General Management

General Management

Introduction

In today’s competitive business environment, organizations must create a good business strategy that enhances its decision-making process and gives it a competitive edge. A good business strategy combines all decisions made and the actions taken to accomplish the objectives of a business to secure a competitive position ahead of the main competitors. The strategy acts as the backbone of an organization because it provides a roadmap that enables to accomplish the desired goals. A good business strategy is especially important to a business because any fault in the utilization of concepts or tools of the business strategy may result in the business losing its position to competitors. The significance of a business strategy cannot be overemphasized, considering the increased competition in the market and the rise of different types of strategies that are available to competitors. A business that enters the market without a good strategy is pursuing more of a dream or a gamble, rather than the success of the business. A business strategy helps in planning activities of a business (Rothaermel, 2016). It is a core component of the business plan because the plan outlines the aims and objectives of the business while the strategy provides a roadmap of fulfilling the set goals. Further, it enables the business to identify its weaknesses and strengths and enables the business to capitalize on the strengths while improving on its weakness and identify the existing opportunities in the market. In addition, it gives organizations a competitive edge because they can capitalize on their strengths to position their brands in a unique manner that differentiates them from those of the competitors. It also gives organizations more control of the path selected to achieve the set goals as they can manipulate all activities within the selected path to ensure that they help in meeting the goals. A business strategy is critical to the organization as it guides the decision-making process that allows it to attain its goals and objectives and gain a competitive edge in the market.

Coca-cola has utilized the concepts of its business strategy well that has allowed it to control one of the most outstanding brands of all time and become the leading beverage manufacturer across the globe. The company’s business strategy employs PESTEL analysis to understand the external business environment and attain self-realization. Self-realization enables the company to determine where they want to reach and create specific objectives that they should achieve within the limits of time, capability, and realism. The company then creates an execution plan to achieve the specified objectives. The business strategy helps the company to evolve and innovate how they conduct business by making informed decisions that keep the company ahead of the competition. The company has evolved its business strategy and aims at becoming the ultimate beverage manufacturer by producing drinks that people want and giving them a wide variety of low sugar and non-sugar options spread across a broad range of categories and available in many locations (Coca-Cola Company, 2017). The strategy has enabled the company to build a vast brand portfolio of consumer-centric products that suits the demands of the consumers and create awareness about the brand portfolio while maintaining a strong focus on consumer needs, preferences, and emerging consumer behavior and trends. The application of PESTEL business strategy has been instrumental in the success of Coca Cola Company as they enable it to make better decisions that make it stay ahead of the competition.

Coca Cola

Coca Cola is the largest non-alcoholic drinks manufacturer in the globe. Its headquarters are located in Atlanta, USA, and it has been producing beverages since 1886 when it was established in the U.S., but it has expanded globally over the years. The multinational produces, distributes, and promotes its wide array of soft drinks, fruit juices, mineral water, yogurt drinks, energy drinks, coffee and tea beverages, and soy drinks. The company offers about 3,400 products under various brand labels. It is known for iconic brands such as Coke, Fanta, Sprite, Minute Maid, Dasani, and Fresca (Abbasi, 2017). The company has a global footprint because it enters into strategic partnerships with bottlers from across the world to enable it to serve and reach more than its 1.5 billion customers every day. Coca-cola is worth over $230 billion, which makes it the largest non-alcoholic drink company in the world. The huge net worth reveals the importance of executing a good business strategy to create a strong position in the market. The company employs the PESTEL business strategy to enhance its decisions and gain a strong presence in the global market.

PESTEL Analysis

The company has realized the importance of conducting external analysis that involves a macro-analysis of the political, ecological, social, technological, environmental, and legal factors that affect the operations of the company directly. An analysis of the external environment helps the company to identify the opportunities, threats, and challenges present in the business environment and devise strategies to exploit the opportunity or overcome the threats and challenges. The macro-level analysis allows the company to realize market segments that are profitable, volatile, and have a high potential for growth (Baines, Fill, & Page, 2013). The company uses PESTEL analysis to monitor and evaluate the macro environment of the business to inform decisions about opportunities, threats, and weaknesses.

Political Environment

The pressures and influences of the political environment of the operating company affect the operations of the Coca Cola Company. In the U.S., the Food and Drugs Administration (FDA) regulates non-alcoholic drinks, and hence, the government monitors and controls the operations of the company. FDA sets standards laws that must be adhered to by all non-alcoholic drink manufacturers and has the power to fine or penalize a manufacturer who flouts the regulations. The government also make frequent changes to existing laws and regulations and come up with new ones that might affect the operations of the company (Banutu-Gomez, 2012). The company must adhere to accounting and taxation laws, environmental laws, and international laws, and any changes in the laws have the potential of affecting the books of the company. The company must abide by the regulations set by the FDA if they are to operate in the U.S. Therefore, it must be keen on any changes in laws or regulations to avoid a potential penalty, fine, or breaking the law that would damage its brand name, reputation, and affect its profitability.

