Coca-Cola drink was created in May 1886 by Dr. John Pemberton in Atlanta, Georgia. In 1891, entrepreneur Asa G Candler gained ownership of the Coca-Cola business. Ernest Woodruff bought Coca-Cola for $25 million in 1919.
Coca-Cola gradually grew and became one of the world’s largest soft drinks company. Although Coca-Cola also deals with non-carbonated drinks, its primary products are carbonated drinks.
The PEST Analysis is an analysis to examine the macro-environment of Coca-Cola’s operations (Johnson, Scholes and Whittington, 2008).
Like most companies, Coca-Cola is monitoring the policies and regulations set by the government. There are no political issues in this instance.
There is low growth in the market for carbonated drinks, especially in Coca-Cola’s main market, North America. The market growth recorded at only 1% for North America in 2004.
There are changes in consumers’ lifestyles. Consumers are more health conscious. This affects the Coca-Cola’s sales of the carbonated drinks as consumers prefer non-carbonated drinks such as tea, juices and bottled drinks. Demand for carbonated drinks decreases and this leads to a decrease in Coca-Cola’s revenues.
As the technology advances, new products are introduced into the market. The advance in technology has led to the creation of cherry coke in 1985 but consumers still prefers the traditional taste of the original coke.
Porter’s Five Forces
Porter’s Five Forces are the five forces that make up the competitive environment. It is used to better understand Coca-Cola’s competitors and operations (Please refer to Diagram1) (Porter, 1998).
Threat of Entry
It is not easy for new competitors to enter the industry and compete with Coca-Cola, thus the threat of entry is low. High capital is required to enter the industry and to sustain the business in the long run. It is also difficult to secure distribution as the distributions channels have been secured by existing players in the industry. As such, new competitors are not able to enter the market to weaken Coca-Cola’s position.
Threat of Substitutes
Consumers can choose from the variety of drinks that are available in the market. Due to the change in consumers’ lifestyles, the threat of substitute is high. Consumers prefer healthier drinks compared to carbonated drinks, which resulted in a decrease in its revenue.
Power of Buyers
The power of buyers is high due to the switching cost of buyers buying another product is low. Buyers can easily buy any drink products, which are readily available in the market.
Power of Suppliers
Power of suppliers is high. Few bottlers supply bottles to Coca-Cola and its competitors in the industry. Suppliers have the choice not to supply bottles to Coca-Cola. It is not easy for Coca-Cola to find new suppliers, as there are not many bottling companies in the industry.
The competitive rivalry is high for Coca-Cola as competitors could easily enter into the market. There is high exit barrier as it is difficult for companies to leave the market easily due to the high production cost incurred. Coca-Cola is easily threatened by the introduction of new products in the market by its competitors.
SWOT analysis is a common tool used by companies to understand its internal and external environment. SWOT enables companies to have a cutting edge in the industry by remaining competitive (Please refer to diagram 2) (Johnson, Scholes and Whittington, 2008).
Coca-Cola has been in the market since 1886 and has strong brand recognition. Consumers choose Coca-Cola as it is more popular and well known. This in turns results in more sales generated for Coca-Cola.
As one of the world’s largest soft drinks company, Coca-Cola produces large quantities of its products to sell in other parts of the...