International Business: Coca-Cola Amatil - Case Study Example

 INTRODUCTION TO CCA Coca-Cola Amatil (CCA) is an Australian soft drink and bottling industry, which serves as a grand manufacturing and distributing organizations of the Coke products. The company also produces gorgeous bottles, fruit juices, still and carbonated mineral waters, and coffee brands, which are exported to Australian, Asian and European countries. According to the official website of the company: Coca-Cola Amatil is the principal Coca-Cola licensee in Australia and independently manufactures its own soft drinks and mineral waters. CCA entered the Australian beverage industry in 1964 and by 1990 had acquired all the Australian Coca-Cola bottling licensed territories in Australia, except for those in part of the Northern Territory. (Retrieved in ccamatil.com.) 1 The company has introduced the following flavours which are not only distributed all over Australia, but also exported in New Zealand, Fiji, Korea, New Guinea and India. The company maintains the following characteristics while presenting its multiple brands of the soft drink: Manufacturing of attractive bottling and eye-catching packing in gorgeous protective material and different size, colour and style Sterilising of the bottles before filling and refilling Introduction of Lemon, Cherry, Orange, Icy, Fruity and other scrumptious flavours Manufacturing of Mount Franklin Brand of still water and Grinders Coffee The management of this magnificent company is always active in introducing new flavours in the field of soft drinks to retain its policy of trend-setting as well as always offering its lovers a unique product. It is therefore, the management of the CCA has recently planned to introduce its products in Spain. Since Spain is geographically and commercially an important European state with distinguished business environment, cultural values and social traditions, new brands and companies are always admired by the people. COCA COLA AMATIL---PESTLE ANALYSES: The techniques and tools applied in the present study revealed the facts regarding strengths, weaknesses, opportunities and threats faced by the company in an age of perfect competition, where competitors and regional brands are offering their products at national and international levels. Lamb et al. declare knowledge of the customer as the most essential element for introducing a product. In their words: The first and the foremost task, in developing a retail strategy, is to define the target market. The process begins with market segmentation, where a successful retailing has always been based on how to know the customers. (2005: p 372) 2 Being the greatest manufacturers of unique soft drink flavours as well as the vital Coke products distributor, CCA has always devised innovative style while presenting its products. It has conducted market research before launching its operation in different brands in multiple countries of the world. Political Analysis: Since a political authority is legally responsible for granting permission as well as arranging comfortable background for the exercise of corporate activities, political situation plays an imperative part in the manufacturing and launching of the product of an industry. The political factors including wars, unsteady prices and instability of governments have a negative impact in an industry’s growth. The 21st century Spain is administered by the constitutional monarch and elected bicameral parliament, where the national policies are made and socioeconomic decisions are taken by the president of the government. As Spain offers equal chances of growth to all individuals without any discrimination on the basis of age, gender, religion or ethnicity, its political structure is highly attractive for the multinational companies and organisations for making investments in the country. According to the Mckeever Institute of Economic Policy Analysis: Spanish government respects fully all rights of its citizens. The constitution disestablished the Roman Catholic Church as the official state religion, although more than 90% of the population are at least nominally Catholic. Both men and women have, legally, the same rights to undertake a new business and for equal job opportunities. 3 Though the Spanish political system is highly stable one, yet due to the growing economic slump all over the globe, contemporary Spanish political government tries to promote its local brands in comparison with the foreign companies. The CCA Company will have to enter into business relations with influential Catholic religious and political groups to enter the national Spanish market for the commencement of its projects in the country. Economic Analysis: Economic factors also have both positive and negative effects on the launching of a product; the same is the case with the Australian soft drink in Spanish market. Economic factors including rise in interest rate, currency exchange rate as well as inflation rate may alter the sales volume of soft drink flavours. Like many other European countries, Spain has also been undergoing serious economic crisis, where both the inflation and unemployment rates are in constant increase. During the last one decade, inflation rose up to a dangerous point in Spain, and it also influenced the soft drink industry. Similarly, decline of Spanish economy and its currency left indelible impacts on the sales volume of foreign beverages. The Australian company i.e. CCA will have to undergo low-cost competition in comparison with the cocktails of other countries; consequently, it would have to either offer its products at lower price, or the company will revise its marketing strategy in Spain, without making any compromise on its quality because it is the matter of survival in the situation of perfect competition. Thus, overall recession in the world at large has put the efforts of launching new food and beverage products and flavours in jeopardy. Social Analysis: Social factors are perhaps the most dominating ones to decide acceptance or rejection of merchandise. People are deeply concerned regarding their health and consult medical specialists even for the use of some specific commodity especially in case of edibles. Soft drinks have long been suspected of leading to lower calcium level and higher phosphate levels in the blood. When phosphate levels are high and calcium levels are low, calcium is pulled out of the bones. The phosphate content of soft drinks like CCA cola products is very high, and they contain virtually no calcium. According to a survey conducted in Spain in 1999, black-coloured soft drinks i.e. cola and toxicity involved in it, are thought to be highly dangerous for the health of kidney and stomach. Injurious chemicals used in black-colour soft drinks create acidity and indigestion in stomach and causes diabetes, disturbs usual liver working and destroys kidney function. Technological Analysis: