Coca-Cola Company PESTEL and Porter’s Five Forces Analysis

Coca-Cola Company PESTEL and Porter’s Five Forces Analysis

Introduction

Coca-Cola Company, an American multinational firm, basically a soft drinks firm. The company got established on January 29, 1886, by a pharmacist called John Stith in Atalanta, Georgia (Ackoff, 2019). And sold it as a medicinal beverage. It is owned by different shareholders such as Warren Buffet and it is based in Georgia. It is one of the largest companies in the united states and ranked among the largest companies in the whole world as large. Coca -Cola company provides beverage products to over 26 million customers (Curuksu, 2018). It also provides employment opportunities to over 12 million people in the world, and the firm has a relative virtual monopoly in the market. Coca-Cola Company is the leading supplier of beverage services in the united state and in the world. The company also provides various drinks such as Fanta, which originate back in the second world war and the sprite brand introduced in 1961(Feroz & Moeen,2017. The company was ranked as number one global brand. Some regions such as in the middle east and Japan, Coca-Cola is not the number one soft drink as drinks such as coffee and tea are more popular due to the temperatures in the regions. In 2005 the firm sold its product to over 2000 countries.

PESTEL Analysis

PESTEL is a combination of initials of several factors listed as Political, Economic, Social, Technological, Environmental, and Legal factors. The PESTEL analysis is the way of managing the exhaustive analysis of the business environment of a firm in which information is provided. (Feroz & Moeen 2017). The PESTEL analysis acts as an essential tool that was put in place by Professor Francis Aguilar, which aids in strategizing the competition to maximize the sustainability and profitability of the business. PESTEL analysis gives an essential insight into dealing with the challenges which the company may face (Ling, 2017).

Comprehension of the various competitive ventures will limit the investors and business people from undertaking any risky landscape venture (Ling, 2017). If the risk can come as a result of an unstable political environment or unexpected economic recession. A good example is the United Kingdom exiting from the European Union recently. This fallout was due to political instability and cost a lot of investors to exit their new ventures and stop their extensions as the future of their goals appeared unsettled to make more decisions. The PESTEL factors affect Coca-Cola Company in the following ways;

Political Factors

Political factors that affect the sustainability and profitability of the company are multiple. Political uncertainty varies from instant changes in the usual political stability to political unrest to significant decisions undertaken by the government. The political regime also affects not only the host but also the other firms that link in trade with Coca-Cola Company (Gill et al.2017). The company generally has benefitted a lot from the political stability of US Government. The government has upheld the principle of ensuring progress as it provides security hence a deepening market for the company.

Economic Factors

Economic factors are the factors that have the concern to the financial stability of the country that the company operates in. These factors include; the rate of foreign exchange, the rate of inflation in the country, economic cycle stage, and gross domestic product of the country. These factors determine if the company will have the potential to make high profits or incur a loss (Feroz & Moeen 2017. Due to the perfect competition market that Company is situated in. However, a virtual monopoly in the world, it pushes the company to be more innovative to maximize their profits. High Gross Domestic Product leads to a high growth of the company. Generally, economic patterns in state favors Coca-Cola company to sustain and maximize profits.

Social Factors

The surrounding society that the company operates to have a significant impact on the company (Ling, 2017). They include the culture, values, and beliefs that govern most people in the community. Social factors are essential to Company in both in operational aspect and marketing aspect. The company has to have a thorough understanding of its customers inclusive of lifestyle, beliefs in society, and level of education (Gill et al.2017). This helps them to formulate products and plan the market messages that lead them to a venture which can emerge a success.

Technological and Environmental Factors

Technology is a susceptible factor that can dismantle the well-being of an industry in a short time. Constant and consistent innovation helps Coca-Cola company to maximize profits as well as becoming the market leaders and also prevent outfit soon. Environmental factors, on the other hand, vary as you move from one industry to another due to environmental conscientiousness in their location. The current weather conditions significantly determine how Coca-Cola manages and transport resources and final products hence affecting delivery dates of final products in case of unexpected monsoon.

Legal Factors

The party which holds the majority in the government is legitimate and should appear in PESTEL analysis. To make Coca-Cola Company a desirable place of employment for skilled and talented workers, intellectual laws of the country are imposed on top of Coca-Cola policies.

Porter’s Five Forces Analysis

Porter’s Five Forces is a great tool used to analyse and understand the competitiveness of the environment surrounding your business and knowing your strategy potential to maximize your profits. The forces are very important because when you are familiar with them in the surrounding of your firm, you can adjust the relevant strategies accordingly. As mentioned earlier, Coca-Cola acts as a monopoly in the beverage sector of US. (Gill et al.2017). This means the company should worry less about the external environment when the five forces are applied. But it doesn’t mean it should take the current comfort situation for granted. The current strategic steps it is making it’s quite clear that it’s trying to ensure that it maintains thriving and prospering even if the Beverage market in the U.S was open to foreign competition. Porter’s five Forces includes; Industry rivalry, entry and exit barriers, power of Suppliers, power of buyers and threat of Substitution (Gill et al.2017).

