New Product Development with Reference to the Coca-Cola Company - Case Study Example

NEW PRODUCT DEVELOPMENT WITH REFERENCE TO THE COCA-COLA COMPANY Candi Number: Module Submit 23rd July 2008 CONTENTS Introduction……………………………………………………………………………1 Marketing Research in New Product Development …………………………………..4 Changing Technology and Govt Policies & Coca-Cola ………………………………6 Technological Analysis………………………………………………………………..7 Competitors Analysis…………………………………………………………………..7 Mobility Barriers……………………………………………………………………….8 Bargaining Powers …………………………………………………………………….9 Competitor Barrier ……………………………………………………………………10 Conclusion……………………………………………………………………………..11 References……………………………………………………………………………… NEW PRODUCT DEVELOPMENT INTRODUCTION: New product development is an essential part of the corporate strategic analysis, which refers to the whole procedure regarding the introduction and inclusion, of some new product or service or both, according to the growing needs and requirements of the market as well as the consumers. Before embarking upon the topic, it would be appropriate to define strategic analysis. Strategic analysis is the indispensable ingredient of a company’s self evaluation, business volume, performance-level and popularity estimation with reference to the always changing market scenario, business environment, global market developments and growing requirements of the customers, consumers and end users of its product. “Strategic analysis”, Prof Worrall views, “is an essential component of the knowledge creation processes of organisations and must be embedded within the organization’s core management processes.” (1998, p 4) The multinational companies and the most reputed brands like Google, Honda Car, Microsoft Corporation, Marlboro Tobaccos, The Coca-Cola Company, Starbucks, Hitachi and others always keep the changing taste of the people in their minds; hence, their research, marketing and quality assurance departments are always engaged in revising their strategic plans and producing as well as presenting something astounding and unique in order to remain at the top position even under the state of perfect competition within the fast changing global market scenario. Moreover, corporate organisations analyse whether or not they are far ahead in respect of multiple products manufacturing, for they scare lest the rivals companies beat them in respect of winning the eyes and hearts of the masses. “A business may decide”, Johnson & Scholes submit, “that consolidation in its present products/markets does not present adequate opportunities, and will search for alternatives, which build upon the present knowledge and skills.” (1993: p 226) New product development is also the important part of this campaign of capturing the attention of the customers and users in more refined and powerful way. New product development involves the scheming and formation of the design, creation of an idea and conceiving of a thought. There are many steps involved in the development of a new product that includes envisaging of an innovative notion and a distinctive design on the one hand, and inclusion of a comprehensive marketing research on the other. The first and foremost thing, for a company, while introducing a new product in the market, is the security in the projection of the already existing products, so that the people could not neglect the dominating product, upon the projection of which the company has made the investment of many precious decades as well as billions of dollars have been spent to win recognition and applause from various corners of the globe. The same is the case with the grand TCCC. The Coca Cola Company has already launched the cola drink in the world in 1886, and the individuals belonging to divergent age-groups, socioeconomic status, gender, ethnicity and religion, welcomed it wholeheartedly. It is therefore, the researches reveal the very fact that the Coca-Cola is the second best known word after “OK”. “First sold regularly through soda fountain outlets including Selfridges and the London Coliseum in the early 1920s, Coca-Cola is now the most recognised trade mark in the world. The word Coca-Cola itself is even thought to be the second most widely understood word in the world after OK!” (The coca-cola company.com) It is therefore, the very first brand and taste that serves as the symbol of the chain of successes for TCCC cannot be put aside at any cost. But since the company always looks for the ways to fulfil the people’s needs, it has introduced the flavours like Coke Diet, Coke Orange, Coke Lime and much more because of the complains that the cola drinks seriously tell upon the liver and kidneys of especially the diabetic patients. The Health bolt journal in its August Review submits that coca soft drinks are very hazardous to healthiness and the readers of this journal are startled by acknowledging the harms of the product. In its words: “Your blood sugar spikes, causing insulin burst. Your liver responds to this by turning any sugar it can get its hands on into fat. (There’s plenty of that at this particular moment). Caffeine absorption is complete. Your pupils dilate, your blood pressure rises, as a response your livers dumps more sugar into your bloodstream. The adenosine receptors in your brain are now blocked preventing drowsiness.” (Quoted in healthbolt.net, August, 12, 2006) Such medical reviews settle the minds of the consumers to use some other drink as an alternative to cola drinks. TCCC has looked such opinions with special attention and decided to launch such flavours