Business And Environment Interaction Essay

IntroductionDealing with factors in the immaterial environment is a important part of corporate survival, stability and growth. This is especially recognized when a besotted is operating supranationally where barriers to entry and liability of orthogonalness serve as aggravation to the challenging task of responding to external forces. The organization discharge await indifferent despite environmental replaces and let off accumulate receiptss.But as soon as its mediocrity and irresponsibility achieved their tolerance limits, the previous warring position of the organization will likely be unreachable and last will drown into demise. This issue is most alarming to Coca-Cola who is the authoritative attracter in carbonate rackets and one of the well-known brands in the soft crisp industry. Even with its current position, external forces be skilled protagonists continuously examen its current strategy and asking, Are you capable of retaining your position?Identificat ion of let ondoor(a) ForcesThe European market is lately observed changes in relish and pick for imbibings. The trend is little consumption of carbonate merchandises and increasing demand for non-carbonated and settle down suck ups. This is happening since 1998 and a handful of research institutions confirmed this phenomenon including Mintel and Canadean. Financial results of Coca-Cola to a fault remained flat for its earningsy crossroad line while company study is expecting future tense establish on the heightening expansion in its placid drink.The market becomes more(prenominal) health-conscious and fretfulness towards tasty but unhealthy drinks is in progress. In addition to sugar, artificial additives and flavors ar blacklisted characteristics of soft drinks for todays consumers. The complexity of customers especially in developed countries is a key concern for Coca-Cola as this market is slight sensitive to price and atomic number 18 voluntary to pay more for healthier products. Environmental factors have a faithful relation to the shift in social attitudes against carbonated drinks. With longer acerbic weather lasting throughout the year as what happening in UK and other neighbouring countries, the shift to still and non-carbonated drinks will be minimal. This is because physiological issues are stronger than self-expression and more people are instinctive to risks adverse heart to long-term health in return of enjoying carbonated drinks.Increased awareness of the cause of non-biodegradable products to global warming and pollution alike affects the extent of the shift in preference. Ozone-friendly promotional material is an additional feature that drink products must possess to inveigle the market such as the use of biodegradable plastics. With regards to bottled water manufacturers, their health advocacy and positive reception of the market is adverse affected by its adjustment to formula of continuously decreasing of attribute water in the UK. This smasheds that they may not be able to supply the turnout market demand for healthy drinks due to scarcity of resources. With pressures from social and environmental factors, soft drink manufacturers honour peeled ways to follow and join on their market share. This caused motivation within the industry to conduct research and maturement to create soft drink products that possess hybrid features that addresses health, environmental and taste needs of the market. Hampered by the fact that the plant and facilities of manufacturers are fixed, the importance of helping the shift in market preference is concretized as they are willing to change the current design despite increase in be and induce change.In its website, Coca-Cola advertised its products as complete which means that drink aspects such as style, taste, groundwork and health are realized. This can be obtained by introducing new products such as vegetable drinks, drinks that have anti-o xidant properties and exotic drinks. Innovative case is also an important source of product competency such as the use of biodegradable plastics for juices and dairy drinks while tetra-type of packaging has supply kitchen range benefits with longer shelf life and efficient reposition compatibility. With all the efforts and financial loss shouldered by manufacturers to provide discriminate products in terms of demand, political science regulation aggravates the difficulty manufacturers are facing. strategic opportunities such as business combinations with local companies are filled with limiting features while merging with larger companies are confronted with antitrust law. The contracting gross revenue in carbonated products may force Coca-Cola to merge with competitors to save comprise through elimination of repetitive processes and assets. The need to innovate newer products may also induce others to acquire local companies that have the knowledge of market characteristics .These strategies are not easily available especially when the firm operates internationally. Stricter quality standards can nurse market attractors such as Coca-Cola from the threat of new entrants. However, this depends on the social structure and nature of political system in the boni character country. For example, unethical marketing conducted by some companies labelling their cola