions Referencing

Vinit Shah MBA2-Finance

Page No. 2 3 3 5 6 6 6 6 7 7 9 10 10 11

Business Strategy in the Global Environment Executive Summary Every business organisation functions has a direct/indirect impact from the outside/external environment. Outside market plays a very important role for the business process. It can be said that the profitability of the company also depends on the changes in the outside world. Fluctuations in various aspects considered such as price, political factor, social and cultural, economical and consumer likes and dislikes varies directly with the business operations. This project gives a brief explanation about the effects a business organisation faces and benefits it can earn in the context of the external environment.


Business Strategy in the Global Environment

Introduction

Business Environment

Functioning of any business is not just with the walls and premises of the office or any place where it is actually carried out. Business depends more on the external factors which helps define their objectives and decide on strategies for the smooth functioning. These external factors are largely outside the control and influence of the business. Business environment can be better explained as it is a combination of political, economic and technological factors (PEST).Outside environment keeps on changing has a direct impact in the business functions and is capability to survive.

PESTLE Analysis

Analyses the external influences on a firm i.e. issues that could significantly affect the strategic development of a firm, the former acronym, PEST, has been expanded to include legal and environmental aspects (Oxford dictionary of Business and Management). It is the scan of the external environment which includes political, economic and technological factors (PEST).

Environmental Scan /

\

External Analysis / Macroenvironment | P.E.S.T.


\ Microenvironment

Internal Analysis

Business Strategy in the Global Environment Political Factors

Political factors include government rules and regulations and all othet legal matters and define both all the formal and informal rules under which any firm/business carries out its operations. They are :1. 2. 3. 4. 5.

Political stability Environmental regulations Tax policy Trade restrictions and tariffs Employment laws

Economic Factors

Economic factors has a huge impact on the purchasing power of potential custo mers and the cost of capital of the business enterprise. 1. 2. 3. 4.

Inflation rate Interest rates Exchange rates Economic growth

( http://www.quickmba.com/strategy/pest/ )



Social Factors

Social factors consist of demographic and cultural aspects of the outside macro environment. These factors impacts customer wants and the range of potential markets. 1. 2. 3. 4. 5.

Career

attitudes Health consciousness Age distribution Population growth rate Emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, decrease the production efficiency, and influence outsourcing decisions. Technological factors can be class ified as :1. 2. 3. 4.

activity rate of technological change technology incentives automation R&D

Organizational

Business Strategy/Structure of Coca Cola

Introduction Coca-Cola

is renowned all over the world. Its has sold more than one billion units /day. More than ten thousand units are consumed every second. It can be a suprice to hear but it is present all around the gloce and around 94% of the world population is aware about it. Coca-Cola used abundant technologies to accomplish its goals of reaching to the top of the soft drink industry. Every year 80 crore un its of just "Coca-Cola" are sold in the U.S alone. Goals "That combination infuses all the elements of the strategy that we are implementing to deliver value to our share owners in the year to come, and well into the future:

1. Speed up carbonated soft-drink growth. 2. Selectively Coca-Cola beverage brands to make profitable growth 3. Serve customers with originality and uniformity to generate growth across from across the globe Vinit Shah MBA2-Finance

Business Strategy in the Global Environment 4.

Drive

efficiency and sell cost-effectiveness drinks with the best and standard quality everywhere.

Product Diversification Coca-Cola is still on going to discover new beverage categories, and fulfil the customers need with different tastes and flavours. Coca-Cola produces 300 beverage brands with more focus on brand Coca-Cola, Diet Coke, Sprite, and Fanta Coca-Cola is moving towards the direction of becoming a beverage-snack company. Environmental Scanning All businesses operate under two different environments, the external Environment where the organisation does not have any control over it, and the functioning of the business within the walls of the office/premises . Coca-Cola's strategy and business process are greatly affected by these environmental issues/factors. Effects of External Environmental Factors The external environmental forces exist in every part of Coca-Cola's global business, and exercise influence on Coca-Cola's business approach and functions. Any business is not capable of being "resistant" of such external forces. These factors affect every working organisation across the globe. Economic Factor Slow economic growth in the United States has adversely affected the sales and consumption of Coca-Cola soft drinks. Hence, the company has been working very hard to increase its presence in the fast growing economies, such as China, India and Middle East countries. Political / Legal Factor Coca-Cola has faced many difficulties in getting hold of the vast market share in India, as consumers are unconvinced of the health effects of its products. The company also faces U.S. government foreign policy restrict where it is not allowed to function in Israel. In the United States, soft drink ingredients have to be tested and certified by the Food and Drug Administration (FDA) before they are allowed to be used in the production. During the international sanctions against Iraq period, Coke products were traded illegally. Now Coca-Cola has authorized preparation with the local Iraqi bottlers. However, the company is facing two great challenges: the unstable and hazardous conditions in the country and strong existence of Pepsi in the Middle East market.


