Marketing Management of the Coca Cola Company - Essay Example

Word Count: 3096 Table of Contents Introduction 2 The Coca Cola Company 2 Standardization vs Adaptation Strategies 3 relationship marketing strategies 5 Customer Relationship Marketing 5 Partners Relationship Marketing 6 Managing innovation 7 Idea Generation 8 Business Analysis 8 Development 9 Commercialization 9 Ethical and social issues 9 The Ethical issue happened in India 10 Actions taken by Coca Cola 10 Marketing Control 11 Conclusion 12 References 13 Appendix 17 Introduction With emergence of technological revolution, lower trade barriers and the unions made for enhancing the collaboration between the countries (European Union) has led the organizations to go international either by direct investment or mergers or acquisitions. Many firms go towards internationalization for the purpose of larger market share, or cost effectiveness (lower labor costs areas), or advanced technology, or getting new talent for innovation (Miller, 2010). Such internationalization and globalization has instigated much modifications in the business strategies for operating in other countries (Eng, 2001). Different Firms use different strategies for the local and foreign marketing management. The main aim of this report is to critically analyze the international operations of an organization and the chosen company for the purpose is Coca Cola which is such a successful company due to its unique strategies. The Coca Cola Company The Coca Cola Company is known widespread for its fizzy carbonated soft drink which is being sold in stores, cafeterias and retailing machines within more than 200 countries. Coca-Cola head offices are situated in Atlanta, Georgia, from where it was originated. The Coca-Cola Company actually produces beyond three thousands drinks and possesses four of the topmost five brands of soft drinks (Coke, Diet Coke, Sprite and Fanta). ‘Coke’ brand is among the world’s top familiar and extensively sold profitable products. Its biggest competitor is Pepsi. Though coke has been fronting a lot of criticism from many NGOs due to the presence of huge amount of Acid and the unhealthy impacts of the carbonated water but it has built strategies to overcome these and is still most familiar and favorite drink. Additionally the company is known for its ethical and safety considerations (Ford, Stephens, & Cooper, 2007). Initially this carbonated drink was envisioned as a patent medicine in the time it was first invented during early nineteenth century, then Coca Cola was subscribed by wise businessman, named Asa Griggs Candler, who made belligerent marketing strategies and enthusiastic marketing campaigns which steered the brand ‘Coke’ to be the most super and widely accepted brand in the world through the twentieth century. While confronted with charges of tenacious lateral impacts on the health of customers and unchallenged practices of the Coca Cola Company, Coke has continued to be a widespread soft drink in the twenty first century as well (Ford, Stephens, & Cooper, 2007). The company has also made its 2020 vision that will come into reality hopefully, as the company has been focused on the change in strategies with change in the world’s trends to shape their business according to these alterations. The report has presented the company’s overall strategies used for being the global company in the world. In addition to this, the new product development and the ethical issues are also discussed. Recommendations are also made for evaluation and control methods beneficial for the company. Standardization vs Adaptation Strategies While entering in the foreign markets, firms have to decide between two opposing marketing strategies; standardization and adaptation. Standardization can be defined as, “the selling of similar product with similar price, promotional strategies and the distribution channel in all the markets.” While adaptation is defined as, “the selling of the product in different markets with adapting to the cultural, social and economic differences in that market, where the different offerings are made with different price, promotional strategies, and distribution channels tailored to different national markets” (Calantone, Kim, Schmidt, & Cavusgil, 2006). There has been a much debate over the choice between the two strategies, which one should be adopted (Agrawal, 1995). Both have their own benefits, such as in case of standardization, the low cost and high quality benefit, and maximization of profit by economies of scale. And more control over the organization (Calantone, Kim, Schmidt, & Cavusgil, 2006). Adaptation strategies do increase cost but they are considered to be more preferred by the culture-specific nations, so it is more effective to adapt to each nation (Theodosiou & Leonidou, 2003). But much of literature has presented a balanced approach of the marketing strategies (Hussain & Khan, 2013; Keegan & Green, 2013; Kotler, 1978). The Coca Cola Company has also gained from the standardization as well as from the adaptation strategy, its marketing strategy is known as “glocal” which means ‘think global act local’. The company has been selling the same coke beverage to all of the countries, its product is globally accepted and a recognized brand which has converged the customer preferences (standardization). Though branding is done on worldwide basis by Coca Cola, but the implementation of the branding of coke is based on the local market preferences, for example, the bottles have local country specific native languages (shown in figure 1) and size (figure 2) are also according to the other bottles’ size in that country, or there are less chilled and sweeter drinks in Asian countries (adaptation) (Banutu-Gomez & Rohrer, 2012). Though Coca Cola has a centralized decision making board who set major objectives for the company (standardization), but for adapting to local countries, Coca Cola has given the control of marketing tactics to the local managers (adaptation) (Weisert, 2001), and their websites also differ in different countries, such as in Japan it is more crowded, ads and campaigns are focused, while in UK it is more colorful and focus is on social responsibility (as shown in figure 3 and 4). Moreover, Coca Cola has achieved economies of scale by using franchising system in all the countries for bottling (standardization) and it has adapted to the legal systems too as the food laws may vary in countries (adaptation). So, The Coca Cola called itself as “multi-local” (Banutu-Gomez & Rohrer, 2012). relationship marketing strategies Relationship Marketing is well-defined by Morgan and Hunt (1994) as, def. “all marketing activities directed towards establishing, developing, and maintaining successful relational exchanges”. These relations are of two types with customers and with the partners (Morgan & Hunt, 1994). The Coca Cola Company has developed technological advances for marketing strategies for both of these relationships. Because for the Coca Cola Company, the customers are at the core of their business. Customer Relationship Marketing The Coca Cola is using social media to connect to the customer and they have developed new portals for its customers which are the end-consumers as well as distributors for the Coca Cola. For distributors, a personal-service website has developed where they put their orders online. This online portal for distributors have benefitted the company in terms of lower transactions costs. In addition to this, the website gives suggestion over the customers’ preferences and needs based on the previous consumption patterns. This create more responsiveness to the customer needs by more collaborations (Mathur, 2013). Coca Cola has partnered with the SAP and is using this software which has capability to access three million end consumers (Mathur, 2013). With use of this technology, Coca Cola has built long term relationships with its customer and has built a customer based website where the customer support team gives the solutions to the customer problems and make their needs to be fulfilled. SAP also help in collaborating the demand and packaging data and help-desk management from the end-consumer side, with the process design for distributors. For making an enhanced connection with the customers, it also make many sponsorships of events favored by the local countries, such as it is connected with many sporting occasions, i.e. Football World Cup and The Olympics. In addition to these, it has brought so many campaigns where it make different associations with thins, such as at Great Britain it was associated with the Saturday Night Meals and its partnering with McDonalds (Banutu-Gomez & Rohrer, 2012). Moreover, for guaranteeing unending consumer significance and fineness in the market, the Coca Cola focuses on five principles (Ford, Stephens, & Cooper, 2007). 1) Availability: easy access of right product at the right time and place to the consumers 2) Affordability: making the offerings in an array of desired and high quality product at the right pricing. 3) Acceptability: improving the product satisfaction to the consumers by offering all-embracing products as well as by having access and fulfilling the customer needs efficiently. 4) Activation: enhancing the inspirations of consumers to select coca cola by enhancing the accessibility and appeal while purchasing. 5) Attitude: the way the sales force interacts with the customers for turning out to be the favorite supplier. Partners Relationship Marketing The Coca-Cola Company has been using the process approach and use “Partnership Model” where the discussion meeting is held for each company’s strategies for partnership and the drivers of partnership as the introduction step for its tactical supplier partnership procedure. A combined partnership strategy is made as product of this discussion at the partnership conference. This partnership plan comprises over three to five yearly goals and precise initiatives that are allocated to different companies. Then it is make sure that the companies have met these objectives (Lambert, 2008). Coca Cola Enterprises and SAP have built a strategic partnership to make Direct Store Delivery (DSD) function. Coca-Cola has also built connections primary producers of consumer products, such as, Kimberly-Clarke, General Mills, Colgate-Palmolive, and Hershey in associating with SAP to improve innovative functions, which are TPM (Trade Promotions Management), SCP (Supply Chain Planning), PLM (Product Lifecycle Management), and Customer Analytics. Managing innovation Innovation which is the essence of competitiveness in this dynamic environment, is