P.E.S.T. Analysis for the Coca Cola Company

Candle Walsh

Dec 9, 2020

P.E.S.T. analysis is a marketing tool that helps individuals to access the Political, Economic, Socio-cultural, and Technological changes (P.E.S.T.) in any business environment. It helps in the understanding of the macro environment and provides a clear picture of the forces affecting the business world. Therefore, the company can take advantage of the opportunities that reveal while addressing any possible threats. It also helps a company to realize any changes and, consequently, advance its systems. It will also aid the company in making the right decisions when the need to expand into other countries arises. Read other interesting info on https://primeessays.com/

The Coca-Cola Company is an international company that has stood the test of time. Its growth has been tremendous, and it is currently a market leader, not just in some countries, but globally. Despite stiff competition from companies such as Pepsi, it still enjoys a competitive advantage in the soft drinks industry. It has also been able to adjust to different laws in various countries of operation. For a company to distribute its product brands to all its target markets, it must adopt the best approaches to doing business. This need is also evident in keeping record of where the company can account for its sales across the globe. Even for individuals who do not buy this product whether under medical reasons or otherwise, the brand is widely known.

The Coca-Cola Company is a global entity in the non-alcoholic drink beverage industry. Being a market leader has led to its unmatched expansion across the globe. In turn, it has been able to generate many opportunities for other parties, for example, contributing to the government revenue through the payment of taxes across the world and creating thousands of job opportunities. The investment of resources also offers a way of boosting the economy in each of the countries where the company has operations.

The macro environment that affects the Coca-Cola Company in respect to political, economic, socio-cultural, and technological factors may differ from one country of operation to another. When combined, they reflect the changes in the markets that organizations must note.

Political Factors

Political factors influencing the Coca-Cola Company and its line of products are influenced by several governing issues in different countries. The company also depends on the government's intervention. In the U.S., it is governed by the food and drug administration (FDA), which is a government body that controls the manufacturing processes of non-alcoholic beverages.

One aspect in the political factors includes changes in some laws and regulations as provided by the governments. These changed concern laws that must be abided by before entering a new market, tax rate laws, and modifications of such laws, as well as their interpretations. This strategy is evident in the sale of the company’s drinks in Eastern Africa and the United States. The tax rates are very different since the United States’ rates are lower than those of Eastern Africa.

There are also the changes in the non-alcoholic business era. Such changes determine the pricing policies that are employed. The company must look into the possibility of maintaining or earning a share of sales in the global market as compared to its competitors. Some governments allow selling of shares to individuals in the United States, for example, where they trade shares that reflect the global sales.

The Coca-Cola Company has been affected by the political stability of its markets. The countries being affected by political instability have shown a significant drop in sales as consumers keep away from the markets. In addition, the company could not make frequent supplies based on the fear of conflicts. One of its target markets in 2010, Sudan, went into political chaos (Fitzpatrick & Parkinson, 2006). The sales dropped significantly since the surrounding countries were also affected.

Political factors direct the company's taxation policies in the long run. In such a way, any new markets that are being ventured into will affect the tax rates of the company. They will be able to identify the markets that can accept construction of another company plant without having to make frequent changes that may strain the company operations.

Economic Factors

Economic factors include every aspect that influences the monetary value of a company. They include the current economic growth, interest rates, exchange rates, and inflation rates. The Coca-Cola Company, being an international company, must bear in mind different rates of all the countries where it has operations despite having its major operations based in Atlanta, Georgia. For instance, in 2013, the inflation rate in China averaged to 2.6 percent, which was higher than in 2012 by 0.5%. The Coca–Cola Company has most of its major operations in China, and this factor was a major setback for the business. The company, in turn, had to recover from the rate of inflation by increasing the selling price of its products. The advantage was that people were willing to pay more to keep enjoying the products.

The increase of prices was about 3.2% and brought greater profits in the long run. The other option was to carry out promotions on its products. This goal was supposed to undermine competitors, as they did not have a wide variety of brands to place out in the market. With alterations on prices, the Coca–Cola Company was able to sustain its margin profits and maintain its position in the market. Despite an increase in the rate of inflation, the company was able to stave off competition and retain its position as a market leader.

