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Strategic Analysis of Coca Cola

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Word Count: 1500 words

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Table of Contents
Introduction:................................................................................................................................................3

Macro-Environment Analysis:.....................................................................................................................3

Micro-Economic Analysis:..........................................................................................................................8

Recommendations:......................................................................................................................................9

Conclusion:.................................................................................................................................................9

Reference List:..........................................................................................................................................11

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Introduction:

In order to create a solid and long-lasting company model, strategic management must be

defined. In this report, we shall have a deeper dive into strategic analysis by analyzing one of the

biggest beverage companies, that is Coca Cola. Due to market-driven changes, regulatory

changes, and socio-economic changes, the company is currently facing difficulties in the market.

To comprehend the environmental impact on the soft drink sector, an external analysis is

conducted and an internal analysis to comprehend its internal capabilities. There are two main

parts of this report which are the internal analysis and then the external analysis, followed by the

recommendation part and then the conclusion. The models used for macro-environment analysis

are PESTEL analysis and Porter’s Five Forces whereas for micro-environment analysis, core-

competencies, key resources and dynamic capabilities of the company will be analyzed.

Macro-Environment Analysis:

The set of conditions that exist in the economy as a whole, rather than in a particular sector or

region, is referred to as macro-environment.

PESTEL Analysis:

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A PESTEL analysis is a framework or tool used by marketers to analyze and monitor the

macroenvironmental (external marketing environment) factors that have an impact on an

organization (Kolter & Kevin 2011, 66). PESTEL analysis on Coca Cola Company is important

because it helps in identifying and analyzing actions that are necessary and important to activate

the company immediately.

Political Factors:

Coca-Cola is a titan in the beverage sector, and it sells its goods all over the world. To keep up

the existing distribution network, the corporation must adhere to a number of norms and

guidelines. Governments and health authorities often inspect Coca-Cola since it is a product of

particular health interest. Its distribution in a Muslim nation is a notable example. Coca-Cola

products might be easily banned from all Muslim nations if they do not have the Halal

certification (Bergeaud-blackler, 2016). It is apparent that the area is influenced by political and

legal factors.

Economic Factors:

Production costs are increasing as a result of the current global economic crisis and growing

inflation (Cooley, Hansen, 1989). Coca-Cola must address the issue by either raising its pricing

or keeping them the same but with a less favorable profit. Because consumers do not satisfy the

necessity for survival, but rather the desire, this poses a serious problem for the business. For

instance, a 1,5lt bottle of Coca-Cola cost 0.99€ in 2002, but after 11 years of rising inflation, it

now costs over twice as much, 1.80€. It is true that the price is quickly impacted by economic

factors.

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Social Factors:

Considering that consumer behaviour varies between nations, cultures, religious views, and

individual ways of living, social and cultural forces are the most significant, in my opinion.

Coca-Cola must in particular make sure that its level of adaptation is appropriate for various

markets and consumer preferences in order to appropriately sell its products at the appropriate

moment and capture consumers' interest. Ramadan, the Muslim holy month during which

Muslims are required to fast for 30 days, is one such instance. During this time, Muslims are

only permitted to consume water. Because it would appear to be against religious customs and

harm its reputation, the corporation is unable to conduct any product promotion at this time.

Another illustration is the studies showing that Coca-Cola encourages obesity (Bukowiecki, et al

1983). Advocates of a healthy lifestyle have become divided as a result of the presented

viewpoint, harming the brand and advertising activities. The promotion of Coca-Cola is thus

inextricably related to social and cultural influences.

Technological Factors:

Coca-Cola pays close attention to consumer feedback and devotes significant resources to

meeting their requirements over a long period of time, giving the business a human-centric

attitude. Coca-Cola produces distinctive collector bottles in a range of sizes and forms with the

use of technology, and distributes them to customers through online events. The company

develops an online store at the same time, allowing it to sell its goods anywhere on the earth

where there is Internet access. Last but not least, Coca-Cola joins the music business in

partnership with Spotify, giving its customers access to music on demand and the chance to

connect with other music fans across the world who share their tastes (Coca Cola, 2013). Each

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digital consumer thus naturally associates Coca-Cola with technology, the music business, and

product launches in terms of recognition and sales.

Porter Five Forces Model:

Threat of new entrants:

Few people entered the competition. Despite the fact that there are new competitors pushing for

market share against the established brands in every nation, bottlers continue to generate a tiny

profit. Because of this, their entry levels are low. Additionally, customers' preferences for buying

non-branded or new products from the market have been impacted by their high preference for

company brands (Bordean et al., 2010). New entrants cannot quickly acquire this competence

since creating a new distribution channel is difficult and expensive. As a result, it is quite tough

for them to reach this level of expertise. Due to the intense competition for profits in this

industry, the number of bottlers is steadily declining.

Bargaining power of buyers:

There are lots of buyers. The American CSD market appears to be fully developed. Due to this,

purchasers now have more negotiating leverage (Collins & Winrow, 2010). Because switching

costs are relatively cheap, consumers may readily switch between any of the brands. Coca-Cola

and Pepsi have a very bitter rivalry. This causes the price to be done in a competitive manner.

This makes it easier for customers to choose between the two main brands. The retail cost of

CSD has either gone up somewhat or stayed the same. This has an impact on soft drink sales as

well as consumer choice and preference. For some people, price is a minor factor.

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Bargaining power of Suppliers:

Because the product is uniform and the majority of the raw materials are produced by the

company itself, there are only a small number of suppliers. As a result, suppliers' negotiating

leverage is somewhat constrained. Small bottlers have been acquired by the concentrate makers.

