It helps a company to distribute their available resources through the efficient. Keywords: BCG Matrix, Business Organizations, Business Improvement. Star examples: iPhone of Apple, Vitamin Water of Coca-Cola.
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The advent of Cola wars has drastically changed the entire scenario of this soft drink industry. There are different giants playing in this industry and Coca Cola is amongst them. The fierce competitors Pepsi and certain other brands are trying their level best to change the scenario of this industry by eating up market shares but Coca Cola’s management strategy is so updated and relevant that they are ahead of their competition. Originating from just one brand 125 years go the strategy of Coca Cola has strengthened so much that they have launched more than 500 brands. The company originated from selling 9 odd drinks in a day in 1886 to 1.8 billion a day in the current era. The company has grown at an enormous pace and starting from just a single city to expanding its operations to more than 200 countries of the world (Coca Cola , 2012). The product actually initiated from a pharmacy and gained so much success after a certain period of time that it is regarded as one of the biggest brand of the world. New brands were added by this organization in their company product line and after a certain period of time most of the brands flourished with time (Coca Cola, 2012). But Coke is considered as one of the biggest brand and flourished at an enormous pace. The brand has grown in such a way that a new terminology of Cola drinks actually came into existence because of this. Catering to the needs of the customer is the biggest success secret of this brand. They know what the customer is actually asking for and they provide the customer that in such a way that the needs are properly satisfied with it. The history of the organization is quite rich and they have travelled their way facing several leaps and bounds. Coca-Cola has the greatest appreciated product name globally and, as one of the greatest noticeable organizations globally, it has great prospect to outshine in every scope of corporate performance (Ferrell, Ferrell, Fraedrich, 2011, p. 308). The organization though has been confronted by many ethical problems in respect with their shareholders. Uncertain about the company’s widespread contributions to the society and educational aspects, numerous shareholders are losing faith in the 100 year old organization. . . . . . . . . . . . . . . . . . .. . .. . .
Limitations of research
Every research has certain limitations and the introduction depicts that the core research would focus on the strategy management process of Coca Cola and discusses the scenario that are utilized by the organization. The limitations of research are initiated by the usage of secondary sources in the research. The information are taken from these sources and it cannot be properly commented that the information presented in these sources are hundred percent right. Moreover, another limitation of this research is that this research should solely be utilized for academic purposes and it should not be used for the decision making process for organizational purpose. In the similar manner it should be noted that this research is prepared by an individual and all rights are reserved.
Organizational Strategy
Reviewing the strategic planning process that keep this organization competitive in this industry are several factors that are associated with this organization. The biggest aspect is the fact the formation of a well established mission and vision. In the similar manner one can easily say that all the strategic decision taken by the management are aligned with the vision and mission of the organization (Hill & Jones, 2012). The objectives are designed so professionally that they are achieved within the stipulated deadline in such a way that they organization achieves success in both the short and the long run.
The mission of the organization revolves around the scenario that they should refresh the world in body, mind and spirit. In the similar manner their objectives focus on the scenario that they should create a difference in everywhere they engage (Sevenson, 2001). The values of this organization are based on leadership, diversity, passion, integrity, collaboration, quality etc. Strategists and decision makers usually claim that the global strategy of this organization is so enormous and gigantic because of the effective decision makers in the organization. Their strategy is up to the mark because the organization is responsive internally and externally. The achieve success in every form because they are aware about the culture of their organization and they generate an atmosphere in their organization which results in a win-win situation (Hill & Jones, 2012). The collaboration of all the stakeholders that are internal and external generates and great fusion for Coca Cola and that is the reason why it is regarded as the brand with the highest level of brand equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The competition in the soft drink industry is quite fierce because of two giant brands which are Coke and Pepsi (Dana 1999). The competition between these two brands is termed as the “Cola Wars”. Coca Cola is considered to be the leader of this industry and Pepsi is usually criticized by the marketing strategists as the brand that utilizes the imitating strategy. The current scenario is so confusing for both the brands because in order to attack the market leader Pepsi should have a distinctive plan or a sustainable competitive advantage (Mazze & Michman, 1998). The strategies with respect to target market and introduction of a sub brand in the market of both the organizations are relatively the same because both the organizations are striving hard to capture the market share so that they can become the leaders in the Cola industry. Pepsi’s market share in Asia is much more than Coke however, besides Asia Coke captures the entire world and this strategy of Coke has taken Pepsi by a storm. The Cola are virtually fought in nearly every country of the world and organization with an effective strategy wins the race (Boutzikas 2000). Each brand is fighting the battle with different brands and both possess several non-alcoholic brands to get a share in customer’s stomach. Since the competition is becoming more and more dynamic with the advent of time and that is the reason why the arena is become much fuzzier and because of this reason the rivals are much difficult to identify and anticipate (Day & Reibstein, 2004).
