Business organization and environment in a global contest - Coca Cola

This report analyses the environment of Mexico through PESTLE analysis and highlights the opportunities and threats for Coca Cola. It also discusses the attractiveness of the market through Porter's five forces.

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Business organization and environment in a global contest

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Contents
Contents................................................................................................................................................1
Introduction...........................................................................................................................................2
Background information of Coca Cola...................................................................................................2
Pestle analysis of Mexico.......................................................................................................................3
Opportunities available for the Coca Cola by expanding its business in Mexico...................................5
Threats that Coca Cola can face by doing business in Mexico...............................................................6
Attractiveness of market (porter’s five forces)......................................................................................7
Conclusion and recommendations........................................................................................................8
References.............................................................................................................................................9

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Introduction
Coca Cola is a multinational corporation that is serving various countries in almost all the
part of the world. By earning the revenue of 84.8 Billion dollars, it comes under the
multinational corporation by serving millions of customers (Fandam, 2016). Due to big
multinational company, Coca Cola is fulfilling the responsibility of being ethical as well as
eco-friendly. Due to use of water in preparing its beverage drink, it takes proper use of water
by keeping it safe. It is also interested in proving the safe drinking water to the poor
countries. The objective of this report is to expand the Coca Cola market into Mexico. For
preparing the report, first environment of Mexico has been analysed through the PESTLE
analysis. Through this, political, economic, social, technological, legal, and environmental
condition has been analysed which is important for taking entry into Mexico for business. By
taking the PESTLE, analysis of Mexico, opportunities as well as threat has been described in
the report that Coca Cola will get by taking entry into Mexico. Apart from the PESTLE
analysis, porter’s five forces has been highlighted in the report. At the end of the report,
recommendations for Coca Cola has also been discussed that will help the company in
Mexico.
Background information of Coca Cola
Coca Cola is an American corporation that was founded in 1892. It is engaged in
manufacturing and selling of beverages. It is largest manufacturer of beverages that is serving
more than 200 countries. It also sells the soft drinks as well other products. It is one of the
largest manufacturer and distributor of the beverages in the world. It has headquartered in
Atlanta, Georgia. From the report published recently, it is founded that Coke is still the king
in the market. The market share of Coke has been increased from 17.3% to 17.8%. The
competitor of Coke, Pepsi’s market share has been dropped to 8.3% that was 10.3%. In the
year 2016, the soft drinks were accounted for $81 Billion in North America (Bronner, 2018).

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Pestle analysis of Mexico
Political factors- In Mexico, there are several political factors that will affect the Coca Cola to
do business. Security and corruption is one of the biggest factors that affect the businesses in
Mexico. Besides this, various positive effects are shown in the diagram given below.
Trade and investment freedom has been increased in recent years that will help the companies
to do business in Mexico (Heritage Foundation, 2018). It is also seen that most of the poverty
is caused by geographic, individual, as well as political factors. For reducing, the poverty in
Mexico, World Bank and international monetary fund take various measures because the
government of Mexico does not take enough actions to ensure the development.
Economic factors- Mexico is the second largest economy of the Latin America as well as
among the 15th largest economies. In 2017, Mexico faced the two big earthquake that
hampered the growth of Mexico. Therefore, it can also hamper the Coca Cola growth when it
will move to Mexico because due to these uncertainties people do not spend too much.
Besides this, Mexico is also known for cheaper labour which will prove to be profitable for
Coca Cola. In the year 2017, unemployment rate also decrease in Mexico with 3.6% that was
3.95 in the year 2016. From these data, it is clearly stated that Coca Cola is required to
research the market properly before moving into the Mexican market for business.

