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Coca Cola - Mkting Review
Coca Cola - Mkting Review
www.themarketingreview.com
290
It is perhaps not so unlikely, that writers such as Porter, Doyle and other
advocates of strategic positioning have developed their models based upon
this ancient text.
According to Cummings (1993) the word strategy derives from the ancient
Athenian position of strategos . Strategos was a compound of
stratos - , which in Greek means army.
Moreover, tactiki - , in Greek meaning tactics, is the way in which
the Greek strategoi (plural of strategos) where implementing their strategic
thinking and putting their plan to action.
This paper illustrates how Coca-Colas international strategy and tactics
work in harmony after an in-depth consideration of the external forces found
in the global environment.
Strategy and organisational effectiveness are essential to the success of
any organisation, but they are both very different. Strategic positioning, is a
unique approach that integrates both strategy and organisational
effectiveness in a way the serves to differentiate an organisation in its market
place and drive success.
To understand how Coca-Cola use strategic positioning in their global
marketing strategy we need to explore the term strategic positioning and
then to determine how a firm can utilise these strategies.
When it comes to product strategy, managing in a borderless world
doesnt mean managing by averages it doesnt mean that the appeal of
operating globally removes the obligation to localise products (Ohmae
1990: 24).
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The global soft drinks market is dominated by 3 household names: CocaCola, PepsiCo and Cadbury-Schweppes. Coca-Cola claims 47% of the
global market, compared with 21% for PepsiCo and 8% for Cadbury
Schweppes. Other major players include Cott and AmBev in Latin America
(www.foodlineweb.co.uk). This is illustrated in table 1 below.
47
21
8
2
1
21
100
292
that prevails. Thirdly, due to the influence and dominance the leader has in
the market it is able to use its position to negotiate lower pricing with
suppliers and to command higher market price for its products. The fourth
reason is that the market leader has in place excellent management teams
and it has successful procedures and processes developed throughout the
organisation.
293
Douglas and Wind (1987) argue that the assumption of a consistent model of
market and customer behaviour existing across the globe is not universally
accepted. They claim that this outlook focuses on the product (product
orientation) and not on the customer (marketing orientation).
The factors that favour globalisation are issues such as cost economies,
transport costs and networks, learning and experience, technological and
operational capacity. These issues however have factors working against
them that serve to fragment markets such as trade barriers and tariffs,
communication links, raw material differentials, different market demand and
differing competitive circumstances. It is therefore apparent that localised
(adapted) production and promotion is necessary and must remain.
Macro
Meso
Micro
Politics
Information
Money
Time
Energy
Space
Systems
and
Structures
Behaviour
and
Expressions
Individual
Resources
294
Nature of Product/Service
Target Market
295
Organisational Factors
Macro/Meso/Micro Factors
P.E.S.TLE
Trends & Concepts
I.T.E.M.S
Market Development
Stage of development
Stage of product life cycle
Customer Similarity
Geographical distance
Political
Economic
Social
Technological
Legal
Environmental
Market Conditions
Cultural differences
Economic Differences
Differences in customer perceptions
Information
Time
Energy
Money
Space
Competitive Factors
Competitive practices
Level of competition
Product
Price
Place
Better control
Price uniformity and consumer mobility
2.
1.
People/Process/
Physical
Economies of scale
Consumer mobility and consistency with customers
Creates world-wide uniformity
Synergetic effects
Psychological meaning
3.
An Integrated Approach
Standardization
Adaptation
Promotion
296
Adapt (international)
Standardise (global)
Product
Price
Place
Promotion
People
Physical
evidence
Process
297
Porter claims that competition is at the core of success or failure of the firm
and that a successful competitive strategy can establish a profitable and
sustainable industry position. He claims that there are two fundamental
questions underlying the choice of a competitive strategy: firstly, how
attractive is the industry with regard to profitability and secondly, what are the
determinants of competitive position within an industry.
According to Porter there are five competitive forces that will govern the
rules of competition and these rules will prevail in any industry both in
domestic and international markets. The five forces are:
Supplier
Bargaining
Power
Entry Barriers
Rivalry
Among Firms
Buyer
Bargaining
Power
Low buyer
bargaining
power. BUT
Coca-Cola do
have to be
careful not to
price
themselves out
of the market
Substitutes
Coca-Cola Company has wide product
portfolio low threat of brand substitution
non-alcoholic drink target sector.
