STUDENT NAME- PRAVEEN KUMAR MUDDA
This essay focus’ on the working patter of different multinational companies in their surrounding environment along with the influence of the external and internal environments on the company’s working patter in short and long run periods. For the evaluation of the factors the fallowing report used coco cola as the example of MNC. There are many economic issues as far as food and beverages concerned in the world. Coca Cola operates business in more than 200 countries. And also it operates even in the most remote areas; it holds the number one position to supply to the economic vitality all over the world. The political, legal environmental and social factors influence on the company in creating specific competitive advantage is clearly explained. The essay also provides information on the opportunities and threats of the company in a view to progress its competitive advantage and creating an impressive market share.
The Coca-Cola Company is a beverage retailer, producer and distributor of soft drink concentrates and syrups. In 1986, a pharmacist John Stith Pemberton invented the Coca Cola in Atlanta, Georgia, U.S.A. The formula for Coca-Cola and the trademark was registered in 1889 by Asa Candler, Coca-Cola Company in 1892.
The Coca Cola Company has started operation in India through its completely owned subsidiary, Coca Cola India Private Limited and the company was launched in 1993 after opening the Indian economy to foreign investment in 1991. In India Coca-Cola Company has different variety of brands that includes Coca-Cola, Fanta Orange, Fanta, Apple, Limca, Sprite, Thumps Up, Burn, Kinley, Maaza,Â Minute Maid orange, Maid, Nestea Iced Tea Minute fleshy freshness halo The range of tea and coffee Vitingo Georgia. These are the top most brands in the competitive market and extensive distribution network consisting of customers, distributors and retailers. When Coca Cola Company re-entered India in 1992 it has invested almost 1.1million US dollars. The Company provides employment opportunity for people that more than 25000, including under the contract. And it also allowed indirect employment opportunity over 1, 50,000 people in related industries, due to the acquisition of purchase and distribution of large enterprises. (Coco Cola, 2011)
Coca Cola is one of the biggest beverage manufacturing companies in the world with income of $35,119 million. The Coca-Cola Company has offered a wide variety of products like soft drinks, fruit juices, mineral water, energy drinks, coffee and tea.
In general, the company offers over 3,500 drinks in its portfolio. Their product quality and packaging to the beverage are reaching the consumer expectations in the market. Dependability and Consistency are important to product quality the Coca Cola Company providing products with higher level of international standards in all over the world. And it is one of the biggest brands recognition globally. The key success of Coca-Cola is their branding schemes and the company has very broad and efficient distribution system. There are many different brands whichÂ Coca-Cola offers in India andÂ all over the world, including Diet Coke, Sprite and Fanta, Minute Maid, Dasani, Aquarius, Powerade, Sokenbicha, Georgia Coffee, Simply glaceau vitamin water, and Minute Maid Pulpy. People can find Coca Cola soft drinks anywhere in the India because the Company has a largest beverage distribution system. And because of its vast distribution network and large scale an operation the company is creating demand in the competitive market and reaches the rural markets as well which consists of huge sections of people particularly in countries like India. This is the main competitive advantage for Coca Cola Company and its distribution strategy is expensive for competitors to imitate. Coca Cola Company has branches in more than 200 countries in the world. (Coca-Cola, 2011)
In India, the Coca Coal Company had a couple of issues on product recall. They issued a voluntary product recall for Smart Water, PET Bottles as these beverages did not reach the FDA’s quality standard for bottled water in 2010. Other countries like in Israel Coca Cola Company (The Central Bottling Company) had to recall some products such as 1.5 liter bottles of Coca Cola and Diet Coke because benzene and sulfur were found in these products. Mistake happened in production department by the firm’s carbon dioxide supplier. These issues are directly effect on the company’s brand and customers lose their confidence on company’s products. (Coca-Cola, 2011)
In India Coca-Cola has decided to increase price on the soft drinks due to the increased costs of raw materials and packaging. Rising raw material costs is pressurizing their bottling forms to undertake marginal cost increases on certain packs in some markets particularly in India. (Sharma.S, 2011)
“Currently, Coca-Cola’s products account for only 3% of all beverage servings of all types consumed globally every day. While per capita consumption (the average number of beverages that people consume each year in a given market) of the company’s products is 394 units in the US and a whopping 675 units in Mexico, it is only 229 units in Brazil, 69 in Russia, 11 in India and 34 in China. Their growing importance for Beverage Company like Coca-Cola could be gauged by the fact that emerging countries like India and china in Asia and many African countries are home to around 76% of the world’s population. Moreover, Asia is expected to account for 34% of global gross domestic product (GDP) and 55% of global wealth by 2030. Also, as per Data monitor estimates; the soft drinks market in Asia-Pacific grew by 4.1% in 2010 to reach a value of $111,023.6 million. In 2015, the Asia-Pacific soft drinks market is forecast to have a value of $143,597.2 million, an increase of 29.3% since 2010.The growth in these Asian markets provides huge potential for Coca-Cola to further strengthen its market base in these economies and achieve higher revenue and volume growth.” (Coca-Cola, 2011). Thus coco Cola Company has a vast number of opportunities in the developing countries like India and china and many more African countries.
