A strtegy about tha coca cola compny

2. Internal Assessment of Strategic Management
ON
Topic : Tools of Strategic Management
“Coca cola”
SUBMITTED BY
Garvit Garg
REG NO. 161001040
BBA V SEMESTER A
BACHELORS OF BUSINESS ADMINISTRATION
UNDER THE GUIDANCE OF
Ms. Archana Poonia
SCHOOL OF BUSINESS AND COMMERCE
MANIPAL UNIVERSITY JAIPUR
October 2018

3. SR.NO
CONTENTS
1 Introduction
2 Coca cola Value Chain Analysis
3 Overview: Coca cola Five Forces Analysis
4 BCG Matrix of Coca cola
5 Coca cola Intensive Strategies (Intensive Growth
Strategies)
6
Coca cola product mix/Ansoff Matrix
7
Environmental Threat and Opportunity Profile (ETOP)
for a Coca cola

4. Introduction
Coca-Cola, or Coke is a carbonated soft drink manufactured by The Coca-Cola
Company. Originally intended as a patent medicine, it was invented in the late 19th
century by John Pemberton and was bought out by businessman Asa Griggs Candler,
whose marketing tactics led Coca-Cola to its dominance of the world soft-drink market
throughout the 20th century. The drink's name refers to two of its original
ingredients: coca leaves, and kola nuts (a source of caffeine). The current formula of
Coca-Cola remains a trade secret, although a variety of reported recipes and
experimental recreations have been published.
The Coca-Cola Company produces concentrate, which is then sold to licensed Coca-
Cola bottlers throughout the world. The bottlers, who hold exclusive territory contracts
with the company, produce the finished product in cans and bottles from the
concentrate, in combination with filtered water and sweeteners. A typical 12-US-fluid-
ounce (350 ml) can contains 38 grams (1.3 oz) of sugar (usually in the form of high
fructose corn syrup). The bottlers then sell, distribute, and merchandise Coca-Cola to
retail stores, restaurants, and vending machines throughout the world. The Coca-Cola
Company also sells concentrate for soda fountains of major restaurants
and foodservice distributors.
The Coca-Cola Company has on occasion introduced other cola drinks under the Coke
name. The most common of these is Diet Coke, along with others including Caffeine-
Free Coca-Cola, Diet Coke Caffeine-Free, Coca-Cola Zero Sugar, Coca-Cola
Cherry, Coca-Cola Vanilla, and special versions with lemon, lime, and coffee. Based
on Interbrand's "best global brand" study of 2015, Coca-Cola was the world's third most
valuable brand, after Apple and Google. In 2013, Coke products were sold in over 200
countries worldwide, with consumers drinking more than 1.8 billion company beverage
servings each day.

5. Coca Cola Value Chain Analysis
Value chain analysis of Coca Cola:
Coca Cola is one of the most recognizable brands globally. Known for its strong brand
image and global presence, Coca Cola has several billion dollar brands in its portfolio.
However, creating such a large and successful brand also requires managing the value
chain successfully. A value chain includes all the activities starting from obtaining the
raw materials from various sources to the final sales and after sales service. There are
several activities in the middle which form the value chain. The concept of value chain
analysis was introduced by Professor Michael E Porter of Harvard Business School.
Managers can obtain a picture of how each stage in the value chain adds value to the
product and accordingly optimize the value chain to obtain better results. Optimization
will not just bring efficiency but it can also generate new sources of competitive
advantage. Here is a detailed value chain analysis of Coca Cola. There are primary
and support activities in the value chain which are discussed below:
Coca Cola Value Chain Analysis
Primary activities:
Inboundlogistics:
Coca Cola has managed a very large supply chain which consists of tens of thousands
of farmers and suppliers. It treats its suppliers as business partners. These business
partners provide its system with raw material including ingredients, packaging and
machinery as well as goods and services. However, it has also set guiding principles
for the suppliers to follow. At a minimum these suppliers are required to comply with all
the applicable laws and regulations. In its guidelines Coca cola also emphasizes on
responsible environmental and workplace policies and practices. It has managed
excellent relationship with it suppliers and that helps it maintain a continuous and
uninterrupted flow of raw material.
Operations:
The operations function of Coca Cola includes concentrate development and all the
administrative functions of headquarters. Coca Cola is a global business that operates
at a local scale in every community where it does business. The Coca cola system
operates through many local channels. However, it does not own or control all its
bottling partners. The company just manufactures and sells beverage bases and
syrups to bottling operations. The company owns the brand and is responsible for the
consumer brand marketing initiatives.
Outbound logistics:
This part of Coca Cola’s Value chain consists of its bottling partners and distributors. It
bottling partners manufacture, package, merchandise and distribute the final product to
the customers and vending partners. These vending partners then sell the product to
the customers. The customers of Coca Cola include the grocery stores, restaurants,
street vendors, convenience stores, movie theatres and amusement parks. The bottling

