Discuss Competitive Strategies Coca Cola Should Adopt to Develop Business Expansion in China - Essay Example

? Teesside Business School Dissertation Proposal “Discuss Competitive Strategies Coca Cola Should Adopt to Develop Business Expansion in China” Student No.: K0180945 Student Name: Miao Miao Table of Contents Serial No. Topic Page No. 1. Aims & Objectives 3 1.1. Aims 3 1.2. Objectives 4 2. Rationale of the Study 4 3. Theoretical underpinning 5 4. Methodology 9 5. Timetable 13 6. Resources 14 7. Ethical Considerations 14 8. References 16 1. Aims & Objectives: The Coca Cola Company has been marketing with its range of products in China to increase its sales. The company along with its bottling partner, COFCO Coca-Cola Beverages Ltd. has released new bottling operations in China with plans of expanding its business. The company has commitments towards the country for investing in further growth in “one of the world’s largest and fastest growing beverage markets” (Guinness, 2011, p.166). The beverage market in China is famous as one of the most vibrant markets in the country. Monnikhof and Kranenberg (2000) had presented facts that around 48 percent of the populations are regular consumers of beverages in China (Alon, 2003, p.151). However, the country has other popular beverage companies as well like the Wahaha Future Cola or Wahaha Extreme Cola that pose competition for the Coca-Cola Company (Zhang & Alon, 2011, p.287). 1.1. Aims: The aim of this dissertation is to obtain the competitive strategies that Coca-Cola should adopt to develop its business expansion in China and to recommend suggestions on the competitive strategies that the company may follow to expand its business. 1.2. Objectives: To determine the current scenario of the Coca-Cola Company’s business in China’s beverage market and the strategies that the company is following for its business outcomes; To understand the strengths, weaknesses, opportunities and threats of the company in its conducting and expanding business in China, thereby finding the factors as well as the competitors that may internally or externally affect the success of the company; To recommend a competitive business strategy for the company that may help the company in developing its business expansion in China and maintain its position above and over its competitors. 2. Rationale of the Study: Globalization and the increasing competition in the current business world reflect the growth and development of different businesses and their expansion across different countries. The beverage industry is one of the largest industries in the world. The Coca-Cola Company being one of the leading companies in the world’s beverage industry (www.rediff.com), a research on their business strategies would help in an understanding of how leading companies create and maintain their position in their own countries as well as in other countries through expansions. With 126 years in business, the Coca-Cola Company currently has 142,200 worldwide employees, over 3,500 brands, 49 consecutive years in increased dividends and over 200 countries where their beverages sell (www.thecoca-colacompany.com). The company first entered China in the 1920’s with the first bottling plant established in Shanghai, 1927. It soon expanded its bottling operations to Tianjin, 1927 and then Qingdao, 1930. In 1949, the company closed operations in China when the socialist regime rose. Since its reentry in 1979, The Coca-Cola Company has seen tremendous growth, where over the last quarter century, brands of The Coca-Cola Company have become major household names in China. It recently opened its 42nd bottling plant in the country to help further the company’s dominance in the beverage industry within the country (www.thecoca-colacompany.com). China’s beverage industry reflects a huge market, particularly for large companies like the Coca-Cola Company. The company strongly has its operations in China but the growing competitions and other internal and external factors may affect the successful expansion plans of the company (Zhang & Alon, 2011, p.287). The rationale of the study is based on learning and understanding the competitive business strategies of a leading beverage company that may benefit the expansion of the company in the China market. In the modern world of increased globalization, there is a need to learn the theories and concepts followed by large companies. This is to have a view on the strategies necessary to keep up a position of a company in the industry among its competitor companies. This study would focus on the Coca-Cola Company that already has its operations in the China market and would look for further expansions to which the company has the requirement of innovative and competitive strategies that would keep its position above its competitors. The results of this study would prove indispensible to business development managers and the business development team endowed with the responsibility of identifying expansion opportunities. The study would also help other companies who require strategies to expand business elsewhere. The researcher will gain knowledge in formulation of competitive strategies that can be applied in future endeavors. Hence, this study is rational in the context that the competitive business strategies of one of the leading companies could be learnt and the research would enable other companies to use such strategies in creating their competitive advantages while expanding their businesses. Mok, Dai, & Yeung, (2002) did a similar study to evaluate the expansion of Coca-Cola Company in China through establishment of Joint Ventures. Joint ventures are an example of competitive strategies that a company can use in an effort to penetrate a new market or even expand in an existing one. A study in the competitive strategies would provide a range of strategies other than joint ventures for Coca-Cola and other companies seeking expansion. 