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development formed by Michael E. Porter that draws five forces that determine the competitive intensity and therefore attractiveness of a market. As far as our case is concerned we aim to develop an analysis which will better let us understand how attractive, lucrative is the Brazilian market for Coca Cola and positive and negative traits they should be concerned about in order to achieve their desired goal ie. to capture the market which they are losing to the Tubainas and the Brand – B companies. Attractiveness in this context refers to the overall industry profitability. An unattractive industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching pure competition, in which available profits for all firms are driven to normal profit.
. Among top 10 non-alcoholic beverage brands in the US. distributor and marketer of concentrates and syrups in the world with sales in over 200 countries. In Brazil Coca Cola faces competition from Guarana Anteratica (owned by A.B. The annual revenues of the group exceeded USD 21 billion in 2005. For example in China. Coca Cola faces stiff competition from local competitors in these markets. Branding is a prominent feature of the non-alcoholic beverages industry.B. a better understanding of the local market needs and a very well established distribution network. Local competition: More than 70% of Coca Cola‟s revenues are derived from markets outside the United States. Inbev greater than 75% share of the Brazilian beer market and uses it‟s extensive distribution network to promote it‟s brand of carbonated drinks. Local competitors tend to have government support. Coca Cola faces stiff competition from Future Cola. It has been seen from the case that Coca Cola has already established as a key player in the Brazilian market but recently facing intense rivalry from the Tubainas and the Brand B companies. Hangzhou Wahaha Group which is government controlled. 5 belong to Coca Cola including the top spot. Coca Cola‟s ability to gain or maintain share of sales or gross margins in the global market or in various local markets may be limited as a result of actions by competitors. The main product of Coca Cola is carbonated soft drinks for which it commands a share of 40% in this market. A. a carbonated beverage manufactured by China‟s largest beverage group. like Coca Cola. The non-alcoholic beverages segment of the commercial beverages industry is highly competitive. operate in multiple geographic areas. as well as numerous firms that are primarily local in operation. Coca Cola competes with major international beverage companies that.. just after Coca Cola. Futura Cola has carved out a 35% share of the carbonated beverage markets for itself.Coca Cola in Brazil Five Forces analysis: 1) Rivalry among existing firms: Coca Cola is the largest manufacturer. Inbev group) which is the second best-selling soft drink brand in Brazil. In less than 10 years. The Coca Cola brand is one one of the most famous brands in the world.
there is a high possibility of a firm entering the market and possibly gaining shares easily by playing along and obtaining a favorable position in the price war. particularly among young people. herbal teas. coffees and sports drinks where Coca Cola does not have a very strong position and which are more fragmented it is easier for new entrants to come in. Coca Cola faces major threat of substitute in this particular market. packaging which limits supplier power. energy drinks. Consumers are becoming increasingly aware of and concerned about the health consequences associated with obesity. 4) Bargaining power of suppliers: All ingredients for Coca Cola are commodities-caffeine. The Diet Coke is the only carbonated beverage brand by Coca Cola which is expected to gain from this trend. The substitutes are generally priced similar to Coca Cola. However in case of non carbonated beverage segments. The new trend is expected to especially affect sales of major brands at Coca Cola including Coke Classic. color. it is relatively hard for new entrants to enter the carbonated beverages market. As a result their preferences have shifted to an array of sports drinks. such as energy drinks. juice drinks. 3) Threat of substitutes: The carbonated beverages industry is under considerable threat from other non-alcoholic beverages due to consumer preference shifts. It‟s efforts have been rewarded with a very strong brand loyalty by consumers of carbonated drinks. flavoured waters. some of which are growing as much as 9X faster than Coca Cola. From the case we can see that in this market. vitamin fortified water. flavour. . However Coca Cola is not shielded to adverse movement in commodity prices.2) Threat of new entrant: Due to the huge spend in advertising needed to build and sustain a brand coupled with the requirement of an extensive bottling and distribution network. Coca Cola uses it‟s brand and exclusive global bottling network to differentiate itself from it‟s competitors. As seen on the case. sugar. It continues to sustain it‟s brand by carrying out extensive advertising globally and sponsoring major sporting and cultural events. Sprite and Fanta which are non-diet carbonated beverages. Also due to the sheer size of Coca Cola it has achieved economies of scale allowing it to differentiate itself in terms of cost which adds an additional hurdle for new entrants to overcome. teas.
