EXTERNAL ASSESSMENT: Whenever any business start operating in two or more than two countries, it come across some

of the problems which are beyond the control of business , like legal restraints, government controls, weather, consumer behavior, economic conditions of the host country, social and cultural factors, geography & infrastructure, channel of distribution available, level of technology and competitive forces. These problems are different in all the countries in which business starts its operations. So business has to design a separate framework for each country to overcome these problems. Coke is one of the oldest companies which are in international business; they have a vast experience of controlling these elements. They heavily rely on research to overcome these problems.

Key external forces or PEST analysis of coca cola : POLITICAL FACTORS: Legal And Political Problems
They perform thorough study of legal and political problems to decide to enter into any country. They track the previous record of the ruling party and policies. They also keep in mind the attitude of other opposition parties about foreign companies. If any problem arises regarding political or legal issues, they dont sacrifice their policies and secrecies.
The political environment of Pakistan affects the coca-cola beverages and Coca-Cola Export Corporation, to some extent. For instance, the political instability in Pakistan causes trade and import policies to change rapidly as the government changes which causes many problems in the import of raw materials. Trade barriers such as tariffs and duties on the import of syrup (concentrate) from USA increases the operational cost. A relaxation has been given by the current government. So the situation for the beverage industry is getting better day by day for the last couple of years. Also the policies have been more or less constant and also the emaciation of free trade zones by the government will help the Coca-cola to flourish more effectively in Pakistan.

ECONOMIC FACTORS Economic factors

Different counties have different economic conditions at a time so Coke designs different strategies to handle these conditions. As Coke is one of the largest businesses in the world, they have a strong financial background to overcome these economic problems. In host countries they change their prices, investment and penetration strategies to overcome economic factors.
The economic condition of Pakistan has not been stable for a long time but The recent economic indicators suggest that the economy is growing and macroeconomic issues are getting sold but at the same time there has not any marked increase in the consumer buying power (inflation). When the recession occurs the price of bottles are dropped down to increase the sales and to achieve the targets of the company. So overall economy of Pakistan directly affects the cost and price of the Coca-Cola Company.

SOCIAL FACTORS: Social And Cultural Factors

Social and Cultural factors have a very vital impact on the business in the host country. Although this is the most difficult task to understand the culture of the host country but business has to do reasonable care to understand this problem.
Coke performs research to understand these issues and design their strategies accordingly. They design their products, prices, place, promotion and customer service according to the culture of the country. As we see that coke has 400 brands allover the world but in Pakistan we have only 4 brands and in India which is a market of 1.1 billion people coke has 15 brands. This is because of cultural differences that they cannot introduce all the brands in all the countries.

Being a foreign based company Coca-cola faces opposition by Muslim activists. The main social issues are: It faced scandal of humiliating Muslims religion that when the inverted image of Coca-Cola brand name is being viewed on the mirror it disgraces the name of Holy city Makkah and Hazrat Muhammad (P.B.U.H). This was a wrong conception as there was no reality in it and this scandal was flopped after a short span. One of the greatest social barriers to coca-cola Lahore is the restriction of coke in the campus premises. Jamiats strike to coke affects the sales and overall image of coke as a larger number of students from all over the Pakistan are studying in the University of The Punjab. But on the contrary in the all parts of the country coke is

viewed as the partner in the major events like Basant and promoter of music thereby making a place in the hearts of young generation of the society.

TECHNOLOGICAL FACTORS
The making of Coke, Fanta, Diet coke and sprite involves "mixing and blending, filling and capping ". For this process, concentrate or syrup is imported from USA and is then mixed in the local plants .Machinery for the local plants was also imported but now the coca-cola company follows Local content law as most of the spare parts are locally made. The system is automated and equipment is fully operational and up-to-dated. In technology Coca-cola company is far ahead than the several other local beverage brands of Pakistan. It is a Highly Technical 10 Steps Process. Which are all done in the local plants using local content law.

Geography & Infrastructure If any business wants to start its business in any other country, it also studies the geography and infrastructure of the host country. That is if feasible for doing business or not. They decide the channel of distribution, modes of transportation and there cost to make decisions regarding prices and designing strategies. In Pakistan Coke found a reasonable infrastructure to do business, which is continuously improving to facilitate distribution system.

