Coca Cola as One of the Famous American Soft Drinks - Essay Example

 Coca Cola as One of the Famous American Soft Drinks Introduction Globalization and Liberalization has changed the whole concept of business and marketing activities. Corporate companies and other big organizations are looking for overseas opportunities at present. Business tycoons have already experienced saturation in their domestic countries and they were waiting for an opportunity to internationalise their business. Globalization has come at the right time for them. Liberalized rules and regulations for the entry of foreign direct investments (FDI) by many of the countries made the path easy for the multinational companies to exploit the possibilities of Globalization. Offshoring and outsourcing are common business practices at present and adopted by MNC’s to cut down their expenses and to increase their profit by exploiting cheap labour and possibilities from other countries. (Coca Cola Pictures, n.d) Coca Cola, is the world’s largest non-alcoholic beverage company. It is one of the famous American soft drink industry leaders which have outlets in many countries across all over the world. “In May, 1886, Coca Cola was invented by Doctor John Pemberton a pharmacist from Atlanta, Georgia. John Pemberton concocted the Coca Cola formula in a three legged brass kettle in his backyard. The name was a suggestion given by John Pemberton's bookkeeper Frank Robinson”. On April 23, 1985, the trade secret "New Coke" formula was released. Today, products of the Coca Cola Company are consumed at the rate of more than one billion drinks per day. (Bellis, 2009) Today, the Coca-Cola Company and more than 300 worldwide bottling partners work together as the Coca-Cola system to deliver daily refreshment and drive to their global success” (Business, 2009) “Operating in over 200 countries with over 50,000 employees and more than 800 production and distribution centres” (Coco-Cola Key Success Factors, 2009) Research shows that its trademark is recognized by over 94% of the world’s population Innovative business strategies keeping in pace with the needs of the changing world made Coca Cola one of the all time great companies in the world at present. This report analyses the secret of success of Coca Cola Company by analyzing the worldwide marketing activities of the company Literature review Coca Cola is marketed globally in different countries and different cultures. International marketing is not easy compared to domestic marketing because of the social, political, environmental, legal, cultural and communal differences of the target country. Even though Coca Cola is marketing same products all over the world, they have utilized different marketing strategies across the world. They have realized that even if the product is the same; markets are different across the world and hence custom made marketing strategies are required for each market. Coca Cola has concentrated in; Focus on needs of our consumers, customers and franchise partners; Get out into the market and listen, observe and learn; Possess a world view; Focus on execution in the marketplace every day; Be insatiably curious (Mission, Vision & Values, 2009) Customer needs are changing every day with the advancements in technology and changing life styles of the people. It is not possible for an organization to cater the needs of the present customers using the conventional products alone. Periodical updating of the product is essential in order to ensure the success of the product in the market. Realizing this great principle Coke has introduced many different products time to time in order to satisfy their valued customers. Coke, Diet coke, Coke zero, Sprite etc are some of the products introduced by Coca Cola in time to time in order to satisfy its customers. Product diversification also has been by Coke as per the requirements of the customers. Coke has realized that the diabetic patients are growing day by day and hence the sugar filled soft drinks may not cater the needs of such people. Coke zero has introduced for such people with zero percentage of calories and sugar in it. Coca-Cola Zero® has been one of the most successful product launches in Coke’s history. In 2007, Coke sold nearly 450 million cases globally. Put into perspective, that's roughly the same size as Coke’s total business in the Philippines, one of our top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries (Products, 2009) “Coca-Cola has been able to survive and grow in an ever-changing market because of its ability to systematically innovate and deliver new products. In the late 90s the company, typically showing earnings growth of 15-20% per year, turned in three straight years of falling profits. It was apparent that the market was changing and in order to keep up with these changes, Coca-Cola had to move from a single core product to a total beverage company” (Coco-Cola Key Success Factors, 2009) Innovative marketing strategies are the core of Coca Cola’s success factor in their worldwide business. They have researched thoroughly before formulating their marketing strategies for different countries. Advertising is the major marketing function most of the organizations undertake for increasing the sales and that also with the help of customized advertising. For example, they have realized that Bollywood film personalities and cricket stars can influence the Indian public immensely and most of their advertisements were formulated with the help of such celebrities in India. Sachin Tendulkar or Shah Ruk Khan will be a huge success for Coke in their advertising campaign in India. Most of the organizations select some celebrities as their brand ambassadors for advertising campaigns. For example, David Beckham might be a better choice in UK whereas he might be a bad choice in China. In china, Jackie Chan might be