Table 1. Coca-Cola’s PEST Analysis
4.2. MICROENVIRONMENT
4.2.1. Porter’s 5 Forces Analysis(Figure 2)
Figure 2. Coca-Cola’s 5 Forces Analysis
4.2.2. Market Analysis
The global soft drinks market as a whole has been showing good growth in most regions in recent years (Figure 3), with particularly strong increases in emerging markets. The move away from alcoholic drinks and the relative inconvenience of hot drinks has caused a major move to packaged soft drinks of all kinds, which are deemed to be most suitable for consumption ‘on the move’ as part of today’s busy lifestyles. Although certain sectors of the market are becoming fairly mature in many countries, manufacturers continue to innovate in order to maintain growth, with newer product categories such as RTD tea and coffee, energy and sports drinks, and other fortified and nutritional beverages beginning to establish themselves across the world.
On the other hand, the global soft drink industry was valued at $393 billion in 2001 and among the global soft drink sales, carbonated beverage was the largest market segment, with $193 billion in sales in 2001. Fruit and vegetable drinks and bottled water shared second place with roughly sales of $69 billion each in 2001.
Figure 3. Global Beverage Volume Trend
4.2.2. Customer Analysis
As Coca-Cola has the most recognized brand name in the world with 94% recognition. Coca-Cola system has millions of customer’s around the world who sell or serve Coca-Cola to consumers. Customers for Coca-Cola include retail outlet, restaurant, or other operation that buys Coca-Cola products and in turn, sells or serves these products to consumers. It also includes retail shops, grocery stores, mass merchandisers, off-licence shops, pubs, hotels, convenience stores, etc. These customers are all over in the 200 countries. ‘The Coca-Cola Company seeks to provide refreshment for all the people on the earth’. Coca-Cola is being targeted on all the age group. These segments of the market are being targeted by the mass advertising, sponsorships, helping the community, marketing schemes, etc.
4.2.3. Distribution Analysis
Coca-Cola Company has the world's largest bottling system of liquid non-alcoholic beverage. Company generally sells products to bottling and canning operations, distributors, fountain wholesalers and some fountain retailers (Figure 4). Company authorizes its bottling partners to manufacture and package products made from its concentrates and syrups into branded finished products, that they then distribute and sell.
Figure 4. Coca-Cola’s Distribution Flow
Because of its geographic diversity and the local nature of its business, Coca-Cola operates in markets with dramatically different consumer preferences, economic conditions, product delivery systems, retail trade customers, and marketplace opportunities. In spite of this diversity, the company's operations are bound together by two key goals: creating the highest quality products possible and superior marketplace execution.
4.2.4. Competitor Analysis
The nonalcoholic beverage industry is highly competitive, consisting of numerous firms. Competitive products include carbonates, packaged water, juices and nectars, fruit drinks, sports and energy drinks, coffee and tea, still drinks and other beverages. Competitors include bottlers and distributors of beverages marketed and advertised at international, national, regional and local levels, as well as chain store and private label beverages, which include PepsiCo, Inc. is a primary competitor of Coca-Cola Company, and other significant competitors include Nestlé S.A., Cadbury Schweppes plc, Groupe Danone and Kraft Foods Inc., and so likes.
Competitive factors with respect to Coca-Cola’s business include pricing, advertising, sales promotion programs, product innovation, increased efficiency in production techniques, the introduction of new packaging, new vending and dispensing equipment, and brand and trademark development and protection.
Focusing on PepsiCo, whom has a nearly 36% global market share to challenge Coca-Cola. It has best balance of promotion, communication to their target audience through celebrities.
PepsiCo is in different market segment and product/promotion positioning as it is being mainly targeted on youth group. Its main pricing policy is to providing quality products at the lowest possible price so to limit any price increases to the retail trade to the lowest possible extent. Most of their sales are through their own direct store distribution systems, which give them the ability to merchandise their products for maximum appeal to consumers. Furthermore, PepsiCo take great care at every level to ensure that highest standards are met in everything they do. In their product, packaging, marketing and advertising, they strive for excellence because they think their customer deserves better quality products.
- INTERNAL MARKETING REVIEW
5.1. SITUATION ANALYSIS
5.1.1. Brand and Product Ranges
Syrups, concentrates and beverage bases for Coca-Cola, the Company’s flagship brand, and nearly 400 other Company soft-drink brands are manufactured and sold. Coca-Cola has become the world’s most valuable brand (Figure 5).
Figure 5. BBC NEWS Report
5.1.2. Product Sales
In 2003, the Coca-Cola Company’s worldwide unit case sales of its brands have grown to be 19.4 billion cases (Figure 6), and its net sales is over $21 billion (Table 2).
Figure 6. Unit Case Volumes of Geographic Divisions
Table 2. Coca-Cola sales for the last 5 years (millions)
5.1.3. Markets and Penetration
The Coca-Cola Company and its subsidiaries operate in nearly 200 countries around the world, and more than 1,200 bottling partners established.
