Market Environment Analysis

Questions: 1. Task A - Market Environment Analysis: By identifying the respective analytical tools outline the micro and macro environmental conditions that Coca-Cola operates in. Also, highlight the critical success factors. 2. Task B Resource and Capability Analysis: Outline the threshold and unique resources, core capabilities and core competencies for Coca-Cola. Answer: Introduction: Coca-Cola Company happens to be one of the major soft drink giants across the globe and have its operations in more than 200 countries in the world. As many as 500 different non alcoholic beverages are being manufactured by it and happen to be the most valuable brand recognised globally due to its serving of about 1.6 billion a day (Hankingson Cowking, 1997). It happens to be the lead player in the world as far as functional drinks are to be considered coupled with those drinks which are specific for Asian countries. Company profile and historical perspective: Its headquarters are located in Georgia. In the year 1919, Coca-Cola was incorporated as a beverage company. They have both sparkling and still beverages including water and juices to offer amongst their wide variety of products. The different products are made available to their customers through the wide and diversified network of different partners like wholesalers, retailers as well as distributers and partners respectively. A number of other allied products known as syrups, beverage bases are along being manufactured by them side by side with still and sparkling beverages (Rothaermel, 2013). This paper basically tries to analyse the strategic fit in the UK market, by evaluating the existing resources and optimise strategies as per the required recommendations. The aim is to identify and analyse the specific strategies taken up by Coca-Cola as a company so that it enjoys competitive advantage over its immediate rivals (Murthy, 1990). The focus shall be on the identification of different key factors as well as various emerging trends which show cases the selectivity of this brand over others in the soft drink industry. The internal strategic fit analysis has been done in terms of the various core concepts and capabilities which have been identified and an in-depth internal analysis of the strengths and weaknesses have been done respectively. Analysis of Market Environment: The analysis of the market environment at Coca-Cola can be successfully conducted in terms of three different attributes which include analysis of the macro and micro environments, as well as the different critical success factors or the CSF which are important for devising the overall idea about market scenario. The Macro Environment: The macro environment basically encompasses all the external factors which are important for analysis and mainly can be done through PESTLE analysis and includes those factors which are external and non controllable by the firm. PESTLE analysis: The PESTLE analysis happens to be a reliable method to qualitatively assess and strategise the company environment in terms of the existing scenario. PESTLE stands for analysis in the spectrum of political, economical, sociological, technological, legislative as well as environmental attributes. This analysis is quite similar to that of Porters five force analysis but happens to be advantageous in being comprehensive in nature (McCartney, 2014). Political Scenario: Political environment has an important role to play and the different guidelines issued by the government in UK needs to be strictly followed by the company, the failure of which shall attract penalty of different types based on severity. The entry of different brands and their competitive pricing in the political circuit can directly have an effect on it. Economic Scenario: The economic scenario of Coca-Cola as a company, have shown that the sales are significant even when there are times of recession and the fluctuation of the market economy. Sociological Scenario: As a result of changes in the life style of people, the sale of colas have though gone down little, yet the demands for non alcoholic beverages including juice, water and coffee have always remained significant. Technological Scenario: The various technological knowhow and newer and updated software like sap is being used to widen and enhance their sales as per the requirement (McCartney, 2014) Legal Analysis: The legislative analysis pertains to providing the constructive legal framework so that they may follow all the rules and regulations. The entire range of product innovations goes through the process of patenting. Environmental Analysis: In order to maintain and judiciously use natural resources, Coca-Cola has devised innovative strategies like making pet bottles which are made up of eco friendly recyclable product. During the manufacturing of soft drinks, a smart energy management system which is highly innovative has been introduced. This ensures that there is at least carbon foot print lessening to some extent (Coomb., 2014). Micro Environment Analysis: The micro environment of Coca-Cola basically refers to the internal environment of the company which involves the different frame works and policies. In order to explain the same Porters five force model is used. Coca-Cola as a company has been analysed in terms of their micro environment through porters five point model respectively (Murphy., 1990). (Source: Management centre, UK) The threat of entry of new competitors In order to combat the threat and gain competitive advantage over the new entrants, a number of strategies are being used by soft drink giant Coca-Cola to keep its competitors at bay. Different Advertisements and marketing gimmicks Coca-Cola spends a whopping $2.58 billion only towards the various advertisements and marketing thereby gaining an increase of 8.3% market share respectively. It is nearly impossible for any potentially new entrant to meet this level of competition and marketing strategy thus limiting the chances of visibility and expansion for them. Brand Image and Loyalty of the