Coca-Cola Company is the world largest beverage company with approximately 500 brands. Apart for coca-cola brand, the company has other 14 brands; Coca-cola zero, vitamin water, PowerAde, minute maid, diet coke, Fanta, sprite and Georgia coffee whose portfolio is over a billion dollars. Coca-cola Company remains the world leader in manufacture and distribution of beverages, soft drinks, coffee and teas, and other types of juices. It owns one of the largest distribution networks in the world marketing in more than 200 countries of the world and serving rate of nearly 1.6 billion per day (The Coca-Cola Company, 2010).
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This study provides a report on marketing strategy adopted by the Coca-Cola Company. Included in the report are the various marketing and/or business issues and opportunities facing Coca-Cola Company, as well as the characteristics of its current and potential customers. The report also provides a discussion of the various segmentation options available to Coca-Cola Company and then gives a recommendation of the most appropriate market segmentation that the company can focus in order to achieve profitable sales growth. An analysis of the company’s strengths and weaknesses based on a proposed marketing mix for a positioning strategy is also given.
Key Business and Marketing Opportunities Facing Coca-Cola Company
Being a global company, one of the key marketing opportunities facing Coca-Cola Company is based on its ability to command franchise leadership in the beverage industry (Beverage-Digest.com, 2004). Coca-Cola Company operates franchises in the global market through having numerous bottling partners in the 200 countries of the world where it has distribution channels. Through these bottling partners contracted by Coca-Cola through franchise, the company has an opportunity of improving its economic system. Improvement of the economic system for Coca-Cola means that the company would be able to design different business models for still and sparkling beverages in specific markets through the franchises operated by its bottling partners to ensure that it is able to meet different consumer needs.
Being a franchise leader also provides Coca-Cola Company with an opportunity to build and expand its supply chain network (Beverage-Digest.com, 2004). Even though Coca-Cola Company commands the greatest market share in the non-alcoholic beverage industry as compared to its competitors such as Pepsi, it has a potential to increase its market share and occupy that share currently occupied by its competitors. This opportunity is made possible by existence of franchise leadership held by the company whereby these franchises can be used to expand its supply chain network even wider in order to leverage the size and scale of its marketing system to gain a competitive advantage.
Apart from expansion of supply chain network opportunity provided by bottling franchises for Coca-Cola Company, this bottling system also provides the company with an opportunity to take advantage of infinite growth around the world (Coca-Cola Case Study, 2010). As the world has currently turned into one global village, consumer tastes and preferences are tuning towards global products. By having a bottling systems in many parts of the world, Coca-Cola Company has an opportunity of servicing large geographic and diverse area where by it can be able to meet the infinite customers needs as soon as an opportunity arises.
Coca-Cola brand recognition is yet another area that provides the company with great business and marketing opportunities. The company’s brand is recognized very well in the world with an approximate recognition of 90% in the whole world today. This recognition provides the company with an opportunity to gain a higher competitive edge over its competitors. There are cases where changes in packaging have negative effects on sales and industry positioning of a company. However, due to strong brand recognition, Coca-Cola Company has an opportunity to keep inventing new packaging methods for its products without having any effects on sales and its industry positioning. The Coca-Cola Company Vice President says, “The Coca-Cola Company brands are among the world’s most recognized and valued” (Beverage-Digest.com, 2004). According to interview response given by Rick Frazier, Coca-Cola has introduced different packaging for its different brands without experiencing significant effects on its sales. Therefore, the company has an opportunity to continue attracting and retaining its customers through innovative brand images and packaging without experiencing negative effects on its sales and industry positioning.
Key Business and Marketing Issues Facing Coca-Cola Company
Despite the fact that Coca-Cola Company is the leading non-alcoholic beverage company in the world, it is faced with certain marketing and business issues that are in the form of challenges and risks. In the recent past, there has been increased awareness on the potential health problems associated with inactive lifestyles and obesity among consumers, government agencies and health professionals. Being a company based in production of consumer food products; this represents a challenge to the Coca-Cola Company. Obesity is a composite public health issue (Coca-Cola Case Study, 2010).
