Global Marketing: Standardization Versus Adaptation by Coca-Cola - Case Study Example

? Global Marketing - Standardization vs. Adaptation by Coca Cola By Inserts His/her Inserts Grade (29, June, 2011) Introduction The days are over when ‘survival’ was the mainstream goal of every company. The technology has revolutionized leaps and bounds and has removed all the domestic and international barriers of expansion. Companies strive for ‘continuous growth’ now, and to attain this they are always in search of broadening the scope of their activities across the boundaries. This concept of global marketing is being applied world wide by multinational companies to have a sustainable competitive advantage, diverse set of consumers and strong bottom line figures. Beverage industry is one of the most dynamic industries that are applying this concept to great effect (Boone et al. 2009, p. 194). Beverage industry is broadly classified as alcoholic and non alcoholic. In both categories there are exemplifications of global marketing. World’s non alcoholic industry is grappled with tough competition by the two large players Coca Cola and PepsiCo. Both the giants are expanding their value horizon across different countries. Though there are numerous companies engaged in providing global beverages, the two giants are at top with extensive portfolio of products tailor made for countries. Though both companies are equally successful, Coca Cola leads the global market, with PepsiCo being on its tail continuously (Cardello 2011). Provide a detailed assessment of the environmental issues affecting Coca Cola global business and marketing strategy. Given guidance in terms of opportunities or threats they may pose for the company in the future. Coca Cola Company is one of the leading companies in the world that is dealing in the manufacturing and distribution of non-carbonated beverages. The brand portfolio of the company entails more than 400 brands including beverages, juices, tea, sports and energy drinks, coffees etc. Strong brand name and brand portfolio has led the company ahead of its close competitors, Pepsi which has a brand value of $12,690 million as compared to $67000 million of Coca Cola (The Coca Cola Company 2011). Since its inception, it has continuously improved upon its marketing strategy that has facilitated the customer recall and recognition of brand overall the world making it easy for Coca Cola to explore new markets. The international marketing strategy of the company can also be quoted as the major reason behind its huge success. However, intense competition and threats are ever-present elements of the external environment that might have a large impact on the company’s profitability. SWOT ANALYSIS SWOT analysis can provide a snapshot of the current performance of the company and of the dark areas that are required to be eradicated so as to avail the new opportunities that can further enhance the company’s performance. SWOT analysis is the best way to study the impact of external environment on the organization’s marketing and global strategy (Mind Tools Ltd. 2011). STRENGTHS: Leading Brand: This is a recognizable fact that Coca Cola has a strong brand name and brand value that is incomparable. From the last few years, company has invested a lot on the promotions that has enhanced the brand’s customer recall and recognition as well. Large scale of operations: Coca Cola is known as the largest manufacturer, marketer and distributor of non alcoholic beverages in the world having a large scale of operations. Currently, Coca Cola is successfully operating in more than 200 countries due to having a support of the strong infrastructure across the world. WEAKNESSES Negative perception of coke: It is a known fact that a recognizable product “coke” can be harmful for a body. Therefore, this shift of trend towards weight reduction and health can adversely affect the company’s profitability in the future. Lack of popularity of many Coca Cola’s brands: Furthermore, many of Coca Cola’s brands are still not being promoted or are not known to many people probably due to unremarkable or non-existent advertising. This company has almost 400 types of drink brands among which only coke and sprite are widely known all over the world. OPPORTUNITIES: Acquisitions: From last few years, Coca Cola is strongly considering acquisitions and joint ventures with leading companies to further strengthen the international operations which in turn will make it easy for company to penetrate into international markets and to expand its profits’ stream line. Growing Bottled water market: From the last few years, it has been observed that bottled water has now become the fastest growing segment in the food and beverage industry of the world. The flavored water in the bottled water market is estimated to grow at a high rate. Therefore, Coca Cola can control its profits by taking advantage of the growing demand for flavored water (a little sugared drink). THREATS: Coca Cola faces intense competition in regional and global markets as well. Continuous product innovation is the main challenge for Coca Cola to handle successfully because consumer’s tastes and preferences are unstable that changes constantly. Furthermore, pricing, advertising, promotions, protection all can be attributed as threats for Coca Cola that can be minimized by utilizing the above mentioned opportunities effectively. Select and highlight the business and marketing practices which Coca Cola has adopted when tapping into global markets. Expansion of operations for Coca Cola on international level poses a big question regarding how the products