that could also be enjoyed by the patients and the elderly as well. It is therefore, it manufactured Sprite, Fanta, Diet Cola and others for diabetics and heart patients. TCCC has devised innovative style while preserving the quality of its existing products as well as presenting its new products in the global market. The Company has launched its operation in 450 different brands in over two hundred countries of the world. At the time of its birth, there existed no popular cola brew that could meet even the local needs of the people. The Coca-Cola not only entered the global market with unique fashion, distinguishing formula, novel bottling pack and superb flavour that it immediately captured the attention of the people everywhere, but also the brand did not stop improving its quality, design and operations on winning applause from all corners. On the contrary, it always remained determined in applying modern equipments for bringing latest and quite unexpected products for its consumers and lovers, which is a matter of great pride for the Coca-Cola fans that have emotional attachment with it and are mad after each and every product of the brand. Recent products established by the company are as under: Presentation of the beverage in different packing, size, colour and style Presentation of Sprite and Fanta for the old people and children respectively Invention of Diet Cola, Coca-Cola Zero, Diet Plus, Lemon, Coke Cherry, Fanta Orange, Fanta Icy, Fanta Fruity and others Presentation of fresh cocktail through machines in various fruit flavours Sterilising of the bottles before refilling Recently adopted policy of replacing every drop of water used before refilling Introduction of Schweppes as the first adult soft drink brand The management of the majestic company is always active in introducing more and more brands in the field of soft drinks to retain its policy of trend-setting on the one hand, and always offering its lovers a unique product on the other. MARKETING RESEARCH IN NEW PRODUCT DEVELOPMENT: Marketing research refers to the systematic procedure for the collection and analysis of data regarding some specific market product. It enables the manufacturers, industries and companies to have a comprehensive and analytical assessment in respect of the views, preferences, requirements as well as prospects and perils of the consumers, retailers and stakeholders involved in sales and purchase of their product. The data gathered and interpreted during marketing research significantly supports the organizations draw out future plans according to the changing trends and scenario of the market. It is considerably helpful in enhancing the organizations’ volume of production and sales. The same formula is applied in the development of the new product, as Marlboro Tobacco Company has introduced divergent brands along with its vital Marlboro Red and Marlboro 100, and the Honda Automobiles launched various designs with the names Honda City, Honda Accord, Honda Oriels and many others, and Microsoft Corporation presented TFT, LCD and others in the wake of computer monitors. The Coca-Cola has hired the services of renowned research marketing organisations, and seeks their help in getting information regarding the consumers’ latest demands from soft drinks and non-alcoholic beverages. The marketing research organisations have conducted researches in order to assess the popularity of the already brands on the one hand, and the vacuum for the more formulae particularly for the children folk and the elderly on the other. On the basis of the research findings, the research department of the Coke Company makes comprehensive strategic analysis to fill the space and vacuum the consumers are looking for. The introduction of multiple flavours in lime, strawberry, orange and vanilla flavours have successfully filled the vacuum to a great extent. In addition, the Coke keeps an eye on the developments made by the rival products so that it could not lag behind from the competitors in serving its consumers. The success of three grand companies including Coca-cola, Colgate-Palmolive and McDonald’s is really based on variation and novelty, not on offering the same product every time. (Levitt: quoted in Lamb et al. 2005: p 72) It is therefore, Coca-Cola is considered more local than American brand by every region, society and culture of the world. CHANGING TECHNOLOGY, GOVERNMENT POLICIES & COCA COLA New product development is also dependent of latest introduced technology. The Coco-Colas learning approach exposes its vision and brilliance on the one hand, and its command over monitoring the changing scenario on the other. Whenever any new technological invention is introduced in the market, the company arranges an introductory seminar as well as meeting of the management, in which the entire advantages and disadvantages of the invention are discussed. The employees participate in the discussion and elaborate their views and opinions. The launching of new product is also exercised on the basis of the technological advancements. Directors and senior managers disclose the unseen difficulties due to the inclusion of new invention and the staff is briefed regarding the utility of the new product and informs them how to take maximum benefits out of it. Moreover, the management trains the staff in respect of evading the drawbacks of the newly developed product. Not only the case is with a new product and latest invention, but also same is the case with the new policy announced by the government as well as new socioeconomic change entered the market. The Coca-Cola Industry moulds its strategies, revises prices of the products, develops schemes and applies techniques to meet the growing requirements. It is by dint of the foresight and vision of the management that the industry is accomplishing all the targets in a devastating way. Technological Analysis: Technological advancement has brought a significant change in media campaign and has opened new dimensions to the soft drink industry. “Technological change”, Johnson & Scholes view, “reduces the length of the product life cycle and therefore the time to recoup investment.”