- Coca-Cola has many competitors now including Pepsi, do you think this could affect
Coca-Cola?
I think this would not affect Coca-Cola because I said above it has its popularity all over the world and they are very competitive with other brands.
Dear Sir/Madam
My name is Maryola Pasha and I am a Student at Mayfield School & College in London. I am studying AVCE Business Studies and I have been set a task for my coursework to research and market a Coca-Cola product. I would be grateful if you could send me any information on the marketing strategies and any information that you have about Coca-Cola.
Your information would be vital importance in helping me to market a new Coca-Cola product to gain high grade.
Thank you
Yours faithfully
Strategy and mission
The strategy of The Coca-Cola Company has for a long time been best characterised 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, the following key areas are considered:
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Consumers – by using innovative and tailored marketing programs based on local consumer insights, The Coca-Cola Company will keep growing its core brands while also leveraging its distribution system to capture other growth opportunities in the ready-to-drink nonalcoholic beverage category.
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Communities – local offices around the world ensure that the Company is a respectful corporate citizen and participates as an integral part of each community.
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Customers – the Company provides value to customers through every consumer purchase, through superior customer service and through great value creation programs.
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Coca-Cola System – the Coca-Cola system business model delivers value to the Company and to its bottling partners. By working together, the Coca-Cola system focuses on growing the overall profits from the beverage category in order to provide strong returns for all parties involved.
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Coca-Cola People – the Company recognises the value of its associates and remains focused on ensuring it has the most talented, creative and motivated people throughout the world.
Mission: to maximize share-owner value over time.
In order to achieve this mission, they must create value for all the constituents they serve, including their consumers, their customers, their bottlers and their communities. The Coca-Cola Company creates value by executing a comprehensive business strategy guided by six key beliefs:
- Consumer demand drives everything they do.
- Brand Coca-Cola is the core of their business.
- The will serve consumers a broad selection of the non-alcoholic ready-to-drink beverages they want to drink throughout the day.
- They will be the best marketers in the world.
- They will think and act locally.
- They will lead as a model corporate citizen.
The ultimate objectives of the Coca-Cola’s business strategy are to increase volume, expand their share of world-wide non-alcoholic ready-to-drink beverage sales, maximize the long-term cash flows and create economic-value-added by improving economic profit.
The Coca-Cola Company is positioned to capture opportunity:
- The Premier Relationship Company
- Innovative Culture
- Energised
- Challenging The Status Quo
- Redefining their Marketplace
- Anticipating Consumer Trends
Objectives
- Strong cash flow position, which can be derived from consistent performance and
lower investment requirements.
- An average earnings per share growth of approximately 15% over the long term.
- Capital expenditures will be stable to declining from historical trends over the next 5 years, as the investments in the bottling side of the business will be reduced.
- Gradually reduce the dividend pay-out ratio to 30% over time. This reduction will occur due to an increase in earnings, not due to a decrease in the aggregate amount of the dividend payment.
- Maintain the net debt-to-net capital ratios that have been shown historically.
The Coca-Cola Company is confident that all the steps they have taken will put them on the forefront of change. They believe that they have a strong understanding of consumer habits and will continue to learn more as they continue to build our core carbonated soft drink business and as they enter into new categories. With the Coca-Cola’s new culture taking hold, combined with their great brands and bottling partners, they are optimistic about their ability to deliver on volume growth and financial results consistently over the long-term.
SWOT Analysis
This looks at factors that might affect the success or failure of marketing strategy. SWOT is an acronym for;
Strength
Weaknesses
Opportunities
Threats
and is a technique which requires the business to look at its external strengths and weaknesses and its external opportunities and threats.
Strengths: The product's image is laden with sentimentality, and this is an image many people have taken deeply to heart. Coca-Cola maintains its major focus on worldwide expansion of the cola market. The Coca-Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognisable branding is one of Coca-Cola's greatest strengths. "Enjoyed more than 685 million times a day around the world Coca-Cola stands as a simple, yet powerful symbol of quality and enjoyment"
Coca-Cola's bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and operated by independent business people who are authorized to sell products of the Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers.
Weaknesses: Relationships with bottling could create territorial and other legal problems. Coca-Cola has recently reported some "declines in unit case volumes in Indonesia and Thailand due to reduced consumer purchasing power." According to an article in Fortune magazine, "In Japan, unit case sales fell 3% in the second quarter of 1998...scary because while Japan generates around 5% of worldwide volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35% of Coke's volume and none of these markets are performing to expectation .Large region bottlers may not have the financial resources to continue expansion.