Organizations usually learn from their past mistakes and that is the reason why they develop a learning habit to face any external and internal issues (Vrontis, 2003). Coke made a marketing research blunder which dipped the competitive graph of their brand and they were sinking in the competitive battle with other brands. Coke, due to blind tests changed the taste of the Coke and developed a formula to make it sweeter. This strategy backfired quiet badly and people started to dislike the name new coke and after a certain period of time they started to dislike the taste too. About $ 4 billion were spent on this campaign and it came out to be a blunder for the company (Axson, 2011)
Review of the Literature
The current objectives of this organization are to use the formidable assets of the company that is their brands to its full potential and attain a sustainable competitive advantage through globally reaching the maximum customers. There are several different strategies that are opted by Coca Cola to attain sustainable growth.
For analyzing the effectiveness of employed business strategies by the management at Coca Cola Company, critical analysis of current market status of the company has been discussed subsequently.
SWOT Analysis of Coca Cola Company
For strategic evaluation of the Strengths, Weaknesses, Opportunities, and Threats which any organization, project, or a business venture comes up with, SWOT Analysis is commonly used. Primary aim behind the conduction of SWOT Analysis is to exhaustively identify what internal as well as external factors are favorably or unfavorably influencing the growth and development of any business (Champman, 2007). In this section, Coca Cola is the undertaken company for the description and evaluation of SWOT.
Strengths
Globally, the Coca Cola Company has following key aspects as its business strengths:
The brand image and equity allied with the company is internationally recognized
The brands and products of the company are strategically distributed all over the world by means of strong and efficient distribution network
The overall financial performance of the company is relatively higher than its competitors
Coke is globally recognized, acknowledged as well as the most preferred brand for soft-drink lovers.
The product-line associated with the company’s brand is extensively diversified
Strong and reliable corporate identity.
Continues innovation and improvisation in business plans and strategies
Weaknesses
Coca Cola has following weaknesses on international grounds:
Despite of having tremendous financial performance of the company, it has high rank in credit ratings
Continuously diverging customer concentrations due to other brands in competition, specifically in US.
Customer loyalty towards Pepsi products, which is the biggest and the strongest contender of Coke around the world.
In Asian countries, like India and Pakistan, Coke failed to acquire #1 position in soft-drink industry.
Opportunities
Coke Company has following significant opportunities world-wide:
The tremendously escalating demand of soft drinks all over the world.
As company has expanded its covered market areas by introducing brands of mineral water, juices, soft-drinks etc, it can reach almost every market segment.
Increasing globalization will allow Coca Cola to have certainly globalized business operations
Health Conscious People are being catered
Drastic growth in mineral water demand
Smaller market players’ acquisitions.
Threats
Following business threats are being faced by the company:
Since soft-drinks are considered to be unhealthy; in such scenarios, healthy drinks usually manufactured by the Fruit Juice Companies are imposing business threats to the Coca Cola Company, worldwide.
Customers’ increasing inclinations towards critical competitors (like Pepsi, etc)
Growing financial crisis and thus, prices of products
Biased image perceptions in different countries of the world.
BCG Matrix for Coca Cola
BCG Analysis is an acronym for Boston Consulting Group Analysis. The concept of BCG Matrix was firstly put forward during 1970 by Bruce Henderson for the Boston Consulting Group with the intentions of helping companies in their business evaluation practices on the basis of their business units or product lines (Middleton, 2003). BCG analysis is considered as an analytical tool for marketing of brands, product management, strategic management, and portfolio analysis. All in all, it helps organizations to allocate their business resources.
Components of BCG Matrix: To better understand the analytical techniques used in BCG matrix, its core components are described in the segment below:
1. Stars
Representing the highly developed business with strong market position and financial performance as compared to its competitors. Businesses rated under this category are considered to be ideal with high shares points.
2. Cash
Businesses having low growth rates but higher point shares are recorded under this category of BCG Matrix. It is assumed that the businesses recorded in this category were initially stars but somehow failed to maintain their attractiveness over time.
3. Question Mark
Businesses having high rates of growth and development but, their point shares are low, are recorded under this category of BCG Matrix. This category is the reflection of certain potentials that business has for future growth and development but, at the same time, indicates the requirement of extensive efforts to increase point shares.
4. Dogs
In this category, businesses have both low point share as well as low rates of growth and development.
A general representation of BCG Matrix is given in the figure below:
Figure 1: The BCG Matrix (Source: Middleton, 2003)
As far as Coca Cola Company is concerned, the BCG Matrix analysis for the company is based upon following statistics:
Figure 2: Coca Cola’s Performance from all over the World (Source: Ahmad et al 2007)
On the basis of afore-mentioned statistical analysis of Coca Cola Company, created BCG Matrix for the company is given below:
Figure 3: BCG Matrix for Coca Cola Company (Source: Ahmad et al 2007)
Porter’s Five Force Model for Coca Cola
For carrying out industrial analysis, The Five Force Model presented by Michael Porter in 1979 is being used as the de facto framework since the time of its introduction. The competitiveness of market is analyzed by Porter’s five forces. The current or potential risks that a company can have from its associated industry are concluded by the experts after employing this model. Following five forces are included in Porter’s model (1) Threat of New Entrants, (2) Threat of Substitute Products or Services, (3) Bargaining Power of Buyers, (4) Bargaining Power of Suppliers, (5) Competitive Rivalry among Existing Firms.
