Coca Cola Economic Position Paper

Running Head ECONOMIC POSITION coca boob Economic Position Paper ECO 365 coca pot is the worlds lead manufacturer and distributor in the beverage industry. The economic position of coca- gage is determined through c beful depth psychology of the organizations history, market conditions, market causes, and finall(a)y the recommendations needed for the forthcoming of the organization in their economic position. Overview of the company will consist of the history, industry market, the role of administration regulations, and issues or opportunities. History of Organization A pharmacist earth-closet Pemberton founded Coca genus Cola in 1886.Pemberton took the caramel colored concoction to Jacobs pharmacy and added carbonated water. The initial take on this strange water was so good that Jacobs pharmacy sold approximately nine glasses a day at 5 cents apiece. After Pembertons death in 1888, the colored water went on a century later to sell more than 10 billion gallons of syrup. D uring World War II, the company established manufacturing for foreign operations and by the end of the war had become an international company. Coca Cola has developed into the thumpingst beverage organization since 1886, an unimaginable dream come trustworthy for the founder.Coca Cola operates in more than 200 countries and market a portfolio of more than 3,000 beverage products including sparkling pl banks and still beverages such(prenominal) as waters, juices and juice boozes, teas, coffees, sports drink ins, and talent drinks (The Coca Cola System, 2010). The core philosophy for the bottling of each product is on building local relationships with customers and communities and is the foundation for growth (History of Bottling, 2010). The mission of Coca Cola is To refreshen the world, to inspire moments of optimism and happiness, and to create value and make a difference (Coca Cola, 2010) Market of the Coca Cola toiletThe Coca Cola Corporation operates in grand market , that is to say the company operates on a global platform, expanding 200 plus countries. The Coca Cola Corporation focuses on the non-alcoholic beverage market in the drink industry. Incorporating over 400 brands and over 3,000 opposite beverage options, the Coca Cola Company is the largest beverage company in the industry. (Coca Cola Corporation, 2008) . The brand, Coca Cola, accepted as the worlds most valuable trademark is bringing in positive cash rises of over 8 billion dollars annually. (Coca Cola Corporation, 2009) . Role of authorities RegulationsCoca Cola bottlers atomic number 18 presently making non-refillable recyclable plastic bottles in the United States as well as markets around the world. Many bottlers extend refillable containers, which atomic number 18 also recyclable. Coca Cola states, Legal requirements keep back been enacted in jurisdictions in the United States and overseas requiring that deposits or certain eco-taxes or fees be supercharged for the s ale, marketing, and use of certain non-refillable beverage containers. All of Coca Colas services in the United States and in other parts of the world are subject to a sorting of environmental regulations and laws.In following the laws and regulations within the United States and around the world, Coca Cola has not nor anticipates any adverse contract-to doe with on the companys competitive position, capital, or net income. Issues or Opportunities The health issue challenge can disrupt the growth of the soft drink industry. However, opportunities exist for CCE to continue to stay ahead in the beverage industry. For example, penetrating multiple markets around the globe is a strategic move that will drop by the wayside acquisition opportunities and enhance the market and financial gains of the company.In addition to acquisition efforts, tapping into the existing bottled-water market frenzy is another opportunity Coca Cola has to recover market growth. The beverage segment of b ottled water is rapidly on an incline in the United States as more people are becoming awake(predicate) of the need for a healthy lifestyle. By tapping into the bottled water segment, Coca Cola will strategically position itself for growth. Taste is the ultimate power behind exchange a beverage by offering flavored water to the consumer-markets, rude(a) and re-brand, loyalty is increasing.Re-brand loyalty is important because consumer segments that lost interest in soft drinks are flavour to live better by a smarter selection of food and beverage. Market Structure _ real _Market Trends The Coca Cola Company (TCCC) operating(a) in an oligopoly is a trend in the carbonated beverage industry not expected to change. This statement, made on the fact that the Coca Cola Company operates not only in the carbonated beverage market, but is a diversified