Further, Coca Cola is a multinational company that operates in different political environments across the globe. Diverse political barriers that make it difficult to penetrate the market or sell their products without meeting strict conditions characterize the majority of the international markets. Developing economies still uphold strong protectionist policies, regulations, and bureaucracy that act as a political barrier to their market despite the world moving towards a liberalized economy. Countries like Bangladesh require the company to have Halal certification, among other regulations, before selling its product in its borders due to religious reasons. Therefore, the company must continuously monitor the political environment of the operating companies to avoid non-compliance with the law.

Economic Environment

It is crucial to carry out an analysis of the economic environment to identify potential areas for growth and expansion. The areas of interest when carrying out the analysis include the growth rate of a country especially when expanding globally, interest and inflation rates as well other key economic indicators such as wages, exchange rates, and the rate of unemployment in a country (Baines, Fill, & Page, 2013). The analysis helps the company understand how local, national, and international economies will affect the company. Thus, it takes advantage of the identified opportunities in the economy or takes precautionary measures to protect the company in case of a recession or a rise in inflation rates at all levels of the economy. The company must be keen on national and international economic trends to determine potential areas of growth. It must identify the fastest growing economies or consumption trends in emerging economies and potential economic opportunities in developing countries (Banutu-Gomez, 2012). The company has registered tremendous success in international economies like Brazil, Indonesia, Japan, and Germany, and these countries will continue to enhance the economic improvement of the company and guarantee a stable growth of the market of its products. The analysis also enables the company to identify consumption habits and identify potential areas of growth in the international market. For instance, the company has capitalized on the consumption habits in Bangladesh and other countries that ban the consumption of alcoholic beverages due to religious reasons and have turned them into markets of the company’s products. The company has experienced a decline in the demand for its carbonated products in its traditional main markets such as the U.S. Hence, it must analyze the economic conditions of other countries to identify areas that have a potential market for such products. A country that is experiencing a high economic growth rate and has low unemployment rates shows that the population has a high purchasing power, and this present the company with an opportunity to enter the market. Coca Cola has been using economic analysis to enter into various markets across the world, and this has given the company a global footprint.

The company also analyzes the economic environment of prospective countries to determine their interest rates. Interest rates refer to the amount that is charged on top of the amount borrowed from financial institutions or the government. An economy with high-interest rates deters further investment because of the high costs of borrowing the principal amount. The company must establish the cost of borrowing before making a decision on whether to make further investments in a given economy because high rates increase the costs of borrowing. The company uses financial derivatives to protect its financial welfare from interest rates fluctuation. The consideration of interest rates is important to the company because a rise in interest rates increases the cost of living, and this makes employees increase wage demands to afford the new lifestyle (Anders, 2013). Higher wages are additional costs to the company, and these costs cannot be passed to the customer by increasing the price of their products because of the risks associated with this strategy as competitors may take advantage of high prices to target their customers. Thus, interest rates are a threat to the company, and it is among the main economic factors that influence the behavior of the company in different economic conditions.

The company must also consider inflation because high inflation raises the prices of most commodities in an economy, and the phenomenon affects the consumers directly. High inflation decreases the purchasing power of the consumers, which affects the financial well-being of the company adversely. High inflation makes the decision-making process difficult because of increased uncertainty considering that inflation is outside the control of the company. Companies experience high expenditures during high inflation phases because of increased input costs, higher wages, high costs of distribution, and high operating costs. However, the beverage market is price competitive, where Coca Cola cannot revise the prices of their final products even during such circumstances, and this necessitates the analysis of the economic environment of a country.

Social Environment

The company analyzes the social environment of the countries where it operates to determine their cultures, social aspects, attitudes, population growth and age demographics, health consciousness, safety concerns, and religious beliefs. The company understands that it cannot change the social aspects of a given population, but a deeper understanding of these factors will help it adjust to fit in society. Thus, it aligns its management and marketing strategies to suit each society where it operates. Coca Cola is a business-to-consumer entity where it sells its products directly to consumers, and hence, it must be keen on changing social needs and emerging trends among the consumers (Anders, 2013). Thus, it is essential that the company analyze the social environment of a particular country when entering the market because every market has a unique culture, and cultures are not homogenous across the globe. The company boasts of a wide brand range that has close to 3500 brands, but it cannot introduce all its products at once in any given market without making social considerations of the target market. When entering a market, the company must first start by introducing a minimum number of brands in accordance with the culture and attitudes of the population.

