Business Strategy Report: Macro Environment and Coca-Cola Analysis

This report provides a comprehensive business strategy analysis of Coca-Cola, examining its macro-environmental factors through a PESTLE analysis, assessing internal strengths and weaknesses with a SWOT analysis, and evaluating its capabilities using the VRIO model. The report also analyzes the competitive landscape using Porter's Five Forces and explores various strategic directions, culminating in a strategic management plan for Coca-Cola. The introduction highlights Coca-Cola's global presence and its position in the beverage industry, setting the stage for a detailed examination of its strategic positioning. The PESTLE analysis covers political, economic, social, technological, legal, and environmental factors impacting the company. The SWOT analysis evaluates the company's strengths, weaknesses, opportunities, and threats. The capabilities analysis assesses the value, rarity, imitability, and organization of Coca-Cola's resources. The report also evaluates strategic directions and provides a strategic management plan for the company. The conclusion summarizes the key findings and recommendations, offering insights into Coca-Cola's strategic management and future prospects.

BUSINESS STRATEGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
PESTLE Analysis........................................................................................................................1
SWOT Analysis..........................................................................................................................4
Capabilities analysis....................................................................................................................6
Competitiveness of Market through Porter's Five Forces...........................................................7
TASK 2............................................................................................................................................9
Evaluation of various types of strategic directions.....................................................................9
Justification and recommendation on the strategic direction....................................................10
Strategic Management plan for Coco Cola...............................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is a term which can be defined as a set of strategic statements that
provides a direction to an organisation in achieving its strategic goals and objectives. In other
words, business strategy is the course of action or action plans which the managements use for
gaining a competitive position in the market (Grant, 2016). The present report is about Coca-Cola
Corporation, an American global company founded in 1886. It manufactures and sells carbonated
soft drinks in the global market. It is headquartered in Atlanta, Georgia, United States. The
corporation is a publicly traded company that is listed on NYSE, DJIA, S&P 100 and S&P 500
component.
The study is going to discuss the impact of macro environmental factors on the company,
an analysis of company's capabilities. A SWOT analysis will be conducted in the project report
for assessing internal strengths and weaknesses of the organisation along with the determination
of available opportunities and threats in the international markets. Market's competitiveness will
be analysed under the report by applying Porter's five forces model which will entail the threat of
various forces of the market. Further, an evaluation will be done of different types of strategic
direction and preparation of a strategic management plan for the company.
TASK 1
PESTLE Analysis
PESTLE analysis is a tool or technique which is used for analysing the impact of macro
environmental (external) factors that have the potential of affecting the business and functioning
of Coca-Cola.
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Illustration 1: PESTLE ANALYSIS
(Source : Strategic analysis: Layers of business environment, 2015)
Political factors : One of the political factor involve the trade regulations and trade &
manufacturing restrictions and the products of the company are continuously under the scan of
Food and Drug Administration (FDA). Since the organisation offers non-alcoholic beverages, it
comes under the regulation of this federal agency of the country. It has to comply all the rules
and standards set by it for conducting its business peacefully. Non adherence of the government
regulations may affect the company's operations adversely and might lead to serious penalties
and ban on its products.
Another political factor is stability of political conditions in the international
markets in which it has its operations. Being a global company, political conditions say for
example, in UK might affect the sales and revenue due to the political events like BREXIT the
country is facing recently. UK after EU would make its own trade laws for domestic and
international firms doing business in the state. If the country formulates more favourable laws for
the internal and global companies for encouraging FDIs, it will benefit the Coca-Cola and if the
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trade regulations came out to be more protective about the domestic manufacturers of soft drinks,
the sales in the UK will adversely be affected (Rahman, 2016).
Economic factors : Economic growth rate in the form of GDP is one economic factor that
impacts the operations of the corporation in the US. In the year 2018, the GDP grew by great
figures which was 4.1 % in the second quarter of the year. This amazing growth helped the nation
in making its annual economic growth to 3%. This growth has positive impact upon the sales and
revenue of Coca-Cola (What America's latest GDP figures reveal, 2018). The purchasing power
of the people in the country increased that in turn risen the demand for beverages and non-
alcoholic products in the country.