6. partners of Coca Cola work with the customers to execute localized strategies
developed in partnership with Coca Cola company.
Marketing and sales:
Coca Cola is a globally recognized brand. However, it has not become as famous without
focusing on marketing. The coca cola logo is one of the most recognizable logos. Its brand is
also known for a very heavy expenditure on marketing. Apart from digital channels and social
media, Coca Cola also uses print media and outdoor marketing to promote its brand and
products. It also runs campaigns from time to time. Last year it brought a major shift in its
marketing strategy and rather than promoting its brands separately, it is now focusing on
promoting the entire brand together. Its products are sold in more than 200 countries
worldwide. From retail stores to restaurants and theatres, Coca Cola products can be seen
everywhere decorating the shelves.
Support Activities:
Technology:
Coca Cola also maintains heavy focus on technology and research and development.
From production to distribution and sales, everywhere it has invested in technology.
Apart from that it also focuses on technological innovation through R&D. It has six R&
D centers around the world that are connected to external technology and assessment
hubs connecting it with partners, tech start ups and university researchers. The
company collaborates with partners in the other industries to fuel innovation across
products, packaging, equipment and the other things. In this way, Coca Cola is
continuously focusing on innovation for growth.
Human Resource Management:
This is also a very important area of Coca Cola’s value chain. The company has
focused on hiring and developing talent and creating an environment of learning and
growth. It pays them good salaries and also complements the payments with rewards.
Coca cola focuses on employee motivation and engagement. Apart from it, the focus is
on performance management to provide the employees with career growth.
Procurement:
Coca Cola procures from thousands of farmers and suppliers. It uses technology to
make the entire process easier and efficient. It has maintained good relationships with
its suppliers and provided guidelines that the suppliers are required to follow.
Firm Infrastructure:
The role of a firm’s infrastructure is central to its success. Coca Cola has managed a
large infrastructure including its management, human resources, financial and
technological infrastructure. It is also educating its suppliers and focusing on innovation
through its R&D centers.

7. Porter’s Five Forces of Coca-Cola
Since its introduction in 1979, Michael Porter’s Five Forces has become the de facto
framework for industry analysis. The five forces measure the competitiveness of the
market deriving its attractiveness. The analyst uses conclusions derived from the
analysis to determine the company’s risk from in its industry (current or potential). The
five forces are (1) Threat of New Entrants, (2) Threat of Substitute Products or
Services, (3) Bargaining Power of Buyers, (4) Bargaining Power of Suppliers, (5)
Competitive Rivalry Among Existing Firms. The following is a Five Forces analysis of
The Coca-Cola Company in relationship to its Coca-Cola brand.
Threat of New Entrants/Potential Competitors: Medium Pressure
Entry barriers are relatively low for the beverage industry: there is no consumer
switching cost and zero capital requirement. There is an increasing amount of new
brands appearing in the market with similar prices than Coke products
Coca-Cola is seen not only as a beverage but also as a brand. It has held a very
significant market share for a long time and loyal customers are not very likely to try a
new brand.
Threat of Substitute Products: Medium to High pressure
There are many kinds of energy drink s/soda/juice products in the market. Coca-cola
doesn’t really have an entirely unique flavor. In a blind taste test, people can’t tell the
difference between Coca-Cola and Pepsi.
The Bargaining Power of Buyers: Low pressure
The individual buyer no pressure on Coca-Cola
Large retailers, like Wal-Mart, have bargaining power because of the large order
quantity, but the bargaining power is lessened because of the end consumer brand
loyalty.
The Bargaining Power of Suppliers: Low pressure
The main ingredients for soft drink include carbonated water, phosphoric acid,
sweetener, and caffeine. The suppliers are not concentrated or differentiated.
Coca-Cola is likely a large, or the largest customer of any of these suppliers.
Rivalry Among Existing Firms: High Pressure
Currently, the main competitor is Pepsi which also has a wide range of beverage
products under its brand. Both Coca-Cola and Pepsi are the predominant carbonated
beverages and committed heavily to sponsoring outdoor events and activities.
There are other soda brands in the market that become popular, like Dr. Pepper,
because of their unique flavors. These other brands have failed to reach the success
that Pepsi or Coke have enjoyed.
Valuation Academy is proud to present our meticulously researched and in-depth
analysis of Coca-Cola using Porter’s Five Forces and a SWOT analysis avaialble for

