Competition is a way of life either toughen up or go home. In the business world, this is no different with many industries striving to excel and get the lion’s share of the market. Throughout the world, there are various industries all fighting for a share into the budget of the consumers. Some industries include the mining and metals industry, business consultation enterprises, the energy industry, financial and the healthcare industries. The economy of Australia has further been projected to be on a 3% GDP increase annually. Furthermore, the country has been stated as one of the countries with very small government debts. This development has been influenced by some factors such as: the geographic location of the country enabling it to trade with big economic areas of Asia pacific and the United States. On another note, the land has an abundance of mineral resources (business development, 2016). It is in this context that we will focus on the industrial and materials sector with the main target the coca cola company.
THE COCA COLA COMPANY
Without a shadow of doubt, coca cola has almost wiped out its entire competition. The company was established in 1986 by Dr.Pemberton in United States. In Australia, the first attempt to produce Coca-Cola was in 1917 but it was not until 1937 that this historic feat was achieved. During the first years of producing Coca-Cola, there were several challenges mainly due the small city markets and the location was not that helpful in the development. The breakthrough of coca cola was in 1939 but its standards went international when the then president of coca cola decided to gift all the service men and women with coca cola. This was regardless of the location and the cost incurred. The Australian companies supplied also the Australian service men and women with this product.
The year was 1950 when Coca-Cola went on to franchise across Australia. In the beginning, the soda was bottled in over 30 locations within the country but later on went and agglomerated into the single company today. At present, the coca cola company produces up to 240 products ranging from soft drinks to flavored milk (Journey Australia Staff, 2017)
COCA COLA COMPANY KEY COMPETITORS.
For years now the nonalcoholic beverages industries has been dominated by Coca-Cola Company and Pepsi Cola Company. As the struggle has been, other companies have cropped up with new products and flavors. These companies have started offering non-carbonated beverages so as to venture into the industry. There are few ways to be used in evaluating the industry and these include market size and profitability of the company. The market size of this industry has been changing as time passes (Datamonitor, 2005).
In the nonalcoholic beverages sector we have few industries which include soft drinks manufacturing and water and ice manufacturing .In Australia this industry is largely dominated by Coca-Cola Amatil Limited where 29% of its shares are owned by Coca cola Company (Dand B Hoovers, 2017). In the Australian market Coca-Cola Amatil Limited face stiff competition from several businesses. Furthermore, there are also price pressures imposed to them by competitors like labels owned by supermarkets and Pepsi Cola Company.
Australian supermarkets like Woolworth and Coles hold more than 80 percent of the Australian market share. These supermarkets produce their own brands and labels of Soft drinks. The two supermarkets have been overpricing Coca-Cola Amatil limited products. Greediness of the leading supermarkets Weighed on profits has proved a problem to the leading soft drink manufacturer in Australia. The process has made consumers to shy away from Coca-Cola’s products.
Discounting of products by competitors has made Coca-Cola to reduce its products prices. Furthermore, these retailers were also reducing its stocks level. Coca-Cola Amatil has been affected greatly by price wars with Pepsi and fewer drinks sales in supermarkets (Davis, 2017).Moreover, low consumer confidence has also affected the sales of its products in Australian regions which are socioeconomically low. CCA has also had to drop its products prices further so as to counter their rivals this made sure that the rivals did not gain anything from the Australian Market share (Wahby, 2017).
According to (Janda, 2014) , CCA experienced a 14 per cent slide in the Australian beverage Market earnings. Mainly because of stiff and aggressive pricing and private label competitors that have been affecting their profit levels. Development of other alternative drinks by their competitors have also hindered their market share advancement. The production of energy drinks like Red Bull and V in Australia has been a very big setback for Coca-Cola Amatil. The energy drinks have experienced good sales surpassing their expectations (Palmer, 2008). Coca Cola has also been struggling to capture a share of the increasingly popular energy drinks sector. Also, they have been struggling to get products and raw materials due to the environmental and the change of climate conditions.
ATTRACTIVENESS TO THE NON ALCOHOLIC BEVERAGES INDUSTRY.
The nonalcoholic beverages industry market share has been shifting as time goes by. One of the instances that shows these shifts is the bottled water sector. A few years ago bottled water segment was performing poorly in the industry. Currently, it holds a greater share of the Australian market as compared to the previous years (Watson, 2017). In this industry, a number of brands have been emerging and are benefiting from the increasing numbers of consumers that have been moving away from carbonated drinks.
Consumers have been looking for new things and hence opportunities for innovations have been opening up. Consumers are always looking for Functional, Unique and natural beverages. These always serve as points where soft drinks manufacturers should explore and produce brands that are best fit to prevail in the industry. Furthermore, In Australia there has been an increase in income levels as compared to the previous years. This is projected to increase the consumption level of the beverages that have been produced. Also this will place some need of other product variety for people to be spending their extra incomes on (Tandon, 2013).
