Joe DavidPESTEL analysis of Coca-Cola (The Coca-Cola company)
This detailed PESTEL analysis of Coca-Cola examines some of the external factors that impact on the operations of the Coca-Cola company. It aims to explore some of the macro-environmental factors such as political, economic, social, technological, environmental, and legal that have been influencing both the strategic and the operational decisions of the company.
Political factors affecting Coca-Cola
The products of the Coca-Cola company are old in over 200 countries and territories. This massive operations offer the company both opportunities and challenges. For instance, it has been thriving extremely well for so long in the USA and Europe because of political stabilities.
However, sometimes political decisions by the U.S government impact on the operations of the Coca-Cola company and many others abroad. For instance, according to the CEO of the company (cited in Jr., 2018), the tariffs imposed on steel and aluminium on numerous nations including Canada, Mexico and the European Union have incurred retaliatory measures that resulted in increases in prices for many products including soft drinks.
The rise of sugar tax on soft drinks in the UK is also a problem for the Coca-Cola company. However, many analysts report that this has not much impacted on sales. It is worth mentioning that the Indian state of Kerala banned the production and sale of Coca Cola in 2006 because of health concerns.
Economic factors affecting Coca-Cola
As the Coca-Cola company operates in many countries, its operations are affected differently. For instance, its products are generally affordable for customers in developed countries; however, many customers in developing and poor countries may not be able to afford them.
Lucas (2020) reports that the CEO of the Coca-Cola company is concerned about economic conditions around the world and how they may impact on consumer behaviour. As many customers are losing their jobs and have financial limitations, they may reduce their consumption of soft drinks like many other less important products. Likewise, the rising cost of raw materials and labour is another important factor affecting the company.
Social factors affecting Coca-Cola
As Coca-Cola operates in many countries, the taste of its drinks may slightly vary to reflect the local cultures, customs, and tastes. The basic ingredients and process used to make the end products are the same in all countries; however, the same soft drink may vary slightly in taste due to factors such as temperature and storing conditions (Coca-Cola company, 2022).
More and more people are becoming health conscious and concerned about the impact of fizzy drinks on their health. This may reduce the demand for fizzy drinks; however, it may also increase the demand for healthier drinks. This is evident from the increasing demand for products such as Gold Peak tea and Simply Light juice. It is worth mentioning that many people consider sugary drinks to be a big contributor to many illnesses.
Technological factors affecting Coca-Cola
Technology is another important element to address in the PESTEL analysis of Coca-Cola. Coca-Cola has been using digital technology to create new consumer experiences via innovative programs. An innovative programme like the sip & scan lets consumers unlock experiences and prizes by scanning icons on Coke packages with their mobile phones (Coca-Cola company, 2022).
Coca Cola has made significant investments in research and development. It is using artificial intelligence (AI) to ensure that it can gain significant insights into consumer behaviour from the data it collects. Introducing Cherry Sprite as a new flavour was a result from that data collection effort (Marr, 2017). It is worth mentioning that 105 million Facebook followers and many more millions in other social networking sites work as a particularly important data source for the company.
Environmental factors affecting Coca-Cola
As a beverage company, Coca-Cola relies on substantial availability of water. Therefore, shortage of water in a given location may impact on its operations. On the other hand, it has been accused of creating water shortages in some places. For instance, one of its bottling plants was ordered to close in northern India in 2014 as local farmers blamed it for using too much water (Chilkoti, 2014).
Likewise, in 2019, it was named the worst company for plastic pollution in the word by Break Free From Plastic, an environmental pressure group (Petter, 2019). This is certainly bad for its brand image and the environment.
Legal factors affecting Coca-Cola
Legal environment is the last part in the PESTEL analysis of Coca-Cola. The Coca-Cola company has been fined substantial amount of money in some countries over breaches of certain rules and regulations. It was sued in 2021 by Earth Island Institute for allegedly having deceptive marketing claims regarding its sustainability activities. Therefore, it is very important for the company to ensure that it meets and fulfils all the local and international rules and obligations to run its operations smoothly.
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Last update: 27 January 2022
References:
Chilkoti, A. (2014) Water shortage shuts Coca-Cola plant in India available at: https://www.cnbc.com/2014/06/20/water-shortage-shuts-coca-cola-plant-in-india.html (accessed 26 November 2020)
Jr, B. (2018) Coca-Cola CEO says company sees cost pressures from Trump’s tariffs, available at: https://www.cnbc.com/2018/07/25/coca-cola-ceo-company-sees-cost-pressures-from-trumps-tariffs.html (accessed 21 November 2020)
Marr, B. (2017) The Amazing Ways Coca Cola Uses Artificial Intelligence And Big Data To Drive Success, available at: https://www.forbes.com/sites/bernardmarr/2017/09/18/the-amazing-ways-coca-cola-uses-artificial-intelligence-ai-and-big-data-to-drive-success/?sh=36ad734178d2 (accessed 25 November 2020)
Petter, O. (2019) COCA-COLA named worst plastic polluter for second year in a row by environmental group, available at: https://www.independent.co.uk/life-style/coca-cola-pollution-plastic-environment-coke-a9168921.html (accessed 26 November 2020)
Coca-Cola company (2022) Who we are, available at: https://www.coca-colacompany.com/careers/who-we-are (accessed 27 January 2022)
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.
M Rahman
