Contribution of Coca Cola on the Us Economy

Running head: STUDY ON COCA COLA
Study on Coca Cola
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Table of Contents
Introduction......................................................................................................................................2
Financial condition..........................................................................................................................2
International trade and Coca Cola...................................................................................................3
Contribution of Coca Cola on the US economy..............................................................................4
International trade issues.................................................................................................................5
Impact of macroeconomic policies on Coca Cola...........................................................................6
Impact of exchange rate fluctuation................................................................................................7
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................9

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Introduction
Coca Cola is the largest beverage manufacturing company in the world. It was founded in
1892 by Asa Griggs Candler. The first product of the company is the coca cola carbonated soft
drink. The United States is the country of origin of the company. With passage of time, the
company has expanded gradually and started selling and operating in other countries as well.
Thus, it can be added that the company has presence in many countries in the world (Sharman et
al., 2019). The company operates in more than 200 countries and have more than 500 types of
products. This report discusses about the financial condition of the company relevant to past five
years. Along with that, focus is given on trade participation of the company and its contribution
towards the economy of the country. Coca Cola sales its products in almost all the countries and
the report emphasizes on the market condition of the company in overseas countries. The trade
issues are area of interest of this report (Serôdio, McKee & Stuckler, 2018). Thus, it mentions
about the trade related issues faced by the company during trade involvement. The report further
discusses the impact of fiscal and monetary policies of the US on Coca Cola. Considering
Canada and Singapore, the impact of fluctuation of exchange rate on te operation of Coca Cola
and the said two countries. Therefore, the report focuses on the economic side of the company.
Financial condition
The condition of beverage companies are somewhat not going well due to several
governmental policies against the sugary drinks that include the any kind of beverages or soft
drinks. Thus, being a beverage or soft drink company it is obvious that Coca Cola would face
difficulties in making enough financial success (Deal, 2018). In most of the developed countries,
the impact on the consumption of beverages is affected adversely. The tax on sugary drinks has
contributed to the decline significantly. Due to this reason, the companies are facing fall in

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income in the last five years. The data on market share of Coca Cola and the entire beverage
market along with the financial statements on the company is evident enough to show the
financial condition of the company (Le et al., 2017). Considering, the data on net income
attributable to the share owners of the Coca Cola has been declining gradually through last five
years with mild fluctuation. In 2014, the net income of the company was $7.12 billion, which
declined to $6.73 billion in 2018. Thus, there is a significant fall in the net income of the country
(Cheptegei & Yabs, 2016). The total current asset of the company has declined too by around 2
billion dollars in the last five years. In 2014, total current asset of the Coca Cola Company was
$32.99 billion. This total current asset decline to $30.63 billion in 2018. Therefore, as per current
asset the company has contracted by more than $2 billion (Kraus, 2019). Therefore, it is evident
that the financial condition of the company is not going well. However, it should be noted that
the beverage industry is growing in the developing and emerging economies and thus there is
still prospect in the industry (Nelson, Pinter & Theodoridis, 2018). The fall in profit is due to the
increasing competitiveness in the industry with more number of companies entering. Coca Cola
remains at the top in as far as market share is concerned.
International trade and Coca Cola
Coca Cola is one of largest beverage company that export its different types of products
to different parts of the world. Apart, from exporting its products the company is engaged in
production of the product of the company in the countries they operate in (Renz & Vogel, 2016).
It is beneficial for the company to produce in the country it operates in. This is because the
products that Coca Cola produce are mostly come into low priced product category. Therefore,
the export of such products in a foreign country is much expensive than producing the product in
that country. Therefore, in most of the cases the country try to produce at the country of

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operation than exporting the product from a different country (Li, 2019). In addition to that, there
are several other benefits associated when producing at the country of operation especially in the
developing countries. In developing countries, the labor is cheap and thus the cost of production
falls. It should be noted that the beverages are packed ion glass bottles which are fragile and if
exported then it would attract risk of damage and the cost of export per unit of product is
significantly high and thus exporting would lower the competitiveness of the company (Zhang,
2019). The company thus has more than 200 bottling partners that manufacture and bottle the
products in the respective country of operation. Therefore, Coca Cola tries to develop bottling
partners first in the country which it tries to expand operation. It is thus evident that the company
is less interested in export oriented sales and more engaged in the production oriented investment
in the foreign countries. Therefore, from the export perspective, the country is not directly
involved but is involved in international trade since it produces outside the country of its origin.
Contribution of Coca Cola on the US economy
Coca Cola Company is the largest beverage country in the United Sates as well as in the
world. It is evident that the company has 62, 600 direct employees worldwide. However,
including direct and indirectly employees more than 225, 000 person are employed in the United
States due to the business of company. The GDP of the US is very high, in 2018, the GDP of the
country was just above twenty thousand billion dollars (Hansen, 2018). Therefore, if the amount
of profit of Coca Cola is considered then it can be estimated that the contribution of the company
to the GDP is not that significant. From the financial statement of the company, it is evident that
the income of the company is significantly fluctuating and has declined over the last five years.
The employment in the company has decline over the years. Previously, the direct employment
in the company in was above 0.1 million but with time it has gradually declined and fell to the