The industrial analysis of Coca Cola Company and its brands on the basis of this five-force model is discussed below:
Threat of New Entrants/Potential Competitors: Median Pressure
As far as beverage industry is concerned, the barriers to the new entrants are relatively low because the cost of consumer switching in this particular industry is approximately zero with quite low requirements for capital investments. A number of new products have been introduced in the market at relatively lower prices than that of the products and brands of the Coca Cola Company.
Threat of Substitute Products: Median to high pressure
The consumer markets have a range of alternative products for soft-drinks, energy-drinks, juices and mineral water. It is an open fact that Coke products lack any unique flavor because its flavor is 97% similar to that of Pepsi as concluded during a blind taste test, in which people failed to distinguish Coca-Cola coke and Pepsi coke.
The Bargaining Power of Buyers: Low pressure
As far as bargaining power of consumers is concerned, Coca-Cola and Pepsi, which is Coca-cola’s biggest rival, have almost same market price thus, it has very little or even 0 pressure on the company. However, newly introduced, low-priced beverages are available in markets which can be preferred by the consumers but at the risk of flavor and quality. Fruit juices are the most preferred drink for the consumers these days as most of the consumers have become health conscious and thus are aware about the adverse impacts of carbonated beverages.
The Bargaining Power of Suppliers: Low pressure
In case of Coca-Cola supplies all over the world, its suppliers are not concerned about the adverse impacts of such carbonated drinks as they can’t afford losing Coca-Cola, which is considered as their fundamental client.
Rivalry Among Existing Firms: High Pressure
Pepsi is the biggest competitor of Coca Cola in recent times as it also has variety of beverage products with strong international network. More or less Pepsi and Coca Cola are rated similarly in all over the world. However, the target market of Coca-Cola, as per its classical brand image, is the adult community primarily; however, youngsters are being focused by the Pepsi group. Nonetheless, the share market of the US is slightly dominated by Coca-Cola rather than Pepsi due to its historical business setup. On the other hand, beverage brands, like Dr. Pepper, have also become popular in US for the reason of their unique flavors.
Discussion
If Coca Cola Company manages to make the most innovation for creating relations and gaining market reputation, the company can easily left all the competitors behind and can stay ahead of them in one way or other.
Innovation can be the first and foremost option for the company to avoid severe market competition. By employing innovative ideas, the company is expected to have strong competitive advantage with respect to its rivals. As a matter of fact, Coca Cola has certain market reputation as well as strong brand image; so, with appropriate innovation in products by keeping customer needs at front, the company can generate certain curiosity among its potential consumers in such a way that people will definitely want to go for it. If Coca Cola comes up with innovative products, consumers will leave with no substitutes and thus, they will happily purchase the commodity even at higher prices. With this strategy, Coca Cola can create a range of loyal customers as well (Covering S1, S2, S4, S5, S7, T1, T2 and T3).
After innovation, marketing is the most important factor to be mulled over by the administration of the company to maintain its prominence around the globe. Marketing is considered as the backbone for any business success and thus, is extremely significant factor for the company. Coca Cola can affirm its long-lasting market prominence and reputation by marinating strong brand image through strategic marketing and advertising of allied products. This strategy will also help the company in maintaining strong consumer loyalty towards its brands and can gain consumer preferences over its competitors (Covering W2, W3, W4, O1, O2, O3, and O4).
Marketing in an environment friendly attitude can definitely help the company to impose certain barriers to the new market entrants and thus can decrease the risks and threats of growing competition in the relevant industry all over the world (Covering T1, T4, T5, S2, S4, S5, and S6).
If Coca Cola brands manage to sustain their quality and taste in such a way that these two factors emerged as unmatchable for rival companies, Coca Cola will be able to reduce severe threats of being substituted (Covering S1, S4, S2, O1, O2, and O3).
Coca Cola Company miss-utilized resources of rare water in various Asian countries, like India and Pakistan, which serve as the primary reason of company’s declining market reputation in this particular region. This mis-utilization adversely impacted the brand image of the company, as the reducing water levels in cola plant are certainly making the lives of the natives miserable. To gain positive reputation in the Asian countries Cola Company can follow the measures listed below:
Land inspection before starting any project
Assessment of environmental impacts that the project can have prior to start up business operations
The project should be compliant with environmental regulatory requirements
Say “NO” to refrigeration equipments containing CFC
Efficient treatment of waste water
Adequate operations for bottling
Commencement of certain programs for energy conservation
Latest technologies for water recycling system should be used by the company for saving 50% of water requirements for the operations (Covering W3, W4, and T4)
With recycling of plastic bottles, costs and resources could be saved. By employing various innovative recycling ideas in company’s business along with appealing advertising of Coca Cola brands can open new market segments for the company. In due course, company will have higher revenues and improved credit rating (Covering W1, W4, T1, T3, and T4).