By looking at all economic factors, the company will be able to identify strategies to maximize the profits. It is possible by predicting the economic situations and finding ways of surviving in various countries of operations. In this way, the company has to identify its economic factors thus affecting the pricing strategies for each country in the long run.

Socio-Cultural Factors

The socio-cultural factors that affect the Coca-Cola Company include cultural variations in different countries of operations. In the United States, citizens are adopting a healthier lifestyle. In turn, this issue has brought about an increase in sales of the bottled water, Diet Coke and Coke Zero. These healthy drinks have very low concentration of sugar. For that reason, the company has focused on producing the healthier drinks. Due to the rise in demand, the company can increase the price of these products. Individuals are likely to pay more in an effort to stay healthy rather than end up in hospitals paying much more on ailments for treatment.

A similar example is reported in China where the country's population growth is in the increase. As a result, more people have been moving from the rural to urban areas. This issue has created to a larger population that can purchase the drinks from the Coca-Cola Company. With the increase in demand, the company can also increase the prices of the products. People are now earning more; hence, they can afford to spend more on the products. Individuals who were more concerned about their health ranged between the ages of thirty-seven to fifty-five.

These two scenarios helped the company realize an opportunity that could increase the sale of the company’s products and develop new brands to meet the consumer needs and preferences. Every product had a target group to meet its preferences. Socio-cultural factors also affect the packaging of the products. Teenagers were reported to prefer the bottled sodas; consequently, the shape of the bottle was altered to have a thinner neck. The beverages were also sweetened with the new flavors such as a pineapple. Socio-cultural factors affected the number of sales and the number of brands in the company.

By factoring in the aspect of differing social and cultural backgrounds, the Coca-Cola Company will be able to produce more customized products to suit its new target market as it geographically expands. This step will help with not only consumer attraction but also consumer retention as the company will be able to keep up with the changing needs and preferences of consumers.

Within a given period, losses were being realized due to competition from the new entrants during the company’s growth stage.

Technological Factors

Technological factors that affect the Coca-Cola Company lie in the way it opts to adapt to the changes emanating from any technological advancement. It is apparent based on the marketing tools in use. With everyone going digital, the company has adapted to the changes and advertises via the Internet. The company’s advertisements are embracing the use of animations, as opposed to the usual human advertisements. The Coca-Cola Company also advertises differently depending on the target group in question. Though they may have universal advertisements, some are meant to target specific markets.

Technology has helped the company gain a competitive advantage as it is quick to adapt to new systems and manufacturing equipment. In China, a competitor, SodaStream International LTD, poses a threat to Coca Cola as it seeks to introduce a home beverage carbonation system. According to this company, this system provides a cheaper and more environmental-friendly alternative to bottled soft drinks. The Coca-Cola Company must, therefore, capture and maintain its loyal customers through other added advantages as it tries to put this competitor out of its target market.

Through technological factors, the company aims at increasing the sales volume in the long term as it can reach out to more consumers. By reaching out to more consumers, it can keep its target market loyal, and the chances of trying out a substitute from its competitors are next to impossible.

Conclusion

This Coca-Cola P.E.S.T. Analysis has helped the company to analyze its internal and external factors. Such analysis allows the company to identify opportunities in the markets where it operates and those into which it seeks to venture. The analysis also helps the organization to devise ways for dealing with any threats from competitors or environmental factors. Similarly, the approach allows the company to highlight its strengths; this step is useful in facing the competitors. It is possible through altering existing systems to suit the changing macro environment. The will to accept change and cope with it has gained the Coca–Cola Company an added advantage. As a result, Coca Cola has maintained its position as a market leader in the non-alcoholic beverage industry.

 

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P.E.S.T. Analysis for the Coca Cola Company

Candle Walsh

Candle Walsh is a freelance writer from North Carolina. She works with https://primeessays.com/ professional essay writing service and delivers any paper to whoever needs it. She helps students to unleash their inner writer, giving the practical lessons of writing skills. She also likes blogging, poetry and doing sports.