Business Administration Capstone

Business Administration Capstone

Business Administration Capstone

Coca-Cola is one of the leading beverage companies across the world. The company operates in over 200 nations and manufactures approximately 3, 900 beverage products which include Sprite, Coke, Fanta, Minute Maid, Diet Coke, Maaza, and Limca among others (The Coca-Cola Company). This paper seeks to explain the internal and external forces that influence Coca-Cola’s operations. The paper largely examines the social cultural and political/legal segments as they are the most influential part of the general environment. This paper also explores the forces of competition that influence the company, its strengths, opportunities, threats, and weaknesses. Although Coca-Cola faces stiff competition from companies such as Pepsi, its effective market strategy, brand identity, and resources will ensure that the company remains competitive.    

Business Administration Capstone

General Environment

Companies are influenced by different external environments segments that exist within a particular industry. These external segments include technological, sociocultural, economic, demographic, global, and political/legal factors which lie outside an organization’s control. Coca-Cola Company is mostly affected by the social cultural and political/legal segment as they rant the highest in influencing the firm’s daily operations (Frue, 2016). The two segments influence Coca-Cola’s decisions of production as well as profitability. 

Sociocultural segment 

Recently, most people especially in the developed world have changed their attitude towards carbonated and flavored drinks as they prefer more health drinks such as coffee and fruit juices. These attitudes and lifestyle changes have resulted to a significant decline in the preference of Coca Cola products leading to reduced revenues (Pratap, 2016). The media has also played in a crucial role in changing the perception of people regarding flavored drinks as they are said to be loaded with calories. This change in attitude has forced the company to introduce new low calorie products such as Diet Coke put they only appeal to a few customers who have chronic conditions such as diabetes (Pratap, 2016). Coca Cola is currently exploring developing countries that still find flavored and carbonated drinks appealing.  

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Political/legal Segment 

Some of the political and legal factors that affect Coca-Cola include regulation and government laws that regulate foods and beverage production. For instance, across the United States, Coca-Cola is expected to follow the guidelines implemented by the Foods and Drugs regulatory body (Pratap, 2016). What’s more, the laws and government regulations vary by country. As such, the company has been under pressure to expose some of its key ingredients as some regulatory bodies Coca Cola does not apply the regulations on some of its drinks. Additionally, the company has been facing legal challenges as it was recently accused of contamination water and poor water management (Pratap, 2016). The fines accrued to these lawsuits have cost the company huge amounts of money.  

Five Forces of Competition

The food and beverage industry has been seeing a significant growth and has become very competitive. The Porter’s five forces of competition include rivalry among existing companies, threat of new entrants, supplier’s bargaining power, threat of substitution, relative power of stakeholders (Hitt et al, 2013). These forces influence profitability and therefore gaining a good understanding of the forces can helping in guiding the business strategy and increasing Coca-Cola’s competitive advantage (Nyakangi, 2020). Two of the most significant forces of competition that are most likely to affect Coca-Cola include threat of substitutes and competitive rivalry between the existing companies. 

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Threat of Substitution 

Coca-Cola faces a threat of substitution from other healthy beverages. Some of the include coffee, fruit juices, teas, chocolates, mineral water, and milk. Currently, companies that deal in these beverages such as Nestle, PepsiCo, Anheuser-Busch InBev, Kraft Heinz Company, Danone, Asahi Group, and Starbucks among others endlessly put pressure on the company. Although Coca-Cola and Pepsi dominate over 40% of the beverage industry, the current health awareness movements across the world are likely to result to serious threats (Nyakangi, 2020). 

Coca-Cola has been able to address this force by introducing some healthy beverages. Two of them include Coca-Cola Zero and Diet Coke which earned the company more than 40% of its total revenue in the past few years (Jurevicius, 2020). Other drinks that have been seen to be healthy include Minute Maid, Georgia Coffee, Minute Maid Pulpy, Smartwater, and Fuze Tea among a few others which earn the company about US$1 billion. These beverages are able to compete effectively as healthy drinks in the developed countries. 

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Rivalry Amongst Existing Competitors 

Secondly, Coca-Cola faces high competition from Pepsi which is it main rival in the beverage industry (Pratap, 2017). Pepsi and Coca-Cola have similar market strategies, products, and are almost equal in terms of size. As such, the price competition is very intense given that the product differentiation is low (Pretap, 2017). Another aggressive competitor is Marquee. Its products use the same ingredients as Coca Cola and the taste is almost similar which brings about competition from the company. 

To squash the competition, Coca Cola has entered contracts with Pepsi to control the bottling technologies as well as set product prices (Pretap, 2017). This ensured that the two companies remain at the top as they control most of the bottling companies. The contracts also ensure that both companies earn good profits from their products. 

Future Improvements

The company needs to venture into more healthy beverages and food segment. Currently, most nations are fighting against chronic diseases such as obesity and diabetes. As such, people are encouraged to consume healthy foods and beverages. Coca-Cola needs to explore this segment so as to ensure productivity and profitability. Although Coca-Cola dominates the soft beverage industry it has to contain further competition from other beverage companies. Given that one of the causes of this competition is the health awareness across the world, Coca-Cola needs to explore the possibility of investing more healthy beverages.

The company can achieve this by forming a joint venture with other established companies that deal in fruit juices and hot beverages (Nyakangi, 2020). The parent companies can establish a new child companies that produces high quality fruit juices or hot beverages across the world. The company can use its market influence and its bottling contracts to promote the new beverages. By so doing, the company will ensure it gains profit a huge number of consumers who are health cautious. The company should also consider producing healthy snacks so as to encourage customers to remain loyal to the company.