Opportunities: Brand recognition is the significant factor affecting Coke's competitive position. Coca-Cola's brand name is known well throughout 90% of the world today. The primary concern over the past few years has been to get this name brand to be even better known. Packaging changes have also affected sales and industry positioning, but in general, the public has tended not to be affected by new products.
Coca-Cola's bottling system also allows the company to take advantage of infinite growth opportunities around the world. This strategy gives Coke the opportunity to service a large geographic, diverse, area.
Threats: Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea, coffee, juices, milk, and hot chocolate.
Even though Coca-Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into these markets, allowing them to have further significant market shares and offset any losses incurred due to fluctuations in the market.
Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produce a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the competition.
PESTEL Analysis
A PESTEL analysis is a way of further looking at the external factors that will affect on Coca-Cola. The acronym stands for;
Political
Economical
Social
Technological
Environmental
Legal
Political Factors
- Political Change, from one party to another this could either boost or lower the sales of Coca-Cola. Also the budget may have an influence on the product and it’s sales. This may effect the way I price my product, especially if there is a change in employment figures.
- To protect the consumer: there are many UK and EC regulation designed to protect the consumer from being harmed by products or misled by suppliers. This would be on advantage for Coca-Cola as the government can protect the environment in which Coca-Cola product are sold, and they have to conform to health and safety standards.
- To ensure full and fair competition: legislation regulates competition in the private sector in order to prevent one or more supplies dominating a particular market against the interests of customers. It is important that Coca-Cola and other companies in different member states compete on equal terms.
Economic Factors
Economic factors will influence the future potential of Coca-Cola.
- National economic factors such as interest rates, unemployment levels and rates of inflection have obvious implications on Coca-Cola. Economic change for example a recession creating increased activity at the lower ends of product prize ranges. Rate of interest rises depressing business and causing redundancies and lower spending levels.
- The UK is experiencing a growth in the employment: this means that more people have money to spend, which may course me to set the price of my product higher. To take advantage of the high employment. But if the UK is experiencing a growth of unemployment than I have to low the prices of my product to save the company.
- Inflation in the UK is expected to remain close to the governments, which is good for Coca-Cola because it means that the price of Coca-Cola product does not increase steeply. The government aim to control inflation, which in turn will stabilise prices.
Social Factors
Social force condition how individuals translate their needs into the specify products and services which they want social change involve changing attitudes and lifestyles. The increasing number of women going out to work, for example, led to the need for time-saving products for the home.
Population
- The sizes structure age distribution and location of population all impact upon the marketing activities of the organization. People are retiring earlier and living longer, they have more times and more money to spend on themselves. This is good for Coca-Cola as it take the advantage of people spending more money.
Education levels
- The rise in the number of people continuing into higher education nearly 40% compared with 5% in the 1960s has created a much more demanding and discriminating group of consumers. This can affect Coca-Cola, such as more people are educated and have better jobs. I could take this for advantage to higher the price for my product as people have more money to spend.
- The demographic structure of society describes it’s humans populations in terms of size, location, age, ethnic origin, occupation, sex, and other statistical measures.
Technological Factors
Technology has affected Coca-Cola such as they use internet, telephone e-mail etc, can help them to advertise and communicate with customers.
The need to create new technology and new products is a major driver for Coca-Cola. If Coca-Cola can achieve a breakthrough which can be patented would get a major sustainable competitive advantage over its competitors.
- Technological change – creates new opportunities for new products and product improvements and of course new marketing technique – Internet, e-commerce. A new marketing technique might make Coca-Cola to expensive for the business to remain profitable. My new product may become obsolete because new technology has developed a more effective substitute. However, changes in technology also offer opportunities, such as potential to break into new markets, which could help Coca-Cola by producing a new radically different product offering.
The use of the internet for business to business transactions and to communicate with customers which is very important for Coca-Cola
Environmental Factors
- A environmental factors that I must consider when packaging my product is that people are able to recycle the packaging after they have finished using it. So I have decided that my product that I am marketing will be contained in plastic bottle so people can use it for other drinks as well and also plastic is quite cheap to produce. When I was researching Coca-Cola I notice that the drink was also contained in cans and glass bottles. I am focusing on plastic bottles so it can be recycle and to help the environment.
- Coca-Cola must consider the environmental when they are producing their soft drink, they have to make sure that their factories not polluting the environment. Coca-Cola have to make sure that this because if they were polluting the environment then they would face action from pressure groups which could give Coca-Cola bad image.