corporation operating in the non-alcoholic drink market. The diversification of TCCC was necessary to continue its competitiveness with m arket trends in the industry.In refreshing-made years, the trends have shown the carbonated drink industry declining in lieu of the health conscious position. Simply stated, the company competes in a variety markets including teas, coffees, energy drinks, and many others facets of the industry. As a result, TCCC competes with only a few corporations in the drink market such as, Nestle and PepsiCo. (The Coca Cola Company, 2009) . TCCC, on with the competitors, operate in collusion with cardinal another in an effort to check consistency and sustainability in the non-alcoholic drink market.An important point to note, oligopolistic organizations operate interdependently and are viewed as collusive (cooperating) or noncollusive (not cooperating). Oligopoly market structures have other defining characteristics that differentiate from the monopolistic competition market structure. Figure one provides some of the characteristics that intend an oligopoly market structure. Figure one dr awframe Impact of New Companies Entering the Market _Current _Market Trends Currently, the carbonated beverage industry has three major corporations that have a strong presence in the market.The Coca Cola Company, PepsiCo, and Dr. Pepper Snapple Group champion the majority structure of the market share in the industry. The statistics careful in 2008 have the Coca-Coca Company dominating at approximately 40% with PepsiCo and the Dr. Pepper Snapple Group fixed at 20. 1% and 8. 5% respectively. The other players to the marketplace compose the remaining 31% (Datamonitor, 2009) . New companies have surfaced in the drink industry and have stirred the competition, at least enough for companies like TCCC and PepsiCo to be observant of their presence.Simply stated, TCCC monitors the sorecomer and surveys the public reaction to the product. Figure two drawframe New companies entering the carbonated beverage market would have significant entry costs (advertising and marketing) to compete w ith the majors previously identified. The nature of the market demands an intensive marketing campaign in order to generate and maintain a successful brand image. With Coca Cola Company and PepsiCo so firmly established in this area, even aside from the costs, this acts as a daunt deterrent to potential entrants (Datamonitor, 2009, p. 18) . Prices Current _Market Trends CCEs trailing-12-month return on capital (ROC) is 11%, compared to a stout 15. 9% for Coca Cola. (Pienciak, 2010) the company is already in a hurt war and needs to make a change to improve its competitive advantage in the market. For this reason, Coca Cola recently announced that it would maintain the worlds largest bottler of Coca Cola-owned beverages names. The merger should improve operations and assist in adjusting to customer preferences. Pienciak (2010) states, Essentially, owning the North American bottling business boils down to flexibility some(prenominal) in product innovation and pricing. Technology _C urrent _Market Trends Recent movements in technology for Coca Cola improvements and modifications have come from the market trend of cleaning up the atmosphere. Coca Cola is committed to putting as little pollution into the atmosphere as possible and has given a press release that states, vitamin C % of their new vending machines and coolers will be hydrofluorocarbon-free (HFC-free) by 2015. Coca Cola is committing to use its scale to aggregate demand and encourage supply as a means of accelerating the transition to HFC-free refrigeration equipment (News Release, 2010).Productivity _Current _Market Trends Coca Cola offers one of the largest widely distributed products for beverages, in a market, which reaches across the globe. Coca Colas products are so favourite that three million people consume them annually. Its product line has 3,000 varieties (Coca Cola, 2010). Production systems include soda, water, juice, tea, and sport drinks. Productivity includes the system with fixed an d variable inputs, including the manufacturing, the branding, the bottling operation, marketing activities, and, of course, one of the most important is the packaging.These market trends change with time as the changing needs, and desires of the consumers change The market trend productivity is on the rise for Coca Cola. In June of 2009, Coca Cola announced a new structure for productivity, the three new structures Global Business Services, Global Information Technology, and Transformational Productivity (Press Center, 2009). Because Coca Cola has created a new structure for productivity, they promoted five new executives, making room for more promotions and new hires. Cost Structure _Wages and Benefits_ _ modern market