So, what is a good strategy? Can a firm position itself in order to gain
competitive advantage over its competitors? Is there a specific position a firm
should take in order for its strategy to be successful?
Rumelt (1980), states that competitive advantages can normally be found
in superior resources, superior skills or a superior position. Resources and
skills enable a firm to do more, or do it better than the competition. Different
resources and skills will be required dependant on the industry or market
segment. Positional advantage is how the arrangement of these resources
and skills are used to out manoeuvre the competition. Positional advantage
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can be gained by forward planning, greater skill and resources, or luck! Once
a dominant position is gained it is difficult for the competition to dislodge the
incumbent firm provided the position merits continuation and that it is
extremely costly for competitors to take over.
As long as environmental forces remain constant position can remain
constant. Positional advantage can take the form of size or scale,
differentiation from competitors and successful trading names.
To be successful, a company needs to get both its strategy and tactics
working in harmony to provide the optimum return bounded by efficiency
(McDonald and Leppard, 1993). Both strategy and tactics should be
designed after a careful consideration of the situational environment.
It is apparent from the following figure (figure 5) that businesses finding
themselves to the left of this matrix are destined to die, strategy being the key
factor as to how quickly.
Considering Coca-Colas international performance, we can argue that the
company is thriving as it is effective-doing things right (having the desired
effect, producing the intended result) and efficient-doing the right thing (able
to work well and without wasting time or resources).
Strategy
Ineffective
Effective
Die (slowly)
Thrive
Efficient
Tactics
Inefficient
Die (quickly)
4
Survive
1
The firm has to consider more than the industry structure, it also has to take
an appropriate position within the industry. This positioning will determine the
competitive advantage a firm can have namely, low cost or differentiation
against competitive scope at the broad or narrow market (see figure 6).
The Coca-Cola Company has adopted both a Differentiation and a Cost
Leadership Strategy.
299
Competitive Advantage
Lower Cost
Differentiation
Competitive Scope
Broad
Cost Leadership
*
Cost Focus
Differentiation
*
Differentiation
Focus
Narrow
300
Economies of scale is the obvious way of reducing costs as there are natural
efficiencies associated with size, although not necessarily so with firms that
will have multiple or diversified products. Aaker (1998) also points to the
experience curve whereby firms utilise knowledge and learning gained over
time as a way of cost reduction. For example, the more times a process is
carried out, the more efficient the process becomes. The use of technology
and plant will also be maximised over time.
The Coca-Colas positioning in the Cost Leadership quadrant is achieved
not only through economies of scale in research, development and
promotion, but also through learning, knowledge and experience in
production and operational processes.
It is also achieved through
effective/efficient distribution networks and manufacturing systems.
McDonald and Leppard (1993) have developed a strategic focus matrix
(see figure 7), which emphasises the impact of time on business activities.
The elements relating to the marketing mix have been emboldened to show
clearly, where they are positioned in relation to time. It is our view that CocaCola adopts the following recommendations, not only at the short term, but
also in medium and long term.
