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Coca-Cola is a multibillion dollar global soft drinks producer, which is a house hold name globally. They have been very successful as a company with strong products and brilliant advertising and marketing strategies, which have led them to the position they are in.
Coca-Cola has always generated strong revenues due to their meticulous market research, well thought out marketing campaigns and vast distribution channels, which they achieve through indirect and direct selling.
On the supply side, they have tie ups with bottlers who manufacture their products according to strict Company regulations, maintaining quality control and efficient processes. The bottlers manufacture in plants which again are according to Company regulations and they are usually located locally in the markets Coca-Cola operates in, thus bringing down transportation costs.
While Coca-Cola has been successful so far, to maintain their leadership position and stay ahead of competitors and in touch with their targeted consumers, they have to increase their intelligence of what the customer wants. The world is constantly changing and so are tastes, where consumers are getting more health conscious etc, so Coca-Cola needs to diversify their product range to cater to these changing needs. They also need to change their marketing strategies accordingly and improve their distribution and awareness campaigns through new distribution channels and new media which are today available and appeal to the new generation.
Below, we will examine what are the factors that have led Coca-Cola to be so successful and what they need to do to continue in a similar position.
Vision and mission
The world is dynamic and to keep with ongoing changes every company needs to alter it to cater to changing trends to continue to achieve sustainable quality growth. These changes in strategy always need to revolve around the Company's vision and mission, and a Company like Cocoa Cola has a vision, that is their easily adaptable 'roadmap' for future development.
Cocoa Cola's roadmap starts with their mission, which is enduring. It declares their purpose as a company and serves as the standard against which they weigh their actions. i.e.
To refresh the world...
To inspire moments of optimism and happiness.
To create value and make a difference.
Being a 'Fast Moving Consumer Goods (FMCG)' manufacturer, Coca Cola's objectives are always detailed through a comprehensive marketing plan which outlines their objectives and the methods to achieve these objectives as a common goal. All objectives are 'SMART' (Specific, Measurable, Achievable, Realistic, and Timed)
Market Share Objectives: gain 60% of market share for soft drinks
Profitability Objectives: achieve a 20% return on capital employed.
Promotional Objectives: increase awareness of the product on the market.
Survival Objectives: Have market relevant products better than competition.
Growth Objectives: increase the size of the worldwide Coca Cola enterprise by 10%
In addition Coca-Cola's objectives are to have satisfied customers and to provide profit to the shareholders and increase the market share.
The coca cola company's financial objectives are to increase revenue by volume growth, expanding their share worldwide of non alcoholic ready to drink beverage sales, maximizing their long term cash flows and improving economic profit.
Keys to success
Three Keys to success at Coca-Cola are:
One Plant at a Time: Implementation of plant improvement has always been undertaken in manageable chunks, generally with two parallel implementations simultaneously, and without succumbing to the temptation of implementing everything everywhere all at once. This may change in the future with the pace of the implementations increasing, but currently the Coke management feels it is important to get the experience of several successes rather than a lot of failures.
Plant Ownership/Corporate Support: All plants are given independence to achieve success so that they are fully involved and the corporate management only provides consulting and training support needed to be successful.
High Expectations and High Standards of Performance: Coca Cola sets standards for each plant and they are expected to achieve this without exception.
Strategic situation analysis and summary (5Cs)
The Coca Cola Company are producers and marketers of non-alcoholic beverages. The company is known for various globally recognized products and they are distributed through shops, restaurants and vending machines in more than 200 countries. The company currently offers over 500 brands worldwide, with various product extensions as well like Diet Coke, Cherry Coke, and Coca-Cola Zero in the Coke range, as an example.
Coca-Cola was invented by pharmacist John Stith Pemberton in 1886. The Coca Cola formula and brand was bought in 1889 by Asa Candler, and the Company's successful marketing strategies have led to its dominance of the soft drink market worldwide.
The company essentially produces concentrate, which is then sold to licensed Coca Cola bottlers worldwide. The bottlers, who hold territorially exclusive contracts with the company, manufacture the finished products in cans and bottles from the concentrate with water and sweetener. After bottling, the product is distributed to retail stores and vending machines and through other channels.
The Coca-Cola Company is headquartered in Atlanta, Georgia. Its stock is listed on the NYSE and is part of DJIA, S&P 500 Index, the Russell 1000 Index and the Russell 1000 Growth Stock Index.