Commitment is required from the company to ensure that its broad product line consists of a wide selection of beverages whose health value takes care of problem associated with obesity. This is possible by having products such as diet and light beverages, sports drinks, and water. Coca-Cola Company is committed in “adhering to responsible policies in schools and in the market place; supporting programs to encourage physical activity and promote nutrition education; and continuously meeting consumer needs through beverage innovation, choice and variety” (The Coca-Cola Company, 2010, p. 34). Nevertheless, in cooperation with government agencies, consumers and educators, Coca-Cola Company is also trying to tackle this issue through developing science based programs and solutions.
Water quality and quantity is yet another business issue facing Coca-Cola Company. “Water quality and quantity is an issue that increasingly requires our Company’s attention and collaboration with the non-alcoholic beverages segment of the commercial beverages industry, government, non-governmental organizations and communities where we operate” (The Coca-Cola Company, 2010, p. 34). Water, which is a key ingredient for beverages produced by the company and due to climatic changes happening in the world today, it is becoming a scarce resource. In order to curb this problem, Coca-Cola Company has started taking initiatives in water-resource management, water treatment and recycling in addition to partnering with various partners and communities in addressing water and sanitation problems and needs.
Currently due to globalization of the market place and improved lifestyles of the people, consumer needs are also increasingly becoming complex day-by-day. Due to this, Coca-Cola Company is faced with an issue of dealing with evolving consumer preferences as the consumers are looking for more and more choices. The numerous shifts in consumer demographics and needs, emergence of consumers who are empowered with more knowledge and information, presence of aging populations, and infinite lifestyles are greatly impacting the marketing and business operations of Coca-Cola Company. In order to be able to deal with issue, the company is committed to creating new opportunities for growth through its core brands. In addition, the company is committed to expanding its number of brands and products in order to create more choices to meet the consumer lifestyle needs, desires, and needs.
The company is also facing another issue from the increased competition and capabilities in the marketplace. Coca-Cola Company competitors are both international and local competitors in the countries where it markets its products. According Coca-Cola Vice President, Rick Frazier, ‘Our Company is facing strong competition from some well-established global companies and many local players”. For Coca-Cola to be able to overcome this issue, it has to selectively expand into other profitable non-alcoholic beverage segments of the commercial beverage industry in order to strengthen its market capability and competitiveness (Beverage-Digest.com, 2004).
Similarly, due to presence of numerous competitors in the commercial non-alcoholic beverage industry, Coca-Cola is also faced with a threat of substitute beverage goods whereby many of these substitute beverages come with almost similar packaging compared to that of Coca-Cola brands. In the soft drink industry, consumers are not necessarily married to one brand or specific brands. Therefore, substitute products become a real threat and a big issue facing Coca-Cola Company. Substitute beverages include hot chocolate, coffees and teas, juices, and milk.
Coca-Cola Company is also facing another marketing issue due to its existing rivalry with one of its major competitor, Pepsi. This form of rivalry has a potential of affecting consumers attitudes and demands towards the company and hence the risk of losing its market share to the competitor. In fact, this is a big issue facing the company given the fact that there is low cost of switching to other brands due to competition in the market.
Characteristics of the Coca-Cola Company Current and Potential Customers
Coca-Cola Company commands a wide customer base in the global market since it is a global company. Coca-Cola’s current and potential customers range from the young, the youth and the old. One of the distinctive characters of Coca-cola customers’ especially the young are based on the benefits they sought from using Coca-Cola beverages. They seek coolness, uniqueness and refreshing taste especially from coca-cola and sprite brand. These two brands are very famous among the young consumers as they are associated with the above mentioned features which the young people like associating with. For the older population which makes Coca-Cola customers, they seek originality when making their choice of products. Coca-Cola has managed to maintain an original taste in many of its beverages and this makes it possible to attract and retain its customers.
