Essay Instructions: This will be a case that conducts a strategic analysis of the Coca-Cola Company. First complete the reading,
to include the articles, in the BACKGROUND section. The objective of this case is to complete an external analysis
for The Coca-Cola Company, using Porter's 5-Forces Model and a PEST Analysis. Ultimately, this analysis will lead
to some conclusions about opportunities and threats facing the company (the first part of the SWOT analysis).
BACKGROUND
SWOT Analysis
SWOT is an acronym for: Strengths, Weaknesses, Opportunities, and Threats. The first two variables (Strengths and Weaknesses)
relate to the internal organization. The latter two variables (Opportunities and Threats) relate to the external environment.
The purpose of an external analysis is to scan the outside environment for factors which might open up new opportunities for the
business - or which may present threats to the survival of the organization. Then, company managers and executives can formulate
plans to take advantage of the opportunities and ward off and respond to external threats. Optimally, the organization wishes to
altogether eliminate (and if this is not possible, to ameliorate to the greatest extent possible) those threats that exist within
the external environment.
There are many, many elements external to a company that can have an effect on its sustainability. Customers, competitors, and
suppliers are all pretty obvious entities that can affect profitability and practice. If we think a little more deeply, however,
we can see that current as well as potential customers should be considered in our assessment of opportunities and threats (e.g.,
in terms of changing consumer tastes and preferences). Any such threats or opportunites will in turn affect that strategic choices
that will be made concerning products and services.
What about technology?
Advances in technology can affect all three of our "obvious" external concerns: product features, how products are made and sold,
what services are offered, and how they are delivered, supply chains, inventory controls, and on and on...the failure to monitor
the technological environment can spell obsolescence for a business in no time!
Ease of substitution is something we always think of when considering competitors. How easy would it be to switch flying on one
airline to another, for example? But thinking more creatively about substitution, we can see that teleconferencing and video conferencing
(virtual worlds?) can eliminate the need for much business travel - thus acting as a substitute to airline tickets. Failure to think
broadly enough will cause a planner to completely miss a MAJOR threat just over the horizon. If you need an example, consider the
immeasurable impact that such internet sites like eBay and Amazon.com have had on the sales of "bricks-and-mortar" operations! Or
consider how video demand on-line has adversely influenced traditional movie sales companies (DVD sales rentals) such as BlockBuster, Inc.
The sheer number of possible external influences creating opportunities and threats is quite simply mind-boggling. This is why most
strategic planners use analytic models to structure their thinking and help avoid perceptual biases that might interfere with a clear
and objective identification of opportunities and threats.
We will be using two different models that approach the external environment from two different perspectives:
1. Industry environment - Porter's Five Forces Model
2. Macroenvironment - PEST Analysis
Industry Environment
Porter's Model of Five Forces is one of the most versatile frameworks to analyze the industry (or operating) external environment.
Employed by a variety of academics and business practitioners for over 3 decades, the Five Forces Model has proved its usefulness in a
variety of arenas. The Porter model helps the user get a handle on the competitive and market characteristics of a specific industry.
The factors covered by the Five Forces Model are:
1. Threat of new entrants
2. Bargaining power of suppliers
3. Bargaining power of customers
4. Availability of substitutes
5. Degree of rivalry among competitors
Macro Environment
While the Porter analysis looks at the conditions in a specific industry, the PEST analysis looks at factors that affect the greater
business environment. The sub-environments addressed by this model include:
1. Political (including regulatory)
2. Economic
3. Sociocultural
4. Technical
For a general introduction to the 5-Forces, the following video interview with Michael Porter is very helpful for putting the external analysis into perspective:
The Five Competitive Forces That Shape Strategy. (2008). Harvard Business Publishing. Podcast retrieved on August 15, 2011 from:
http://www.youtube.com/watch?v=mYF2_FBCvXw
The following chapter gives a very detailed explanation of how to use the 5-Forces Model, and what data are used in the 5-Forces ? data that are essential in
preparing your SLP and Case. To access this article, you will need to register with this site, but there is no fee involved. The following site is an excellent
introduction to the industry (operating) and remote (macro) environments. This site gives a good overview of Porter's Five Forces and PEST. It will also help you
to complete key parts of the SLP as well.
http://faculty.babson.edu/gwin/indstudy/index.htm
http://cdad.trident.edu/Presentation.aspx?course=95&term=100&presentation=50372
Key forces in the external environment. (2009). Retrieved on August 15, 2011 from: http://www.president.kku.ac.th/petmas/External%20Scan.pdf
PEST analysis. (2009). Retrieved on August 15, 2011 from: http://www.valuebasedmanagement.net/methods_PEST_analysis.html
Porter's Five Forces: A model for industry analysis. (2007). Retrieved on August 15, 2011 from: <>
SWOT analysis: Lesson. (2009). Retrieved on August 15, 2011 from: http://marketingteacher.com/Lessons/lesson_swot.htm
Zahorsky, D. (2009). A business owner's secret weapon: SWOT analysis. Retrieved on August 15, 2011 from: http://sbinformation.about.com/cs/bestpractices/a/swot.htm
Carrying out a PEST analysis. (2005). Retrieved on August 15, 2011 from: http://www.thefreelibrary.com/Carrying+out+a+PEST+analysis-a0141751272
PEST analysis. (2007). Retrieved on August 15, 2011 from: http://www.quickmba.com/strategy/pest/
Porter?s Five Forces. (2009). Retrieved on August 15, 2011 from: http://www.mindtools.com/pages/article/newTMC_08.htm
Porter?s Five Forces (2007). Retrieved on August 15, 2011 from: http://www.themanager.org/Models/p5f.htm
Porter's Five Forces: A model for industry analysis. (2007). Retrieved on August 15, 2011 from: http://www.quickmba.com/strategy/porter.shtml
ASSIGNMENT
An environmental analysis can be a very extensive undertaking, requiring far more time and resources than we have for this course. So you will
want to limit your analysis to the identification and evaluation of one or two key items in each element of the two models, as described in the background readings for
this module.
Keys to the Assignment
- Step One: Determine the scope of your analysis (entire company, selected business division?) and find the appropriate NAICS code for the Coca-Cola Company.
- Step Two: Using the sources you identified in the SLP, collect some data to support an industry analysis of each of the 5-Forces in Porter's Model.
- Step Three: Using the sources you identified in the SLP, collect some data to support an analysis of each of the 4 elements in the PEST analysis. When considering economic
data, use the most current data you can find.
- Step Four: In a 4-5 page paper, write up the results of your external analysis, and be sure to label each of the 5-Forces as high, moderate, or low. Taken together, the
5 Forces analysis and the PEST analysis should lead to conclusions about the opportunities and threats facing The Coca-Cola Company as revealed by your research. The data
you report from the 5-Forces and PEST analysis must be properly cited through in-text citations and a reference list, or footnotes.
- Step Five: Consider the Case as a formal business report that you are developing for the Board of Directors and CEO as Coca-Cola's company consultant. This is a professional
document. Follow the format below:
- Executive summary: a synopsis of the main points, conclusions and recommendations made in the longer report. If you have never written an executive summary before,
or would like a refresher, check this website: http://www.highendfinance.com/CommercialLoans/Docs/07-4%20ES%20Guidelines.doc
- Introduction: State the main purpose of the paper (thesis statement), what you hope to accomplish, and how you will go about doing it.
- Main Body: The "meat" of the paper. Emphasize analysis, not just description. Delineate separate topics or sections with headings.
- Conclusion: Summarize your paper in the light of your thesis statement.