3. Theoretical underpinning: Conducting businesses in foreign countries involve large amounts of investments. The internalization theory as suggested by Buckley and Casson states that when the costs of business transactions are too high in other countries, the company may reduce its costs by using its “internal corporate structure” instead of being dependent on the market (Mok, Dai & Yeung, 2002, pp.2-5). The opportunities available in China for a business’ growth and development can be realized from the investments made by the Coca-Cola Company. Study on China presents a huge population and higher rates of gross domestic product, thus suggesting a huge potential for foreign companies to conduct and expand their businesses in the China market (Mok, Dai & Yeung, 2002, pp.2-5). Business Scenario of the Coca-Cola Company in the China Market: Reports suggest that the company has “invested more than $1.1 billion” in the past two decades and the annual sales of the company now has a record of crossing the amount of $1.2 billion (Tian, 2007, p.184). A combination product strategy has facilitated the company to increase its sales in the market of China. Coca-Cola, Diet Coke, Sprite and Fanta, which are the core products of the company, are made available to the consumers. At the same time, the company has its focus on local soft drinks for its consumers and tries to follow the strategy of “think local, act local” that proved to be successful in marketing in Japan (Tian, 2007, p.184). Coca-Cola has also launched several new products in China. However, the company’s success has been found to be restricted to the urban population of China. The company is now also focusing on new products to attract the rural customers (Tian, 2007, p.184). SWOT Analysis of Coca-Cola Company: As different studies have reflected, the Coca-Cola Company has certain internal strengths and weaknesses and certain external opportunities and threats. The company’s strengths lay in its being one of the world’s leading companies in the beverage industry. The revenue of the company represents high growth in sales. A weakness of the company is that its business is not rapid in the North America amongst all the countries where the company operates. The company has huge opportunities as its bottling of water is gradually increasing its operations and developing. The increasing number of mergers, acquisitions, and joint ventures are also improving the levels of business for the company, and hence are good opportunities for the company. However, there are certain threats as well that the company faces while conducting its business. The most important of these is the increasing rates of competition from the global competitors as well as several local beverage companies. Also, the company has an immense dependence on its partner companies who are partnering with Coca-Cola Company in bottling. The development of carbonate beverages of the company has also been found to be slowly reflecting another threat for the company (Coca-Cola SWOT Analysis, n.d., p.2). Coca-Cola Company: The PEST factors affecting the business operations: Researchers have also studied the different political, economic, socio-cultural and technical factors that may affect the business operations of the company and its expansion plans. Considering the political issues, it has been observed that an unsteady political atmosphere can have negative impacts on the implementation of strategies of the company. Economic changes are also rapidly occurring affecting the business world. Thus, the Coca-Cola Company also has the threats of being affected by the economic changes. Socio-culturally, the company encounters the problem with the consumers who are patients of obesity and are directed by doctors to avoid consumption of soft drinks. Technically studying the company, the company seems to be in an advantageous position with its increasing use of the internet technology and developing several programs particularly addressing the young generation to attract more and more customers (Neuez, 2003, p.3). Porter’s Five Forces Analysis: As researchers have presented their studies with, the long-established competition for the company arises from the prices of the Pepsi Company, the local beverage companies, the share in the market, the sales and promotion activities as well as competitions in regard to the different range of products made available by the company to its consumers. Threats for the company may also arise from the entry of new companies that may try to bring in products similar to Coca-Cola’s to attract consumers. Also, there are substitute products available in the market like coffee, beer, and so on, that may pose competitions for the company as well. The supply chain