a better choice. Thus the advertising activities must be customized for each country in order to conduct the marketing activities successfully and Coca Cola did exactly that. On the other hand, for western countries Coca Cola has formulated another marketing strategy with the help of music companies since they have realized that music has wide influence in such countries and through music they can reach out customers of western countries. The Coca-Cola Company and Warner Music Group's Atlantic Records have come together to record and release a new song featuring some of the hottest acts from the worlds of rock, pop and hip hop. The track accompanies the third in the Coca-Cola "Happiness Factory" series of commercials, and uses the 5-note melody made famous by the ads. Titled "Open Happiness," the single features the combined talents of Cee-Lo Green, Fall Out Boy's Patrick Stump, Brendon Urie from Panic at the Disco, Travis McCoy from Gym Class Heroes and acclaimed, Grammy nominated songstress Janelle Monae. The song reflects the spirit of positivity, optimism and fun expressed in "Open Happiness," the new global integrated marketing campaign for brand Coca-Cola. (Innovation in our Marketing, 2009) Coke has successfully formulated and implemented their vision, mission and values in all their marketing activities across the world. They have clearly stated that their mission was to become the market leader in soft drink industries in the world and they have succeeded in that with their commitment to Leadership, (The courage to shape a better future), Collaboration, Integrity, Accountability, Passion (Committed in heart and mind), Diversity, Quality (What we do, we do well, Inspire creativity, passion, optimism and fun) etc (Mission, Vision & Values, 2009) Social responsibility is one of the core business strategy adopted by major business tycoons. It is impossible for a major company to sustain their business activities smoothly if they overlook the needs of the public and their commitment to social responsibilities. Coke has faced severe criticism from Indian market because of their alleged exploitation of ground water resources. In order to restore their credibility in Indian market, they have taken measures such as rainwater harvesting, restoring groundwater resources, going in for sustainable packaging and recycling, and serving the communities where it operated. (Coca-Cola India's Corporate Social Responsibility Strategy, n.d) Today, there are over 700 low- and no-calorie beverages in Coke’s portfolio. By the end of 2008, they plan to include Guideline Daily Amount (GDA) nutrition labeling on all of their packages in Europe. In 2007, the Company and Foundation spent $6 million to support active, healthy lifestyle programs” (Products, 2009) As per the changing needs of the customers Coke has raised the standards of their products also. They never worked on increasing the profit alone. In fact they have given more importance to the health of the people and hence they have started to include the percentage of different ingredients in their soft drink bottle labels itself in order to help the public in selecting the product based on their health conditions. Moreover Coca Cola has spent millions of dollars for educating the public to lead a healthy a life. In addition to investments in bottling and distribution infrastructure, the Company also makes significant expenditures in support of their trademarks. Integrated marketing programs are used to create awareness and product appeal for their trademarks. These programs include activities such as advertising, point-of-sale merchandising and product sampling. Through bottling investments and strategic alliances with other bottlers of their products, the Company develops and implements integrated marketing programs on a global basis. In developing a global strategy for a Company trademark, the Company performs product and packaging research, establishes brand positioning, develops precise consumer communications and seek consumer feedback (The Coca-Cola Company Business, n.d) Coke is one of the topmost companies in the world which spends millions of dollars for advertising activities and trademark development. Print ads, Television ads, News paper ads, internet ads, billboard displays, point of sale (POS) materials, etc are some of the advertising channels used by Coke in order to strengthen their marketing campaigns. The advertising responsibility of each product of the Coke brand has been given to separate advertising agencies in order to concentrate more on the selling of each product. Moreover this strategy helped Coke to enhance the brand’s global positioning, increase accountability and also to the efficient utilization of Company's marketing expenditures. From 1996 onwards Coke has implemented another new tool called value-based management (VBM) to improve their performances. It helped Coke in the efficient management of economic profit. This approach was successful in creating value - in everything they do, every day. By focusing on value, they developed better strategies that helped them to create more value for our share owners. (The Coca-Cola Company Business, n.d) The above approach helped them concentrate on all the aspects of business rather than the profit alone. Product life cycle (PLC) Usually a product undergoes five stages during its life span in the market; (1) product development; (2) introduction; (3) growth; (4) maturity; and (5) decline (Product life cycle, 2007) The life of the product starts from the product development stage. During this stage the firms conceptualize their product. Introduction of the product into the market is the next stage. This stage normally characterised by low sales and low profits. During the growth stage only the product will be able to deliver high sales and profits to the company. Maturity stage is