Abstract: Environmental analysis of the target country: The Czech Republic, is necessary for strategic placement and expansion of business in this industry. The first task is focused on PEST analysis of the business environment in the Czech Republic paying attention to factors that concern the soft drink industry. The third task is conducting a SWOT analysis of Coca Cola in the Czech Republic with recommendations giving strategic guidelines for Coca Cola in order for the company to become a market leader in the soft drinks industry.
Introduction: As the report states the soft drink beverage industry is in the maturity stage with three major players dominating and Coca Cola will become the market leader if it follows the strategic guidelines outlined in this essay and using the analyses PEST of the business environment of the Czech Republic in order understand the conditions which will affect the company’s performance. An analysis of the external environment is necessary to understand different regions and the forces which determine the success of the company.
The Coca Cola products are global and sold everywhere and in the Czech Republic is an established brand in the mature stage of the product life cycle. The business strategy is necessary as the soft drink industry in the Czech Republic is in the maturity stage which may mean the market is at saturation and other trends are able to grow ie the bottled water and healthy drink trend. Coca Cola has been in the Czech Republic for many years the main task is to become the market leader and in order to do this an analysis of the environment is necessary.
Political and Legal Environment
Non-alcoholic beverages fall within the food and beverage category of guidelines and legislation in the Czech Republic and manufacturing codes and regulations and fines if the company do not meet these regulations. The Czech Republic’s political landscape is changing and now that it has accession in the European Union and the European Union is aware of the strategic importance of the food and drink industry and its subcategory the soft drink industry as there is a strong presence of international companies such as Coca Cola and Pepsi as well as local companies such as Kofola and Karlovarske Mineralni Voda.
With the integration of the Czech Republic into the EU there are responsibilities both local and EU legislative directives that the company must meet in order to maintain a business presence. As Coca Cola is a foreign company a Czech branch of the company can be setup to conduct business and the branch registered at the Czech Commercial Register. The levels of corruption in the Czech Republic could also been seen as high currently 52 in the corruption perception rankings and there are fairly high levels of bureaucracy.
Economic Environment
Geographically the Czech Republic is in the crossroads of Europe maintaining good close links to other important European countries such as Germany, Poland , Hungary and Slovakia. To estimate the future potential of Coca Cola’s market share the economic factors such as interest rates , taxation policies and the level of economic growth need to be analyzed. As the interest rates are at approximately 1% from the Czech National Bank, this means that if Coca Cola requires capital for capital resources for expansion then the cost of borrowing could be done locally.
Other major economic indicators include GDP is declining due to the financial crisis and unemployment is rising from 8%. The declining GDP can have a negative consequence for increasing investment opportunities and a reduced rate of return. What this means is that people will be more sensitive to prices and the Coca Cola being a premium soft drink consumers may choose a cheaper alternative.
The current VAT rate for food is 9% and is similar across all EU countries. As the Czech Republic has yet to adopt the Euro as currency there will be higher transaction costs when moving currencies from abroad especially the U.S dollar as the Czech Crown is still strong relative to the dollar. Social and Cultural Factors The health based trend of drinking soft drinks that are healthy is continuing and there is a preference for soft drinks with vitamins and free of preservatives and colors as well as drinking more bottled water. As the nature of the consumer environment towards the typical softdrink beverage is moderate Coca Cola will need to incorporate more healthy drinks and or change the content or image of some of their more popular brands.
The competitive environment also plays an important part in the successful implementation of the strategy for Coca Cola has high competition from local and international companies. Coca Cola is also competing with a heavy beer drinking culture in the Czech Republic and as possibly the most popular beverage in the country and gaining a share of this market will boost market share of the non alcoholic beverage industry.
Marketing campaigns replacing a beer product with a Coca Cola product in a typical Czech setting in a pub for example can change this perception gradually. Another approach is to categorize alcoholic beverages such as beer and or wine as alcohol giving the perception of it as associated with alcohol and therefore a drug. This perception can make people seek alternatives to beer and alcohol and incorporate an unhealthy association with alcoholic beverages.
Another social factor is the tendency for Czechs to view soft drinks as unhealthy where exposure to the U. S obesity epidemic blaming soft drinks for this problem and changing this perception will be the key to dominating the Czech Market. Technical, technological and production factors The Czech Republic has a highly experienced and educated IT sector and what this means is that Coca Cola can utilize these resources in a marketing and Customer Relationship Management role to better manage customers and market share.
In a marketing prospective Coca Cola can use different marketing techniques using the latest social networking sites such as Facebook, Myspace and others . Companies have begun to tap into this technological resource and there is a growing trend where there are about 2 million Czech users. 2There is also a high level of R;D potential in the Czech Republic due to this Coca Cola can conduct market research and better understand customers behavior and perception.
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