Conclusion
This paper attempted to analyze the strategic business planning of the Coca Cola Company exhaustively. The study affirms that company is in its booming stages and is enjoying profitable success and reputation all over the world. However, from a superficial overlook, the afore-mentioned fact might be considered as “true;” but, in-depth analysis of what business strategies the Coca Cola company has, evidently reflects the existence of certain loopholes due to which the company is exposed to certain risks and market threats. Even though company has god market reputation, but innovative and unique brand ideas are required to be practiced so that the credit rating of the company could be improvised. In addition, it was also concluded that owing to severe market competitions, the company should put much emphasis on its advertising techniques so as to make its market prominence even more visible. Last but not the least, Coca Cola company has failed to comply with the health requirement regulations in specifically Asian countries which serve as the reason of its declined reputation in that particular area. Thus, company has to put much focus on this domain to reduce negative consumer perceptions and to make them loyal with the brand and products.
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1.0 Introduction & Background:
Coca Cola Company is one of the leading manufacturers of sort drink in the whole World. Coca Cola was launched in May 1986 by Dr. John S. Pemberton in Atlanta Georgia. The name Coca Cola was suggested by Dr. Pemberton’s bookkeeper, frank Robinson. He reserved the name Coca Cola in the flowing script that is well-known today. The Coca Cola is most important manufacturer, marketer, and distributor of non-alcoholic beverage concentrates and syrups, company in the World, which are used to produce nearly 500 beverage brands that make up for its wide portfolio. The market which I shall be investigating is the soft drink market in the UK, although I think it’s important that I consider the whole market including soft drinks and energy drinks. This is because soft drinks and Energy drinks are competing with other alcoholic mixer, (2008).
This report will focus on a product part of this market and I have chosen the market leader for stimulant drinks, Coca Cola. I shall be examining marketing planning process, and its activities and justifications. Also, marketing environment is included, Internal audit, External audit, macro environment, and looking at the product with PESTLE, SWOT Analysis (Internal strengths and weaknesses). Furthermore, It Includes Porter’s five forces and Ansoff’s Matrix, BCG Matrix and other tools and techniques. At the end, I have given three marketing options and recommended approach after these bibliography.
2.0 Strategic Marketing Planning Process:
Strategic marketing is a process in which to develop a strategy to cope with competitors, identify market opportunities, develop and commercialize new products and services, allocate resources among marketing activities and design an appropriate organisational structure to ensure the performance desired is achieved. Corporate strategy is a process in which approach to future that involves examination of the current and anticipated factors associated with customers and competitors and the firm itself, aligning policies, practices, and resources to realize that vision, (2010). Planning and plans are two very different concepts. Planning refers to the process of developing a coherent plan, while the plan is the output from the process. A successful marketing campaign must incorporate strategic marketing planning. Strategic marketing planning is the process of researching a market and its environment to determine the target market. It involves determining what the target market wants and the types of messages that resonate with that audience. Marketing is one of the key elements in addition to other functions without which the company cannot get success. Therefore, marketing planning is a set of document in which details of action is given to achieve the objects set by the management for a period of one or up to five year. It could be based on selling of any kind of product. It’s very important to have a very aggressive plan if you are not an introducer of new product and still you want to grab the market, (2010).
2.1 Marketing Planning Benefits:
Marketing plan comes through a long process, it starts from a single department and ends up to management decision, plan must be always like easy to understand for management to approved it and realize the facts of market strategies for what they want from customer. Coca Cola always makes a attractive marketing plan which always looks different from others, for now this marketing plan which is very supportive for the organisation is just because it meets the need of customer in a very smart way like they introduced a new Cherry Coke flavour which is they want to be market the product by new style which a customer attract and also get some benefited for an organisation. If the plan is according to organisation and customer then it is easy to take decision for management.
Plan should be compressed and productive for organization.
Plan should be not so long time process and not to be very costly.
Plan should be as per new techniques and 3D type as per new generation like
Plan should be process after research
Plan should be shows new market prices, long life and skill full.
If the plan is according to companies favour so there is no any chance that it could be rejected. Always approach will be positive to make the plan competitive and advance. Coca Cola always looks in those matter which are highly skilled, attractive and sincere with the organisation, to gain the agreement for strategic plan for organization is a very important role for marketing department to extent their plans which are still are in favour of organisation and as before management like the approach to get always new marketing styles, the best approach for management is that to produced their best efforts to capture the market because now a days there are so many competitors in the market if they lack in the advertisement or promotion or introducing in new products then it could be easy for other competitors to overcome, (2010).
Marketing Planning Process:
There are ten stages of the Strategic Marketing Planning Process which are given bellow in tables.