the key stage in product’s life cycle and after maturity stage the sales of the product will start to decline. Coke is in the maturity stage as far as the PLC is concerned. “This maturity stage lasts longer than all other stages. Management has to pay special attention to products during this stage of the product life-cycle. During the maturity stage, products usually go through a slowdown in sales growth. According to Coca-Cola's 2001 annual report, sales have increased by 1.02% compared to last year. This percentage has no comparison to the high level of growth Coca-Cola enjoyed during its growth stage” (What are Product life Cycle of Coca Cola?) Prolong product life cycle “Innovation in the market is the key to prolonging products life cycle. Prolonging the PLC of a product amounts to staving off the decline stage of a given product’s life cycle as that product contributes to overall company profitability. This might include such strategies as increasing investment to gain market share, innovation to improve a product, creating new uses for a product or recombining a product with new or other products to increase its utility thus prolonging the useful life of the product” (Moore) It is not easy to predict when the decline stage will start in the PLC of Coca Cola. But being the number one soft drink in the world, nobody wants to see the closure of Coke’s plants and products. At the same time the world is changing drastically and along with such global changes the consumer behaviours and habits were also changing. Coke must formulate strategies to prolong the PLC of it as much as possible. Innovation and modification are the best ways to accomplish such objectives. Discussions and Analysis Everything is undergoes changes in this world and the soft drink industry is also not an exception. Like many other business sectors soft drink industry is also witnessing stiff competition and struggle for existence. The competition between Coke and Pepsi is famous since these two giants control majority share of the world’s soft drink industry. Even though Coke is the market leader, Pepsi cola is also not far behind. In fact in some regions or countries like Middle East or India, Pepsi has attained the leadership in soft drink industry whereas in most of the other part of the world, Coke has established its supremacy. Without innovation, no business can sustain their market share in the current market. “Some of the offer consumers more beverage choices; some tap into growing categories like tea, coffee and smoothies; and some provide custom beverages and food/beverage pairings. Examples of innovative marketing strategies of coke are given below. Coke’s new Bevariety beverage dispenser allows consumers to choose from 12 brands and multiple flavor shot options, totaling more than 50 different drink combinations, in the same footprint as the existing legacy dispenser. Gold Peak variety tea dispenser is a self-service urn that offers four different tea flavors, offering choice and variety in the growing tea category. Juan Valdez caféREALE system enables foodservice operators to serve hot, fresh cups of Colombian coffee on demand. Minute Maid two- and four-valve juice dispenser delivers healthy beverage choices throughout the day, such as orange juice at breakfast and lemonade in the afternoon. The Coca-Cola Brands with Meals website provides customers with suggested food and beverage pairings, and a tool to develop specialty beverages with chefs from the Culinary Institute of America. (Innovation in the Marketplace, 2009) Coke never tried to implement innovative methods in marketing just to convince the customers that they are constantly updating their products. They always researched thoroughly about the possible success percentage of that strategy before implementing it to the market which helped them to attain high success percentages for most of their innovative marketing strategies. In fact, the history of Coke began with an innovation in which they converted a mixture of syrup and water into a soft drink which became one of the worlds’ leading soft drink at present. Coke has successfully implemented global and local standardization of the product which helped them to keep their number one position in tact so far. (Global standardization is a process of unification of business standards on a global perspective. In such standardization process the global customers will be targeted. But in local adaptation the business is focussing entirely for the customization standards flexible to the local standards and peculiarities). After the principles of the traditional international marketing concept, a pronounced global marketing program standardization-- understood as using a common product, price, distribution and promotion program on a worldwide basis--does not seem adequate. Given these differences in market conditions, a standardized strategy would not seem to be an effective strategy. By employing a more responsive international differentiation strategy, the different levels of market development and the differences in household income, customer expectations and usage patterns could be better addressed. The key to a better understanding of the standardization issue lies in a broader perspective. An exclusive market-oriented perspective in which success in a foreign market is attributed to a high responsiveness to the local business environment and market situation does not suffice to explain strategic decisions of international firms (Schuh, 2000) Because of the differences associated with each country and culture, a standardized business strategy seems to be impossible in the global market. The leading writing equipment manufacturing company Parker Pen has suffered a lot because of their effort to standardize marketing strategy on a global perspective. They thought same product needs same marketing strategy all