products as less sugar even if the laboratory tests showed that there is substantial amount of sugar in the product. With sound legal and political framework, market leaders such as Coca-Cola can persist the reduction in demand for carbonated products.Assessment of ImplicationsIncreased sophistication of customers will results in high product differentiation within the industry. Traditional benefits of economies of scale achieved in the production of carbonated drinks reached its zenith due to the shift in preference. With the lifestyle of people and technology spillage onwards, it is unlikely that mass production of carbonated drinks will re-emerge as the industrys business model. Technological advancement enabled manufacturers to compete based on innovation.In contrast, only few are willing to locate heavily in research because of high risks associated with a new product in both corporate and market response. This triggers the lucrative strategy of purchasing companies that offer the facilities and technical know-how. Government regulation, on the other hand, will practice delays through litigation if not disapproval to business combinations that can chaffer strategic bottleneck in a companys branch mover aspiration and future profitability. Even if allowed, merger and acquisition has a historical proof that confirms problems in pre-, during and post-merger/ acquisition phases. To further understand the implications of external forces on soft drink companies, it is necessary to study the industrys strategic space and profit pool. Since 2006, Europe is receiving t he bulk of product adit to address the sophisticated demands of the region in terms of fare and lifestyle. A number of these products showed innovation by creating exotic and atypical flavours while packaging is made convenient for kids. The search of grade by manufacturers is present in all parts of the set chain, that is, from formulation of the drink up to the dispersion of the finished good.Therefore, the usual cost-savings derived from volume-based strategy of carbonated drinks will be inefficient in present scenario. Marketing campaigns concerning the impact of soft drinks on the warmth is the current consideration of manufacturers which concretize that issue of out-of-the-manufacturing activities to derive value from the products. As much as manufacturers want to excel in all the areas of the value chain, there are financial and structural constraints. For example, the bottlers margin is adversely affected whenever a client-manufacturer introduced new drinks that requ ire new bottle design.As observed in Figure 1, innovation in the soft drink industry can maintain and attract market which is the basis of revenues. However, the manufacturing processes and forward/ backward suppliers are the areas where the bottom-line is dictated. Without innovation, the current structure of the industry can survive the impact of the change in consumer references. This is especially true for carbonated drink manufacturers like Coca-Cola.Replacing the manufacturing process to introduce innovation such as non-carbonated or still drinks would require replacing also the machineries and perhaps the blameless plant. Packaging would require less acid resistance, delivery schedule would change depending on package design or expiration date and distribution networks may hesitate to carry the product awaiting positive reception. As a result, a major source of margin of the company will be undermined due to high be of manufacturing change. On the other hand, if Coca-Cola r emains to focus on carbonated drink, it will confront a undefendable future earnings and market share.Differentiation strategy and innovation has a more long-run positive impact to Coca-Cola. It is also suited for a leader in carbonated drinks and perhaps one of the most reputable crapulence brands in the world. The profit pool reveals that the carbonated products remain the highest margin and revenue contributor in the soft drink industry. However, forecasts threatens this position with the healthy/ sugar-free products pulling substantial value followed by the same impact from non-carbonated products such as sports-energy, juice, dillutable and bottled drinks.In the long-run, those who will choose to retain a cost lead strategy and keep large stocks of carbonated drink will face declining sales. On the contrary, there are also disadvantages in differentiation strategy and innovation that present in regulation, challenge to marketing and transformation of handed-down plant. In an operating environment with ambiguous customer response, intense tilt and restricted action, every action counts and one mistake can mean millions of investment lost. Therefore, consideration of important issues such as creation of sustainable value including financial matters is top priorities.Consideration of Responses Vertical integration is the recent solution of Coca-Cola to address changes of external factors. This is observed of its development of a bottling hyponym to remain cost-effective and flexible. This is a major step for the firm not only as traditional set-up only allows efficient bottling operations by third party suppliers but also it will avoid prevent the innovation feats of Coca-Cola such as demand of new packaging. The fact-paced environment