Legal Factors
A legal Factor can affect the production of Coca-Cola products are the restrictions on the chemicals that are allowed to be used by Coca-Cola. It is very important that Coca-Cola specify what factor that the drink product they are selling is.
Equal opportunities legislation
All marketing communications must conform to equal opportunities legislation-there should be no discrimination by gender, race or disability. This can cause difficulties for a business that is targeting a particular market segment.
Boston Matrix
The influences of growth and market share have been brought together into a matrix by the Boston Consulting Group (BCG).
High Low
A Star product is growing fast and has achieved a high market share. Although it generates high revenues and profitable, it uses lots of cash to fuel its growth and maintain its competitive position. It is well placed to survive and prosper when growth slackens.
A Cash Cow has high share of a market which has matured. Because of their dominant market position, they are able to exploit maturity and generate plenty of surplus cash from their sales. Cash Cows evolve from the stars of the growth stage and are a critical source of cash and other resources to develop new products.
A Question Mark is in growth stage but has achieved a relatively small market share. As this makes the product unprofitable at present and could put it in an even weaker position when the market matures, it requires some changes probably investment to improve its market position.
Question Mark are therefore net users of cash resources. They may be managed into Stars but they can also degenerate into Dogs if market growth disappears.
A Dog has the worst of both worlds having a low share of a market with no or low growth. They represent a drain on an organisation’s resources often at the expense of other products and candidates for deletion unless they can be transformed into a wildcat through growth.
In accordance with the BCG matrix, I would recommend the following strategies for Coca-Cola products in each category:
Dog Strategy: Either invest to earn market share or consider disinvesting.
Star Strategy: Invest profits for future growth.
Question Mark Strategy: Either invest heavily in order to push the products to star status, or divest in order to avoid it becoming a Dog.
Cash Cow Strategy: Use profits to finance new products and growth elsewhere.
Coca-Cola has a large range of product, which includes:
- Coke
- Diet Coke
- Cherry Coke
- Diet lemon Coke
- Coffine Coke
From the products above products I will put each one into the Boston matrix to find out if there is any potential growth with any of the products.
My product
The product that I am introducing onto the market, is Coca-Apple-Cola drink, which has an apple flavor. I would put my product onto the Question mark of the Boston matrix. This means low market share in a growing market Either invest heavily in order to push the product to star status, or divest in order to avoid it becoming a Dog.
Product lifecycle
The product lifecycle is a description of a product from its final withdrawal from the market. Products have a finite existence in the marketplace. Many are short-lived fads or failures; others go on for many years before they are overtaken by new developments. However long they last, products, like people are mortal. They do not live forever; some have a brief moment of glory, others persist in relative obscurity, but they all wax and wane in popularity. Their lives, like ours, can be divided into several distinct stages:
- Products are conceived and developed by their innovators until they are ready to be launched;
- They are born to introduced into the marketplace;
- They mature as their markets become saturate and more competitive;
- They grow to the limits of their sales potential;
- They decline and die as demand falls and alternative products are born to begin the cycle over again.
Stage1 Stage2 Stage3 Stage4 Stage 5 Time
The life cycle stages
The development stage
In the development stage, new products ideas are researched and taken through to readiness for the marketplace. No sales are made during this stage (except perhaps during a market test), so it is an unprofitable, cash absorbing phase in a product’s life. Two aspects of product development need emphasising as they can work against each other
- The most important element in the marketing mix is getting the product right in the first place. No amount of clever promotion, sophisticated pricing or extensive distribution can compensate for a weak product that is not in tune with customer needs.
- Speed of new product development is becoming more and more important in competitive international markets. It is no loner enough to get distribution can compensate for a weak product that is not in tune with customer needs.
- Speed of new product development is becoming more and more important in competitive international markets. It is no loner enough to get there first; continual improvements to existing products are required just to maintain market share.
Given the overwhelming importance of getting the products right, Coca-Cola suffers from inertia in developing new products to take over from successful existing products. The result is that they lose out to more agile competitors.
The Introduction or Launch stage
In this stage the product is introduced into the marketplace and made available to customers. Most new products are relatively unknown at this stage and therefore, demand is slow.
- If the product is at all innovative, competition will be limited.
- The product specification remains basic as refinements are not yet needed and may be undeveloped.
- The need to develop awareness of product makes promotional effort the highest priority in the marketing mix, whether this comes from advertising, personal selling, PR or other methods.
- Pricing pressures are downward because of increased output and more competition.
