The Business Analysis of Coca-cola Company and Its Challenges

Introduction

PepsiCo, in collaboration with San Diego-based biotech firm Senomyx, is in the late stages of developing a "taste modifier" that would essentially fool taste buds into thinking they are getting more sugar than delivered. The ingredient, which is called "S617" and still requires regulatory approval, would theoretically allow for PepsiCo to lower the amount of sugar and high-fructose corn syrup in full-calorie beverages such as regular Pepsi while keeping the same sweet cola taste.

Coca-Cola, meanwhile, continues to experiment with steviol glycosides, which are the sweet, calorie-free extracts from South American stevia plants. The first cola version, called Coca-Cola Life, was launched in Argentina in the summer. In the U.S., the company is examining results from a recent test market of stevia-infused line extensions Sprite Select and Fanta Select.

Mid-calorie sodas New formulations could potentially serve as the basis for future advertising efforts for both companies while providing shelter from health critics and politicians who blame soda for the nation's obesity epidemic. The negative attention has hurt sales: Soda consumption continues to fall

To elaborate on the demographic, cultural, political, social, environmental, technological, economic and legal environment where business function. It also explains the relationship among business, environment, and society as well as how to adopt the changing environment in the organization. This analysis states the changes and challenges in Coca-Cola Company in the last five years and how the company deals with them.

Environment means the influences, circumstances, constraints, and opportunities that surround and affect the business organization. There are two kinds of environment microenvironmental factor and macro-environmental factor. Internal factors close to the organization called macro environment. It can be controlled by the organization. Microenvironmental factor affects the company decision-making process and performance. These factors include consumers, suppliers, and competitors.

The external factors which affect organization plans and strategies called macro environment. It is uncontrolled by the business organization. Which includes Political, economic, technological, social, environmental and legal factors. These factors are outside of the control of the business. New laws, demography changes, tax changes government policy changes are the example of macro change. The successful management must be capable of adapting to the environment.

Moreover, it is important for a business organization to analysis business environment and changes in different factors of the environment such as a change in the technological environment, economic environment. In decision making process, organization analysis various alternatives and choose the best one. It gives information to decision makers. It helps an organization to develop strategies and policies, understanding about changing environment help to diversify the business in the new area and keep company dynamic.

In addition, changing in business environment impact on the organization by making effective use of PESTEL business organization can take advantages of changing the environment and make strategic plans for threats. PESTEL analysis is the most popular method which focuses on external factors of business where it operates. It is beneficial tools to understand the growth and decline of the market, direction for the operations, opportunities and business position.

SWOT analysis is a tool that recognizes the strengths, weakness, opportunities, and threats of a business organization. This analysis answers the two questions, where is an organization at present? And In what direction the organization is going? To identify of SWOT analysis is important for the business organization because succeeding in the planning process for achieving the company goal.

Business Environment

Over the past years, Coca-Cola Company has faced lots of changes in the business environment. Company create counterpart with American sweet test product, however, it was a commercial failure and coca cola change its strategy and return back to its old formula. Consumers become more health conscious then company lunch new product to address consumer needs, such as diet coke and coca cola zero. The company bought the bottling business in South Korea which allow to access in a retail store as well as makes easy to enter in Japan, Malaysia, and China.

Moreover, China is now the largest coke consumer in the world. In 2007 the coca cola output of coke in China was 3.6bn tons and it was export 15.3 m tons. By the end of 2007 coke, total production in China was 360 million tons. In addition, from 2008 to 2009 company introduced new plant which capacity was 20 million tons. The target of China coke industry is the export large quantity of production countries such as India, Brazil, Belgium and Japan. In 2007, China export to Japan 22% of its total production. This report shows development and positive change in the environment of the coke industry in China. (China daily, newspaper website)

Political factors:

Coca-cola, the nonalcoholic beverages falls in the category under the FDA (food and drugs administration) and the government has the power to set fine for the coca cola company that didn't t meet their standard law requirement. The charges in laws and regulations, such as taxation requirements, environmental laws, and foreign jurisdictions can affect to their entry into a foreign land. The changes in nonalcoholic beverage Business Company might get pricing pressures, competitive product and their ability to maintain the share in the global market.

