The main objective of this work is to provide necessary knowledge about business environment. To elaborate the demographic, cultural, political, social, environmental, technological, economical and legal environment where business function. It also explains the relationship among business, environment and society as well as how to adopt the changing environment in the organization. This paper will analyse the changes and challenges in Coca Cola Company in last five years and how company deal with them.
2. Introduction
Environment means the influences, circumstances, constraints and opportunities that surround and affect business organization. There are two kinds of environment micro environmental factor and macro environmental factor. Internal factors close to the organization called macro environment. It can be controlled by organization. Micro environmental factor affects the company¿½s decision making process and performance. These factors include consumers, suppliers, and competitors. The external factors which affect organization¿½s plans and strategies called macro environment. It is uncontrolled by the business organization. Which includes Political, economic, technological, social, environmental and legal factors. These factors are outside of the control of business. New laws, demography changes, tax changes government policy changes are the example of macro change. The successful management must be capable to adapting to the environment. It is important for an organization to know about business environment it helps to a business organization to develop its strategies and long term policy, knowing about the changing environment will keep the organization dynamic in its approach. (Saikh 2006).
Moreover, it is important for business organization to analysis business environment and changes in different factors of environment such as, change in technological environment, economical environment. In decision making process, organization analysis various alternatives and choose the best one. It gives information to decision makers. It helps an organization to develop strategies and policies, understanding about changing environment help to diversify the business in new area and keep company dynamic (Jain et al 2009). In addition, changing in business environment impact on organization by making effective use of PESTEL business organization can take advantages of changing environment and make strategic plans for threats. PESTEL analysis is the most popular method which focuses on external factors of business where it operates. It is beneficial tools for understand the growth and decline of the market, direction for the operations, opportunities and business position. SWOT analysis is a tool that recognizes the strengths, weakness, opportunities and threats of business organization. This analysis answer the two questions, where is organization at present? And In what direction organization is going? To identify of SWOT analysis is important for business organization because succeeding in planning process for achieving the company¿½s goal.
3. Organisation Description and background
The Coca Cola Company is the most valuable brand name and world¿½s largest non alcoholic beverage company. This company was founded in 1886 in united state of America. Now it operates in more than 200 countries. Coca cola also distributes juice, energy drinks, water, and coffee. The company has partnership with more than 300 bottling and canning company worldwide. Who produce and sell coca cola beverages worldwide. The bottling partners are responsible for consumer brand marketing initiatives, handle manufacturing and merchandising.
John pemberrtion invented the original recipe of cocawine. Which was inspired by vin mariani, a popular cocawine invented by Angelo mariani. John Pemberton developed coca cola which was non alcoholic version of cocawine. When Pemberton was making drinks for his friend accidently he added carbonated water. His friend liked the test and he adjusts the formula. In 1888 company sold by three companies. Calder purchased one company with exclusive rights to the cocla cola formula from Woolfolk Walker, margate dozier and john Pemberton cut out of competition. In 1982 company started marketing the product and achieved status of national icon for the USA by its 50th anniversary. Coca cola started sold bottles in 1894 and cans in 1955. In 1899 Coca Cola Company made first bottling agreement with Chattanooga and Tennessee. In 1985, company introduce new coke by changing original formula. Most consumers preferred the test of original coca cola. Many people stop to buy the Product then company shift back to its original Formula.
4. Coca Cola Business Environment
Over the past years, Coca Cola Company has faced lots of changes in the business environment. Company create counterpart with American sweet test product however, it was commercial failure and coca cola change its strategy and return back to its old formula. Consumers become more health conscious then company lunch new product to address consumer needs, such as diet coke and coca cola zero. Company bought bottling business in South Korea which allow to access in retail store as well as makes easy to entry in Japan, Malaysia and china.
Moreover, china is now largest coke consumer in world. In 2007 coca cola output of coke in china was 3.6bn tons and it was export 15.3 m tons. By the end of 2007 coke total production in china was 360 million tons. In addition, from 2008 to 2009 company introduced new plant which capacity was 20 million tons. The target of china¿½s coke industry is export large quantity of production countries such as, India, Brazil, Belgium and Japan. In 2007, china export to Japan 22% of its total production. This report shows development and positive change in environment of coke¿½s industry in china. (China daily, newspaper website)
4.1 Political factors:
Coca cola, the non alcoholic beverages falls in the category under the FDA (food and drugs administration) and government has power to set fine for the coca cola company that didn¿½t meet their standard law requirement. The charges in laws and regulations, such as taxation requirements, environmental laws and foreign jurisdictions can affect to their entry in foreign land. The changes in non alcoholic beverage Business Company might get pricing pressures, competitive product and their ability to maintain the share in global market. In international market if government change frequently their might be restriction to transfer funds from one country to another. However Coca Cola Company is fallowing the rules and regulation set by government. Since last two years government is so conscious about the environment. Company adjustments in planets and proper way of wastage settlement the chance of affected by the protection laws are decline. Political conditions are overall leave natural effects on coca cola industry. It impact good for the cock¿½s reputation.
