New Political

7/31/2019 New Political

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POLITICAL ENVIRONMENT

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INTRODUCTION

The political environment of a country is influenced by the political

organizations such as philosophy of political parties, ideology of government

or party in power.

This includes the political system, the government policies and attitude

towards the business community and the unionism. All these aspects have a

bearing on the strategies adopted by the business firms. The stability of the

government also influences business and related activities to a great extent. It

sends a signal of strength, confidence to various interest groups and investors.

Further, ideology of the political party also influences the business

organization and its operations. Strikes, lockouts and labor disputes etc. also

adversely affect the business operations. However, with the competitive

business environment, trade unions are now showing great maturity and started

contributing positively to the success of the business organization and its

operations through workers participation in management

The political environment of a business has enormous influence on the

business. The viability of a business depends upon the ability with which it can

meet the challenges arising out of the politicallegal environment. The

political system prevailing in a country promotes shelters, directs and controls

the business activities of the country. To ensure economic development of the

country, the political system should be stable, honest, efficient and dynamic.

The system must ensure political participation of people as well as personal

security to the citizens. Legal and political environment provides a framework

within which the business is to function and its existence depends upon the

success with which it can face the various challenges constructed out of

political and legal framework.


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Political Institutions:

Under a democratic setup, like in our country, the political environment

comprises three vital political institutions:

Legislature

Executives

Judiciary

Legislature

Executives

Judiciary


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1. Legislature:Legislature is the most powerful institution. The main powers are vested in

the legislature are:

a. Policy makingb. Law makingc. Approval of budgetsd. Executive controle. To act as a mirror of public opinion

2. Executive :Government is the executory body of the laws which are framed by

the legislature. In the simple words the government is to shape, direct and

control the business activities. Its job is to implement whatever was decided

by parliament.

Role of government is to shape, direct and control the business activities. The

translation of objective of any laws to the reality depends as much upon the


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laws itself as on its implementation. The implementation of law can ensure the

realization of its true objectives.

3. Judiciary :The third political institution is judiciary. The judiciary sees

to it that the exercise of authority by the executives is according to the

general rules laid down by the legislature. Following are the few

examples of the disputes which are often referred to court for settlement

and verdicts are sought:

Disputes between employer and employees. Disputes between employer and employer. Disputes between employee and employee. Disputes between employers and public. Disputes between employers and government.

The judicial verdicts have far reaching consequences on business. The

consequences become more intense and severe because:-

Judges may vary in severity of punishment inflictedPossibility of wrong assessment of penaltyConflicting verdicts may be pronounces by different judges on same

disputes

There is lot of confusion in the labor laws themselves.


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POLITICAL RISK

Political risk refers to the complications businesses and governments may

face as a result of what are commonly referred to as political decisions or

any political change that alters the expected outcome and value of a given

economic action by changing the probability of achieving business

objectives.

Political risk faced by firms can be defined as the risk of a strategic,

financial, or personnel loss for a firm because of such nonmarket factors

as macroeconomic and social policies (fiscal, monetary, trade, investment,

industrial, income, labor, and developmental), or events related to

political instability (terrorism, riots, coups, civil war, and insurrection).

It is any government action or politically motivated event that could

adversely affective long term profitability or the value of the firm. It varies

from nation to nation.

There are two types of risks: Macro political risk: It affects all

international business. Micro political risk: It affects specific foreign

business.

Try to avoid political risk by minimizing activities in or with countries that

are considered to be of high risk. Use higher discount rates for projects in

riskier countries.Try to reduce risk by adapting the activities (for example, by using

hedging techniques discussed previously).

Diversify across national borders, so that problems in one country do not

severely damage the company.

Buy insurance policies for political risks.


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4.Government contracts: Due to privatization of the economy a numberof government contracts are executed by private business houses. Many

business houses submit the tenders. It is the responsibility of the business

houses to carry out the projects according to required specifications and

standards.

5.Providing service to the government:Sometimes, some influentialand competent businessmen are included in the advisory boards constituted

by the government. Some businessmen are appointed as members of the

delegations who go abroad for exporting trade and industry prospectus.

6.Corporate contributions to political activities:The businesshouses are involved in the political activities in the following ways:

a)Making monetary contributions to political parties particularly at the timeof elections.

b)To contest elections as independents or on party tickets.c)Through lobbying which refers to the behavior after the election and is

concerned with securing legislation in favor of business.

It is the responsibility of the business houses to make sure that their political

involvement provides an additional safeguard against the authoritarian

potential of a mass society.


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RESPONSIBILITIES OF GOVERNMENT TOWARDS

BUSINESS:

The business has its own expectations from the government. Specifically, the

expectations of the business or the responsibilities of the government towards

business are as follows:

Political institutions:Government is responsible for preparing the lawswhich make the business system function smoothly. In these we include

various economic and business laws. It is the responsibility of the

government to provide for the implementation of the laws. Further, it is the

responsibilities of the government to provide a proper judicial system for

settling the disputes between business firms, individuals or government

agencies.

