The PEST analysis identifies changes in the market caused by political, economic, social, and technological (PEST) factors.
Below is the PEST analysis for the Coca-Cola Company, a global enterprise that has ranked as one of Fortune's top ten most-admired companies for the past consecutive five years.
Political Analysis and Factors
The Food and Drug Administration (FDA) regards non-alcoholic beverages such as Coca-Cola as within the food category. The government regulates the manufacturing procedure for these products. Companies that fail to meet the government's standards are subject to fines. Coca-Cola is also subject to the Occupational Safety and Health Act and to local, state, federal, and foreign environmental regulations. Following are some of the factors that are influencing Coca-Cola's operations:
- Changes in laws and regulations: changes in accounting standards, taxation requirements (tax rate changes, modified tax law interpretations, the entrance of new tax laws), and environmental laws either in domestic or foreign authorities.
- Changes in the non-alcoholic business era: competitive product and pricing policy pressures and the ability to maintain or earn a share of sales in the worldwide market compared to rivals.
- Political conditions, specifically in international markets: civil conflict, governmental changes, and restrictions concerning the ability to relocate capital across borders.
- Ability to penetrate emerging and developing markets: This also relies on economic and political conditions, such as civil conflict and governmental changes, as well as Coca-Cola's ability to form effectively strategic business alliances with local bottlers, and to enhance their production amenities, distribution networks, sales equipment, and technology.
Economic Analysis and Factors
During the recession of 2001, the US government took aggressive actions to turn the economy around by 2002. Coca-Cola took note of this and realized that loan interest rates would likely rise as the economy returned. Thus, they took out low-cost loans in 2001 to fund growth in 2002. They used the loans for research and development on new products to capitalize on in a strong 2002 economy.
Currently, as global growth is slowing, Coca-Cola may be watching for a similar opportunity.
Social Analysis and Factors
Social factors that affect the sales of Coca-Cola's products include the following:
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- The majority of people in the US are showing increasing interest in healthy lifestyles. That has strongly influenced the sales within the non-alcoholic beverage sector as many customers switch to bottled water and diet colas such as Coca-Cola Light or Zero.
- Time management is a concern for 43 percent of all households, a percentage that has increased over the years.
- Customers from ages 37 to 55 are concerned with their nutrition. Also, a large portion of the population is baby boomers. As they become seniors, they are more concerned about life choices that will impact their life expectancy. That will continue to affect the non-alcoholic beverage sector by increasing the demand for healthier drinks.
Technological Analysis and Factors
Some factors that cause a company's actual results to vary from expected results include:
- The efficiency of a company's advertising, marketing, and promotional programs: For example, television, web, and social media advertising are constantly evolving. The ability of a company to effectively promote their products through these channels impacts sales.
- Packaging design: In the past, the introduction of cans and plastic bottles increased sales volume for the company due to how easy these containers were to carry and dispose.
- New equipment: Because technology is continuously advancing, new equipment is constantly being introduced. Because of these new technologies, Coca-Cola's production volume has increased sharply compared to that of a few years ago.
- New factories: Coca-Cola Enterprises (CCE) has six factories in Britain that use modern technology to ensure the quality and speedy delivery of the product. In 1990, CCE opened one of Europe's largest soft drinks factories in Wakefield, Yorkshire. The factory has the ability to produce cans of Coca-Cola at a faster rate than a machine gun can fire bullets.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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