There are numerous factors that contribute to investors venturing into a specific business. These factors play a significant role in forecasting the future growth of the investment. Some of them include politics of the state, economic status of the target market, level of technology, environmental issues as well as the social behavior of the target market. Social behavior as one of the factors comprise of numerous facets. These include population growth, age distribution, cultural beliefs, and health consciousness of the customers as well as their value for safety and career attitudes. All these significantly affect the manner in which a business operates in a specific market. For Coca-Cola Company to reap from investing in a juice company in China, its management had to be well versed with some of the social trends present in the Chinese market. Numerous social factors have been depicted in the case where Coca-Cola acquired a Huiyuan Ltd (a juice company) in China. These social factors will be discussed and analyzed in this short essay.
One of the social factors that have been brought out in this case is the issue of health consciousness by consumers. With more people losing their lives to diseases caused by poor eating and drinking modes, more consumers have started reviewing their ways of eating and are now abandoning some of the products they used to eat. This has drastically affected some of the companies as their sales volumes have gone down (McCabe 2003). In addition, some cultures prohibit the use of particular products. People are encouraged not to use the products despite there being no genuine reasons behind the prohibition. This is the case in Saudi Arabia. Most of the people in this country are Muslims and hence are prohibited from eating products manufactured using pork. Besides, people in this country are prohibited from wearing short dresses for ladies. This makes it hard for companies that sell clothes to establish themselves in Saudi Arabian Markets. Moreover, it has been hard for fast-food companies to reap from this market leading to most of them avoiding the market. Chinese consumers are not exceptional when it comes to being health conscious. The outbreak of Severe Acute Respiratory Syndrome (SARS) led to consumers having negative attributes towards carbonated beverages. They were perceived to be the main cause of this disease. Eventually, most of the Chinese consumers stopped using them.
To rescue the situation and maintain its market share in China, Coca-Cola opted to acquire Huiyuan Juice Ltd. It was after the company realized that demand for fruit juice was going high as more people stopped using carbonated beverages. Through this strategy, Coca-Cola Company would be able to maintain and expand its operations and gain wider market coverage.
Unlike in China where people have started being considerate in their feeding methods, consumers in Saudi Arabia are strongly attached to their religious and cultural beliefs. Most of the people in this country are Muslim. Their religion and culture prohibits consumption of pork. As a result, companies selling pork products do not make substantial sales in this market. Numerous fast-food companies have ended up abandoning the market and looking for others due to them not getting returns from Saudi Arabia. This has not been the case with McDonald Company. The company’s management team conducted a thorough market analysis to identify the cultural practices of the people of Saudi Arabia.
After realizing that consumers in this market do not eat products that are prepared with pork such as burgers, they embarked on producing burgers manufactured using other types of meat. Currently, the company ensures that all the burgers served in this market are manufactured using halal meat. Some of the burgers that are currently in the Saudi Arabian market include Chicken Big Mac and double Big Mac. By ensuring that it has complied with social-cultural beliefs of the Saudi Arabian people McDonald Company has been able to expand its operations in this market as well as increase its profitability.
Apart from Coca-Cola Company, Starbucks is also putting into consideration the lifestyle and health consciousness of its target market to develop new products. The current desire by consumers to have products that do not adversely affect their health has led to Starbucks coming up with novel products. To prepare its coffee, the company looks for high quality beans, and manufactures its products bearing in mind the nutritional needs of its consumers. This has helped it not only retain its customers but has also expanded its market share (Raza 2010).
Trend in population growth of any country is another social factor that greatly influences investors when making decisions on if to invest in the country or not. A country whose population growth shows an increase in the number of the olds implies that in future labor force will be scarce in the country thus becoming more costly. Consequently, investors wishing to invest in the country are compelled to look for labor force from other countries. In such instances, companies relocate their operations to developing countries where labor cost is low and the manufactured products are later shipped to the intended markets (McCabe 2003). Despite these saving the companies from incurring costs associated with labor, other costs come into play such as time wasted before products reach the intended markets.
