External and Internal Environments: Coca-Cola Company (Essay Sample)

External and Internal Environments
Student’s Name
Institutional Affiliation
External and Internal Environments
The Coca-Cola Company operates in the carbonated soft drink industry that is highly competitive. The company was founded in the year 1883, and it has become the world-leading manufacturer, distributor, and marketer of nonalcoholic soft beverages and syrups producing over 500 brands of beverages. The company is locally headquartered in Atlanta, Georgia, with more than 200 subsidiaries across the world. Back in 1886, the Coca-Cola Company first operated as soda fountain drinks. Over the years, sales of the fountain became quite popular, but the company's popularity grew more rapidly in the period, when it began bottling products, hence, making the beverage more popular.
The company focuses on manufacturing only sparkling drinks such as a carbonated energy drink, carbonated water, and flavored water. In addition, there are still beverages, which are non-carbonated energy drinks and water. These products are distributed to its consumers through a sophisticated supply chain system. Coca-Cola's major competitors are Nestle, PepsiCo, and Dr. Pepper Snapple Group. The company has managed to match with constant, trending, and dynamism of the global market through its mission and vision. The Coca Cola's mission is to inflict moments of happiness through refreshments and establish a difference by creating a value for its customers. The company's vision aims at achieving the ability to make its customers happy, expand its projects' portfolio as well as improve its profitability and productivity. Furthermore, the company is guided under fundamental core principles, namely the quality customer and employee drive and integrity.
The soft drink industry is highly competitive, and this calls for strategies designed to boosts its competitive advantages over its rivals. Notably, the competitors, such as PepsiCo, Dr. Pepper Snapple Group and Nestle, cover a market share of 30%, 22%, and 6 % respectively. Despite this competition, Coca-Cola has maintained a competitive cutting edge with a substantial market share of 42%, which it has earned through its innovative products.
Thus, the paper seeks to discuss the two segments of the general environment, particularly the demographic segment and economic segment. In addition, the paper will evaluate how well the company has addressed the two forces of competition, which are the competition rivalry and the threat of substitute's products, along with assessing the company's external threats, opportunities, strengths, and weaknesses as well as determining the Coca-Cola's resource capability and competencies. Finally, it will analyze the company's value chain in order to determine where they can create avalue using resources, capabilities, and core competencies.
External Analysis
General Environment
The general environment usually consists of seven segments, namely the demographic, political/legal, technological, economic, global, physical, and sociocultural segments. However, the demographic segment and economic segments play a significant role in regard to the Coca-Cola's operation (Hitt, Ireland, & Hoskisson, 2014 ).
Demographic Segment
The company provides its products to a substantial population size, a wide range of age groups, wider geographic distribution as well as diverse religion and ethnic groups. The company's largest portion of products primarily focuses on teenagers and middle-aged adults. According to the statistics revealed by Index Mundi, the majority of the world's population lies in the demographic structure of 15-54 years old as of 2014.This suggests that the company's decision to focus on teenagers and middle-aged customers has enabled it to capture the world's potential customers, which increases the company's sustainability and growth. Concerning the geographic distribution, the company distributes its products to a wider market region as it has over 500 subsidiaries in different countries ( Coca-Cola , 2015). The market share is evenly distributed across all the ethnic groups and religions across the world.
The demographic segment is highly sensitive, especially when the targeted age structures change their taste and preferences towards the company's products. For instance, teenagers have a tendency of shifting their consumption behavior as they like trying related products, and this poses a danger to Coca-Cola if its competitor, such as PepsiCo, attempts to win the teenagers' customer base. Ethnic groups and religions tend to have cultural aspects that may either be favorable for the company products or not. Thus, when the teenage customers change their tastes and preferences, while the ethnic and religious groups behave in a manner that discourages the consumption of Coca-Cola products, the company is likely to suffer losses or a massive reduction in sales (Anders, 2013).