Table 1: The Marketing Planning Process
Stages
Description
Stage 1 Mission Statement
At this stage the board establish a long-term vision for the company. This entails communicating a memorable statement easily understood by employees and other key stakeholders.
Stage 2 Corporate Objectives
At Corporate Objectives the organisation setup the desired level of profitability, business boundaries, such as products/markets, facilities and size of labour force and other corporate objectives, such as social responsibility, corporate image, stock market image, employer image, etc.
Stage 3 Marketing Audit
Marketing Audit is a structured review of your current marketing activities. It is a systematic review of all the external and internal factors that have affected a company’s commercial performance over a defined period.
Stage 4 SWOT Analysis
SWOT analysis is a tool for auditing an organisation and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.
Stage 5 Assumptions
At this stage assumptions are made on the basis of marketing audit and swot analysis. Marketing manager must keep in mind it should not too broad.
Stage 6 Marketing Objectives and Strategies
In this stage the objectives and strategies relate to the companies products/services and brands and to the markets you currently/ propose to operate in. Objectives are about deciding what you are offering (selling) and to whom. Strategies are about how you are going to achieve these things.
Stage 7 Estimate Expected Results
At this stage to employ judgement, analogous experience, field tests and so on. Also, to test out the feasibility of the objectives and strategies in terms of market share, costs, profits and so on.
Stage 8 Identify Alternative Plans and Mixes
In a strategic marketing plan, It is normally at this stage board identifies alternative plans and mixes are considered.
Stage 9 Budget
The budget is the process of documenting the expected costs of the proposed marketing plan. To justify all marketing expenditures from a zero base each year against the task that you wish to accomplish. In reality budgets are often incremental, that is, they are based on what was spent in the previous year.
Stage 10 First Year Detailed Implementation Programme
This may involve spending money on advertising, launching new products, interacting with potential new customers, opening new retail outlets etc. Its major function is to determine where the company is, where it’s wanted to go and how it can get there. It should be used as an aid to effective management, (McDonald 2006, p. 379-393).
I have described all activities and justification in the Marketing Planning Process which are given bellow in table.
Table 2: Activities and Justification in the Marketing Planning Process:
Stage
Activities
Justification
Stage 1 Mission Statement
Board meetings
Objectives discussion
Target of the company
Motivate employees and customers
Lack of motivation and output
It gives the direction to the company
Stage 2 Corporate Objectives
Financial forecast
Provide long-term stability
Profitability of the products
Predict financial forecasting
Overall company operations
It gives review policies and desired level of profitability
Stage 3 Marketing Audit
Marketing environment objectives
Perform STEEPLE Analysis
Competition and Market share
Competitive advantages
Examine internal and external information and procedures
Life cycles for major products and for market segments
Policies and competitive advantages of other organisation
Stage 4 SWOT Analysis
Trend in the market
Knowledge of the business
Value added by competitors
Setting objectives and strategies
Data Collection
Focusing internal and external key factors such as, internal strengths and weaknesses and external opportunities and threats.
A summary of reasons for good and bad performance
Stage 5 Assumptions
Government policies
Economic data
Major competitors
Price competition
It is made on planning environment
Pick the right market and sell the right products
It emphasises on success factors
Stage 6 Marketing Objectives and Strategies
Sales promotion objectives
Marketing objectives
Pricing objectives
Advertising objectives
Social responsibility
Marketing objectives and Strategies are made on marketing plan
Advertising, pricing and promotion service levels
Highlight sales value, sales volume, percentage penetration of outlets
Stage 7 Estimate Expected Results
Employ judgment
Analogous experience
Field test
Gap analysis on actual and desired results
To test out the viability of market share
At this level managers set the expected results
Stage 8 Identify Alternative Plans and Mixes
Motivate alternative strategies
Promote mixes
Manage the business
Choose the best tactics
Understand what market works and what doesn’t work
From alternative plans managers select best suitable plan
Stage 9 Budget
Advertising cost and expensive
Zero base
Emphasis on yearly marketing budget
Spend their budget more efficiently and effectively
Get smart about market every year they are in business
Budget prepare by board of director and marketing managers.
Stage 10 First Year Detailed Implementation Programme
Customer plans
Sales promotion plans
Goals are divided into sub goals.
Market plans
(McDonald 2006, p. 379-393)
Target their primary customer
Focus on achieving specific objectives
In sub goals include pricing plans product plans, promotional plans and market plans with objectives
The External Market Audit and External Environment (Macro) Analysis:
In this section of the report, I have used some data, of tools and techniques that are relevant to Coca Cola’s current situation relevant examples. External environment is important to marketing decision making. Initially, I have shown data on market share and growth of UK’s soft drink markets.
3.1 External Audit:
For scanning external audit and external (macro) environment of Coca Cola I have used Porter’s five forces. In this part of report to scanning soft drink position in the UK’s soft drink market two tables are given.
