Saturday, February 11, 2012

Coca Cola

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1. Introduction


The Coca-Cola Company Limited is the world¡¦s largest beverage company and is the leading producer and marketer of soft drinks. Due to the facing of highly competition in the market, the Company used more than million dollars in the R& D, marketing and production, in order to design a new product to gain a higher margin. This report is mainly focusing on how Coca-Cola Company Limited uses strategies in order to competitive in the mature market. Firstly, the issues of the Company will be identified, and then SWOT analysis of the company will be conducted. After that, evaluation of alternative strategies will be stated and finally recommendations and implementation will be given.


. Background


Coca-Cola Company Limited is the world largest offerer of non-alcoholic beverages and the most valuable firm in the world. They owned over 00 brands in over 00 countries and serving carbonated soft drink and non-carbonated beverages such as fruit juice, fruit drink, sports drinks, coffees and bottled water. Coca-Cola Co. is operating in their existing brands, and also develops new global and local brands and acquisition of the global or local brands.


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In 00, the company has launched new brand product including Diet Lemon Coke, Vanilla Coke and large varieties of fruit taste Fanta including lime, grape, strawberry and passion fruit in Australia. The company has also acquired many new international water brands such as Danone Waters, Sparklettes, Alhambra and Evian brands in US. They also continued collaboration with the Walt Disney Company to market children¡¦s soft drinks.


Coca-Cola Company Limited has invested a huge amount in marketing campaign to support their brands. The aims for these campaigns are to enhance the consumer awareness and consumer preference for a certain brand. As a result, Coca-Cola Co. has maintained a long-term growth in profitable volume and large market share in the worldwide non-alcoholic beverage market.


. Problem or Issue Identification


The non-alcoholic carbonated or non-carbonated drinks have reached the mature market; Coca-Cola Co. has to develop strategies in order to remain in the strong competitive market.


4. Situation Analysis


4.1 Strength


�æ Global Soft drink industry leader Coca-Cola Co. is the world largest bottler. Products sell throughout the world. It generates $870 million sales in Australia last year. According to the Business Week Magazine, Coca Cola was listed at NO.1 in the world¡¦s 100 most valuable brand in terms of their intangible assets (Business Week Magazine, 00).


�æ Brand recognition - Strong brand name over worldwide and leader in the soft drink industry. Its brand new is well known in 0% of the world (Allen, 15).


�æ Large varieties of product Besides the carbonated soft drink, Coca Cola Co. has provided other range of beverages such as water, fruit juices and sport drinks to satisfy different customer¡¦s needs. However, different countries customer may have different preferences, Coca Cola has positioned as a worldwide brand but it has different strategies for each market.


�æ Highly distribution their products are largely distribute in everywhere, customers in over 00 countries can enjoy the Coca Cola product and consumer 1 billion sales unit globally (PR Newswire, 00). People could buy the product in supermarket, convenience store, vending machines, food court, fast food shop, etc.


�æ Different age group Coca-Cola has provided a wide range of products, which can target different group. For example, Classic Coke target a wide range of customers, Vanilla Coke is heavily target 16- years old and Diet Lemon Coke is slanted 1-0 years old female (http//au.news.yahoo.com/00817//lace.html).


�æ Product Innovation Successful innovation help the achieve of the pricing power. They have set the right mix between pricing and volume and thus generate profit. An example of successful innovation is the introduction of Vanilla Coke which was first launched in US on May 00 and continued to launch in Canada, Australia and Hong Kong and New Zealand (Datamonitor plc, 00).


�æ Growth of market share Increase market share by the acquisitions of the other bottling companies ¡V Herb Coca-Cola, Dr Pepper and Tarpon Springs (Datamonitor company profile, 00).


4.. Weaknesses


�æ Competition within the company, as Coca Cola Co. has a wide range of product line such as Coca Cola Classic, Diet-Coke, Sprite, POWERade, Dr Pepper, Fanta and Aquarius. This will increase the competition between each other.


�æ Highly rely on the carbonated beverage % sales of the Coca-Cola Enterprises are come from the Coke product. Carbonated soft drinks are its core category, however this category has reached mature and growth slowly in the market. The expected growth of annual sales in the carbonated soft drink category is .8%, while the total soft drinks category expected to growth in 4.% (Datamonitor plc, 00).


