Coca olas Response to Changing Market Conditions - Essay Example

? Case Study: Case Study Q1 Coca cola’s response to changing market conditions were very different from the way Pepsi looked at the issue. First, Coca cola chose to focus on the carbonated drinks as their main products. While Coca Cola was focusing too much on carbonated drinks, PepsiCo was responding to market changes in two important ways. To begin with, Pepsi chose diversification as its strategy to increase its customer base. By this time, they had already realised that they would be better access a bigger part of the market by offering complimenting products such as energy bars and other snack foods. Meeting emerging consumer concerns PepsiCo also realised one important thing about consumer needs. As people started to be more concerned about the health issues caused by cola drinks, PepsiCo was quick to launch healthy products such as diet code and other non-sugary products. This was a very good way to access the segment of the market which was tied in people who could not use the normal carbonated beverages. At the same time, the number of people with health issues such as diabetes was becoming very high and this made it possible to have a big market share for non-sugary beverages. Pepsis was quick to respond to this rising marketing needs. Yet, at such a time when non carbonated drinks were becoming favourite for so many people who were either concerned about the health impacts of carbonated drinks or whose health issues could not allow them to use the same, Coca cola, under the leadership of Goizueta, continued to focus on its cola drinks. Roberto Goizueta believed that being able to efficiently produce carbonated drinks was the strategy that would help the firm to have a permanent grip on the market. This was both right and wrong. This is because although low production costs are a good strategy, they can only be helpful to a business if they are geared towards the right direction. In other words, Coca cola’s low cost strategies were good but were focused on the wrong product. This is a time when Coca cola should have been focusing on looking at how it could have been able to introduce new products which would fit the new and emerging consumer needs. This made Coca cola to remain behind PepsiCo and therefore giving PepsiCo the upper hand in the market. Coca cola not only failed to diversify like PepsiCo had done, but is also failed to consider new market needs. Q2 Coca Cola Coca Cola’s marketing orientation is geared towards affecting the way the buyer thinks about the product. A closer look at the way in which Coca Cola manages its marketing in the times of Goizueta indicates that Coca cola is not customer oriented. This is seen as the old-school marketing in which organisations did not look too much into what the customer wanted but rather only focused on developing a product and the presenting it to the consumer (Ireland, Hoskisson and Hitt 2010). In this regard, it means that Coca Cola only focused on producing the products which they thought best for customers and then delivering this product. In such an arrangement, marketing is done by massive branding campaigns which would be geared towards making the customer to believe that the product is best for them (Kenny 2009). This is what coca cola had used for a long time leading it to become the number one brand in the world. Coca Cola also seems to focus on specialising rather than diversification. In this regard, especially under the leadership of the charismatic leader Goizueta, Coca Cola focused too much on its main product which was its cash cow. In fact, Coca Cola’s diversification was only as a reaction to PepsiCo’s market success brought by PepsiCo’s diversification strategy. PepsiCo PepsiCo on the other hand had a different marketing orientation. Towards the end of the 20th century, PepsiCo seemed to have realised that aligning the business strategy to the needs of the customer was the next big thing. Unlike Coca Cola, PepsiCo started focusing on looking at what the market is demanding and then delivering this. For instance, after realising that there was hype for healthy drinks which did not have sugar, PepsiCo was the first to jump in to develop a range of products which met these new market needs. PepsiCo did not remain rigid in terms of the way it looked at the market. Rather, it was reactive to the market needs and always sought to meet the customer’s needs when and where they arise. PepsiCo’s marketing orientation also seems to be based on market diversification so as to reach to all segments of the market. In this regard, PepsiCo seems to always scan the market for any new ways to diversify the market and this strategy has rewarded the firm by placing it at the top of the world, thus dethroning Coca Cola. Q3 Coca cola Out of four points, Coca Cola has achieved only two points in the effectiveness-efficiency matrix. This is because Coca Cola is doing some right things in the wrong way, such as focusing on cost management and low cost production but of the wrong products. Coca Cola also has tried purchasing other firms in order to diversify its products. It has however done this in the wrong way because it has chosen to have partial acquisitions rather than full acquisition. PepsiCo PepsiCo has acquired four points out of possible four points because it is doing the right things in the right way. Its diversification program is excellent and done in the right way. Q4 According to Kenny (2009) diversification has its benefits as it has challenges also. With regard to PepsiCo’s diversification program, there are a number of benefits which the firm has gained and which has made it to be better than its main competitor, Coca Cola. PepsiCo’s diversification has for instance helped the firm to respond to market needs. As it has already been discussed, PepsiCo’s market strategy is based on meeting customer needs by developing products which are purposely geared towards meeting customer needs. In this regard, since customer needs vary from one customer to the other, having diverse products helps in making sure that the needs of all the customers have been met. This gives the firm a very great advantage in terms of the market (Kenny 2009). PepsiCo has a diverse range of drinks to suit the needs of all the various consumer needs and this helps to make sure that all PepsiCo’s customer can have something in PepsiCo. Diversification in PepsiCo also goes beyond just diversifying the drinks and goes towards providing complementing products. Providing the customers with complementing products is useful because the utility of each product can be increased if the product has a complementing product. For instance, most soft drinks go well with energy snacks. Since PepsiCo has invested in a number of energy snacks, this increases the utility of its products to the customers and thus creating customer loyalty. This gives PepsiCo a great advantage over its competitors and especially over Coca Cola, its main competitor. Diversification has also helped PepsiCo in making accessing a broader market as more market segments are reached. For every new diverse product products, PepsiCo is able to reach more market segments. This has diversified its revenues thus the firm’s revenues are safer. Q5 Unlike PepsiCo which has resorted to total buyouts of the firms they are interested in, Coca Cola has focused on mini-mergers which mean that they own only part of the firms they are interested in. Part ownership has a number of disadvantages on the side of Coca Cola. This is because unlike full ownership, part ownership does not give the firm total control of the acquired firm and therefore may not be able to effectively make business strategic decisions (Ireland, Hoskisson and Hitt 2010). Part ownership will not help Coca Cola to be able to use the products of the acquired firm to improve its product portfolio. Yet, from the side of the Innocent Drinks, part ownership with Coca Cola is a big advantage because they will benefit from Coca Cola’s big brand, while at the same time still maintaining some of its equity. Q6 One of the future challenges for Coca Cola will be reasserting itself as the leading and trusted drinks brand. With so many issues such as reposts of contaminated drinks from Coca Cola going around, Coca Cola will definitely need to be able to look at the ways in which it can turn around the bad image. Due to its failure to be a leader in meeting customer needs and developing diverse range of products to meet emerging customer needs, Coca Cola will have a bigger issue with regard to its ability to gain position one in the industry. However, the main challenge will come from restructuring the organisation’s structure and making the structure more flexible. Failing to have a more flexible organisation structure and a better organisational culture will only lead to Coca Cola having issues with its strategy development. Bibliography Ireland, R.D., Hoskisson, R.E. and Hitt, M.A., 2010. Understanding Business Strategy Concepts Plus, 3rd ed.: Concepts Plus. London: Cengage Learning. Kenny, G., 2009. Diversification Strategy: How to Grow a Business by Diversifying Successfully. New York, NY: Kogan Page Publishers. Read More