8. just $4. This 2,500 word, (fully editable) 10 page word document will be available for
download after checking out through the link below.
BCG Matrix for Coca-Cola Company
Coca-Colaisa large scale companythat has beenoperatinginthe beverage industryformore thana
century,supplyingdifferentproductsto200 countries.The BostonConsultingGroupMatrix (BCG
Matrix) can be usedtoanalyze the differentproductsbeingsoldbythe companyintermsof their
marketshare,salesgeneratedonanannual basisandthe potential forgrowth.The BCGMatrix for
Coca-Colaisas follows:
Cash Cows
Cash cows are those business products which are a significant source of income for a
business entity and generate enough sales to obtain a significant market share in the
local or global industry. The market is at a mature stage for these products,
nevertheless, these products continue to generate cash for the organization. The Cola
market, as a specific part of the beverage industry has matured over the years,
becoming concentrated by various companies selling their own brand of cola. Coca-
Cola as a beverage has been operating as a cash cow for the Coca-Cola Company, as
the brand is sold across 200 countries in a mature beverage industry. A larger segment
of the operations is based on finished products (including sparkling and still beverages)
manufactured by the company, constituting 63% of the operations in 2015 (The Coca-
Cola Company, 2015). The bottling partners in different locations help in making the
finished beverages available to the market in their respective regions, enabling the
organization to earn significant amount of revenues from its finished products
categories. Since the industry is mature, the company needs to invest little effort to
keep the sales high as the business unit has captured a large market to generate cash.
A slowdown in sales has been a temporary setback for the organization, however
adjusting the business strategy has helped the management to regain its firm hold in
the industry (Estrel, 2016).
Stars
The products that are viewed as stars are defined by the key feature of having a high
market share as compared to the other products which have a lower share in the
market. The market is still in the phase of development, therefore, the stars have the
likelihood of further adding to the existing market share and create a steady source of
revenue for a business entity. The bottled water produced by the Coca-Cola Company
can be categorized as a star for the organization. The reason for this classification is
that the mineral water industry is still viewed as a gradually evolving segment on an
international scale. The rising number of people increases the need to produce more
bottled water to fulfil the needs of the expanding population. In Europe and Asian
regions, Kinley is being sold while Dasani bottled water is targeting the US and UK
market. Both of these business units are stars for the Coca-Cola Company as the
rising need of bottled water opens up growth opportunities in the industry (Estrel,