Business Strategy in the Global Environment Technological Factor The advancements of technology in the fields of soft drink production, information, raw material, and communication technology have great positive impacts on the overall functioning of Coca-Cola. The availability of new soft drink ingredients encourages Coca-Cola to introduce new products to its existing consumers. With the boom in information technology, it has made the company "populated" the new generation of soft drink consumers. The company¶s website enables the world to "keep in touch" with the latest happenings and developments of Coca-Cola. Social / Cultural Factor Before a short span of time, voices were raised against Coca-Cola being aroused in the world market place. The most recent case is the call for Coca-Cola to stop its sponsorship of Live 8 in India. Such negative response is due to severe water shortages and underground water pollution caused by Coca-Cola production activities, and distribution of its toxic waste to local farmers as fertilizer, and so CocaCola spent over $2 billion in the U.S. and over $5 billion worldwide on recycled content material and supplies. Even rumour such as the concentrated soft drink includes pesticides which was a setback for the company, then the company made it a point to prove the standards, loads of capital was invested in marketing, advertising just to prove to positive response from the clinical research. Demographic Factor The increasing health consciousness and importance of healthy lifest yle not only in developed nations, but also all over the globe, have slowed down the sales of Coca-Cola's areated soft drinks. In response to this health consciousness issue, the company introduced Diet Coke. Such change of consumer life st yle had also led to the commencing of its bottled purified mineral water . Presence of Opportunities & Threats The opportunities and threats faced by Coca-Cola, and its responses towards them in comparison of the actions taken by its rivals. A summary of the opportunities and threats Coca-Cola faces are as below. Each of the elements is dealt with in greater details.

Opportunities/Threats

1. 2. 3. 4. 5. 6. 7.

Competition

New products introduction Health issues Major rivals also investing in non -carbonated drinks Brand is attractive to global partners Strength to boost acquired brand and major products link -ups. Free trade


Business Strategy in the Global Environment 8. R isk of cannibalizing sales 9. Focus upon core products 10. Varying growth in non-core categories

Elements of Threats Market is been growing very fast and trying to chase time as well and hence there are more and more companies coming up resulting in competition, the threat of new viable competitors in the carbonated soft drink industry is not very substant ial. The threat of substitutes, however, is a very real threat . The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on Coke and its competitors include tea, coffee, juices, milk, and hot chocolate. Competition The non-alcoholic beverages section of the commercial beverages industry is highly competitive. Competitive products include carbonates, packaged water, juices and nectars, fruit drinks, sports and energy drinks, coffee and tea and other beverages. Non-alcoholic beverages are sold to consumers in both ready-to-drink and not-readyto-drink-form. Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produced a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their customers. There are high chances that consumers can easily switch to other beverages with little cost or importance. Health issues Increasing consumer and regulatory awareness of the health problems arising from obesity and inactive lifestyles represents a serious risk to the majority of CocaCola products. As health problems continue to grow, industry legislation and public backlash may both harm the company's performance going forward. Response to Opportunities & Threat Coca-Cola was in the core of the Cola combat and the company is in need of more market share. It then grabs the opportunity that arises with the presence of McDonald's. It was the best chance of growing for Coca-Cola as the plan was to enter into younger demographic of market and refining such branding awareness of CocaCola, while this market is still at its baby stage. Not only that, Coca-Cola was also able to provide McDonald's restaurant with a portfolio of brands inducing dismissal of other colas. Coca cola strived further entering into the customer branding awareness through attachments with schools and education institutions, as this was the market penetration method employed. Naturally, people want to have assurance in their the beverages they like the most. Coca-Cola understands that consumers place priority on being healthy and fit and promotes active living through programs around the world that support physical activity.



