The Coca Cola Company Overview - Case Study Example

Module Case study for Coca Cola Marketing Analysis The past few decades have been characterized by increasing levels of competition in the business world. This can be attributed to the improved technology, minimized restrictions of entry into business in addition to growing global population. This has resulted to an increasing market base for the good and services produced in a given entity. Technological advancements have led to increased competition in the global market as small companies can compete with major companies. Small companies have integrated online marketing in their sales and this has enabled them to boost their sales in spite of having inadequate capital and presence in most parts of the world (Michaels 17). Coca Cola is an example of such an establishment that has remained a proficient player in the beverage trade amidst the increasing competition in the industry. It was established in the nineteenth century and it is the market leader in producing, distributing and selling soft drinks in the international market. The company operates in nearly 200 nations and has invented over 400 brands since it was founded (The Coca Cola Company). Its leading brands include Coke, Sprite, and Stony among others. Their success has its major rivals at bay including Pepsi and Nestle. This case study gives an in depth analysis of the company’s marketing strategy and the potential issues facing the company. COMPANY’S OVERVIEW As far as the global manufacturing, distribution and sale of soft drinks are concerned, the Coca Cola company in the lead. The company was founded in 1886 in Atlanta Georgia by John Pemberton who was a pharmacist by profession (The Coca Cola Company). His formula was later purchased by Asa Chandler in 1891 and this marked the advent of the company’s business achievement. It sells approximately 400 brands making it the top company in terms of market capitalization. Additionally, the entity enjoys impressive customer loyalty and has licensed distributors in over 200 countries. This fact ensures that the entity is in a position to segment its customers hence the high profitably levels. In spite of the harsh economic conditions, the company has remained financially stable over the years. This is due to the company’s ability to adapt to cotemporary marketing strategies such as the use of online marketing through social media such as Twitter, MySpace and Face book (The Coca Cola Company). The company has a history of having a strong corporate culture that propelled the company’s success to date (The Coca Cola Company). For example, the company sponsored the FIFA 2010 World Cup and has constructed wildlife reserves. Potential Issues Facing the Company. Although the company has a huge part of the market share, it is clear that it faces stiff harsh competition from other key players in the industry. However, the company has been experiencing a constant increase in the stocks since 2008 as compared to its major rival Pepsi Co, Inc. Furthermore, the non – alcoholic industry is increasingly competitive with numerous companies. There are competitive products in the market including carbonated drinks, energy drinks, packaged juices and fresh juices. Other significant competitors of the company include, Cadbury Schweppes plc, Nestle and Groupe Danone (Lopez 25). The competitive factors are with regard to pricing, product innovation, sales promotion, dispensing equipment, packaging, and production techniques. Moreover, the company competes in terms of brand name and trade mark protection. The company faces other issues in their operations that may have an impact on its future. In the recent past there have been fluctuations in the value of the dollar against the common currencies. The larger percentage of the entity’s income is generated outside the United States and owing to the strong performance of the dollar the firm’s revenues from other parts of the world its profits may fall considerably (Lopez 38). The other issue facing Coca Cola is scarcity of water. The company has been criticized on several incidences for utilizing excess volumes of water in their production process. Critics are sceptical concerning this due to the increasing scarcity of water around the world. There company has been met by fierce competition from PepsiCo. which is its key competitor. Pepsi Co. has been ensued with a long term battle with Coca Cola over market share in countries with a high population such as India. Consumers’ tastes and preferences are the main determinants of the sales made by a corporation. Emerging issues in the beverage industry such as growing concerns over the amount of sugar and calories contained in a particular drink have affected the choice consumers’ choice. Coca Cola mainly produces carbonated drinks that have significant amounts of sugar and calories and this affects their choices currently and may also affects their preferences in future. In addition to this, the carbonated drinks market is saturated (Bazil). The company