Coca-Cola customers are very loyal to its brands. Many of them even prefer not having a drink if they do not get their preferred Coca-Cola beverage form the stores. According to a consumer survey conducted by The Coca-Cola Company in 2009, many of the current consumers says that they were influenced by their friends, relatives and parents to start using beverage products from the company. The younger generation using Coca-Cola products says that they acquired the habit from their parents as they have been using the same products too. It can therefore be said that the company’s current customers are loyal.
Buying occasion characterizing Coca-Cola customers are undefined as beverages from the company suite well with all occasion, times and seasons. These beverages range from beverages for quenching thirst taken during the day or hot season, beverages for warming up the body taken during cold seasons or at night, pure drinking water, energizer drinks, health drinks for kids and old people and others. Therefore, customer buying occasions are all seasoned with the current daily serving of 1.6 billion intakes from different brands.
Based on the buying process of Coca-Cola customers, it is characterized by simple events as the company has franchise bottling systems across the world through which packaging is done and then the beverages are distributed to wholesalers and retailers in the countries. Due to this expansive distribution system, Coca-Cola beverage products are available even in the local kiosks in almost every country and this makes the customers’ buying process very simple and even more occasional. Coca-Cola run very extensive advertising campaigns in the media especially the television and makes one of the factors influencing consumers’ choice. Other factor affecting consumers’ choice for Coca-cola beverage products is income though to a small extent since many of its products are easily affordable by people within different income groups. The decision making unit influencing current and potential customers for Coca-Cola Company is the family since its beverages suite with almost all beverage needs in a family setting.
Segmentation Options Open to Coca-Cola Company
Market segmentation involves identifying meaningfully different consumer groups. The process involves finding out the different types of customers that exist in the market and what are their needs. Customers come in different forms as some demand performance, speed, roominess, safety, uniqueness while others demand originality (Perner, 2010). The segmentation options available to coca-Cola Company include, segmentation based on demographic variables, behavioural variables and segmentation based on benefit sought.
Segmentation option based on demographic variables is based on statistics such as income level, location, education level, age and gender of the consumers. In the case of Coca-Cola Company, it is easy to segment its market based on demography since different parts of the world have different demographic variables. Segmentation based on consumer behaviour is yet another segmentation option available to Coca-Cola Company. Some consumers portray strong brand loyalty while others portray weak brand loyalty. Others are heavy users of a given brand while others are light users. These are behaviours which can be used to segment a market (Perner, 2010).
Another market segmentation option available to Coca-Cola Company is segmentation based on benefit sought (Perner, 2010). Different consumer groups seek different things from use of a given product. This is more common in different age groups where the young generation seek different kinds of satisfaction and feelings from use a product as compared to the old generation. In the case of Coca-Cola Company there are consumers who seek to quench their thirst, others seek to refresh their bodies, other seeks to energize their bodies while others seek nourishment. All these can be used to group consumers into different segments depending on the benefits which they seek from Coca-Cola beverages. Other segmentation options available to Coca-Cola Company include segmentation based on lifestyle and values, and segmentation based on consumers’ levels of uniqueness where there are consumers who prefer to stand out from the rest while others prefer to be similar with the others.
The most meaningful segmentation method to recommend to Coca-Cola Company is segmentation based on demographic variables. This is because demographic variable are easy to identify and to categorize. Using demographic variable to segment a market, many market segments can be developed ranging from market segment based on income, age, level of education to market segment based on location.
Factors Used to Evaluate Market Segment
Based on the market segmentation recommended above, one of the factors that can be used to evaluate the segment is “how well are existing segments served by other competitors?” (Perner, 2010). It would be easy for Coca-Cola to appeal to a market segment whose needs are currently not served by its competitors than to one which is already well served by a competitors producing similar or substitute goods. Another factor that Coca-Cola can use to evaluate the recommended segmentation method is the size of the segment. Here, the company need to identify its potential to grow in the identified segment. Size does not necessary mean large, it means the potential of a segment to grow rapidly without much competition.
Finally, the company will need to access if it has the strengths to assist it appeal to the consumers in the chosen market segment. Such factors include reputation, family friendliness, quality and consistency. Based on the above mentioned factors, the profiles of a significant market segment include absence of competitor, accessibility, availability of consumer needs, and ability to grow and expand physically and product wise.