The relationship with big bottlers such as CCE are absolutely critical for Coca Cola. Many bottling partners have the right to manufacture or distribute their own products or certain products of other beverage companies and may choose to do so if the relationship is not optimally serviced. However Coca Cola is able to differentiate itself through strong branding. CCE is a publicly traded entity which can independently decide to increase prices to retail customers without the consent of Coca Cola which could affect Coca Cola‟s market share. Also dedicated bottlers such as CCE are not willing to handle new products that don‟t approach the high volumes of carbonated beverages. convenience stores. Bargaining power of suppliers is extremely high in the Brazilian market. however it‟s influence over CCE has significantly decreased due to the strain in relationship over time. Although the tax rate for Coca Cola had gone down from 30% in 2001 to 22% in 2004 positively affecting the prices that Coca Cola can offer to it‟s customers. . This impedes Coco Cola‟s attempts to diversify into other drinks.5) Bargaining power of customers: Coca Cola used to be vertically integrated into bottling. 6) Main threats: The threat from substitutes and bargaining power of customers are the 2 forces that pose the greatest threat to Coca Cola‟s future profitability. Bottlers in turn sell Coca Cola to fast food restaurants. However in 1990s the bottling operations were hived off into a separate company called Coca Cola Enterprise (CCE) which is now the biggest customer for Coca Cola‟s concentrate. Substitute products are available but they cannot compete with Coca Cola‟s brand loyalty and exclusive distribution network. regular restaurants. supermarkets and vending machines. It may be higher in case of global fast food chains like McDonalds where Coca Cola products are sold exclusively. Direct customers are willing to pay higher prices for their bottle of Coca-Cola if is conveniently available to them (via a vending machine or at a restaurant/fast food chain where it would complement their meal). any increase in tax rate would adversely affect the prices to end customers. PepsiCo has a better leverage with supermarkets than Coca Cola does because of it‟s combined product offerings (snacks and drinks) that help supermarkets generate much higher revenues. Coca Cola continues to have a 38% stake in CCE. The barrier to switch to other carbonated drinks is very low.
PepsiCo on the other hand is more willing to diversify in accordance with the trend. As in depth analysis from different sources show. vitamin fortified water. If the bottlers continue to raise prices Coca Cola may be forced to resort to radical measures to defend Coca Cola‟s interest such as reacquiring 62% of it‟s main bottler CCE that it does not own. It possesses a wide distribution network reaching customers in some of the most remote areas of the world. Additionally even though Coca Cola does offer some alternate beverages it faces stiff resistance from its dedicated bottlers who are not willing to carry to new products that don‟t approach the high volumes of it‟s carbonated drinks. Water. Strong brand recognition and customer loyalty combined with vast production economies of scale through its controlled bottling operations have shaped and sustained Coke‟s competitive advantage to date. PepsiCo has solved the distribution problem for Gatorade by distributing it via an effective system of food brokers. herbal teas. Source for competitive advantage – Coke is one of the most powerful and well-recognized brands in the world. some of which are growing as much as 9X faster than Coca Cola largely due to the lack of management support. The management board of Coca Cola comprising of old stalwarts and in the absence of a strong CEO strongly believe that Coca Cola should stick to their core strategy of getting their core carbonated beverage brands right as the market for all other drinks is relatively small. which steadily increased in the „80s and „90s is experiencing a shift in trend. Per capita soda consumption. Coca Cola‟s main customers are it‟s bottlers. .Coca Cola has not been able to sufficiently respond to the change in trend to substitute products such as sports drinks.. coffee and other carbonated and non-carbonated soft drinks are gaining share from Coke. If Coca Cola does not gear up it will lose a chance to catch this trend even as it‟s revenues of carbonated drinks will decline in the future. vs 81% for PepsiCo‟s Gatorade brand. PepsiCo got a 2 year jump on Coca Cola in bottled water. However. Many of the bottlers are publicly traded entities which can independently decide to increase prices to retail customers without the consent of Coca Cola adversely affecting Coca Cola‟s market share. the sports drink brand that could have been Coca Cola‟s had it not been for a last minute deal back out by CocaCola‟s board member Warren Buffet.S. They also outmanoeuvred Coca Cola to acquire Gatorade. As a result Coca Cola‟s Powerade has just a 17% share of the fast growing sports-drink segment in the U. consumer preferences are changing. energy drinks. sports drinks. energy drinks. juice.