9. 2015). Even though the company faces competition from other bottled water
producers, the growing market offers it significant opportunities to attain a large market
share and expand it further in future. Nevertheless, an important consideration for the
management is to ensure that the bottled water brands remain a source of significant
sales as decline in sales can reduce the revenues.
QuestionMarks
The products that are categorized as questions marks seem to have a dubious outlook
for the future development. These products have not thrived into the market to such as
extent that they can be recognized as stars. The market has growth opportunities, but
these products have not been able to take benefit of these opportunities in an effective
manner. Minute maid is one such example where the business units can be seen as a
question mark. Even though in some regions minute maid has been able to obtain a
generous sales volume of $ 1 billion, the brand has not been able to gain widespread
popularity as the coke (Arnett, 2015). Apart from minute maid, the sales volume of Diet
coke doesn’t present favourable prospects for the future. As indicated by Kell (2015)
the brand has received relatively favourable response in the past, however recent data
shows that the brand is losing its popularity. The health conscious consumers
formulate a significant part of the industry, suggesting the growth potential, but diet
coke has not been able to tap this market potential to gain sustainable revenues.
Dogs
The products that are included in the category of dogs are a part of mature industry,
thus the chances of further growth are limited. Another issue that raises question about
the feasibility of these business units or products for the company is that they do not
offer significant revenues to the organization. Moreover, the future outlook of these
products is also bleak, necessitating the evaluation of the viability of continuing
business operations in this domain. Coca-Cola life is a brand that has been launched
with the aim of targeting the market that is seeking low calorie soda. It has been
developed using the blend of coke and diet version of coke to offer the consumers a
comparatively healthier beverage option in terms of calories consumption. Despite the
efforts to target this segment of the market, the brand has not been able to perform
well as depicted through the declining sales of this business unit. The soda industry
has matured over the years, limiting the growth prospects for new products. In case of
Coca-Cola life, the brand has not been able to gain expected level of market share.
Murphy (2015) has mentioned that in an effort to keep the market share of the leading
brand of coke (which is cash cow for the organization), coke life was presented to the
market. However, it was not readily accepted by the targeted market, leading to low
sales of the new brand. It has been further stated that the decision to launch the low
calorie version of coke didn’t take the market needs into consideration, which has
resulted in the brand becoming an initiative with low market share.

10. Coca Cola Generic and Intensive Strategies
Porter’sGenericandIntensive growthStrategiesusedbyCocaCola
Coca Cola, the soda beverages giant is the leader in its industry. 21st century is
marked by intense competition and any brand that wants to remain ahead of the others
must have one or another critical advantage. A sustainable competitive advantage
helps brands get ahead of the competition and operate profitably. Coca Cola is a global
brand that is found in almost all the corners of the world. Its closest rival is Pepsi. Coca
Cola has manged its place through some critical factors which are a source of
sustainable competitive advantage for it. Michael E Porter has highlighted three key
strategies that come in handy if you are trying to build a competitive advantage.
These strategies are – cost leadership, differentiation and focus. The third strategy he
has subdivided into two categories – cost focus and differentiation focus. These
strategies can help a brand build a competitive advantage and overcome competitive
pressure. However, there are also four intensive strategies that are useful when it
comes to expanding the brand’s customer base and growing sales. This is a
discussion of the generic and intensive strategy that Coca Cola has used to build
sustainable competitive advantage and grow its market presence globally.
GenericStrategies:
The main generic strategy used by Coca Cola is that of cost leadership. This is a
strategy employed by several big brands of the world that are leading in the market.
Cost leadership is a very effective strategy that helps brands quickly increase market
share and gain popularity. Everyone wants to spend less on any product. Especially,
the middle class which forms a very large part of Coca Cola’s customer base loves low
prices of products. Coca Cola has kept the prices of its products low. These are
affordable products and available easily in every corner of the world. Coca Cola has
ensured both affordability and accessibility which has led to both higher sales and
popularity. This has proved to be a source of sustainable competitive advantage for
Coca Cola.
From time to time, Coca Cola also uses discounts and promotional campaigns to
increase sales and popularity. It is mainly for the affordability of its products however,
that the sales of the brand and its products have remained high. Thus, the benefits of
cost leadership are clear. It helps achieve higher sales, build a large customer base
and also gain recognition. Coca Cola spends a lot on marketing and promotion but still
if its products’ prices were not as affordable, its sales would have been lower. While
cost leadership is the main generic strategy sued by Coca Cola, it has also used
differentiation to gain an advantage over the competitors. It has introduced a number of
healthy products including health drinks and juices that are aimed at the health
conscious customers. So, Coca Cola has sued a mix of cost leadership and
differentiation to gain competitive advantage and to build customer loyalty.
Intensive Strategy:
There are four intensive strategies for a brand’s growth and market expansion. They
are – market penetration, market development, product development and