�æ Limited product range Comparing with the major competitors PepsiCo and Cadbury Schweppes, Coca-Cola has less product range such as snacks division. Therefore, they are relatively weak in competitive in the food and drinks market (Datamonito plc.00).


�æ Vest amount of investment in the marketing campaigns Coca-Cola has put a huge amount of money in investing the marketing campaigns. However, it rivals are also invested large amount in marketing, thus the result of the campaigns are less effective (Datamonito plc, 00).


4.. Opportunities


�æ World wide economic and population growth this will sustain the growth of the beverage market as the demand of product increase.


�æ Soft drinks dominate the Australian beverage market / of the beverage market is dominated by the soft drinks and fruit juices comprise 1.1%. More of the sales are depending on the carbonate soft drinks.


4.4. Threats


�æ Political and economic instability in many developing countries ¡V Coca Cola has recently report sales decline in the region of Indonesia and Thailand because of the economic weaken and lower the consumer purchasing power (Mclean, 18).


�æ Competition in national, regional and global soft drink companies ¡V they have a threat on substitutes. As there is only a weak commitment between Cola and consumer, their switching cost is low. It is possibly substitute by others beverage such as coffee, juice, tea, milk and hot chocolate (¡§Cola Wars¡¨, 11).


�æ Consumer attitudes changes ¡V Although soft drinks are dominated the Australian beverage market, there is a significant growth in the fruit juices and bottled water market due to the increase awareness of the health concern (Food Australia, 00). Scientists The Lancet mentioned in the British medical journal that consumption of soft drinks would have a high risk of getting obesity in the 11-1 years old child. This significantly loss the contract with the school (Eckelbecker, 00).





5. Generation and Evaluation of Alternative Strategies


5.1. Characterises of Mature Market


In the mature market, competitions are intensive. There are several or many competitors compete for the position. Company have to spend lots of expense in maintain or optimise their position. As a result, there are product proliferation, price competition, intensive competitive promotional activity, the erosion of margins, and slackening sales growth potential (Cravens et al, 000). Therefore strategies in product management, distribution, pricing and promotional activity are developed.


In this case, Strategic Market Planning Process (appendix A) act as the model to identify Coca-Cola Company strategies was used in the competition of mature market. The first step has to be done is the SWOT analysis. This identifies the Coca-Cola Business Performance, Market Attractiveness and Competitive Advantage.





Then a portfolio analysis was done (appendix C). Coca-cola has a strong competitive advantage as it is a global soft drink leader which is very successful in the existing beverage market. Almost 0% of the world has recognised the brand with good reputation. Company also have huge resources in doing R&D and Marketing. On the other hand, the competition in the beverage market is intensive, the major competitor is the Pepsi Co and they have strong resources in for the marketing, thus the effectiveness of Coca-Cola¡¦s marketing effectiveness is decreased. Company should actively attract the customer to prevent of switching brand. Therefore, Coca-Cola has adopted both defensive and offensive strategies to competitive in this mature beverage market (appendix B).


5.. Offensive Strategic Market


Offensive strategies are used to produce sales growth and improve share position and future profit performance.


Present Products New Products


Present Markets Market Penetration Product Development


New Markets Market Development Diversification


Ansoff¡¦s Growth Vector Matrix - Innovation of New Products


Source D.T. Brownlie & C.K. Bart, Product and Strategies, MCB University Press, Vol 1, No.1, 185, p


Product Development


Product development strategy aims new or improved products at the existing markets. An awareness of the present market¡¦s are required for the company to recognise new ways to satisfy the customers.


In 00, Australia¡¦s Coca Cola has launched 18 new beverages such as Vanilla Coke, Diet Lemon Coke, New flavour POWERade and Cherry Coke in 00. Targe market of the Vanilla Coke and Diet Lemon Coke is heavily target 16- and 1-0 years old female (http//au.news.yahoo.com/00817//lace.html) respectively. The consumption of the Vanilla Coke is approximately 6 million unit case in the first months launched. In 00 early April, Fanta expand its product line in producing some new flavour carbonated soft drinks which including the original orange flavour and also grape, lime, strawberry and passionfruit with new packaging splash bottle. The product target market is the 1 to 17 teens. This product development has generated positive volume and pricing growth in many countries such as Europe and Thailand (www.coca-cola.com). They are helpful in generating profit and capture the market share.