trends. _ Fixed and _Variable Costs current market trends. Fixed costs are those such as factories, which do not change regardless of the level of production. Variable costs include such things as cans, bottles, and hourly wages, these things directly relate to the l evel of production. Because of its vast economies of scale, Coca Cola has very low variable costs. Coca-Cola uses sugar, bottles, cans, and soft drink syrup as inputs. Because it is a very large buyer, it can use its influence to obtain these goods at reduced rates. Coca-Cola creates its own syrup, the recipe for which is a trade secret.TCCC sells Coca Cola Enterprises the syrup, which they use to create beverages, and then distribute. Therefore, in spite of Coca Colas relatively good salaries and benefits, its variable costs are a excusable consideration. However, its fixed costs are considerable. Each factory costs millions of dollars to build and maintain, as well as the bottling equipment, recycling equipment and vehicles. Price Elasticity of Demand Current Market Trends Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in hurt (Colander, 2008, p. 128) . Concerning the Coca Cola Company, price elasticity of demand is, at best, subjective to many areas of business. Geographic location, type of product/brand, and competition are facets considered subjective when speaking to price elasticity of demand. Market trends in price elasticity of demand relative to the standard carbonated offering (cola, sparkling) are concentric. Simply stated, the prices are inelastic to commonsensible price changes however, pressure from health groups may influence the future state of price elasticity of demand in the carbonated beverage industry.In recent estimations, the price elasticity for all soft drinks is in the range of . 8 to 1. 0. (Elasticity of . 8 suggests that for every 10% increase in price, there would be a decrease in consumption of 8%, whereas elasticity of 1. 0 suggests that for every 10% increase in price, there would be a decrease in consumption of 10% )(Brownell et al, 2009, p. 1602) . Competitors Current Market Trends Coca Cola is a very diverse organization with over 400 brands dividing into approxim ately 3,000 products. opposition includes companies such as PepsiCo. nd Aquafina the variety of competitors stretches through the supply and demand chains to include organizations like Starbucks or any store that carries products other than Coca Cola brands Pepsi Co. is the leading competitor for Coca Cola because of the ties with the carbonated beverages for which both companies produce. PepsiCo and Coca Cola have fought a Cola War (Strauss, 2010) for decades with their marketing techniques and following the flow of market trends. Supply and Demand Analysis Current Market Trends In a new report from Beverage Digest, a remarkable downturn in the soft drink market is accelerating.Total US sales fell 2. 3% in 2007, which was worse than the 0. 6% drop in 2006, which was, in turn, worse than the 0. 2% extraction in 2005. The carbonated soft drink industry has moved from roughly 3% growth in the 1990s to increasing rates of decline in the last three years. Then again, the US is doing its best to keep Coke afloat. Even with the recent declines, the U. S. still has the highest consumption of carbonated soft drink per capita in the world (Kedrosky, 2008). Coca Colas expansion into other markets has absorbed the decline in demand for carbonated soda, as the demand increases for their other products in the US.Globally Coca Colas demand is still increasing with expansion into newer territories. Impact of giving medication Regulations Current Market Trends Final Recommendations The analysis thus far of the economic position for Coca Cola is only lacking in recommendations for the future, price, production, and composition of inputs, global competition, and the possibilities of expansion. Government policy, social vicissitude, and business ethics will be necessary as part of the recommendations for the future status of Coca Colas economic position. PriceAs the worlds largest provider of non-alcoholic beverages CCE has positioned itself in the market as the standard f or others to follow. Competitors are constantly knocking at the door and for this reason CCE needs to continue to be groundbreaking with pricing strategies throughout the world market. The trend today is prices on non-alcoholic beverages are increasing, fuel, and electrical cost are higher causing companies to raise prices. CCE can maintain its position as the world leader by reducing costs and pass the savings on to customers. Production The North American and Western europium markets have been difficult for CCE recently.Both markets have shown a decline due to consumers turning towards healthier non-carbonated beverages. Prices for raw