defined as, def. “the application of new ideas to the products, processes, or other aspects of the activities of a firm that lead to increased value” (Trott, 2008). When the organization is involved in the new product development or improving the existing product, it is product innovation. But when the organization innovate the ways to produce or deliver the product then it is process innovation (Scherer, 1984). New product is not merely a technological development but it is a complete offering which benefit the people and bring a change in their lives, so customer needs must be accounted (Shavinina, 2003). The stages involved are the idea generation, analysis, development and commercialization. The Coca Cola Company also uses these steps to develop a new product. Firstly the company started the development process in 1980s when the Pepsi was winning over the market share due to their extensive expenditures over the research and development and the sweeter taste than coke. Then the company initiated the largest research project upon which it spent over four million dollars within the period of two years. It was aimed at discovering the new and sweeter formula of soft drinks, named as “New Coke” and took several pilot tests over the customers so that customer would give their product more priority than the Pepsi. Over 200,000 pilot tests were conducted and 30,000 on the last proposed formula of “New Coke”. After the launch of the product, the major customers reject the new coke formula but it make much beneficial for the company as the customers wanted the old formula given by Coca Cola which make it more recognized brand (Shavinina, 2003). This entails that customer preferences were primarily focused by the company which make them replaced the new with old formula. Coca Cola used the four steps when it introduced it’s another brand known as Coke Zero. Idea Generation At first, Coca Cola generated many ideas for the new product development. All the ideas were tested for choosing the best one. The company then chose the idea of Coke Zero which was targeting the young male with age of 25 to 30. The product was having the amount of caffeine and sugar equal to zero as the name of the brand indicates. It was for entering into the new market segment and for ensuring the company’s social and ethical responsibility related to public health. Business Analysis The company then took a business analysis in which the costs were compared to the benefits of the product. The forecasted revenue and sales volume suggested to enter into the market. In this step, the company also assessed the demand for the product in the market which was quite good. Competitive analysis is also done. Development Coca Cola has always focused to maintain its brand recognition in all over the world, so for development of new product, it necessarily account for the color and texture to be remained same even with new taste. While the trial product was made with the uniqueness element, the trial product is tested over the market that is being targeted to get the alterations and modifications if needed. Commercialization After the product has passed all the previous steps then the development of the technological requirements and all the resources needed to produce the product, promote, and deliver the product are set up. Coca cola is an expert over this and trained the new sales force for this new product and then launched it through social media and the event organization (The Coca Cola, 2007). Ethical and social issues Each company has a specific code of conduct that are used to behave in working environment. Although these are overseen by some people in organizational settings, but there are many other behaviors that also encompassed in ethics but are not being watched over. There could be many unethical issues related to the workplace such as employee’s rude behaviors, leaking confidential information, dishonest ways, paying no attention to company’s guidelines and letting down by breaching of promises (Velasquez, 2006). Moreover, corporate social responsibility is also a known term that well explain the ethical behavior by corporations. Every corporation has some responsibilities directed towards the society it served. Coca Cola has been victimized many times with social and ethical accusations, but the Indian incident is much popular and important. The Coca Cola was successful in fronting this problem with some initiatives related to corporate social responsibility. The Ethical issue happened in India The story started in 2003, when a remonstration against Coca Cola Company was being held in Kerala, India. The dispute was based on the bottling plant which was using up the water in large quantity and contaminating the water near public places. So this plant was terminated (Srivastava, 2008). A NGO working for the environmental issues gave report of larger amount of pesticides (more than European Criteria) in the beverages and the largest market share was of Coca Cola. Then Coca Cola do research by using a private research institute which proved that these beverages are harmless and without pesticides but NGO remained on protests by saying that they didn’t test the synthetic flavors and sugars. But the issue of water was still there causing long term effects on the company’s repute (Torres, et al., 