External Environment Report: The Coca-Cola Company

Founded in the year 1892, the Coca-Cola Company is considered to be one of the largest beverage companies around the world that provides customers with hundreds of different brands. Some of its commonest products include Minute Maid, Fanta, Dasani, Sprite, and Coca-Cola. The mission of the company is mainly to refresh the world, to create value and also make a difference , and to inspire moments of happiness and optimism. Some of the objectives of the company include developing quality beverage brands that would satisfy the needs and desires of people. Another objective is to maximize the returns to its shareowners and at the same time focusing on the overall responsibility of the company. Finally, it has the objective of being a responsible citizen that aims at making a difference through the process of helping to build and support sustainable communities. The Coca-Cola Company runs in the beverage industry or the soft drink industry. 

Industry Analysis 

The Coca-Cola Company operates in the beverage industry or the soft drink industry. It is a company that has a large market share in the industry and has operations all over the world. The soft drink industry started a long time ago and has now become very large, especially in the United States. However, there are a number of big competitors in the industry such as PepsiCo because it sells almost similar products and it is in direct competition with Coca-Cola. Indirect competitors include Energy drinks and Red Bull (Jolly, 2003) . However, even with the many companies that compete with Coca-Cola, it still considered being the number one soft drink company around the world. It still dominated the US market share even if it still continues to lose the market share as Americans are reducing their intake of carbonated drinks in favor of bottled water. The company’s competitor, PepsiCo is also facing a similar challenge in the market. In the year 2015, the beverage giant saw the volume of soft-drink declining with per capita consumption decreasing to a 31-year low. However, the total volume of the two companies grew, especially with their sports-drink and water brands. It is worth noting that the change in consumption is because the beverage industry is going through a seismic shift (Kaplan, 2017) . It is evident from the fact that bottled water has emerged as the number one type of beverage. It is also a clear indication of the fundamental change in the wants of consumers from their beverages. 

The Current Condition of the Organization’s Industry 

Over many years, companies in the soft drinks industry have had positive growths. However, there have been changes because people are becoming health conscious and the fact that the current environmental condition and the general environment are affecting them. An analysis of the industry using the PESTEL analysis indicates that there are some political factors that influence the soft drinks or beverage industry. One of the political factors is the Obey Food, Drug and Cosmetic acts that govern the process of producing and distributing the various kinds of soft drinks in the market (Miller, 1998). In addition, soft drinks are subject to the American with Disabilities acts. The availability and application of these laws help in the creation of an environment that is healthy for consumers. However, the acts limit the ability of new entrants in the industry. The next political factor that affects the industry includes the environmental laws and regulations that enforce recycling, energy, packaging, and water policies with the aim of making sure that the industry is operating in an environment which is healthy. In addition, it makes the soft drink industry to be more attractive for consumers. The last political factor that affects the industry is double taxation because often they have the obligation to pay tax in the country where they produce the product and where they distribute them. It thus makes the industry to become less attractive for companies that do not want to be subjected to double taxation policies. 

The economic factors that affect the industry include inflation in diesel prices because often companies in this industry rely on trucks in distributing their diverse end products. It means that the trucks are subject to inflation of the fuel prices. Considering the fact that distribution is a core activity in businesses, diesel prices can affect the distribution and expenses for the company. Another economic factor is the inflation of the foreign exchange rate because often the revenues from soft drinks are affected by exchange rates fluctuations, profits, and the cost of purchasing raw materials. The effects of exchange rates fluctuations are especially true considering the fact that the companies in these industries often operate in a different region that has different kinds of currencies. 

The socio-cultural factors that affect the industry mainly involve the increase in health consciousness among people. Soft drinks are assumed to be responsible for increasing the risk of obesity among children. Currently, as people become more educated, they also increase their levels of health awareness. Obesity is becoming more apparent and thus encourages people to take care of their health. It is worth noting that soft drinks that are full of calories can result in obesity (Osterwalder, 2014) . The rise in obesity is especially on the rise among children because they are mostly consumers of drinks. Another social factor that affects the industry includes changes in consumer taste and lifestyle . It is well known that consumers now are shifting their tastes from carbonated drinks that have negative effects on the health of consumers. They now demand drinks that are healthier such as fresh juices and water. 

Technological factors that affect the industry and which have helped in developing the manufacturing process include the PDX technology which is an advanced technology helps companies in the industry in mixing ingredients used in the process in the most efficient ways. The technology is especially vital because it cuts the cleaning time, it saves power, and also in increasing the processing speed. 

The environmental factor that affects the industry is the use of glass bottles as opposed to plastic bottles because glass bottles are considered to be environmentally friendly. In addition, the use of bottles protects the community because some chemicals that are found in soft drinks usually react with plastic and thus can cause serious diseases. The use of glass bottles also helps in making sure that the soft drink tastes better and for a long time. 

The main legal factor that affects the industry includes regulations by the American Beverage Association such as the removal of soft drinks from schools to reduce the risk of child obesity. Often, soft drinks are considered to be full-calorie drinks and need to be replaced with healthy and low-calorie beverages. 

