International Marketing: Coca Cola Company - Essay Example

International Marketing: Coca Cola Company Contents Introduction 3 Discussion 3 The Rationale behind PepsiCo Inc to Participate In Internationalization Process 3 Saturation of Existing Market 4 Increase Sales through Acquiring Global Consumer Base 4 Market Entry Strategy in Different Countries 4 Marketing Mix Strategy Adopted by Diageo plc 6 Brand Positioning and Advertising Strategy 8 Competitor Analysis with respect to the Host Country 9 Social and Cultural Influence on Targeted International Market 9 Development of International Distribution Channel 10 Conclusion 10 Findings 11 Reference List 12 Introduction In this contemporary era of globalization and rapid liberalization of economies, international trade has gained significant attention. More and more companies operating in this global environment are aiming to take part in the cross-border trade for taking the advantages of the opportunity of business expansion through capturing consumers, beyond their home market (Rau, 2011). According to the American Marketing Association, the concept of international marketing can be defined as the process of planning and implementing the products, price, place and promotion of goods and services and exchange of such goods and services among two or more international entities in order to satisfy organizational objectives (Arnold, 2003). In this paper, the international marketing strategies and practices of the leading US multinational carbonated beverage company PepsiCo Inc. will be analysed. The company is one of the largest producers of soft drinks in the whole world. Apart from carbonated soft drinks, the product basket of PepsiCo Inc. is diversified with various foods and snacks, packaged drinking water and fruit juices. The products of the company have reached more than 200 countries in the world. Such widespread business has enabled PepsiCo Inc. to capture the second largest position in the world in terms of revenue and in North America, it is the largest. The paper will explore the international marketing and operational strategies of this world-famous beverage company, PepsiCo Inc. Discussion In the next segment, the motivation of PepsiCo Inc for expanding their business internationally and accordingly differentiated marketing, sales and distribution strategies adapted by the company will be examined in details. The Rationale behind PepsiCo Inc to Participate In Internationalization Process As mentioned earlier, due to the liberalization of economies, many companies are showing their interest in expanding their business internationally and maximizing their profitability through serving a large number of customers beyond the home country. In fact, observations of the big multinational companies have indicated that immense business opportunities are lying in the emerging nations in terms of potential customer base and availability of cheap resources, utilizing which, the companies can be benefitted to a great extent (Johnson, Whittington and Scholes, 2011). The reasons behind PepsiCo Inc to participate in internationalization process are as follows. Saturation of Existing Market PepsiCo Inc has been operating in the beverage industry in its home market, United States since 1965 and has evolved as one of the leading companies in the carbonated beverage segment within a short span of time. The company acquired more than 36.6% of the market share, in the home country and secured a position among the 10 most valuable brands in US market. However, due to excessive maturity of the home market, the growth in sales and profitability became saturated and the company experienced difficulties in further product penetration and diversification. In such circumstances, PepsiCo Inc felt the urgency of expanding the business internationally in order to ensure strong growth of the company through capturing a larger customer base and global market share (Blomstermo and Sharma, 2006). Increase Sales through Acquiring Global Consumer Base Once a company confirms sound business operations in the domestic market through capturing substantial market share and customer base, the company definitely aims to expand its business in foreign markets to ascertain growth and sustainability in this competitive business environment. Since its initiation, PepsiCo Inc was operating with an aim to create consumer products that will be most respected and considered to be the best performing in the whole world. Such ambition combined with the strong financial and operational condition of the company motivated it to expand in the international market so that their products can reach to the global consumers and revenue can be enhanced from the derived value of their products by the target customers (Blomstermo and Sharma, 2006). Market Entry Strategy