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External Environment Analysis Essay

Today, the Coca-Cola Co. is one of the leaders in the world beverage industry. At any rate, the company holds one of the leading positions in the market and expands its business internationally. In actuality, the Coca-Cola Co. focuses on the expansion of its market share. The Coca-Cola Co. is the international brand that is renowned worldwide. In spite of the seemingly strong position of the company in the market, the Coca-Cola Co. still needs the development of effective marketing strategy and policies that can enhance the position of the company in the market and to prevent the entrance of new rivals. In this regard, the company needs to conduct the in-depth analysis of its competitive environment and to reveal basic trends in the industry as well as the environment in which the company operates. Therefore, the Coca-Cola Co. can use the Porter’s Five Forces analysis and PEST analysis to assess objectively its current competitive position of the company and the environment, in which the company has to operate.

First of all, it is possible to use the Porter’s Five Forces analysis, which helps to understand the competitive business environment of the company and its competitive potential. The Coca-Cola Co. can assess its competitive potential and prospects on the ground of the Porter’s Five Forces analysis. In terms of the Porter’s Five Forces analysis, it is possible to refer to the bargaining power of suppliers. The bargaining power of suppliers of the Coca-Cola Co. is quite high because the company operates worldwide. At the moment, the Coca-Cola Co. tends to the localization of production that means that the company uses local suppliers. As the company operates worldwide, the number of suppliers of the Coca-Cola Co. grows steadily. In such a way, the company can rely on its suppliers and replace them if necessary. For instance, if some suppliers of the company proves to be unreliable, the Coca-Cola Co. can easily replace them by other suppliers. Therefore, the Coca-Cola Co. can conduct flexible policies in relation of its suppliers and the wide choice of suppliers makes the company relatively independent of its suppliers. At the same time, the company is traditionally very attentive to the process of selection of its suppliers because suppliers affect consistently the quality of products of the company. Therefore, the Coca-Cola Co. involves the large responsibility of suppliers to ensure the safety of its drinks.

The bargaining power of customers is also very important for the company. Today, the bargaining power of customers of the Coca-Cola Co. has dropped because of the recent economic recession in the US and global financial crisis. As a result, customers grow more concerned with saving that decreases the consumption of the Coca-Cola Co.’s products. Hence, sale rates of the company drop fast and the company attempts to accelerate its sales, introducing changes in its products, such as the production of new packaging. For instance, the company used white cans with white bears to attract customers to its products.

Furthermore, the threat of substitutes in the beverage industry persists and today this threat grows more and more significant as customers become more concerned with their health. At this point, it is important to place emphasis on the fact that the Coca-Cola Co. faces the problem of the growing criticism because of the quality and safety of its products. To put it more precisely, the Coca-Cola Co. is criticized for its drinks that may have a negative impact on the health of customers, especially if they consume them in large amount on the regular basis. Instead, customers grow more and more concerned with their health and food and drinks play an important part in the healthy lifestyle of people. Therefore, customers often prefer juice or other drinks which are safe and may have positive impact on their health. In such a way, the Coca-Cola Co. faces the risk of the emergence of substitutes, such as companies that offer customers healthy drinks or, at least, minimize the negative impact on the health of customers. In such a situation, the Coca-Cola Co. may be in a disadvantageous position compared to its rivals.

Threat of new entrants is relatively low because the Coca-Cola Co. holds one of the leading positions in the market. The company has set high barriers to entry that prevents new entrants in the industry. Nevertheless, the probability of the appearance of new rivals exists but this probability is extremely low.

Therefore, the competitive rivalry within the industry is relatively low because the Coca-Cola Co. is one of the behemoths in the beverage industry. However, a few competitors of the Coca-Cola Co. still maintain a strong competition because the few behemoths carry on the competitive struggle and the Coca-Cola Co. cannot ignore policies and impact of its rivals. In such a situation, the company needs to develop effective strategies for the maintenance of its competitive position. In this regard, the international market expansion comprises one of the major parts of the competitive strategy of the Coca-Cola Co. at the moment.

At the same time, the PEST analysis can help to assess the environment, in which the Coca-Cola Co. operates. First of all, it is important to dwell upon the political environment. In actuality, the political environment is favorable for the Coca-Cola Co. because the company is one of the largest employers in the US and the world. As a result, the US government is interested in the further development of the Coca-Cola Co.’s business. Similarly, governments of other countries are also interested in the Coca-Cola Co.’s investments because the development of business by the Coca-Cola Co. stimulates the economic growth in the target markets because the Coca-Cola Co. creates new jobs and revives business activities.

Furthermore, the economic environment is quite difficult at the moment. In this respect, the Coca-Cola Co. and the beverage industry at large suffer from the negative impact of the recent economic recession in the US and the global financial crisis. Moreover, today, the economic situation in the EU is uncertain as well as the development of the global economy. Such uncertainty naturally deteriorates the position of the Coca-Cola Co. in the market because customers focus on saving and prefer to save costs refusing from the mass consumption of the Coca-Cola Co.’s products. As a result, the economic environment is quite difficult. On the other hand, the Coca-Cola Co. can develop its business successfully in new markets. For instance, Chinese economy keeps growing, regardless of the global financial crisis. The Coca-Cola Co. is ready to invest in new markets that open larger opportunities for the development of its business.

The social environment is also unfavorable for the Coca-Cola Co. To put it more precisely, customers grow more and more concerned with their health and healthy lifestyle that make many customers to refuse from the Coca-Cola Co.’s products, which they consider to be unsafe and contributing to the development of such health problems as obesity. In such a situation, the company should change and improve its public image to attract customers. On the other hand, the company still can count on markets of developing countries, where concerns of customers of their health are less significant and where the company is still successful.

Finally, the technological environment is favorable for the Coca-Cola Co. because the company can use new technologies to increase the automation of the production process. As a result, the company saves costs and increases the effectiveness of its production. Therefore, the company benefits from new technologies and the Coca-Cola Co. implements innovations in its production process.

Thus, taking into account all above mentioned, it is important to place emphasis on the fact that the Coca-Cola Co. holds a strong position in the market. The Coca-Cola Co. is one of the largest companies in the beverage industry. On the other hand, the economic downturn and health concerns of customers increase the risk of the appearance of substitutes in the market and deterioration of the competitive position of the Coca-Cola Co. in the market.

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