should be modified as per the local requirements. Should the standardized product be offered or should it be adapted in accordance with the relevant dimensions of target audience? The two alternatives that a company indulging in international marketing have are either standardization or adaptation. The process in which the similar value proposition is offered worldwide is called standardization. Contrary to it is the adaptation technique in which the product is amended in accordance with the various dimensions of the country. There are other strategies as well in which companies can offer a completely new product designed rather than extending their core product (Czinkota & Ronkainen 2007, p. 328). Both approaches have their own usefulness and drawbacks. Standardization offers a company cost cutting approach whereby it can have large scale economies and a global marketing mix at best possible cost. It also saves R&D costs, enhances global competitiveness and inculcates an element of integration to the operations. Contrary to it, adaptation is beneficial to acclimatize as per the government regulations, consumer behavior patterns and competition of the particular country. What is universal brand Coca Cola’s approach for global expansion? (Paul & Kapoor 2008, p. 196-198). Coca Cola being a globally recognized brand, scores high on brand equity. To support this, the product portfolio being offered is such which doesn’t require in depth knowledge for usage. With time, the global scenario is changing and it is becoming more homogenous in nature. The product variations are reducing by the time as consumers tend to accept the standardized format of products. It can be said that Coca Cola’s marketing strategies that are universalized have high degree of standardization. Though most of the marketing strategies followed by Coca Cola are standardized, yet there are regional differences, language barriers, cultural aspects, pricing and distribution strategies which have to be catered to in accordance with the region. Coca Cola has been adoptive of standardization strategy which has helped them maintain a consistent brand image, large economies of scale through franchising and efficient technological practicability across the world (The Times 100 2011). The marketing mix of Coca Cola justifies their strong stance on standardization strategy. They have been continuously delivering the same tasteful experience which has delighted the customers for centuries in all countries. The product portfolio doesn’t require excessive search regarding the ingredients and therefore has strong sensory appeal. Whether it maybe Coke Diet, Coke Classic, Sprite or any other variant and in whichever SKU, it has years of providing delightful experience and the same trend follows in all regions they expand in. Though the pricing and placement has to be adjusted according to the regional pricing policies and standards, yet the essence remain the same i.e. money for value. Different prices are charged according to the region’s regulations, range of SKUs and different distribution strategies are adopted – however people treasure the brand experience which makes it a global leader (Jones & Morgan 1994, p. 191-193). Coca Cola’s communication strategy shows their steady promotional approach. The element of ‘Happiness’ is always the core essence of their promotion which depicts a consistent communication strategy. Communication for all countries rotates around the concept of happiness, enjoyment, refreshing lives, personal values and traditions which is effectively implemented by both ATL and BTL activities. However these activities are customized so that they are aligned with the region’s focal values. This has helped position Coca Cola as a brand that instills happiness for all. The packaging of Coca Cola is one of the most associative aspects of it along with its red and white attractive logo. The unique shape of the bottle in Hobble Skirt fashion itself is sufficient for brand recognition even if the logo is removed. This distinctive shape along with use of catchy colors has given Coca Cola a brand personality that has earned millions of diversified customers across the globe (The Coca Cola Company 2011). Apply the strategic concepts and analytical techniques which you have studied relating them to practical examples. You should use recognized theories and models to support your arguments. Coca Cola operates in more than 200 countries with a brand portfolio exceeding 400. Not only are they propelling excellence in soft drinks with Coke, Coke Diet, Fanta and Sprite; they are also excelling in bottled water, juices, tea, coffees and power drinks with brands such as Powerade, Minute Maid, Kinley water and other successful brands. Mexico is the one of the largest consumer of the soft drinks which has been providing high margins for Coca Cola for years. Coca Cola is the largest seller of soft drinks in Mexico with the highest market share. Coca Cola’s operations in Mexico supports both the models – large degree of standardization coupled with adaptation in certain aspects. Coca Cola marketed their world renowned products in Mexico with globally formulated policies which are applicable to all countries. In Mexico, Coca Cola emphasized on ethical marketing and adopted socially responsible measures. Execution of top quality business processes, providing favorable work environment, preservation of ecosystem and a win-win situation for both the company and consumers are its core operations. All the employees are bound by the business code of conduct to perform in a manner that induces professionalism, honesty, commitment, respect