in Different Countries Different companies opt for different modes for entering the foreign market. Fundamentally, foreign market entry strategy of a particular company largely depends on the nature of its business, prevailing business environment in the host country and the robustness of the company itself. For example, a franchise model can prove to be beneficial for an apparel company; however this mode of entry may not appear to be fruitful for a company producing consumer goods and services. Figure 1: Market Share of PepsiCo Inc. Since 2004 (Torelli and Stoner, 2015) PepsiCo Inc mainly follows the international market entry modes of joint venture, licence agreement and strategic acquisition, depending upon the situation and condition of business. The company penetrated the European market through the market entry mode of license agreement in 1980 and started distribution of its beverage products such as carbonated soft drinks, bottled and purified drinking water and fruit juice products Tropicana under the brand name of PepsiCo Europe. After capturing more than 16% market share of the European beverage industry in 2009, the company expanded its operations in Russia through acquisition of the country’s juice and dairy brand Wimm-Bill-Dann Foods in 2010 by investing $1 billion (Verbeke, 2013). Considering the Asian countries, PepsiCo Inc. confirmed its existence in China market through establishing 30 joint ventures in various parts of the province. The reason behind such massive expansion in China market can be attributed as the insight of the CEO of the company, Indra K. Nooyi, who considered the market as the single biggest opportunity outside the US market (Jansson, 2008). In India as well, PepsiCo Inc. entered through instituting joint venture with RP Goenka Group and Agro Product Export Ltd for implementing the plant for manufacturing cola concentration and accordingly distribution of the products such as carbonated soft drinks and packaged water Aquafina throughout the country. Soon the company started giving tough competition to the long established Coca Cola (Cavusgil and Knight, 2015). Most recently, PepsiCo also extended its operations to Middle East and Africa either through direct exporting its key manufacturing and distribution facilities or through licensing and contract manufacturing mode. As per the reports of 2012, approximately 13% of the company’s net revenue constitutes from this newly entered business line. Recently in 2014, PepsiCo Inc. entered into a licensing agreement with the local parties of Myanmar and re-entered the non-alcoholic soft drink market of the market almost after halt of 15 years (Cavusgil and Knight, 2015). Marketing Mix Strategy Adopted by Diageo plc Marketing Mix indicates the products, place, pricing and promotional strategies practiced by a particular company in international market. For any company, operating in multiple foreign locations, it requires to modify its marketing strategies according to the existing market conditions in different countries. Considering the case of PepsiCo Inc., as the company mainly adopts the strategy of acquisition or holds comparatively stronger position in joint ventures, it attempts to implement almost similar or slightly differentiated strategies in every month. Place: PepsiCo Inc., with an aim to achieve top line growth and margin expansion, drove for rapid geographical spread and integrated the consumers of 200 countries including Ireland, United States, Spain, Italy, Africa, Latin America, Australia, India, Vietnam and Gulf Region and facilitated them to experience their products and services. In order to manage such widespread business, the company has been successfully established large-scale global distribution network which the company manages from three distinct channels viz. Direct Store Delivery (DSD), Customer Warehouse (CW) and Third-Party Distributor Networks. (Torelli and Stoner, 2015) Product: PepsiCo Inc. included a wide range of carbonated and non-carbonated soft drink products such as Pepsi itself, 7Up, Mountain Dew, the orange flavoured soft drink Mirinda, the fruit juice product Tropicana, Lipton Tea, packaged and refined water, sports drinks etc. Under the non-beverage segment also, PepsiCo Inc holds a series of food products such that chips, flavoured snacks, cereals, rice, pasta, and dairy-based products.   