External and Internal Environments in Coca-Cola Company
This paper uses Coca-Cola Company as the case study to explain more about the external and internal environments in business. Coca-Cola Company was founded in the year 1886. It operates its business in more than 200 nations and has more than 2,700 beverage products. Its products comprise of, sparkling beverages, like waters, juice drinks, sports drinks, teas and energy drinks. It also produces four of the top nonalcoholic beverages which include coco-cola, Fanta, diet coke and sprite (Regassa, & Corradino, 2011).
The coca cola market analysis
The market analysis is responsible for monitoring the company’s both external and internal environment. Coco cola uses this strategy to watch both external and internal factors in regard to its business. This is because the external and internal factors contribute or influence a lot to its achievement of remaining as the best soft drink industry (Njanja, Ogutu, & Pellisier, 2012).
Internal Business Setting
The internal business environment and its effects is contained within the company’s management. The essential internal environments that Coca-Cola ensures are put in place include effectiveness in the production procedure, proper organization skills and effective communication networks. To effectively monitor and manage its internal environment, coke conducts assessments of it is operations and responds appropriately to any aspect, which is likely to cause ineffectiveness in any section of the consumer and production procedure (Njanja, Ogutu, & Pellisier, 2012).
External Business Environments
They are also termed as outer business environment. The external business environments are more powerful than internal business environment factors. They can affect the entire company or economy. Coca-Cola is aware that alterations in the external settings can create achievements or threats in its market place. Some of the keenly monitored external business environmental aspects comprise of, customer attitudes, instabilities in the economy and demographic patterns. This can affect the reception given from the customers.
Segmentation of the environment
Coca-Cola establishes the segmentation requirements and the people that are most likely to undergo that requirement. Its segmentation is determined by a comparison between the advantages given by their benefits and the requirement of the outlook. Some of the two segments in Coca-Cola that give them the highest influence comprise of:
- Reduction in expenses by improving productivity, cash flow and manufacturing quality.
Coca-Cola has outlooks that monitors economizing and production of mature products at the best time of their life cycles to reduce credit rating problems. On the other hand, coca cola has prospects that ensures conventionally low profit margins, conventionally high inventory costs and targets individuals that reside in expensive areas. Moreover, it has measures to ensure multi- discipline manufacturing procedures (Njanja, Ogutu, & Pellisier, 2012).
- Supporting physical activities and sports.
Internationally, Coca-Cola Corporation has a long record of associating itself with sport and activity. It has been the main Olympic Games supporter since 1928 and it also engages itself in sponsoring of international sporting events like football. For instance, It sponsored the FIFA world cup that was held in South Africa. It also sponsors majority of the New Zealand events like rugby and netball. At grass root level, it has formed partnership with various non-governmental organizations around the world to nature the talents of students. An example is its sponsoring of Out of School Care and Recreation based in New Zealand. This has made it to increase its familiarity to the public worldwide than any other company. Very few companies involve themselves in sponsoring sporting events, therefore, Coca-Cola uses this strategy as a competitive adavantage.
If Coca-Cola continues to engage itself in sponsoring of sporting activities, then it will continue dominating the world in beverage production and consumption. This is because many people around the world use sporting activities like football and athletics as a source of entertainment. Therefore, this remains the best platform of advertising as it has many viewers than any other platform.
Threats and opportunities in the Coca-Cola Company
Coca-Cola Corporation uses the SWOT analysis technique to monitor its threats and opportunities. This has made it remain a complex part of realm culture for a long time. Its product appearance is loaded with over-romanticizing, which attracts a large number of people. Furthermore, its appearances are displayed in T-shirts and hats which make it memorable. This remains one of Coca-Cola’s utmost strength (Ščeulovs, & Gaile-Sarkane, 2011).
Product recognition is the foremost issue affecting Coca-Cola’s competitive position. Its trademark name is recognized by about 94% of the world’s population at the moment. The core concern over the past years has been to make its trademark to be better recognized by its consumers or customers. The variation in packaging has on the other hand; affected sales and the company’s positioning, however, a great number of the consumers have not been affected by innovative products. Additionally, its bottling organization also permits it to take advantage of countless emerging opportunities around the globe. This scheme grants Coca-Cola the opportunity to facilitate a large environmental, diverse region.
Presently, the threat of upcoming competitors in the beverage industry is not such extensive. The threat of replacement remains the only big threat. The soft drink business is such strong; however, customers are not essentially married to it. Probable replacements that endlessly put pressure on coke and Pepsi comprise of, coffee, milk, chocolates and tea. Despite coke and Pepsi dominating about 40% of the whole beverage market, the varying health awareness of the market is likely to cause a serious threat. Though, Pepsi and coke have expanded into these markets, permitting them to contain further vital market shares and counterbalance any losses experienced as a result of fluctuations in the market (Ščeulovs, & Gaile-Sarkane, 2011).
The competition amid coke and Pepsi has led to an extremely dawdling moving company where the management has to always react to the varying attitudes and requirement from their customers or run a risk of losing the market segment to the competitors. The biggest threat of all being losing consumes because they may change to other beverages that have little cost and health effect. However, threats can be escaped by minimizing and monitoring the weaknesses. This assists in achieving productivity and effectiveness in the company’s activity.