Competitive Forces Whenever any business enters into any other country they face competition with some local and international brands. Coke Combat this problem with their quality commitment and continuously providing its customers with quality product, services and entertainment.

19- COMPETITORS Cadbury Schweppes plc Nestle S.A. PepsiCo, Inc. Unilever

Procter & Gamble Cott Corporation Kraft Foods, Inc. National Grape Cooperative National Beverage Corp. Quilmes Industrial S.A. Quinenco SA Yeo Hiap Seng Limited Wimm-Bill-Dann Foods OJSC Co-Ro Food A/S Rynkeby Foods A/S Spadel SA Delta Holding S.A. Spendrups Bryggeri AB Pago Hermann Pfanner Getraenke GmbH J Garcia Carrion Vitasoy International Holding Ltd

Porters five forces model of coca cola: The Five Forces model of Porter is an outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value...) of an industry structure. It captures the key elements of industry competition.

 Traditional competition: Prices of Pepsi, local brands Market share Promotional actions of competition New entrants: New look-a-like manufacturers Substitute products: Fashionable new drinks, milk drinks, coffee, beer, ... Suppliers: Price and availability of ingredients on world market Quality speed safety, traceability, flexibility of supply chain Buyers/consumers: High as a result of intense competition both among branded and unbranded products. Combined purchase power of shops, bars, supermarkets

Competitive advantages: The Competitive Advantage model of Porter learns that competitive strategy is about taking offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces. Companies can combat the pressure of the five forces and create competitive advantages. There are 2 basics types of Competitive Advantage : Cost leadership (low cost) Differentiation Strength of porters five forces model: The model is strong tool for competitive analysis at industry level. It provides useful input for performing a SWOT analysis. Limitation: Inside-out strategy is ignored (core competence) It does not cope with synergies and interdependencies within the portfolio of large corporations (parenting advantage) The environments which are characterized by rapid, systemic and radical change require more flexible, dynamic or emergent approaches to strategy formulation (disruptive innovation)

 Sometimes it may be possible to create completely new markets instead of selecting from existing ones (blue ocean strategy)

Porter's Five Force analysis for COCA COLA COMPANY:

One of the earliest models used to examine industry economics and industry attractiveness is Michael Porter's Five Force Model (Porter, 1980). Porter suggests five forces that determine industry profitability: Threat of new entrants-Low New entrants to the industry are not a strong competitive pressure in the soft drink industry. Coca-Cola dominate with their strong brand name and superior distribution channels. In addition, the soft-drink industry is fully saturated. New growth is small. This makes it very difficult for new, unknown entrants to start competing against the existing established firms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labor and economies of scale. New entrants cannot compete on price without economies of scale. These high capital requirements and market saturation make it extremely difficult for companies to enter the soft drink industry; therefore new entrants are not a strong competitive force. Threat of Substitutes-Very Strong Substitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea. Bottled water and sports drinks are increasingly popular with the trend towards the health conscious consumer. This trend is epitomized in the beverage consumption pattern of the ageing baby boomers. There are a growing number and varieties of water and sports drinks that appeal to different consumers' tastes. These are advertised as healthier than soft drinks. In addition, coffee and tea are competitive substitutes because they provide caffeine. Soft drinks can be substituted with coffee. Specialty blend coffees are also becoming more popular with the increasing number of Starbucks stores that offer many different flavors to appeal to all consumer markets. Low switching costs for the consumer makes the threat of substitute products very strong Threat of Suppliers-Strong Suppliers to Coca-Cola are bottling equipment manufacturers and secondary packaging suppliers. Although Coca-Cola does not do any bottling, the company owns about 36 percent of Coca-Cola Enterprises. The rest of the Coca-Cola Enterprises is a publicly traded company. This is the largest bottler in the world (The Coca Cola Company 2006). Since Coca-Cola owns the majority of the bottler, it looks like that particular supplier does not hold much bargaining power. However, there has been increased concern about the simmering tensions between Coca-Cola and its increasing powerful independent bottlers such as Coca-Cola Enterprises. Coca-Cola Enterprises controls 80 percent of the US market as well as parts of Europe. Coca-Cola is introducing new product at a significant rate. The operational and distributional complexity due to new product introduction is affecting the bottom line of the bottlers. Some bottlers have even refused to carry new products. The conflict with the bottlers can be a major threat to Coca-Cola.