customers Pepsi and Coca-Cola as a company has gone a long way in investing millions of dollars on building up the brand image and maintains a steady existence in the market. Thus, the loyalty of the customers is reflected due to customer satisfaction and the new product launched shall have to go a long way in order to go for branding or attracting customers (McCartney., 2014). Distribution in terms of retail sector: As the margin money is quite high, a lot of it goes towards the different retailers who sell the product and varies between 10-30 % respectively. A reasonable amount of money is thus present to entertain seasoned retailers as nobody really want to provide back up to am new comer. Threat from Substitutes: Here basically, the substituted products which are available at a best price are analysed. The different non alcoholic beverages of both still and sparkling genre as prepared by Coca-Cola are analysed against their new entrants which also supply similar products to the market at a cheaper rate (McCartney, 2014). Bargaining power of the different buyers: There are numerous factors which have a direct relationship on the bargaining power of the different buyers and also entail various partnership levels as the buyers mostly happen to be the fast food fountains, convenience stores, restaurants, vending machines, college canteens etc. The ratio of revenue generation and profitability and revenue clearly showcases that the bargaining power of buyers are different for different entities. Suppliers and their bargaining power Most of the raw materials which are increasingly required by Coca-Cola happen to be the basic raw material which are easily available and include color, caffeine, flavour, sugar etc. As these products are quite easily available, the suppliers have little or no bargaining product in soft drink industry. Existing competition or rivalry amongst different presently available players Competition does exist between the seasoned players in the soft drink market but Coca-Cola tries to gain competitive advantage through huge investments in brand building and advertisements in both print and electronic media(Sharma ., 2013). Various critical success factors There are a number of critical success factors which are integral for the successful establishment of world leader in soft drink industry. They include: Operational strategy wherein Coca-Cola has dominated the current market share by reducing costs through the establishment of a centralised system for production. Department of sales and marketing ensures that customer and brand loyalty returns are important so as to ensure a continuous profitability ratio for themselves. Various channels of distribution ensure smooth deliver of the product at the right time to their customers by the various bottling companies along with automated distribution channel holds to be most successful (McCartney ., 2014). Analysis of resources and capabilities: The analysis done in 2009-2012 has shown a trend towards the upward direction as far as the annual revenue is concerned. The statistics have shown that consumption of Coca-Cola in UK happened to be 26.7 billion bottles. This exceeded the previous year figure by 1 billion there leading a significant increase in the revenue. This trend towards the upliftment was significant to a large extent (McCartney., 2014). The various resources of Coca-Cola can be classified in terms of tangible, intangible as well as human resources respectively. It is thus important to analyse these three aspects of resources respectively Tangible resources: They mostly include the physical and financial resources and describe the profit margins obtained by Coca-Cola in these years. There is a strong base of sustainable resources in terms of finances when it comes to describing Coca-Cola. Very strong resources are being used by them in order to undergo for major investments in the countries of Vietnam, India, China, etc. The money which has been invested ensures that a strong connect is made, the brand is built over a time with the requisite facilities to carry out the everyday processes (Metzger., 2014). The intangible resources: The various resources which are based on technology and the overall reputation make it a vital factory where investment is possible to a great extent. The network of Coca-Cola has been successfully expanded by the presence of hybrid engine truck. The fuel is saved to a large extent along with the harmful gas which are released from the exhaust pipe are also less considerably. One of the successful researches of Coca-Cola happen to be the plant bottle which is also known as green bottle respectively. They have been found to be very environment friendly with high rates of decomposition as well as capacities to recycle itself. Coca-Cola has been in the market for about 127 years now and happens to be amongst the top three valuable soft drink brands of the world (Anders., 2011). Human Resource: The engagement of employees happen to be one of the most important and vital jobs at Coca-Cola. The success of this company is largely dependent upon the motivation levels with which the different employees at various levels work together in unison. Thus, periodically a small set of tests are being organised by Coca-Cola so as to understand and analyse the satisfaction and engagement level of all its employees with the work front scenario. Also, the aim is to build a work place which is composite and comprehensive with all modern amenities like gym, free coke, and fruits, flexible work timing etc thereby helping it to become of the ideal offices (Doole Loowe ., 2011). Periodic training and development activities are also in the agenda to keep and maintain the focus of the employees. The staff is paid a salary which is high in standard compared to others in the industry thereby creating and interest to learn and train themselves. The staff at Coca-Cola exceeds 1.5 lakhs and these employees are not only restricted to the UK office but belong to multi ethnic and cultural groups across the world with different