Marketing analysis paper on: External audit of Coca Cola
EXTERNAL AUDIT
External audit is related to the analysis of external forces that can affect the business of organization positively as well as negatively. Here in external audit of Coca – Cola we would be analyzing the opportunities and threats available in the market for Coca – Cola. Let us first discuss the opportunities of Coca – Cola. As we all know that Coca – Cola is a market leader in the carbonated soft drinks industry. It has ignored the non carbonated soft drinks sectors and that is why Pepsi has made its strong position in non carbonated soft drink sector. Coca – Cola has a great opportunity to diversify itself into the non carbonated sector. Since it’s a big brand it will not have to face difficulties in establishing its business in non carbonated sector. Similarly, consumers of soft drink industry are becoming health conscious and hence Coca Cola has an opportunity to inter into the segment of healthy drinks. Another opportunity for the company is increasing disposable income of people in countries like China, India and other European countries. These countries are emerging economies and have a high potential of growth for soft drinks industry. Also the company can go for food business as well; it will not only diversify the business of Coca cola but also will enhance the sales of soft drinks of the company.
Now when we discuss the threats of Coca Cola the biggest threat we find is its low growth in the non carbonated soft drinks sector. It is required to focus on the non carbonated soft drinks as well, where Pepsi has already made its strong position. Unstable economic condition of the world is another big problem of not only Coca Cola but in fact of all the business. Debt Crisis in Europe and then economic slowdown in America affected the business of Coca Cola on a great scale. These countries are overcoming of their financial problem now which is a good sign for Coca Cola. Other threats are increasing prices of the raw materials and easily available substitute for the soft drinks. The biggest threat of Coca Cola is high competition from Pepsi. It needs to make some strong strategies to face the competition from Pepsi.
EFE MATRIX
Next is external factor evaluation matrix which is based on the opportunities and threats that we discussed in previous slides. EFE matrix helps us in evaluating the current business environment of the business. A weight is given to all the possible opportunities and threats and then ranks are provided. By multiplying rank with the score we have got weighted score of each opportunity and threat. The opportunities which have high potential then the others have got higher weight similarly in the case of threats. By calculating we have got total score of coca cola equal to 2.98. The total weighted score we have got for Coca Cola is above average which 2.5. It means company is effectively taking the advantage of opportunities available to it.
KEY EXTERNAL FORCES
Now we would be analyzing the key external forces for Coca Cola. In this segment of the presentation we would be discussing the external forces which affect the business of Coca Cola in its different markets. The main forces are Economic, Social, Cultural, Demographic, and Natural environment, Governmental, Political and Legal. Each would be discussed one by one.
ECONOMIC
As we already discussed that the economic condition of world has become very unstable which is affecting the business of coca cola. But the countries like China and India where Coca Cola is present have high growth potential as these countries are consumption driven economies. To get stability in unstable economic situation coca cola can borrow money and invest in research and development so that it can get some new products are processes to enhance its business performance.
SOCIOCULTURAL, DEMOGRAPHIC AND NATURAL ENVIRONMENT
Understanding the taste and preferences of the society and its culture is essential for the success of business. In carbonated soft drinks industry we can see that the preferences of the consumers are changing. They are shifting to the non carbonated soft drinks. Also the consumers of Coca Cola are young age people as well as older. In fact children are also targeted by the company. And the people who are of the age between 35 and 55 are becoming health conscious and they are more concerned about the nutrition in their drinks and foods. Coca cola needs to focus on these factors.
POLITICAL, GOVERNMENTAL AND LEGAL
Understanding the legal requirement of a country is very essential for running a business successfully. Countries always change the laws related to taxes or labors etc. If a company would be found disobeying the law it will be charged a penalty. Coca cola takes care of the legal requirements of its different markets.
Similarly, government of a country is responsible for the political situation of that particular country. If government is not able to handle the political situation it would affect the business of coca cola or any other company. These unstable political situations could be civil wars or protests against the government. Also the changing governmental strategies affect the business of a company.
TECHNOLOGICAL
Technology is the key success factor of any business today. A better technology helps in the promotional strategy of Coca Cola. For example we have facebook, twitter and other social networking websites which help in the promotion of the products of Coca Cola. A better technology helps not only in promotion but also in production as better machineries enhance the production processes and make the company able to produce a large quantity of products.
COMPETITION
When we analyze the competitive environment of Coca cola we find that Pepsi is its biggest competitor. And the main competition is in the non carbonated soft drinks sector. People are changing their preferences to the non carbonated drinks and Pepsi has made its strong position in this segment with its many successful products like Aquafina, Gatorade, Propel, Tropicana etc. Pepsi has 50 % market share in US in non carbonated soft drinks industry whereas Coca cola owns only 23 % of the market share. It needs to focus on non carbonated sector as well. There are also other competitors in the market such as Cadbury, Red bull etc.
MANAGEMENT AUDIT CHECKLIST
As we know that auditing helps an organization in understanding its current business environment. Auditing is basically of three type management, financial and operational. Here we are discussing the management audit. There are some questions given which will help in the auditing process. These questions are mainly related to the achievement of strategic objective of the company, production process of the coca cola as well as the products of the company.
BCG MATRIX
Next is BCG matrix which has four quadrants: Star, Cash Cow, Question Mark and Dog. These quadrants are made according to the market share and growth rate of products. We have analyzed the products of Coca Cola according to the BCG matrix and we found that Star products of Coca Cola are Thumps Up and Maaza. These are star products because they have high market growth as well as high market share. Similarly, Limca and Kinley come in the cash cow quadrants as these products have low market growth even they are able to generate enough cash with the help of high market share. Fanta, Sprite, Minute: these products come in the quadrants of Question mark because they have high growth rate still they are not able to achieve the market share. It means these products are required to have some new promotional strategies. And the last is dog. The products which come in this category are those products which are not beneficial for the company and company should stop producing those products.
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