Coca-Cola and many other companies rely on the Federal Reserve to help get the economy moving. Federal Reserve and other countries have injected hundreds of billions of dollars into the banking system. The policy of the federal reserve impacts the Coca-Cola company by ensuring stable prices and employment. Like other companies, the monetary policy of the Federal Reserve is affected by federal funds. “The Federal Reserve Act mandates that the Federal Reserve conduct monetary policy so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates” (Board of Governors of the Federal Reserve System). “Any and all corporations operating within the US market must deal with their regulations of the monetary policy set forth by the United States Federal Reserve Bank, and the Coca-Cola Bottling Company is no exception. Donald Kohn stated that “The financial and economic crisis that started in 2007 tested central banks as they had not been tested for many decades” (Kohn, 2010). Coca-Cola’s economic growth remained steady during the 2008 financial crisis. “As the cola wars spread to other battlegrounds, Coca-Cola Co KO.N has come out ahead of PepsiCo Inc PEP.N, proving it can steal market share and grow even as a financial crisis threatens the global economy” (Geller, 2008). Donald Kohn stated that, “The financial and economic crisis that started in 2007 tested central banks as they had not been tested for many decades” (Kohn, 2010). Coca-Cola’s economic growth remained steady during the 2008 financial crisis.
Geller, M. (2008, October 15). Update 4 Coca-Cola may best Pepsi in weak economy, results
show. Reuters. Retrieved September 22, 2022, from https://www.reuters.com/article/cocacola/update-4-coca-cola-may-best-pepsi-in-weak-economy-results-show-idUSN1520152120081015
Kohn, D. (2010). The Federal Reserve's policy actions during the financial crisis and lessons for
the future. Board of Governors of the Federal Reserve System. Retrieved September 22, 2022, from https://www.federalreserve.gov/newsevents/speech/kohn20100513a.htm
Board of Governors of the Federal Reserve System. (n.d.). Retrieved September 22, 2022, from
Coca Cola is a multinational company (Coca Cola, 2022). It is guided by the policies of the Federal Reserve Bank because it conducts business in the US. The fiscal policy of America influences how Coca Cola conducts business in terms of monetary gains and losses. This is because the actions of Coca Cola that influence its market are affected by the policy.
Economic Growth
The fiscal policy affects Coca Cola both positively and negatively depending on the content of the policy. If the policy dictates more government spending, this results in either taxes being raised or more bonds being sold by the government (Cowen, 2021). Depending on which option is picked, Coca Cola may be forced to pay more for taxes which eventually leads to the final cost being catered for by the consumer. The economic growth of the company is thus negatively affected because that will follow the law of demand. The effect of crowding out is also an effect of increased spending by the government (Cowen, 2021) which negatively affects Coca Cola because of the decrease in consumption of their products.
Effects
The current fiscal policy of the Federal Reserve allows Coca Cola to buy bonds with low interest rates. Following this, the company has been able to increase its ability to pay off its current liabilities and grow their assets (Carmichael, 2021). For the company and its key market, this means that they can carry out business smoothly. The company engages in social projects that help the community (Coca Cola, 2021). By experiencing economic growth, the company is able to engage well with its projects and in turn increase demand from these audiences.
References
Carmichael C. (2021). Understanding Coca Cola’s Capital Structure (KO).
Coca Cola. (2022). 2021 Business & ESG Report. Retrieved from https://www.coca-colacompany.com/content/dam/journey/us/en/reports/coca-cola-business-environmental-social-governance-report-2021.pdf.
Coca Cola. 2022. The Coca Cola System. Retrieved from https://www.coca-colacompany.com/company/coca-cola-system.
Cowen P. (2021). Fiscal Policy.