Even if, Coca-Cola’s domestic business and a lot of its international markets are blooming most of them being in Latin America, it has lately reported some reduction in unit case volumes in Thailand and Indonesia as a result of decrease in customer purchasing power (Ščeulovs, & Gaile-Sarkane, 2011).
Business forces facing coca cola cola how it has managed to remain strong
The beverage drink business is extremely profitable for the company which produces the concentrate like Coca-Cola. This is because the product sold is not complex to produce. There are many forces behind thriving in this business.
- Barriers to Entry:
The competitors face a difficult in entering the soft drink or beverage market because of, bottling network. Pepsi and coke have authorized business contracts with their prevailing bottlers who have the authority in specific environmental regions in permanence. These contracts outlaw bottler’s from undertaking new rivaling brands for equivalent products. Moreover, with the current union among the bottler’ plus the backward incorporation with pepsin and coke purchasing significant portion of constructing companies, it is extremely hard for a company to enter and get bottler’s ready to distribute their produce. Therefore, the choice that is only left for them is to build their own bottling plants, which could be extremely expensive, and capital intensive with construction of a new plant going for more than $ 75 million.
On the other hand, the advertising speed becomes a barrier to entering in the soft drink industry. The marketing and advertising cost of Coca-Cola in 2000 was around 6.6 billion in their bottler’s. The total advertisement expenditure per point of marketing share was 8.3 million. This high advertising cost makes it exceedingly hard for a new company to enter and compete with others already in the market (Ščeulovs, & Gaile-Sarkane, 2011).
In addition, the brand image or loyalty acts as a barrier in entering the business. Coca-Cola has a record of heavy advertising which has earned them brand equity and loyalty from customers worldwide. This makes it difficult for a new company to compete with Coca-Cola in the marketplace. On the other hand, traders enjoy noteworthy margins of 15-20% on these beverages for the shelf space they present. The margins are noteworthy for their existing companies in the market like coke as it makes the new entrants to fear retaliation.
- Suppliers, buyers and substitutes
There are basic raw materials required for making of soft drinks. Some of these commodities are caffeine, color, tasters, spices, sugar, and packaging. The manufacturers of these products have no control over the pricing therefore, the suppliers are weak.
The main networks for the Soft Drink business are foodstuff stores, Fast foodstuff fountain, marketing, accessibility stores plus others in the channel of market share. The success in every section evidently shows the buyer influence and how diverse buyers pay dissimilar prices depending on their ability to negotiate (Regassa, & Corradino, 2011).
1) Foodstuff Stores: Buyers in this section are to some extent associated with a number of chain stores and a small number of limited stores, as they give premium shelf space, they lower prices.
2) Accessibility Stores: This section of buyer’s is extremely disjointed and therefore, must pay higher prices.
3) Fountain: This is the section of buyer’s with the least profit due to the reason of high purchases made. It permits the buyer to have the choice to bargain. Coca-Cola mainly considers this section as “Paid Sampling” as they have low margins.
4) Vending: the vending section serves the consumers directly totally no control by the buyer.
An industry cannot successfully put into place any strategy without being in a position to use the required set of capabilities, main competence and resources. Coca Cola Company identifies its competence and capabilities by considering its strengths and weaknesses.
The Coca-Cola Company deals with two types of resources, which are tangible and intangible. Tangible equipment’s comprise of its financial capital and manufacturing equipment’s. On the other hand, intangible resources are those possessions that create value to consumers but are not seen. Intangible resources in the coca cola company comprise of, brand competence, reputation and its organizational culture.
Coca-Cola’s competence permit it to create value for consumers by doing activities that there competitor cannot do. These are activities that give them competitive advantage and include product innovation and leadership, market leadership and consumer leadership. Further aspects of main competencies that make Coca-Cola to have a competitive advantage include,
- Valuable: This leads to value creation for consumers by neutralizing threats.
- Non-substitutable: No resources that can provide the same value as they provide to customers.
The value chain in Coca-Cola comprise of the primary and secondary activities. The activities include inbound logistics, operations, sales, human resources, accounting and information technology assistance. Each step of value chain in Coca-Cola adds costs, however, it creates value. It always analyzes its value chain to look for ways to operate more effectively thus creating value to consumers or customers.
In conclusion, the internal and external environments are extremely significant to the success of any business. The Coca-Cola Company has been able to dominate the soft drink industry because it strictly adheres to this two business aspects. In summary for any business to be successful, it must be in a position to beat its competitors, and it can only beat its competitors by winning the loyalty of the customers. In order to have loyalty of the customers both marketing and management strategies must be effective (Regassa, & Corradino, 2011).
Njanja, L., Pellisier, R., & Ogutu, M. (2012). The Effect of External Environment on Internal Management Strategy. International Journal Of Business & Management, 7(3), 194-205.
Regassa, H., & Corradino, L. (2011). Determining the value of the coca cola company — a case analysis. Journal Of The International Academy For Case Studies, 17(7), 105-110.
Ščeulovs, D., & Gaile-Sarkane, E. (2011). External and internal influence on e-marketing . Journal of Economics & Management, 16947-953.
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