Business and its Environment Essay
Business environment keeps on changing as a result of globalization which has brought about unfair competition between different firms and industries. This paper therefore will examine Coca Cola Company and its business environment with particular regards to political, economic, social, technological, legal and ethical factors. The paper will also examine kinds of carrying out business i.e. sole trader, partnership and limited partnership. Market structures i.e. both perfect competition and monopoly will be discussed in this paper.
Political-political factors may have a direct and indirect effect on the performance of the company. For example some of the decisions made by the different governments where Coca Cola Company has invested have impacted negatively or positively its business operations. For example the recent political violence in Africa and particularly in Kenya resulted to the company losing a lot of revenue because of declined sales.
Economical- Every business including Coca Cola Company is affected by economic factors. Fiscal policy rates, interest arte policy, currency exchange rates, consumer factors, among other factors have affected the operations of coca Cola Company in some of its branches around the globe. For example, in the European countries the economy is considered to be booming and has boosted the consumption of Coca cola products.
Social factors-Forces within the society such as media, family and friends have affected the way Coca Cola Company has sold its products. This means that companies such as Coca Cola Company have benefited heavily. Such social factors have affected the attitude, beliefs and interests on the way people view the products of the company. For example, the constant advertisements by the company have created positive attitudes towards Coca Cola products thus boosted the company’s sales and hence an increase in profitability margins.
Technological factors- The way Coca Cola Company operates its business has changed as technology changes. The internet for example, has assisted the company to explore new markets and extend its global outreach. The company has cope with changing technology and modernization in this ever changing world for example using superior distributing channels.
Legal- Businesses must operate in a legal environment and at the same time operate a lawful business permitted by law where the business is set up. In all its branches the Coca Cola Company operates legal business operations and has also complied with required business legislations such as paying of taxes and license fees.
Ethical- For any firm including Coca Cola Company to succeed in its operations, the compliance to industry norms is very important, that is they must adhere to the rules of competition for market share within a particular industry. The company has always avoided unfair competition between firms in the same industry. Coca Cola Company is also engaged in social responsibilities such as minimizing pollution, employing the local people and providing sponsorship programs to the needy among other issues.
Therefore, the PESTLE analysis will facilitate the formulation of strategic plan by the Coca Cola Company which requires a clear understanding of the business environment. Distinctive competencies are things that give a firm an advantage over similar businesses. Research also indicates that no matter how attractive an opportunity may be the business must have the competencies to capitalize on it. An opportunity without the competence to capture it is no really an opportunity to the business. (Kotare and Helena, 2004)
Sole Trader, Partnership and Limited Partnership
Sole trader is a common form of business since it is easy to start and manage when compared to other forms of business such as partnerships and companies. Sole trader is the only person running the business and therefore has power to do whatever he thinks it is right for his business. It requires small capital to start and does not require a lot of procedures such as legal issues in order to set up the business. Decision making process is very fast since it does not require to be approved by any an outside force but only the manager who is always the owner of the business thus ,making it a popular business.
To convince UK traders to change their legal status to either partnership or limited company will not be an easy task. Partnership involves relationships of two or more person with a common view of attaining profit. Limited partnership must not consist of more than twenty people and at least one should be a general partner. General partner is liable to all debts of the firm while limited partner does not incur any liability or obligations for all debts of the firm beyond the amount he has contributed.
First, I will convince the UK sole traders that in partnership, contribution of capital are allowed thus they will pool resources together and form a viable business with common objectives. Secondly sharing of loses will be another chief reason in that in partnership in case of any loss the partners will share equally thus will not be so risky as compared to sole trade where one person will incur all the loss if any. There will also be sharing of responsibilities in partnership and thus partners will carry out their duties effectively which will lead to positive outcome in terms of productivity.
Under partnership also there few cases of mismanagement and embezzlement of funds since each and every partner will be held accountable for fraudulent deals. The UK sole traders should also join limited partnership as limited partners since in case of big debts and obligations they will only be liable to such losses to the extent of their contributions. (Allard, 2005)
Perfect Competition and Monopoly
Economists defines perfect competition as, a market whereby there are very several participants, no barriers to entry and exit, existence of homogenous products and consumers are assumed to be having full knowledge of what is provided in the markets. Whereas monopoly is a kind of a market whereby, one particular participant dominates the market. Under perfect competition the level of production efficiency is high in that there are many firms of the same industry producing similar products thus quality products are produced since the firms will opt to produce superior quality products that attracts and retain customers of there products.
The prices charged by firms in perfect competition structure are not exaggerated since the market forces i.e. the supply and demand determines the prices of products. The level of production efficiency is low in monopoly since one firm dominates the market and there are no competitors to compete for the market share. Such firms exploit the customers through provision of low quality products and often exaggerate prices.
Firms operating in the monopoly structure tend to make high proceeds than firms in perfect competition structure. Firms under monopoly has no competition thus can exploit customers easily since the customers has no option for alternative products and has to cope with exaggerated prices which in turn will lead to high profits level.
Firms operating in perfect competition structure can only receive high profit levels if they become market leaders which grants them high market share thus high proceeds. However, such firms faces the difficulty of maintaining high profits level every year as a result of the ever changing business environment brought about by intense competition. (Joseph, 1999)
Allard, M. (2005):- Theoretical Marketing Strategies. Readings, Cases and Exercises: 3rd Edition.
Harlow: Prentice Hall
Joseph, T. (1999): The Place of Mises’s Human Action in the Development of Modern
Economic Thought: – Quarterly Journal of Economic Thought Vol. 2
Kotare, M. and Helena, K. (2004): Global Marketing Management
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