The environments in which businesses operate keep on changing from time to time. This makes businesses to keep on inventing new measures to adapt to the change. The business environment comprises of internal and external forces that put pressure on business operations and functions. The external business environment comprises of legal, social and economic factors that influence business operations and the business has no direct control over them. This paper will compare and contrast business elements and the legal, social and economic factors influencing Coca-Cola and Pepsi companies which operate in the beverage industry. Concretely saying, the two companies are the market leaders in the beverage industry.
The legal, economic and social environment in which Coca-Cola and Pepsi operate.The legal, social and economic factors are external environments that greatly affect business operations. Both Coca-Cola and Pepsi conduct their business operations in the same environment. The legal environment comprises of laws and policies that regulate how a business operates. It also consists of associations and groups of people, government and non-governmental agencies that play a regulatory role in organizations. Coca-Cola Company has bottling subsidiaries almost all over the world, and a change in law acting against its products has detrimental effects. A case example happened when the European Commission put an alert to its member states on consumption of Coca-Cola products due to the CO2 poisoning of children in Belgium (Epstein & Buhovac 2014).
The social environment is made up of the change in attitudes and lifestyle habits. Many people in the United States are opting for bottled water as opposed to beer. This has widened the market and production capacity for soft drinks especially bottled water and diet colas have made Coca-Cola and Pepsi increase production of these drinks.
The economic crisis experienced in many European nations has led to the slowed development of many companies in the United States. The economic environment comprises of the buyers ability to purchase a product. It also entails the changes in buyers income, tax rates and changes in prices of substitutes. When the economic environment is negatively affected, sales decrease, and this lowers the profit margin.
Organizational culture and performance
Organizational culture refers to norms, values, beliefs and distinct personalities that make up a company. Coca-Cola Company has a strong belief in people and its diverse brands. Coca-Cola invests heavily in its employees, customers, brand, and management. This is borrowed from Coca-Colas core values of leadership, integrity, passion, accountability, and quality. Pepsi Company has professionalism and fun in the workplace as its culture. Pepsi allows its employees to pursue their individual goals so long as they rhyme with its organizational goals. People of all backgrounds and cultural orientation are given equal opportunity and chance to work at Pepsi Company. Organizational culture brings cohesiveness and a sense of belonging to the company, and this plays a key role in achieving the goals of the organization.
This involves awareness creation about the goods and services that an organization deals in with the intention of increasing sales. Coca-Cola Company employs the use of incentives to attract customers and increase sales, i.e., awarding customers with data bundles and free short messaging services to encourage customers to consume its products. Pepsi also employs a similar approach to penetrate the market by using incentives. Even common in the two companies is the use of celebrities in endorsements and sponsorships to increase sales (De 2013)
Management and Administration
Coca-Cola Company employs different management styles in its many departments. Democratic style is applied where all managers, the junior managers, and other staff take an active role in generating new ideas and are discussed by all parties before its brought to the managers for evaluation and implementation. Coca-Cola also uses Management by Objectives style which emphasizes the role leadership plays and communication in an organization. Pepsi Company, on the other hand, uses Consensus Management style where decisions are made in a group, and total commitment of all is applied. This has seen Pepsi succeed in achieving its mission over time.
Decision making strategy.In Coca-Cola Company, strategic decisions are made by the top level management. These decisions are expansion in the foreign markets and decisions that involve a huge capital investment. Pepsi Company has its strategic decisions made by a Board of Directors that is a top organ comprising of one executive director and twelve other independent people sourced from outside the directors.
Both Coca-Cola and Pepsi have adopted an open style of communication where both the management and the staff members are free to communicate with each other. This open and free communication channel has enabled the two competing companies to tackle issues arising within the shortest time possible. The Internet has been key in marketing communication strategy.
Application of SWOT
The Strengths, Weaknesses, Opportunities, and Threats abbreviated SWOT is a tool employed by the management to determine strengths, weaknesses, opportunities, and threats. An organization uses its strong areas to its advantage while weak points are used in planning to avoid losses or business failure.
Coca-Cola company SWOT tool analysis.Strengths include the presence in many countries in the world, has many leading brands in the beverage industry and has over 47% of sales of carbonated drinks. Coca-Cola weaknesses include a decline in the turnover of carbonated drinks, the complex relationship between the Companies and how it relates with other bottlers in America and the world at large and an inefficient distribution channel for non-carbonated drinks. Coca-Colas opportunities include risk-free drinks like the minute maid that are demanded by people who have concerns about the health impacts of other drinks as well as wide channels across Europe and Latin America. Coca-Cola threats include strong brands from Pepsi like Aquafina, India protesting against Coke and its negative publicity in some parts of Europe (Ling, 2017).
Pepsi Company SWOT tool analysis.Pepsis strengths include the worlds second selling brands from Coca-Cola, innovation in new products and presence in many countries in the world. Pepsis weaknesses are the reduced market for the carbonated drinks and the fact that it targets the youth in its products. Pepsi opportunities are the increased sales of the healthy beverages and the concern for bottled drinking water. Pepsi threats are the marketing and innovation strategies by Coca-Cola company which is its main competitor, concerns of obesity, over-dependency on America and markets in Europe only (Muzumdar, 2014)
How Coca-Cola company applies the Functions of Management
Organizing: Coca-Cola Company has decentralized its operations to fit within its centralized model. This means that the main headquarters retain the sole decision making but has regional and geographical territories to assist in problem-solving situations without having to wait for the main offices to decide (Kerzner, 2013).
Leading: Coca-Cola Company has delegated powers to regional and geographical territory managers to decide on the best strategy to approach and increase sales so long as they follow the global Coca-Cola culture. A democratic and laissez-faire style is applied worldwide.
Controlling: This is done through a regular periodic review of the performance of both the managers and the sales personnel. The set targets are evaluated against the actual results recorded by each manager and employee.
Planning: Coca-Cola Company has put itself in formulating and implementing short and long-term plans that enable the corporation to adapt to the ever-changing internal and external environments.
Financial issues affecting Coca-Cola and Pepsi Companies.
Consumption of soft drinks especially soda and other carbonated drinks especially in America and other European markets have seen the two companies suffer financially from reduced sales and profit margin. In 2015, there was a 1.2% decline in the total soda consumption according to research conducted by Beverage Digest. Pepsis consumption dropped by 3.2% in the same year. Americans turning away from soda brands is a big financial blow to these market leaders in the beverage industry.
Elements of business in which Coca-Cola and Pepsi operate.Value base which covers the product, product features and benefits versus the competition, market size and the minimum viable product that bring feedback from customers instantly or without delay. Customer clusters that entail the type of customers the product will sell to, and the customer needs the product addresses. Relationship with customers and involves how the organization will create demand for the product. Cost Expenditure structure that involves all costs both fixed and variable which will be incurred to run the business. Resources: Includes the suppliers, the commodities and other essential elements necessary for the business to succeed. Business partners: Includes other business enterprises that will assist to form links that will lead to success. Revenue avenues: Involves the number of revenues to be collected and the sources of profits and the profit margin (Rosemann & Brocke 2015)
In conclusion, business corporations do not work in isolation. They operate in business environments that are both internal and external. These environments affect in many ways the performance of business operations. Coca-Cola and Pepsi are market leaders in the beverage industry and command a big segment of the world. The management and administrative aspects of the two companies have played a key role in their success.
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