Provision of a peaceful atmosphere:Government has theresponsibility of maintaining law and order situation in the country and to

provide to persons and their property. No successful business can be carried

on in the absence of a peaceful atmosphere.

Provision of a system of money and credit:The government has toprovide for a system of money and credit by means of which the business

transactions can be effected. Further, it is the responsibilities of the

government to regulate money and credit and to protect the money value of

the rupee in the terms of other currencies.


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Balanced development and growth:It is the responsibility of thegovernment to make sure that there is balanced regional development, full

employment and a stable economy. Government has the resources and

capabilities for all this; the only requirement is optimum utilization of

resources.

Provision of information:It is the responsibility of the central, stateand local governments to provide information, which is useful to the

businessman in conducting their business activities. This information may

be about economic and business activity in general, specific lines of

business, scientific and technological developments and many other things

of interest to business houses.

To assist small scale industries:The government has specialresponsibilities towards small scale industries because these industries

generally face problems relating to finance, marketing technical knowhow

and infrastructure. It is the responsibility of the government to provide these

facilities and to encourage small scale sector.

Licensing and inspections:Government agencies should inspect theprivate business houses to ensure quality and to prohibit the sale of

substandard goods. Moreover the government should issue licenses to

competent business establishments. So that they may carry on different and

useful business activities.


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IMPACT OF POLITICAL ENVIRONMENT ON

BUSINESS

Political Environment is one of the most important factors effecting the

operations of a business. Political forces are said to be part of the Macro-

environment. All the factors of the Macro-environment are external to an

organization and completely beyond its control.

Political factors are concerned with the overall situation of politics in a countrywhich in turn can be associated with the situation of government. If a country

is democratic by nature, people will have full voting authority and they would

be able to choose a government that would work for the betterment of the

people and the country. In such a situation, businesses will thrive because of

the good policies of the government.

On the other hand, if there is no democracy, there is no respect for the chosen

government. There will be instability and uncertainty in the country.

Governments will come and go and so will their respective decisions and

policies. Businesses will suffer in such a case as they will not know what will

be their future.

That is why it is said that a stable and democratic government and its political

decisions are important for a country and overall business. A stable political

situation will also attract more and more investors from other nations.


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ESTABLISHING A POLITICAL STRATEGY

Identify the issue. (e.g. environmental standards) Define the political aspect of the issue. (Is it within the political

domain?)

Assess the potential political action of other companies andspecial-interest groups. (Greenpeace)

Identify important institutions and key individuals. (lobby /bribery)

Formulate strategies. (key objectives, the major alternatives)

Determine the impact of implementation. (fallout at home and atthe host country)

Select the most appropriate strategy and implement it.


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THE INDIAN POLITICAL BUSINESS

The decade and a half following Indias economic reforms of 1990 -91 has

been an exciting and transformational one for India and its people, and has also

had a significant impact on the entire world. Much good has happened, with

increasing growth and prosperity benefiting millions. The world has observed

the rise of a large and vibrant middle-class, an aggressive and innovative

private sector, and the growth of a soft culture. It is true that severe challenges

still remain, caused mainly by massive disparities in income and access to

resources, which mean that over 300 million people remain desperately poor

and large parts of the country not benefiting from growth.

A lot of Indias growth and stability today has been credited to its overallpolitical structure and institutions. This is what has kept the nation united

through the numerous challenges it has faced, and continues to face. The

federal nature of the government, coupled with the presence of an independent

judiciary and a powerful media have all combined to create the unique

phenomenon that is Indian democracy. There are notable flaws, such as weak

law enforcement, and an excessive bureaucracy, but, for better or for worse,

Indian democracy has worked.

However, over the past few years, a major development has occurred in India,

almost silently, which illustrates the uglier side of this system. While the

growth rates clocked by the economy over the years have been impressive,

most of the major policy changes benefited big established business houses.

This has resulted in the India of today being a highly oligarchic economy; with

a relatively small population enjoying disproportionate power, wealth and

influence (four of the worlds ten wealthiest individuals are from India). Actual

market friendly policies, which would help the middle-class and poor byboosting entrepreneurship would often be to the detriment of this group, and

are often inhibited. In the 1950s, Eisenhower warned the Americans of a

military-industrial complex which could skew American priorities. His fears

might have been unfounded, or at the very least, quite exaggerated. However,

India today does face the danger of a big political business complex distorting

its priorities.

