External Analysis Coca-Cola SWOT

Coca Cola -- External Analysis

An external analysis of Coca-Cola (NAICS # 312111 -- Soft Drink Manufacturing) requires scrutiny of the specific industry environment with Porter's 5-Forces model and examination of the larger business environment through a PEST analysis. In his interview on YouTube, Porter speaks of the five factors of Competitive Rivalry, Threat of New Entrants, Threat of Substitute Products, Bargaining Power of Suppliers, and Bargaining Power of Buyers. He also discusses the underlying forces for each factor, examining the Airline Industry, in which all five factors are strong, and the Soft Drink Manufacturing Industry, in which all five factors are "benign," essentially making the Soft Drink Industry "a license to print money" (Harvard Business Publishing, 2008). Porter stresses the importance and flexibility of his five forces, which keeps an organization focused on "underlying fundamentals" so the organization's leadership is not tricked or trapped by the latest trend or sensation (Harvard Business Publishing, 2008). Explaining that his five forces are dynamic rather than static, Porter emphasizes constantly reexamining how the company, and ideally everyone working for the company, are broadly pursuing a "common proposition of gaining competitive advantage" (Harvard Business Publishing, 2008) and assures his audience that competition does not have to be a "zero sum" competition; rather, there can be many "pieces of the pie" and each company within an industry can offer a unique way of serving various consumer needs so all the companies within an industry can thrive (Harvard Business Publishing, 2008).

Using Porter's Five Forces

Sources providing information to assess Coca-Cola according to Porter's Five Forces are numerous and many of them are set forth in Carl Gwin's A guide for industry study and the analysis of firms and competitive strategy. Gwin first explains that several of Porter's Five Forces combines "analysis of market structure" and "vertical boundaries," which are two Microeconomics tools (Gwin, 2001). Corresponding several of Porter's Five Forces to similar business concepts, Gwin sets forth valuable data sources for analysis. Porter's "Industry Competitors" corresponds with Gwin's "Number of Sellers" and sources of information can be found: at www.census.gov (United States Census Bureau, 2012), where the researcher can use Coca-Cola's NAICS number of 312111 to examine the 20 NAICS sectors, 96 subsectors and 1170 industries regarding the number and concentration of sellers; Gwin also mentions www.galegroup.com (Gale Cengage Learning, 2010) as a good source for information regarding the number and concentration of sellers (Gwin, 2001). Porter's Threat of New Entrants corresponds with Gwin's "Barriers to Entry" and Gwin mentions sources of information such as annual reports quarterly earnings reports and dividend announcements by the company; consequently, for purposes of examining Coca-Cola, the researcher can use Coca-Cola's published reports (Coca-Cola Company, 2011). Additional information about Threat of New Entrants/Barriers to Entry can also be found from investment analyst reports, such as the report(s) offered by "Stock Analysis on Net" (EBIT Financial Analysis Center, 2012). Information regarding Porter's factor of Bargaining Power of Suppliers corresponds with Gwin's "Market of Inputs" and data for analysis can be found through determining the suppliers of "raw materials, components, labor and services" (Gwin, 2001), for example at Wikinvest (Wikinvest.com, 2010). Porter's factor of Bargaining Power of Customers can be analyzed by collecting data from sources such as an RFM Analysis (Chapter 21, 2011) and by studying the buyer concentration compared to the company's concentration ratio, for example through the U.S. Census site (United States Census Bureau, 2012). Porter's Threat of Substitutes, which corresponds with Gwin's "Product Characteristics" can be examined through data gained from company websites (Coca-Cola Company, 2011) and from periodical articles such as Bhasin's examination of Coca-Cola's market positioning based on its product characteristics (Bhasin, 2011). Through these and numerous other industry-related sources, the researcher can gather significant data for examining Coca-Cola through Porter's Five Factors.

Using PEST Analysis

A PEST Analysis, which considers factors within the greater business environment, looks at four "sub-environments" of: "Political (including regulatory); Economic; Sociocultural; and Technical" (President, Khon Kaen University, n.d.). Political information, concerned with "the extent to which government and its bureaucracy supports and contributes resources…