Lecture 3 Strategic Framework and eBiz

Source / Reference:

1.       Sullivan-SloanMReview-1985

  Provided on WebCT

2.       http://web.ics.purdue.edu/~pbawa/421/pepsi%20cola%20pest%20case%20study.htm

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Response:

In Lecture 3, we have learnt the strategic framework and BPR.

In strategic framework, the environmental scan could be separated into internal analysis and external analysis, which could then be separated to macro-environment and micro-environment. PEST Analysis is used in macro-environment and SWOT Analysis is used to micro-environment and internal analysis. PEST Analysis and SWOT Analysis are important for business environment. In this article, PEST Analysis will be explained mainly.

PEST Analysis

PEST Analysis is used to analyze the external macro-environment that affects all firms. PEST includes and stands for Political, Economic, Social and Technical.

Political	The way and degree that a government meddles in the economy. Examples: l   Industrial safety regulations l   Mandatory employee benefits l   Wage legislation – minimum wage and overtime l   Anti-trust laws l   Taxation
Economic	The way that a government affects the purchasing power of potential customers and the firm’s cost of capital. Examples: l   Inflation rate l   Efficiency of financial markets l   Unemployment rate l   Discretionary income l   Infrastructure quality
Social	The ways that affect the needs of customer and the size of potential markets. Examples: l   Education l   Entrepreneurial spirit l   Demographics l   Leisure interests
Technical	The ways that lower the barriers of entry, improve the efficiency of production and affect the outsourcing decisions. Examples: l   Rate of technological diffusion l   Impact on cost structure l   Impact on value chain structure l   Technology’s impact on product offering

Example: Coca Cola

Coca Cola is a famous international cola company and its products sell throughout the world. In the following part, I will use PEST model to analyze the macro-environment of Coca Cola.

Political:

Coca Cola sells its products in the international markets, so the political change of different countries will restrict the operations of Coca Cola, for examples, civil unrest, government changes and restrictions on the ability to transfer capital across borders. Also, the changes in laws and regulations will affect it, for examples, the taxation requirements and environmental law in domestic or foreign jurisdictions.

Economic:

If the overall economy of the World is strong, the sales of products will be more optimistic. In the last few years, the overall economy of the World was affected by the financial meltdown. So many countries faced recession and the continuously increasing unemployment rate. Especially the U.S A, its economy changes affect many other countries. The business of Coca cola will be affected naturally. It should change as soon as possible when there is any change in economy of the World or in some countries. However, when the government lowers the interest rate, which means that the debt cost will decrease, Coca Cola can borrow money for investing in other products and researching in new products or technologies. The decreased interest rate will stimulate consumers to spend money. It is an opportunity for Coca Cola to promote its products to obtain purchases from the consumers.

Social:

In the recent years, more and more people pay more attention on healthy lifestyle. They change their lifestyle, such as preferring drinking water or diet colas instead of ordinary colas or beers. Coca Cola needs to tackle this trend seriously and implement related measures, such as selling Diet Coke and Coca-Cola Zero emphatically. It should also let the consumers know that its products still can suit their needs no matter how their lifestyle have changed.

Technology:

Coca Cola can have more promotions to attract their target customers through different kinds of channels, for examples, the Internet, newspaper and television. Improvements on those cans, plastic bottles and other products can also help to increase the sales of colas because some designs such as slimmer cans and lighter bottles can appeal to customers.