This phenomenon was partly displayed during the debate over the Indo-US

nuclear deal. A seemingly innocuous bilateral treaty, it created frenzied debate,


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polarized the polity and the nation, and forced the government through a no-

confidence motion. To a complete outsider, it all seemed a lot of action for

something which appeared quite a routine. To Indians though, it all seemed

wearingly familiar. The nuclear deal holds many ramifications for India, and

the general consensus amongst the scientific, business and intellectual

community is that it would be beneficial, if negotiated properly. Power

generation is one area where the deal is said to have probable benefits. India

remains critically deficient in power generation, with large parts of the country,

including metros, suffering from severe power shortages. This has had a major

impact on the growth of small business units, especially in manufacturing.

Since nuclear energy can be used to generate power, it appears that the deal

could help meet the shortage, and thus, presents a huge opportunity for big

business houses. Each major political alliance in India has its support base

comprised of various business houses, and each alliance feels the pressure to

make sure the deal goes through when it is in power, to ensure the maximum

benefit for its support base. Simultaneously, policy changes such as

decentralizing power production, removing subsidies or limiting power theft

are often prevented, as those would enable the entry of other players into the

sectors. It is like a double whammy effect.

Two other areas where the impact of the political-business nexus can be seenare agriculture and retail. Organized retail presents a massive opportunity for

India to broad base its growth, and help kick start the agriculture sector, with

estimates ranging from $ 500 billion to over $ 1 trillion. A large amount of

agricultural produce in India is wasted each year due to the lack of cold

storage, to the tune of $ 7 billion. Investments, both foreign and domestic,

should be welcomed in this sector, as well as initiatives to promote local small

businesses. Yet, the whole sector has been dominated by big players, who

would rather establish consolidated supply chain which would squeeze pricesall along the retail chain.

On a broader governance level, the negative impact of the political business

nexus can be observed. Running for public office in India is an incredibly

expensive proposition and campaign financing remains murky, with virtually

no accountability. This works perfectly to the advantage of the business

lobbies, in exercising control over political parties. The labor market also

remains highly informal and unorganized, as this keeps labor prices cheap.Another good example is the real estate sector, where acquisition of land for


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commercial or private purposes remains incredibly difficult, for businesses

which want to establish themselves. It needs to be pointed out that these

phenomena were not the creation of the big players today, but it works to their

benefit today to ensure that the status quo remains.

It is entirely likely that the influence of this group would diminish with the

passage of time, and that fears about it would prove unfounded. Yet, in the

Indian context, there needs to be a greater awareness of the dangers posed by

such developments, and how they could impact the overall growth story.

Factors affecting the political balance

1.Stability of the government.

2. Government type (dictatorship, democratic, monarchy, etc).3. Economic policy of the government.4. Trade policy.5. Diplomatic events in surrounding countries

Growth and political stability

To say that economic growth would lead to equality of income distribution has

became a myth today, though it was an accepted belief during the 50s. Recentresearch suggests that income distribution is a key factor to promote economic

growth.

2008-09-24 13:2There exists a strong relationship between a countrys

development strategy and its political system. Authoritarianism or democracy

has an unfailing influence on the pace of development and justice. Political

institutions always dominate the fate of nations in many ways. The strategy of

economic development pursued by a country is the outcome of its political

system, which, in turn also determines its success or failure.

The rate of economic growth and the level of economic and social

development represent the well-being and prosperity of an economy and

political stability indicates the well-being of its political institutions. When one

looks at the economy and politics of a country, there arise a number of

questions. For example, what is the role of political institutions in

development? Which kind of political institutions (democracy or dictatorship)


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help or hinder economic growth and itstrickle-down effect? Is there a trade-

off between economic, political and civil liberties and economic growth? What

is the role of income distribution, poverty alleviation and other social welfare

provisions in determining economic performance?

The conventional economics, somehow, fails to answer these questions mainly

because it is devoid of the role of the state or that of political institutions,

which are treated exogenously in all discussions. The answer can only emerge

if the role of the state is treated endogenously. This is done in what is termed

as the New Political Economy, which is, in fact, a revival of what, at one

time back in history, was known as political economy.

The New Political Economy unlike the mainstream conventional economics,incorporates governments impact on the economic system and its components,

without going into the questions of the development of political systems,

constitutions and their processes. In essence, it accounts for the behavior of the

electorate, the legislatures and the bureaucracy. It is only then that we are able

to answer various questions related with the behavior of the state and its impact

on the economic functioning of a given system.

There is a strong relationship between economic growth, capital accumulationand democracy on the one hand and between political instability and income

inequality on the other.