relies immensely on the sale of these drinks whose demand is falling gradually all over the globe. Over the past few years, the gross profit and net margins have been observed to take a downward trend. This trend may even continue in the coming years due to increased cost of production as a result of increase in the prices of raw materials. The overall result of this is decreased profits. Water scarcity has also contributed to rising production costs. The company has been facing legal problems on disclosure of the side effects of drinking carbonated drinks (The Coca Cola Company). Some of the drinks produced by are known to have serious health side effects thereby; the company should make this known on the product labels. Evidently, disclosing such information will highly discourage customers from purchasing such products and this will lead to decreased sales. Financial Analysis The company has had a remarkable track record over the years as evidenced by the table below. Year Sales revenues in million US$ Gross profit in million US$ Operating income in million US$ Net income in million US$ Dividend per share Debt-to-equity ratios 2006 24089 15922 6303 5081 1.23 0.63 2007 28 858 18452 7253 5982 1.37 0.69 2008 31945 29575 8440 5808 1.54 0.85 2009 30991 19908 8232 6823 1.68 0.83 2010 35118 22429 8445 11807 1.77 0.78 2011 38, 129 24, 456 9,522 13,006 1.86 0.80 (The Coca Cola Company) Predicted growth in the next two years The table below shows the predicted growth of the company indicating further growth of the company. Year Sales revenues in million US$ Gross profits in million US$ Operating income in million US$ Net income in million US$ Dividend per share Debt-to-equity ratios 2012 40,003 25,672 10,921 14,117 1.90 0.84 2013 43,230 29,501 12,974 15,651 1.95 0.91 (The Coca Cola Company) The increasing profits accrued from the entity’s investment in areas such as Latin America and Asia- Pacific (The Coca Cola Company). Previously, the company was mainly concentrating on the American and European markets. From the above table it can be observed that the sales increased rapidly in 2010, this resulted from acquisition in the Asia Pacific and Asian regions. Coca Cola diversified its products by introducing a wide array of manufacturing products and this enlarged their customer base. There was a substantial increase in the dividend per share in 2009 and this was followed by an increase in net profit in 2010 (The Coca Cola Company). The decrease in the debt equity ratio signifies that the company has the ability to borrow money to fund its business operations. In a nutshell, the company’s sales and revenues are expected to increase in future show financial and economic stability. Managing Channels and Communication. Marketing channels aim at meeting the customers’ needs and are composed of pricing, packaging, branding, sales promotions, public relations and advertising strategies. Marketing channels are used to make all the decisions marketing mix decisions. In relation to promotions, the channels are used to come up with creative and innovative marketing ideas that are used to advertise the company’s products. Distribution channels on the other hand need to improve an increased ownership of their bottling partners to avoid entry by new competitors. Communication is essential for the effectual operation of a given entity. Coca Cola’s communication systems within the organization, with their suppliers and consumers are well developed (The Coca Cola Company). This has lead to effective communication to the top management enabling them to make the relevant changes as per the needs of the stakeholders. Price Management. Price is described as the most flexible element in the marketing strategy. Coca Cola product prices are set according to the size, psychological pricing and competitive strategies. This makes the customers perceive their products to be cheaper than those of the competitors. The company’s financial stability over the years can be can be characterized by the effective price management framework. The entity has set a number of objectives to be attained by their pricing strategy. Pricing is an imperative for the company to generate profits for future investment projects and for the stakeholders. The pricing strategy can be employed to kick its major competitors out of the game. Coca Cola sets the prices for its products at competitive levels and this attracts a high number of consumers (Lopez, 17) Its pricing has been formulated to maximize sale and retain its position as the market leader. Finally, its pricing ensures that the company is at the premium side of the market. Other auxiliary objectives of the pricing mechanism in the entity include skimming, penetrating, destruction pricing and competitive pricing. Firstly, skimming involves setting a high price for new products faced by minimal competition. This enhances overall profit making in the company. Secondly, penetrating relates to prices that have already been established thereby this requires no alterations. Thirdly, destruction