In the international market if government change frequently there might be a restriction to transfer funds from one country to another. However, the Coca-Cola Company is following the rules and regulation set by the government. Since last two years government is so conscious about the environment. Company adjustments in planets and proper way of wastage settlement the chance of affected by the protection laws are decline. Political conditions are overall left natural effects on coca cola industry. It impacts well on the cock reputation.

Economical factors:

The economic analysis explores national and world economy impacts as well as inflation and recession. Economic factors are those factors that affect the production and sales of the company. If the economic condition is not good at that time coke to decide to increase its price it would impact very negative in the production of Coke. The non-alcoholic beverage industry has high sales outside the USA. There has been an improvement in soft drink Company in major international markets like Brazil, Germany, and Japan. These markets play a great role in the growth of the nonalcoholic industry.

The country like Pakistan where is the unemployment rate is very much high. In Pakistan coca cola company employs1800 people. During the last two years, the company in Pakistan has involved $130 million. If economic variables are positive of the country it impacts well otherwise the impact is bad.

Social factors:

Many people are spending a healthier lifestyle. Change in lifestyle, population growth rate and carrier attitudes affect nonalcoholic industry so that many people like to have bottle water and colas instead of beer. The need for healthy products, bottled water, and juice is more important in the daily life.

Consumers from the age of 37 to 55 are more concerned with nutrition. Older age people are becoming more concerned with increasing their long life. This kind of social trend can affect on demand of the nonalcoholic beverage industry. Increase in awareness among consumer and modern lifestyle might be a challenge to the coca cola company. However, the company recognized the consumer needs and began to produce diet coke, like beverage, juice and sports drinks. Many nutritionists advise that maximum consumption of coca cola might be harmful to health especially to young children. Drinking of coca cola daily can affect health after a few years.

Technology factors:

The technology of television and internet which affects companies advertising, marketing, and promotional programs. Media advertise product attractively as it helps to increase sales of the product. Introduction of plastic bottles and can have increased the sales of coca cola. It is easy to use and bin them. The advancement in technology led to company create a new product like cherry cock in 1985 but consumer prefers an original test of coca cola so that some time technology can affect badly.

Coca-Cola Company introduces new technology all the time because of the introduction of new machine company production level increase tremendously. Ardagh glass is the latest technological achievement by Coke Company which is an environmentally friendly bottle. It has won several awards for its lightweight.

Environmental factors:

Coca-cola focused on energy management, water stewardship, and climate protection. The company made progress in these areas but the company has a lot of things to do. In 2007, the company used approximately 300 billion liters of water to produce beverage coke is among the world largest purchasers of fructose corn syrup, sugar, coffee, citrus. It has the largest consumers of cans and bottles. At the same time company announced to return to communities and nature. An amount of water equal how much company used to produce their beverage. Now the company has three objective

1. Recycle the water so it can be returned safely to the environment.
2. Reduce the water consumption level in the manufacturing process.
3. Refill the water in communities through a global network of local partnership.

While the coca cola comes up with advanced recycling programs company decides through education they can prevent Littre. Company support keeps Australia beautiful in Australia, keep America beautiful in the USA and tidy Britain group in Britain. Weather and changes in temperature can affect many industries such as coke. The company also invested in fashionable outfits which are made by recycling polyethylene terephthalate bottles.

Legal factors:

Laws, political changes affect firm behavior. An increase in the minimum wages of labor and more requirements for firms can influence organization productivity. Sometimes a change in laws also creates new opportunities for the company. There is some legal issue that Coca-Cola Company had faced in recent years. In 1970 coca cola company refuse to share its formula to India, therefore, company stop to produce locally for 16 years.

EU member countries ban the coca cola due to the poisoning of 100 children in Belgium and cause seems to be wrong carbon dioxide which was used in coca cola. In 2003, a nongovernment organization in India said coca cola contained toxins with lindane, and malathion that may cause breakdown of immune system and cancer. In India (Kerala), the production of coke along with other soft drinks was banned.

Changes and Challenges

The nonalcoholic industry is competitive. The company should carefully consider below factors which affect the financial condition and its future result.

Awareness may reduce demand for coke:

Government officials and consumers are more concerned and aware about health. Many press reports indicate that lawyers and consumer advocates have threatened by the company. Furthermore, misleading exercise related to contract to sell soft drink in school. Consumers are more aware of these issues and negative publicity in media may reduce the sales of carbonated beverage.