Let us now find answers to the question with regard to the linkages between

the well-being of an economy and its political set-up. These answers emerge

from the experience of different countries and take the form of distinct

hypotheses as given below:

Democracy retards economic growth (Indias experience up to theeighties)

Democracy helps achieving high rates of economic growth Authoritarian regimes lead to faster economic growth (East Asian

experience)

Dictatorial regimes lead to poor economic growth (African and LatinAmerican experience)

As the hypotheses are contradictory and inconsistent, the picture is hazy and no

categorical conclusion can be made. Nonetheless, the fact remains that politicalinstitutions play a crucial and relevant role in the process of economic growth
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and development. The way political institutions influence the pace of economic

growth is not something which is quantifiable nor is it a matter of trade-off

between economic and civil liberties and economic growth. It is something,

which is not easy to notice, understand, or explain in concrete terms. It is, in

fact, a subtle relationship, which has to be qualitatively analyzed and that too

with great caution.

An attempt to reconcile the first two hypotheses and last two again makes it

clear that both democratic institutions and dictatorial regimes are practiced in

different countries in different ways and it is this variation that makes all the

difference to the attainment of economic growth. Countries can be more

democratic or less democratic in terms of the basic democratic tenets of regular

and reasonably free and fair, multi-party elections and dispensation of

economic and civil liberties. It therefore, follows that in democratic countries,

where these two conditions are partly met, other things being given, the pace of

economic growth gets retarded and where these two conditions are honored

and economic growth gets accelerated. We can make similar statements for

dictatorial regimes.

All this leads to the conclusion that whether it is a democracy or a dictatorial

regime, what matters is its political stability. The degree of political stability

cannot be measured directly. It depends on a number of factors like, political

upheavals; riots, strikes and lockouts; crime and (political) assassinations;

coups and change of power; infighting amongst political parties; scams

including rent-seeking and directly unproductive profit seeking activities; lack

of peoples faith in the government; poverty and income disparities.

One may use these indices to work out the degree of political stability in

different countries/regions over different periods. This would lead to a number

of interesting hypotheses establishing a link between the indices of political

stability and economic growth. For example, during the periods of political

unrest, or coups, or change of power, or even intense infighting within the

ruling party, the rate of growth has been seen to slow down and even become

negative, essentially through lower savings and investment rates and also

through a lack of vision in the part of the bureaucracy.
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It is now understood that the magnitude of these activities and political

instability reinforce and strengthen each other to quite a great extent with the

result that taken together, they work against the growth process. They require

being neutralized, weakened and counter-acted.

Beyond rent-seeking and directly unproductive activities, there are two

other explanatory socio-economic factors of political instability that require

our attention. These are poverty and inequality of income distribution. There is

a two-way relation between poverty and political instability in the sense that

they lead to each other and are mutually reinforcing. It is a known fact that

poor countries are, by and large, politically unstable. It is also known that

political instability is not conducive for saving and investment, and thus

adversely affects growth efforts, which in turn, perpetuate poverty. The two-

way cause and effect link between the two traps the economy into an acute

vicious circle.

To say that economic growth would lead to equality of income distribution has

became a myth in recent times, though it was an accepted belief during the

fifties, when it was thought that in the initial stages of economic growth,

inequalities would rise, but eventually they would fall. During that era,

countries, therefore, depended on the growth process to attain equality of

income distribution. Recent research suggests that income distribution is a key

factor to promote economic growth. There are two ways, in which this

happens. Income distribution influences growth via its impacts on political

stability, and also through other means. For example, unequal income

distribution leads to social unrest, which in turn, creates demands for changes

in the status quo. In such situations, savings and investment are adversely

affected, which imply low growth. Inequality of income distribution has a

dampening effect on economic growth through other means as well. It

encourages private rent-seeking activities creating distortions in the market-

behavior, which results into poor investment and thus low growth.

It therefore, means that apart from adopting an appropriate macro strategy for

growth with implications for poverty alleviation, employment generation and

social justice, we will have to devise direct programmes targeted at the poor

and the lower income groups and aimed to provide them with entitlements,

employment and (productive) assets, and also to pursue welfare-oriented

minimum needs programmes, which aim at improving the social consumption


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of essential goods and services by the poor and the downtrodden, notably in

the areas of health, education, housing, drinking water and also in a number of

other areas through discriminatory pricing and subsidies.

We also have to evolve an optimal mix of new and strong (economic, political,

social, and legal) institutions to provide the necessary support for the

promotion of growth, prosperity, and social justice. For example, a strong legal

system, with an authoritarian regime within the framework of democratic

traditions, will play an important role to provide the required built-in

mechanisms to correct distortions and malfunctioning in the government as

and when they occur. Equally important would be the integrity and political

honesty of the people who are at the helm of political affairs.

Political stability to positively impact Indias rating S & P

Formation of a stable government at the Centre will have positive implications

for India's sovereign rating, global agency Standard and Poor without

indicating when it would review country's rating.

"Generally speaking political stability is a positive factor for the sovereign

ratings. Because of strong mandate, next government will have a better

opportunity to execute its policy agenda". Pointing out that it was too early to

comment on the impact of formation of a stable government at the Centre, it

was said, "a better political environment itself will not warrant to progress in

the areas such as fiscal consolidation, deregulations and public sector reforms,

to improve main constraining factors for sovereign ratings of India."