2012). Actions taken by Coca Cola There were so productive and well organized actions which were taken by the Coca Cola Company that can be outlined here below; Water ingestion was abridged by applying other solutions such as rain water storage and then use that in their plants. Left-over products were given as fertilizer to the agronomists and others that was also impeded. To avoid pesticide involvement in the ingredients and drinks, activated carbon filtration technique was introduced. Medical aid to deprived people and NGOs were also announced to gain the confidence back (Torres, et al., 2012). Marketing Control Marketing control is such a process in which organizations make it sure that the marketing plan applied is successful and it has achieved the set objectives. There are many methods used for the measurement of the marketing performance (Baker & Hart, 2008). Kotler (2002) has given four marketing control techniques, such as Annual-Plan Control, Profitability Control, Efficiency Control, and Strategic Control. The first three control metrics are used to evaluate the sales, profitability, efficiency by the use of tangible values, such as market share percentage, the profitability ratios, financial analysis etc. (Kotler, Marketing Management, Millinieum Edition, 2002). But for Coca Cola, this won’t be enough to evaluate the performance because for Coca Cola intangible assets, such as the good will which are more worth able than the tangible assets (Standard & Poor, 1996). There are two kinds of such intangible metrics, Consumer behavioral, such as market share, loyalty, and “intermediate” metrics, such as purchase intention, awareness. Such kind of metrics are given in figure 5 where the marketing leadership council has compiled some metrics (Lehmann & Reibstein, 2006). So, the strategic control is suggested to be used for the Coca Cola marketing evaluation. In strategic control, it is evaluated that either the company is availing best opportunities or not. It comprises over four steps of evaluation. 1. Marketing-Effectiveness Review: there are five metrics related to check effectiveness, such as strategic orientation, integrated marketing organization, customer philosophy, operational efficiency, and adequate marketing information. 2. Marketing Audit: it is an interview process where the meeting is held with all the participants. Metric used for this are environment audit (macro-environment, task-environment), strategy audit, system audit, function audit, productivity audit, and the organization audit. 3. Marketing Excellence Review: in this, best practice metrics are outlined in the three sets of poor, good and excellent, and the rates are assigned to them. 4. Ethical and Social Responsibility Review: in this review fair labor and ethical practices are assessed which is the most important part. Conclusion This report has presented the comprehensive description of the Coca Cola Company’s international operations. The company has been successful from many years and still is. The main reason for such huge level of success is inherent in their marketing strategies and their continuous focus on the customer needs and preferences. The company has made a recognized identity in the consumer’s mind which is brand. The mix of standardization and adaptation strategies has led the company to be globally successful as well as the success at each country level. It has been focusing on developing the technological innovative solutions for the customer relations marketing that was result in by the partnership with SAP. So they are now much more responsive to the customer needs. Innovation and new product development is also the company’s reason for success where they have been spending a lot to remain competitive in the market. Though there have been much criticism over the ethical and social issues but the company has fronted them all successfully, not by negating but by providing solutions and taking actions according to them. Moreover, the report has suggested the marketing metrics for the evaluation of the marketing efforts of company which is strategic control as the company’s intangible assets are more valuable than the tangible assets. 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Standardization versus adaptation of international marketing strategy: an integrative assessment of the empirical research. International Business Review, 12(2), 141-171. Torres, C. A., Garcia-French, M., & Hordijk, R. (2012). Four Case Studies on Corporate Social Responsibility. Utrecht Law review, VIII(3), 51-57. Trott, P. (2008). Innovation Management and New Product Development (5th ed.). England: Prentice Hall. Velasquez, M. G. (2006). Business Ethics: Concepts And Cases. Oxford : Prentice-Hall Inc. . Retrieved May 28, 2014 Weisert, D. (2001). Coca-Cola in China: Quenching the Thirst of a Billion. China Business Review. Appendix Figure 1 Coca Cola adaptation to different native languages and symbols. Image source: (Gemici, 2010). Figure 2 Coca Cola Adaptation to the local preferences of colors and size of cans. Image source: (Gemici, 2010) Figure 3 The Coca Cola Japan Website. Image source: (Gemici, 2010) Figure 4 The Coca Cola UK Website. Image source: (Gemici, 2010) Figure 5 Marketing Metrics used by marketing leadership Council (2001). Image Source: (Baker & Hart, 2008) Read More