Table 1: Market share in UK soft drink market in 2010
Name of Brand
% of market share
Coca Cola
44
Pepsi
23
Cadbury
16
Fruit Juice
9.4
Other Drinks
8
From the above table of UK soft drink market share in 2010, it is clear that Coca Cola is the market leader among competitors. Coca Cola hold 44% of soft drink market share whereas Pepsi is in the second position by holding only 23% (2010).
Table 2: market growth in UK soft drink market between 2009 to 2010:
Name of Brand
2009 (% of market share)
2010 (% of market share)
% of growth
Coca Cola
43
44
1
Pepsi
24
23
-1
Cadbury
15
16
1
Fruit Juice
9
9.4
0.04
Other Drinks
9
8
-1
From the above table we can see Coca Cola and Cadbury have the most significant growth rate by 1% in the last year and Pepsi and other drinks lose their share by -1%. Fruit Juice has only 0.04% growth in last year.
For analysing external market in this part, I have given Porter’s (1985) five forces model which is given below:
Barriers to Entry: It involves;
Importance of economy of scale, for example, a new Coca Cola drinks.
Challenging with established brands, for example, Coca Cola, Diet Coke.
High upfront capital costs or legal requirements, for example, intellectual property protection, factories etc.
UK’s soft drink market is established by some well known brands, such as, Pepsi, Cadbury, Fruit juice etc. It is very difficult to enter in this market by other competitors.
Coca Cola has a long history of heavy advertising and this has made it enormous amount of brand equity and loyal customer’s entire over the world.
Substitutes: It contains;
Large numbers of substitutes, for example, coffee, beer, juices, water etc are available in the market for customers but it is countered by brand equity, huge advertising, and making their product easily available for customers.
Coca Cola expand its business in the UK by offering substitutes it selves to protect Coca Cola from competition.
Its products and services can be easily substituted with another type of product and service such as public transport being used instead of private transport.
Buyer Power: It consists of;
Large amount of buyers, for example, Wal-Mart or Tesco.
Undifferentiated brands and low switching costs.
As there are many soft drinks in the UK, so the bargaining power of buyer is extremely very high.
Buyer’s ability to walk away or get an alternative, if buyer does not satisfied with our products or services he can get an alternative products or services.
Supplier Power: It includes;
Supplier does not depend on one or a small amount of buyers.
Supplier product is necessary to buyer.
In the UK, soft drinks bargaining power of supplier is low, as the market size is large so suppliers always want to keep contracts by providing low price.
A large number of buyers but a small number of suppliers.
Most of the times raw materials needed to create concentrate are basic commodities, for example, colour, flavour, additives, sugar etc. Basically, these are the main commodities.
Existing Competitors: It computes the degree of competition between existing competitors. Rivalry will be higher if;
In the UK, there are a huge amount of similar sized companies, for example, Pepsi, Robina, Red bull etc.
Competitors can lead to a dynamic periods of aggressive pricing and promotion in war for customers.
Products and services are supposed as a commodity by consumers and resulting in low switching cost for consumers.
3.2 External (macro) Environment Analysis:
PESTEL Analysis for external (macro) environment of Coca Cola. PESTEL Analysis undertaken to understand local, global factors influencing business and potential opportunity and threats. Here PESTEL analysis given bellow in a table:
Table 1: PESTEL Analysis:
Political
Economical
National Government
Regulatory bodies
Trade Associates
Government Stability
Newly Industrialised
Employment Law
Critical Global Market
Important Political Events
Market Structure
Government Policy
Taxation
Interest Rates
Personal Saving Rates
Money Supply
Inflation
Disposal Income
Social-Cultural
Technological
Population Demographics
Culture
Attitudes to Work and Leisure
Current Issues
Income Distribution
Social Mobility
Lifestyle Changes
Level of Education
Products
Materials / Components
Processes
Distribution / Spending on Research
Marketing/Administration
Rates of Obsolescence
New Discoveries / Developments / Product Innovations
Legal
Environmental
Competition Law
Health and Safety
Employment Law
National and World Legislation
Trading Policies
Regulatory Bodies
Global Warming
Environmental Issues
Local and National Issues
Current and Future Environmental Legislative Changes
Recycling Considerations
Source: http://www.slideshare.net/Jackieken/the-marketing-audit-download-ppt
Political Factors: Coca Cola operates globally and their performance is influenced by the political stability and instability of these countries. There is currently political stability in the UK and Coca Cola business is flourishing, (2010).
Economical Factors: High inflation in any of the counties will cause the price of Coca Cola to rise and consumption of Coca Cola may fall. The UK economy is recovering from recession and employment level is rising people will consume more Coca Cola products, (2010).
Social Factors: Consumers in the different counties will have different taste and perception about Coca Cola. In the UK the brand is known for quality products and marketing it will be easier, (2010).
Technological Factors: The present environment is technological driven and the need for dynamic development. Coca Cola has got experienced research and development (R&D) team who find out new technologies to improve productivity, (2010).