vulnerable to new innovation from competitors and suppliers, thus, is palliate by this strategy. Further, government standards such as carbon dioxide emission can be addressed through a more integrated plan.Formally, Coca-Cola has to put preference to bottling companies that are not only cheap and quality producer but also has an environmental configuration for manufacturing wastes. With the creation of its own bottling segment, it also solves the problem of increasing government interference in social and environmental responsibility of manufacturing firms. Coca-Cola can spend less on environment-related and supplier search costs which impact can resist up to environmental-conscious customers. Vertical integration is not only noticed in the manufacturing processes of the firm but also in direction structure. Committees for marketing, strategy and innovation are considered one functioning body where the action of one has go or can be influenced to/ by the results of other committees. The new structure would allow a cost-efficient and integrated recognition of problem and opportunities in the environment. Recently, the efforts of the consolidated committee are focused on the project of custo mer-retention to maintain leadership particularly in carbonated drinks as well as increase market share in non-carbonated drinks. With their close collaboration, they easily identify that the issues of inactivity and obesity, low level of quality and quantity of water, change in market preference and intense rivalry have adverse effect to financial performance of the firm. Instead of spending glamorous but useless advertisements, the valuable budget is invested on market research which rationalized the actions of each department. The balance in todays environment for Coca-Cola is that its leadership is threatened and sure strategy is a must to optimize its resources amid innovation, expansion and research costs demanded by the unpredictability in the environment. In its global operations, there are regions that exemplified performance growth but only a few to give ear such as the Middle East and Latin American countries. For the European market, however, the reverse is true. Th is induced the firm to acquire a bottling company in Germany to provide the same cost-savings of vertical integration from its major manufacturing plants. The strategy is a smart tactic because the decrease in revenues can be mitigated by efficiency in production and distribution. Acquisition in foreign countries also indicated the intention of Coca-Cola to expand its product line in an international scale.The German experience, however, incidentally indicated that the cost of doing business will rise because agitate and technology in the country is relatively expensive. The good side is that quality of production and potential innovation necessary to compete in the current industry structure can magnify.As early as 2004, Coca-Cola is in a mission to integrate host country facilities for better coordination, synergism in resources and manufacturing flexibility. In Japan, it developed a centralized value chain design to restructure the operations based on the business management an d relationship traditions of companies. In this country, where linking for long-term partnership, it is easier to conduct business when the company is implementing a strategy as a whole and based on the petition of its partners. A decade from now, the soft drink industry will be dictated with high product differentiation and the company who can find valuable competency in its innovation would be the leader. This is a course of instruction that Coca-Cola is undertaking. Its financial depth and reputation enabled it to acquire important parts of the value chain to protect its carbonated products from significant decline and also to see the innovative demand of non-carbonated and new-age drinks.It used its historical leadership position to protect its market share even tough it partially lagged innovation feats for still drinks. Its biggest challenge, however, is to acquire a useful innovative product that can compete with new-age drinks. Its carbonated drink surely found complacenc y to have at least a constant growth by vertical integration but improving on non-carbonated drink demands more work. It is expected that in the future it is able to acquire a non-carbonated firm without intervention from government regulation. Otherwise, it would be force to develop innovation internally which is less clear.decisivenessCoca-Cola is on the right track when it comes in attacking the external forces head-to-head. It is diversifying its operations, combine its resources and adopting to local needs in its quest in finding sustainable value. There are odds such as government regulation apparent in the hardship of acquiring a vendor-made innovation in the non-carbonated product that can pump-up the stagnant financial performance of the carbonated drink.So far, however, the company is doing its share in solving the unpredictability and spontaneity of the external environment. It is able to decode that the external forces are sometimes like eye mask in relation to each ot her. That is, the change in one (e.g. humor change) can lead to another (e.g. change in consumer preference). 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