Report On Expanding Coca Cola Into Mexican Market: A PESTLE Analysis

Background information of Coca Cola

Coca Cola is a multinational corporation that is serving various countries in almost all the part of the world. By earning the revenue of 84.8 Billion dollars, it comes under the multinational corporation by serving millions of customers (Fandam, 2016). Due to big multinational company, Coca Cola is fulfilling the responsibility of being ethical as well as eco-friendly. Due to use of water in preparing its beverage drink, it takes proper use of water by keeping it safe. It is also interested in proving the safe drinking water to the poor countries. The objective of this report is to expand the Coca Cola market into Mexico. For preparing the report, first environment of Mexico has been analysed through the PESTLE analysis. Through this, political, economic, social, technological, legal, and environmental condition has been analysed which is important for taking entry into Mexico for business. By taking the PESTLE, analysis of Mexico, opportunities as well as threat has been described in the report that Coca Cola will get by taking entry into Mexico. Apart from the PESTLE analysis, porter’s five forces has been highlighted in the report. At the end of the report, recommendations for Coca Cola has also been discussed that will help the company in Mexico.

Coca Cola is an American corporation that was founded in 1892. It is engaged in manufacturing and selling of beverages. It is largest manufacturer of beverages that is serving more than 200 countries. It also sells the soft drinks as well other products. It is one of the largest manufacturer and distributor of the beverages in the world. It has headquartered in Atlanta, Georgia. From the report published recently, it is founded that Coke is still the king in the market. The market share of Coke has been increased from 17.3% to 17.8%. The competitor of Coke, Pepsi’s market share has been dropped to 8.3% that was 10.3%. In the year 2016, the soft drinks were accounted for $81 Billion in North America (Bronner, 2018).

Political factors- In Mexico, there are several political factors that will affect the Coca Cola to do business. Security and corruption is one of the biggest factors that affect the businesses in Mexico. Besides this, various positive effects are shown in the diagram given below. Trade and investment freedom has been increased in recent years that will help the companies to do business in Mexico (Heritage Foundation, 2018). It is also seen that most of the poverty is caused by geographic, individual, as well as political factors. For reducing, the poverty in Mexico, World Bank and international monetary fund take various measures because the government of Mexico does not take enough actions to ensure the development.

Pestle analysis of Mexico

                                             

Economic factors- Mexico is the second largest economy of the Latin America as well as among the 15^th largest economies. In 2017, Mexico faced the two big earthquake that hampered the growth of Mexico. Therefore, it can also hamper the Coca Cola growth when it will move to Mexico because due to these uncertainties people do not spend too much. Besides this, Mexico is also known for cheaper labour which will prove to be profitable for Coca Cola. In the year 2017, unemployment rate also decrease in Mexico with 3.6% that was 3.95 in the year 2016. From these data, it is clearly stated that Coca Cola is required to research the market properly before moving into the Mexican market for business.

Main Indicators	2016	2017	2018 (e)	2019 (e)	2020 (e)
GDP (billions USD)	1,077.78	1,151.05e	1,199.26	1,242.39	1,306.77
GDP (Constant Prices, Annual % Change)	2.9	2.0e	2.2	2.5	2.7
GDP per Capita (USD)	8,815	9,319e	9,614	9,866	10,282
General Government Balance (in % of GDP)	-4.0	-2.4	-2.6	-2.6	-2.6
General Government Gross Debt (in % of GDP)	56.8	54.3	53.8	53.7	53.7
Inflation Rate (%)	2.8	6.0	4.8	3.6	3.0
Unemployment Rate (% of the Labour Force)	3.9	3.4	3.5	3.5	3.5
Current Account (billions USD)	-23.32	-19.35e	-15.31	-15.97	-19.66
Current Account (in % of GDP)	-2.2	-1.7e	-1.3	-1.3	-1.5

(Santander, 2018)

Besides this, statistics of Beverage industry shows that the market value is also increasing every year (Statistica, 2018).

Social factors- As per the data, it is estimated that the beverage industry of Mexico is expected to increase by $55 million in 2025. 62% of the Mexico consumers are looking forward for the natural beverage options. Therefore, Coca cola can also add this in its product for speedy growth and more market base. Besides this, consumers are also not interested in bottle rather than they believe more in the taste of product. In this way, Coca Cola can focus more on the flavours of its drink in order to satisfy the Mexican customers (Liem, 2018).

Technological factors- Technological factors play an important role in the Food and Beverage industry. It is an important factor in the new market. In order to successfully setup the business in Mexico, Coca Cola is required to adopt the technological advancement in its products that will attract the Mexican customers toward its brand. Technologies also change the production process for every company. Therefore, Coca Cola is required to adopt some innovative technologies in order to more focus on the output and increased sale. From the report presented for food and beverage industry, it is founded that people are getting more concern about the healthier ingredients that has more protein and vitamin (Serodio, Stuckler, Mckee and Cohen, 2016). Besides this, they also require those drinks that contain less sugar. Therefore, it becomes necessary for Coca Cola to use such technologies that will less make the product better and healthier.

Political factors

Environmental factors- This factor provides the information regarding the performance of country on environment policies as well as indicators. Mexico has the issue of natural resources. Besides this, it also has various environmental problems due to the urbanization, population growth, and industrialization (Caraveo, Cruz Caballero & Pérez, 2015). Due to various industries, Mexico is facing the problem of air pollution in huge rate. In addition this, Mexico ranked on the number 92 for getting the easiness in electricity. Therefore, for starting the business in Mexico, Coca Cola is required to obtain the certificate from the Comisión Federal de Electricidad. Mexico also faces the water issues due to frequent floods in Mexico (3bl media, 2017).

