CRITICAL PESTEL AND SWOT ANALYSIS
By Name
Course
Tutor’s Name
Institution
Date
|
Question One: PESTEL Analysis
Most businesses adopt various strategies to enter into the new markets due to competition from rivals. A strategy is a plan, which firms make to achieve their goals and solve problems. Therefore, they embrace the PESTEL framework to enter new markets. For example, Coca Cola has adopted a PESTEL framework to enter new markets and retain existing customers globally. However, the firm experiences some challenges in the implementation of the planned strategies, although it works hard to achieve the set objectives of entering into the new markets. The approach has enabled the firm to enter into more than 200 countries and sell more than 500 non-alcoholic beverages. The company’s annual report of 2019, indicated that its 2 billion products were consumed globally. The firm established extensive global distribution and networking strategy, which has supported its sales. The firm has used marketing strategies and differentiated itself from other rivals such as Pepsi. Consequently, the firm has faced challenges on political issues, social-economic, legal, technological and environmental factors in their struggle to ether into new markets.
Coca Cola obeys government policies to operate without restrictions due to the usage of caffeine and sugar in production that has received criticism. The lawmakers have become strict about the health issues of their representatives; therefore, the firm changed its production processes to alter chemical components in their drinks to avoid government lawsuits and sanctions. Besides, the firm pays taxes on time in areas of operation to prevent government threats in such areas. Therefore, the company can operate and enter new markets since it produces health products and obeys government regulation. Additionally, the firm embraces the strategy of reintroducing safer products to change the mentality of Gen-X and millennial consumers (Ackoff, 2019, p. 192). The firm has opened some departments, which are concerned in the production of energy drinks instead of the carbonated beverages due to health concerns. The carbonated drinks are associated with the cause of obesity, high blood pressure and blood sugar. Coca Cola adopts such measures to bring light to the consumers and the general population that it cares for all consumers. The firm has reintroduced a Coke Zero brand other products with low calories. These products are healthy, and the general population has accepted consuming them at a higher rate than the carbonated and sugary drinks. However, looking at the perception of people about carbonated drinks globally, Coca Cola has faced challenges due to a decrease in sales globally. Also, most of the third world countries have considered Coca Cola has destructive to the environment due to waste disposal of bottles and livelihood (Vergassola, 2019). Others, such as Middle-east are reluctant to introduce the new brands in the market because they considered them to be American brands rather than Arab products. However, Coca Cola embraces better marketing strategies to expand their sales into most global markets.
Additionally, the firm has faced challenges of high budgets of water in production since most of its products are beverages and requires water. It has allocated more budgets to the water to avoid shortages, which may affect production processes. Also, it has faced challenges in the rising cost of other ingredients used for production (Ling, 2017). Coca-Cola responds to such economic issues by shifting its production plants to areas where raw materials are lower to reduce the cost of the product. On the other hand, Coca Cola has based its advertising process on social media. It has received most followers on the various social media platforms, and therefore, has campaigned for the product. Currently, the firm has more than 110 million Facebook followers and 4 million followers on Twitter and higher numbers in others. So, the firm uses these platforms to reach the target of new markets. Also, Coca Cola has embraced significant data operations and AI analytics to decide market trends and support processes of management. Besides, it uses the latest technologies to increase production and marketing processes. The firm uses technology in water harvesting to lower the budget of water caused by high demand due to water shortages in the world. Such economic and technological strategies enable the firm to reduce the cost of production, produce more and enter new markets.
Consequently, Coca has faced a backlash from environmental organizations because it is the largest consumer of global freshwater. Some countries such as India have held Coca Cola accountable for the shortage of water in their ground tunnels in most regions. The country threatens to bun Coca Cola from operating due to the cause of water shortages. The firm took immediate action to begin water management operations to avoid sanctions and be banned from operating in Asian countries. It started the usage of some smart water management methods such as CARE, and RAIN to harvest and conserve maximum water to avoid shortages (Vergassola, 2019). Also, some host countries have complained about carbon emissions from Coca Cola. The firm adopted advanced technology to reduce carbon emissions. Besides, it sought assistance from global management organizations to devise other methods of conserving the environment. Such measures have been beneficial to the company and thus has increased its operational capacity in regions where it would not operate before. However, the firm has faced challenges of expanding in the new areas due to shortages of raw materials.
Perhaps, Coca Cola devises new strategies to comply with local laws in countries where it operates to remain in operations and enter new markets. Some states have strict regulations on standards of consumption of sugar and caffeine. Some nations had forced the Coca Cola Company to pay some lawsuits as a result of failing to meet their health standards. The company, therefore, devise new ways to meet all requirements to ensure they sell their products without challenges. The other legal issue that Coca Cola had faced is labor injustices. The firm has been known to offer its casual employees low wages and subject them to unfair practices (Ackoff, 2019, p. 192). Most labor unions had protested against the actions of Coca Cola. The firm changed its corporate ethics, and it currently values its employees both in the headquarters and the host countries. The reformed corporate ethics have created a positive reputation for the company to the public. Therefore, the company can operate efficiently and enter into the new markets through the adoption of the above PESTEL strategies.
Question Three: SWOT Analysis
The primary objectives of a company are to have adequate resources and capabilities to attain competitive advantage and profit. Resources and capabilities enable firms to operate and face competition in the market. Resources can be classified as human resources, tangible, and intangible. The human resources are skilled labor, while tangible resources are financial and physical assets, and intangible resources are brand names and reputation. On the other hand, capabilities are processes, business routines, and core competencies. The SWOT analysis indicates that companies with adequate resource s and capabilities have a competitive advantage over their rivals. For example, Coca Cola has vast resources, strong brand, strong distribution technique, and product diversification. However, the firm faces other challenges such as regulatory issues, competitive threats, water management problems, and diversification.