Price: PepsiCo Inc always maintains a competitive pricing policy in order to capture a larger chunk of market share from its biggest competitor, The Coca Cola Company. However, in many countries, the company follows value based pricing, especially in the markets where the prices of cold drinks are market driven. Considering the case of partnership with various supermarkets such as Walmart where the main objectives of the supermarkets is to provide products at a lower price, PepsiCo Inc. has to maintain a low cost through considerably reducing its operating cost (Cole, 2003). Promotion: Promotional strategy holds utmost importance for any carbonated beverage company. PepsiCo Inc is not an exception. The company drives for extensive sales promotion, advertisements, putting glow sign boards and hoardings etc. The company also concentrates on Pepsi Stuff promotion in which consumers are influenced to collect Pepsi Points through purchasing of various products of the company and enjoying some discounts at the time of next purchase. In fact, the company also appoints the most prominent starts of the era as brand ambassador such as Tiger Woods and Shahrukh Khan and drive extensive promotional activities through them. PepsiCo Inc also sponsors various reality shows and matches at national and international level in order to capture mass attention of their target consumer segment (Cole, 2003). Brand Positioning and Advertising Strategy PepsiCo Inc. holds strong brand positioning and advertising strategies. Brand positioning is a marketing strategy that enhances the attributes associated with a brand to its target customers and provides the customer segment a reason to buy the products and services distributed under that particular brand name. A perfect brand positioning also highlights the uniqueness of the brand and its competitive aspects to the niche market and target audience so that the target audience can undertake every reason to buy the products of the brand (Hitt, 2009). The brand Pepsi inherently targets the young consumer group as a youth icon and it also aims to capture the attention of the overall society as the way of mitigating their purpose for refreshments. However, extensive research on brand positioning confirmed the company that it is impossible to position a particular brand for attracting mass consumers across all segment. Understanding that, since 1960 the company started targeting mainly the youth population across world through creating marketing campaign and brand promotions utilising the youth icons, especially from the sports segments and movies starts. In this way, PepsiCo Inc. created brand awareness and positioned their brands in such a way that helps the young people to relate the brand with them. The slogans and taglines such as “any whether is Pepsi whether” or “drink it to believe it”, “it’s our moment, it’s our time” are made so catchy and energetic that it is bound to attract the fun-loving and adventurous youth population (Muriithi, 2014). One important need to be mentioned in this regard is that in order to accomplish the brand positioning strategy, a company must exercise relevant advertisement strategies in order to pose its brand efficiently. In case of PepsiCo as well, advertisement is considered to be the main weapon for gaining mass recognition. With a series of timeless and contemporary television advertisements and glow sign board, hoarding PepsiCo has confirmed its position in consumers’ mind forever (Advertising Age, 2012). Competitor Analysis with respect to the Host Country Considering the competitors in United States, PepsiCo Inc, the company encounters competitions from a number of brands from the US non-alcoholic beverages market. Among all such brands, the company is involved into cut throat competition with its most important rival brand The Coca Cola Company. However, in order to maintain brand equity, PepsiCo Inc. never gets involved into price war with this rival. Rather, it continues to modify its products and promotional strategies in order to retain the consumers’ confidence. Apart from that, the company experiences significant competition from Dr Pepper Snapple Group, Inc. and Mondelez International, Inc. (Bloomberg, 2007) In fact, PepsiCo Inc. also competes with the non-alcoholic drinks such as Red Bull GmbH, Cott Corporation (COT) and Monster Beverage Corporation. Social and Cultural Influence on Targeted International Market Social and cultural influence of PepsiCo Inc is huge not only in United States and western market but also in the markets of Asian, African and other Middle Eastern countries (Torelli and Stoner, 2015). Such global brands strive to establish homogenizing forces through selling same tastes throughout the world, across cultures. Such influence is prominent from the global advertising campaigns efforts of the company. “Live for Now” and “Come Alive with Pepsi” are some of the instances of advertising campaigns of PepsiCo Inc through which the company attempts to connect the youths across the globe (Chirkova, 2011). Development of International Distribution Channel Distribution channels help an international player to procure materials and make the products of the company available to the end used at the right time and right place. PepsiCo Inc incorporates