conditions pertaining to the socio economic strata of the society. Thus, the international standard training courses help all the employees to prepare themselves as per the global requisite parameters (Sharma., 2013). The overall branding at Coca-Cola gives rise to development of competitive prices The direct peers are no way near the investment cycle of Coca-Cola when it comes to branding. The financial capability is very strong in the case of Coca-Cola along with the presence of a talented multicultural, multiethnic team of employees who have their knowledge bases updated through various periodic trainings and workshops (Murphy., 1990). However, it is important to ensure that Coca-Cola as a company should not really stop its development after obtaining victory and continuous innovative measures are required to maintain the core product quality as well as investment in research for the development and improvisation of the new and existing products respectively. Analysis of Strategic Fit: Coca-Cola happens to be the topmost shareholder when it comes to defining the soft drink industry across the world and macro and micro environment as well as the critical success factors have been discussed and dealt in details. There are quite a number of new entrants to this industry which could be potential threats for the company and eventually may attack the weaknesses. Hence, it is advisable at this point to undergo a SWOT analysis for better understanding of the present scenario (McCartney, 2014). Strengths: Value based best brand in the global market: As per the statistics of inter band, the Coca-Cola company has been found to be the best brand which has been so highly valued. Maximal market share in terms of soft drink industry: About 40% of the market share is being undertaken by Coca-Cola Very strong team for marketing as well as advertising related events: There has been as much as $3 billion spent on advertising and marketing leading to brand recognition. Distribution channel happens to be the most extensive: The operations of Coca-Cola happens to be spun at more than 200 countries across the world and they serve as many as 1.7 billion servings a day. Loyalty of Customers: It has a very loyal customer clientele. Suppliers and bargaining power over them : Coca-Cola happens to be the giant in soft drink production and thus there is a significant amount of power as far as the prices of raw materials are concerned. CSR related activities: The different programs of social responsibility are a focus of Coco cols which include packaging and recycling, conservation, green energy, climate change, and a host of other factors which boost the image of the company (Pendergrast., 2013). Weakness: Maximal focus on the carbonated drinks: The maximum focus is to sell the carbonated drinks under this banner. The underlying strategy might work in the short term but in the long term, people might abstain from it due to chances of obesity. Unified form of portfolio for its products: If we compare the other competitors, the ole concentration of Coca-Cola to serve different flavours of carbonated drinks only and in the long run they will find loads of issues to maintain sustainability as their only revenue source is coke. Acquisitions and debts: Debt of high value as many as $8 million during acquisition (Coombs., 2014). Negative form of publicity: There are cases of high water consumption in places where the water itself is low along with the use of harmful chemicals as taste enhancers. Opportunities: Increased consumption of packaged water: There is an overall increase in the consumption of water within the country. Demand for food and drink which are healthy: there is an opportunity for Coca-Cola to do in depth research and modify their product lines to carb down on the intake of food materials with loads of fats thereby preventing obesity. Increased consumption of beverages: Emerging markets in the BRIC countries have increasing share of beverages for them thereby enhancing its own market share. Acquisitions based growth: It is quite difficult for Coca-Cola as a company to maintain the present statistics for growth and penetration of new market, but this is possible through acquisition. Threats Customer preferences alteration: As a result of being health conscious, the average preference of people have strict requirements. But Coca-Cola happens to serve carbonated drink which could be a great hit. Scarcity of water: The scarcity of water across the world has enhanced the cost as well as given the way to criticism (Karnani., 2014). Dollar value: Maximum income of Coca-Cola is from outside US. The overall income might fall down in the absence of synchronisation of the corresponding currency with dollar. Competition: Rivals and peers like PepsiCo is immensely competing with Coca-Cola for BRIC countries share. Conclusion: Coca-Cola has been able to maintain its gigantic position in the world map. However, it is important for it re-design and reinvent the different strategies through which it can gain competitive advantage in the changing dynamics of the market. Though, carbonated drinks have been found to be the main profit margin for Coca-Cola, but it is also imperative to look for alternate products and their branding equally so that in the absence of a proper product for earning, there are others which can mitigate the risks. As a result that a whole lot of money is being spent for branding and image building, it is necessary to always look for cheap alterations which will eventually reduce the cost without really affecting the course of events. Research and development is absolutely required to maintain and sustain its number 1 position in the world. References Anders, J. (2011). Coca-Colas Marketing Strategy: An Analysis of Price, Product and Communication. Coombs, W. T. (2014).Ongoing crisis communication: Planning, managing, and responding. Sage Publications. Doole, I., Lowe, R. (2012).International marketing strategy. Cengage Learning. Hankinson, G., Cowking, P. (1997). 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