materials that CCE needs to produce its products have become more expensive. To combat these obstacles CCE needs to provide innovative ideas and methods to reduce production cost. CCE could benefit from cutting down on employees and utilizing assets more efficiently. CCE might benefit from new products that are non-carbonated. New products would a ppeal to the healthier consumers. Composition of Inputs Many different inputs are needed to produce the 3,000 different varieties of Coca Cola products.Figure 3 downstairs shows how some of these inputs work together to produce the final product. Figure 3 drawframe Some of the other inputs are the quality of work performed by employees, and vendors who supply the bottling process. All of these inputs work together to create the most recognizable brand in the world. (Figure 3 provided by Fuzzy Logic Control) Global Competition Global competition is much like national competition and one of the biggest competitors is the neighborly PepsiCo. For Coca Cola, it is vital to watch the competition in its back yard.PepsiCo universe from the same country is the biggest competitor. Import and export scenarios are much the same for both companies making production costs in competition, which in turn makes the price of each beverage competitive. The three primary issues TCCC can focus on to ke ep up with the competition globally are (1) expansion in countries that are growing rapidly, (2) expansion on lower sugar beverages, and (3) expansion into noncarbonated beverages (Sivy, 2007). All three expansions will help maintain a competitive edge as well as diversify the company making Coca Cola stock more sustainable.The recommendation for Coca Cola is expansion. Analysis of Government Policy, Social Diversity, and Business Ethics on Expansion Government policies result in TCCC being proactive in meeting or exceeding rules and regulations, on a national and global plane. Expansion of operations demand TCCC follow local, state, federal and foreign government policies to ensure cohesion exists between the units to satisfy the objectives of each. The new market trends in the beverage industry indicate a shift to the health-conscious position, thus increasing the need for TCCC to expand into new markets.National and State government policies designed to rid the public school syst ems of high-calorie beverages create new challenges for carbonated beverage providers, thrusting TCCC to diversify its offerings to support a healthy lifestyle for children. alien governments have accused carbonated beverage makers of allowing harmful levels of pesticides in their carbonated offerings, thus increasing the need for higher standards of quality in to be placed into the product. Both challenges have a direct impact on expansion, but also provide for innovation in the carbonated beverage industry.Social diversity is an aspect of expansion directly affecting TCCC in a positive direction. Expansion of operations suggests global implications meaning more opportunities for a diverse workforce. TCCC operating in a global arena demands the company use diverse workforces to improve its position in the marketplace. The company can both educate tour also learning from individuals cultural backgrounds to propel TCCC to greater achievements in the beverage industry. Business ethi cs are an important feature of expansion.TCCC is committed to performing all business dealings with the highest morals and standards in the industry and is reflective of their Code of Business Conduct in daily operations. Business ethics encompasses a large and often complex set of guidelines to abide by. Expansion often suggests the mitigation of competition through mergers or corporate takeovers. TCCC has the responsibility, in such cases, to act with one to its adversary. Conclusion The market trends of the economy will cause changes for Coca Cola however, the organization is very stable and will often lead the industry into new market trends.All variables will touch Coca Cola at some time but several that affect the organization on a regular basis are new companies, prices, new technology, variable costs, competitors, supply and demand, and globalization. Coca Cola has led the industry in innovation. Through expansion into new markets around the world, Coca Cola will continue t o lead the industry. References Brownell, K. , Farley, T. , Willet, W. , Popkin, B. , Chaloupka, F. , Thompson, J. , & Ludwig, D. (2009, October 15). The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages.The New England Journal of Medicine, 361(16), 1599 1605. Retrieved from http//content. nejm. org/cgi/content/full/NEJMhpr0905723 Coca Cola. (2009) Annual Report. Retrieved from http//www. theCocaColacompany. com Coca Cola buys stake in Honest Teas. 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