a strong and integrated global distribution channel which is considered to be one of the factors that have provided the company a competitive edge. The international distribution channel of the company is segregated into three distinct channels. Direct Store Delivery through which PepsiCo Inc. tends to deliver its products directly to the Point of Consumption (POC) or Point of Sales (POS), rather than depending upon any retailer or external distribution vendor. Customer Warehouse in which the products of PepsiCo Inc is delivered from the company’s manufacturing units to retail stores such as various supermarkets like Tesco Plc, Walmart etc. The third international distribution channel of the company is an integrated distribution network that enables the company to reach their products to the end-consumers through the channels of manufacturers to distributors, from distributors to retailers and finally to the end-users. Strong harmonization with suppliers and distributors and capability of the company to establish long term relationship with all such global distributors of PepsiCo Inc. is considered to be visionary for all companies operating in international framework. Conclusion PepsiCo Inc. is the leading beverage company in the carbonated soft drink segment throughout the world. Though the company started its operations from US market, efficient foreign market entry strategy of the company enabled it to confirm its existence in the most of the corners of the globe. Efficient marketing strategy including pricing and sales promotion, integrated international distribution channel as well as superior brand positioning has helped the company to achieve such foremost position in the global market. In spite of holding strong position in the market, the company is subject to experience huge competition from many other international brands such as The Coca Cola Company and Dr Pepper Snapple Group, Inc. However, the image created by PepsiCo Inc. in the global social and cultural context, has become successful in drawing the attention of the young folks. All such efforts in aggregate have enabled PepsiCo Inc to maintain the leading place in the international beverage industry for such a long period of time. Findings In spite of enjoying huge competitive advantage in the world market in aggregate, it has been noticed that there are some underlying problems in various markets that PepsiCo Inc. has been overlooking for so many years. For instance, overconsumption of Pepsi products is creating health issues and obesity in many countries, especially in Asian and Middle East countries. Moreover, due to high sugar content, a trend of avoiding Pepsi products has been noticed among the health conscious young generations (Business Insider, 2014). Many countries are banning the carbonated products of Pepsi as they have repeatedly found pesticide in those products. If the company can concentrate on taking corrective measures in all these segments, it will be able to maintain its leading position in the global marketplace for a long enduring period. Reference List Advertising Age, 2012. Pepsi Tackles Identity Crisis. [Online] Available at: [Accessed 13 June 2015]. Arnold, D., 2003. Strategies for Entering and Developing International Markets. Financial Times: Management & Leadership, 1(1), pp. 1-5. Blomstermo, A. and Sharma, D. D., 2006. Learning in the Internationalisation Process of Firms. Cheltenham: Edward Elgar Publishing. Bloomberg, 2007. Pepsi: Repairing A Poisoned Reputation In India. [Online] Available at: [Accessed 13 June 2015]. Business Insider, 2014. Theres One Major Problem With Pepsis New Stevia-Sweetened Drink. [Online] Available at: [Accessed 13 June 2015]. Cavusgil, S. T. and Knight, G., 2015. The born global firm: An entrepreneurial and capabilities perspective on early and rapid internationalization. Journal of International Business Studies, 46(3), pp. 3–16. Chirkova, A., 2011. Pepsi across cultures: analysis and cross-cultural comparison of Pepsi websites. [PDf] Available at: [Accessed 13 June 2015]. Cole, G.A., 2003. Strategic Management. Singapore: Cengage Learning EMEA. Hitt, A., 2009. Strategic Management Competitiveness and Globalization. Edinburgh: Nelson Education Ltd. Jansson, H., 2008. International Business Strategy in Emerging Country Markets: The Institutional Network Approach. Cheltenham: Edward Elgar Publishing. Johnson, G., Whittington, R. and Scholes, K., 2011. Exploring  strategy: Text and cases. New Jersey: Prentice Hall. Muriithi, J. K., 2014. Brand Internationalization Process: The Case of Ecolab. [PDf] Available at: [Accessed 13 June 2015]. Rau, P. L. P., 2011. Internationalization, Design and Global Development. Berlin: Springer Science & Business Media. Torelli, C. J. and Stoner, J. L., 2015. 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