Coke should invest in penetrating this new wave of change in consumer preference. Coke should also consider buying back the bottling operations altogether. snack food). Coke clearly needs to respond to the change in consumer demand and become more like Pepsi with a diversified product portfolio strategy. PEST Analysis for Coca Cola‟s operations in the Brazilian market. . This would provide improved leverage with retails when competing for shelf space. This would allow Coke to have better control and visibility over the retail price set for end-customers.e. the strategy of penetrating emerging markets should provide ample top-line growth opportunities. India) where the company holds considerably market share. In the long run. under new leadership. Gatorade sports drink. Further.In the short term (e. Given pricing pressures from its bottling operations. These new product categories possess higher growth prospects than traditional carbonated soft drinks market. and Aquafina water. Coke should pursue strategies to expand its carbonated soft drinks market share in the emerging markets (i.g. In the short term. Coke should diversify into food categories (i. 3-5 years).e. Similar to Pepsi‟s Tropicana juice.
including civil unrest. to paying attention to what people from different cultures and backgrounds like to drink. and where and how they like to drink it. it is still very committed to local markets. the company has benefited from the various cultural insights and perspectives of the societies in which business is done. No doubt of the remarkable experience it has. government changes and restrictions on the ability to transfer capital across borders. especially in international markets. These include. (including tax rate changes. As Coca-Cola has expanded over the decades or even nearly a century. including changes in accounting standards. The government plays a role within the operation of manufacturing these products in terms of regulations. Political structure and legal considerations also have impinged on Coco-Cola Company‟s strategies. Political Analysis Non-alcoholic beverages fall within the food category under the FDA. competitive product and pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors. has enabled Coca-Cola to exploit the economies of scale that was gained by its global marketing and at the same time making its products appeal to local taste. There are potential fines set by the government on companies if they do not meet a standard of laws. without limitation. Political analysis in Brazil has not been given that much information about in the case. Governments of some Arab nations boycotted Coca-Cola‟s products due to a political dispute and discontented with the company for maintaining distributors in Israel. Economical Analysis Being flexible and willing to change to satisfy consumers‟ needs. taxation requirements. new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign jurisdictions. which these have earned the company an enormous profits quarterly. Political conditions. to remain competitive and to develop more new . The following are some of the factors that could cause Coca-Cola company's actual results to differ materially from the expected results described in their underlying company's forward statement: Changes in laws and regulations. Changes in the non-alcoholic business environment.
Every 10 seconds. 126. Before the attacks on September 11. things changed. consumers will recover their confidence over the next year. Now. 2001. market share of more than 50 percent in beverage industry globally and about 70 percent of its income comes from countries outside United States. improving and developing new drinks to appeal to local tastes. Consumers are now resuming their normal habits. in term of translating product name. choose to reach out for one of The Coca-Cola Company brands. car shopping. However. the United States was starting to see the economy recover slightly and it is only just recently that they achieved the economic levels. as it is important that the products suit one‟s taste. Coca-Cola developed over 30 new drinks for the Japanese market. In China. and eating out at restaurants.S. preferences and fulfill one‟s needs. However. coffee and fermented-milk drink. Coca-Cola has also begun the similar strategy of introducing beverages developed for the taste buds of local market. which inclusive of Asian tea. . Coca-Cola did not look much into this aspect when entering into the markets of countries like China and Taiwan as the literal translation of Coca-Cola in Chinese characters mean. the estimated brand equity of Coca-Cola is $84billion. They believe that with lower inflation still to come. slogans and promotional messages so as not to convey the wrong meaning. After discovering that Coke did not appeal as much to Japanese consumers. many are still handling their money cautiously. As researching for new products would cost less the Coca-Cola Company will sell its products for less and the people will spend as they would get cheap products from Coca-cola. It launched a fruit juice drink called Tian Yu Di (Heaven and Earth) specifically for the Chinese market with planning of introducing the market with a Chinese iced tea and soy milk drink. and it is the company‟s mission to make that choice exciting and satisfying. Culture has a tremendous effect on people‟s preferences and perception. “bite the wax tadpole”. Language is one of the aspects of culture that marketers must take care of. Changes are necessary in international marketing for consumer‟s products. Social Analysis Foreign environment factors have influenced the Coca-Cola‟s strategies in international marketing. going to the malls. Previously the U.drinks to satisfy its markets.000 people in the whole world. English tea. economy was strong and nearly every part of it was growing and doing well. Coca-Cola has continued changing. every single time.