Based on segmentation based in demographic variable, the best target segment for Coca-Cola Company would be income and age market segments. A market segment based on age of the consumers has the ability to achieve profitable sales growth because the company can be able to introduce quality products to the consumers at an early age, then build consumer loyalty with these costumers such that there will be consistent sales from such customers till old age.
On the hand, segments based on income of the consumers have the possibility of achieving profitable sales growth since the company can be able to provide quality goods to the customers according to their ability to purchase them or their purchasing power. If the customers have high purchasing power, the company can provide goods in large quantities and varieties while if the purchasing power is low, the same goods can be provided to the customer but in smaller packaged quantities.
Recommended Positioning Strategy for Coca-Cola Company
Positioning in marketing terms means implementing a chosen image and appeal to the chosen market segment. This involves implementing the targets that have been set to be achieved from the chosen market segment (Kumar, 2010). The best positioning strategy that Coca-Cola Company can adopt is differentiation marketing strategy. Since the recommended segmentation approach was based on demographic variables, it is they advisable for the company to adopt differentiation marketing strategy to position itself in the identified market segments.
Differentiation strategy involves distinguishing products or offering from the others so as to make them attractive to a particular market segment. Products are differentiated from other similar products produced by the competitor or even from other product offerings from the same company (Kotelnikov, 2010). This strategy helps a company to gain competitive advantage. Differentiating products helps to create some sense of uniqueness of the products and also create a sense of value to the consumers. Differentiation can be done through special packaging, branding, and advertising. In the case of Coca-Cola Company, a market segment with high income earners, say in the urban area, the products can be differentiated with those to be sold to low income earners’ segment, say in rural areas.
Differentiation here can be in the form of packaging; where by those living in urban areas may have the beverages packed in fancy and trendy cans or bottles which are disposable since it is common for urban dwellers to buy take-away food products. For those in rural areas, the same brand of beverage can be packed in smaller packets or in returnable containers so that the price charged is a bit lower compared to the price of the same beverage in non-returnable containers.
The most appropriate marketing mix that Coca-Cola Company can adopt for differentiation marketing strategy is the use of the 4ps of marketing commonly known as Porter’s 4Ps of marketing. These 4Ps of marketing include product, promotion, place and price. A combination of the four variables to market company’s products can be referred to as a marketing mix (Kumar, 2010). Below is a diagram illustrating the combination of the four variables for an appropriate marketing mix for differentiation marketing strategy:
Figure 1: Appropriate marketing mix for a differentiation strategy
Source: Consumer Behaviour: The Psychology of Marketing (Perner, 2010)
To achieve a good marketing mix, Coca-Cola Company will need to create products that meet the needs of their intended customers in the target market segment. This can be achieved by clearly defining the characteristics of the beverages that meets the needs of these customers. These characteristics may include quality, packaging design, brand, support, warranty, functioning and appearance. Then the products can be classified according to premium, basic and durable. Premium means that the products are high class or first class products. This means they have to of high quality. The products also have to meet the basic needs of the consumers in terms of beverage intake and lastly, they have to be durable.
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Under price, Coca-Cola has to first identify how much the customers of the intended market segment are willing to pay, and then decide on the price to charge. Price discounts and special offers should be put into consideration when deciding a pricing strategy. Use of price completion strategy is not a good idea in marketing as a company might end up making losses by being a price leader (offering the lowest prices in the market). However, even though consumers tend to associate high price of products with high quality, it is also important to avoid charging high prices in the name of quality for a company may end making less sales. Pricing is therefore important and a good pricing strategy should be adopted by Coca-Cola Company for it to be able to penetrate in a new market segment.
It is also important to include in a marketing mix how the targeted market segment will be informed or educated about the products and the organization (Kumar, 2010). These include deciding on the most appropriate medium to use to convey promotion message and information to the market. Finally, the place which is also referred to as distribution is a very important variable in designing a good marketing mix. In penetrating a new market segment, Coca-Cola Company should ensure that products are at the right place at the right time and in right quantities. Factors to consider in designing this variable of marketing mix are location, logistics, channel motivation, channel members and market coverage.