Industry Rivalry

This can be defined as the number and power of the business competitors you have. This includes the number of rivals you have, who they are, and their strength and how their products’ quality can be related to yours. A market with a lot of rival firms attracts customers by cutting off prices significantly (Ling, 2017). Where industry rivalry is low, you’ll likely make high profits and have a lot of strength. Coca-Cola works in a very regulated market, and the government reduces competition, though the company has very few competitors, which means it faces little or no competition.

Entry and Exit Barriers

Your position in the market can be highly influenced by many firms’ ability to enter freely into the market. To enter into Beverage sector is highly costly. Coca-Cola got lesser reasons to worry about firms entering the market (Feroz & Moeen 2017. As mentioned earlier, the U.S government has regulated a lot of new firms entering the industry. Furthermore, it’s hard for new investors to have that lump sum money to start Beverage companies that can outfit Coca-Cola beverage company.

Power of Suppliers

This is determined by the way your suppliers can raise their prices quickly. The number of suppliers who can supply you, if they have very different products from others and how costly it is to change a supplier (Gill et al.2017).  In a unique technology, the power of suppliers almost does not exist. For Coca-Cola Company, suppliers apply the power of technology since there is technological sophistication in the market of Beverage in the united states. Hence there is a quick delivery of the raw materials which has enable continues production.

Power of Buyers

This is determined by the buyers that you have, how much they spend to purchase things from your company, and how it’s easy for them to drive down your prices. The power of buyers for Coca-Cola Company is low because there are few rivals in the beverage sector in the U.S and also in the entire world (Gill et al.2017). The company has acquired a colossal customer area. The large customer base offers the company the power to set prices though there are government influence and intervention all the time.

Threat of Substitution

This refers to when the people you supply your products look for another way of getting what you provide to them. They go on and do it manually or outsource. This is a threat to your profits and position in the market. Beverage substitutes in united states are rare though the landline phase is available for the same purpose in US. But Coca-Cola is expanding into beverage that are drink-based.

Recommendations

The company should include a corporate value to sustain long-term development, such as integrity, efficiency, and transparency, purposely to build their trust with their customers (Gill et al.2017). They should as well implement good governance structure and measures This is to help the company achieve its set goals and objectives in the future. For the company to have a future of expansion, the management should create initiatives, formulate, and improve some policies and establish procedures to govern the workers to ensure maximum production and profits. The company should as well publicize policies to everyone who holds its device and a copy of guidelines for everyone to know well about it and their accessories. This will expand their market.

As the company is located in Atalanta, Georgia, where there are relatively stable rivals, improved levels of technology, and high-grade innovation and invention, the management should adjust their employees to keep up in touch with the latest tech changes. This is to ensure that the company’s output is up to date (Feroz & Moeen 2017. This gives morale to the customers as every day they are yearning for something new and more improved. In this manner, the customers will remain in touch with the business due to interest; hence the company will maximize its profits.

The management should be able to understand the market by knowing what customers need from them and also what their employees need as part of the company to produce more. Motivation and healthful working conditions should be offered to the employees, and every employee should be familiar with the goal of the company (Gill et al.2017). This will help them to work hard towards achieving the set goal if relevant motivation methods are employed. Awards from the company for employees should be offered at the end of each year according to various performance of the workers. This works as a motivating tool for better performance.

For the company to maintain its position in the market, the management should consider constructing depots in various parts of the world. To ensure that not only people in the United States but all over the world, people can access their services first hand.  This motivates customers as they are guaranteed to purchase original products from the producer at the comfort of their country (Gill et al.2017). In this way the company will have strategized to sustain competition in the market and maximize its profits.

Conclusion

In conclusion, The Coca-Cola Company has significantly dominated as a Beverage company since it was founded in 1886 (Ling, 2017). It has taken into account almost every single thing that it takes to be the single leading company in United states and the world at large. In addition to government support, the company can as serve as many as over 50 million customers as it produces both soft drinks and drinking water hence acting as a virtual monopoly in the market. Taking into account the PESTEL analysis, the company is thriving as for the details taken into account, very few or no factors that threaten the sustainability of the company (Feroz & Moeen 2017). The company has been solidly established within the years. With keen observation and reliance on some of the sensitive elements such as social, technological, and legal factors, it has boosted its performance generally to be one of the biggest companies in the world. According to Porter’s Five Forces, it’s clear that the company analyse and understood its competitive environment and took initiatives to curb the undermining factors.  This is due to its recent stability, as analyse earlier in which most of Porter’s Five factors have a negligible threat to the company. The company has been able to establish itself by considering the various strongholds.

References

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Ackoff, R. (2019). Management for Scientists. benefits, 191, 192.

Curuksu, J. D. (2018). Principles of Strategy: Primer. In Data Driven (pp. 129-152). Springer, Cham.

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Forbes-Haley, C., Jones, S. B., Davies, M., & West, N. X. (2016). Establishing the Effect of Brushing and a Day’s Diet on Tooth Tissue Loss in Vitro. Dentistry journal, 4(3), 25.

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