over the world and tried to use the same marketing strategies everywhere and failed miserably. They failed to analyse the differences in global markets, politically economically and culturally. Coke on the hand realized the differences in global market and devised suitable marketing strategies for each region, country or culture. They never visualized globalization as a process of standardization. Even among rich countries sometimes the same product may not move equally well. “Globalization requires many internal modifications like changes in philosophy concerning local autonomy, concern for local operating results rather than corporate performance, local strategies designed for local rather than global competitors etc.” (Marketing across cultures, p.194, n.d) In a globalized business environment the local features must be given prominence in order to sell the product well. In some countries or communities, the purchasing attitudes of consumers may be different. For example, in a country like India, which consists of 25 states of different cultures, language and identity, the same selling strategies may not work equally well everywhere. The northern regions of India consist of cricket crazy illiterate people mostly. So any marketing campaign with the help of cricketers may get a big response in these areas. On the other hand on the southern region, football is a favorite game the footballers are superstars there along with film personalities. So any advertising campaign using the above celebrities will work well in the southern region compared to the campaign using the cricketers. Coke has realized these differences in culture even in the same country and has used custom made marketing strategies everywhere where they found differences. SWOT analysis Strengths The major strength of Coca cola is their brand value. Coke is one of most trusted brands in the world as far as soft drink industry is concerned. Large scale operation is another strength for Coke. They are operating in most of the countries and they can extend their hands anywhere in the world. Coke’s unique business policies, in which they were ready to collaborate with local bottling companies to sell their product, have made huge success to their marketing activities across the world. Local participation in their business has given them the edge in foreign countries while competing with competitors like Pepsi. Coke has evaluated the target market thoroughly before they formulating their marketing strategies. Merger and Acquisition policies has widely used across the world by Coca Cola in order to reduce the market competition and to strengthen their base in foreign countries. The major strength of Coca Cola is the sentiments, most of the customers attached with this soft drink. Because of the long tradition and the American backgrounds the name Coca Cola is a trusted one in many countries and the people have taken the image of Coke deeply in their heart. The Coca-Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable branding is one of Coca-Cola’s greatest strengths. “Enjoyed more than 685 million times a day around the world Coca-Cola stands as a simple, yet powerful symbol of quality and enjoyment” (Coca-Cola Case Study, n.d) “Coca-Cola’s bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach.” (Coca-Cola Case Study, n.d) Coca Cola has realized the importance of local collaboration in their business and hence they have authorized the local companies to produce bottles for their products. The company provide all the specifications and designs of the bottle they needed along with the coke syrup needed to be filled in the bottles. These bottling companies are authorised to sell coke products and hence their enthusiasm will be doubled since the feeling of a partner of Coca Cola like big international company is great for most of the local business groups. Advertising is another area where Coke has put their competitors far behind. They have realized the fact that ads prepared for American community many not catch the attraction of either Indian or Chinese community. Celebrities like Brad Pitt or Tiger Woods may earn more customers for them in America or western countries whereas in India or China like countries they realized the fact that they need the services of celebrities like Sachin Tendulakar, Amir Khan or Jackie Chan. Coke has given more emphasise in developing their trademarks for integrated marketing activities. They have utilized all channels like print, television, internet, news papers etc for trademark development. Value Based Management (VBM) was another innovative marketing strategy developed and implemented by Coke. With respect to this policy, Coke has redefined the values, missions and visions in their business activities. Most of the organizations are keen in making profits alone whereas Coke has successfully implemented VBM in order to make their employees and channel partners aware of other aspects of business apart from profit making. Coke never tried to engage in unethical behaviours in their operations. Business ethics have been kept intact even though the company was in tight competition with Pepsi all over the world. They never tried to engage in deliberate actions to damage the interests of others, to protect their interests while competing. Weakness The major weakness of Coke is the negative publicity about their products. In some countries the public have conducted agitations against them because of their exploitation of the natural resources and the suspected harmful ingredients in their products. “To be able to market its product properly, a firm must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers” (Coca-Cola Case Study, n.d) Coke has gone through several frightening periods during their journey towards its present position in the world. In India like countries, they were forced to stop all their