Until end of 2002, the world annual per capita consumption of company products is 74 cups, and company’s worldwide number of employees is over 49,000 (Figure 7).
Figure 7. APCC & Percent of Employees by Geographic Divisions
Coca-Cola has a massive market share and an incredibly strong brand, appealing to all of the market (Figure 8).
- North America – 20% of Coca-Cola’s operating income comes from US.
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Africa – The Company markets more than 80 brands in Africa, and the growths in recent years maintain over 5%.
- Asia – The Asia is the most profitable region for Coca-Cola, accounting for almost 30% of operating income.
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Europe, Eurasia and Middle East – EU is Coca Cola’s second biggest market region in terms of both revenue and operating income.
- Latin America – Latin American countries are significant markets though Company must face the challenging economic and politic climate.
Figure 8. Coca-Cola shares in Beverage Markets
- IMPLEMENTED STRATEGY
The strategy of The Coca-Cola Company has for a long time been best characterized as follows: global marketing and local manufacturing. However, the global marketing approach has been changed to local marketing because of the differences in consumer demands and experiences. To implement their ‘Think Local, Act Local’ philosophy, which can be identified as 3P: Pervasiveness, Preference, Price to Value, can be explained as:
- Keeping on creating and delivering attractive brands to thirsty people everywhere.
- Locating decision-making & innovation at local level.
- By being based in values, earns consumers’ trust and makes a significant contribution to bettering their communities.
SWOT ANALYSIS
Coca-Cola Company’s SWOT analysis as follow (Table 3):
Table 3. Coca-Cola’s SWOT Analysis
SELECTION OF STRATEGIES
7.1. MARKETING MODEL ANALYSIS
7.1.1. Product Life Cycle
Based on PLC, Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers (Figure 9). Cost management, product differentiation and marketing have become more important as growth slows and market share becomes the key determinant of profitability. In foreign markets the PLC is in more of a growth trend, Coca-Cola's advantage in these areas is mainly due to its establishment strong branding and it is now able to use this area of stable profitability to subsidize the domestic campaigns.
Development Launch Growth Maturity Decline
Sale
Profit
Stages 1 2 3 4 5
Figure 9. PLC of Coca-Cola products
7.1.2. Ansoff Matrix
As previous analysed, Coca-Cola is a well-established company, who holding most valuable brand and strong market shares (Figure 10). It has to develop new markets for which it does not entry, and has to develop new product for the existing markets. Coca-Cola has to develop new product so to sell in the existing markets to make more profits. Development of new product would help company spread their risk and help in having more sales.
Figure 10. Coca-Cola’s Ansoff Matrix
7.1.3. Boston Group Matrix
Figure 11. Coca-Cola’s BCG Matrix
Coca-Cola Company at this stage matches in the Cash Cows, as its huge annual cash flow and its the highest market share compared to its competitors. Second, it has a high growth rate due to its variety of other brands and its mass advertising. Third, as its large scale of profits, it invests heavy money to advertise and to keep their product on the No.1 position.
7.2. SELECT MARKETING STRATEGIES
PEST and SWOT analyses showed how changes are caused in the marketplace due to variable factors and Company self.
Product Life Cycle shows that Coca-Cola is at a stage of maturity where it has slow down in sales growth as it has achieved acceptance by most of the customers
BCG matrix recommends investing profits to produce new products and sell them in the market.
Ansoff Matrix recommends developing new products for the existing market coming up with ideas for new products for existing market.
The strategies will focus on the holistic ranges of Coca-Cola’s brands and products, rather than focus on neither one or two new developed product nor new extended brand.
7.3. MARKETING MIX DECISIONS
7.3.1. Product
Excluding markets expansion, Coca-Cola Company is recommended to improve existing products (e.g. solve the health problem) and innovate new products (e.g. avoid seasonal sales except in summer). Second, keeping on its localised branding and producing strategy so to satisfy different customers and attract more prospects.
7.3.2. Price
Long-term objectives: depends how the organisation wishes to position itself in the market place, or how it wishes to establish itself financially
- Making a profit, for the stakeholders and for future investment
- Pricing to keep competitors out
- Pricing which positions the company at the premium end of the market
- Pricing to maximize sales and become the market leader
Short-term objectives: tactical, as in promotion and selling.
- Skimming – Charging high price for new products that at first has no competition.
- Penetrating – Coca-cola at this stage does not have to worry about this pricing as it is already well established.
- Competitive pricing – Coca-cola can redefine its prices to differentiate competitors.
- Destruction pricing – Knocking out the competitors by cutting prices, a process commonly known as price wars.
7.3.3. Distribution
Due to previous analysed, the Company’s distribution system has relative competitiveness compared with main competitors, but only needs to prove in increasing ownerships of those bottling partners in order to avoid new competitors/entrants/substitutes to exist.
7.3.4. Promotion
For matching such strategies, the types of Coca-Cola’s promotion are classified as follows:
Advertising – The most persuasive possible selling message to the right prospects (markets) for the product or service at the lowest possible cost. Company is recommended to increase advertising inputs and differentiate advertising schemes.
