Coca Cola: The International Strategy - Case Study Example

Introduction The world’s largest beverage company, Coca Cola has earned a huge reputation in providing non-alcoholic beverage concentrates and syrups in the world. Being one of the largest corporations of the United States, Coca Cola has been paying great attention towards different cultures and people about what they want to drink. To fulfil the local demands of people from various cultures, Coca Cola has been partnering with local communities. Through adapting suitable strategies, today, Coca Cola is selling more than 1.4 billion beverages daily. Moreover, the company is selling more than 3000 of its beverages in about 200 countries of the world (Coca Cola Website, 2009). Although company has maintained its performance in the year 2009 and sold more than 1.7 billion of unit cases of juices, still, the increasing competition in the global market is raising concerns for the company. In this report, the analysis of the company will be done by analysing its operations in different world markets. Finally, based on analysis, a conclusion and recommendations will be presented. Current Operations of Coca Cola Coca Cola is offering a variety of beverages and drinks worldwide and the products of the company can be categorised into different groups including Energy drinks, Juices, Soft drinks, Sports drinks, Tea and Coffee, Water and others (Coca Cola website, n.d.). It is interesting to note that the soft drinks of the company are being considered as the trademark of Coca Cola however, different drinks are very popular among local communities. In order to explain how Coca Cola is targeting the local regions and communities, I will like to quote an example. Appollinaris is one of the product brands of Coca Cola and it comes under “water drink type”. This mineral water is available in three flavours including apple, lemon and normal or unflavoured water. Moreover, Appollinaris is only available in Germany and New Caledonia. Similarly, the soft drink of Coca Cola is available in different flavours including Cola, Cola Lemon Lime, Cola Lemon, Cola Orange, Cola Green Tea, Cola Lime and Cola Raspberry (Coca Cola Website, n.d.). This example shows that Coca Cola is not pursuing standardised strategy but it has been introducing products based on the needs of the market where it operates. The major reason which is posing great threats for the company is the external environment and the market changes. The market changes include the regulatory changes and socio economic changes. The mission statement of the company also shows that the two long term objectives of Coca Cola Corporation are competitive position and technological position. Coca Cola has been seeking to get competitive position by becoming the market leader whereas, through becoming the leader in production and marketing technologies, the company aims to become the technological leader. Therefore, in the following section, the current strategies of the company in different markets will be analysed and recommendations will be given in parallel. Analysis and Recommendations The major reason because of which Coca Cola has been able to retain its higher profit margins in the past is the low cost strategies of the company. The different regional drinks of Coca Cola in local geographical markets show the focused strategies of the companies. Therefore, rather than focusing on one global strategy, the company is thinking globally and acting locally. The strategies of Coca Cola have been allowing the company to penetrate into the existing markets and to invest more in the new product development. Coca Cola has been also pursuing integration strategies for the expansion of the company such as joint ventures, strategic alliances etc. However, there are various strategic units of the company which needs attention because Coca Cola is not considering the liquidation and retrenchment strategies. Since the aim of this report is to highlight the importance of standardisation or differentiation of the products of the company, therefore, now I would like to present some evidences in this regard. Coca Cola has been facing issues related to its products such as in Indian Market, Coca Cola was penalised for draining the underground water containing industrial effluents (ICMR India, 2006). Most of the companies do not face such issues whilst dealing in international markets because they usually claim about the standardised features of their products. Since Coca Cola is operating at very large scale therefore, the company has to fulfil the needs of local markets. Previously company was earning huge profits even from soft drinks only, and the company is still making enough profits however, the changing social and economic environment does pose major threats for the company, therefore, the company has to think about the standardisation or differentiation of its products. The life standards of people are changing, for example, in 2005, in Canada, an average person used to consume 107 litres of soft drink and the grocery of Canadian. This is not the case now and the average consumption of people has declined over time. An organisation has to determine whether it should sell its product or service in the standard form or should it customise the products based on the needs of the foreign markets where it is operating (Docstoc Website, n.d.). Since Coca Cola is offering more than 3000 products worldwide based on the needs of local markers therefore, it can be argued that the company is currently focusing on differentiation strategy. In order to learn about the current strategy of Coca Cola, Ansoff Matrix will be used. Existing Products New Products Existing Markets Market Penetration Product Development New Markets Market Development Diversification Market Penetration This strategy is adopted by a company to increase the market of its existing products however, Coca Cola, being the market leader in its industry is not primarily pursuing this strategy because most of its products have already penetrated into the market however; company uses strong marketing strategies to increase the demand and penetration of its products. It is interesting to note that Coke started its expansion through marketing penetration strategy in the U.S. and Japan (Scribd, n.d.). Market Development Market development strategies are pursued by a company when it starts exploring new markets and Coca Cola keeps on pursuing this strategy by introducing its products in new markets. Product Development Product development strategy is the one in which new products are introduced in the markets. It is very interesting to note that Coca Cola is mainly targeting this strategy to survive in this fierce competition. More than 3000 products of Coca Cola in different world markets provide strong