Earlier in January, the decision of the global agency to change the outlook for

long term ratings, which was pegged at BBB, from 'stable' to 'negative' in

January evoked sharp reaction from the Finance Ministry, which questioned

the rationale behind the move.

Credit rating BBB indicates that adverse economic environment could impair

the capacity to meet financial obligations. While 'stable' outlook implies that

rating would remain the same, the 'negative' outlook suggests likelihood of a

downgrade.


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Standard and Poor's Ogawa further said that in absence of the economic and

fiscal policies of the new UPA government, it would be too early to comment

on the impact of the victory of the coalition at the general elections on India's

sovereign ratings.

The Congress-led UPA, which won over 260 seats in the general elections for

the 15th Lok Sabha, is slated to form the government on Friday and come out

with a budget in July which will spell out its economic policies.

Answering question on the weight that rating agency assigns to political

stability, it was said that "highly rated sovereign tends to have a strong and

stable political system and environment and those rated lower tend to have

weak or unpredictable political systems."

However, the relative importance of political stability for our sovereign

consideration could change, depending on the country's situation.

"If the country's political situation is very volatile and current government and

opposition has significantly different views on the economic, fiscal or foreign

exchange rate policies, then political stability is very important for such

sovereigns."

Political factor, Ogawa added, could be less important in case a country has an

acute problem in areas like balance of payments, fiscal deficits, inflation or

debt payments.


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CASE STUDY

PESTEL ANALYSIS OF THE COCA-COLA

COMPANY

INTRODUCTION & HISTORY

Refreshment is a language everyone understands, and no one speaks it better

than Coca-Cola. Sometimes a soft drink is more than just a carbonated,

sweetened beverage. Sometimes it represents an exciting lifestyle. Soft drink-

giant Coca-Cola was one of the first on the bandwagon of promoting soft

drinks as a way to excite your life. Starting as early as 1907, ads described the

drink as "full of vim, vigor and go."

John Pemberton, an Atlanta pharmacist, invented the drink one day in 1886

while seeking a quick headache cure. He put it on sale for 5 cents a glass in his

neighborhood pharmacy. Back then, the syrup was mixed and then added to a

glass of seltzer water upon purchase.

Pemberton's bookkeeper, Frank Robinson, christened the drink "Coca-Cola"

and wrote the name in the distinctive script that is still used today. The name

comes from the extract of coca leaves and kola nuts contained in the syrup.


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Eventually in 1929, the cocaine was completely removed from the formula,

leaving caffeine to provide the kick.

But Pemberton wasn't a businessman and didn't understand the drink's

potential. Between 1888 and 1891 he sold the company in bits and pieces to

local entrepreneur Asa Griggs Candler.

In 1891, Candler completed the purchase and became Coca-Cola's first

president. He traveled the country introducing pharmacists to the drink, which

they sold from their counters. Candler also gave the pharmacists plenty of

clocks, scales, calendars and other items laden with the Coca-Cola logo as well

as coupons for customers to redeem a free glass of the drink.

Even Candler didn't fully appreciate the brand's potential. In 1899, not

realizing that customers might want to take their Coke with them, he sold the

bottling rights to two Chattanooga, Tennessee lawyers for a dollar. They soon

built a thriving bottling business, in turn selling the rights to other

entrepreneurs around the country. In 1916, the Root Glass Company created

the well-known curved bottle that immediately differentiated Coca-Cola from

the many imitators that had sprung up, and Coca-Cola smartly obtained a

patent for the design.

The bottling business grew, with 1,000 bottlers by 1920 as the brand expanded

into Cuba, France, Puerto Rico and other territories. In 1918, Candler sold the

company to Ernest Woodruff, whose son Robert became president in 1923.

Robert Woodruff was the man responsible for the rapid expansion of the Coke

brand throughout the world -- during World War II, he decreed "every man in


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uniform gets a bottle of Coca-Cola for 5 cents, wherever he is, and whatever it

costs the company."

The Coca-Cola Company is the worlds largest beverage company. They

operate in more than 200 countries & markets more than 2800 beverage

products. Headquartered at Atlanta, Georgia, they employ approximately

90500 employees all over the world. It is often referred to simply as Coke or

(in European and American countries) as Cola or Pop.

MISSION

Our Roadmap starts with our mission, which is enduring. It declares our

purpose as a company and serves as the standard against which we weigh our

actions and decisions.

To refresh the world...

To inspire moments of optimism and happiness...

To create value and make a difference.

VISION

Our vision serves as the framework for our Roadmap and guides every aspect

of our business by describing what we need to accomplish in order to continue

achieving sustainable, quality growth.

People: Be a great place to work where people are inspired to be the best they

can be.