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current level mentioned above. Owing to this, the number of indirect employment has declined
too. Therefore, it can be said that the contribution of the company towards the employment of the
United States is not that significant currently as it was before. There are many reasons due to
which the contraction has occurred in the industry as well as the Coca Cola Company. The major
problem that the company is facing is the campaign against consumption of sugary drinks that
are proved to increase the chances of diabetes in consumers and thus along with the several anti-
sugary drink consumption campaigns the government has imposed tax on the product that
contains high sugar level. Therefore, it is evident that the company is unable to provide the
amount of economic growth the company used to contribute to the economy of the country.
Thus, in the last five years, the company has declined gradually and thus contribution of the
company towards the economy has now decline.
International trade issues
In the world scenario there has been several changes and activities occurred that have
significant impact on companies related to all the industry. The impact has been more the
companies that operates in various countries all around the world (Hair, Page & Brunsveld,
20189. Coca Cola Company is one of such companies that operate outside the country of its
origin. Thus, these companies not only faces difficulty that are domestic but also the
international and country specific problems. It has been noticed with stringent laws present in an
economy the companies struggle to abide by the rules (Meyer & Peng, 2016). The major
problems a company like Coca Cola faces when it participates in international trade are
fluctuation in exchange rate, industry law in the country of operation. Economic condition of the
country of operation. Therefore, it is the most difficult situation to take speared polices for
separate countries. Exchange rate pose difficult situation as change in the exchange rate the price

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and thus of the product get significantly impacted and may lose market share. In international
market there are many other and companies that produces similar kind of product and thus
trading causes more product pressure. Therefore, it is evident from the discussion of the segment
indicates that international trade causes various issues that hampers the business like Coca Cola.
Impact of macroeconomic policies on Coca Cola
The United State is one of the largest developed economies in the world and thus in
different times the country has tried different economic policies to improve the socio-economic
condition of the country. The major policies that would impact each and every organization
operating in the country are fiscal and monetary policy (Ndou & Mokoena 2019). Fiscal policies
that a country uses are expansionary and contractionary policies. The types of monetary policy
are same as the fiscal policies that is expansionary and contractionary. Under expansionary fiscal
policies and the government of the US lowers tax rate or increases government transfer
expenditures. This type of policy increases the disposable income of the individuals of the
country, thereby consumption would rise, and there is high probability that the sales of the
products of Coca Cola Company rises (Eickmeier, Metiu & Prieto, 2017). Thus, it can be said
that the expansionary fiscal policy would directly increases the demand for eth products and thus
there would be expansion of Cola Coal Company under such policy intervention by the
government of the US. On the other hand, contractionary fiscal policy is opposite for the
expansionary fiscal policy and thus implementation of such a policy would lower the demand for
normal goods in the economy and thus hereby will fall in demand for beverages (Wu, 2019).
Hence, it is evident that contarctionary policies have negative effect on the demand for beverages
produced by the Coca Cola Company. It should be noted that fiscal policy is a demand side
policy. On the other hand, monetary policy is a supply side policy and the expansionary

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monetary policy is mostly implemented by reducing central bank interest rate. Therefore,
reduction of the interest rate lower the price of loan. As a result, the amount of investment in the
economy rises and due to that, the production of the economy increase. The impact of such a
policy would be significantly effective on the Coca Cola Company (Carter, 2019). The company
would increase its amount of investment by hiring more employees and installing more
equipment and purchasing more raw material in order to produce beverages and tap the markets
that are still out of each of the company. Thus, there is a possibility of expansion of the company
owing to the expansionary monetary policy. However, implementation of contratcionary
monetary policy would make loans less affordable for the company and thus there will be no
investment and hence no expansion of the company.
Impact of exchange rate fluctuation
Coca Cola Company participates in international trade and thus exchange rate being one
of the key component of international trade. The exchange rate data for past few years has shown
that Canadian dollar has depreciated against the US dollar. It means that investing in Canada is
cheaper than that of investing in the US. However, it should be noted that the even though the
Canadian dollar has depreciated thoroughly during last few years there is fluctuation and thus it
is difficult for the company to produce at a cost structure given since pricing similarly with
different cost structure is not viable for the company. Therefore, in the case of Canada the price
fluctuation hampers the export market of the Coca Cola. On the other hand, Singapore dollar has
steadily decline against the US dollar, hence it is easier for the company to invest in Singapore as
it would improve the condition of country.

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Conclusion
The above discussion on the Coca Cola Company leads to the conclusion that the
company is the largest manufacturer of beverages in the industry as well as the soft drinks. The
company holds nearly 50% of the beverage market share in the world. The company is over 100
years old and it has operations all around the world. As per the company, it operates over 200
counties in the world. Coca Cola a product of the company sells in the largest volume. However,
the financial condition of the country is fluctuating over the last five years. The profit of the
company has reduced by around half a billion dollar. The current asset of the company has also
reduced during this period and thus it can be inferred that the market condition of the company’s
product is not going well. On the other had the study showed that the contribution of the
company is not that significant to GDP of the country. However, the amount of employment
provided is commendable. The macroeconomic policies that is fiscal and monetary are of utmost
important for the Coca Cola Company, but the policies impact the market of the products
produced by the company. Finally, it has been observed that exchange rate plays a crucial role
since production depends on it hugely when international trade is concerned.

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