Coca-Cola (The Coca-Cola Company) is a leading global manufacturer of soft drinks that includes more than 400 brands of nonalcoholic drinks sold in over 200 countries. To-date, Coca-Cola has remained among the most valuable brands internationally. The company was incepted in 1886 and has defied all odds to remain a global leader in the soft drink market. This is despite the many tribulations that the industry has faced, notably periods of economic depression and prosperity, war and peace, and economic bust and boom (Coca-Cola Company, 2013). Coca-Cola is involved in the production, distribution, as well as the marketing of various types of nonalcoholic syrups and beverages. The company owns the trademarks to or has granted licenses to over 400 brands namely, juice drinks and juices, light and diet beverages, energy and sports drinks, coffees, and waters. Moreover, Coca-Cola holds ownership interests in a multitude of canning and bottling operations. Its key main segments of operations in the over 200 countries are: South, East and Pacific region, Africa, Latin American, European Union, North America, Eurasia, Middle East and North Asia, Corporate, and Bottling Investments (Coca Cola Company, 2009). The company’s activities bestride virtually all the individual sectors of the larger soft drink industry where Coca-Cola has a commanding market share. It is a leader in the value and volume of vegetable/fruit juice, carbonates, coffee, and RTD (Ready to Drink) sectors. It is also already in the functional drinks sector and bottling water.
The five main factors that have been at the heart of the success of Coca-Cola as a global brand are quality, global availability, unique, recognized brand, and continuous innovation. In terms of structure, the corporate segment provides overall direction to the company. More importantly, it gives support to Coca Cola’s regional structure. The Executive Committee sitting at Coca-Coal’s Head Office makes key strategic decisions that affect the company the CEO (Chief Executive Officer) of Coca-Cola doubles as the figurehead for the company in his capacity as the Chair of the Executive Committee. Accordingly, he is also the company’s senior decision maker. Appointed executives (Coca-Cola Company, 2013) also head the major regions such as Africa and Latin America. The organization of the company into a regional structure makes sense considering that Coca Cola’s success rests on how best it can connect with its local consumers such a regional structure thus integrates localization and centralization.
Analysis of the macroeconomic environment of your selected firm
Like other leading multinationals, the Coca-Cola Company is also affected by various macro environmental factors as below:
Political: governments in the various regions or jurisdictions in which Coca-Cola has operations in can institute various regulations that affect the soft drink industry. Such changes might include the kind and nature of nutritional information that needs to appear on the packaging. When this happens, it means that Coca-Cola has to change its nutritional information on packages to conform to the directive (Coca-Cola Company, 2010). In addition, fluctuations in currency exchange rates would likely lead to losses incurred by the company, especially when sourcing for raw materials, or while trading overseas.
Social: there has been a growing interest among consumers globally in embracing a healthy lifestyle. This has largely been informed by the availability of nutritional information, and the creation of awareness by governments and health care providers on the need to embrace healthy lifestyles. Thus, consumers are increasingly concerned about the fat and/or sugar content of the products that they consume, especially soft drinks (Coca-Cola Company, 2009).
Economic: economic slowdown during times of and economic bust or recession could lead to a slowdown in the sales of a company and by extension, the revenue generated. However, in 2010, when the UK was faced by a recession, this had the opposite effect of increasing the company’s retail sales in this market. The company’s three key brands namely, Diet Coke, Coca-Cola Zero and Coca-Cola attained the £1 billion mark under the ‘My Coke’ campaign (Coca-Cola Company, 2010).
Legal: changes in corporation or income tax would obviously affect Coca-Cola’s financial position. For instance, incase such taxes are increased it means that the income of the company from the various foreign countries where it has operations will reduce. In addition, Coca-Cola’s financial results could also be adversely affected by the institutions of reforms in the US tax system, especially if such reforms have been executed with a view to changing corporation tax of companies such as Coca-Cola with foreign operations (Coca-Cola Company, 2012).
Environmental: The Coca-Cola Company has come under increased pressure from environmentalists and lobby groups in recent years on the need to utilize more environmentally friendly and sustainable packaging materials. In addition, the company has been compelled to ensure that it always states whether bottles or cans are recyclables, including the correct way of recycling them.
Technological: The Coca-Cola Company has not been left behind in the technological front. On this, the company has so far partnered with various software companies to develop different applications for use with Smartphones with the aim of promoting its products. For example, the Share a Coke app enabled users to develop a digital can using their Smartphones and thereafter, send it to a person of their choice (Coca-Cola Company, 2013).
The key micro environmental factors that affect Coca-Cola include:
The company: The Coca-Cola Company operates under a strong work ethic whose aim is to “…. treat our people well, help them develop and give them a rewarding life” (Coca-Cola Company, 2010). In addition, Coca-Cola has done well to develop skills and performance of its employees. It also facilitates them to attain their career goals (Coca-Cola Company, 2010).
Customers: “Brand love: is the key focus for Coca-Cola in regards to its customers. The company believes that its position will ultimately be augmented by customer loyalty. Moreover, the company acknowledges that building strong relationships with its consumers will in turn translate into improved sales (Warc, 2010).
Suppliers: Coca-Cola owes its continued success to its suppliers. On this, the company believes in a sound, stable, and ethical supply’ (Coca-Cola Company, 2013).
Competition: The main competitor of the Coca-Cola Company in the global soft drinks industry is Pepsi. In 2011, Pepsi realized a 14 percent increase in its net revenue. Like Coca-Cola, Pepsi’s brand enjoys distribution in more than 200 countries (PepsiCo, 2011). The competition between the two brands is so intense that it has escalated into constant price wars.
Assessment of ethical and regulatory considerations
In its local and global operations, The Coca-Cola Company has to ensure that it takes into accounts various ethical considerations that are likely to have a negative impact on its business operations. One of the ethical issues that the company has to consider is product safety. Being sued by a consumer for having consumed an unsafe product would not only negatively affect the image of the company, but would also hurt its revenue (Coca-Cola Company, 2013). The company must also ensure that it settles possible conflicts between its distributors, as well as those of the competitors. More importantly, Coca-Cola needs to ensure that it does not contribute towards environmental pollution while procuring raw materials for its products, and it handles its waste products responsibly so that they do not also contribute towards environmental pollution. There is need to for the company to ensure that union workers are not intimidated.
The company should also ensure that it desists from engaging in child labor, and that its suppliers too do not engage in such practices. Moreover, Coca-Cola, while procuring raw materials, should ensure that it does not contribute towards the depletion of natural resources (Coca-Cola, 2010). This can be achieved by encouraging Coca-Cola is also expected to engage in ethical production of its products by embracing green production that leads to little or no pollution to the environment.
On the issue of regulatory requirements, the company should ensure that it maintains products safety and quality of its products, in line with the existing industry standards. In addition, the company should ensure that it complies with the existing standards and policies regarding the levels of ingredients, labeling of products, and packaging, sustainability and recycling of for example, packaging materials. Non-conformance with the existing legal and regulatory requirements could result in the closure of its operations in the affected regions.
The soft drinks industry is under increased pressure from consumer lobby groups and governments to ensure that products sold do not contribute towards unhealthy lifestyles. If at all The Coca-Cola Company hopes to remain a global leader in this industry, it must address the health issues raised by governments and consumers by embracing responsible procurement of raw materials, distribution, and marketing of its products. The company also needs to ensure that it conforms to the legal, ethical, and regulatory requirements set by the industry, government agencies, and other interested parties. More important, the company should ensure that it addresses the macro and micros environmental factors that affect its operations globally. Doing so will increase the number of loyal customers thereby maximizing on its profits.
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