11. diversification. Below is a discussion of the intensive strategies used by Coca Cola to
grow its market and sales.
Market penetration:
This is the strategy of selling more to the existing customer base. It is one of the key
strategies Coca Cola has used to grow its sales. Apart from keeping prices affordably
low, the brand also uses promotional tactics like seasonal discounts to push sales
among its existing customers. It releases new packages and runs promotional
campaigns that are aimed at increasing the sales of its products worldwide.
Market development:
This is the strategy of entering new markets or regions and selling to new customers. It
is another key strategy that has helped Coca Cola become a global brand. Coca Cola
products are sold in more than 200 countries. The brand has spread globally to nearly
every corner of the world. Apart from the flavor of the coca cola products and there
affordable rices, the credit also goes to the use of marketing and promotions for
international growth. the strategy has been highly effective and helped Coca Cola grab
the leadership position in the beverages industry.
Product development:
Product development is the strategy of bringing more products to the market to
increase sales and revenue. Overtime, the product array of Coca Cola has grown quite
broad. Its large product portfolio is made up of 500 sparkling and still brands and it
serves nearly 3900 beverage choices. Now, there are 21 billion dollar brands in its
portfolio. In this way, Coca Cola has achieved a lot of growth through product
development.This was a discussion of the generic and intensive strategies that Coca
Cola has used to grow its brand and earn a competitive advantage. It is the leading
brand in the beverages industry and this position has been achieved with the help of a
sustainable competitive advantage. Its global growth story is a testimony of its use of
generic and intensive strategies.

12. Product mix of coca cola.
This is an article by request of a reader. One of the many questions you need
answered while analysing a competitor, is the analysis of the product mix itself. What
are the various products of the competitor, and what is his total product line? When you
analyse the product mix of competitor, you find out the things missing in your own
product mix or product line.
Hence analysing the product mix is important. Here we take the example of Coca cola
to analyse the product mix and product line of Coca cola. Before this, i would also
recommend that you read the original article of Product line and product mix.
The link that i referred to for coca cola products is here. However, we have not
included the products of Coca cola as it would be quite lengthy and it is upto you to
decide what depth of products you want to analyse.
To analyse the product line, first list out the different types of products a brand has. So
in this case, Coca cola has 3 different products. Soft drinks, minute maid range of
products, and mineral water. In soft drinks, the product line has 5 products, in minute
maid the product line has 3 products and in mineral water, the product line has 1
product.
The product mix in this case is The number of products + the product lines within them.
So in case of Coca cola, the product mix is 3 product lines + 9 products within them.
Hence, the product mix of Coca cola has 12 total products (applicable in this scenario
only. In reality Coca cola has a very large product portfolio).The product line in this
case is 3. This is because there are 3 core product lines within the product mix – Soft
drinks, Minute maid and mineral water.
This is the basic explanation of how to analyse the product mix of any company. Any
company that you take an example of, will have different product lines and within those
product lines, there will be various products, the combination of which will give you the

