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Economics in a business context

Categories Bus, Business, Economics

Essay, Pages 5 (1093 words)

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Essay, Pages 5 (1093 words)

However a Swot analysis would not be effective without identifying the company’s weaknesses for example Coca-Cola’s few weaknesses would include their lack of product variation, which increases the chances of the soft drinks market being too saturated and therefore could lead to a decrease in sales. Furthermore the Coca-Cola Company operates globally therefore it is likely to be greatly effected by price changes such as exchange rate fluctuations and hence it’s lack of control, of exchange rates is still likely to determine the level of costs the company will generate and hence can be considered a weakness.

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Further analysis of Coca-cola would identify the opportunities available both internally and in the external market for example the recent boom of Internet marketing could enable Coca-Cola to use the internet in order to increase their coverage and equally cut costs through reducing other means of marketing exposure, however the use of internet marketing is unlikely to increase the companies profile.

In addition to this the Coca-Cola Company is very limited to opportunities as they have largely explored all international markets, however they could diversify for example into soft drink cafes or other means related to their core competences.

The Swot analysis model also identifies the threats that a company is likely to face, for example in relation to Coca-cola, the recent success of their main rivals Pepsi on an international scale have signalled a significant threat to Coca- Cola. In addition to this the recent health conscious consumer appears to be a threat to Coca-Cola as if this trend increases it is likely to reduce Coca-Cola’s sales as well as their global reputation.

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It can be argued that Swot Analysis is a very effective way of identifying a company’s Strengths and Weaknesses, and of examining the Opportunities and Threats a company is likely to face.

Carrying out an analysis using the Swot framework will help a company to focus their activities into areas where a company is likely to be strong and where the greatest opportunities lie. However despite this the Swot analysis is limited and not free from drawbacks as the Swot analysis usually reflects a person’s existing position and viewpoint, which can be misused to justify a previously decided course of action, rather than used as a means to open up new possibilities and hence could lead to a waste of both time and money.

‘ In addition to this Swot analysis can be very subjective and is often simply one persons interpretation or view and therefore limits the usefulness of this model of business analysis’ (McLean 1991). Finally it could be argued that Swot analysis is not significant enough to make large-scale strategic decisions, because it ignores other factors of analysis, as all of businesses activities cannot be simply categorised into strengths, weaknesses, opportunities and threats.

Another model of business analysis that can be considered is the Boston Matrix analysis . The Boston matrix is ‘concerned with the classifying of an organisations product portfolio’ (lect 2 notes). The Boston Matrix is used to plot the percentage of the market enjoyed by each product in a firm’s portfolio against the type of market that it is in. The Boston matrix allows a firm to see which products are achieving their potential and which may need to be supported or divested.

The Boston matrix categorises a companies products into four possibilities stars, which is said to be a cash neutral as products in this category generate both a high market share and a high market growth, Dogs which is said to have a both a low market share and a low market growth rate, cash cow’s which is described as cash generator and finally a problem child which is described as a cash user. The BCG matrix simply examines a company’s product portfolio and is often acts as the centrefold when a firm devises their overall strategy.

The Boston matrix can be applied to many companies product portfolio for example Coca Cola, where their main brand of original Cola is described as their cash cow as the cola market is relatively saturated however despite this Coca-Cola have large market share in the cola market. Money generated from their cola (cash cow) is used to fund the fruit flavoured soft drinks such as ‘fanta’ which is categorised as the star in their product portfolio, as this product has a high market share in a rapidly growing market.

Coca-cola’s lemonade brand ‘sprite’ is said to be the ‘dog in their product portfolio as this product has a low market share in a saturated market. Finally Coca-cola’s water drink ‘Distani’ is described as a problem child as there is an increasing market for bottled water, however the Coca-cola Company remain to have a small market share. The Boston matrix analysis can be considered useful as it allows a business to examine its product portfolio and analyse which products are worthwhile in terms of generating a higher market share.

However the usefulness of the Boston matrix analysis is limited as there is an assumption that higher rates of profit are directly related to high rates of market share. This may not always be the case for example ‘when Boeing launches a new jet, it may gain a high market share quickly but it still has to cover very high development costs’. In conclusion business analysis models such as the Swot analysis and the Boston matrix analysis can be considered useful as it enables firms to plan their market and devise strategies, detailing a plan in order to ensure success.

Carrying out an analysis using the business analysis models will help a company to focus their activities into areas where a company is likely to be strong and where the greatest opportunities lie and hence ensure a firm’s internal and external environment is analysed effectively. However I believe that the usefulness of these business analysis models is limited, as they appear to be too simplistic and lacks detail in order to allow a firm to effectively analyse its position in the market.

In addition to this, these business analysis models are often too subjective and can be interpreted in many different ways, therefore cannot be considered useful. Finally I believe that these business analysis models can be considered if it is used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter’s Five-Forces analysis as it would enable a company to undertake analysis of the business in a great level of depth, therefore ensuring that these business analysis model are practical for any business.

Cite this essay

Economics in a business context. (2020, Jun 02). Retrieved from https://studymoose.com/economics-business-context-9902-new-essay

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