Coca Colas and Pepsis Marketing Strategies - Term Paper Example

 Multinational Corporations Table of Contents Table of Contents 0 Introduction: 1 Brief Overview of Companies: 1 The Firms and Their Products: 3 Coca Cola’s and Pepsi’s Marketing Strategies: 3 Conclusions: 8 References 9 Introduction: Globalization has created a big difference in the working of almost all companies across the world. Globalization is a word which has become one of primary importance in the current business world. This became dominant in the 90s when the cold war ended and the Soviet Union came to a sudden collapse and fell apart was separated. Globalization is the process of speedy yet steady change and integration of countries and the occurrences that happen with the use of foreign trade and a lot of foreign investments (Bentley & Ziegler, 2007). Globalization can be expressed as newer opportunities and possibilities for action among people across the world. Here the location is not an issue and the social activities are not affected by the location of the individuals or the businesses. There have been a number of different definitions that have been provided for globalization, however none of these can be considered to be precise (Bentley & Ziegler, 2007). This report aims discussing the strategies adopted by two companies and to learn about how the companies differ or are similar to each other in different markets. The chosen industry for the study is Non-cyclical consumer goods and services, and the two companies that have been chosen for this study are Coca Cola and Pepsi. Before moving into analyzing and evaluating each of these companies, a brief overview of these companies will be provided. The main reason to choose this industry is that this is one of the few large sectors in the world markets and the two companies have been recognized internationally. Brief Overview of Companies: Coca Cola is one of the leading companies throughout the world. It has had the highest and biggest selling soft drinks in the history and is one of the best known products in the world. Coca Cola was introduced in 1886 and was produced by mixing ‘Coca Cola’ syrup with carbonated water. This was started in Atlanta. However over the years the company has grown to become the world’s largest and most well known companies across the world. The company has created a trademark value for itself which has become invaluable and the goodwill that the company has been able to create for itself is very high. The company has made a name so strong for itself, that even if the company was faced with complete physical property losses, it could still borrow enough money to rebuild the entire company and still live up to its name (Kaye, 2004). . It started to grow its markets globally as early as 1919. Coca Cola has been extremely successful with this and is now present in over 200 countries worldwide. Coca Cola is the world’s largest manufacturer of non – alcoholic beverages. The company has been able to create a brand image throughout the world and it is safe to say that with the number of different brands it possesses it is the one which is no stranger to the global consumer. Over the years Coke has used a number of different marketing strategies and has been successful in almost all the cases. Pepsi Co. has been recognized to be one of the other leaders in the markets. The company was founded by Donald M. Kendall, and Herman W. Lay as a merger of two companies, i.e. Pepsi – Cola and Frito – Lay. The two companies were created in 1890 and 1961 respectively. The company has grown over the years and has been able to develop to an extent where the reported sales has been at $43 billion and the company employees as many as 198,000 employees worldwide (Pepsi Co, 2010). The company has been able to spread across the world and the company performs with the vision, ‘PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today’ (Pepsi - Vision, 2010). The Firms and Their Products: The Non-cyclical consumer goods and services market is one which involves intense levels of competition and also high range of products. The two companies mainly deal in manufacturing aerated drinks and other related items. Considering the two companies, it is clear that the two companies cater to similar markets and have similar products. The two major products of the companies include the aerated cola drinks across the world. There is a vast range of similarities in the two products and the only differentiating factor of these products is the brand name and brand image. Both Pepsi and Coca Cola can be recognized to be multinational companies. The companies have used several different strategies across the world to build and grow their brand images. Both these companies are very ethical and socially active companies. The marketing strategies of the two companies however differ with the differences in the various cultures and communities. Coca Cola’s and Pepsi’s Marketing Strategies: Considering Coca Cola’s international strategy, it has been noted that the company has always been of the types which prefer to undertake risks. This is seen by the fact that the company prefers to invest into emerging markets and grow within these markets. Coca Cola has been noted to be successful in every market they enter, irrespective of whether it is an emerging market or a fully developed market. Coca Cola has used a very strong step to ensure a strong building and sustainment of the brand image by