THE ECONOMIC ENVIRONMENT OF BUSINESS

The Economic Environment of Business

The Economic Environment of Business

Introduction

Organizations operate in a complex business environment where things can and cannot be controlled. Managers are skilled and trained to how analyze and improve the organization for it to survival, grow and improve in the changing world. The management system is divided into two levels. Internal factors in an organization can usually be managed and dealt with, like labor, money, materials and equipments. These inputs can be turned into useful products, goods or services and make it available to the consumer. On the other hand external factors are hard to manage. They consist of all outside institutions: competitors, customers, suppliers and economic, technological, political, cultural and demographic objectives.

Founded in 1886 in Atlanta, Coca-Cola Company is the world's lading manufacturer, marketer and distributor of nonalcoholic beverage concentrates and syrups, used to produce moral than 230 beverage brands. It is also the world's most inclusive brand and company.

Market Structural

The cola industry is chiefly an oligopoly. The main players that control this industry are the Coca Cola Company and PepsiCo (Pepsi). The soft drink industry is largely a duopoly. Coke and Pepsi were among the first to launch carbonated soft drinks (CSD). For over a century other companies tried to enter the market but had to face fiacre competition and lawsuits from Coke and Pepsi. The worldwide demand for soft drinks in 1999 was 31 billion cases. Coke and Pepsi together held 74% of market share followed by Cadbury Schweppes at 6%. In this duopoly, participating firms are assured of high long-term economic rants, and there are high barriers of entry. Being the established sellers, Coke and Pepsi can persistently raise prices above competitive levels without any significant threat of new entrants (e.g. 1978 Coke had a significant price hike, and Pepsi followed by 15% price increase).

Even though, in recent years, demand for CSDs seems to have leveled off in USA, other countries have the potential to offer significant growth opportunities. New challenges of the 21st century included boosting flagging domestic cola sales and finding new revenue streams. Both firms also began to modify their bottling, pricing, and brand strategies. They looked to emerging international markets to fuel growth and broaden their brand portfolios to include noncarbonated beverages like tea, juice, sports drinks, and bottled water. Additionally, the soft drink industry is knowledge intensive; most of the significant costs are for advertising, promotion, and market research. Any innovation costs have been sunk in the past.

A. Neville Isdall leads the Coca-Cola Company into the new century with a firm commitment to the values and spirit of the world's greatest brand. In 2005, Coke earned $2.04 par share, an increase of $0.04--2 percent--over 2004. As Coca Cola is a large multinational company, each country has its own Head Office and departments. The Coca-Cola Company is geographically split into five geographic operating segments, also known as strategic business units (SBU's), which are North America, Africa, Asia, Europe, Eurasia and Middle East and Latin ...