On the other hand, a country whose population index reflects a uniform growth becomes a potential market for investors. Such a country does not only harbor a potential market for investors but also has readily accessible and cheap labor force. Consequently, investors readily invest in the country. From the given case, as well as statistics on population growth, it is evident that the Chinese population continues growing. This implies that by investing in the juice company, Coca-Cola Company is guaranteed of a ready market for its drinks. This coupled with the fact that demand for fruit juice in the country is going up gives the company the impetus to acquire Huiyuan Ltd.
One of the factors that have made it hard for Starburks to invest in Northern America, Africa and Asian countries is the fact that despite these countries being densely populated, they comprise of low income earning population. In addition, most of the people from these countries prefer tea to other beverages (Raza 2010). The company claims that it targets consumers who are aged between 15 and 64 years old. Consequently, most of its customers comprise of the college students and upper middle class.
Despite people arguing that globalization has led to significant social-cultural transformations thus leading to companies losing market, Coca-Cola has been found to take this opportunity to develop products that best meet the needs of the different market segments. Chinese are believed to have strong affinity to products that are locally developed. For them, they prefer promoting local manufacturers despite their products or services being expensive in comparison with those that are manufactured in foreign countries. Through its ‘glocal’ (global-local) approach, the company has been able to develop products that have been perceived by the target markets as to be locally produced. It is through this strategy that the company has identified the different tastes and preferences available in the Chinese market thus coming up with products to satisfy them. Its acquisition of Huiyuan Ltd is one of the avenues the company has used to cater for these tastes and preferences.
Saudi Arabians have been found to be more conscious about environmental conservation rather than locally manufactured goods. Hence, they are sensitive to the varied organizational practices that may have negative effects on the environment. For instance, they object to the issue of fast-food companies packing their foods in non-biodegradable materials. It is in this respect that McDonald Company has invented new methods of responding to consumer preferences as a way of retaining and expanding its market share in the country. The company has taken the initiative of helping in steering ahead environmental conservation measures that have been put in place. The company also accounts for all its environmental conservation efforts (Sandon 2007). Today the company recycles, reuses and is in the process of cutting down on use of packaging materials that contribute to environmental pollution. All these have come due to immense pressure from customers and the society at large.
The main reason why organizations regularly conduct market analysis is to identify the emerging needs as well as changes that arise in the market. Through this, they are able to come up with products and strategies to meet the identified changes. Some market segments are possible to predict their future changes thus helping organizations equip themselves with the requisite skills and technologies to cater for the foreseen changes. However, there are other markets that are hard to identify or predict the future changes that are likely to occur. Companies operating in such markets are caught unawares thus not being in a position to immediately respond to the changes. Chinese are fickle-minded people. It is difficult for one to predict their future tastes and preferences. Consequently, it becomes hard for companies to effectively exploit the market. Products; such as beverages sold in the Chinese market have shorter life spans. In spite of the Coca-Cola Company finding the potential in fruit juice company, its management is skeptical of the market as it does not know for how long will demand for fruit juice last. The ever changing attitudes towards products in Chinese market make it hard for companies to reap from their investments. This is not the case in other markets. For instance, Saudi Arabians are not fickle-minded and it is easy for investors to predict future changes in the market.
Social factors play a significant role in determining the success of any business in the market. It calls for all investors to have clear knowledge of the social factors underlying in their target markets. For Coca-Cola Company to succeed in its fruit juice investment in China, it has to effectively understand the taste and preference of the Chinese. In addition, the company has to understand that consumers in this country are health conscious hence use production methods that cater for their health issues. The current rate of population growth in China guarantees Coca-Cola a ready market for its juice products. Nevertheless, the company has to come up with mechanisms for identifying consumer demands and other changes that occur in the market as Chinese are known to be fickle-minded.
Reference List
McCabe, L., 2003. Understanding business: Environments. New York: McGraw-Hill.
Raza, R., 2010. Starbucks to open first store in Central America. Web.
Sandon, A., 2007. Societal marketing: McDonald’s. Web.