However, inflation rates in the global markets have been increasing. The outcome of
which is decrease in the purchasing power of the consumer in most of the countries like Africa
and South Eastern Asian countries. Prices of company's products have to be managed in such
situations as consumers can potentially switch to low cost beverages of another firms. This would
make the corporation in losing its market share in the global market.
Social factors : Social factors such as lifestyles of the people, preferences of customers,
ethinicty etc., affects the functioning of non-alcoholic industry. For example, people nowadays
are changing their lifestyle and are more concerned about their health, nutrition intake, calories
etc. This has created some major challenges for the firms operating in this industry because
beverages involve high diluted sugar which have very high calories and low nutritional factor.
Coco-Cola is making its best attempt for fulfilling the changing demand of the consumers
around the world. It has introduced sugar free and calorie free beverages for the diet conscious
people and so far it has been successful in meeting these requirements of its consumers around
the globe.
Technological factors: Evolving technologies such as outspreading of internet across the
world have majorly impacted the way firms in the industry are advertising, marketing and
conducting promotional campaigns. More access to the customers is facilitated through the
digital media. This is the reason why Coca-Cola have been so aggressively marketing and
promoting its products on websites, social sites such as Facebook, Instagram, Twitter etc. This
has helped the company in boosting their revenues because of the company now has greater
access to the customers in the international market (Gürel and Tat, 2017).
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Another technology factor is the emergence of robotics in the manufacturing, labeling and
packaging of the products. Employment of such robots in the manufacturing area has led to the
increase in the productivity of the company.
Legal factors: Health & Safety laws, employment law, anti-trust beverages laws, data
protection acts, food and safety laws, copyright and patent laws etc., of the host country and
different international countries affects the operations of the beverage industry. Non compliance
of these laws would result into severe fines and penalties for the organization (Aithal, 2016).
Environmental factors : Organizations are required to undertake their business activities
in the most social and environmentally responsible manner. Various international laws have been
formulated for reducing the carbon footprints on the nature. For example, the company has
recently used Ardagh glass which is Eco-friendly replacement of Coca-Cola couture bottle and it
has made the bottles lightweight for which the company has also won many awards for being
environmentally responsible. Non-adherence of the environmental laws and being mean to
environment can lead to non-acceptance by the society.
Stakeholder mapping- This is effective method that aids to design a program. It is inclusive of
individuals, community, groups and other individuals. It is defined in following manner as-
Influence High & Medium Low and not known
High /medium The government and suppliers
are the stakeholder that are
very important. They play
effective role in terms to meet
effective working and support
to the activities.
Thus, they also source of
significant risk and must be
careful in order to monitoring
the management.
Low and not known The needs and desire of
customers. This must be union
and should be full-filled
timely.
It contains the stakeholder that
has little influence and power
and high interest in project.
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SWOT Analysis
SWOT analysis can be referred as a technique of assessing and evaluating company's
internal strengths and weaknesses. The opportunities and threat could also be assessed by taking
the findings macro environmental scanning. Below is the swot analysis of the Coca Cola
corporation :
Strengths Strong brand identity : The company has solid brand recognition in the global market and
enjoys wide base of customers around the world. History & Experience : Coca- Cola has been in the beverage business for 132 years. The
organization has tremendous experience in the industry and is well known with every bit
of the beverage industry in the world. Surviving for so long in the market has earned it
good reputation and loyal fan base. Market valuation : Corporation has a valuation of approx.. $80 billion. Sales and profits
have been consistent for the company over the years which has made it a great market
valued company in the world. Innovative marketing strategy: The company is known for its innovative marketing
strategy. For example, in the countries like India, the company has taken the essence of
country's culture and blended it with advertisements ideas. It has emotions and family
values while promoting and launching ad in India. Another instance, is when its launched
a promotional campaign where it started printing customer’s names on the bottle.