complete commitment. This is one of the biggest and strongest indicators that the company pays a lot of attention to the marketing both local as well as international is the fact that the company has spent as much as $3.8 billion on marketing alone in 1995. The international strategy of the company is to reach out to all markets irrespective of their size or current standing in the markets. One of the most essential aspects that Coca Cola also keeps in mind while devising their international strategy is the fundamental rule of ‘Think local, Act Local’ (Kaye, 2004). This is the basic fundamental adopted by the company which makes the company more successful and one of the most invaluable brands of the world. Coca Cola however faces a high level of competition from Pepsi. Coca Cola has a high competitive advantage over Pepsi. Coke has grown to be the biggest and most profitable drink across the world. The company has shown a high level of growth and has gained a much larger part of the, market when compared to Pepsi. 1995 statistics shows that Pepsi had a strong operating margin of 10% while Coca Cola was as high as 23%. The company has also been able to gain a cultural benefit over Pepsi (Christo, 2009). It is noted in researches that people enjoy a drink not only based on the drink by itself but also to a great extent the cultural brand image that it has been able to build (Johnson, Scholes, & Whittington, 2006). The table below highlights Coke’s Market Share compared to the other soft drinks that are available in the market. This is as of 2007 and it is clearly seen that the original Coke Classic has proved to be the highest in terms of the market share and has quite a difference compared to Pepsi Cola as much as 6.5%. This is quite a high range of difference and this is the factor that makes Coke stand out when compared to any other cold drink / beverage. Also another very strong element that has helped Coke become more famous and provide a competitive edge over Pepsi is the fact that the company has a strong hold on the marketing. The company has been known for its storytelling techniques and for being able to reach out to a larger group of customers through the introduction of Santa Claus. This forms its competitive edge over Pepsi and this allows Coke to be well recognised by all throughout the world. The company however has faced a number of issues with the marketing. Some of the different issues will be discussed here and the strategies that Coke has developed to overcome these issues are also discussed in the next section. One of the biggest issues the company faced was in 2004, when the company’s sales were reducing and the company was starting to face issues as the people became more health conscious and believed that carbonated drinks are bad for health (Scott, 2007). The other major issue that was faced by the company was when complaints were made against the company for marketing the product to school children. This had affected the health of the school going children and was also a big cause for childhood obesity (Warner, 2005). Neville Isdell who was the new CEO of Coke in 2004, Isdell spent hundreds of million dollars to market the carbonated drinks and the new cola innovations. This resulted in the company earning revenues much higher than it had every earned since 1988, despite the fact that the sales in U.S was still declining. Isdell has been believed to use simple steps in the marketing process and techniques. He stuck to five important points while creating the entire strategy for the company’s marketing to overcome the issue of the dropping sales (Brand Sizzle, 2007). Firstly, Isdell notes that there was a ‘lack of belief’ among the consumers for carbonated soft drinks and this became a prophecy for the companies when the marketing support and the innovations weakened. The first step that he undertook was the introduction of the Coke Zero along with a lot of marketing. Although this was a carbonated drink, it still did help in reducing the decline of the company. This along with the added marketing acted as a support for the company to help only reduce the decline. Secondly, Isdell also followed one of the expressions used by a former boss – ‘Stand on the Balcony Once In A While’. This basically referred to the idea to forget about the day – to –day issues and to give importance to learning. This was one very useful idea used by Isdell as it allowed Isdell to reaffirm the company’s vision and work on uniting the company’s strategy (Brand Sizzle, 2007). Thirdly, a trick followed by Isdell was to define the product himself rather than letting others define the product. He replaced the name carbonated drink with Sparkling Beverage on account of the fact that carbonated drinks were being deemed to be unhealthy. This was an innovative step undertaken by the Isdell to help reposition the product and create a different brand image. Next, Isdell also noted that it would not be beneficial for the company to withdraw from production of carbonated drinks, as it was the core of their business. Even though the company does have a number of different non carbonated drinks as a part of their brand portfolio, they do not earn as much as the core (Brand Sizzle, 2007). Isdell pointed out that withdrawing support from Coke even though it still brought in the majority of the revenues would be the biggest mistake. Lastly, the one point which he noted was to realize the different innovations that can