4.2 Economical factors:
Economic analysis explores national and world economy impact as well as inflation and recession. Economic factors are those factors that affect the production and sales of the company. If the economy condition is not good at that time coke decide to increase its price it would impact very negative in the production of Coke. Non alcoholic beverage industry has highly sales outside the USA. There has been improvement in soft drink Company in major international markets like Brazil, Germany and Japan. These markets play great role to growth of non alcoholic industry.
The country like Pakistan where is the unemployment rate is very much high. In Pakistan coca cola company employs1800 people. During the last two years, the company in Pakistan has involved $130 million. If economic variables are positive of country it impact good otherwise the impact is bad.
4.3 Social factors:
Many people are spending healthier lifestyle. Change in lifestyle, population growth rate and carrier attitudes affect non alcoholic industry so that many people like to have bottle water and colas instead of beer. The need of healthy products, bottle water, and juice is more important in the daily life.
Consumers from the age of 37 to 55 are more concerned with nutrition. Older age people are becoming more concerned with increasing their long life. This kind of social trend can affect on demand of non alcoholic beverage industry. Increase in awareness among consumer and modern life style might be challenge to the coca cola company. However, company recognized the consumer¿½s needs and began to produce diet coke, like beverage, juice and sport drinks. Many nutritionists advise that maximum consumption of coca cola might be harmful to health especially to young children. Drinking of coca cola daily can effect on health after few years.
4.4 Technology factors:
The technology of television and internet which affects companies advertising, marketing and promotional programs. Media advertise product attractively it helps to increase sales of the product. Introduction of plastic bottles and cans have increased the sales of coca cola. It is easy to use and bin them. The advancement in technology led to company crate new product like cherry cock in 1985 but consumer prefers original test of coca cola so that some time technology can affect badly.
Coca Cola Company introduces new technology all the time because of introduction of new machine company¿½s production level increase tremendously. Ardagh glass is the latest technological achievement by Coke Company which is environmentally friendly bottle. It has won several awards for its light weight.
4.5 Environmental factors:
Coca cola focused on energy management, water stewardship and climate protection. The company made progress in these areas but company has lot of things to do. In 2007, company used approximately 300 billion liters of water to produce beverage coke is among the world¿½s largest purchasers of fructose corn syrup, sugar, coffee, citrus. It has largest consumers of cans and bottles. At the same time company announced to return to communities and nature. An amount of water equal how much company used to produce their beverage. Now company has three objective 1. Recycle the water so it can be return safely to the environment. 2. Reduce the water consumption level in manufacturing process. 3. Refill the water in communities through a global network of local partnership.
While the coca cola come up with advance recycling programs company decides through education they can prevent Littre. Company support keep Australia beautiful in Australia, keep America beautiful in USA and tidy Britain group in Britain. Weather and changes in temperature can affect many industries such as coke. Company also invested on fashionable outfits which are made by recycle polyethylene terephthalate bottles.
4.6 Legal factors:
Laws, political changes affect firm¿½s behaviour. An increase in the minimum wages of labour and more requirements for firms can influence organisation productivity. Sometime change in laws also creates new opportunities for the company. There are some legal issue that Coca Cola Company had faced in recent years. In 1970¿½s coca cola company refuse to share its formula to India therefore company stop to product locally for 16 years. EU member¿½s countries ban the coca cola due to the poisoning of 100 children in Belgium and cause seems to be wrong carbon dioxide which was used in coca cola. In 2003, non government organisation in India said coca cola contained toxins with lindane, and malathion that may caused breakdown of immune system and cancer. In India (kerala), the production of coke along with other soft drinks was banded.
5. Changes and Challenges:
The non alcoholic industry is competitive. Company should carefully consider below factors which affect financial condition and its future result.
Awareness may reduce demand of coke:
Government officials and consumers are more concerned and aware about health. Many press reports indicate that lawyers and consumer advocates have threatened by company. Furthermore, misleading exercise related to contract to sell soft drink in school. Consumers are more aware about these issues and negative publicity in media may reduce the sales of carbonated beverage.
Increase in competition:
The non alcoholic beverage industry is highly competitive. Coke have to compete with international companies as we as local companies where it function. In many countries where coke operates including USA, Pepsi is a primary competitor in the market. Coke¿½s capability to maintain the sales of share or get profit in the global market or various local markets may be limited because of competitors.
Water scarcity and poor quality
Water is main ingredient for Coca Cola Company. Many part of the world it is also limited resources. Company consume huge amount of water per year. Demand of water increase around the world and quality of available water decline this will increase the production cost of the company and affect on profit.