The nonalcoholic beverages sector boasts for its large consumer base. It also has an abundant supply of raw materials at low costs .In this the industry is expected to grow even further since there is the easy access of raw materials. Capital required is minimum and thus boosting the production of commodities. In addition, skilled labor to this industry is easily acquired and accessed (Tandon, 2013).
The sector has also been experiencing a high rate of growth with industry leaders mainly Coca Cola and PepsiCo announcing significant investments in venturing further into the industry. This shows that the industry offers significant growth rates in the coming years (S.R.Goenka, 2013). These factors have shown that the industry boost a great deal of expansion to existing companies and also a potential for growth. The industry has a potential to growth if innovation is high and the consumers’ interests are put in mind.
PESTEL AND PORTER’S FIVE FORCES ANALYSIS MODELS
There is the porter’s five forces of analysis which is meant to be a study of the industries operation with the main aim to help it in gaining a competitive edge by discovering new sources. The model explains the different levels pf profitability in the market and why companies are able to sustain profits. The person behind this analytical model, Porter, identified five crucial parameters that unquestionably lead to the rise or fall of every industry and market. In the analysis of the P5 model, five major question arise regarding the survival in the industry; to find out the threat that is available due to substitute goods and services, the threat that may arise from new competitors, the bargaining capabilities of the consumers, the degree of rivalry in the competitive sector and finally the significance of the bargaining power of suppliers. Its application is mainly to find the attractive nature of the market and its profitability.
On the other hand, PESTEL is a study tool due to the influence of outside factors. This is because external factors such as economics, politics, and sociocultural, technological, environmental and legal factors among others play a critical role in the survival of business entities in the industry. The political aspect is considered because politics plays a critical role in the provision of opportunities and the pressure that it can exert on any business entity. Furthermore, politics determines the public relations of any business entity. The economics determine the growth of any business in the industry by indicating the gross domestic product of the country and its variability over time. Furthermore, it may indicate the purchasing capabilities of the market. On to the sociocultural context, the economics and the cultural affiliations of any place determine the market trends and availability. The third factor which is laws is meant to be as a means of regulating the company’s activities through implementation of order. The technology and the environmental factors as well determine the variability of market trends in terms of technological advancement and environmental considerations in the business operations.
HOW PORTER’S FIVE FORCES AFFECT THE INDUSTRY’S PROFITABILITY.
Using simple frameworks, we can be able to predict how certain factors affect a company’s profitability. The porters five forces model helps in looking at competition and how I affects profitability of a company. The five forces explain the competitive forces that affects how companies run their businesses.The model explains how the company competes in an industry and other factors that affect that competition. This way, we can be able to project our sales and growth.
In the nonalcoholic beverages company, Coca-Cola’s main rivals are PepsiCo .The two rivals have been at it each other’s necks for a long period of time now. They have similar ingredients in their products. They also have non soda drinks such as orange juice and bottled water .Pepsi also have other products that changes the way they compete. This makes Coca-Cola have a disadvantage. Furthermore, Coca-Cola competes also with Snapple. Snapple has big brands in the soft drink industry but it does not have cola brands of drinks. For this consumer behaviors shifts which would leave Coca-Cola vulnerable if it’s consumers’ were not loyal. For this the risk are moderately reduced.
New Entrants to the industry are also possibilities. Although Coca-Cola and its competitors have key licenses to the industry. Licenses that allows for their goods to be sold in fast food chains and other distribution centers. Another company can get hold of the market share. The company should have a very positive image and should spend quite an amount so as to get the brand recognition the big companies experience and enjoys. Moreover, the push to healthier lifestyles can push a lot of new comers to the industry trying to satisfy consumers’ needs and interests.
In this entry of several companies at ones into the industry it can fragment the industries market. This can affect the Coca-Cola market share and also finally affect the companies profitability. Similarly, we have to be aware of the products’ alternatives. These are the goods buyers could purchase instead of nonalcoholic beverages. Also consumers would have an increase to their preferences to freshly prepared smoothies. As a more health conscious society is being built, the taste of soft carbonated drink is fading. Thus this is affecting the profitability of the industry. This is because the market share is decreasing hence a sharp decline to the profit margins.
In the industry there is no sell of drinks to end consumers. Companies sell drinks to distribution companies who later service fast foods companies and vendor machines. Furthermore, companies have to sell their products to distributors at a relatively cheap price in order to be able to sell the goods to the consumers. Prices of the products are also consistent at each outlet. In case of an increase in the cost of goods sold either the company or the distributing company absorbs the changes in price. This gives the buyer’s a relatively fair amount in the bargaining power. Lack of this power would lead to shift in consumers’ preferences and this would lead to a shift in the profitability of companies.