evidence in this regard. The company has also identified the market of Winnie the Pooh Roo Juice for the age of 2 to 5 years and this products really attracted the women and their kids. Company is offering this juice without any additions and sugar, which has really attracted the target market. Diversification When a company invests in an entirely new product or industry, it is know as diversification. Coca Cola has been exploring new beverages categories however; still the company has not focused upon diversification strategies. Even the company is offering packaged snacks in some countries; still the company is not targeting unrelated product markets. It has been analysed that Coca Cola is currently focusing on focused low cost and broad differentiation strategy. Because of a few reasons, the company has been able to attain the focused low cost advantage. First, Coca Cola has achieved economies of scale through mass production. Second, the knowledge and experience of the company has increased its long learning thereby, improving its learning curve. Moreover, the company has gained great effectiveness and efficiency in its distribution network, research and development and marketing. Coca Cola is pursuing broad differentiation strategy because it is offering more than 230 brands worldwide and high brand image has created a superior product perception image of Coca Cola in the minds of consumers. Moreover, through attractive packaging, Coca Cola has been able to purse broad differentiation strategy. Low Cost Differentiation Broad Overall low cost Strategy Broad differentiation Narrow Focused low cost strategy Focused differentiation strategy William Pecoriello is considered as one of the famous analysts in the beverage industry and he predicted that the current generation of teens would not a “lost generation” for CSD market because their survey results of 1,550 consumers showed that the selected sample of age between 13 and 65 view that US CSD segment would remain under pressure. Therefore, in 2007, a decline of 1.5 percent in annual volume was predicted for the CSD segment. Moreover, in his report, Puravankara (2007) shows that in Canada, the volume of carbonated drinks declined by 2 percent and according to Euromonitor International report (2005), the decline in this sector is increasing because of the lack of positive health attributes of its products. According to Barbara Murray (2006), “For years the story in the non alcoholic sector cantered on the power struggle between…Coke and Pepsi. But as the pop fight has topped out, the industrys giants have begun relying on new product flavours…and looking to non carbonated beverages for growth (Deichert, 2006).” Based on the changing market trends, dependence of Coca Cola Company on soft drinks category and increasing awareness of consumers, I would suggest that Coca Cola should continue with its differentiated products strategy. However, if the company will only give focus on carbonated drinks then in future it may lose its market position. Since the demand of carbonated drinks is declining and about fifty percent of Coca Cola revenues come from carbonated drinks, therefore, it is recommended to the company that it should aggressively compete in the other beverage categories such as energy drinks, water and non-carbonated drinks. The non alcoholic industry is showing increasing trends of tea and coffee (11.8%) and bottled water (9.3%) (Deichert, 2006). In this way the company will not only ensure its success in its own industry but it will also ensure its long term success. Standardisation of products is also not recommended to the company because company is already pursuing focused low cost and broad differentiation strategy. The quality of Coca Cola products is what makes it actually different from its rivals. The company has been emphasising on cost reduction rather than price reduction. Most of the companies go for standardisation to attain the status of low cost leadership and Coca Cola is already enjoying this status with differentiated product strategy. Another reason because of which it is recommended to Coca Cola that it should keep pursuing its differentiated product strategy is the changing behaviour of consumers. The company should create value through its innovation, uniqueness and proactive approach. The current positioning of the company is based on the customers’ loyalty and this loyalty can be sustained by offering customers according to their needs. The standardised product strategy cannot help the company because of the changing technology and consumer needs. Another recommendation to Coca Cola Company is that along with its differentiated product strategy, the company is also pursuing differentiated marketing strategy. The company is not focusing on global marketing strategy therefore, if the company goes for mass marketing of its products through standardised promotions and advertisements, it can surely get huge benefit. Conclusion Based on the above analysis, it can be concluded that Coca Cola should continue pursuing its differentiated products strategy and in future it should continue its product innovations and expansion of its product line. Since, the soft drinks market is already saturated therefore product innovation is important for its long term survival. Moreover, to sustain its profits and customers loyalty, Coca Cola Company should be socially responsible especially in energy, sports and health drinks. In this way, such strategies can actually help the companies to maintain its position and leadership in the international market. References Coca Cola. (n.d.) Product Descriptions. [Online] Available from: http://www.virtualvender.coca-cola.com/ft/index.jsp [Accessed 11 April 2010]. Coca Cola. (2009) The Coca Cola Company Heritage Timeline. [Online] Available from: http://heritage.coca-cola.com/ [Accessed 11 April 2010]. Deichert. (2006) Industry Analysis Soft Drinks. [Online] Available from: http://www1.csbsju.edu/liBRary/local/5thYear/zeigler_paper.pdf [Accessed 11 April 2010]. Docstoc. (n.d.) The International Strategy: The Four Ps. [Online] Available from: http://www.docstoc.com/docs/27829701/Chapter-4---International-Strategy-The-Four-Ps [Accessed 11 April 2010]. ICMR India. (2006) The Coca Cola Business Practices: Facing the Heat in India. [Online] Available from: http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/BECG061.htm [Accessed 11 April 2010]. Puravankara, D. (2007) Strategic Analysis of the Coca Cola Company. Simon Fraser University Library. Quick MBA. (n.d.) Ansoff Matrix. [Online] Available from: http:// www.quickmba.com/strategy/matrix/ansoff/ [Accessed 12 April 2010]. Scribd. (n.d.) Coca Cola Business Strategy. [Online] Available from: http://www.scribd.com/doc/19359539/CocaCola-Business-Strategy [Accessed 12 April 2010]. Read More