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Main Indicators 2016 2017 2018 (e) 2019 (e) 2020 (e)
GDP (billions USD) 1,077.78 1,151.05e 1,199.26 1,242.39 1,306.77
GDP (Constant Prices, Annual %
Change)
2.9 2.0e 2.2 2.5 2.7
GDP per Capita (USD) 8,815 9,319e 9,614 9,866 10,282
General Government Balance (in % of
GDP)
-4.0 -2.4 -2.6 -2.6 -2.6
General Government Gross Debt (in
% of GDP)
56.8 54.3 53.8 53.7 53.7
Inflation Rate (%) 2.8 6.0 4.8 3.6 3.0
Unemployment Rate (% of the Labour
Force)
3.9 3.4 3.5 3.5 3.5
Current Account (billions USD) -23.32 -19.35e -15.31 -15.97 -19.66
Current Account (in % of GDP) -2.2 -1.7e -1.3 -1.3 -1.5
(Santander, 2018)
Besides this, statistics of Beverage industry shows that the market value is also increasing
every year (Statistica, 2018).
Social factors- As per the data, it is estimated that the beverage industry of Mexico is
expected to increase by $55 million in 2025. 62% of the Mexico consumers are looking
forward for the natural beverage options. Therefore, Coca cola can also add this in its product
for speedy growth and more market base. Besides this, consumers are also not interested in
bottle rather than they believe more in the taste of product. In this way, Coca Cola can focus
more on the flavours of its drink in order to satisfy the Mexican customers (Liem, 2018).
Technological factors- Technological factors play an important role in the Food and Beverage
industry. It is an important factor in the new market. In order to successfully setup the

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business in Mexico, Coca Cola is required to adopt the technological advancement in its
products that will attract the Mexican customers toward its brand. Technologies also change
the production process for every company. Therefore, Coca Cola is required to adopt some
innovative technologies in order to more focus on the output and increased sale. From the
report presented for food and beverage industry, it is founded that people are getting more
concern about the healthier ingredients that has more protein and vitamin (Serodio, Stuckler,
Mckee and Cohen, 2016). Besides this, they also require those drinks that contain less sugar.
Therefore, it becomes necessary for Coca Cola to use such technologies that will less make
the product better and healthier.
Environmental factors- This factor provides the information regarding the performance of
country on environment policies as well as indicators. Mexico has the issue of natural
resources. Besides this, it also has various environmental problems due to the urbanization,
population growth, and industrialization (Caraveo, Cruz Caballero & Pérez, 2015). Due to
various industries, Mexico is facing the problem of air pollution in huge rate. In addition this,
Mexico ranked on the number 92 for getting the easiness in electricity. Therefore, for starting
the business in Mexico, Coca Cola is required to obtain the certificate from the Comisión
Federal de Electricidad. Mexico also faces the water issues due to frequent floods in Mexico
(3bl media, 2017).
Legal factors- In Mexico, government has made several rules and regulations to conduct the
beverage and food industry properly. From the recent report, it is founded that almost 70% of
the population in Mexico is suffering from the overweight an obesity problem. By taking care
of this, Mexico government has enacted the sugar tax (The Guardian, 2018).This law has
reduced the consumption of sugary drink by the Mexico people. Health experts also stated
that this tax could see the progress of Mexican people by decline in the rates of obesity
related diseases.
Opportunities available for the Coca Cola by expanding its business in
Mexico
a. As stated from the economy of Mexico, the recent reports show that the rate of labour
in Mexico is low. In this way, Coca Cola can get the various benefits by hiring the
labour at cheaper rate (Figueroa et al, 2018). By doing this, it will be able to decrease