In terms of equipment manufacturers, the suppliers are generally providing the same products. The number of equipment suppliers is not in short supply, so it is fairly easy for a company to switch suppliers. This takes away much of the suppliers' bargaining power. However, rising sugar and packaging material prices have a direct impact on the profitability of the Coca-Cola's products. Bargaining power of Buyers-High The buyers of Coca-Cola and other soft drinks are mainly large grocers, discount stores, and restaurants. The soft drink companies distribute the beverages to these stores for resale to the consumer. The bargaining power of the buyers is very evident and strong. Large grocers and discount stores buy large volumes of the soft drinks, allowing them to buy at lower prices. Restaurants have less bargaining power because they do not order in large volume. However, with the number of people drinking less soft drink, the bargaining power of buyers could start increasing due to decreasing buyer demand. The interesting shift in buyer demand because of increased demand for healthy choices has driven the market share of substitute drinks. Consumers are focusing more on healthy choices and buying healthy drinks from "high end speciality stores. This phenomenon is due to health and wellness trend sweeping across the global beverage market. Soft drink consumers are moving their consumption from regular cola carbonates to low-calorie carbonates, bottled water, sport drinks, juice and teas. Coca-Cola should adapt to this consumer behaviour for future growth. Competitive rivalry-High The competitive pressure from rival sellers is the greatest competition that Coca-Cola faces in the soft drink industry. Coca-Cola, PepsiCo., and Cadbury Schweppes are the largest competitors in this industry with global presence. Though Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite), it had lower sales in 2006 than did PepsiCo. However, Coca-Cola has higher sales in the global market than PepsiCo. In 2006, PepsiCo dominated North America with sales of $22 billion, whereas Coca-Cola only had about $7 billion, with more of their sales coming from overseas. PepsiCo is the main competitor for CocaCola and these two brands have been in a power struggle for more than a century. Brand name loyalty is another competitive pressure. The Brand Keys' Customer Loyalty Leaders Survey (Brand Loyalty, 2006) shows the brands with the greatest customer loyalty in all industries. Diet Pepsi ranked 18th and Diet Coke ranked 47th as having the most loyal customers to their brands The overall KSF identified for the competitive rivalry are size, global presence and brand image. Porter's Five Forces Model identifies the five forces of competition for any company. The recognition of the strength of these forces helps to see where Coca-Cola stands in the industry. Of the five forces, rivalry within the soft drink industry, especially from PepsiCo, is the greatest source of competition for Coca- Cola.

18- KEY EXTERNAL FACTOR

S. No. Factor Weight Rate Score

Opportunities
1 2 3 4 5 6 7 8 Entering into snacks business (Pepsi earns 60% from snacks) Expansion by taking over Cadbury division or product line Expansion by introducing new ready-to-drink products (tea, coffee, etc.) Entering into or introducing new sports events (e.g. Formula I) to introduce energy drinks Strong financial and assets support available worldwide to take financing for expansion Introduce soft drink with focus of "healthy soft drink" - eliminate obesity concept Diversification of bottling business to other industries like pharmaceuticals Link with computer internet/network/cell gaming business to focus on youth worldwide - to take advantage of technology 0.100 0.050 0.050 0.025 0.015 0.075 0.050 0.025 0.025 0.015 0.430 0.100 0.075 0.075 0.100 0.075 0.075 0.015 0.025 0.015 0.015 0.570 1.000 3.50 4.00 4.00 3.50 1.50 3.50 2.50 2.50 3.00 3.00 4.00 3.50 4.00 4.00 3.50 3.50 2.00 3.50 3.50 2.00 0.35 0.20 0.20 0.09 0.02 0.26 0.13 0.06 0.08 0.05 1.43 0.40 0.26 0.30

9 10 Opportunities - Total 11 Hurting products containing sugar & sugar-substitute based drinks (trend towards more healthy eating & drinking) 12 Increase in raw material costs 13 Government policies may hurdle in expansion 14 Government policies - for disclosure of health warning 15 Ban in public schools due to obesity issues 16 Lack in snacks business 17 Lack of share in homeland market (refer Exhibit 8) - room for other brands 18 Availability of purified water (being main component) in different parts of the world 19 Competitor may access unreached parts of the world prior to Coca Cola 20 Salesman not equipped with sales ordering devices Threats - Total Grand Total