Portfolio: Bring to the world a portfolio of quality beverage brands that

anticipate and satisfy people's desires and needs.

Partners: Nurture a winning network of customers and suppliers, together we

create mutual, enduring value.


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Planet: Be a responsible citizen that makes a difference by helping build and

support sustainable communities.

Profit: Maximize long-term return to shareowners while being mindful of our

overall responsibilities.

Productivity: Be a highly effective, lean and fast-moving organization.

PESTEL Analysis of Coke

What is PESTEL analysis?

There are many factors in the macro-environment that will effect the decisions

of the managers of any organization. Tax changes, new laws, trade barriers,

demographic change and government policy changes are all examples of

macro change. To help analyze these factors, managers can categorize them

using the PESTEL model.

PESTEL stands for Political, Economic, Social, Technical, Environment and

Legislative. It is a strategic planning technique that provides a useful

framework for analyzing the environmental pressures on a team or an

organization. It describes a framework of macro environmental factors used in

the environmental scanning component of strategic management. It is a part of

the external analysis when conducting a strategic analysis or doing market

research and gives a certain overview of the different macro environmental

factors that the company has to take into consideration. It is a useful strategic

tool for understanding market growth or decline, business position, potential

and direction for operations. PESTEL factors play an important role in the

value creation opportunities of a strategy. However they are usually outside the

control of the corporation and must normally be considered as either threats or

opportunities.


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Kotler (1998) claimed that PESTEL analysis is a useful strategic tool for

understanding market growth or decline, business position, potential and

direction for operations. The headings of PESTEL are a framework for

reviewing a situation, and can in addition to SWOT and Porters Five Forces

models, be applied by companies to review strategic directions, including

marketing proposition.

Coca Cola is the largest manufacturer, distributor and marketer of beverage

concentrates and syrups in the world. Coca-Cola is recognized as the worlds

most valuable brand. They market four of the worlds top five nonalcoholic

sparkling brands, including Diet Coke, Fanta and Sprite. The Company owns

or licenses more than 450 brands, including diet and light beverages, mineral

water, enhanced waters, juices and juice drinks, teas, coffees and energy and

sports drinks. Through the worlds largest beverage distribution system,

consumers in more than 200 countries enjoy the companys beverages at a rate

of approximately 1.5 billion servings each day. The Company generates

revenues, income and cash flows by selling beverage concentrates and syrups

as well as finished beverages.

Even Coca Cola, the worlds largest beverage company has to consider about

their macro environment and its opportunities and threats. They too have to

analyze their political, Economical, Social cultural environment and legal

factors in order to catch up with the fast changing world.

P: Political change, from one party to another in control- for example the rise

in private healthcare and privatizations under Conservative governments.

Political Analysis for Coca-Cola

Non-alcoholic beverages fall within the food category under the FDA. (Food

and Drug administration) The government plays a role within the operation of


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manufacturing these products in terms of regulations. There are potential fines

set by the government on companies if they do not meet a standard of laws.

The following are some of the factors that could cause Coca-Cola company's

actual results to differ materially from the expected results described in their

underlying company's forward statement:-

Changes in laws and regulations, including changes in accounting standards,

taxation requirements, (including tax rate changes, new tax laws and revised

tax law interpretations) and environmental laws in domestic or foreign

jurisdictions.

Changes in the non-alcoholic business environment. These include, without

limitation, competitive product and pricing pressures and their ability to gain

or maintain share of sales in the global market as a result of action by

competitors.

Political conditions, especially in international markets, including civil unrest,

government changes and restrictions on the ability to transfer capital acrossborders.

Their ability to penetrate developing and emerging markets, which also

depends on economic and political conditions, and how well they are able to

acquire or form strategic business alliances with local bottlers and make

necessary infrastructure enhancements to production facilities, distribution

networks, sales equipment and technology.

A threat that the Coca Cola Company had to face recently due to the changes

in the political factors was the War against Iraq made USA and UK very

unpopular in Middle East as well as in other Muslim countries. Because Coca

Cola is known as the very American company, this had a huge effect on the

sales of its products.


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E: Economic change, for example a recession creating increased activity at

the lower ends of product price ranges. Rate of interest raises depressing

business and causing redundancies and lower spending levels.

Economic Analysis for Coca-Cola

Last year the U.S. economy was strong and nearly every part of it was growing

and doing well. However, things changed. Most economists loosely define a

recession as two consecutive quarters of contraction, or negative GDP growth.

In 2008 we are witnessing a global economic crisis which was suggested by

several important indicators of economic downturn worldwide. These included

high oil prices, which led to both high food prices (due to a dependence of

food production on petroleum, as well as using food crop products such as

ethanol and biodiesel as an alternative to petroleum) and global inflation; a

substantial credit crisis leading to the bankruptcy of large and well established

investment banks as well as commercial banks in various nations around the

world; increased unemployment; and the possibility of a global recession.