13. product mix of the company.Here’s how the product mix and product line of any
Environmental Scanning, Industry Analysis, Competitive Intelligence
and ETOP Study
INTRODUCTION
Strategic analysis is basically concerned with the structuring of the relationship between a
business and its environment. The environment in which business operates has a greater
influence on their successes or failures. There is a strong linkage between the changing
environment, the strategic response of the business to such changes and the performance. It is
therefore important to understand the forces of external environment the way they influence this
linkage. The external environment which is dynamic and changing holds both opportunities and
threats for the organisations. The organisations while attempting at strategic realignments, try
to capture these opportunities and avoid the emerging threats. At the same time the changes in
the environment affect the attractiveness or risk levels of various investments of the
organizations or the investors.
BROAD DIMENSIONSOF EXTERNAL ENVIRONMENT
The macro environment in which all organizations operate broadly consist of the
economic environment, the political and legal environment, the socio cultural aspects
and the environment related issues like pollution, sustainability etc. The technological
temper and its progress has been the key driver behind the major changes witnessed
in the external environment making it increasingly complex.
Strategic Analysis These factors often overlap and the developments in one area may
influence developments in other. For example, the opening up of economy integrated
the markets globally and increased the competition between private and public firms.
This forced the Indian government to revisit its economic policies. Under its new
liberalization policy and economic reforms of 1991, regulations like MRTP, which
restricted the size of the business and therefore inhibited their efficiency and
competitive levels, were removed with a positive impact on the indigenous industries.
However, the delay in addressing to the policies like Indian companies act or Exim
policies, organisations both from domestic and abroad still find the Indian business

14. environment not so conducive for business. The current political developments are
sure to have more uncertainties in the minds of business people regarding the future
policy direction in certain sectors. The social considerations in the context of a
developing country like
India also plays a critical role in deciding the broad dynamics of the business
environment. The clash of ideologies between preserving the Indian ethos and culture
and giving a freedom of choice to people often create problems and confusion for
business.
PESTEL FRAMEWORK
Careful analysis of the above factors will help in identifying major trends for different
industries. Exhibit-1 shows the PESTEL framework which is most popularly used for such
analysis. The external forces can be classified into six broad categories: Political, Economic,
Social, Technological, Environmental and Legal Forces. Changes in these external forces
affect the changes in consumer demand for both industrial and consumer products and
services. These external forces affect the types of products produced, the nature of
positioning them and market segmentation strategies, thetypes of services offered, and
choice of business. Therefore, it becomes important for the organizations to identify and
evaluate external opportunities and threats so as to develop a clear mission, designing
strategies to achieve long-ter objectives and develop policies to achieve short-term goals.
Here, we will discuss alL the six forces individually and then try to come to the conclusion
regarding environmental analysis. Few indicative points are listed to guide you to find the key
forces at work in the general environment. While the framework may be used to understand
the most important factors at the present time, it should be primarily used to look into the
future impact which may be different from their present or past impact.
The PESTEL Framework – Macro-environmental influences. The framework primarily
involves the following two areas:
1. The environmental factors affecting the organization;
2. The important factors relevant in the present context and in the years to come.
Political
1. Government stability
2. Political values and beliefs shaping policies
3. Regulations towards trade and global business
4. Taxation policies
5. Priorities in social sector

15. GENERAL ENVIRONMENT AND ORGANIZATIONS’ STRATEGY
As a next important step the manager needs to analyze the kind of impact the change may
bring in their own industry as the impacts are never same for all industries. For example, the
emerging younger demographic profile of India will have very different consequences for
businesses say in health care or entertainment. While the former will face an adverse effect, the
latter will have a positive effect and this needs to be analyzed and integrated into strategic
decision making. In response to these assessments of differential impacts, managers will be
able to take advantages of the opportunities or guard themselves of the threats. Exhibit 4 shows
in how different ways various industries get affected by the different environmental trends.
Responding to these various impacts with new strategic initiatives the managers must take
notice of the fact that if the changes are significant, it may have the potential of changing the
competitive rules of the game in the industry. For example, in India the Strategic Analysis
competitive rules of the game for sectors like telecom, banking and insurance etc. in the post
liberalization period changed specially in last two years. With the easing of FDI and particiption
of major global players, norms have changed dramatically which is reflected in the strategies of
most of the firms in the sector. These changes can be seen in the area of technology and
pricing, intensity of advertising and promotions, their business alliances and network in the
country. Managers need to be cautious of the fact that there may be developments, which are
not so easy to be predicted and therefore need further attention so that they can be
incorporated in their strategy. In the global context, the managers must see the kind of impact
any single change will have in different markets. It is quite possible that they are very different
both in degree and their nature.
Exhibit 4
Environmental Potentially positive Probably neutral Probably negative Trends effects effects
effects
1. Aging population medical services minerals colleges and schools
2. Multiple income fast food machine tools grocer’s supplies families
3. Deregulation shipping financial sector
4. Increased waste management software leather environmental lelgislation
5. Growing global telecommunication competition mining small scale/handicrafts
Structural Drivers to Change
The PESTEL analysis gives a number of factors and their likely influences. However it
is important to identify the specific factors which may influence an industry and force
them towards competitive adjustments. These factors are termed as structural drivers
of change which have the likely effect on the structure of an industry or on the
competitive environment.
As a first step based on PESTEL analysis, the key driving forces need to be identified
and then impact of the combined effect of these forces should also be made.
Increasing globalization of the industry and the E enabled era could be such driving
forces capable of affecting the structure of an industry or its environment.