- Financially, growth leads to profits as revenue increases and unit costs decline. This may not be reflected in a positive cash flow however as increased deptors and stocks, or other investments necessary to cope with growth, absorb surplus cash. Profits may also be reinvested in product improvement or other marketing activities in order to capture more market share.
The growth stage
During this stage product should be establishing itself in the mass market, sales and profits should be increasing and the initial investment in research and development should be paid for. When my product reaches this stage it will be making a profit, however because there is such fierce competition with sun care products the amount will not be huge. However as the male range takes of and I use heavy marketing to encourage a high market share, this could lead to my product making a larger profit.
The maturity stage
As markets become saturated and competition increases, growth peaks and sales begin to stabilise. This is the onset of maturity, the most common stage for products as it tends to last longer that other phases. Common themes in this stage are:
- The slackening rate of growth leads to a shake out amongst competitors. At first competitive activity may increase as rival suppliers try to maintain growth by increasing market share through promotional activities, product improvements and price-cutting. The resulting decline in the profit margins usually forces weaker competitors to exit from the market. This may allow for a period of relative stability among the few established organisations that emerge as the final market leaders.
- Product become more refined as rivals seek to gain competitive advantage through improvements to performance and presentation and by the addition of new features. It is in the maturity stage that the added value of the product becomes a more and more significant determinant of demand.
- Promotional activity is no longer targeted at creating awareness but at maintaining loyalty to a brand or product. Some promotions may seek to develop new, secondary market segments.
- Pricing becomes more sophisticated as market mature. Discounting may threaten margins in the short term. However suppliers often try to protect margins by offering a more attractive ‘bundle’ of benefits for the same price.
- Distribution spreads even wider in an attempt to improve sales. It may be at this stage that international markets become more attractive for the first time as demand in the home market slackens. New channels of distribution may be opened up to gain access to different to different segments.
The decline stage
Eventually the sales of an individual product or group of products may go into decline. This can represent a gradual shift or more rapid decline in demand caused by the introduction of better or substitute products, or change in consumer attitudes. Choices for marketing management includes:
- Maintain the product by concentrating on segments where there is evidence of continued demand.
- Revitalise the product so that it is re-launched as new in some way.
Coca-Cola in the Life Cycle
To be able to market its product properly, a firm must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. 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.
Furthermore, 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 product life cycle is in more of a growth trend Coke's advantage in this area is mainly due to its establishment strong branding and it is now able to use this area of stable profitability to subsidise the domestic.
My product is aimed at a new market it means would be in the launch stage of the product lifecycle, this is very expensive and costs are likely to be high and profits are low. I need to use a heavy promotion in order for the product to become recognised by customers and for the product to enter the market and gain a market share. I would need to use a penetration pricing in order to encourage people to try the product. I have decided to use TV advertising, Newspapers, which is expensive.
Ansoff’s Matrix
Each business including Coca-Cola waiting to expand will have a choice of marketing strategies. These were arranged in matrix by business writer Igor Ansoff. The matrix plots haw safe or risky various marketing objectives are and can be used by business to judge the likelihood of success.
Products
Existing New
The horizontal axis shows existing and new products. The vertical axis shows new and existing markets. The basic to by two matrix gives four possible strategies for increasing sales.
Initially there are two key choices in the Ansoff matrix: to exploit the product or the market. To make a decision a business would have to assess or screen the new markets and new products, then compare the potential benefits with those expected from continuing with existing markets products.
Market penetration involves expanding market share in existing markets by using existing products. This can be done by persuading current customers to buy more of the product e.g. 3 for the price of 2. These offers have the effect of improving the perceived value for money and frequently deter customer from switching to other brands.
Also Coca-Cola could try poaching customers from their competitors or they could withdraw the products in their range that are less profitable and concentrating on the products with better prospects.
Market extension takes existing products into new markets. This strategy assumes that existing markets are fully exploit or that new markets can be developed concurrently with existing markets. Coca-Cola could cater for different segments or enter new geographical markets. This is a medium risk strategy financially as they don’t have to cover the heavy research & development costs designing and researching new product.
Product development introduces new products into new existing markets. This means changing or adopting the product so that it sells to more people in existing markets. Product development can be radical with the introduction of an entirely new products in some way such as performance, presentation or quality.
Diversification
This is when Coca-Cola would have to develop new products that would be sold in new markets; this however is both expensive and risky, as it requires intensive screening of both the ideas for new products and the opportunities in new markets.