As the inflation rate grows higher and higher consumer buying power also

represents a key threat in the industry. The rivalry between Pepsi and Coke has

produce a very slow moving industry in which management must continuously

respond to the changing attitudes and demands of their consumers or face

losing market share to the competition. Furthermore, consumers can easily

switch to other beverages with little cost or consequence.

It is said that Coca-Cola's growth will slow in Europe and U.S. due to the

economic crisis but the drink company expects to remain as the leader of the

beverage market. The company does not hope to cut down prices , even though

the consumers purchasing power has grow down. The Coke company says

although we will feel the impact we will win the market.

Future Outlooks


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The non-alcoholic beverage industry has high sales in countries outside the

U.S. According to the Standard and Poor's Industry surveys, "For major soft

drink companies, there has been economic improvement in many major

international markets, such as Japan, Brazil, and Germany." These markets will

continue to play a major role in the success and stable growth for a majority of

the non-alcoholic beverage industry.

S: Social change involves changing attitudes and lifestyles. The increasing

number of women going out to work, for example, led to the need for time-

saving products for the home.

Social Analysis for Coca-Cola

Many U.S. citizens are practicing healthier lifestyles. This has affected the

non-alcoholic beverage industry in that many are switching to bottled water

and diet colas instead of beer and other alcoholic beverages. Also, time

management has increased and is at approximately 43% of all households. Theneed for bottled water and other more convenient and healthy products are in

important in the average day-to-day life. Possible substitutes that continuously

put pressure on Coke include tea, coffee, juices, milk and hot chocolate

Consumers from the ages of 37 to 55 are also increasingly concerned with

nutrition. There is a large population of the age range known as the baby

boomers. Since many are reaching an older age in life they are becoming more

concerned with increasing their longevity. This will continue to affect the non-

alcoholic beverage industry by increasing the demand overall and in the

healthier beverages.

Increasing awareness among consumers, public health professionals and

government agencies of the potential health problems associated with obesity

and inactive lifestyles represents a significant challenge to the coca cola


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industry. The company has recognized that obesity is a complex public health

problem. Their commitment to consumers begins with the companys broad

product line, which includes a wide selection of diet and light beverages, juices

and juice drinks, sports drinks and water products.

Since there are indications that "soda and sweetened drinks are the main

source of calories in American diet," most nutritionists advise that Coca-Cola

and other soft drinks can be harmful if consumed excessively, particularly to

young children whose soft drink consumption competes with, rather than

complements, a balanced diet. Coke has got a lot of sugar by which continuous

drinking of Coca-Cola may cause health problems. Being addicted to Coca-

Cola also is a health problem, because drinking of Coca-Cola daily has an

effect on your body after few years.

A common criticism of Coke based on its allegedly toxic acidity levels has

been found to be baseless by researchers. The drink has also aroused criticism

for its use of caffeine, due to the possibility of physical dependence. There is

also some concern regarding the usage of high fructose corn syrup in the

production of Coca-Cola. Since 1985 in the U.S., Coke has been made with

high fructose corn syrup, instead of sugar glucose or fructose, to reduce costs.

In India, there exists a major controversy concerning pesticides and other

harmful chemicals in bottled products including Coca-Cola.

T: Technological change - Creates opportunities for new products and

product improvements and of course new marketing techniques- the Internet,

e-commerce.

Technological Analysis for Coca-Cola

Some factors that cause company's actual results to differ materially from the

expected results are as follows:


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The effectiveness of company's advertising, marketing and promotional

programs. The new technology of internet and television which use special

effects for advertising through media. They make some products look

attractive. This helps in selling of the products. This advertising makes the

product attractive. This technology is being used in media to sell their

products.

Introduction of cans and plastic bottles have increased sales for Coca-Cola as

these are easier to carry and you can bin them once they are used.

As the technology is getting advanced there has been introduction of new

machineries all the time. Due to introduction of this machineries the

production of the Coca-Cola company has increased tremendously then it was

few years ago

? CCE has six factories in Britain which use the most stat-of the-art drinks

technology to ensure top product quality and speedy delivery. Europe's largest

soft drinks factory was opened by CCE in Wakefield, Yorkshire in 1990. The

Wakefield factory has the technology to produce cans of Coca-Cola faster than

bullets from a machine gun.

A latest technical achievements made by The Coca-Cola Company and

Ardagh Glass was the new environmentally friendly version of the

iconic Coca-Cola' Contour bottle which has won number of awards for

its light weight.

E: Environmental changes The deterioration of the natural environment is a

major global concern. In many world cities, air and water pollution, have

reached dangerous levels. Marketers need to be aware of the threats, and

opportunities, associated with four trends in the natural environment: the

shortage of row materials, especially water; the increased cost of energy;

increased pollution levels; and the changing role of government.