Through this tactic, company saw increase in its sales at the international level (Kibriya,
2018). Wide range of brands : It has about 500 brands under its belts. Well received subsidiary
brands of the corporation are Limca, Mazama, Fanta, Kinley etc.
 CSR activities : The company has focused on packaging and labeling in the most
effective manner by emphasizing on reusing and recycling.
Weaknesses
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 Lack of diversification: The organization has not yet branched itself away from beverage
industry. It is lagging behind its biggest competitor as Pepsi has already started venturing
into other businesses.
 Lack of strong portfolio of healthy and diet beverage: The corporation has not a
powerful portfolio of nutritious product line which is its weakness.
Opportunities Marketing of lesser popular brands : It is an opportunity for Coca Cola through which it
can make portfolio more appealing. Diversification : With strong brand recognition and consistent profits, the organization
has the opportunity and capability of venturing into other industry. This will it in
diversifying its business risk (Thursby and Berbari, 2016).
 Healthy and nutritious drinks : The organization have an opportunity of manufacturing
and selling protein drinks and healthy beverages for attracting and retaining the health
conscious people.
Threats Accused of pesticides in drinks: Coca Cola has been suspected of having pesticides in its
beverages. This has detrimented its brand image. Cut throat competition : It is facing severe competition from Pepsi, Red Bull, Nestle.
These companies are providing the soft drinks and energy drinks at the most reasonable
prices in the global market.
 Inflation : This factor is a major threat to Coca Cola as it leads to rise in the prices of
goods and services in inflation period results into rise in the cost of production which is a
challenge for the company.
Capabilities analysis
VRIO model could be used to analyze the capabilities of the Coca Cola that whether those
capabilities and resources provides a competitive advantage to it over its competitors in the
marketplace. VRIO model stands for the following components:
Capabilities : Marketing, Human resources, Differentiation and secret formula
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Value : Whether the capabilities add to the value for the customers?
The company has always won hearts of customers through its advertisement and
promotional campaigns. It has also managed long associations in the field of sports. Organization
possess extremely talented and skilled workforce that helps in delivering satisfactory products
and services to customers. Coca Cola focuses on making its products highly unique from its
competitors in its terms of its bottle's design, labeling, taste etc. The secret formula of Coca cola
drink has been patented for years. Thus, all these things add to the value of customers (Wheelen
and et.al., 2017).
Rare : Whether the resources are rare to control?
Having and managing talented workforce is rare. Secret formula is patented which makes
it very convenient to control the recipe of beverage. Formulating and executive effective
marketing strategies is one of the rare quality in firms in the market. Differentiation can be made
only through huge investment in R&D and not all the firms have such regular capital and funds
for investing in this department (Knott, 2015).
Inimitable : Whether the capabilities can be imitated by others?
Recipe of cola drinks are patented which has ruled out every possibility of imitating this
resource. Marketing strategies can be imitated by these have different effective level for different
types and size of organizations. Retaining and managing human capital is one of the toughest job
in corporate sector and not every entity has resources of imitating it. Innovation and
differentiation requires funds and skills. Such skills are copyright which make its inimitable
(Rugman and Verbeke, 2017).
Organized : Whether Coca Cola is organized enough to reap benefits of such capabilities?
The global giant is very well organized and is divided into departments and divisions for
effective functioning. Like it has marketing, IT, HR, Finance, Customer support departments. For
operating globally, it has formed divisions which has its own departments such as Coca Cola
India company. It has blended together the powers of decentralized and centralized
organizational structure to capture the benefits of these capabilities.
VRIO Analysis
Resource/ Value Rarity Inimitable Organised
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Capabilities
Marketing
strategies
Yes Yes No Yes
Differentiation Yes Yes Yes Yes
Human capital Yes Yes Yes Yes
Secret formula Yes Yes Yes Yes
From the above analysis, it can be interpreted that Coca Cola has a competitive
advantage because of its valuable, rare, inimitable and organized capabilities and resources.