(1993, p 80) Investment cost can also be increased as the number of technologies in a product is increased. Keeping in view this factor, the Coca-Cola has engrossed modern machinery, latest freezers, beautiful packing and innovative shapes of bottling according to some special mega event being held in the world. “Coca Cola’s ‘Thums-Up Cola’ outsells Coke by a four-to-one margin in India. In Turkey, Coke sells a pear-flavoured drink, while in Germany it offers a berry drink. Now, Coke is developing soft drinks for tastes around the world.” (Lamb et al, 2005: p 90) It is essential to present the product in novelty to enhance attraction regarding sales. It also fascinates the children folk, who especially welcome the commodity that offers prize schemes or distinguished presentation. The Coca-Cola Company introduced new bottles resembling soccer during the Football World Cup 2006 that became highly popular during the event. COCA-COLA---COMPETITORS ANALYSIS The world is fast moving, and companies face perfect competition in every field of life. The rivalry and competition exists in every sector of growing corporate environment generating a healthy competitive trend on the one hand, and driving the companies towards creativity and innovation on the other. The same is the case with Coca-Cola that faces threats by its vital rival Pepsi Cola beverage company, which offers all its products at almost the same price, same packing and same flavours as offered by the Coca-Cola. Pepsi Cola keeps 37% of the total market share in the beverage industry of the world and its products have been launched in 190 countries. Pepsi Cola is always extremely conscious in making its entry in a new market in an appropriate way and it is therefore comprehensive strategic analysis is made before starting its operations in any new land. Pepsi Cola is highly committed with its quality control programme and its QC department performs surprise raids to examine the quality. Since Pepsi Cola has its markets in almost all international corporate sectors, it has become a serious challenge for the sales of Coca Cola. The main threats and dark aspects include the rival company’s imitation in all fields. Furthermore, the competitor company Pepsi Cola has made penetration in the market by entering into contract with the sports boards of national and international level. It has drawn an imperative crack into the monopoly of the Coca-Cola Company. Moreover, Pepsi Cola always adopts negative methods to get popularity in the hearts of the consumers. Further, Coca-Cola also faces the threat from the local drinks within various countries, which are also introducing their products reducing the sale of the Coca-Cola soft drink products. The most drastic thing the company undergoes is the people’s concern regarding health problems. The medical specialists do not recommend cola soft drinks to people especially suffering from diseases related to throat, stomach, liver, kidneys and bladder. MOBILITY BARIERS OF COCA-COLA Competitive environment is one of the strongest external factors while analysing structural environment of an organization. Porter (1980) has defined five factors in order to analyse competitive environment. The Entry threat is the basic hazard for an industry to enter into a market and economy of scales is the primary one among these mobility barriers. The term simply means that the higher rate of product lessens the cost and vice versa. Hence, in a market, particularly overseas and international ones, it becomes hard for an international company to enter and capture the market at a situation where the sales volume is limited, and cost goes high consequently. Moreover, change in economic and legal policies announced by a government also serve as a significant threat of entry, and may disturb the sales expectancy. Further, presence of another strong competitor is also an imperative threat, though it is not very significant in respect of Coca-Cola Beverages. Porter (1980) has proposed an approach related to the entry or mobility barriers that signify the obstacles for a company while entering a market other than its native one. “Mobility barriers”, according to the Glossary of Statistical Terms, “are factors which impede the ability of firms to enter or exit an industry, or to move from one segment of an industry to another.” (Retrieved in stats.oecd.org) The mobility barriers of the Coca-Cola can be studied under the following sub-headings: Bargaining Powers: The bargaining powers of suppliers and bargaining powers of customers are among the five factors of mobility barriers described by Porter. Bargaining powers of suppliers identify the ability to influence the price determination. The power of suppliers has reverse relation with the power of buyers, especially in the market where the switching costs from one product to the other are higher. Bargaining power is always high if the brand is powerful. As the Coca-Cola soft drink industry