Legal factors- In Mexico, government has made several rules and regulations to conduct the beverage and food industry properly. From the recent report, it is founded that almost 70% of the population in Mexico is suffering from the overweight an obesity problem. By taking care of this, Mexico government has enacted the sugar tax (The Guardian, 2018).This law has reduced the consumption of sugary drink by the Mexico people. Health experts also stated that this tax could see the progress of Mexican people by decline in the rates of obesity related diseases.

1. As stated from the economy of Mexico, the recent reports show that the rate of labour in Mexico is low. In this way, Coca Cola can get the various benefits by hiring the labour at cheaper rate (Figueroa et al, 2018). By doing this, it will be able to decrease its cost and see its drinks at lower cost. By doing this, it will be able to get the more profit and growth at Mexico. It can also add various products in its brand by taking the assistance from Mexican workers. As a result, it will require more labours and more employment will be generated for the working class people. By doing this, it will help in reducing the poverty at Mexico and will be good add in the Coca Cola company.
2. After the enactment of sugar tax, Mexican people have reduced the consumption of sugar drinks.  Therefore, there is great opportunity for the Coca Cola to offer some sugar free drinks to the people of Mexico. This will help it in increasing the market share of its brand in Mexico. By doing this, it will be able to get the more market demand for its drink. Besides this, it can also offer the sports drink that is required by most of the people in today’s time. By offering this drink, it will be able to get the more customers and market share for its brand which will be helpful in the future.
3. By reducing the wastage and industrial pollution, it can fulfil the corporate social responsibility. This will welcome the many opportunities in its industry such as large customer base, assistance from government. It is true that those firms likely to success more who have fulfilled the corporate social responsibility in proper manner. In today’s time, it is seen that those companies are successful who are helping in reducing the wastage that is coming from their industries. Several companies have also fulfilled the CSR responsibility in best manner by less pollution and proper disposal of wastage. Therefore, it is good opportunity for Coca Cola to adopt such measure which will be helpful in fulfilling the corporate social responsibility in best possible manner (Klimkiewicz & Oltra, 2016).
4. It is seen that poverty is the main problem that is persisting among the Mexico people. Therefore, Coca Cola can include the right to education for its employee’s children as a CSR activity (Strandholm & VanHemert, 2018). By including this in its corporate social responsibility, it can get several benefits in the company. Due to this, various investors will like to invest in its company as well as customer will like to purchase more of their products.

1. Due to continuous floods and droughts, Coca will face the threat related to water. Therefore, the water issues will harm the productivity of Coca Cola in Mexico. Water is an essential resource that is required by every business to operate successfully in any country. Mexico is such a country where generally the issue of flood arises which decreases the flow of water. Therefore, in order to address this issue, Coca Cola can take certain measures.
2. The changing demand of customers frequently in Mexico can affect the production of Coca Cola. It becomes essential for Coca Cola to cope with the changing demand of customers.  If any rule implemented by Mexico government for the beverage industry in upcoming year, its productivity will affect largely.
3. Due to unavailability of various technological advancement in the country, it can face many problems such as less productivity, less productive output. Besides this, it will not able to cut down its cost much due to less technological advanced technologies. It might happen that, it will increase the cost in its production process. Therefore, Coca Cola must take suitable measures for its technology before moving to Mexico for setting up its business.

1. Bargaining power of buyers- soft drink market is bigger beverage industry. As the prices of Coca-Cola are already low, so buyers usually do not bargain. In case, if any retailer will buy the products in bulk quantity then only it will have high bargaining power. Customers will easily buy the drinks of Coca Cola due to its low prices. In this way, the overall bargaining power of customers will be low.
2. Threat of substitutes- In Mexico, there are various industries who are offering the soft drinks to the people of Mexico. Besides this, there is no substitute cost for transferring to any other brand. In this way, threat of substitute is higher for Coca Cola to enter in the market of Mexico. In order to minimise the threat of substitute, product differentiation strategy will be helpful. It will help the company to company to produce more innovative product by offering unique product (Trivikram, 2016).
3. Bargaining power of supplier- In Mexico, it will face the high threat of suppliers due to availability of various other firms to which supplier can supply the raw material and products. In this way, it is essential for Coca Cola to take the assistance of well-established firm in Mexico for doing business.
4. Competition rivalry- In Mexico, there is various competitors from which Coca Cola will face competition. Among all the competitors, it will face the huge competition from Mexico who is a leading beverage industry in Mexico.
5. Threat of new entrant- In spite of various laws, Coca Cola will face the competition from new firm who are entering in the market. Various customers have very limited budget that makes them enable to afford. This reason has encouraged the firms to come in the Mexico market and make the strong market base just with small margin. In order to avoid this threat, Coca Cola can also adopt the low pricing strategy for some time in order to gain the market share (EuroMonitor, 2018).

Conclusion and recommendations

From the above discussion, it can be concluded that Mexico has various environment problems that requires the firms to take appropriate actions. Therefore, it is recommended to Coca Cola that it can make the best use of its technologies to minimise the negative impact from these problems. Moreover, due to the increment in the poverty of Mexico people, it can help the children of its workers to get some education assistance from the company. This will help the company in fulfilling its corporate social responsibility that is important for the success of the business.

It can also add a research and development department in its business for proper identification of opportunities and threats that it can face in the upcoming years. By doing this, it can make the best investment in any of the activity (Charter, 2017).

References

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