Bottlers have remained in contact with sources other than only suppliers (Gonzalez-Benito &

Suarez-Gonzalez, 2010). Producers of concentrate frequently maintained connections with

multiple suppliers. However, the sales figures for concentrate producers rely on how fiercely

bottlers compete in the market.

Threat of Substitutes:

There aren't many options for replacements. Despite being a uniform product, just a few brands

produce bottled goods. Other marketing outlets cannot simply take the place of bottlers. Only a

small handful of other international brands, like Pepsi, pose a significant threat to Coca-market

Cola's share and brand recognition. Sales of Concentrates still consist largely of selling soft

drinks via bottlers. Even if there are more alternatives on the market now than ever before,

customers still like the firm brand.

Industry Rivalry:

High levels of competition among established businesses raise operating costs and have an

adverse effect on sales. There aren't many companies in the industry competing, but Pepsi is the

leading one. Other industry rivals from around the world are trying by producing low-quality

goods and mediocre results. However, because consumers are loyal to international brands, there

is little industry competition. As the market expands, more well-known brands are entering it.

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Micro-Economic Analysis:

Core Competencies:

A highly motivated and skilled sales force, creative approaches to promotion and advertising,

choosing the best distribution channels, accurately identifying customer segments and needs, and

successful pricing strategies are just a few of the key competencies of Coca-marketing Cola's and

sales department. Consumer marketing and customer and commercial leadership are two

categories into which Coca-marketing Cola's and sales efforts can be divided.

Key Resources:

Coca-Cola is the owner of reliable and enduring financial resources. They invest billions of

dollars using their substantial financial resources in key areas including Vietnam as well as

China, India, and Russia. Investment funds are utilized to create the infrastructure, the brand, and

close partners to widen the distribution network.

Intangible resources include Coca-technological Cola's resources and reputation. Coca-Cola

makes technological investments to upgrade its equipment. Almost every step of the production

process is automated. Coca-Cola can speed up production while maintaining consistent product

quality and a safe workplace (Olkarinaite, 2010)

Dynamic Capabilities:

The robust financial capabilities of Coca-Cola are mentioned first. They are able to expand the

business globally because to their strong financial position. The funds are utilized to develop the

distribution network, establish infrastructure, and train people.

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Coca-Cola also possesses great organizing skills. They have the capacity to support more than

100,000 people while providing an assortment of more than 500 soft drink brands in close to 200

different nations. Coca-Cola consistently understands how to close the gap between their

customers and their products (The Coca-Cola Company, 2012).

Recommendations:

In this part, we will take a look at the improvement strategies from internal environment and

external environment for Coca-Cola, some effective customer acquisition strategies and positive

customer retention strategies.

The management of the Coca-Cola Company should implement the idea of consumer attention.

Customer focus is the process of viewing the customer as the most valuable resource for the

financial success of the company throughout the entire organization (Jana 12). The management

of the Coca-Cola Company should communicate this vision to all of its departmental workers in

order to maintain efficient customer focus concept integration among its globally spread

enterprises.

Due to the industry's intense competition, there is a lot of rivalry in the soft drink sector. An rise

in the number of investors entering the soft drink business leads to increased competition. The

selection of commercial beverages has increased as a result. The Coca-Cola Company's

management has to adopt the idea of ongoing market research.

Conclusion:

A crucial component of a company's financial performance is strategic management. This is

because it makes it possible for the company to surpass its rivals in terms of competitive

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advantage. It is crucial that the management of the Coca-Cola Company considers incorporating

numerous principles linked to strategic management given the competitive nature of the soft

drink business.

There are a few options that the Coca-Cola Company may consider in order to maintain its

competitive advantage in profitability during a market downturn and prevent any further

financial crises. First, the Coca-Cola Company should continue to pursue its cost-cutting strategy

by putting its backward integration approach into practice to lower material prices and its

marketing cost calculation technique. To ensure that the corporation would benefit from currency

fluctuations, the Coca-Cola Company should insist on its foreign currency fluctuation control

policy. Corporate social responsibility should be incorporated by the management as well. The

company will gain a favorable reputation through CSR, enabling it to carry out foreign direct

investment more successfully. By using the SRM principle, Coca-Cola Company should also

foster positive relationships with its suppliers. Due to the efficient supply of resources, this will

allow it to run its activities cost-effectively.

Reference List:

Bergeaud-blackler, F., et al. (2016). Halal Matters, Islam, Politics and Markets in

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Global Perspective. (1st). London: Routledge.

Bordean, O., Borza, A., Nistor, R. & Mitra, C., (2010). The use of Michael Porter's generic

strategiess in the Romanian Hotel Industry. International Journal of Trade, Economics and

Finance, 1(2), p.173.

Bukowiecki, L., J. et al (1983). Effects of sucrose, caffeine, and cola beverages on obesity, cold

resistance, and adipose tissue cellularity. American Journal of Physiology - Regulatory,

Integrative and Comparative Physiology. Vol. 244 (4).

Coca Cola (2013). Every Song Has a Place: Coca-Cola. Spotify Launch

Groundbreaking Social Music App.

Collins, M. & Winrow, B., (2010). Porter's generic strategies as applied toward e-taliers post -

Leegin. The Journal of product and brand management, 19(4), pp.306-11.

Cooley, T., F., Hansen, G., D. (1989). The Inflation Tax in a Real Business Cycle

Model. The American Economic Review. Vol 79(4), pp. 733-748.

Gonzalez-Benito, J. & Suarez-Gonzalez, I., (2010). A study of the role played by manufacturing

strategic objectives and capabilities in understanding the relationship between porter's generic

strategies and business performance. British Journal of Management, 21(4), pp.1027-43.

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