The company also examines the health consciousness and safety concerns of the consumers to inform the development of new products. Governments and consumers have expressed concerns about the consumption of calorie-rich products because they are associated with obesity and other health problems. Previously, Coca Cola manufactured carbonated products sweetened with sugar to add flavor. However, the sugar content was associated with increased calorie consumption that contributed to an increase in obesity levels. Health concerns decreased the demand for such products but created a new opportunity for manufacturing new healthy options such as Diet Coke, energy drinks, mineral water, and sugar-free beverages (Coca-Cola Company, 2017). The company must also examine the age distribution of a particular market to enhance the success of its marketing strategies. The biggest market share of its products is among children and people aged below thirty-five years. Thus, it must make advertisements that appeal to this market segment to increase brand awareness and build customer loyalty. The analysis has helped the company to introduce new products in the market to satisfy the changing social trends of the population and allowed the company to shift its focus to rural areas as it is a viable market given that the majority of a country’s population resides in rural areas.

Technological Environment

The company must keep track of technological advancements that have the potential of improving the soft drink industry. The company has used technology to revamp its packages that have played a major role in differentiating its products from those of its competitors. In addition, the company has used technology to introduce new ways of making their products available to consumers. It has introduced automated vending machines in all corners of the world that have eased the distribution and availability of its brands. It has employed technology to introduce stylish cans that attract youngsters, introduce products such as Diet Coke, and develop new recyclable bottles that are environmentally friendly (Coca-Cola Company, 2017). Technology gives the company a unique opportunity to introduce new products in the market and improve the existing products.

Environmental Analysis

The company must comply with state, national, and international environmental laws and regulations, given the attention that environmental pollution has received globally (Baines, Fill, & Page, 2013). It must ensure that its practices are environmentally friendly and incorporate taking care of the environment in its corporate social responsibility goals. The company benefits indirectly by taking part in activities that protect the environment. It enhances its brand image as an ‘eco-friendly’ company that increases brand awareness and customer loyalty since most people wish to be associated with responsible organizations.

Legal Environment

Coca Cola Company operates in diverse countries where it is subjected to numerous acts, laws, and regulations, and it must adhere to these legal factors and keep track of any changes in legislation. Countries have established guidelines to regulate competition, the safety of the products, environment laws, land use, water conservation, and labor laws, among others (Banutu-Gomez, 2012). Changes in the legal environment might be costly to the company, especially when such changes require the company to make additional labeling or make major changes to the product. The company must adhere to legal factors to avoid confrontations with the authorities or raise ethical concerns about its products.

The Success of PESTEL Business Strategy

The employment of the PESTEL strategy has enhanced the success of the company as it enabled it to identify opportunities present in the external environment. The company has identified a higher consumption of non-alcoholic beverages in developing and emerging economies and has capitalized on this knowledge to expand its operations in these countries. It has also identified the need to develop a strong supply chain to have a competitive advantage over the competitors. PESTEL has helped the company to expand research in the bid to bolster its business lines to provide healthier alternatives and produce packaged water. The strategy has been vital in informing the need to diversify its brand portfolio and allowed the company to realize a marketing opportunity using digital media (Banutu-Gomez, 2012). The company has ventured into the food business, and provision of healthy alternatives to customers that has improves Coca Cola product offering and improve its revenue by cross-selling these products to new and existing customers. In addition, PESTEL analysis has allowed the company to expand its market by entering into strategic partnerships with food brands or acquire food chains. The strategy has enabled the company to focus more on the needs of the customers and create products that suit their needs. The company has successfully employed the PESTEL business strategy to control the non-alcoholic beverages market in the globe. The approach has been vital in informing decisions that have made the company stay ahead of the competition.

References

Abbasi, H. (2017). Marketing Strategies Of Coke: An Overview. Kaav International Journal of Economics, Commerce & Business Management, 4, 194-199.

Anders, J. (2013). Coca-Cola’s Marketing Strategy: An Analysis of Price, Product and Communication. New York: GRIN Verlag.

Baines, P., Fill, C., & Page, K. (2013). Essentials of Marketing. London: OUP Oxford.

Banutu-Gomez, M. B. (2012). Coca-Cola: International business strategy for globalization. The Business & Management Review, 3(1), 155.

Coca-Cola Company. (2017, Feb 23). New Business Strategy to focus on Choice, Convenience and the Consumer. Retrieved from https://www.coca-colacompany.com/news/new-focus-on-choice-convenience-and-consumers

Rothaermel, F. T. (2016). Strategic management: concepts (Vol. 2). McGraw-Hill Education.