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its cost and see its drinks at lower cost. By doing this, it will be able to get the more
profit and growth at Mexico. It can also add various products in its brand by taking
the assistance from Mexican workers. As a result, it will require more labours and
more employment will be generated for the working class people. By doing this, it
will help in reducing the poverty at Mexico and will be good add in the Coca Cola
company.
b. After the enactment of sugar tax, Mexican people have reduced the consumption of
sugar drinks. Therefore, there is great opportunity for the Coca Cola to offer some
sugar free drinks to the people of Mexico. This will help it in increasing the market
share of its brand in Mexico. By doing this, it will be able to get the more market
demand for its drink. Besides this, it can also offer the sports drink that is required by
most of the people in today’s time. By offering this drink, it will be able to get the
more customers and market share for its brand which will be helpful in the future.
c. By reducing the wastage and industrial pollution, it can fulfil the corporate social
responsibility. This will welcome the many opportunities in its industry such as large
customer base, assistance from government. It is true that those firms likely to success
more who have fulfilled the corporate social responsibility in proper manner. In
today’s time, it is seen that those companies are successful who are helping in
reducing the wastage that is coming from their industries. Several companies have
also fulfilled the CSR responsibility in best manner by less pollution and proper
disposal of wastage. Therefore, it is good opportunity for Coca Cola to adopt such
measure which will be helpful in fulfilling the corporate social responsibility in best
possible manner (Klimkiewicz & Oltra, 2016).
d. It is seen that poverty is the main problem that is persisting among the Mexico people.
Therefore, Coca Cola can include the right to education for its employee’s children as
a CSR activity (Strandholm & VanHemert, 2018). By including this in its corporate
social responsibility, it can get several benefits in the company. Due to this, various
investors will like to invest in its company as well as customer will like to purchase
more of their products.
Threats that Coca Cola can face by doing business in Mexico
1. Due to continuous floods and droughts, Coca will face the threat related to water.
Therefore, the water issues will harm the productivity of Coca Cola in Mexico. Water

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is an essential resource that is required by every business to operate successfully in
any country. Mexico is such a country where generally the issue of flood arises which
decreases the flow of water. Therefore, in order to address this issue, Coca Cola can
take certain measures.
2. The changing demand of customers frequently in Mexico can affect the production of
Coca Cola. It becomes essential for Coca Cola to cope with the changing demand of
customers. If any rule implemented by Mexico government for the beverage industry
in upcoming year, its productivity will affect largely.
3. Due to unavailability of various technological advancement in the country, it can face
many problems such as less productivity, less productive output. Besides this, it will
not able to cut down its cost much due to less technological advanced technologies. It
might happen that, it will increase the cost in its production process. Therefore, Coca
Cola must take suitable measures for its technology before moving to Mexico for
setting up its business.
Attractiveness of market (porter’s five forces)
a. Bargaining power of buyers- soft drink market is bigger beverage industry. As the
prices of Coca-Cola are already low, so buyers usually do not bargain. In case, if any
retailer will buy the products in bulk quantity then only it will have high bargaining
power. Customers will easily buy the drinks of Coca Cola due to its low prices. In this
way, the overall bargaining power of customers will be low.
b. Threat of substitutes- In Mexico, there are various industries who are offering the soft
drinks to the people of Mexico. Besides this, there is no substitute cost for transferring
to any other brand. In this way, threat of substitute is higher for Coca Cola to enter in
the market of Mexico. In order to minimise the threat of substitute, product
differentiation strategy will be helpful. It will help the company to company to
produce more innovative product by offering unique product (Trivikram, 2016).
c. Bargaining power of supplier- In Mexico, it will face the high threat of suppliers due
to availability of various other firms to which supplier can supply the raw material
and products. In this way, it is essential for Coca Cola to take the assistance of well-
established firm in Mexico for doing business.

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d. Competition rivalry- In Mexico, there is various competitors from which Coca Cola
will face competition. Among all the competitors, it will face the huge competition
from Mexico who is a leading beverage industry in Mexico.
e. Threat of new entrant- In spite of various laws, Coca Cola will face the competition
from new firm who are entering in the market. Various customers have very limited
budget that makes them enable to afford. This reason has encouraged the firms to
come in the Mexico market and make the strong market base just with small margin.
In order to avoid this threat, Coca Cola can also adopt the low pricing strategy for
some time in order to gain the market share (EuroMonitor, 2018).
Conclusion and recommendations
From the above discussion, it can be concluded that Mexico has various environment
problems that requires the firms to take appropriate actions. Therefore, it is recommended to
Coca Cola that it can make the best use of its technologies to minimise the negative impact
from these problems. Moreover, due to the increment in the poverty of Mexico people, it can
help the children of its workers to get some education assistance from the company. This will
help the company in fulfilling its corporate social responsibility that is important for the
success of the business.
It can also add a research and development department in its business for proper
identification of opportunities and threats that it can face in the upcoming years. By doing
this, it can make the best investment in any of the activity (Charter, 2017).

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