Value chain analysis model-
This term is consist of number of activities that supported by namely primary activities
and support activities. Thus, they have immediate impact on production, maintenance, sales and
support of products etc.
Inbound logistic- It is process that is inclusive of receiving, storing, and internal distribution of
raw material and number of ingredient that aids carry out process effectively. Under this,
relationship of supplier is very crucial.
Production- operational system are guiding principle that aids to conduct the creation of value.
This department works as to produce good and services.
Outbound logistic- It aids to delivering product and services to customers. It is inclusive of
storage, distribution and transport.
Marketing and sales- This department of coca-cola is responsible in order to manage the and
generate better customers relations.
Thus, the number of support activities are as-
Human resource management- this department is responsible to carry out all activities in
smooth manner. They must hire the suitable candidates so that better things can be conducted.
Technological development- by the use of technical innovation and improvement the entity can
produce and develop the good in effective and efficient manner.
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Competitiveness of Market through Porter's Five Forces
Competition prevailing in the market affects the business strategies decisions of Coca
Cola very significantly. Porter's five forces analyses the impact different market forces on
company's business. Bargaining power of buyers : Individual buyers does not affect the company in any way.
So, the force is weak. However, large retailers like Walmart, Tesco etc., affects the
business of Coca Cola as these retailers buys cola products in large quantities. Change in
the prices of the products could lead to buyers switching from Coca Cola to other firms.
Thus, the force of large retailers is high. Brand loyalty has however reduced this force.
Company has a huge loyal fan base throughout the world (Kane and et.al., 2018). Threat of substitute : The force of this market factor is moderate to higher. There are
substitutes which are capable of satisfying customers changing preferences such as real
juices, energy drinks, homemade soda etc. Also, the taste is not completely unique from
the products of Pepsi. The corporation have to consider this threats as these can
potentially bring down the sales of the company. Threat of new firms: The entry barriers are not really difficult for the companies wanting
to enter into beverage industry. Many firms are entering in the market that are offering the
similar products at lesser prices than Coke. Although the company is well established and
is in the market for century long period, still it has taken preventive steps against new
entrants. This is because whenever a new firm enters, it comes up something new and
fresh and its fundamental phenomenon that customers are attracted to new things. Thus,
the force is moderate. Bargaining power of suppliers: The suppliers of the ingredients used in soft drinks are
water, sugar, caffeine and phosphoric acid. There is as such no differentiation in relation
to ingredients except for price. Thus, the force is weak. Coca Cola being a such a large
manufacturer of soft drinks and beverages, it is one of the largest customer of the
ingredient and every supplier would want to supply its materials to giant beverage
producer (Chhabra and Kiran, 2015).
 Competition: Intensity of the rivalry is in the market is very high. Its major rival is Pepsi,
Nestle, Dr. Pepper are giving its stiff competition to Coco Cola. For coping up with such
competition, the company would have to make its product more unique, by bringing its
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prices down, improving the quality, producing more healthy and nutritious drinks for
meeting the expectations of the consumers.
CONCLUSION
Hereby, it can be concluded that porter five forces aids to take one most effective
business strategical decision. This model affects the working of the enterprise in both term
internal as well external. Under this, competitors, bargainers, suppliers are greater source that
aids to conduct and impact the working of enterprise.
TASK 2
Evaluation of various types of strategic directions
Ansoff matrix guides the company in deciding the most effective expansion and growth
strategy. It lays down four market growth strategies which could be used by Coca Cola based
upon the above analysis of internal and external business environment of the company.
Illustration 2: Ansoff matrix
(Source : Understanding Ansoff matrix, 2019)
Market penetration : This strategy is about selling the existing product in the existing
market. Coco Cola could use this strategy by boosting its sales since it enjoys tremendous brand
recognition throughout the world.
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