Increase in competition:

The non-alcoholic beverage industry is highly competitive. Coke have to compete with international companies as we as local companies where it functions. In many countries where coke operates including the USA, Pepsi is a primary competitor in the market. Coke capability to maintain the sales of share or net profit in the global market or various local markets may be limited because of competitors.

Water scarcity and poor quality:

Water is the main ingredient for Coca-Cola Company. Many parts of the world it is also limited resources. Company consumes the huge amount of water per year. The demand for water increase around the world and the quality of available water decline this will increase the production cost of the company and effect on profit.

Change in the nonalcoholic beverages business environment:

The business of nonalcoholic beverage has been changing because of Consumers lifestyle, emerging views of health and nutrition, changing consumer needs and preferences, increase in similar products and price factor. Furthermore, the beverage industry is being affected by the intermediates, especially in the USA and European countries. If Coca-Cola Company is not able to change along with changing business environment it will effect on company profit and sales of share.

Increasing the cost of energy:

Coca-cola Company bottling partners operate a huge number of trucks and other vehicles, as well as they, use a large quantity of electricity, gas, and other energy sources to function the bottling company. Day by day price of fuel is increasing it will increase in the production cost of coca cola company. So it will affect the company profit.

Weather condition:

Weather influence the sales of the coca cola where company function. In summer more people prefer cold drinks such as juice and sprite, however, in winter the demand of product decrease. Some part of the world where most of the month temperature is always high in those places consumption of coca cola is maximum.

Change is important, long-lasting and disruptive

Changes in company create some opportunities as well as challenges in new areas of business. Such as lunch fresh product in the market, the company might encounter with the economic crisis and to change the direction of the organization.

Change in plans strategies and operations are important for the company. Furthermore, sharing these changes with managers, supervisors and all level employees make able to them adjust properly to face the changing environment. Moreover, change is an essential phase in the business world mainly in technology. Use of technologies in Coca-Cola Company reduces the operation cost and increase the profit of the company. There are so many situations the company need to change such as advancement in technology that is being used by other similar companies to compete with the company should adopt the technology.

In 2007 coca cola modify their product due to people are more concern about health and fitness. Many people are investing more money in their health in order to cope with that trend coke lunch their new product named Enviga, which is calories burning drink. In addition, Coca-Cola Company ties up with Nestle. Both companies are dealing with innovation and change. In the same year, company change in organizational structure to fulfill the demand and need of the consumers through assimilating with North American can, bottle and juice company.

The Coca-Cola Company keep on refresh everybody it touches. The product of the company has multiple to approach of cultural gratitude and understand, this is a main key factor that the company introduces its product worldwide. Company entry and development in the international market will be faster. Coke commitment to remain at the changing environment proved that they are the superior among other nonalcoholic product. Awareness of environmental issues and health care might impact the sales of the company, however; creative idea and strategy help to grow the business. Coke has developed the entire vital component to expand their business in long-term.

Reward system is an effective technique for the motive employee in changing the environment of the organization. Coca-Cola Company should apply reward system to its employees so that it will increase in production and sales. Reward system can be financial or nonfinancial nevertheless, the company have to give fair importance to all level employees.

Reward system of coke must be functional to make employees devoted to organizational goals. In addition, Training and development programme must be used to groom the career of their employees at the top to bottom level. Coca-Cola Company has to declare some amount of money for training and development purpose. Monthly training session raises the productivity of the organization.

Relationship with the consumer is vital for Coke Company in some country where Business is controlled by the authorities, in those countries, there is a lack of consumer relationship which needs to improve. Coke needs to market segmentation in a new country where the company is planning to introduce the product because consumer need, test is different from another country. By doing market segmentation company can serve effectively to its consumers.

Demographic factor should be considered by the Coca-Cola Company. Culture, tradition, and characteristics of the consumer in a new country might be different; it gives information to the company to change certain plans. There are some factors such as climate, test, and culture Affect Company directly or indirectly to the individual company needs to apply they're own strategic and management style to increase the sales of coca cola. Dividing a market into direct groups of buyers who might require separate marketing mixes; the process of classifying consumers into groups with different needs, characteristics and behavior.