Coca Cola always completes a situation analysis to determine how best their marketing efforts should be directed and where the greatest potential lies for increased sales and revenues...
The primary Target market are segments where there is a high concentration of customers who desire high quality drinks that Coca-Cola produces. The Company then increases its exposure to this market by advertising, doing community service etc. to increase visibility and the campaigns are catered according to age profiles, ethnicity, lifestyle etc for maximum effect. In the last decade, Coca-Cola has focused on a second target market, based on psychological characteristics like consumer health consciousness and buying products to support overall health. Coca-Cola is reaching out to this market by manufacturing and reiterating that these product lines are healthy.
There are four widely used marketing campaigns by Coca-Cola
The most widely used method used by Coca Cola is the differentiated marketing method as it enables Coke to pitch its various products to different customer segments and is the most effective for its product range.
Coca-Cola's market segmentation is based on age profiles, ethnicity, levels of consumption etc. Accordingly they have charted their market segments but below are the main segmentations;
13 to 15 year olds: This segment is important because Coca-Cola has to influence its marketing efforts to parents as well.
16 to 18 year olds: this segment makes its own decisions and campaigns are directed to them
21 to 24 year olds: coke must retain those who have chosen coke as their primary soft drink brand by this point. At this time coke must make non Coca-Cola users switch from competitor's products, and this is done with various promotions. The third segment are those who have not chosen a specific soft drink brand through social events, and to get market share of this segment is a priority for the Company.
Coca Cola uses intensive market research to understand customer requirements and accordingly formulate business strategies for maximum effect. There are three types of information that Coca-Cola gathers:
- Exploratory Research that clarify the issues and find solutions
- Descriptive Research intended to measure and describe things as a potential market for products and characteristics of the target market.
- Casual Research used to test a hypothesis about the cause and effect relationship.
Coca Cola uses all 3 types of research to determine the best business strategies they should use.
Factors Influencing Consumer Choice
Various factors influence customer choice of a product and Coca-Cola takes factors like, Socio cultural, Economic, trends etc. to determine what a customer segment would like best. For example:
Psychological Factors: such as motivation, lifestyle, personality and self concept, learning, and attitudes influence consumer behaviour for the product. And Coca Cola has solved this problem by introducing the Diet Coke to meet lifestyles of the weight conscious...
Socio cultural factors: as sub-culture, culture, socioeconomic status, family and reference groups influence consumer behaviour for a product. Coca-Cola has thus diversified their range to have an assortment of products for different tastes.
Economic factors: as disposable income, discretionary income. Coca Cola has -addressed the impact of this by maintaining an undervalued price of their products.
Government Factors: As new regulations, inflation, interest rates affect all consumers spending and a choice Coca-Cola revises its pricing strategy.
In short Coca cola tries to market their product as 'hip and cool' to a younger market segment while as 'refreshing' to an older segment. Coca-Cola is essentially creating awareness of its products and creating a demand for it by proper positioning.
Coca-Cola has to compete in the market continuously to retain and garner more market share. Thus their advertising and other campaigns continually reflect the benefits of their products.
Coca-Cola has many competitors, of which Pepsico is their main rival in most markets... Both are highly successful and dominate the beverage market. For the cola product, Pepsi is the perfect replacement product without differences noticeable in flavour, compared to coca, pepsi have higher sugar content and continues to be the biggest opponent of Coca-Cola in regular soft drinks. Pepsi was ranked second in the CSD brands.
With continuous use of celebrities and television advertising of high profile, both companies try to achieve attention, by placing more attention to their message effectively. When we compare the products of both companies, we find they have equally strong products. So in this competition, both companies have equal strength. However, competition is at the peak in price. Every time Pepsi reduces the price of a 1 liter bottle of cola or disposable bottle drink, Coke immediately adjust its prices as well so they do not lose their customers to their competitors and vice versa. Both companies are still striving to achieve leading market position
Coca-Cola is the largest company in the beverage industry; Coca Cola enjoys the biggest market share. The company controls about 59% of the world market. Comparative analysis of market share of Coca Cola sales effectiveness business with competitors. Coca Cola looks to increase its market share to over 60%.