be done with the products. To ensure all the possible innovations are made, he introduced the Coke Zero, which helped realize that no category can be discarded without trying all the innovations, to meet the changing trends and tastes of the consumer. For the case of the school, Coca Cola took this as a very serious issue and steps were taken not to advertise to children below twelve. Coca Cola has been one of the first few carbonated drinks company to withdraw the carbonated drinks vending machines from all schools. The company took this as a very serious matter and ensured that children below twelve did not become a part of the target market. However there have been a few issues that have been unresolved as the company still does run campaigns for school children and provides school children with a number of sponsorships for the play ground, stationeries, etc. Also the campaign does include a number of promotion activities within the schools where the company dress the school play grounds with the colors of Coca Cola, thus spreading the colors into the school. Also the campaign that has been undertaken by the company to promote good dietary habits among the school children has turned into a mode of advertising for the company. Pepsi has been in the market equally long as Coca Cola and the company have been able to reach out to several countries over the years. The company currently serves over 200 countries and the main operations of the business is located in North America, Mexico and United Kingdom. The company is divided into three main business units which it uses across the countries, i.e., PAF – PepsiCo Americas Foods, the Latin American Foods and the snack business. The other brands include the PepsiCo business that is present in Europe and across the other areas like Asia, Middle East and Africa (The New York Times, 2010). Pepsi has worked with a number of marketing techniques and marketing strategies which include the experimental packaging and the ‘think global’ concept. According to the director of Arnell Group, the company has undertaken a wide range of research and development before formulating the packaging strategy and the company has been able to penetrate into the emerging markets and worked hard on finding the target markets for the product drivers. A lot of research has also been put into finding out the brand perception of people across the various markets (Romanik, 2007). Pepsi also similar to Coca Cola has developed several loyal customers and has been able to create a brand image and brand association where people have an attachment to the brand and have recognized it to be their favorite drink. The company worked with the basics stating, ‘Pepsi-lovers needed to see three elements for sure—the Pepsi "globe," the iconic Pepsi blue, and the familiar tilted Pepsi capital letters’ (Romanik, 2007). Another one of the excellent strategies that has been followed by Pepsi is the difference in thinking as per the country. For example, in India where people seem to be moving out of their shells and starting to do things their own way, Pepsi, has brought in an advertisement campaign which states, ‘My Pepsi, My Way!’ efforts like these and campaigns like this one allows the company to emotionally connect to the locals of the country thereby gaining the trust and the loyalty of people within the country. Conclusions: It is clear that the two companies have worked on finding different strategies and styles of management to deal with the culture and the needs of the different markets. Although the two companies have used very different marketing activities, the main basis of all activities are yet the same, i.e. ensuring that they can reach out to the local markets irrespective of which market they are operating within. Both Coca Cola and Pepsi have developed very diverse yet, equally successful strategies for the cross boarder activities. References Bentley, J., & Ziegler, H. (2007). Traditions & Encounters, Volume 2 from 1500 to the Present. McGraw-Hill Humanities/Social Sciences/Languages Publishers. Brand Sizzle. (2007, March 12). Marketing Strategy: Five thingd The Coca Cola Comapny Can Teach Us. Retrieved March 8, 2010, from http://www.brandsizzle.com/blog/2007/03/brands_five_les.html Christo, D. (2009). Coca – Cola: Universal Appeal? Pace University: Lubin School of Business. Johnson, G., Scholes, K., & Whittington, R. (2006). Exploring Corporate Strategy. Essex: Prentice Hall. Kaye, J. (2004, January). Coca – Cola India - Tuck School of Business at Dartmout. Retrieved November 9, 2009, from http://mba.tuck.dartmouth.edu/pdf/2004-1-0085.pdf Pepsi - Vision. (2010). Our Vision. Retrieved March 9, 2010, from http://www.pepsico.com/Company/Our-Mission-and-Vision.html Pepsi Co. (2010). Our History. Retrieved March 9, 2010, from http://www.pepsico.com/Company/Our-History.html#block_1965 Romanik, R. (2007, May 23). Pepsi's Global Strategy. Retrieved March 9, 2010, from http://article.unipack.ru/eng/18573/ Scott, S. J. (2007, August 23). Coca - Cola's New Marketing Strategy. Retrieved March 8, 2010, from http://samueljscott.wordpress.com/2007/08/23/coca-colas-new-marketing-strategy/ The Newe York Times. (2010). Pepsico Inc. Retrieved March 9, 2010, from http://topics.nytimes.com/top/news/business/companies/pepsico_inc/index.html Warner, M. (2005, July 12). Coke is Urging Youth to get Physical. Retrieved March 9, 2010, from http://www.nytimes.com/2005/07/12/business/media/12adco.html Read More