maintains an outstanding and an influential brand, its bargaining power is also strong, and the industry can tackle the price situation skilfully. The suppliers having monopoly over the distribution of the product can use tactics to get more shares out of the product. The bargaining power of buyers is also a threat of entry and serves like a challenge especially for the imported product. Control over the balanced ratio between demand and supply keeps the product “in” within the market scenario. The soft drink industry also undergoes threat of substitute products. It is especially the case with the Coke. The substitutes are though very few, yet use of local drinks and juices present a significant alternative of cola drinks. Even then, the powerful trademark and popular brand name do not allow any threat to be a great hurdle at all. The same is the case with threat of new entrance and intensity of competitive rivalry. Only one cola drink is there in the market, but it cannot deteriorate the Coke’s monopoly to a great extent. Further, so many cola beverages have been introduced in different countries all over the world, but the popularity of Coke is as superb as it had been in past. Competitor Barrier: Pepsi-Cola has been the greatest rival of Coca-Cola for the last many decades. Since it serves as an alternative of the Coke at all levels, its presence serves as an imperative mobility barrier for the Coca-Cola. Pepsi imitates the innovative ideas of the Coke and applies the same in all markets of the world. Recently, Pepsi captured the markets of India and Pakistan by offering its refrigerators, deep freezers, chairs, tables, sign boards, fresh drink machinery and alike especially to the shopkeepers and restaurants in order to get complete hold of the markets. The shopkeepers welcomed the scheme launched by the Pepsi and replaced Coke with Pepsi products. It became a serious hurdle for the Coca-Cola to re-enter its own markets. Moreover, the Pepsi revitalised its relations with the corporate tycoons and succeeded in entering into contracts with the organisers of the mega sports events. Subsequently, the markets of the countries including Hong Kong, China, Singapore, Pakistan and India turned into Pepsi Cola centres. But the situation was quite an unpleasant one both for the Coca-Cola as well as millions of its lovers and their dynamic values and emotional attachments. The Pepsi cola’s new product “Pepsi Blue” also created hurdles for the Coke in 2003 onward. But the high demand of the consumers and strategic schemes of the administration turned these markets as the Coke-markets again within 2 years. CONCLUSION The Coca-Cola Company has devised such planning that stakeholders happily accept the stock of the product and are always ready to make investment for this product without having any fear of loss at all. All this is because of untiring efforts to developing a comprehensive strategy of product development and marketing. The industry has witnessed many fluctuations and untoward events during the course of time; it is therefore, it keeps the ability to mould its methods to remain popular and matchless in the market. It is by the virtue of its commitment that it is always engaged in making plans for the future. The launching of by-products including fruit juices, filtered water, vending machines and food products under the supervision of a world class brand, is sufficient to maintain its position in future. Making the analysis of the new products Coca-cola, it comes to know that manufacturing, introducing and successfully launching of orange, lime, cherry and strawberry flavours reveal the hard work of its committed team, experienced staff, innovative ideas, penetration in international markets, committed customers, reliable partners and joint venture with multinational products and companies, tangible and intangible assets and intellectual property, which are among the strengths of the industry. Its fast growing products, wide range of consumers, long list of retailers, shareholders, management, policy formulation, inventory, innovation and unique formula are among its plus points that keep the industry at a higher rank in production and popularity. It is therefore, each and every product of the company sells like hot cake even in the yonder lands of the globe. REFERENCES Ball, Donald A. & McCulloch, Wendell H. (1999) International Business: The Challenge of Global Competition. 7th Edition. IRWIN/McGraw Press INC. p 643. Gates, Bill. (1999). Business at the Speed of Thought. The Warner Book Company New York p 1 Johnson, Gerry & Scholes, Kevan. (1993). Exploring Corporate Strategy. Text and Cases. Third Edition. Prentice Hall New York pp 88-100 Lamb, Charles W, Hair, Joseph F & McDaniel, Carl. (2005). Essentials of Marketing South-Western College Pub; 8 edition. pp 72-90 Porter, M. E. (1980) Contemporary Strategies Schunk, Dr. Donald, and Woodward, Dr. Douglas. (2005) Local Fiscal Impacts of the Proposed Watson Hill Development Moore School of Business at the University of South Carolina in Columbia, SC p 7 Warnerfelt, B. (1984) A resource-based view of the firm. Strategic Management Journal, volume 5, no. 2. UK p. 173 Worrall, Prof. Les. (1998) Strategic Analysis: A Scientific Art Wolverhampton Science Park 27th May 1998 p 4 Coca-Cola Reduces Profit Targets (November 12, 2004) (Quoted in http://www.indiaresource.org/news/2004/1053.html) Health bolt Journal. (12.08.2006). “What Happens To Your Body If You Drink A Coke Right Now?”http://www.organicconsumers.org/school/cocacola021605.cfm Read More