Suppliers also have a bargaining power too. Commodities prices vary from time to time and their availability are sometimes not secured. Raw material costs can be affected by few factors like natural disasters. Well companies have contracts with suppliers that makes the effects of these disasters minimal (Renee, 2015). This is of course if the disasters do not occur repeatedly.
In an industry, competitiveness is mostly determined by the intensity of rivalry in the industry. Factors like innovation boosts a company’s advantages in terms of competitions. Also the level of advertising expenses can tell the industry’s competition levels. Moreover, powerful competitive strategies are also used as a measure of this rivalry.
Strategists consults regularly the porter’s five forces frameworks so as to make adequate evaluations when it comes to firms positions in the industry. Furthermore, porter’s five force model are shown to examine a company’s competitors. The model helps to analyze and explain the industry’s competition in general as well. It is has shown that the five forces can adhesively affect the profitability of a company and also of the industry. This conclusion is drawn after looking at both the internal and external factors that has a significant impact on what a company does.
COCA COLA AND THE EXTERNAL AND INTERNAL FACTORS
When the PESTEL factors are considered in the operation of the Coca-Cola Company, the technological knowledge behind the company is immense. This is boosted by the fact that the company has grown by over a decade. Continuous upgrade in the technological knowhow has ensured that the company remains ahead of the competition.
The company has been in no conflicts with the laws by ensuring that all the activities it engages in are as per the stated laws in their area of operation. This has been one of the catapulting factor in the company’s survival and growth. It is stated that the first time the company was willing to explore the Australian market, it sent scouts to determine the availability of the market and the laws of the country.
Of the various regions that coca cola has ventured into, there is always the sociocultural regard. The company would not venture into regions that there is no regard for their products such as in some Arabic regions. Thus feasibility examinations play a pivotal role in determining the proper locations for business expansion. The coca cola company has invested huge amounts over its tenure that the economics behind its existence are unparalleled. It thus has the potential for growth when its economics come into place.
Considering the internal and external forces that the company has to continually face in the industry, its main advantage is the huge economics behind its existence, the huge technological background and the socioeconomic acceptance of the products. Most backgrounds do not disregard the product. The company has managed to do away with most of the competitors such as Pepsi due to the huge market base. This is because of the technological capabilities over the competitors and the variability of the products they offer at a better price. It has been often stated that although companies offering goods at lower prices are more likely to attract a bigger market, this does ensure the survival in the long term. Furthermore, the goods provided at the lower price must have attractive attributes to the consumer.
The relationship between PESTEL and Porter’s five forces models cannot be simply disregarded. This is because some of the internal factors of the company may be determined by external forces and vice versa. Say for instance threat from new competitors may be politically instigated or the bargaining power of the society may be due to the sociocultural ties associated. It is thus very important to study external forces and the internal forces when determining the idea of venturing into any business. The coca cola company, being among the first in the industry, set the benchmark for all these forces.
DEVELOPMENT STRATEGIES OF COCA COLA
It has often been stated that there are strategies that give any company the competitive advantage and that not necessarily reducing the price of any commodity will increase its sales. From a humble background the company has grown to have annual returns of billions. At present the company is using some price cutting strategies in order to increase and maintain the consumer base. Some of these strategies include: the company has taken full advantage of the economies of scale and the knowledge of the consumer curve, the company has used the bargaining power to its suppliers in order to deliver products at very low prices, the use of sophisticated software’s and mechanism to achieve efficiency, motivating employees among other methods. These methods have ensured that coca cola remains above the competition.
STRATEGIC CAPABILITIES OF COCA COLA
Coca cola has managed to adopt to the changing environment over time ensuring its survival in the market. Some of the strategies that the company has used in the industry include dynamic and ordinary capabilities. On dynamic capabilities, coca cola has renewed its strategies over and over through changing environments and has ensured efficient production in the past and present. Coca cola has seldom experienced downfall since its inception and hence there has been no need to adopt turnaround strategies on a large scale. These are just strategies meant to reverse the fortunes of a company on the downfall.
The Coca-Cola Amatil limited has had a dynamic edge over its competitors in Australia. This is mostly attributed to its enforcement to the porter’s five forces frameworks. Strategies like extensive advertisements, increased innovations and usage of modern day technologies can be attributed to this advantage. Coca-Cola Amatil limited has also been shifting with its consumer’s tastes and preferences producing quality goods at a standardized price. In the production of water and natural juices of high quality in order to keep up with their consumers. Moreover, Coca-Cola has given its consumers a bargaining power with their prices that are mostly consistent with every distributor. Coca-Cola also has concentrated in nonalcoholic beverages which makes them only have one industry to worry about. In this Coca-Cola has shown its powers and strengths.
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