pricing is also referred to as a price war which explains the process of reducing costs in a move to fight against the competitors. Lastly, competitive pricing can be attributed to the redefining of prices by the company. This leads to overall differentiation of Coca Cola’s products (The Coca Cola Company). Price management is an important issue in relation to the company’s profit generation and maintaining a competitive edge over its competitors. The management should constantly review their prices to keep up with the global trends and to ensure continued profitability. Country Image Concepts. The brand name ‘Coca Cola’ has been a huge part of America’s culture for over a century since the inception of the company (The Coca Cola Company). The products presence is associated with sentimentality and most consumers have remained loyal to the brand over the years. This leads to the conclusion that branding is one of the company’s strongest traits. Its trade mark is a powerful symbol that represents quality and enjoyment. Packaging has evolved over the years in line with the changes in culture, technology and consumer preferences. Consumer Animosity. Coca Cola is a global company and this presents numerous challenges to its marketing and advertising (Michaels, 54). With the increasing level of globalization the consumers have a wide range of products to select from than ever before. Consequently, marketers have looked into the factors affecting the consumers’ choice of imported products. They have formulated several theories to analyze how the features of the products are incorporated in the purchase decisions. Furthermore, qualities such as brand name and price are considered to be cues of the other characteristics (Kurtz 34). A high price may cause the consumer to think that the product is of a superior quality and reliable. Though not much research has been done on this, previous studies conducted on the purchasing decisions of imports reveal that decisions are made regarding a country’s image. This reflects their innovation and technological advancement and their workmanship which is translated to the products. It is correct to conclude that purchasing decisions are directly affected by the product’s origin. Consumer animosity may be as a result of past economic and political disputes or rivalry emanating from sharing a controversial border, for example in the case of Canada and the United States. Similarly, countries involved in unfair trading policies might experience discrimination in the foreign markets. Managers are advised to target oversee market with minimal cases of animosity. They should also come up with efforts to adjust their current marketing and communications systems in countries where consumers’ animosity is a real challenge to business. This may not be a significant challenge to Coca Cola’s competitive capability as the brand in known throughout 90 percent of the world to a date (The Coca Cola Company). Global Marketing Characteristics. The soft drink industry is dynamic due to the emergence of the new entrants, variations in customers’ tastes, technological advancements and changes in the legal framework. This has caused the company to apply certain global marketing strategies to keep up with these changes. The company has resulted into e- marketing in order to boost their online sales (Kurtz 47). The entity has also uses market segmentation to retain their customers in the face of the stiff competition in the contemporary world. The company has introduced low cost products to suit the needs of the low cost customers due to the current economic fluctuations. Finally, the entity has expanded their distribution activities in BRIC countries due to their increasing economic growth and development (The Coca Cola Company). With regards to the Preferential Trade Area Agreement, the company has enjoyed its enactment due to minimized taxation across borders hence the realization of greater profits. The company has had a successful history through its state of the art marketing strategies and it will be an interesting area of study to observe how it faces the ever growing problems in the industry. Case Study Questions What are the company’s strategies for being among the most profound brand internationally? What management strategies does the company employ to maintain a competitive edge over its rivals? What are some of the challenges likely to affect the company’s future operations in the global market? What are some of the strategies that can be used to manage these problems? Works Cited Bazil, M. The Motley Fool: Coca-Cola Has a Prosperous 2013 Ahead of It. Web. 4 May 2013. Kurtz, David L. Contemporary Marketing. Cengage Learning, 2008. Print. Lopez, Daniela. Brand Development of Coca-Cola Company (UK): Exploring New Branding Opportunities for Coca-Cola Company (UK). GRIN Verlag, 2012. Print. Michaels, Robert J. Transactions and Strategies: Economics for Management. Cengage Learning, 2010. Print. The Coca Cola Company. Coca Cola Journey. Web. 4 May 2013. Read More