Firstly, Coca Cola has a strong non-alcoholic beverage brand. It’s a well-established brand that has earned the recognition of its products and therefore created an efficient marketing platform. The firm has not only shown a leading position in soda distribution but also recognized its growth in marketing globally. Since 1892, it has grown and can operate in more than 200 countries. The firm spends a significant amount of money on marketing operations. In 2019, Coca Cola used 4.1 billion USD forb advertising its products. The firm uses digital marketing, websites, and other social media platforms for marketing and promotional activities. The firm acquires more customers through social media platforms and regular marketing campaigns (ABBASI, 2017, p. 194). For example, Facebook alone has more than 110 million followers of Coca Cola products and thus creating a good avenue for marketing to potential customers globally. A strong marketing strategy has enabled the firm to gain a global presence. Although its largest market is based in the U.S., the company has expanded its sales in Europe, Africa, Asia, and the Middle East. Coca Cola has divided the business into six segments: North America, Latin America, Africa, Middle East and Africa, Global ventures, Asian Pacific, and bottling investments. Customers can recognize the brands worldwide easily due to its unique name and logo. Therefore, distinct identity, branding, marketing and product quality have enabled Coca Cola to have a competitive advantage over its rivals such as Pepsi, which lacks such competencies.
Also, Coca Cola has an extensive product portfolio of non-alcoholic beverages such as sodas, juices, waters, dairy products, tea, and coffee. The firm sells over 500 brands, of which 3900 are soft beverages. For example, in the U.S market alone, Coca Cola sells more than 800 drinks, which fetches more than 21 billion USD annually (Sulistiani, Wardani & Sulistyawati, 2019, p. 102). The brands cater to the most population where more than 20 brands have no calories to enable those with some health defects to consume. The firm has established a tasting lounge in Atlanta for clients to sample some varieties. Therefore, the vast product portfolio gives the firm a competitive advantage over its competitors. Besides, it has a stable distribution channel. Coca Cola has an extensive network of bottlers, retailers and distributors across the world to distribute its beverage products. Its strong distribution network is considered as its core strength and a competitive advantage over Pepsi, which has a weaker distribution channel. The reliable distribution channel has enabled Coca Cola to remain as the largest beverage distributor in the world. In 2019, the firm sold more than 30.3 billion units. It serves more than 2 billion customers globally, which is estimated as a large number compared to other companies operating in the beverage sector.
However, the firm has some weaknesses that make Pepsi, which is its rival firm has a competitive advantage. For example, Coca Cola has water management problems, where it requires a large amount of water in beverage production. It has faced legal suits in Asian countries and criticism due to the water management issue. Such legal matters affect its overall operations, and thus its rival company Pepsi may have a competitive advantage over Coca Cola when it is concentrating on such weaknesses. Also, the company has lower product diversification compared to Pepsi, which is leading. Pepsi has diversified its production in cereals, snacks, chips, and dairy products. At the same time, Coca Cola limits itself to certain beverages, and thus increase its sources of revenue compared to Coca Cola. Despite that Coca Cola has an extensive portfolio of products compared to Pepsi, it should diversify its production to cope with completion in the market. It should add chips, snacks, and other products to withstand competition from Pepsi (Sulistiani, Wardani & Sulistyawati, 2019, p. 102). Also, in the recent decade, soda consumers are aware of the effects of calories to the body. Some of the researchers state that calorie products cause obesity. Such beliefs and trends, therefore, have affected Coca Cola soda sales and other carbonated products. Coca Cola thus can reach more markets and gain a competitive advantage over their rivals if they end production of products with calorie and produce healthier beverages. Such measures enable the firm to tap more customers and therefore earn more revenue. The firm is facing pressures to produce according to the consumers of healthy products. Most of the consumers who were used to sodas know to take juices and other healthy products. The Coca Cola Company, therefore, has the responsibility of investing in a new product that meets their customers’ preferences (Zaman, 2019). Also, they need to invest in the marketing of the latest products and engage customers on the importance of new brands.
On the other hand, even if Coca Cola has a competitive advantage over its rivals, it is facing threats from other beverage producing companies such as PEPSI, Monster Energy and Red Bull. Pepsi Company is posing a significant threat in leadership and therefore challenging Coca Cola to improve its operations to withstand the competition (Sulistiani, Wardani & Sulistyawati, 2019, p. 102). Also, the company has been facing a regulatory issue. Coca Cola has been criticized due to tax evasion, unfair labor policies, and waste management issues due to carbon emissions. Moreover, fines and sanctions of Coca Cola due to non-adherence to laws in local countries have increased, causing pressure to the firm, which affects its operations, and therefore lowering its competitive advantage. The firm should, therefore, comply with statutory laws in their host countries to perform well and produce in large quantities to have a competitive advantage over its rivals.
References
ABBASI, H., 2017. Marketing Strategies of Coke: An Overview. Kaav International Journal of Economics, Commerce & Business Management, 4, pp.194-199.
Ackoff, R., 2019. Management for Scientists. Benefits, 191, p.192.
Ling, X., 2017. Customer Relationship Management: Case study Coca-Cola Company.
Sulistiani, H., Wardani, F. and Sulistyawati, A., 2019, October. Application of Best First Search Method to Search nearest Business Partner Location (Case Study: PT Coca Cola Amatil Indonesia, Bandar Lampung). In 2019 International Conference on Computer Science, Information Technology, and Electrical Engineering (ICOMITEE) (pp. 102-106). IEEE.
Vergassola, I., 2019. Prerequisites and outcomes of globalization of marketing strategies by international retailers: the case study of IKEA and home depot in China.
Zaman, S.H., 2019. SWOT ANALYSIS OF IGLOO ICE CREAM AND MILK UNIT.