Technological Analysis Some factors that cause company's actual results to differ materially from the expected results are as follows: The effectiveness of company's advertising. As the technology is getting advanced there has been introduction of new machineries all the time. The new technology of internet and television which use special effects for advertising through media. Due to introduction of this machineries the production of the Coca-Cola company has increased tremendously then it was few years ago The absence of soft drink vending machines in the supermarkets and malls which is one of Coca Cola‟s expertise in the line of distribution to the customers as outlined above poses a major technological drawback for operations in the market. Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. .Many U. This will continue to affect the non-alcoholic beverage industry by increasing the demand overall and in the healthier beverages.S. This technology is being used in media to sell their products. There is a large population of the age range known as the baby boomers. Introduction of cans and plastic bottles have increased sales for Coca-Cola as these are easier to carry and you can bin them once they are used. citizens are practicing healthier lifestyles. This helps in selling of the products. This has affected the non-alcoholic beverage industry in that many are switching to bottled water and diet colas instead of beer and other alcoholic beverages. They make some products look attractive. The need for bottled water and other more convenient and healthy products are in important in the average day-to-day life. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. marketing and promotional programs. time management has increased and is at approximately 43% of all households. This advertising makes the product attractive. Also.
the production process itself. quantify the environmental emissions in each stage of the life cycle. packaging. Thus.” LCA generates an analysis of all production processes. one can evaluate the effects of absorption and inputs (Impacts evaluation). select significant environmental indicators. Application of LCA enables various analyses including: raw material entrance. elect better result technologies. Subsequently.al.Product lifecycle Analysis – Initial trials to utilize a tool that would facilitate decisions associated with emergent 7 environmental demands. Stimulated by the Resource and Environmental Profile Analysis – REPA of Coca-Cola – used to compare types of soda packaging. and/or the process which contributes greatest impact. and reformulate products or the process. Also. processing or preparing materials to be used in the process. and management of residue and sub-product (BARRETO et. SETAC (The Society of Environmental Toxicology and Chemistry) defines LCA as “an objective process to evaluate the environmental loads associated with a product or activity. while defining best option(s) – generated many studies. distribution. 2007). identify the life cycle phase in which impacts occur. appeared in early 1970. Figure 1 details the activities that compose the 4 stages of LCA and provide important data for process and design management. with software developed to help in analysis. it is possible to develop products. while identifying opportunities for a greater economic efficiency and8 . analyze the environmental exchanges to obtain project approval. which appeared effective. and those wasted and left in the environment. evaluating the environmental balance in all phases of the product and processes life cycle (LCI – Life Cycle Inventory). identifying and quantifying energy and materials utilized. it is possible to perform evaluation of the environmental consequences associated with the process or product.
Demand conditions – demand conditions in the home market can help companies create a competitive advantage. in customer-client relation. Thus the following can be derived from the case Company Life cycle (Coca Cola) – growth. set goals and are managed is important for success. Industry lifecycle – growth. Porter‟s Diamond Model – The Porter‟s Diamond Model approach looks at clusters of industries. In Brazil. but they also participate in the upgrading process. the demand conditions are positively efficient and carbonated soft drink demand is in full swing. Firm strategy.possibly creating new products. We can see that the factor conditions that are important for the operations are present and necessary inputs are available. The way in which companies are created. Specialized resources are often specific for an industry and important for its competitiveness. But the presence of intense rivalry in the home base is also important. It can be seen that all . The Porter's analysis deals with the dynamic process by which competitive advantage is created. The Brazilian market indeed provides a lucrative market with all aspects in the growth stage. Related and supporting industries – these industries function by producing inputs which are important for innovation and internationalization. structure and rivalry – these agendas constitute the fourth determinant of competitiveness. Product lifecycle – growth. when sophisticated home market buyers pressure firms to innovate faster and to create more advanced products than those of competitors. The phenomena that are analysed are classified into six broad factors incorporated into the Porter diamond. thus stimulating other companies in the chain to innovate. or in a local or regional contexts. There are ample supporting and related firms and industries in the market ie. capital resources and infrastructure. it creates pressure to innovate in order to upgrade competitiveness. These industries provide cost-effective inputs. the soft drinks manufacturers. physical resources.human resources. An implication of this model will let us verify what necessary conditions and factors exist in the Brazilian market that will aid Coca Cola to achieve their desired objectives. knowledge resources. which has become a key tool for the analysis of competitiveness: Factor conditions . where the competitiveness of one company is related to the performance of other companies and other factors tied together in the value-added chain. Specific resources can be created to compensate for factor disadvantages.