Legal Factors: The Coca Cola Company gets all the rights applicable in the nature of their business and every invention and product developments are always going into the copyright process, (2010).
Environmental Factors: According to the data of the Coca Cola Company, all the services are strictly approved according to the environmental laws inflicted by the government, (2010).
3.3 Changes in the External (Macro) Environment:
The Coca Cola Company has faced many changes in the external environment that have changed the management of the company. During the World War II, the Coca Cola was able to continue the position of the company, at the same time. The Coca Cola was able to enter fresh markets despite of the environment. The company turned out to be more aggressive through supplying free drinks for the GIs in the World War II. During this the corporation was able to hit two birds at one stone. First, because the carbonated drinks sent by the company, it became a loyal symbol by the United States soldiers in which guided to consumer loyalty. Second, the Coca Cola was able to get benefit of the situation and determined the product in newly occupied countries by the Helper forces and due to the company created plants in different locations in the whole World paving the method for its post war expansion.
Another thing is that, the external environment is the change of flavour and believes of the consumers. In the mid-1980s where the Americans favoured the sweet flavour of the competitor product, the company made its complement but it turned into a commercial failure. Coca Cola changed its management strategy and restored the old formula, and just changed its name, such as, Coca Cola Classic. After that Coca Cola got its position again and it released latest versions of Coke that address the needs of these kinds of customers, These products are included by Diet Coke and Coca Cola Zero.
According to Bool, (2008) companies, for example, Coca Cola is necessary to change due to trends that have a huge impact on its business; another trend is health and fitness. Many people are spending extra money on their health; In addition, Coca Cola launched its new products which are a calorie burning soft drinks, such as, Enviga, Diet Coke, Coca-Cola Zero, and Coke. Furthermore, Coca Cola is working together with the Swiss company Nestle. Coca Cola is contracting with innovation and change. For the duration of the Asian Financial Crisis, Coca Cola was also prompted to change its courses of management in that specific region. The responses and reactions of Coca Cola with the external environment are its internal changes.
Organisational Change Management: This theory presents a general process for managing the change in the side of the people at an organisational level (Kotter, 1996). According to Hiatt and Creasey, the organisational change management is contains three stages, which are, preparing for change, managing change and reinforcing change. The theory of organisational change management was efficiently used by Coca Cola. Various managers in different branches of the World have operated organisational change management in order to address the matters that the Coca Cola faced. According to the current stage, the main emphasis of the Coca-Cola is to get the needs of their consumers with outstanding product developing and product distribution. Coca Cola’s change management is very weak since Coca Cola forecasted that there are a number of marketing challenges in the near future that they have to face.
3.4 Internal Audit (SWOT Analysis: Strengths and Weaknesses Analysis of Coca Cola):
This part of report provides information about current and previous year’s profit and loss account data, market share data, performance graph which have indicated internal or operational strengths and weaknesses of current marketing strategy and BCG Matrix.
Table 1 Profit and Loss Account:
Year ended 31, December
2010(£millions)
2009(£millions)
2008(£millions)
Net operating revenues
21,959 ($35,119)
19,377 ($30,990)
19,974 ($31,944)
Gross profit
14,022 ($22,426)
12,011 ($19,209)
12,862 ($20,570)
Operating income
5,283 ($8,449)
5,146 ($8,231)
5,281 ($8,446)
Income before taxes
8,906 ($14,243)
5,593 ($8,946)
4,693 ($7,506)
Profit after tax
7,415 ($11,859)
4,318 ($6,906)
3,673 ($5,874)
Source: http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf
Profit and loss account indicates operational excellence of current marketing strengths. We see a consistent growth in the profit margin. In 2009 profit after tax was 4,318 and in 2010 it became 7,415. It is increased by 3,097 million pounds in a year.
Market share of UK’s soft drinks: Analysing market share of UK soft drinks, it is clear that Coca Cola is the market leader by getting 44% of total market. The comparative positioning of Coca Cola’s market share with respect to other leading players in the market has been illustrated as follows, (2010).
Figure 1: Coca Cola and other competitors Market Share
Performance Graph: Performance graph of Coca Cola and Pepsi over the last five years can be summarised with the help of growth in following key indicators, (2010).
Figure 2: Coca Cola – Last Five Years Market Growth
This graph clearly shows that Coca Cola in 2006, it was slight increase in profit margin but in 2007 it was slightly decrease. From 2008 to 2010 market growth of Coca Cola was increase year by year.
Internal Strengths of Current Marketing Strategy:
Coca-Cola has been an intricate part of American culture for over a century. The product’s image is laden with sentimentality, and this is an image many people have taken deeply to heart.
Coca Cola is a very recognizable firm. Its products/brands are available everywhere in the World. Its popularity is one of greater strength is virtually incomparable.