Market analysis investigates the business environment both internally and externally as both influence the respective countries and their characteristics will be related to decisions Coca-Cola makes for success and survival in the beverage industry.
Internal business environment
Internal business environment is within the control of the Company and Coca-Cola needs to have efficient production processes, good management skills and effective communication channels. To effectively control and monitor the internal business environment, Coke must conduct continuous evaluation of the activities of the business and willing to act on any element causing inefficiency in any phase of the production process.
External Business Environment
External business environment and its effects are powerful forces that affect the entire industry, and in fact, a whole economy. Changes in the external environment will create opportunities or threats in the market and Coca-Cola has to react to them.Fluctuations in the economy, changing customer attitudes and values, and demographic patterns heavily influence the success of Coca- Cola products on the market and the reception they receive from customers.
- Brand equity/image & recognition
- Product distribution and worldwide network
- Solid financial performance
- One of the world's most recognized brands
- Product diversification (water, juices, soft drinks, sport drinks, etc).
- Credit rating
- Customer concentration, particularly in the US (Wal-Mart accounts for more than 10% of Coca Cola's business in the US)
- A lot of loyal Pepsi customers.
- Bottled water growth
- Acquisitions of smaller players
- Health consciousness growth, especially of baby boomers
- Non-carbonated drinks are the fastest-growing part of the industry
- Commodity prices growth
- Image perception in certain parts of the world (i.e., Colombia)
- Smaller, more nimble operators/players
- Key competitors (Pepsi, etc).
Coca-Cola decides which segments of the market it will compete in, and accordingly positions its products to obtain high brand recall from targeted customers. Coca Cola uses process-based location positioning and positions their products to benefit their sales by making it easier for their marketed audience to access and be reminded of their products and benefits.
Based on market research data and once they have decided their positioning strategy for products, Coca-Cola then devises a Marketing strategy based on who they are targeting with what product and how they will convey the message of the benefits of that product. The marketing campaign then uses advertising through media, gimmicks, events etc to sell the product.
Coca-Cola Company's products include beverage concentrate and syrups, the beverage product is completed. Enterprises with more than 300 beverage brands worldwide with the main ones being Coke, Fanta, Lift, Spite, Frutopia 100% fruit juice and Powerade. The Coca-Cola Co. Drinks pack their sizes in plastic bottles, 2 litres, 1.25 litres, 600ml and 300ml. There are also available in aluminium cans of 375ml. Coca-Cola is the most famous brand, is recognized by 94 percent of world population. Quality is strictly maintained and thus enjoys a very good reputation.
Coca-Cola Co. use marketing strategies to differentiate their products from competitors to gain a competitive advantage. For product variation Coca-Cola constantly comes up with innovative schemes and products.e.g. Vanilla Coke and lemon Coke. Coca-Cola also introduced the purchasing of products from vending machines via SMS messaging. Another innovation was launching of an idea of new packaging, the fridge Pack. The Fridge Pack packaging increased awareness and led to a high percentage increase in sales and profits.
The price of Coca-Cola products vary depending on brand and size. Coca-Cola Company products are sold in retail stores, convenience stores, gas stations, etc. The valuation methods / strategies are set by the companies who sell it. Gas stations and convenience stores often sell Coca-Cola products at a fixed price. However, retail stores using the method of valuation and pricing strategy to sell Coca-Cola products.
Competition based on pricing Coca-Cola products typically priced below, above or equal to its competitor's price, For example, during Easter sale periods (Coca-Cola vs. Pepsi):Coca-Cola soft drinks 2L - $1.68Pepsi soft drinks 2L - $1.87Coca-Cola soft drinks 375 x 18 - $9.98Pepsi soft drinks 375 x 24 - $9.98 . Discount price Coca-Cola products are usually marked down during sales and other special occasions. This will generate sales and Increase profit
To meet the competition-pricing, Coca-Cola product prices are set on the same level as competitors. Most of the Coca-Cola products use psychological methods of valuation. For example, for a package of 18 x 375ml cans of Coca-Cola soft drinks it cost $ 9.98 instead of $ 10.00.This pricing strategy to make consumers feel the products are cheaper
Place of distribution
Coca-Cola Co. sell its products for bottling and canning operations, distributors, fountain wholesalers and fountain retailers. These are then distributed to retail stores, milk bars and corner stores, restaurants, petrol stations, newsagents.