and competition between firms. Human Capital. Reinsurance. Consulting. Government interventions can occur at local. “Brazil ranks as the tenth largest economy in the world with a medium-low regulatory risk in conducting international business with. Information about government interventions and strategies have not been illustrated in the case. national or supranational level. demand conditions in the home market. Brazil has been an emerging country and is currently under the FTAA rules and regulations of international business. Brazil as a country is a major democratic country even though they have seen there fair share of corruption and societal problems.these conditions have been taken care of by Coca Cola in their course of operations in the highly intensive Brazilian market. the legalities involved in the increase of gold traded to Brazil is aggressively being enforced by utilizing all current resources. conversion could be one of the riskiest steps pertaining to globalization. Exchange and Repatriation of Funds Risks In conducting global business exchange. is thoroughly inspected to ensure all legal freight laws and guidelines are adhered. Clearly government can influence the supply conditions of key production factors. Transportation of the gold. The two additional factors that also comes to play are Government can influence each of the above four determinants of competitiveness. According to AON Risk management. They are important because they create discontinuities in which some gain competitive positions and some lose. Country Risk Analysis – Political. Chance events are occurrences that are outside of control of a firm. and Regulatory Risks In every country. The determination of if to accept future payments from a particular country‟s .” In abiding by all rules. The Porter thesis is that these factors interact with each other to create conditions where innovation and improved competitiveness occurs. regional. which is used for trade. politics plays a crucial part in the determination of the risk versus reward of an international business alliance. Legal.
but pricing will be different because of the currency conversion from the U. Physical and Environmental Challenges Many parts of Brazil are inaccessible by river or road. has not maintained numerous roads and highways. 2005) Airports and airline transportation to major cities and metropolitan areas is modern and efficient. dollar ($) to the Brazilian reais. Many international countries will not accept any other form of funds if the currency is not there own or equal to their currency at matching value. many are unpaved. which should fare for better means of road transportation in the future as roads and highways are repaired. (XE.currency could be dangerous if not able to determine the future value. (Library of Congress. which hinders the transportation of goods and trade. The effect of the physical environment should not be problematic for the trade of gold into the country. Years of clearing land for farming and development as well as agricultural use of land has caused soil erosion. desertification and pesticide pollution of water and soil. The target market will consist of people in the middle to upper income class which are more likely to reside in larger and better developed cities and towns to be close to better paying employment. 2005). Market Risks The risk of the four P‟s (product. According to the U. price. Environmental conditions and deforestation in the Amazon has created a great deal of attention for Brazil during the 1980s. Brazil has a wide organism of roads and highways connecting many areas of Brazil however. Air transport to Brazil‟s major cities can be equated to airports and air transportation in the United States (Library of Congress. State Department. Brazil has been the focus of environmental concerns for sometime. Gold is currently being sold for 927 USD per ounce. place and promotion) should be kept to a minimum.S. leading to an inefficient means of transportation. metropolitan cities rather than remote towns and villages. The gold exported to Brazil will be via airliner into the larger. The government. Promotion will continue to follow the format that has led gold to be an enduring commodity in the United States and throughout the world.479 BRL. The gold will continue to be the same quality that is sold in the United States. Urban areas suffer from air pollution and rural areas do not have sufficient sanitation disposal. President Lula Da Silva has stated his intent to focus on the infrastructure of Brazil. built and maintained. in Brazil the price would be 1. Transportation into other regions of the country will be the responsibility of the buyer. the . 2008) The place risk consists of individual jewelry stores purchasing our gold. This attention and the publicity it caused resulted in a change of public opinion concerning the Amazon region and encouraged tighter control of government regulations. 2008) The Amazon region is not the only environmental concern of Brazil.S. (United States Department of State.
com/free-essays/11964. enjoys up-to-date fashion.S. designer labels and fine jewelry.antiessays. Brazil is good at official rhetoric yet poor in actual practice of its environmental policy. References – http://www. especially in urban areas.html http://www. These examples. Department of State.com/free-essays/137466. risk management investment tools. 2008). 2008). The government “has made economic growth and poverty alleviation top priorities” and is promoting increased exports and financing options to increase exports to the country (U. Gold jewelry and investment gold fulfills both these desires of a growing middle class looking to spend on a valuable commodity which will retain value over time.antiessays.wikipedia. However. along with the fact Brazil is an ally with the United States.scribd. offers opportunity and promise to our organization in the trade of gold in the country of Brazil. some progress has been made at the state and local level. These scenarios portrait booming possibilities for Coca Cola to target these customers as their customers in the Brazilian market.government has not been effective in controlling damage to the environment. Brazil‟s population.org/wiki/Diamond_model http://www. This group is also interested in saving for the future and providing for their families in safe.html http://en. (United States Department of State. Trends which work in favor of Coca Cola The middle class continues to grow allowing its citizens purchasing power of luxury items such as gold jewelry and investment avenues.com/doc/52823009/27/PEST-ANALYSIS-OF-COCA-COLA .