New flavour Fanta launch by Coca-Cola Company


In 001, Japan¡¦s Coca-Coke Company Limited first launched a new product line called ¡§Qoo¡¨ which is a non-carbonated fruit drink product line. It is an innovation and totally distinct from the classic product image. The drink has an animation character called Qoo and showed in every bottle. The character of Qoo is cute and happy, aims to target the child and young people. Initially, there are only two flavours launched which is orange and grape. Due to the popular demand, they have expanded their product line and produce other flavours apple, passion fruit, lemon and peach. Afterward they have introduced these products line into other Asian countries such as Korea, Taiwan, Hong Kong, Thailand, etc. The result is very positive and getting popular throughout the country. Now, Qoo is not only a character of the drink but also has its side products, such as glasses, dolls, alarm, key ring, etc. People could get these products by buying the Qoo drink. The advocate of Qoo is not limited to the child but also many teenagers and office ladies. In 00, Qoo has entered Hong Kong¡¦s McDonald and act as another choices of drinks besides the carbonated drinks under the brand of Coca-Cola Company. This significantly increases Coca-Cola Company sales and market share (www.cocacola.com.jp).





Qoo Apple Juice Qoo Grape Juice Qoo Side Product ¡V doll Qoo Side Product - Bag


At the mature stage, consumers decision-making are increasing in price sensitive, pricing pressure may lead to reduced company¡¦s profit margins and profitability. This pressure could be reduced by product differentiation. New product development is likely to increased competition of limited shelf space and prominence. The most space allocated will generate to the highest turnover, highest profit margins, highest incentives, and strong promotional support. In 00, 5% of the revenue is come from the new products. Coca-Cola has maximized the benefits to strengthen the brand portfolio. This could help the gain of market share position and avoid the left behind with the competitors. However, as Coca-Cola is an innovator and market leader of the beverage market, ¡§Copy Cat¡¨ may follow Coca-Cola to product the new innovation product and spread the profit generate.


5.. Defensive Strategic Market


Defensive strategic marketing plan was used to protect high market share position and it is useful to help the short-run profit performance and shareholder value by generating cash flow in the mature market for offensive marketing.


Present Products New Products


Present Markets Market Penetration Product Development


New Markets Market Development Diversification


Ansoff¡¦s Growth Vector Matrix - Innovation of New Products


Source D.T. Brownlie & C.K. Bart, Product and Strategies, MCB University Press, Vol 1, No.1, 185, p


Diversification


Diversification strategy involves the company moving into totally different lines of business. Company produce entirely unfamiliar products and market. Coca-Cola undergoes diversification by acquisition of other companies. Coca-Cola has keeping an eye on the Fruit Juice Maker Berri and decided to use AUS$400 million to acquire Berri. They plan to invest plant and equipment to the company and make more innovation packaging and product. As the growth rate of the juice market was 4% compare with the % growth of Coca-Cola original main market, the juice market was very attractive to the Coca-Cola Co. The total market share of the carbonated soft drinks and juice comprise 11% of the non-alcoholic ready-to-drink market in Australia (Mitchell, 00). Therefore if Coca-Cola Co is decided to enter the juice market, the rival are intensive and unfamiliar, enter in that market is not easy. If the acquisition success, Coca-Cola Co. would benefit from Berri juice market knowledge and also gain the existing market share of Berri in the juice market in order to increase the overall size of the market. If the acquisition is unsuccessful, Coca-Cola Co. would expand into the flavour milk segment which is another favourable and high potential market (Johnston, 00).


This strategy could help to maintain and protect the business market share by generating cash flow, short term profit for investment and prevent the market share erosion. This a great opportunity for Coca-Cola Co. to enter another market segments in the beverage market. As Coca-Cola can use the resources including the skilled labour, equipment, business knowledge and existing market share. It is more secured to enter the market with familiar knowledge and save analysis cost. After Acquisition, this could also lower the competition with others companies product and improve the competitive advantages in the beverage market. On the other hand, it will increase the competition between Coca-Cola¡¦s products.