Coca Cola deals with huge amounts of money every year. Similarly, whole businesses they have had their ups and downs monetarily, but Coca Cola has done very well in this section and Coca Cola will go on to do well and make better than its competitors (Pepsi). The money they are earning, it is significantly better than most beverage companies (competitors), they use into their own company so that they can get well, (2010).
Everybody is known very well Coca Cola in the World. Its image is displayed on hats, collectible memorabilia and t-shirts. There is no doubt, no beverage firm (competitor) compares to Coca Cola’s social popularity status. And this extremely recognizable branding is one of Coca-Cola’s greatest strengths, (2010).
Even though, Coca Cola controls almost 44% of the whole drinks market, the changing health-consciousness attitude of the market could have a serious effect on Coca Cola.
In addition, according to Bettman (1998), Coca-Cola’s bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and managed by independent business people who are authorized to sell products of the Coca-Cola Company. Because, Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers, (2010).
Internal Weaknesses of Current Marketing Strategy:
Coca Cola has many weaknesses; they need to be finished these weaknesses, if they want to increase the next level. Now a day’s, constant shift to health products, some products could probably lose customers. This fresh focus on weight and health might be a problem for the item that is labelled detrimental to your health, (2010).
Coca-Cola has recently reported some declines in unit case volumes in Indonesia and Thailand due to reduced consumer purchasing power. According to an article in (Fortune magazine), in Japan, unit case sales fell 3% in the second quarter scary because of Japan produces around 5% of worldwide volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35% of Coke’s volume and none of these markets are performing to expectation (Mclean, 1998).
Word of mouth unluckily is something that is very difficult to control. Although, people would have their views, Coca Cola has to try to control their negative views. If bad views are extinguish to people who have yet to try Coca Cola products, after that could create lost of customers which shows why word of mouth is a weakness, (2010).
Coca Cola produces many drinks, some are very popular such as, Coke, Diet Coke and Sprite but Coca Cola has approximately made 500 different types of brands, such as, carbonates, energy drinks, sports drinks, fruit juices, water etc. Most of them unknown and rarely seen for available purchase. These drinks do not mostly taste bad, but are rather a result of low profile or nonexistent advertising, (2010).
As we know, health is a significant matter in 21st century. Coke have high level of sugar and caffeine content.
Boston Consulting Group Matrix (BCG Matrix):
The BCG matrix method is the theory to determine list of priorities that should be given in the product portfolio of a business unit. There are two dimensions should be analyzed in the implementation of this method; market share and market growth. There are four characters in this diagram represent four categories of products in company’s portfolio, which are given bellow.
Stars: It represents the products that have a high market growth and high market share. Products in this class usually need a fairly high cost in the process of development. For example, Coca Cola’s bottled water (Dasani).
Question Marks: It represents the products that have a high market growth and low market share. In this category, products have the worst cash characteristics because they have high level of the demand but low returns because of their low market share. For example, Coca Cola’s energy drink brand (Full Throttle).
Cash Cows: Cash cows represent the products that have low market growth and high market share. In this class products should have huge level of profits and cash generation. In order to achieve that result, company should keep their level of investment low because the market growth for these products also low. Such as, namesakes soft drink (Coca-Cola).
Dogs: Dogs represent the products that have low market growth as well as market share. Products in this category will absorb a lot of cash but low level of returns because low provided market share and weak market growth. For example, sweetened juice drinks (Hi-C), (2010).
Coca Cola would use income from Coke to invest their primarily in Dasani and Full Throttle, whereas, looking to sell off Hi-C to some private equity fund with huge amount of cash on its hands. It is able to standard product life cycle tends to have five stages which are given bellow.
Development
Introduction
Growth
Maturity
Decline
As a result, Coca-Cola is presently in the maturity stage, which is evidenced mainly by the fact that they have a large, loyal group of stable consumers. In addition, cost management, product differentiation and marketing contain more important as growth slows and market share becomes the key determinant of profitability. In international markets the product life cycle is in more of a growth trend Coke’s advantage in this section is primarily due to its establishment strong branding and it is now able to use this part of stable profitability to support financially the domestic Cola Wars, (2010).
4.0 Ansoff’s Matrix:
This Matrix was developed by Igor Ansoff; it is one of the most well known frameworks for deciding upon strategies for growth. It is a tool that helps the company to decide their product and market growth strategy. It is determined by two scopes of option which are products and markets. It consists of market penetration, product development, market development and diversification.
Market Penetration: Selling more of an existing product to an existing market. It is going deeper into a market, such as, coke and diet coke. Coca Cola in UK is doing market penetration through the selling its products to the business buyers and retailers who are huge multinational organizations like Tesco, Asda, McDonalds, Subway, KFC and many more.
Market Development: Selling an existing product in a new market, for example, taking out various bottle sizes to attract different buyers. It is called market development. Many flavours of Coca Cola are not being sold in every shop, retailer market and other business buyers. Coca Cola can develop a new market if they introduce those flavours in their market.
Product Development: Selling a new product to an existing mark