Change in non alcoholic beverages business environment:
The business of non alcoholic beverage has been changing because of Consumers life style, emerging views of health and nutrition, changing consumer needs and preferences, increase in similar products and price factor. Furthermore, the beverage industry is being affected by the intermediates, especially in USA and European countries. If Coca Cola Company is not able to change along with changing business environment it will effect on company¿½s profit and sales of share.
Increasing in cost of energy:
Coca cola Company¿½s bottling partners operates huge number of trucks and other vehicles as well as they use large quantity of electricity, gas and other energy sources to function the bottling company. Day by day price of fuel is increasing it will increase in the production cost of coca cola company. So it will affect the company¿½s profit.
Weather condition:
Weather influence the sales of the coca cola where company function. In summer more people prefer cold drinks such as juice and sprite however, in winter the demand of product decrease. Some part of world where most of month¿½s temperature is always high in those places consumption of coca cola is maximum.
Change is important, long-lasting and disruptive
Changes in company create some opportunities as well as challenges in new areas of business. Such as, lunch fresh product in the market, company might encounter with economic crisis and to change the direction of the organization.
Change is continuous process to adjustment:
Change in plans strategies and operations are important for company. Furthermore, sharing these changes to managers, supervisors and all level employees make able to them adjust properly to face the changing environment. Moreover, change is an essential phase in the business world mainly in technology. Use of technologies in coca Cola Company reduces the operation cost and increase the profit of the company. There are so many situations company need to change such as advancement in technology that is being used by other similar companies to compete with them company should adopt the technology.
In 2007 coca cola modify their product due to people are more concern about health and fitness. Many people are investing more money in their health in order to cope with that trend coke lunch their new product named Enviga, which is calories burning drink. In addition, Coca Cola Company is ties up with Nestle. Both companies are dealing with invation and change. In same year, company change in organisational structure to fulfil the demand and need of the consumers through assimilating with North American can, bottle and juice company.
6. Conclusion:
The coca Cola Company keep on refresh everybody its touches. The product of company has multiply to approach of cultural gratitude and understand, this is main key factor that company introduce its product worldwide. Company entry and development in international market will be faster. Coke¿½s commitment to remain at changing environment proved that they are the superior among other non alcoholic product. Awareness of environmental issues and health care might impact on the sales of the company however; creative idea and strategy help to grow the business. Coke has developed the entire vital component to expand their business in long term.
7. Recommendation
Reward system is an effective technique to motive employee in changing environment of the organisation. Coca Cola Company should apply reward system to its employees so that it will increase in productive and sales. Reward system can be financial or non financial nevertheless, company have to give fair importance to all level employees. Reward system of coke must be functional to make employees devoted to organizational goals. In addition, Training and development programme must be use to groom career of their employees at top to bottom level. Coca Cola Company has to declare some amount of money for training and development purpose. Monthly training session raise the productivity of the organization.
Relationship with consumer is vital for Coke Company in some country where Business is controlled by the authorities, in those countries there is a lack of consumer relationship which need to improve. Coke need to market segmentation in new country where company is planning to introduce the product because consumer¿½s need, test is different from another country. By doing market segmentation company can serve effectively to its consumers. Demographic factor should be considered by Coca Cola Company. Culture, tradition and characteristics of consumer in new country might be different; it gives information to the company to change certain plans. There are some factors such as climate, test and culture Affect Company directly or indirectly so individual company need to apply their own strategic and management style to increase the sales of coca cola. ¿½Dividing a market in to direct groups of buyers who might require separate marketing mixes; the process of classifying consumers into groups with different needs, characteristics and behaviour¿½ (Kotler, 2001).
Ref.
Sheikh, s.2006 Business environment press sanat printers New Delhi
By TR Jain, Mukesh Trehan, Ranju Trehan 2009 business environment(http://books.google.com/books?id=AgWNmP4blhoC&pg=PA21&dq=what+is+business+environment&hl=en&ei=WRdcTM-lKIi74gaos5HwAQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CD0Q6AEwAjgK#v=onepage&q&f=false
Kotler, P. and Armstrong, G. (2001). “Principles of Marketing” (9th Ed.). Prentice-Hall India Kotler, 2001 p. 46).
http://www.thecoca-colacompany.com/investors/pdfs/10-K_2005/Coca-Cola_10-K_Item_01a&b.pdf
By TR Jain, Mukesh Trehan, Ranju Trehan 2009 business environment(http://books.google.com/books?id=AgWNmP4blhoC&pg=PA21&dq=what+is+business+environment&hl=en&ei=WRdcTM-lKIi74gaos5HwAQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CD0Q6AEwAjgK#v=onepage&q&f=false
http://www.chinadaily.com.cn/business/2009-07/13/content_8420666.htm
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