In my point of view all nonalcoholic beverage companies are competitors for Coca Cola Company. The company faces extreme competition in different markets in both local and international level. Also, some of local beverage companies including juices and nectars and fruit drinks are the competitors. Pepsi is the main competitor for Coca Cola Company. Government and Public health sector agencies creating awareness of health problems associated with obesity and inactive lifestyles and medical practitioners are encouraging people to reduce consumption of sugar-sweetened beverages, all these represents a significant challenge to Coca Cola’s industry. The Coca Cola manufacturers add more percentage of sugar in their soft drinks and it lowers the calories count in the drinks which causes health problems. Especially these issues affect the children. Many of the public school managements banned the sale of soft drinks on their campuses.in India the government implemented a new rule that a warning label be placed on all soft drinks which containing more than 13g of sugar per 12-oz serving. This rule leads a direct impact on all soft drinks which containing full calories produced by the Coca Cola Company (coco-cola, 2011). Consumers are becoming more health conscious these days, this resulted in decreasing the growth rate of carbonated soft drinks and automatically it affects the overall profitability of Coca Cola Company (Coca-Cola, 2011). Increasing the price of the product will also create a negative impact on the interest of the purchase capacity of the people in nations like India where most of the people are near to the poverty line. (Sharma, 2011)
“Water is the main ingredient in substantially all of Coca-Cola’s products. Rapid population growth and continued pollution of existing freshwater sources in countries like India and china have created water shortages which there by affects nearly every country. Global consumption of water is doubling every 20 years, more than twice the rate of human population growth. According to the UN, more than one billion people already lack access to fresh drink water. By 2025, the demand for freshwater is expected to rise by 56% from the amount that is currently available. As a result, Coca-Cola may incur increasing production costs or face capacity
Constraints which could adversely affect its profitability in the long run” (Coca-Cola, 2011)
According to Analoui & Karami (2003, p.74) “The external environment of the organizations includes both general environmental factors and industry factors” The factors that includes in the external environment are Political and Legal (P), Economical (E), Socio-cultural (S) and Technological (T). These factors are very essential for any Industry to consider if it wants to stay within the market, also these factors helps a company/organization to learn about entering foreign market for competition. Here in the below contest the PEST factors and their influence on MNC’s were discussed in detail by taking coco cola company and its working pattern in India as an example.
This external factor mainly deals issues such as law and restrictions. It also implies on the tax/legal duties a firm needs to pay attention when doing business locally or internationally. Political factors are very important because it varies from not only states but also country to country. The factors such as tax policy, trade limit, environment policy, laws imposed on the recruiting labors and services provided by the government.
Coca Cola is a nonalcoholic beverage company every product that company manufactures has to be certified from FDA department (Food and Drug Administration) in the world, it is a government department. The role of FDA is to check and certify the whole process of manufacturing department in the firm and whether the firm reaching international standard quality or not. And government involves in imposing taxes and accounting standards for the firm (Henry 2008). Countries like India are politically less stable so MNC’s like coco cola should have an adaptable strategic management system for a longer period of time to withstand the changing political factors.
Key economic factors include interest rates, disposable income, unemployment rates, retail price index, gross domestic product (GDP) and exchange rates. This factor also analyses the economic condition of a country such as Supply and demand conditions. There are many economic issues as far as food and beverages concerned in the world.
Coca Cola operates business in more than 200 countries. And also it operates even in the most remote areas; it holds the number one position to supply to the economic vitality all over the world. In countries like India where a multicultural pattern is being exhibited, the Coca Cola Company employee employees from different communities and cultures, it also recruits thousands of employees globally and it shows the commitment towards community investment programs. Indirectly the Coca Cola Company leads to economic success of the country by creating employment opportunities to the local people, paying taxes to governments, paying suppliers for goods and capital and services equipment. Sometimes country’s economic conditions show the impact on firms for example in India Coca-Cola has decided to increase price on the soft drinks due to the increased costs of raw materials and packaging. Rising raw material costs is pressurizing their bottling forms to undertake marginal cost increases on certain packs in some markets. (Henry.A, 2008).
Social factors include culture changes within the environment and also considered to as socio- cultural. According to the Dr. R.K. Singla (2011 p.28) “Business in born and develops in society. Therefore, the effect of various social factors on business is but natural. Social factors include customs, fashions, traditions, wishes, hopes, level of education, population, standard of living of the people, religious values, distribution of income, corruption, family set-up, consumers’ consciousness, etc.”
Sometimes these social factor changes may impact on change of goods or demand of the product in the organization because of the cultural issues such as religion, race, ethnicity and heritage/tradition which imposes restriction on goods. Coca Cola’s marketing strategy and product labeling is different from country to country it depends on their country’s culture and tradition. In countries like India which exhibits mostly filmy driven trends and standards, most of the population were highly influenced by the reputed film stars. Coco cola utilizes its marketing techniques with these film stars as their brand ambassadors. The company chooses local celebrities of that particular country and attracts the population towards their products. For example in India “Amir Khan” is the brand ambassador for Coca Cola. Customers are becoming more health conscious these days; they prefer diet and zero cokes than normal cokeÂ this would impact on decrease in demand of normal soft drinks.
According to the Dr. R.K. Singla (2011 p.28) “Technology includes new methods of production of goods, services and discovery of new implements. Technology changes make available better methods of production and that makes the optimum use of the raw material possible. The technology changes offer both the possibilities and threats for business. In case a company understands these things well in time it can achieve its objective, otherwise the very existence of the company is threatened.” Technological standards of India were advanced and also mimic the stands of many European and western countries. So MNC’s like coco cola should adapt the same techno efficient stands that were being practiced in the western and European nations. They also should have a long term strategic approach towards the rapidly changing technological standards and thereby creating and maintaining a standard competitive advantage over their rivals.
In conclusion this report showed the complete overview of the coco cola company and it also evaluates the different analysis of Coca Cola Company. The analyses include SWOT and PEST analyses form the journal articles. And explained about how the company competes within the internal environment and the external forces. By taking a variable market segment assembled nations like India as an example this report also provides valuable information on how a Multi-national companies like coco cola should adapt to different market segments and create a competitive advantage over its rivals. The influence on various external factors on the MNC’s were discussed in detail and the necessary strategic modifications the company should implement in their strategic plan to become an effectively profitable organization were listed out.
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