Strengths and Weaknesses of Coca-Cola Company that are Likely to Underpin the above Mentioned Positioning Strategy
According to Coca-Cola Company CEO, Isdell, in an interview with Beverage-Digest.com, “…we have the world’s greatest brand. The specialness of Coca-Cola permeates the company and is part of the very positive elements of the culture…” (LeadersMagazine.com, 2010). Presence of a strong world brand is one of the key strengths which the company has and can exploit it gain profitable sales growth in new market segments.
Presence of strong management team is yet another strength that Coca-Cola Company has and can use it in exploring new market segments and targeted consumer groups. With good management at the top, it becomes easier for things to be executed at the ground as a good management team acts as a driving force and source of motivation for the frontline employees. Management is also involved in decision making. Strong management team enhances making of decision which suites not only the needs of the organization, but also the needs of the consumers.
Isdell, the CEO says that, “…we have tremendous global reach and strength…” Being a global company presents Coca-Cola Company with yet another strength that can support the above recommended segmentation option as well as the positioning strategy. This presents the company with an opportunity to expand and operate in all countries of the world especially in the modern era of globalization. Through the use of internet and others means of transmitting information, Coca-Cola Company can easily manage branches and franchises from all parts of the world (LeadersMagazine.com, 2010).
Coca-Cola Company has an extensive and well networked manufacturing and distribution system. A good manufacturing and distribution system are key components to every organization for successful supply chain management. This is because they enhance delivery of products at the right place, at the right time and at the right quantities. Due to the already existing distribution channels in the 200 countries where Coca-Cola Company operates in, and a good bottling system, the company has a potential of penetrating new market segments with ease (Leaders Magazine.com, 2010).
Financial stability in form of strong balance sheet is yet another strength that Coca-Cola Company has and it provides a good supporting system for it to able to expand in targeted market segments. In establishing a new market segment, substantial amount of investment is required in conducting market research. Also, during the first years of establishment a lot of expenses are incurred advertising and other forms of product promotion. It also takes time before a new market start to make profitable returns. Therefore, with a strong financial position, Coca-Cola can be able to overcome the challenges of establishing in a new market segment.
On the other side, Coca-Cola Company is currently facing low growth engine. This has been as a result of layoffs which took place in tow different batches in the recent past. This is a weakness and the company has currently lost trust that existed within the organization which was usually referred to as ‘fulltime employment’. Many employees have lost hope and trust with the company and it has a likelihood of affecting employees’ performance in the company. However, according to Isdell, Coca-Cola CEO, “…we are trying to rebuild that, we are in an era where people now have hope. I don’t think I’ve translated that yet into belief….that is a longer term job. It is what I call culture re-generation…” It is therefore clear that the company is trying to re-generate back the trust that people had in it and this will be cleared off quickly. Where people do not have trust with an organization, there is a possibility that the growth pattern in terms of sales and physical expansion can be affected. It can also affect the company’s public image and therefore being unable to conduct business in the market. Negative public image can also hinder a company from penetrating in new market segments (LeadersMagazine.com, 2010).
For Coca-Cola Company to be able to effectively and efficiently understand the behaviours of its customers, it should conduct extensive research on consumer behaviour. Market research on consumer behaviour can be made through use of primary and secondary research methods. Primary research methods may include undertaking field survey on consumer behaviour by use of questionnaires, observing how consumers behave and use of consumer focus groups. Secondary research methods involve use of information about consumer behaviour that has already been put together. It is always important to conduct market research on consumer behaviour especially by using primary research methods in a new market segment. Primary research method helps a company to get actual facts about a specific target market other than relying on secondary information which might not always apply to all market segments.
From a personal perspective, Coca-Cola company can make use of market testing to measure the effectiveness of the proposed positioning strategy; product differentiation strategy. The company can produce a few differentiated beverages to test customers’ response in the new market. Then undertake a survey on the consumers’ opinion about the products. Based on the market response for the differentiated products and consumers’ response from the survey, then the company can decide on whether to explore the proposed market segment or not.
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