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Secondly, to overcome the rivalry between Coca-Cola and Pepsi, the company needs to increase its advertising initiatives in countries such as Latin America, Australia, Cuba, and North Korea. Coca Cola can also support major events and non-profit organizations across Africa, Brazil, Syria, Iran, India, and Afghanistan to increase its market (Baah, & Bohaker, 2015). These initiatives will increase the advertising power of Coca-Cola as well as improve brand loyalty which will gain the company a competitive advantage over Pepsi. The company also needs to improve its adverts on some of its drinks that are not quite well known. These beverages include minute maid, glaeau vitaminwater, glaceau smart water, gold peak tea, del valle, and powerade among others. 

Greatest External Threat

Coca-Cola applies SWOT analysis in monitoring its opportunities and threats. Recently, Coca-Cola has earned a bad reputation and has been termed as an “evil” company with the accusations of dehydrating communities due to overuse of water sources, use of pesticides in water, affecting local agriculture, and mistreating its employees in countries such as Russia, Guatemala, Colombia, and Turkey (Ling, 2017). These sentiments are a huge threat to the company given that consumers today are only loyal to companies that show social corporate responsibility. This threat is even serious given that companies such as Pepsi have well established water sources that are environmentally friendly. Coca Cola needs to find new sources of water such as digging their boreholes and having several purification plants across nations. 

Greatest Opportunity

Coca-Cola has numerous opportunities that it can explore. The most promising is that the company can explore markets in developing nations given that developed countries are buying more healthy drinks recently (Baah, & Bohaker, 2015). Developing nations still explore soft and carbonated drinks and therefore increasing their market in countries such India that have very hot summers will increase profits. 

Strengths and Weaknesses

Some of the greatest strengths that Coca-Cola Company can capitalize on include a vast global presence, its brand equity, best market strategies, and its huge market share. Coca-Cola brands and branches can be found across 200 countries across the globe and its only competition in these countries is Pepsi (The Coca-Cola Company, 2014). Regardless of this competition, Coca-Cola has an upper hand due to its fantastic drinks which include Diet Coke, Sprite, Maaza, Fanta, and Limca. The company is well known across nations for its unique brand identity. The company can use these strengths to win the loyalty of many more customers across nations. Some of the weaknesses that the company has include stiff competition from Pepsi, low product diversification, lack of health beverages, and poor water management. To overcome the weaknesses, Coca-Cola can invest in the healthy food and beverage segments which will enable it to compete effectively with Pepsi. 

Strategies 

The company should pursue new markets in developing countries. In developed nations, the company needs to produce more health drinks that do not increase obesity and people are more sensitive (Business Strategy Hub, 2019). This will enable the company to maintain profits while at the same time marketing its new health beverages in the developed nations.

Resources, Capabilities, and Core competencies.

In terms of core competencies, Coca-Cola is a very competent company that has effective and strategic marketing plans. Coca-Cola is reputed for associating with sports and physical activities. Since the company was founded in 1928, it has been a major supporter for Olympic Games (The Coca-Cola Company, 2019). The company sponsors international sports such as FIFA world cup, netball, and rugby. This is influential because the sponsorship programs ensure that the company is well marketed and continues to dominate the world in beverage consumption and production as masses use these sports as a source of entertainment.  

The company’s capability lies in the fact that the quality and quantity of its products are guaranteed and so are sales. In 2019, the company’s operating revenues were about US$37.27 billion (Bedford, 2020). The company is sure that most of their products will be sold regardless of its challenges. Nonetheless, given that it’s operating revenues were US$ 48.02 and US$46.85 in 2012 and 2013 respectively, there is need to improve the supply chain and strategize its market plans better to reduce this decrease in revenue (Bedford, 2020).

 Lastly, the company’s resources include technological resources, raw materials, and monetary resources. The company partners with bottling companies to come up with unique bottles and bottling procedures. The company in conjunction with Pepsi controls almost all bottling companies enabling the two companies to own the technology. 

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References

Baah, S., & Bohaker, L. 2015. The Coca-Cola Company. Culture16, 17.

Bedford, E. 2020. Coca-Cola Company’s net operating revenues worldwide 2007-2019. https://www.statista.com/statistics/233371/net-operating-revenues-of-the-coca-cola-company-worldwide/

Business Strategy Hub. 2019. Coca Cola SWOT analysis 2019 | SWOT Analysis of Coca Cola. https://bstrategyhub.com/swot-analysis-of-coca-cola-2019-coca-cola-swot-analysis/

Frue, K. 2016. PESTLE Analysis of Coca Cola. Retrieved from https://pestleanalysis.com/pestle-analysis-of-coca-cola/

Jurevicius, O. 2020. SWOT analysis of Coca Cola (6 Key Strengths in 2020). Retrieved from https://strategicmanagementinsight.com/swot-analyses/coca-cola-swot-analysis.html

Ling, X. 2017. Customer Relationship Management: Case study Coca-Cola Company.

Nyakangi, E. 2020. Coca-Cola: External and Internal Environments market analysis. https://kenyayote.com/coca-cola/

Pretap, A. 2016. Coca Cola PEST Analysis. Retrieved from https://notesmatic.com/2016/08/coca-cola-pest-analysis/

Pretap, A. 2017. Coca Cola Five Forces Analysis. Retrieved from https://notesmatic.com/2017/02/coca-cola-five-forces-analysis/

Retrieved from https://www.worldofcoca-cola.com/about-us/coca-cola-beverages-products/

The Coca-Cola Company. 2019. Sustainable Business. Retrieved from https://www.coca-colacompany.com/sustainable-business.

The Coca-Cola Company. n. d. About Us: Coca-Cola Beverages and Products. https://www.worldofcoca-cola.com/about-us/coca-cola-beverages-products/

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