0.26 0.03 0.09 0.05 0.03 1.43 2.86

EFE Matrix of Coca-Cola Company

External Factor Evaluation (EFE) matrix is a strategic-management device which is frequently used for evaluation of current business environment. The EFE matrix is a superior instrument to prioritize and visualize the opportunities and threats that a company is facing. An external factor in the EFE Matrix comes from social, political, legal, economic and other external forces. An example of external factor evaluation (EFE) matrix is given for the Coca-Cola Company.

Steps in the Construction of EFE Matrix

In the first column, lists down all the opportunities and threats. EFE matrix should include 10 to 20 key external factors. 1. In the second column assign weights to each factor that ranges from 0.0 (not important) to 1 (most important). The total weights must sum to 1.00 (It should be noted that the importance of weights depend upon the probable impact of factors on the strategic position of the company). 2. In the column three, rate each factor (ranging from 1 to 4) on the basis of companys response to that factor. (Here, 1 shows poor response, 2 shows average response, 3 shows above average response and 4 shows superior response). 3. In the column four, calculate the weighted score by multiplying the each factors weight by its rating. 4. Find the total weighted score by adding the weighted score for each variable.

External Factor Evaluation Matrix of Coca-Cola Company

By adding the weighted score of various opportunities and threats of Coca-Cola Company, we get the total weighted score of 3.05. Here it should be noted that the highest possible total weighted score of a firm is 4 whereas the lowest possible total weighted score is 1. The total weighted score remains in the limit of 1 to 4 regardless of the total number of opportunities and threats. Similarly, the average total weighted score is 2.5. If the total weighted score of a company is 4, it means that the company is effectively taking advantage of existing opportunities and is also able to minimize the risk. On the other hand, the total weighted score of 1 show that firm is not able to take advantage of current opportunities or avoid external threats. In the case of Coca-Cola Company, the total weighted score is above average, which means that the Coca-Cola Company strategies are effective and the company is taking advantage of existing opportunities along with minimizing the potential adverse effects of external threats.

Competitive Profile Matrix of Coca-Cola

A competitive profile matrix (CPM) categorizes a firms main rivals and its particular strengths and weaknesses in relation to a design firms strategic position. In Competitive Profile Matrix an organization assess itself as well its rivals by giving rating and weights to the critical/key success factors. It then recognizes its strategic competitive place with its major rivals. A firm which obtains superior weighted points would have the strong competitive place than its rivals. The construction of competitive profile matrix for the Coca-Coal company is given below:

Steps in the construction of CPM

Here we will be using weighted rating system for the construction of competitive profile matrix. Some of the important steps involved in the construction of competitive profile matrix are given below: 1. In the first column, lists down all the key success factors of Industry (usually from 6 to 10). 2. In the second column, assign weights to each factor ranging from 0.0 (not important to 1 (most important). Greater weights should be given to those factors which have grater influence on the organizational performance. The sum of all weights must equal 1. 3. Now rate each factor ranging from 1 to 4 for all the firms in analysis. Here, rating 1 represents major weakness, rating 2 shows minor weakness. Similarly, rating 3 indicates minor strength whereas rating 4 shows major strength. It means that weakness must receive 1 or 2 rating while strength must get 3 or 4 rating. 4. Calculate weighted score by multiplying each factors score by its rating. 5. Find the total weighted score of all the firms by adding the weighted scores for each variable.

Competitive Profile Matrix for the Coca-Coal Company

The competitiveness of a company can be assessed on the basis of its general strength rating. If the dissimilarity among firms overall rating and the points of lower-rated rivals is greater then the firm has greater net competitive advantage. Alternatively, if the dissimilarity among a firms overall rating and the points of higher-rated rivals is larger then the company has net competitive disadvantage. In the above example, CPM Matrix demonstrates that Coca-Cola is the market leader and dominates its rivals with highest points of 3.74. Pepsi is the runner up with 3.42 points and Cadbury Schweppes is the weakest rival among these three with the score of 2.80. This Matrix also shows that Coca-Cola is strong in all the aspects of rivalry and has strong position in the market place.