Technological advancement has brought a significant change in media campaign and has opened new dimensions to the soft drink industry. According to Johnson & Scholes: Technological change reduces the length of the product life cycle and therefore the time to recoup investment. In order to reduce these costs at international markets, many grand products enter into joint venture to overcome the competition threats. (1993, p 80) 4 Investment cost can also be increased as the number of technologies in a product is increased. Keeping in view this factor, the CCA must engross modern machinery, latest freezers, beautiful packing and innovative shapes of bottling according to some special mega event being held in the world as the might Coca-Cola has observed at the eve of grand events. “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) 5 It is essential to present the product in novelty to make it acceptable for the customers and end users of quite a new land and area. The orange and lime flavours of the CCA will surely fascinate the children folk, who especially welcome the commodity that offers the products in multiple colours and packing as well as announce prize schemes or distinguished presentation. The CCA must introduce new bottles, which is its speciality, as the Coca Cola presented bottles resembling soccer during the Football World Cup 2006, which became highly popular particularly during the event. Legal Analysis: Legal factors include changes in the laws and government policies regarding some specific industry. Sometimes, it so happens that the local brands and rival companies are projected and promoted by the government, which leaves no space for other products. In the same way, political rivalries also force the government change their policies towards a specific product, as invasion of US-led forces in Iraq and Afghanistan, created hatred for the American products, which really left indelible affects in their sales volume. The people all over the world disliked the US invasion on Iraq, where Australia also served as the US ally. The peace-seeking Spanish people do not look at the war mania with approval or admiration, so an Australian product may have to bear the brunt of the mistake committed by its government. Environmental/Cultural Analysis: Environment is the most dominating feature of a country and its inhabitants, which regulate and control the affairs of the country by adopting and admiring a product on the one hand, and neglecting and refusing it on the other. According to Ball & McCulloch: Environment is the sum of all forces surrounding and influencing the life and development of a firm. These forces can either be external or internal on which management has no control and command. (1999: p 16) 6 Cultural and religious factors may change the market strategy of various companies. Culture includes family, religious beliefs, social set up and patriotism. Being a Christian state, containing over 90% population as Catholics, the CCA must introduce the schemes related to religious values of the Spanish people, which may make its brands very popular in Spain. Though, the cultural values do not affect the soft drink market to a significant way especially in the very beginning, yet overall cultural environment may be supportive for projecting the commercial activities of a company at large. It is therefore, strategic analyses are made keeping in mind the margins of losses created by unpredictable situation and unexpected calamity. The management must have to launch a comprehensive advertising campaign to combat such infamous plans drawn out by its rival brands. Similarly, the Health bolt journal in its August review states coca soft drinks very dangerous to health and the readers of this journal are startled by acknowledging the side effect 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. (Quoted in healthbolt.net, 2006) 7 Such medical reviews settle the minds of the consumers to use some other drink as an alternative to cola drinks. Moreover, they serve as a serious threat to the sale of the drink. Age group is also one of the important social factors of the soft drink sale. According to the sociological analyses, children and young are the strata to welcome fashionable products related to wearing and eating. The strategic analyses can be made keeping in mind the growth rate of different countries, and launching of some specific commodity, as KFC and McDonalds did in most of the Asian and African countries. They exercised their methods by involving children in the advertisement campaigns. Strengths: Making the analysis of the CCA, it comes to know that 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 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 CCA at a higher rank in production and popularity. Weaknesses: Estimating the weakness the industry faces include concerns of public regarding health and fitness. Cola drinks create troubles for stomach, liver and kidneys and toxic as an essential ingredient of the formulae disturbs body functions in man. Besides, its formulae are thought to be dangerous for health, and it creates different types of diseases in human body. Growing awareness about cola drinks among masses is a sure threat for its sale for the future days to come. In the same way, Indian population has arranged demonstrations against its bottling plants because its filling and refilling, according to them, is polluting drinking water. Opportunities: CCA has innovative brands and distinguished flavours. In addition, its ideal presentation sterilized bottling, tin packs, sole ownership of Fanta and Sprite beverages, collaboration with other companies, and agreement with states as official drink, vast range of land ownership all over the world, thousands of employees in different departments including sales, management, quality control and public relations are part of its opportunities. Threats: The trend of fresh juices as well as use of local brands is increasing in Spain, which serves as threat and entry barrier for the CCA. Hence, CCA should also take necessary measures in this regard. The management can overcome this threat by introducing more juice flavours along with entering into joint ventures with grand brands. REFERENCES 1. http://www.ccamatil.com.au/Australia.asp 2. Lamb, Charles W, Hair, Joseph F & McDaniel, Carl. (2005). Essentials of Marketing South-Western College Pub; 8 edition. pp 72-90 3. http://www.mkeever.com/spain.html 4. Johnson, Gerry & Scholes, Kevan. (1993). Exploring Corporate Strategy. Text and Cases. Third Edition. Prentice Hall New York pp 88-100 5. Lamb, Charles W, Hair, Joseph F & McDaniel, Carl. (2005). Essentials of Marketing South-Western College Pub; 8 edition. pp 72-90 6. 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 7. Ball, Donald A. & McCulloch, Wendell H. (1999) International Business: The Challenge of Global Competition. 7th Edition. IRWIN/McGraw Press INC. p 643. Read More