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Environmental analysis for Coca Cola

The Coca-Cola systems environmental commitments are focused on the areas

in which they have the most significant opportunities to make a difference -

water stewardship, sustainable packaging, and energy management and climate

protection. The company has made progress in each of these areas, but Coca

Cola has recognized that there is much more to do.

However, with a system of Coca Colas size and reach, we must also step back

and look at how cokes local operations add up to a global impact. For

example:

In 2007, the system used approximately 300 billion liters of water.

Coca Cola is one of the worlds largest purchasers of sugar and high fructose

corn syrup.

Coke Company is among the worlds largest purchasers of citrus and coffee.

Coca Cola is the largest consumer of aluminum cans, PET bottles and

refillable glass bottles in the nonalcoholic beverage industry.

The company has more than 10 million vending machines, coolers and

fountain dispensers in use around the world.

In 2007, the company used approximately 300 billion liters of water in their

plants to produce beverages. To meet their water needs while helping to

conserve watersheds and improve community water access; water stewardship

leads the list of the companies sustainability efforts. In 2007, Coca Cola

announced their aspirational goal to return to communities and nature, an

amount of water equal to what is used in the companys beverages and their

production. Coca Cola call this water neutrality.

The company is moving towards their goal with three objectives:


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Reduce the amount of water used to produce their beverages.

Recycle water used in the manufacturing processes so it can be returned safely

to the environment.

Replenish water in communities and nature through a global network of local

partnerships and projects.

Coca Colas vision is to advance a packaging framework in which their

packaging is no longer seen as waste, but instead as a valuable resource for

future use. To realize this zero waste vision, they have been guided by a

commitment to continuous improvement. In 2007, the company continued tomake strides by advancing packaging initiatives focused on three goals:

Reduce - To design consumer-preferred packages that use the least amount of

resources, while maintaining product quality

Recover - To build packaging management systems to collect post-consumer

packaging.

Reuse - To use post-consumer packaging and packaging materials again to

deliver sustainable value. The company is in the process of setting specific

global targets, in addition.Smaller cap for PET bottles

- eliminating 40 million pounds of plastic annually in the U.S. alone

While the company has worked hard to advance community recycling

programs, they know that public education is a key to preventing litter. Coca

Cola system supports numerous litter prevention and community beautification

organizations around the world, including Keep Australia Beautiful in

Australia, the Tidy Britain Group in Great Britain and Keep America

Beautiful in the United States.


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In 2007, the company invested in designing and producing sustainable fashion

apparel made from recycled PET bottles. The T-shirts are made from a blend

of recycled PET bottles and cotton and feature playful slogans such as Make

Your Plastic Fantastic and Rehash Your Trash. Coca Cola launched their

sustainable fashion line of apparel and consumer products at the new World of

Coca-Cola in Atlanta, Georgia.

L: Legal Changes Marketing decisions are strongly affected by

developments in the political and legal environment. This environment is

composed of laws, government agencies and pressure groups that influence

and limit various organizations and individuals. Sometimes these laws also

create new opportunities for business.

Here are some of the legal affairs that the Coca Cola Company had to face

recently.

In the 1970's, India required Coca-Cola to share its secret formula with thelocal subsidiary so as to continue doing business there. Coca-Cola refused and

halted operations in India for almost 16years.

The European Commission has alerted EU member countries to ban Coca Cola

drinks because of recent poisoning of 100 children in Belgium and cause

seems to be the wrong carbon dioxide which was used in Coca-Cola softdrinks.

Recently there were demonstrations all around the India, protestors demanded

Coca Cola to stop production. Demonstrators believe that Coca Cola is

depleting groundwater.


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CONCLUSION

Afterall the discussion over political environment we can concludethat. The political environment of a business has enormous influence

on the business. The viability of a business depends upon the ability

with which it can meet the challenges arising out of the political

legal environment. Political environment is not stable and can change

quickly

The political environment has an important impact on the business

There is a large field with many factors which the companies have to

consider if they want to expand overseas.

Ahealthy, efficient, comfortable & promoting political environmentfavors the substantial growth of business in any country.

Hence, they need to recognize that their success or failure could

depend on how well they cope with political decisions, and how well

they anticipate changes in political attitudes and policies.


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BIBLIOGRAPHY

http://www.studymode.com

http://thepoliticalenvironment.blogspot.in

http://www.businessdictionary.com

http://en.wikipedia.org

BOOKS

Strategic management- by micheal vaz
http://www.studymode.com/http://www.studymode.com/http://thepoliticalenvironment.blogspot.in/http://www.businessdictionary.com/http://www.businessdictionary.com/http://en.wikipedia.org/http://en.wikipedia.org/http://en.wikipedia.org/http://www.businessdictionary.com/http://thepoliticalenvironment.blogspot.in/http://www.studymode.com/

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