16. ENVIRONMENTAL SCANNING
The factors or the forces understood under PESTEL framework put together, present a
highly complex and uncertain environment which are difficult to predict or foresee.
From a long term view of strategy however, reaching somewhat closer to such forces
are important in understanding the key factors influencing the success of such
strategies.
Environmental scanning is one of the few ways to detect future driving forces early and
this involves studying and interpreting the developments of social, political, economic,
ecological and technical events that could become driving forces. It attempts to figure
out few radical happendings or path breaking developments which may be catching on
and see their possible implications 5 to 20 years into the future.
The purpose of the environmental scanning is to raise the consciousness of managers
about potential developments that could have an impact on industry conditions and
bring in new threats or opportunities. Environmental scanning is normally accomplished
by systematically monitoring and Environmental Analysis studying current events,
constructing scenarios and employing the Delphi method (a technique for finding
consensus among a group of knowledgeable experts) Scenario Planning technique is
briefly discussed in Unit 5 under the competitive environment.
Process of Business Environment Analysis
Background Environmental analysis is a systematic process that starts from
identification of environmental factors, assessing their nature and impact, auditing them
to find their impact to the business, and making various profiles for positioning. A
common process of environmental analysis or scanning is discussed in the following
section.
Environmental Analysis Process
A business manager should be able to analyze the environment to grasp opportunities
or face the threats. Organizations need to build strength and repair their weakness
available in the business environment. Therefore, this process consists not only a
single steps but a process of various steps. Environmental analysis comprises
scanning, monitoring, analyzing, and forecasting the business situation. Scanning is to
get the relevant information from the information overload. It is to focus on the most
relevant information.Monitoring is to check the nature of the environmental factors.
Analyzing requires data collection and use of different required tools and techniques.
Forecasting is to find the future possibilities based on the past results and present
scenario.
Environmental analysis process is not static but a dynamic process. It may differ
depending on the situation. However, a general process with few common steps can
be identified as the process of environmental analysis these are a) Monitoring or
identifying environmental factors, b) Scanning and selecting the relevant factors and
grouping them, c) Defining variables for analysis, d) Using different methods, tools, and
techniques for analysis, e) Analyzing environmental factors and forecasting, f)