Economic Segment
Between the years 2008 and 2013, the global economy experienced an inflation in terms of foods and beverages, which was higher than the general price of commodities in the market. This was significantly influenced by the 2008 global financial crisis (Nganga, 2014). As a result, many consumers ended up having a less disposable income to spend on these commodities. In addition, the Coca-Cola Company also suffered an increase in transportation and logistics costs globally due to the subsequent rise in prices of oil. This translated to the general increase in cost in the soft drink industry. The industry became more competitive as the rivals were striving to develop strategies that could combat the downturned economy. The company found it difficult to reduce its cost of production, which also affected the setting of competitive prices in the market. In this sense, the rapid fluctuation of currency in 2013 also caused the company to experience a decline in profit margins, especially in its foreign business operations. The economic downturn negatively affected the company negatively, leading to a massive decline in revenues. According to their 2013 annual report, Coca-Cola still managed to register a 1 % worldwide growth worldwide (Anders, 2013).
Five Forces of Competition
The Porter's five forces of competition model comprises of bargaining powers of suppliers, the power of suppliers, the threat of substitutes, threats of new market entrants, completive rivalry. However, a competitive rivalry and threat of substitutes are the most significant aspects, which Coca-Coca ought to address (Hitt, Ireland, & Hoskisson, 2014 ).
Competition Rivalry
The soft drink industry is made of Coca-Cola, PepsiCo, Dr. Pepper Snapple Group and Nestle. Coca-Cola and PepsiCo are considerable competitors in the games with a total of 72 % market share, while other rivals, such as Dr. Pepper Snapple and Nestle, cover a small size of Pepsi. Therefore, Coca-Cola's major threat is PepsiCo, which produces over 200 brands that include the Pepsi-Cola, Gatorade Quaker, Frito-Lay, and Tropicana brands (Puravaranka, 2007). These brands provide an extensive variety of products which present a direct competition to Coca-Cola, since they offer a satisfaction close to that of Coca-Cola's products to customers. In this respect, the two companies have taken much of the competition in advertising, rather than using price strategies. Both Coca-Cola and PepsiCo carry out the product differentiation to their brands; thus, their market expansion continues to grow.
Coca-Cola has managed to address this issue setting the objective of focusing its already developed carbonated beverages market. However, the company has exploited some lucrative markets, such as Africa and the Middle East, which have given them a chance of doubling their 2014's revenues by 2028 ( Coca-Cola , 2015). In addition, the company is attempting to increase the sales of non-carbonated beverages by acquiring and merging with other drinks company, while shaping the health and wellness approach in the soft drink industry. This was to counter the PepsiCo's idea of acquiring NutritionCo as a subsidiary to meet consumers' health and wellness requirements.
Threat of Substitutes
The soft drink industry faces high threats of substitutes, as there are many alternative beverages such as coffee, tea, water, energy drinks, as well as alcoholic drinks. Additionally, the threats have escalated, since these substitutes exist at a relatively close price as Coca-Cola products. Thus, consumers can easily consider the alternate product due to the low cost of shifting. In respect to this, Coca-Cola has engaged intense advertising campaigns to mitigate the substitute's threats. In addition, the company has undertaken a rapid product differentiation on their brand to win customers' preferences at fair prices (Anders, 2013).
Future Prediction
Shortly, Coca-Cola has a chance to continue minimizing the threat of competition from PepsiCo and other competitors as well as reducing the threat posed by the substitutes. In order to reduce the PepsiCo's threat, there is a necessity to extend a diversification and differentiation of its brands and products. The differentiation will render productsfor them to stand out from those of PepsiCo. This is will be achievable when the company conducts an extensive research to come up with innovative products, while observing the health and wellness of its customers. Regarding the threat of substitutes, Coca-Cola can consider the merging or acquisition strategy with companies that produce alternative commodities such as energy drinks and non-carbonated water. In terms of this approach, Coca-Cola will still benefit even if customers choose to switch towards the alternate products ( Coca-Cola , 2015).
SWOT Analysis
Externally, the SWOT analysis examines a company's threats and opportunities within the industry. Like any other company, Coca-...