5.4. Pull and Push Communication Strategies


Coca-Cola Co used two types of marketing communication strategies ¡V pull and push in targeting the customer and intermediary.


Pull Strategies


Customer Preference and Customer loyalty


It is a customer-targeted marketing communication strategy in order to build up awareness, attraction, loyalty and building effectiveness. As Coca-Cola brand is strongly recognised, it does not usually has advertising campaign unless it has new product launch such as Diet Lemon Coke, Vanilla Coke and new taste Fanta. However, it has some encouragement program for the loyalty customer or brand lovers such as the product exchange program (while buying two coke by adding additional dollar, you would get a memorable side product of the company), thus to enhance the commitment with the customer.


Also there is a phenomenon on the Coca-Cola Company¡¦s product advertising, the product it advertised do not emphasis on Coca-Cola Company brand name and its brand name is only display in a small size or unaware place. This strategy was developed because people have perception that Coca-Cola sell unhealthy product which are high calories (Steinberg, 00), therefore they seldom show their entire line of beverages.


Public Relationship and Sponsorship


As mentioned above, Coca-Cola Company is not frequently advertising it brand name. They used sponsorship instead to build up brand reputation and goodwill. Coca-cola has successive years sponsor the Olympic game in Atlanta and Sydney which would help to build up a healthy and positive image for the brand (Belch and Belch, 00). These events would overwhelm unhealthy facts by the sporty and energetic image.


Push strategies


Market Coverage


Coca-Cola is the exclusive beverage supplier for many fast food shops, cinemas, hospitals, schools and universities. And recently Coca-Cola has form a Global Marketing Alliance with Westfield Corporation Inc. They have signed a 10 years beverage contract that Coca-Cola continue to serve as the exclusive beverage provider in the mall-based vending operations world wide and become part of Westfield¡¦s Alliance Partner Program. There are nearly 1 billion customers yearly in Westfield, this would give a greater chance for Coca-cola highly penetrate in the market in order to maintain its market (PR Newswire, 00). This increases the availability and coverage in carry Coca-Cola brand product.


Distributor Push


Coca-Cola has strengthened the Customer Relationship by the joint business planning. In 00, Coca-Cola has co-managed with Woolworths¡¦ and Coles¡¦ inventories by doing their ordering of Coca-Cola Brand product. Indeed, this could create a long lasting and strong relationship, it helps to minimise the stock out problem in the supermarket shelves and greater marketing effort than without push communications (www.coca-cola.com.au).


Promotional supports in order to maintain the product positioning and brand identity retain and enhance retail presence and support. This can be an investment for keeping a product in the minds of the target market purchaser and for ensuring continuing trade support. Large amount of money are required to invest in the market campaign to get an effective response. It is because due to the intensive competition in the beverage market, competitors such as Pepsi Co and Cadbury Schweppes have also put so much effort on marketing. Thus this could minimize our effectiveness of the advertising and promotional campaign. Luckily, Coca-Cola has also announced that, therefore in last year, they have consume US$40.7 million on the media (Steinberg, 00).


6. Recommendations and Implementation


From the above evaluation of strategies, a defensive strategy is the most attractive and feasible to undertake in order to maintain the market share in the mature market. Diversification by using acquisition is the best way to go, it is because through acquisition it requires the least resources including the skilled labour, market knowledge of other segment and Research and Development cost. This would reduced the company compete with others beverage brand. Also Diversification would help the company decentralised it core business from the carbonated soft drinks to non-carbonate drinks. Due to the increases of health concern issue, carbonated soft drinks are indicated as unhealthy beverages. The sales growth of the carbonated soft drinks is declining, on the other hand, the demand of fruit juices and bottled water are accelerating. Thus through the diversification, Coca-Cola Company can maintain its market share and remain rival in the competitive beverage market.


As there are only little differences in customer needs and demographics for the Coca Cola, a mass market strategy will be appropriate for all. They will modify their products and marketing communications to meet the specific customer in the global market (Best, 004).





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