Porter’s Five- Forces Model 

The industry that Coca-Cola operates in is the soft drink industry, or the beverage industry. To better understand the industry, it is also vital to analyze it using the Michael Porter Five Forces Model. The analysis of the industry using the model indicates that the rate of rivalry is high. The high level of rivalry is mainly because various factors that include the growth of the industry, the number of competitors, changes in customer tastes, product differentiation, and switching costs. Further analysis indicates that there are a few but large companies which are almost equal in size in the industry. The companies include the Coca-Cola Company and PepsiCo. It is estimated that the two companies make up more than seventy percent of the market . Therefore, the two companies watch one another closely. In addition, there are other competitors in the industry that compete with the two giants, thus further increasing the rivalry. The companies include other companies that produce soft drinks like National Beverage and Dr. Pepper Snapple and companies that produce energy drinks like Rockstar and Red Bull. A change in the lifestyles of consumers has also caused them to shift from the carbonated to non-carbonated soft drinks, thus increasing competition levels. Therefore, companies like the Coca-Cola Company and PepsiCo had to adjust to the alterations in demand through focusing on innovation and marketing. 

The bargaining power of buyers is considered to be moderate to high. Often these customers can be categorized into two including those who buy in large quantities such as supermarkets, small grocers, mass merchandisers, convenience stores, fountain outlets like restaurants, and vending machines. The next category includes those who buy in small quantities such as the final consumers. The first category that includes customers that buy in large quantities has a high bargaining power. In many cases, industries which have many suppliers and very few large buyers are characterized by buyers capturing a bigger share of the profits. It is mainly because they buy in bulk and can easily switch between the suppliers considering the fact that products lack differentiation and are standard. In addition, they have the power to demand high quality because of the fact that they buy in large quantities. The second category consists of the end consumers and the low quantities of their purchases reduce their bargaining powers. However, their power is increased because of the availability of substitute products and the low switching costs eventually making their bargaining power to be moderate. 

The bargaining power of suppliers is moderate to low. Considering the fact that raw materials like sugar, plastic, cans, ink, water, and bottles are homogeneous, they are readily available in the market. It thus reduces the bargaining power of suppliers. However, consumers are becoming more health conscious making the small number of suppliers who provide healthy ingredients to have a higher bargaining power. However, it can be moderated by having long-term agreements with suppliers. 

The threat of substitutes is high in the industry, especially from non-carbonated soft drinks like water, tea, milk, and coffee. Other substitute products include energy drinks and sodas. Products pose a big threat because the switching cost is low. 

Finally, the threat of new entrants is moderate to low because the barriers are of different types. The barriers include technical barriers as large companies already have their recipe, commercial barriers such as reputation, brand name, and access to distribution, financial barriers, and retaliation. 

From the analysis, the dominant force is the threat of substitute products that mainly include non-carbonated drinks as consumers are becoming more health conscious. It is also a threat to the Coca-Cola Company and the best threat against it is for the company to diversify its products by also manufacturing and selling healthy products like water and fresh juice. 

Company Strategic Group 

The strategy of the company is to increase revenue and growth, invest in the business and brands of the company, and becoming more efficient. Other strategies include becoming the market leader in the industry. The company has been able to perform well through having a strong brand positioning. 

SWOT Analysis 

The SWOT Analysis for the Coca-Cola Company is as shown below; 

Strengths  Strong brand  Strong market position  Strong financial strength  Strong and creative marketing strategies	Weaknesses  Many competitors  Negative publicity
Opportunities  Increases market share  Acquisitions and alliances	Threats  High rivalry  Healthcare awareness

The main opportunity for the company is the because of an increase in competition and rivalry in the industry, there is the opportunity for alliance and acquisitions aimed at reducing threats (Graham, 2012) . Another opportunity has increased the chance to increase its market share. The threats that affect the company include healthcare awareness that has led to the reduction in revenues in the industry as people substitute the product with healthy drinks like water. Another threat is a high rivalry because of competitors, low switching costs, and similarities in the products. The threats and opportunities have been selected because of the fact that they determine the decisions that are made by the company. They relate to the VMO and the strategy of the company in terms of increasing its competitiveness (Pickton, 1998). 

Strategy 

The strategy of the company is to maintain its competitive advantage through meeting the needs of consumers and by making its products affordable ( Jiambalvo, 2009) . However, the company still needs to address the needs of customers to get products that are considered to be healthy. 

Conclusion 

Coca-Cola is considered to be the biggest company in the soft drink industry whose main competitor is PepsiCo . The company is affected by internal and external factors that determine the level of profits. The most crucial factor that affects it is the threat from substitute products as people are trying to try healthy products such as water and healthy drinks. The company can also take it as an opportunity to tap into the market and also provide products. 

References 

Graham, J. R., Smart, S. B., & Megginson, W. L. (2012).  Introduction to corporate finance . Australia: South-Western/Cengage Learning. 

Jiambalvo, J. (2009).  Managerial accounting . Hoboken, N.J: Wiley. 

Jolly, A. (2003).  Managing business risk . London [u.a.: Kogan Page. 

Kaplan, J. (2017, 04 19). PepsiCo, Coke Lose Market Share as Americans Drink Less Soda . Retrieved from Bloomberg: https://www.bloomberg.com/news/articles/2017-04-19/pepsico-coke-lose-market-share-as-americans-flee-soda-drinks 

Miller, D. (1998). Coca-Cola: a black sweet drink from Trinidad. Material cultures: Why some things matter , 169-87. 

Osterwalder, A., & Papadakos, T. (2014).  Get started with ... Value proposition design: How to create products and services customers want . Hoboken, NJ: Wiley. 

Pickton, D. W., & Wright, S. (1998). What's SWOT in strategic analysis? Strategic Change , 7 (2), 101-109.