External Business Factors

External Business Factors

1. Economic

   • The surrounding economy always affects a business, big or small. The selling of luxury items is dependant on the wealth of the surrounding country and who the product is marketed towards.
   • One of the tell-tale signs of an economy’s health is the value of its dollar. As a country’s dollar’s value fluctuates, so do the businesses using it. Whether this change is an increase or a decrease, it will have an impact on imports and exports.
   • When a company borrows money from a bank to invest in itself, it is dependant on the interest rates put in place by the bank. Low interest rates are ideal for businesses because when a interest rate is too high, growing businesses will find it difficult to source money to help achieve their goals and sometimes when a business uses all of their wealth to pay an interest rate companies are left with little to no profit.
   • As an international brand, Coca-Cola always needs to consider the global economy and market. In recent years, the substantial increase of consumers from emerging economies like India, China and Mexico has become apparent, where Western countries like America are steadily declining due to change consumer behaviour. With increased focus on countries like India - where newer generations and the economy are rapidly changing how consumers buy luxury products like Coca-Cola - Coca-Cola is forming complex strategies to market to these places.
   • The amount of participants in the competition market for soft drink will have an impact on the business performance of Coca-Cola, meaning rival companies like Schweppes and Pepsi Co. will increase the choice that consumers have and therefore decrease the amount of sales each company gets

2. Political

   • Government enforced policies can have a large effect on a business. Major changes in Parliament can lead to concerns within businesses about whether it will be affected.
   • Taxation is a very common way that the government affects businesses. Taxation is the government’s way of getting money back from the population and it affects businesses in the form of losing a percentage of their profits to pay for the infrastructure and services provided by the government. In recent years, the Australian Taxation Office (ATO) has talked of reducing company tax rates in order to increase business investment and job creation and hopes to pass this tax reform in the next 8 years and this will definitely affects Australian companies.
   • Trade is another factor that can exponentially affect business. Political trade policies allow Australian companies to market and sell all around the world which increases the overall money earned by the country. Trade can also work in reverse- providing consumers with what they want which may not be available in this country.
   • Coca-Cola has been affected fairly recently by a NSW environmental policy with the introduction of the Container Deposit Scheme, or ‘Return and Earn’. This policy encourages the public to return certain containers to be recycled and receive money, usually 10 cents, back for it. One of these recyclable containers is the soft drink can and many of these are Coca-Cola cans. In order to make up for the cost lost when returning money to the consumers who recycle their cans, the prices of these drinks has gone up the 20 cents, which has affected the business and almost encourages consumers to avoid them.
   • Coca-Cola is affected by the US government Food and Drug Administration(FDA) because the beverages controlled by the brand has to pass tests and follows rules and regulations set in place by the government. If the Coca-Cola does not continue to follow these rules set in place by people like Demetris in 2006, the company cannot continue production.
   • The introduction of sugar taxes have a significant effect on soft drink manufacturers. The sugar tax in California adds 10% to the cost of sugar-sweetened beverages, like Coca-Cola. There is evidence to suggest that sugar taxes bring down soft drink consumption and may even improve the sales of bottled water. While the American Beverage Association says that the sugar tax does not result in meaningful reduction in obesity rates, it acknowledges that it must play a role in improving public health. It is important to note that Coca-Cola has its own brand in bottled water, so the negative effect caused by these taxes is counteracted by the positive effect of their water sales increasing.

3. Technological

   • The ever-updating technology in the world is continuing to advance the way that businesses run and companies should try to stay aware of ways they can improve production processes and service delivery, using technology.
   • As technology progresses, less and less laborious tasks need to be performed by human beings. Using up-to-date, automated technology can be cheaper for business product production. Using these technologies instead of humans can have a bad effect on job creation.
   • Social media, as a marketing strategy, has increased the direct communication between consumers and businesses. Websites like Facebook, Instagram, and Pinterest have all allowed businesses to work advertisements in to consumer's daily lives.
   • Coca-Cola, as the company working together to make the syrup for the famous drink, are heavily reliant on the technology they use to bottle all their beverages. Bottling is a very important factor in the Coca-Cola production line because the presentation of their product is a very crucial marketing point. Other factors like recyclability and pollution must also be taken on board when thinking sustainability.
   • Soft drink manufacturers, like Coca-Cola, are also reliant on marketing and sales of their products through vending machines. These machines do not require any retailers or salespeople which is a good cut back on unnessercery costs spent on employees. Coca-Cola is also working very hard on producing more energy efficient vending machines to be able to continue using the machines in the modern world.

4. Social

   • The neighbouring communities and their attitudes can alter the way that people consume goods. The social environment around businesses is always changing and a business should always persevere to stay aware of and keep up with trends and popularity.
   • The age demographic of a country should always be taken into account when marketing towards a certain group of people. In Australia, the population is aging which means means business must consider the changes in consumer behavior. In places like India, however, the average age of consumers has decreased meaning that companies have to look to the younger population for the future of their companies.
   • When working in an international market, companies need to factor in the ethnicity and religion of their demographics. If a business were to ignore something as pivotal as their customer’s beliefs they may be seen as offensive or insensitive which can cause the brand to have a negative impact on the market.
   • Diversifying the products available is important for the growth of businesses like Coca-Cola when involved with many different cultural tastes around the world. In the early 1900s, Coca-Cola began to expand to Eastern countries like Japan and China. In order to reach the very different tastes of these countries, Coca-Cola introduced 30 new different flavours to appeal to these Eastern Audiences.
   • In the past 20 years, the population has become increasingly concerned with their health and become wary of soft drinks like Coca-Cola. Statistics for the amount of soft drink consumed show a steady decline while the amount of bottled water consumed have shown an increased. Coca-Cola have been handling this situation in a number of ways, like having the Pump water brand.

5. Legal

   • Companies and businesses must adhere to the laws of each country they market to. So, a business should be aware of the laws and legislations that affect it in each place of business.
   • The Australian Consumer Law(ACL) places rules and restrictions on businesses around Australia, regardless of what the business is. Consumer Law is designed to protect customers from poor communication of information or a lack of quality regarding a particular product. Some of the subsets of Consumer Law are unfair contract terms, faulty guarantees, unsafe products and poor sales practices.
   • Businesses are required, under law, to manage and take care of their employees. “Workplace Health and Safety (WHS) … involves the assessment and mitigation of risks that may impact the health, safety or welfare of those in your workplace.” - Business.gov.au
   • Government legislation regulates the presentation and advertising of products to the public. Coca-Cola is known across the world for its famous brand, its striking red colour and its memorable advertising campaigns. One of Coca-Cola’s most influential advertisements was the “I’d love to buy the world a coke” ad from 1971 featuring people from cultures all around the world which was very progressive for that time period and made it a very famous advertising stunt.
   • There are ongoing laws put in place with the purpose of protecting a business’s ideas regarding devices, processes, methods or substances. These are known as patent laws, and are a way a company can protect its commercial rights from competitors. Coca-Cola has many assigned patents to protect its assets and processes such bottle and container designs, recipes and trademarking things like logos.

6. External Business environment are the factors that affect the business, but are NOT under the business's control.

Images and files in the map