system of the company has quality, speed, security, and flexibility. The purchase power of the customers is combined among the shops, bars and supermarkets (Akkermans, n.d.). Coca-Cola and the Strategic Position of the Company: Several researchers have reflected that the company is effective and efficient in its business strategies and operations. The company does the things rightly and generates the desired outcomes. It also intends to do the right things being able to give the required effort and utilizing all the available resources optimally. The organization tries to keep its focus on the structure of the industry in different countries in order to position its products in the foreign markets. The positioning of the company determines the competitive advantage of the company over its competitors. Studies reflect that the Coca-Cola Company has adopted strategies of differentiation and cost leadership. The differentiation strategy enables the company to be different from its competitors by modifying its products to some extents, also by increasing the quality of the products, and improving the promotion and packaging policies that in general attracts the consumers. The company also follows the cost leadership strategy that which the company achieves through economies of scale in research, expansion and advertising, as well as through knowledge, gaining awareness and skill in operational activities. The sales and distribution channels, and the processes of manufacturing with efficient use of advanced technology also enhance the leadership position of the company. The company is also known for its global presence, at the same time launching new products at new locations and developing the existing ones (Vrontis & Sharp, 2003, pp.298-301). 4. Methodology: Research Approach and Strategy This study primarily focuses on identifying strategies that Coca-Cola Company should employ in order to expand business in China. In order to get this information, the study will use qualitative techniques. This is due to the nature of information being not easily quantifiable. A qualitative analysis would help to go through the strategies of the company that are currently followed, the market scenario in China, and hence try to determine the competitive strategies that would best aid the company in its expansion policies. Identification of competitive strategies primarily relies on the internal strengths or weaknesses of a company and the external structures of the competitors, which allow a competitor to have a competitive edge. Some information on the Coca-Cola Company and its strategies are available through literature reviews as well as the internet-based sources such as books, academic journals and articles that give insights of the previous researches conducted on the competitive strategies of the company in the context of expanding business in other countries. This will provide for secondary data in the study, as it is information that has already been gathered. In addition to the secondary data, primary data will also be gathered during the study. Primary data is important, as it will provide information that is not readily available in the secondary sources. For this study, primary data can be collected through interviews with high-level members of staff in the management chain of the Coca-Cola Company and employees. Employees are a rich source of creative ideas that if tapped might prove profitable. The top management, on the other hand supply, vital information on what the competitive environment holds. Primary data collected is unbiased and not manipulated. Subjective results in the interviews can then be correlated to formulate a working strategy for the company. Interview questions can be communicated prior to date through the notice board. The top management will give feedback on strategies employed in expansion before and their effectiveness, why some strategies failed, and what has changed in the market environment since then. Employees will be interviewed on new product concepts that will captivate the rural strata of the China market. The interviews will bear open-ended questions to enable free discussions while still geared towards a specific focus. For this to happen, a friendly environment must exist. To achieve this, the interview setting will be informal as opposed to structured and formal set-up. Recording the interview will enable reference and clarity during compilation. This in turn ensures accuracy of the information during analysis. Data Analysis The information once gathered will be treated using two methods. A TOWS matrix will enable identification of the internal strengths and weaknesses as well as opportunities available to promote expansion. In addition, the threats posed by competitors will be identified. Through this tool, strategies that use strengths to increase opportunities and strategies that use strengths to minimize threats will be formulated. Similarly, ‘Porters Five Forces’ analysis will expose the internal strengths and resources that the company possesses which are peculiar. This forms a basis through which the resources can be utilized to create a competitive advantage that would aid expansion in the China market. Every firm possesses unique capabilities that are hard to copy, and thus increase or prolong the competitive phase. Due to the nature of information