Economic Environment
Geographically the Czech Republic is in the crossroads of Europe maintaining good close links to other important European countries such as Germany, Poland , Hungary and Slovakia. To estimate the future potential of Coca Cola’s market share the economic factors such as interest rates , taxation policies and the level of economic growth need to be analyzed. As the interest rates are at approximately 1% from the Czech National Bank, this means that if Coca Cola requires capital for capital resources for expansion then the cost of borrowing could be done locally. Other major economic indicators include GDP is declining due to the financial crisis and unemployment is rising from 8%. The declining GDP can have a negative consequence for increasing investment opportunities and a reduced rate of return. What this means is that people will be more sensitive to prices and the Coca Cola being a premium soft drink consumers may choose a cheaper alternative. The current VAT rate for food is 9% and is similar across all EU countries. As the Czech Republic has yet to adopt the Euro as currency there will be higher transaction costs when moving currencies from abroad especially the U.S dollar as the Czech Crown is still strong relative to the dollar.
Social and Cultural Factors
The health based trend of drinking soft drinks that are healthy is continuing and there is a preference for soft drinks with vitamins and free of preservatives and colors as well as drinking more bottled water. As the nature of the consumer environment towards the typical softdrink beverage is moderate Coca Cola will need to incorporate more healthy drinks and or change the content or image of some of their more popular brands. The competitive environment also plays an important part in the successful implementation of the strategy for Coca Cola has high competition from local and international companies. Coca Cola is also competing with a heavy beer drinking culture in the Czech Republic and as possibly the most popular beverage in the country and gaining a share of this market will boost market share of the non alcoholic beverage industry. Marketing campaigns replacing a beer product with a Coca Cola product in a typical Czech setting in a pub for example can change this perception gradually. Another approach is to categorize alcoholic beverages such as beer and or wine as alcohol giving the perception of it as associated with alcohol and therefore a drug. This perception can make people seek alternatives to beer and alcohol and incorporate an unhealthy association with alcoholic beverages. Another social factor is the tendency for Czechs to view soft drinks as unhealthy where exposure to the U.S obesity epidemic blaming soft drinks for this problem and changing this perception will be the key to dominating the Czech Market.
Technical, technological and production factors
The Czech Republic has a highly experienced and educated IT sector and what this means is that Coca Cola can utilize these resources in a marketing and Customer Relationship Management role to better manage customers and market share. In a marketing prospective Coca Cola can use different marketing techniques using the latest social networking sites such as Facebook, Myspace and others . Companies have begun to tap into this technological resource and there is a growing trend where there are about 2 million Czech users.There is also a high level of R&D potential in the Czech Republic due to this Coca Cola can conduct market research and better understand customers behavior and perception.
Task 2: Coca Cola in the Czech Republic SWOT Analysis
Strengths
- Established and highly recognized brand
- High technological skills
- Distribution channels located centrally in Europe
- Production quality
- High scalability
- Hypermarket and Discount store demand
- High quality water availability
Weaknesses
- Saturated market in Czech Republic
- Unhealthy connotation
- Management
- Some weak brands
- High price
- High taxation
Opportunities
- Healthy soft drink market
- Technological trends ie Facebook and social platforms
- New product potentials from the U.S and adaptations to local and Bottled “health” water
- Central distribution channels
- New markets
- Hypermarket share
- Liquid concentrates expected increased demand
- R&D potential
- Sponsorship-Government Institutions
Threats
- Association with obesity and unhealthy practices
- Currency and transaction costs
- Local competitors
- High price
- Lower demand of soft drinks
- Financial crisis –lower spend and high product substitutes
Task 3: Strategic Guidelines for Market Leadership in the Czech Republic
“In the long term we are all dead.” (J.M. Keynes)
Strategically the Czech Republic soft drinks market for Coca Cola is an immense opportunity for expansion the main competitors Kofola and Pepsi are all in the same position and the first company to make bold moves will become the market leader if they approach the market with the right combination what consumers want. At the moment Coca Cola is in the maturity stage of the product life cycle and the final stage is the decline stage where supposedly sales begin fall off and decline dramatically. After analysis of the SWOT and PEST in the Czech Republic the opportunities outweigh the threats and there is potential for Coca Cola to increase their market share with the following strategic guidelines.
- Product development- With the increasing demand for healthy soft drinks Coca Cola could conduct more R&D and fine tune consumer demand and develop new products to fill this demand instead of focusing and relying on their stable brands such as Coca Cola “original”. High profit is available in the bottled water market where Coca Cola can reduce costs and source quality water from different parts of the Czech Republic. Allocating more resources to product development will maximize Coca Cola’s market share in the long term while running with the general consumer trends . The SWOT analysis indicated that there in no more market share to gain and strategically we turn weaknesses into strengths and introducing a health/energy drink will find a strong market for Coca Cola.
- Its no secret that international corporations tailor products and marketing techniques to local markets. And in Coca Cola’s case in the Czech Republic there should be more of an emphasis on this strategy to make more Czechs drink Coca Cola products. A typical example is a Kofola television advertisement using a typical Czech scene on a lake where a typically Czech scene was played out and this type of marketing is sorely lacking in the Czech market. There are still strong differences between markets opposing the belief that consumer culture is extensively homogenous.
- Increasing sponsorship within the Czech Republic is another strategic guideline where a strong presence and loyalty can be maintained. This is especially the case within government institutions and events. This can build an association to a solid and respected force in peoples lives and improve brand loyalty. Sporting events is a good example as well as hospitals and environmental causes.
- Increasing R&D to properly understand consumer behavior and the Czech culture will give Coca Cola an advantage over local competitors as the availability of R&D resources in the Czech Republic is abundant and the cost benefits out weigh the initial investment in the long term.
- Using technology platforms to gain a strategic advantage especially when the Czech Republic has high concentrations of IT resources in the form human capital and infrastructure . Using social networking platforms to base marketing campaigns can be a cost effective way to gain market share and consolidate into a unique sector.
References:
Czechs most active users of social platform Facebook
http://www.radio.cz/en/article/124057
Czechs most active users of social platform Facebook
http://www.radio.cz/en/article/124057
