Assessing External Factors in Strategic Planning

Topics: Coca-Cola, Soft drink, PepsiCo Pages: 5 (1422 words) Published: February 22, 2012

This assignment explores the course text book and a number of internet sites to assess the macro environmental factors that shape the beverage industries direction and strategy. However, according to Thompson, Peteraf, Gamble & Strickland (2012) the factors in a company’s environment having the biggest impact pertain to the company’s competitive environment. The most powerful and widely used tool for systematically diagnosing the principal competitive pressures in a market and assessing the strength and importance of each is the five-forces model of competition.

Influences from the macro-environment should shape the company’s direction and strategy. After reviewing case five, “Competition in Energy Drinks, Sport Drinks, and Vitamin Enhanced Beverages”, (Thompson, Peteraf, Gamble, & Strickland, 2012, p. C-76), the relevant environmental factors that the beverage industry should consider during an external scan for a strategic planning process are: demographics; social forces; political, regulatory, legal forces; natural environment; and technological factors.

Demographics include such factors as, population growth, age distribution, and cultural composition. A change in the age distribution in a population has potential consequences for the beverage industry. Pepsi and Cola have often been known as the young person’s beverage and now with “baby boomer” generation, Pepsi and Cola will have to become inventive for this generation especially as many of the baby boomers are considering healthier lifestyle choices. If Pepsi and Cola were to enter another country they would have to be cognisant of the culture and their drinking habits. For example, entering in the Chinese market, Pepsi and Cola’s alternative drink, ready to use tea, maybe more profitable then carbonated beverages.

Social Forces
Social forces include society’s values, lifestyle, and attitudes that may affect the beverage industry. According to Thompson et al (2012), the decline in carbonated drinks for the fifth consecutive year indicated that the US consumer were drinking less carbonated drinks and developed a preference for alternate beverages such as bottled water, sports drinks, and vitamin enhanced water etc. The baby boomer generation make up a large percentage of the population and are concerned about their health and longevity. This will affect the beverage manufacturers by increasing the demand for healthier beverages. Many beverage companies have made the commitment to their customer by introducing alternate beverages such as water, juices and sports drinks as well as reducing the amount of sugar and caffeine in their products such as the “diet” beverages. Political, Legal, and Regulatory Factors

These factors are regulations, guidelines, and standards with which companies must comply. Non-alcoholic beverages fall under the FDA, (Food and Drug Administration), which regulates and certifies ingredients before they are allowed to be used in soft drink production. Coca Cola and Pepsi operate globally and their performance is influenced by political stability in many countries. For example, the war in Iraq put the US in a unfavourable light which resulted in a huge affect on sales of Coca Cola products in many Muslim countries (“PESTEL Analysis of Coke”, n.d). Natural Environment

The environment is a global concern and company’s such as Pepsi and Cola should be aware of the threats and opportunities associated with the environment. Natural disasters could affect the availability, and in turn, the price of raw materials.

Technological Forces
In today’s market, companies must be able to keep up with the ever-changing technological advancements. The effectiveness of a company’s promotional advertising and the technology of the internet both should be utilized to enhance the attractiveness of the product in hopes to positively influence sales. Computerized manufacturing technology has been...
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