PESTEL Analysis of Coke
P: Political environment Political Analysis for Coca-Cola
The government intervenes in all the stages of the product life cycle of any product in terms of protocols. Every government defines the set of penalties if the companies fail to meet the pre-set standards and laws. Coke must be concerned about the following developments:
- With the requirement, the country can change its protocols, laws, orders and regulations. This might include changes in taxation and accounting procedures, financial disclosure requirements, environment protection laws and local content requirement in domestic or foreign jurisdictions.
- Time may develop the new political sequences like civil protest and unrest, change in the government, restrictions in the financial transfer, restrictions in cross country funds flow etc. This can affect the performance of the company.
The involvement of the United States in the unrest in the Middle East has made it unpopular in the eyes of extremists. Because Coca-Cola is known as a very American company, this might have a huge effect on the sales of its products.
E: Economic changeEconomic Analysis for Coca-Cola
The competition between the Coca-Cola and Pepsi Cola has turned the soft drinks industry into slow-growing industry in which management must continuously respond to the fluctuating insolences and choices of the customers/consumers. Failing to do so, the companies must be ready to lose their market share. On the other side, since the switching cost of the soft drinks beverage is almost negligible, the consumers can easily shift their choice.
With the growing economic recession, the sales and growth of Coca-Cola can be highly affected in European and American market even though the company sees positive vibes of staying as the market leader. Even when the consumers’ purchasing power declines, the company becomes reluctant in bringing its price down. In such situation, the sales can be highly affected by the change in purchasing power and the economic condition. The Coke Company also understands that such condition can affect their sales, but they remain hopeful in winning the market.
Leaving U.S. behind, the market for the soft drinks beverage is very high in the rest of the world. According to the survey done by S&P, “In the countries like Germany, Brazil and Japan, the soft drinks companies have marked their strong presence. These markets will be very important to determine the stability and the growth of the non-alcoholic beverage industry.
S: Social changesSocial Analysis for Coca-Cola
We are seeing unprecedented increase in the human awareness thanks to the tireless efforts of consumers, health professionals, nutritionists, government agencies and the media. Human wellbeing has thus become a new buzz word. This change has affected the beverage industry that do not produce alcohols in that many are switching to healthy products like bottled water and diet colas as an alternative of alcoholic beverages. Other possible substitutes that continuously put density on the sales of Coke include juices, coffee, milk, tea and hot chocolate
Obesity that is seeking the attention of the entire developed economies is attributed to consumption of beverages like Coke. In response, Coke has started broadening its product line by introducing Light Cokes and Diet Cokes and other juices.
Coke has been facing heavy criticisms on its alleged toxic acidity levels, use of caffeine, and use of high fructose corn syrup and use of other harmful chemicals.
T: Technological change Technological Analysis for Coca-Cola
The sales of Coca-Cola began to increase after it started packing its drinks in plastic bottles and aluminum cans because this kind of packaging made it easier to carry coke, and once the drink is completed, the disposal of the bottles and can was easy.
Coca-Cola has been using cutting edge technologies in its manufacturing and bottling plants.
A latest technical achievement made by the joint effort of Ardagh Glass and the Coca-Cola Company was the development of award winning eco-friendly contour bottles. The bottle won awards for its lightweight.
E: Environmental changes Environmental analysis for Coca Cola
A great moral leader of the world Mahatma Gandhi rightly said that the world has enough for everyone's need, but not enough for everyone's greed. This message is gaining an increasing acceptance with every passing day. Coca-Cola consumes hundreds of billion liters of water every year in their plants to produce beverages. The packages used by Coca-Cola are contributing to solid waste all around the globe.
The Coca-Cola system’s environmental promises are concentrated on the regions in which they take the greatest weighty opportunities to make a difference such as energy management, packaging in a sustainable way, water stewardship and climate protection.
L: Legal Changes Legal analysis for Coca-Cola
Some of the legal cases that Coca-Cola confronted in the recent dates.
- When Coca-Cola tried to enter Indian market during 1970’s, the law of India required Coca-Cola to share its formula with the subsidiary in India. Disagreeing to this, Coca-Cola closed its production for 16 years in India.
- After the case of poisoning in 100 Belgium children, EU countries were alerted by European Commission to put a strict ban on cold drinks usage especially Coke. The carbon dioxide present in the coke was believed to be the reason for that incident.
- Coca-Cola faced a severe protest in India recently, and the protestors raised the voice to stop Coca-Cola production. Protestors argued that Coca Cola is depleting groundwater.
These instances are just the tips of the icebergs. If Coca-Cola fails to acknowledge the desire of people to improve their wellbeing, it may find itself landing in trouble.
Overall, PESTEL analysis is a great way of getting to know the battlefield environment for existing as well as wannabe companies. Therefore, a look at all these building blocks of a business environment separately has been carried out. The degree of political stability has a huge impact upon business environment and the economy in general. Regarding the economic environment, the most Coke can do is modifying its business strategies and various commercial and financial policies accordingly to make the most of the economic situation at hand. Social factors may have a huge impact upon Coke's operations within the business environment as any action by the firm, which goes against or threatens the societal/environmental norms, may face criticism, negative publicity and protests. Technological and legal factors may assume decisive proportions and may affect the cost, quality and scope of innovation for the products/services offered by Coke. The various Political, Economic, Social, Technical, Environmental and Legal factors that Coke needs to consider and research in order to maintain if not grow its beverage business in the changing environment have been depicted in the analysis above.
Cherunilam, F. (2010). Business environment. 1st ed. Mumbai [India]: Himalaya Pub. House.
Coursework-writing-advice.com, (2014). A case study on Coca Cola - PEST Analysis Coursework Sample | Coursework Writing guide. [online] Available at: http://www.coursework-writing-advice.com/pestanalysiscourseworksample/ [Accessed 1 Oct. 2014].
Dealtry, T. (1992). Dynamic SWOT analysis. 1st ed. Birmingham (Prince's Corner, Harborne Park Road, Harborne, Birmingham. B17 0DE): Dynamic SWOT Associates.
Fayolle, A. and KyroÌˆ, P. (2008). The dynamics between entrepreneurship, environment and education. 1st ed. Cheltenham: Edward Elgar.
HubPages, (2014). PEST Analysis for Coca-Cola: The Coca-Cola Company. [online] Available at: http://annasurname.hubpages.com/hub/PEST-Analysis-Coca-Cola [Accessed 1 Oct. 2014].
Ivythesis.typepad.com, (2014). PESTLE Analysis on Coca Cola - Thinking Made Easy. [online] Available at: http://ivythesis.typepad.com/term_paper_topics/2009/12/pestle-analysis-on-coca-cola.html [Accessed 1 Oct. 2014].
Pendergrast, M. (1993). For God, country, and Coca-Cola. 1st ed. New York: Scribner's.
Researchomatic.com, (2014). Coca Cola Company | Researchomatic. [online] Available at: http://www.researchomatic.com/Coca-Cola-Company-93097.html [Accessed 1 Oct. 2014].
Worthington, I. and Britton, C. (2006). The business environment. 1st ed. Harlow: Financial Times Prentice Hall.
Y"uksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), p.52.