Management tools SWOT and PEST are used by managers to inform decisions regarding business
strategies. Discuss the usefulness and limitations of these tools in relation to a chosen organisation,
providing commentary on how managers may overcome/minimise any limitations and improve
management decisions.
Organisation: BMW OR Coca-Cola
Introduction
PEST AND SWOT ANALYSIS.
Coca Cola Company is the world’s largest beverage company based in United States,
which has a high number of refreshing consumers and still brands. The companyis also
ranked at top 10 privateemployers with more than seven hundred thousand system
employees. The Coca-Cola Company also owns its anchor bottler in North America
popularly known as Coca-Cola Refreshments(Baines, Fill & Page, 2013).Managers of Coca
Cola Company have been aware that strategic management is not a simple process. Strategic
management is a process that often comes with numerous difficulties and is aimed at
realizing the company’s objectives in atimely manner(Dubrin, 2012). Therefore, managers
have been using SWOT and PEST analysis inorder to achieve their desired goals. However,
these types of analysis have been associated with several advantages and shortcomings. The
following discussion, therefore, describessome of thebenefits of the two types of analysis on
Coca-Cola Company. In addition, the paper highlights how the managers may
overcome/minimize any limitations and improves the management decisions from the
analyses.
Discussion
SWOT analysis has been one of the management tools used by managers in Coca-
Cola Company mainly because of its related usefulness. One of its usefulness is that the tool
has been a source of information for strategic planning. This is due to the tool’s ability to
identify thestrengths of the company. These strengths include customer loyalty, strong
marketingand advertising, bargaining power over suppliers and corporate social responsibility
(Baines, Fill & Page,2013). In addition, SWOT analysis providesinformation regarding the
company’s weakness. These include negative publicity, under diversified product portfolio,
significant focus on carbonated drinks, and high debt level due to acquisitions (Friend
&Zehle, 2009). The analysis also provides information regarding the potential opportunities
for the company. These include bottle-water consumption growth, growth through
PEST AND SWOT ANALYSIS.
acquisitions, increasing beverages consumption, and growing beverages consumption in
emerging markets mostly BRIC (Panda, 2008).
Furthermore, the tool provides information about the threats to the Coca-Cola
Company. These are the company carries with it strong dollar, water scarcity, changes in
consumer preferences and competition from PepsiCo.Upon getting information for strategic
planning from the SWOT analysis, managers at Coca-Cola Company maximize their
response to the opportunities. As a result, the company reverses its weakness once the tool
has identified them(Dubrin, 2012). Moreover, the tool is useful to the company as it enables
the managers to identify the core competencies for the companies, thereby rebuilding the
organization’s strength.
However, SWOT analysis has several limitations that limit its benefits to the Coca-
ColaCompany.One of itis that it makes its conclusion form small base of data. Most of this
data is mainly biased, and forces managers to make decisions that are not reliable. Another
drawback from SWOT analysis is that it is mostly unrealistic. It normally underestimates the
power of the threats (rivalry) and weaknesses to praise strengths and opportunities (Dubrin,
2012). This management tool also demands that the company has skilled and efficient labor.
This retrogressively affects the company, and it makes managers unable to achieve their goals
with the new existing system with threats and weaknesses.
PEST analysis of Coca-Cola Company
From the above analysis, SWOT analysis focuses on internal environments of the
company. Therefore, Coca-Cola Company uses PEST analysis to assess its external
environments.The company’s managers use this management tool to determine the areas of
concernand importance that can be addressed in the external environment (Braun & Latham,
2014). PEST analysis is important for strategic planning process for the Coca-Cola Company.
PEST AND SWOT ANALYSIS.
This is because it unveils political factors affecting the company. This is, for example,
changes in the non-alcoholic business environment. This might comprise competitive product
and pricing pressures, and their ability toget or maintain share of sales in the global markets
as a result of actions by competitors (Wheelen& Hunger, 2012).This is useful in enabling the
company to anticipate future business threats and take relevant action to minimize and limit
their impact.
PEST analysis is also beneficial to the company as it enables the companyto
understand economic factors such, for instance, factors that led to the recession and inflation
(Lukac, 2005). This management tool is also important as it promotes the understanding of
social factors such as when consumers engage healthy lifestyles. In addition, it enables Coca-
Cola Company to develop external and internal thinking about their markets (Henry,
2011).PEST analysis also provides an analysis of the technological factors. This is benefit to
as it enables the company to match which the new technology, thereby increasing an
understanding of the wider business environment.
However, PEST analysis has limitations as far as Coca-Cola Company is concerned.
One of its limitationsis that the analysis is time-consuming as it involves accessing quality
external data sources from companies such as PepsiCo (Pangarkar, 2011). Another limitation
is that data utilized in theanalysis is mainly basedon assumptions that subsequentlymake
Coca-Cola Company to anticipate programs and projects that may affect the organization in
future (Frynas&Mellahi, 2011). Lastly, the analysis tends to oversimplify the amount of data
used in decision-making; therefore, it is easy to use scant data.
Ways to Minimize Limitations inPEST andSWOT Analysis
Managers in the Coca-Cola Company can minimize the limitations resulting from the
above types of analysis by combining PEST and SWOT analysis. This will make the
PEST AND SWOT ANALYSIS.
managers get a more realistic overall picture in strategic planning (Henry, 2011). To
counteract the limitations from PEST analysis, managers of Coca-Cola Company should be
conducting the analysis on a regular.This will enable the Coca-Cola Company to get
comprehensive data about market opportunities that will be beneficial to it. It canbe deducted
that PEST and SWOT analysis are two management tools that have a tremendous effect on
Coca-Cola Company’s strategic management. Therefore, these tools are useful for a company
to enable to address the immediate environment and future environment.SWOT analysis
enables the company to discover its strengths, weaknesses, opportunities, and threats. PEST
analysis, on theother hand, enables the company to assess the political, economic, social, and
technological aspects for it to survive(Baines, Fill & Page, 2013). However, these two
analyses have severallimitations, and managers can develop strategies to counteract them.
Combining the two analysescan enable the company to address limitations from each analysis
using counterpart analysis. However, combining the two analyses may at times bring non-
reliable results(Henry, 2011). Therefore, managers at Coca Cola Companyshould be advised
to use Porter’s five factors. To summarize the discussion,it can be said that Porter’s five
factors will enable the managers to have a deep analysis of the rivalry, threat of substitutes,
buyer power, supplier power, and barriers to entry. It can be observed that Porter’s five
factors addressalmost all aspects in PEST and SWOT analyses. This is because, in business,
what troubles much is not the profit, strengths and objectives, but the repercussions that can
arise upon entry of competitor in the market pool. This is what Porter’s five factors can help
the Coca Cola Company to deal with rival firms such as PepsiCo.
Bibiliography
PEST AND SWOT ANALYSIS.
Baines, P., Fill, C., & Paige, K. (2013). Essentials of marketing. Oxford, Oxford University
Press.
Braun, M., & Latham, S. (2014). Mastering Strategy.Santa Barbara, ABC-CLIO.