Indirect distribution: Coca-Cola Co. to use intermediaries in their distribution. That is, companies do not sell their products directly to consumers.
Intensive distribution: Coca-Cola Company uses in-depth distribution strategy. The enterprise's products are sold in most stores including retail boutiques such as Restaurants â€¢ gas station newsagents â€¢ School â€¢ Sports and entertainment area â€¢ vending machines
Getting shelves: They buy shelf space in big stores, department stores and display their products including shelf in the style in which their products can be displayed clearer and more attractive to consumers.
Eye Catching Position: Vendors use coca cola refrigerators to place their products in the eye
catching locations. Usually they keep their freezers near the entrance of the store.
Sale Promotion: The Company also sponsors various universities and schools cafes and sponsors
sporting events and activities to boost sales.
UTC Scheme: UTC means under the crown. Coca cola regularly does this type of program and they offer prizes like bikes, helmets, television sets, cash prizes, etc. This program is very popular among children.
Direct Selling: direct sales of their products to stores using their own transport. They have a large fleet of vehicles to deliver their bottles. In this type of selling, company gains higher profit margins.
Indirect Selling: Coca-Cola uses both salespeople and agencies to cover all areas. This mode of distribution ensures that almost all aspects of every market are covered with Coca-Cola products.
Coca-Cola uses a range of promotional activities such as:
Coca-Cola Company uses advertising as a major source of increasing consumer awareness through television, radio and print media. Television allows it to garner a larger audience and is a major mode of creating awareness. The latest TV ad for Coca-Cola soft drinks is 'You know you want it 'campaign. Another was "If you drink it, you'll have a better life". Radio is also used as it is cheaper than television. Coca-Cola uses big global events to promote their brand where there is a large audience through these media channels, like the Olympics and World Cup.
Coca-Cola Company has sales teams trained and act as a representative of the company to retailers. This strategy helps to maintain service and product loyalty. It has been proved by the business to be highly effective.
Coca-Cola also uses publicity to promote its products and strengthen the Company's image. E.g. Vanilla Coke was released to the media as a news summary to outline the huge profits gained by the business.
Sales forecasts and budgets
FINANCIAL INFORMATIONS OF COCA-COLA COMPANY
According to the annual report of the Coca-Cola Company in 2009, in the fourth quarter (October to December) the number of net revenue increased 5 percent compared with fourth quarter 2008. In other cases, companies have had a significant increase in the number of consolidated bottling operations, but also in the bottled segment of the investment activities in the past few years, mainly due to acquisitions in the year 2008 and 2007. In some cases, Coca-Cola Company may determine it would be convenient to make payments in advance for specific customers, marketing activities intended to generate profits and invest in the program infrastructure projects. (Financial statements and additional data of Coca-Cola Company, the Coca-colacompany.com)
Other relevant sections
Coca-Cola is always trying to reinvent itself, so that it stays ahead of competition. It has realized that to stay ahead it has to further diversify its product range from just soft drinks to 'daily beverages' on a global platform. It also has to focus on working across many geographies, cultures and channels, targeting the right consumers in a fragmented media environment and innovating ..." from purely mass marketing to one-on-one marketing."
CocaCola has realized that the customer today is more discerning and if products do not meet their high expectations, then they will move to competition, so CocaCola has devised a '2020 Plan ' which will address changing demographics and tastes, relationships with suppliers and using new types of media to promote its products.
Recommendation and Conclusion
While Coca-Cola has currently a 51% of the global soft dinks market, the world's tastes are changing and so is competition. To cater to these changes, Coca-Cola needs to keep a close eye on the market and step up innovation to come up with new products that cater to these changing tastes. They also need to diversify their product range so they are not subject to product concentration risks.
Coca-Cola also needs to keep up with changing times to diversify the ways they reach out to their customers by using other methods and channels of advertising like, digital billboards, social media and in-store advertising, while affirming its intent to continue creating high-profile TV campaigns.
The other area of improvement is CocaCola's relationships with their suppliers, which need to be constantly developed, so that they do not lose them to competition, while at the same time improve operations and bring down costs.
To conclude, CocaCola's focus should be to cater to local solutions on a global scale for economies of scale and they should focus on "one-on-one marketing", as a different approach from "Mass marketing" to get closer to their targeted markets.