collected, the techniques above provide the utmost viable way of analysis. Once the information is collected it would be studied and analyzed in details to find a conclusion and recommend suitable competitive strategies for the development of business expansion of the Coca-Cola Company in other countries. Credibility and Verification: The verification of qualitative data is very important. Hence the research has based its judgment on the accuracy, reliability, and precision of the data collected. Credibility and verification of data are required to be taken utmost care of, so that there would not arise any grounds of mistrust on the research (Denscombe, 2007, pp.295-296). Utmost care has been taken to ensure that the websites used from the internet are not unauthentic and they contain proper articles and information provided by different theorists or authors. Books and journals have been considered as they are authentic in nature and provide with useful information on the concerned topic. Limitations The study will focus majorly on the internal structure of the company and its internal strengths. The real competitive market has other forces that tend to influence even the elaborately planned expansion. These, for example, may be government interference or even unfavorable customer response upon introduction of the product concept. The employees might not be willing to disclose in totality what they consider weaknesses of the company. This results from fear of intimidation. With scanty weakness details, the TOWS matrix would be inaccurate leading to formulation of misleading strategies. The market environment keeps changing. The strategies identified in the preliminary phase might vary during the actual implementation of the expansion. The study will not show financial implications of the strategies. Any planned expansion requires a budget. The methodology is subjective and fails to grab essential data on monetary allocations. Language barrier may also affect the validity of information collected. Recording of interviews, however, allows seeking for clarification and even translation where necessary 5. Timetable: The research may be followed maintaining the following timetable. Week Number ACTIVITY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Discuss with supervisor Refine data Analyze data First draft of dissertation Think and record the discover Renew the literature review Complete the dissertation Hand in dissertation on time 6. Resources: To accomplish the research, it needs the supports of human, physical and financial resources as follows: Human resources: A series of work in relation to dissertation accomplishment, for instance data collection, data analysis, proposal writing and dissertation writing, need the researcher to devote not only time but also energy. In addition, the successful accomplishment may also demand the help of peer groups as well as the supervisor. Thus apart from the researcher himself, the study would require other human resources in its assistance. Physical resources: It is indispensible for the research to use computer, paper and pen during the process of dissertation writing. Moreover, the research would require drafts to be prepared before the final dissertation is ready. Accordingly, the draft files may be required to save the project. Once the project is ready, the printouts need to be taken out as well. Financial resources: The research would try to avoid unnecessary expenditures during the process of research. However, depending on the secondary data collection, some expenditure may occur on the use of internet since long periods of time would be required for searching and collection of the data. 7. Ethical Considerations: The different codes of ethics needed to be followed include integrity, objectivity, professional competence and due care, confidentiality and professional behavior. To maintain integrity, “fair dealing and truthfulness” should exist in the research work. Each and every matter should be addressed individually and with utmost care. Personal influence should not have an effect on the outcomes of the research objectives. Professional standards in regard to knowledge and care need to be utterly maintained. Disclosure of information should have proper backup supports such that illegal measures are not taken in addressing different data and disclosing them to the public. Moreover, professional behavior needs to be highly maintained in any research work so as not to affect the professional relationships with respect to any step taken in the process. Transparency should be maintained while doing the research work and each and every procedure followed for the research work require to be clearly mentioned in the report (Ethical Dilemmas: What would you do?, n.d.). Ethical factors have been duly kept in focus while conducting the research work. The collection and analysis of data have been done with due care to ensure that professional ethics is not harmed by any wrongdoings. References 1) Alon, I. (2003), Chinese economic transition and international marketing strategy, Connecticut: Greenwood Publishing Group 2) Coca-Cola SWOT Analysis. (n.d.), Yousigma, available at: http://www.yousigma.com/comparativeanalysis/cocacolaswot.pdf (accessed on September 20, 2011) 3) Collins, H. 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