Focus for Success
Business activities
Short term
Medium term
Long Term
Objectives
Short-term profit
Medium-term profit
Innovation
Management focus
Productivity
Beat competition
New product/markets
Target market
Existing customers
Energy directed at
Own staff
Competition
Differential
advantage
Cost Control
Segmentation
Differentiation
Key component of
mix
Price
Promotion/place
Product
Organizational
culture
Financial
Marketing
Entrepreneurial
Current markets
Current products
New markets
New Products
Product improvement
Product line extensions
New products for same markets
Market Development
Strategies
Expand markets for existing
products
- geographic expansion
- target new segments
301
Diversification Strategies
Vertical Integration:
- forward integration
- backward integration
Diversification into related businesses
(concentric diversification)
Diversification into unrelated
businesses
(conglomerate diversification)
302
Question Marks
Stars
Selected few
H
I
g
h
G
r
o
w
L
t
o
h
w
R
a
t
e
Low
Dogs
Liquidated
SBUs
Produce cash
303
1997 - 2000
Nordic &
Northern
Eurasia
60.0%
CAGR
40.0%
20.0%
Great Britain
Germany
France
China
Spain
Mexico
0.0%
Japan
USA
Chile
Aust ralia
Argent ina
Southern Korea
Africa
Brazil
Northern
Africa
Phillipines
Central Europe
& Eurasia
-20.0%
120%
Columbia
100%
80%
60%
40%
20%
304
Build Selectively
Medium
Market Attractiveness
High
Protect Position
Invest to grow at
maximum digestible rate
Concentrate effort on
maintaining strength
Low
Strong
Invest To Build
Build Selectively
Selectively Manage
For Earnings
Limited Expansion
Or Harvest
Medium
Divest
Sell at time that will
maximise cash value
Cut fixed costs and avoid
investment meanwhile
Weak
Markides (1999) further states that, behind every successful company, there
is superior strategy. The company may have developed this strategy through
formal analysis, trial and error, intuition, or even pure luck. No matter how it
was developed, it is the strategy that underpins the success of the company.
To understand corporate success, the logic of successful strategies must
be understood. It would be quite incredible to identify two people who share
the same definition of strategy from the concept of strategy as positioning to
strategy as visioning.
Conclusion
The Coca-Cola Company, founded in 1886, is the world leading
manufacturer, marketer and distributor of non-alcoholic beverage
concentrates and syrups. Today, Coca-Cola has an international presence,
operating in more than 230 brands in nearly 200 countries, with around 70%
of the company volume and 80% of the company profit come from outside
the United States.
A number of uncontrollable elements affect Coca-Colas international
marketing strategy and tactical implementation. These groups of elements
are Macro, Meso and Micro factors and comprise the PESTLE (Political,
Economic, Social, Technological, Legal and Environmental) macro factors,
prevailing Trends and Concepts Meso factors and ITEMS (Information, Time,
Energy, Money and Space) micro factors. This makes the exclusive use of
305
306
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www.coca-cola.com
www.foodlineweb.com
Appendix
Country Specific Examples
Poland
in 1994 there were groups of Polish youths and young adults who looked
down on the American way, and preferred to preserve their own identity and
heritage. Many would rather support a local cola brand than buy Coke.
308
Asia Pacific
Long Term objectives concentrated in Chinese/Japanese markets where
there are growth opportunities.
Purchasing power and income per head in Asian countries will exceed that
of the US in 2010 (Coca-Cola Company Annual Report, 1998).
Vietnam
Target audience, primarily teenagers, (people under 20 = 50% of
population). Target audience anxious for freedom and associated ideals
(perhaps due to events of past) (Dana and Oldfield, 1999). Hence,
marketing adapted and focussed towards this segment. Also due to
North/South division advertising has to reflect cultural and political
sensitivities.
Pepsi entered the Vietnamese market first and they (Vietnamese) in turn
became brand loyal.
When introducing its product, Pepsi was very sensitive to the traditions and
values of the Vietnamese people. The company utilised Miss Vietnam
(favourite role model in traditional dress playing classical music - scene
switches to western style bar where seen drinking Pepsi - depicts
internationalism. This gave Pepsi a huge leap in market share.
Coca-Cola thus needed to adopt a similar but differentiated strategy in
order to gain market share.
China
Product quality, consumer trust and perceived value are traits Chinese
consumers look for in leading brands. Coca-Cola developed a number of
market specific brands in order to further penetrate local markets, e.g.
Smart was the first soft drink developed for the Chinese market. Due to
widely dispersed consumer preferences are in this region (www.cocacola.com).
We are developing relationships with consumers and getting Coke and
other beverages into their lives. (Douglas Daft, CEO, 2000)
Latin America
We are continuing to focus on developing our core brands and introducing
local CSD brands. We entered the water segment in Latin America in 1995;
however, beginning this year, we are putting some real marketing muscle
into this category (Douglas Daft, CEO, 2000).
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Argentina
Due to the prevailing economic conditions (income tax increases) Coca-cola
have adjusted certain strategies to offer more affordable packaging options
to facilitate greater competition with other local brands (www.coca-cola.com).