Choice of strategy
The strategy that I have chosen to use on behalf of Coca-Cola is a market-based strategy. The market-based strategy that I have decided to use is market expansion, this involves using existing products to increase market share by moving into new markets
The Marketing Mix is defined as a set of tools that a firm can 'mix' in order to produce the response they want in the market. This covers everything from creating new TV advertising through to designing new packaging. All these options can be gathered together into four groups known as the '4Ps'. The '4Ps' are :
Product
Promotion
Place
Price
While each of the 4Ps individually has significant power to influence consumer demand - it is only by creating an effective 'mix' that great marketing campaigns can be created. In this regard, it was the innovative choice of Marketing Mix made by Coca-Cola that helped determine the success of their product launch.
The Coca-Cola Marketing Mix: Product
'Product' is defined as anything offered to a market that might satisfy a need or a want. It includes physical objects and services, as well as persons, places and ideas. The Coca-Cola product consists of a totality of its attributes - everything from the taste of the drink, through to the shape and size of the bottle and can. It was found that the soft drink to be sold all around the world did not need to differ from that which had been developed for other markets, except in terms of minor packaging changes. As such, no time was needed before the product launch for research and development - production from an existing standard could begin immediately.
The Coca-Cola Marketing Mix : Price
'Price' is what consumers pay to acquire a product. The main factor that would determine the
price of Coca-Cola was the price of the main competing brands, as well as Coca-Cola’s own cost base. This strategy made the new product attractive to consumers, as well as ensuring an adequate return on production and distribution costs. In the supermarket channel where larger pack sizes are sold, such as 2 litre bottles, various special deals were offered during the initial launch phase. These deals are a common feature of product launches and such a strategy is referred to as Penetration Pricing. The aim of Penetration Pricing is to win as many customers as possible before the competition has time to react. However in the case of Coca-Cola, it was decided to concentrate on teen specific packs such as 500ml bottles and 330ml cans during the launch phase.
The Coca-Cola Marketing Mix : Place
'Place' is defined as the way in which a company makes a product or service available to consumers. This includes all aspects of distribution as well as the manner in which items are displayed in shops. In the soft drinks market shelf space is critical. If products cannot be seen, they cannot be purchased. In order to guarantee itself adequate shelf space, Coca-Cola went to exceptional lengths.
The Coca-Cola Marketing Mix : Promotion
Among the most innovative aspects of the marketing mix created for the launch of Coca-Cola was that of promotion. Promotion includes all activities that communicate information about a product and its merits to a target audience, and persuades them to buy. The most important consideration for Coca-Cola in this regard was to create an integrated communications strategy across different mediums, as shown in the diagram, that would direct a standard message at the youth and adult market from across a range of media.
The promotional campaign for Coca-Cola included television and magazine advertising, outdoor advertising, in-store promotion and advertising.
When creating its campaign Coca-Cola also had to be mindful of Advertising Standards legislation. This legislation, which is contained in the Consumer Information Act 1978, seeks to prevent the spread of false or misleading claims about products. The Office of the Director of Consumer Affairs and Fair Trade is also heavily involved in this area and can review any advertisements that have been referred to it by members of the public.
The combination of these four methods constitutes the Promotion Mix. Public Relations is about communicating with the media to create good publicity for a firm or its products. The media then communicate these activities to the public.
Public Relations
One of the marketing department’s functions is to manage public relations and maintain a positive and beneficial image of the firm’s policies and products. The aims of the Public Relations Manager liaising with the marketing function are to:
Coca-Cola’s’ powerful brand personality has become a vehicle for promotion in its own right, sponsoring many events both on a global and local level. The company has long been associated with global events such as The Olympic Games, The FIFA World Cup, Rugby World Cup and Special Olympics. Coke has also been linked to world fairs and national exhibitions since 1905. With the Olympics blossoming in popularity and complexity, increased attention has been turned to serving the growing crowds and to supplying the needs of the athletes and organising committees. In many countries where Olympic associations lack full government sponsorship local bottlers of ‘Coca-Cola’ donate funds to aid potential Olympians as the partnership of ‘Coca-Cola’ and the Olympics continues to grow.
‘Coca-Cola’ was the official sponsor of the Olympics 2000 Games held in Sydney maintaining an unbroken presence at the games since 1928. The company has already contracted to sponsor both the summer and Winter Games through to 2008.
‘Coca-Cola’ will be the official global sponsor of the Special Olympics to be held in Ireland in 2003 (this is the first time the games will be hosted outside the US). As the Olympic Movement’s longest-standing corporate partner, ‘Coca-Cola’ has aided the evolution of games together with more than 190 National Olympic Committees assisting thousands of athletes in their training.
Product
From all the research that I have obtained, I have decided that