and responsibility. They treasure their Human Resource as their biggest asset and tool that has helped developed such a strong brand. Coca Cola stresses the significance of customer relationship – by maintaining a cordial and win-win relationship with distributors, suppliers and end users. All of these policies were carefully designed by Coca Cola pertaining to its operations in Mexico. Coca Cola also developed labor relations regulations and policies in accordance with Mexican laws. Employee and union rights were provided with high degree of flexibility which ensured freedom to join union at will. Though Coca Cola requires that the employment and labor relation laws comply by the international standards set by them, yet it is their belief that these matters can be best catered by the Mexican themselves. This shows the fact that though Coca Cola’s mainstream approach is standardization; nevertheless they execute it in a manner that allows the country degree of freedom to mold it as per their laws and values. However, all didn’t go well for Coca Cola in Mexico. Coca Cola’s major competitors in Mexico were Pepsi and Big Cola, both giving a tough time to Coca Cola. Big Cola’s success was mainly accounted for its low pricing strategy which supported the low income and buying power demographics of the country. To deal with this, Coca Cola reduced prices at cost of their profit margins. There were numerous allegations on Coca Cola for adopting anti-competitive trading practices to degrade the market for Big Cola with the use of threats of non provision of Coke to retailers if they kept Big Cola. With evidence from retailers and Big Cola, a suit of US $15 million back in 2005. This suggests that ethical standards are necessary to maintain in all parts of the world however strong the brand is (Deresky 2008, p. 62-64). One more example which can be quoted in relevant context is the failure in India. Though Coke was instituted in India ages before Pepsi, yet they are second to it. Pepsi’s late entry in international markets didn’t hamper its success as it attained operational grants and local partners in India with effective negotiation and flexibility. Coke on the other hand showed reluctance to adhere to local demands and align its operations to local benefits (Thakur, Burton & Srivastava 2007, p. 406). There were other severe accusations for usage of underground water in production and cleaning of bottles, poor scrutiny of industrial effluents used in products and other variations of such accusations. These ecological issues created an upheaval and resulted in Coca Cola’s failure in India (Deresky 2008, p. 65-66). Conclusion Global marketing is a revolutionary concept that is changing the surface of the world with its bounties for companies. Expansion across the boundaries is trend that many multinationals are successfully implementing nowadays. Spreading business in different countries require a decision to be made that whether to provide standardized product or adapt it with the local demands. Companies are free to decide on the continuum of complete standardization to complete adaptation. Both have their pros and cons. Coca Cola’s mainstream strategy remains standardization, however with prior experiences they have coupled the approach with adaptation. This has helped it achieve large economies of scale, lower costs and fulfillment of local needs at the same time. The consumer needs are becoming homogenous by the time; however there are localities where local values and interests are more important. Coca Cola can have long term success via mixed approach which would help it negate its weaknesses and threats and overcome the external issues. Reference List Boone, Louis E., Kurtz, David L., MacKenzie, H.F. & Snow, Kim 2009, Contemporary Marketing, 2nd edn, Nelson Education Ltd., USA. Cardello, Hank 2011, Cola Wars: Pepsi is Number Three and That’s a Good Thing, The Atlantic, viewed 28 June 2011, < http://www.theatlantic.com/life/archive/2011/03/cola-wars-pepsi-is-number-three-and-thats-a-good-thing/73155/ > Czinkota, Michael R. & Ronkainen, Ilkka A. 2007, International Marketing, 8th edn, Thomson South Western, USA. Deresky, Helen 2008, International Management – Managing Across Borders and Cultures Text and Cases, 6th edn, Dorling Kindersley India Pvt. Ltd., New Delhi, India. Deresky, Helen 2008, International Management – Managing Across Borders and Cultures Text and Cases, 6th edn, Dorling Kindersley India Pvt. Ltd., New Delhi, India. Jones, Geoffrey & Morgan, Nicholas J., Adding Value – Brands and Marketing in Food and Drink, Routledge, New Fetter Lane, London. Mind Tools Ltd. 2011, SWOT Analysis - Discover New Opportunities. Manage and Eliminate Threats, viewed 29 June 2011, < http://www.mindtools.com/pages/article/newTMC_05.htm> Paul, Justin & Kapoor, Ramneek 2008, International Marketing - Text and Cases, Tata McGraw- Hill Publishing Company Limited, West Patel Nagar, New Delhi. Thakur, Manab, Burton, Gene E. & Srivastava, B.N. 2007, International Management – Concepts and Cases, 9th edn, Tata McGraw- Hill Publishing Company Limited, West Patel Nagar, New Delhi. The Coca Cola Company 2011, History of Bottling, viewed 28 June 2011, < http://www.thecoca-colacompany.com/ourcompany/historybottling.html > The Coca Cola Company 2011, Products, viewed 29 June 2011, < http://www.thecoca-colacompany.com/brands/index.html?WT.cl=1&WT.mm=footer3-prodinfo-red_en_US > The Times 100 2011, International Marketing, The Times 100 & Wilson and Wilson Publishing Limited, viewed 28 June 2011, < http://www.thetimes100.co.uk/theory/theory--international-marketing--241.php > Read More