SWOT ANALYSIS Strengths:- Coca-Cola has been serving American culture for over a 100 years. The Coca- Cola image is displayed on hats,T-Shirts and other collections. This extremely recognised brand image is one of Coca-Cola¶s greatest strengths. ³More than 685 million servings are enjoyed around the globe, Coca-Cola stands as a simple, yet powerful symbol of class and pleasure´. Coca Cola¶s bottling system is one of their kinds and so is one of the greatest strengths of this brand. Functions carried out throughout the world but still maintains a local appro ach. The companies making bottles and cans are private owned and operated by independent business people who are certified to sell products of the Coca-Cola Company. Weaknesses:- Coca-Cola has recently reported some "declines´ in sales regarding unit case volumes in Indonesia and Thailand due to less consumer purchasing power." In Japan, unit case sales fell to 3% in the 2nd quarter [of 1998] that scared because while Japan generates 5% of worldwide volume, it contributes 3 times as much to profits. Opportunities Brand name/Goodwill is the most significant element affecting Coke¶s competitive position. Coca-Cola is known well recognised in 90% of the world. Main aim of coke is to make its brand name even better and well known across the globe. Changes in packaging have also affected unit case, but the public has tended not to be affected by new products. infinite growth opportunities around the world is its advantage because of its bottling system.

Threats The threat of new practical competitors in the aerated soft drink industry is not very considerable. The threat of substitutes is very real in kind. The soft drink industry is in boom but consumers are not inevitably addicted to it. Contribution of Coca-Cola and Pepsi covers nearly 40% of the whole of the bever age market, the changing health consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into these markets, allowing them to have further significant market shares and offset any losses incurred due to fluctuations in the market (³Cola Wars´, 1991). A key threat to the industry can be buying power of the consumners. The rivalry between Pepsi and Coke has produce a very slow moving industry in which management must take action conitiously to the changing attitudes, likes, dislikes and demands of their consumers. Consumers can easily switch between other brand making beverages with little expenditure or importance. (http://www.neilstoolbox.com/bibliography-creator/reference-website.htm# ) Vinit Shah MBA2-Finance


Recommendation of Coca-Cola's Future Generic Business Strategy As Coca-Cola is entering into different market segments by diversifying more into drinks and snacks, it is reco mmended that the company to pursue an overall low cost strategy and planning in the broad markets that it serves with variety of products. With this strategy, Coca-Cola will be able to compete with the major rivals by offering its products at competitively low prices, or match the rivals' price yet earn a higher profit margin.

Conclusion The results of analysis of Coca-Cola's vision, mission, environmental scanning of the drink industry in which it operates, the generic business strategies, global and internet strategies it adopts, the corporate strategy and the implementation give us a full overview of Coca-Cola's operation and positioning in the drink industry. The ever-changing external environment and the challenges posed by the opportunities and threats in its immediate industry command a significant attention and resources from top management. With the current successful generic business strategy, Coca-Cola should not be complacent. On the contrary, it has to keep an eye on its rivals' actions and changes in external environment variables, than shift the current generic business strategy to a more appropriate one. The company needs to juggle its corporate strategy and the internal corporate culture in order to achieve a sound strategy execution and implementation.


Business Strategy in the Global Environment References India R esource Centre. (2005). Coca Cola. Available: www.indymedia.org.uk/en/2005/06/313633.html. Last accessed 29th Nov 2010. Anonymous . (2005). Daily Servings Count. Available: http://www.thecocacolacompany.com/. Last accessed 29th Nov 2010. Anonymous . (2005). Coca Cola. Available: http://www.thecocacolacompany.com/ourcompany/index.html. Last accessed 29th Nov 2010. QuickMBA. (2005). PE ST analysis. Available: http://www.quickmba.com/strategy/pest/.

Last accessed 29th Nov 2010. Praveen Arichandra. (2005). SWOT analysis. Available: http://web.ics.purdue.edu/~pbawa/421/pepsi%20cola%20swot.htm. Last acc essed 29th Nov 2010.


PNB Business Analysis ( SWOT & Pestle )

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