17. Designing profiles, and g) Strategic positioning and writing a report. Brief discussion is
made on each of the step of this environmental analysis process.
Identifying environmental factors
First of all a strategist should identify all the relevant factors that might affect his or her
business. In this process, one should first know what the internal areas of the business
are. This includes all the systems, internal structure, strategies followed, and culture of
the organization. All these areas can be covered into the five functional areas in
classical approach. Similarly, a business daily interacts with the close environmental
components outside the business such as customer, competitor, and supplier. It might
cover all other stakeholders such as trade union, media, and pressure group.
Furthermore, general such business environment factors as political-legal, economic,
sociocultural, and technological factors are to be identified
Scanning and selecting relevant and key factors Out of all the business
environmental factors, a strategist should focus only on the relevant factors for further
analysis. All the factors are not equally important and affecting to the business. In this
context, a strategist has to scan the environmental trend to select only the most
affecting environmental factors from the information overload. This step paves the way
of environment analysis and forecasting.
Defining Variables for Analysis
Selected environmental factors are to be further specified into the variables. A concept
can be interpreted into different variables. For example, political situation can be
measured using few variables such as instability, reliability, and long-term effect.
Economic environment might cover many variables such as Per Capita, GDP, and
Economic policies that can be further classified into many other variables. Variables
are the basis of measurement in environmental analysis process. Variables can be
compared, grouped, correlated, and predicted to find the clearer picture of the broader
concept. It is, therefore, necessary to define the variables first in any kind of analysis
including the environmental analysis.
Using Different Methods, Techniques, and Tools
Different types of methods, tools, and techniques are used for analysis. Some of the
major methods of analysis can be Scenario Building, Benchmarking, and Network
methods. Scenario presents overall picture of its total system with affecting factors.
Benchmarking is to find the best standard in an industry and to compare the one’s
strengths and weakness with the standard. Network method is to assess organizational
systems and its outside environment to find the strength and weakness, opportunity
and threats of an organization.Some of the techniques of primary information collection
can be Delphi, Brainstorming, Survey, and Historical enquiry. Delphi technique collects
independent information from the experts without mixing them. Brainstorming is
information collection technique being open minded without criticizing others. Survey is
to design questions and to ask them to the participants whereas the historical enquiry
is a kind of case analysis of past period. Analysis tools can be statistical such general

18. descriptive tools as mean, median, mode, frequency. Tools can be inferential as
ANOVA, correlation, regression, factor, cluster, and multiple regression analysis. There
are manytools of analyzing functional areas. Finance and accounting use mostly
profitability, leverage, fund flow and other similar accounting and financial tools for
analysis. Human resources use employee turnover, training, satisfaction and many
others as the basis of evaluating strength and weakness.
Production area is assessed using quality control, productivity, breakdown, and many
others. Similarly, marketing effectiveness is judged from the sales volume and market
coverage. Research and development is perceived successful if it can really develop
the strength in an organization.
Forecasting Environmental Factors
Collecting relevant information from the selected areas and to identify the variables in
such areas are the basics of analysis. Analyzing the past information to predict the
future is the main objective of this step. As discussed earlier, use of different methods,
techniques, and tools comes under the analysis process. It is, therefore, a
comprehensive process that analyses collected information using different tools and
techniques.
Designing Profiles
After analyzing the environmental factors they are recorded into the profiles. Such
profiles record each component or variables into left side and their positive, negative,
or neutral indicators including their statement in the right side. Internal areas are
recorded in Strategic Advantages Profile (SAP) and external areas are recorded in
Environmental Threat and Opportunity Profile
(ETOP). Strength, Weakness, Opportunity, and Threat (SWOT) profile can be
designed combining both of these two profiles into one.There are varieties of reporting
formats or profiles used for external and internal business environment analysis.
Environmental Threat and Opportunity Profile (ETOP) is commonly used to report the
external environmental situation whereas Strategic Advantages Profile (SAP) to report
the internal environmental situation1. Both of these profiles can be merged into
Strength-
Weakness-Opportunity-Threat (SWOT) profile. David used External Factor
Evaluation (EFE) Matrix to present weighted score of external environmental factors.
Similarly, he used Internal Factor Evaluation (IFE) Matrix to make the reporting of
internal environmental audit. Whellen & Hunger used External Factors Analysis
Summary (EFAS) and
Internal Factors Analysis Summary (IFAS) as described. Environmental threats and
opportunities profile (ETOP) is a commonly used profile related to external business
environment. Strategic advantages profile (SAP) is related to internal business
environment. Nowadays, strength &weakness and opportunities & threats (SWOT)
profile has become very popular. Present writing pursued the approach of reporting
external and internal business environment using the same approach.

19. Preparing ETOP Environmental threat and opportunity profile is referred as ETOP
profile. It identifies the relevant environmental factors. Such factors might be general
environmental factors and task environment factors. Thereafter, it is necessary to
identify their nature. Some factors are positive to the organization whereas others are
negative. Therefore, it is necessary to find out their impact to the organization. Positive,
neutral, and negative sign in ETOP denotes the relevant impact of environmental
factors.