This report evaluates how future changes in the legal, social, political and economic factors may affect the growth strategies of Coca-Cola Enterprises Ltd. The report also briefly explains how a forecast change in the aforementioned factors may influence the plans of Coca-Cola Enterprises Ltd.
The following are the 4 main factors:
In the future, economic factors will have the greatest influence on Coca- Cola Enterprises Ltd. The Office of Budget Responsibility forecasts an optimistic GDP growth of 2.0 for 2013. However, given the future threat of the Eurozone crisis, the UK economy is at risk of landing in a triple dip recession. The restructuring of the UK economy is to contribute to the future economic challenges. This would mean that the UK is likely to face stagnant growth as for the case in Japan’s since 1990. It is evident that the pace to recovery will have an impact on Coca- Cola Enterprises Ltd.
Firstly, the above threats may put Coca- Cola Enterprises Ltd in a position to reduce investment which would in turn affect the number of opportunities for growth. The company may have to reduce the number of employees to save money for the future which would increase the unemployment rates of the UK economy.
The forecast is to have an effect on the future promotional activities of the company. This is because; Coca-Cola Enterprises ltd will have to create other means to adapt to the future economic situation. However, the recession may also act as an opportunity for Coca-Cola Enterprises Ltd to maximize the sale of their products as consumers opt for cheaper products.
In addition, the Eurozone crisis is to have a negative future impact on the exports and imports levels of the business. The firm may be forced to reduce the prices or quantity of exports as the market for their products in Europe would be reduced.
However, this change will definitely generate losses for the firm unless people in Europe are trading down. Trading down simply means, that cash strapped consumers are adopting cheaper products.
From the above, we see that Coca- Cola Enterprises Ltd may have to take huge steps to overcome these challenges. We also see that the forecast of the continuing slump in the economy will make it extremely difficult for the company to measure up to competitiveness of the market.
Political factors have an influence on the stability of Coca-Cola Enterprises Ltd. The company is most vulnerable to future changes in the corporation tax.
Firstly, HM Treasury and Customs plans on charging 23% for Corporation Tax in 2013. This change is to have an impact on large companies that carry out purchase agreements and stock lending transactions.
Despite a reduction by 1% compared to 2012, this rate is still relatively high. High levels of corporation tax will reduce the amount of profit Coca- Cola Enterprises Ltd will make.
This change will affect the number of purchase agreements Coca- Cola Enterprises Ltd will use. This is because it will be expensive for the company as the tax rate will be high. This short-term capital source will be hard to use in turn affecting the revenue of the firm.
Secondly, a change in Corporation tax will affect the sales and production levels of the business. A business generating a lot of profits based in the UK is required to pay Corporation tax. Coca- Cola Enterprises may decide to reduce its sales in the UK and relocate elsewhere to avoid the high taxation rates.
However, this change may boost competition among firms which will promote growth for large businesses like Coca- Cola Enterprises Ltd.
Nevertheless, the firm will be partially satisfied with the continued reduction in Corporation Tax.
Legal factors refer to fixed legislations and policies put in place. For example, the national minimum wage is a legislation over which business have no control and are unable to change....
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