Analyse Coca-Cola as an organisation and to identify potential strategic growth opportunities.
MICHAEL ROMILLY (0105881)
PG Dip ENTREPRENEURSHIP
MT1103A “BUSINESS GROWTH STRATEGIES”
JIM PATERSON
‘Select a business of your choice then carry out an analysis of the business to identify strategic venture growth opportunities which are likely to attract customers and contribute to the overall success of the venture’
TABLE OF CONTENTS
- INTRODUCTION
- MARKET SHARE
- MARKET PENETRATION
- MARKET DEVELOPMENT
- PRODUCT DEVELOPMENT
- DIVERSIFICATION
- RECOMMENDATIONS
- CONCLUSION
- APPENDIX 1
- APPENDIX 2
- REFERENCES
1.0) INTRODUCTION
The purpose of this paper is to analyse Coca-Cola as an organisation and to identify potential strategic growth opportunities (appendix 1). In order to identify strategies that are likely to attract customers and contribute to the success of the business as a whole, it is necessary to consider a number of factors. This paper will begin by discussing these critical factors including the nature of the competitive arena (market share), market penetration, the development of new markets, product development and product diversification (Trifiletti, 2002). In order to develop strategic growth opportunities, it is essential to analyse the current situation of the company and the factors that are critical to future success (Grundy, 1995).
2.0) MARKET SHARE
In order to select the correct growth strategies for the organisation, it is necessary to analyse the organisation’s current market share. From the following information it is possible to ascertain that Coca-Cola are currently the CSD market leader in many countries across the world. In addition, trends in the market display little fluctuation in terms of competing companies share of the CSD market. In 2000, Coca-Cola was the best-selling soft drink in supermarkets in the USA (Kotler, 2000). In the same year, Coca-Cola held a 44.1% share of the American consumer soft drinks (CSD) market. Their closest competitor was Pepsi, who held a 31.4% share of the overall market. The CSD market remains to be Coca-Cola’s primary line of business activity. In essence, Coca-Cola may choose to diversify their product range and attempt to capitalise on opportunities that lie out with the CSD market (Sheperd & Shanley, 1998). This is one potential growth strategy that Coca-Cola could explore in order to attract new customers and expand the overall size of the business. Coca-Cola have subsidiaries in countries all over the world and are easily able to dominate the CSD market on a global basis. Although this indicates the size and power of the company, it may suggest that the CSD market has very little left to offer in terms of growth potential. According to Shepherd and Shanley (1998), there are two possible strategies that a market leader can adopt in order to promote organisational growth. Hanan (1987) refers to the first of these options as ‘organic growth’. This occurs when an organisation seek to expand by increasing existing market share by diversifying into new product lines and categories. Alternatively, a company like Coca-Cola could attempt to induce organic growth by increasing the level of consumption of existing customers (Henderson, 1984). The second of these strategic growth opportunities relates to the acquisition of new companies in order to expand the size of the organisation (Hanan, 1987). These two strategic options are both potential sources of growth for the organisation.
3.0) MARKET PENETRATION
As a multinational organisation, Coca-Cola constantly seeks to increase the consumption levels of their products all over the world. According to Kotler (2000), there are a number of ways in which an organisation can attempt to increase the usage levels of a product. Firstly, Coca-Cola may choose to embark upon a promotional campaign in order to reinforce the company’s brand image in the mind of the consumer. Secondly, Coca-Cola may choose to alter the price of certain product lines. This may occur in the form of what Brassington and Pettit (1998) refer to as price skimming. This allows the organisation to reduce the price of certain products for a short period of time in order to make the product more appealing to the consumer. In addition, the organisation can make improvements to their service by modifying and speeding up the distribution process and increasing the overall selection of products (Trifiletti, 2002). This can also increase consumption levels and potentially assist the organisation in the process of customer acquisition (Egan, 2000). However, both of these strategies are designed to increase sales volume over a short period of time and the purpose of this report is to identify potential growth strategies that can benefit the company in the long-term (Chisnall, 1995). This is similar to what occurred during the ‘cola wars’ of the 1980’s. During this period of time, Pepsi launched an advertising campaign based upon the idea of ‘the Pepsi challenge’. At the time, Pepsi experienced a heightened market share and managed to penetrate further into the domestic CSD market without actually changing its product (Kotler, 2000). However, this growth orientated marketing strategy only proved to be beneficial until Coca-Cola responded with a new advertising campaign. After this occurred, Pepsi experienced a slow decline in terms of market penetration until the American CSD market returned to its original state. According to Chisnall (1995), it is pertinent to consider the role that consumer brand loyalty occupies within the buyer decision-making process. Coca-Cola has a recipe that has been established for over a century; therefore, any alteration to the product itself could be severely detrimental to the state of the organisation. Within the context of this assertion, it is possible to identify a number of strategies that could promote growth and development within the Coca-Cola company. Firstly, the organisation could aim to increase its profile by concentrating on marketing activities that incorporate a high degree of Corporate Social Responsibility (CSR) (Schlegelmilch, 1998). This could involve a marketing programme that aims to invest in schools and colleges that are situated in areas of the USA that are poor and in need of economic regeneration. This could hold a number of advantages for Coca-Cola as an organisation. Firstly, it would allow them to tie up contracts with schools and colleges so that they can only distribute Coca-Cola branded products in restaurants and cafeterias. Secondly, this conveys an image that Coca-Cola is concerned about society and the youth of America. According to Smith and Quelch (1996), organisations that choose to focus heavily on philanthropic gestures and CSR can often increase sales and profitability in the long-term. However, Schlegelmilch (1998) suggests that such a strategy can potentially backfire if acts of CSR are engineered as a matter of ‘enlightened self-interest’ or an exercise in public relations, rather than a genuine attempt to help and benefit society. Finally, this gives Coca-Cola direct access to American teenagers. In essence, students in America represent a large proportion of overall domestic sales revenue. By establishing deals with schools, colleges and universities, the company can target students directly in an attempt to introduce new product lines and categories and increase overall levels of consumption. However, there are risks that can be associated with this type of strategy (Smith & Quelch, 1996). Coca-Cola must attempt to ensure that their marketing actions are genuinely based on ethical principles; any deviation from this may result in bad publicity for the corporation (Schlegelmilch, 1998). Coca-Cola could effectively target this market very aggressively by using advertising and promotional material that appeals specifically to American teenagers by using high profile celebrities and sports personalities to endorse the brand. Coca-Cola could also promote organisational growth by targeting the ‘baby-boomer’ market. This would involve using advertising that appealed to older users who still maintain a youthful outlook on life and targeting them in the same way. Coca-Cola could dramatically increase sales revenue through a combination of product placement and brand exclusivity contracts with large event organisers, restaurants, sports/concert arenas and amusement parks (Trifiletti, 2002). Kotler (2000) indicates that the key to successful market penetration depends upon the organisations ability to increase its own visibility in the public domain through promotional and marketing efforts.