actions earlier in the 70’s and 80’s. Even now they are facing stiff challenges in Indian states like Kerala as they are accused of exploiting underwater resources of Kerala and forced to stop some of their filling stations due to people’s agitation. Opportunities Bottled water industry is growing which can be utilized by Coke. Globalization has opened the doors of opportunities widely for Coke they have lot of opportunities in countries where globalization policies have implemented. Coke can use the merger and acquisition policies as an opportunity to strengthen their wings. The Coke Company has used the merger and acquisition strategies effectively in different countries in order to reduce competition and also to increase their market share across the world. For example, when they entered the Indian market they have realized that a small company soft drink called “Thumps Up” was more popular in India. Immediately they have acquired that company and currently it is working under the label of Coca Cola. “Coca-Cola, returned to India in 1993 after a gap of 16 years giving a new thumbs up to the Indian Soft Drink Market. In the same year, the Company took over ownership of the nation's top soft-drink brands and bottling network” (Coca-Cola, n.d) Threats Coke is already in the matured stage and any time the decline period can start which is the major threat for Coke. Competition in the soft drink industry is growing with the entry of new products in the market. Environment pollution is one of the major factors of concern in the current world. The Coke bottles made of plastic is definitely a major threat to the environment when we consider the huge volume of plastic bottles produced worldwide for bottling Coca Cola products. In order to save the future generation from environment problems, Coke must try to avoid the usage of plastic bottles as much as possible and also they must formulate strategies for recycling their plastic products or the safe disposal of the plastic products. “The corporate culture involving a super-brand like Coke can result in managers becoming overconfident in the product as well as the processes and procedures that have built up throughout the company over time. The danger is that the public will simply get bored with the brand” (Coca-Cola Management, 2006) So Coke need to think about complete restructuring of its marketing activities since they have faced some severe challenges in the recent past for their traditional marketing methods. Coke must realize that the feeling of on top of the world may create some kind of laziness among their managers and hence in order to revitalize them Coke need to devise and implement certain new strategies. Customer segments for Coca Cola The major customers for the coke are the youths even though coke is used by all the people. Youths often consider the drinking of Coke as a status symbol. Moreover, youths are often engaged in lot of activities which need physical workouts. The energy loss after the physical workout session is often compensated by having a soft drink by most of the youths and they select Coke as their favourite soft drink because of the impeccable taste and energy it provides to the consumers. Conclusions Like the acceptance of Microsoft all over the world, Coke also has established its supremacy globally even though Pepsi like competitors are raising stiff challenges to them in many countries. Coke has adopted diversification in almost every segment of their business. The products like Coke zero and Coke diet has revolutionized soft drink industry because of their wide acceptance among diabetic patients like customers. They have realized the fact that it is not possible for them to market their soft drink everywhere using same marketing strategies. Social, economical, political and cultural backgrounds are different in most of the countries and hence unique marketing strategies may not succeed everywhere. Customization of product is the order of the present world and Coke has realized this fact very well. Recommendations Drinking water shortage or water scarcity is one of the major problems faced by the world at present. Soft drink industry people are accused for the heavy exploitation of underwater resources in many countries. Coke has also such a bad reputation in countries like India. So in my opinion, Coke must think about utilizing the drinking water sources from other countries for their operations in countries where drinking water is a big problem. Moreover they must ready to research further in the field of making sea water suitable for drinking purposes. Most of the soft drinks available in the market are treated suspiciously by health professionals because of some of the ingredients of such drinks, which were harmful to the health. Coke must take more care while preparing their soft drinks as the human health is considered as precious as anything else. Coke must realize that people when they are tired or feeling thirsty, they will accept whatever the drinks available in the market trusting on the manufacturers. Such confidence of people in trusted brands should not be exploited by Coke like socially committed companies just for making profit alone. Globalization has provided immense opportunities to multinational companies. It is possible for these companies to utilize the resources of poor countries for mutual benefits since such countries may not have enough technology and resources to utilize their resources. Being a socially committed organization, Coke should take extreme care while expanding their businesses to overseas countries especially to poor countries. Coke has already got some bad reputations in some countries and hence their expansion processes must be evaluated more carefully than before in order to avoid possible conflicts later. References 1. 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