Branding – Branding is a method of identifying one product or service from another by creating a name, term, design or symbol (logo) which is unique to that product or service in your line of business. It creates an image that differentiates the product in the consumer’s minds from the products of competitors.
Packaging – Packaging is a major aid to promotion and ‘product presentation’. Repackaging with different targeted markets and customers groups so to attract the shopper’s attention, especially at the ‘point of sale’.
Sales Promotion – Sales Promotion can boost sales effectively. Money off vouchers, free gifts and competitions can encourage customers to buy certain products. It only works in the short term though, so other promotion strategies have to be used.
Merchandising – In a shop or a retail outlet, the merchandiser is in charge of the presentation of the products and of the store itself. A merchandiser or salesperson employed by the Company visits retailers to offer advice on presentation of Coca-Cola’s products.
P.R – Publicity has far greater impact in that it appears to come from a third person, and is thus more believable. If the press favorably reviews something good about Coca-Cola, it will sell more than any advert could achieve. Both advertising and publicity can dramatize the product to create interest.
Sponsorship – Coca-Cola has an over 70 years sponsor relation with The Olympic Games and other public events, this tradition must be enhanced rather than be reduced.
- IMPLEMENTATION & BUDGET PLAN
As the selected strategies are focused on holistic ranges of Coca-Cola brands and products, the Company’s implementation plan would be organized in both of long-term and short-term activities. The implementation and budget plan is generally executed as follow (Table 4):
Table 4. Company Implementation & Budget Plan
CONTROL & COMMUNICATION
Customer Feedback Study
Investigations are to be made into the design and implementation of ¼ yearly business customer feedback study that will be used to provide accurate information on a variety of factors regarding the relationship between Coca-Cola Company and the distribution bases. All departments to improve product and service quality will use these information.
Market Research
Market research into new products demanded by the end customer will be completed on an individual basis and, as part of the product alliance with business customer. In doing so costs can be shared, together with knowledge within the company.
Internal Communications
Internal feedbacks from Marketing Department will be analysed by a series of meetings. Otherwise, during marketing campaigns, the information intercommunion with other departments is required and indispensable. These feedback sessions will be used as a means to keep marketing department fully appraised of new business and, over all company performance in marketing campaigns.
BIBLIOGRAPHY
TEXT BOOKS
Graham Hooley & John Saunders & Nigel Piercy: Marketing Strategy and Competitive Positioning, 2004 (3rd Edition), Prentice Hall
Malcolm McDonald: Marketing Plan, 2002 (5th Edition), Butterworth Heinemann
M. Solomon & G. Bamossy & S. Askegaard: Consumer Behaviour a European Perspective, 2002 (2nd Edition), FT Prentice Hall
WEBSITES
Coca-Cola Company 2003 Annual Report
http://www2.coca-cola.com/investors/pdfs/ko_022704.pdf
Coca-Cola Company Sponsorships
http://www2.coca-cola.com/citizenship/sponsorships.html
Standard and Poor’s Survey (2002): Beverage Industry Research
http://www2.standardandpoors.com/servlet/Satellite?pagename=sp%2FPage%2FSiteSearchResultsPg&l=EN&r=1&b=10&search=site&vqt=coca-cola#Funds
PepsiCo 2003 Annual Report
http://www.pepsico.com/investors/annual-reports/2003/annual2003_flash.shtml
Coca-Cola is world's 'top brand'
http://news.bbc.co.uk/2/hi/business/3919947.stm
CDF (Children’s Defense Fund)
http://www.cdf-mn.org
Beverage Digest: Maxwell Ranks U.S. Soft Drink Industry for 2003
http://www.forrelease.com/D20040304/nyth127.P2.03042004115632.15027.html
Beverage Digest: Top-10 U.S. Soft Drink Companies and Brands for 2001
http://www.beverage-digest.com/editorial/020228s.php
Sourced by www.coca-cola.com
PEST: stands for Political, Economic, Social, and Technological
Sourced by the Standard and Poor’s Industry Survey (2002)
Sourced by CDF (Children’s Defense Fund) http://www.cdf-mn.org
Michael Porter’s 5 Forces analysis, which focuses on the single, stand alone, and SBU (Strategic Business Unit), helps the marketers to contrast a competitive environment.
Sourced by www.coca-cola.com
Sourced by www.pepsico.com
Sourced by Interbrand’s survey (2004)
Sourced by Coca-Cola 2003 Annual Report
Sourced by Coca-Cola 2003 Annual Report
Sourced by Coca-Cola 2003 Annual Report
Sourced by www.coca-cola.com
SWOT, Strengths, Weakness, Opportunities, and Threats, is a technique much used in many general management as well as marketing scenarios.
To be able to market its product properly, a firm must be aware of PLC of its product. The standard PLC tends to have five phases: Development, Launch, Growth, Maturity and Decline.
Ansoff Matrix: a future method of analysing product and market policies
The budget plan is made basically and presumably by proportion rates, because there is no accurate data to support the research.
