An Analysis of Coca-Colas Marketing Strategy - Term Paper Example

 «An Analysis of Coca-Cola’s Marketing Strategy» Abstract Global Marketing Associates was retained by Coca-Cola to undertake a comprehensive analysis of the company’s existing marketing planning, to assess the competition within the global soft drink and beverage industry, to identify the macro and micro level environmental factors impacting the industry and to develop a series of recommendations related to future marketing initiatives that the company might consider. There is no doubt that Coca-Cola is one of the most successful companies in the world. However, being number one means that all of the industry’s competitors set their own goal of becoming the industry leader. Coca-Cola remains the global leader in soft drink sales. However, the environmental scan and the SWOT analysis that form part of this report indicate several areas where Coca-Cola may be vulnerable. The company is not as strategically placed in the health and energy beverage markets as some of its competitors. The report recommends that Coca-Cola review its digital media and social network marketing objectives. The company appears to be particularly vulnerable in China, India and Latin America. Governments in these countries have been clear in stating that public funds will be used to support local industry in expanding capacity and increasing market share. This poses a real threat to companies such as Coca-Cola. The company has recently completed a ten year marketing plan that it calls Vision 2020. The plan contains some very ambitious goals. This report recommends that marketing professionals within the company conduct a research-based study to determine the feasibility of implementing the planning objectives. Table of Contents Abstract P. 2 Introduction P. 4 The Company Profile P. 5 The Micro and Macro Environment P. 6-12 Coca-Cola’s Global Marketing Objectives P.12-13 Analysis of the 2020 Marketing Objectives P. 14 Conclusion P. 14 References P. 15-16 Introduction In today’s global economy, a number of multi-national corporations are rethinking how to identify their product brand, how to increase their market share and how to position the company to be responsive in a global marketplace. Global marketing is characterized by intense competition by firms within a given industry and by consumers who have high expectations of the products they consume and the companies that produce them. Moreover, companies that are in the food and beverage industry are expected to develop health conscious products, be engaged in community awareness programs as part of a larger commitment to corporate social responsibility and to adopt as part of the company mission an awareness of global environmental issues. Twenty years ago, Coca-Cola successfully focused on branding and marketing Coke soft drink products. The only competitor of any significance was PepsiCo, and between the two companies they controlled the soft drink industry. Times have certainly changed. Coca-Cola can no longer rely solely on the traditional marketing strategies that served it so well for so many years. It must now market a corporate image, not just a series of products. It must use digital media to reach computer-savvy consumers, its products must appeal to a constituent group with tremendous variability in demographic and cultural profiles and it must provide a product mix that includes healthy beverages. This report presents a comprehensive analysis of Coca-Cola’s current marketing plan, it assesses the micro and macro environmental factors that currently impact the company and the soft drink and beverage industry, it identifies threats from competitors and concludes with a series of recommendations to the company’s senior management team and Board of Directors. The Company Profile Coca-Cola’s website provides a detailed history of the company from its inception in Atlanta, Georgia in 1886 to 2010 where the company is the global leader in the soft drink and beverage industry. Coca-Cola manufactures 3,300 beverage products under 500 different brands. The company’s products are consumed in 200 countries around the world. Coca-Cola’s Mission is “to refresh the world; to inspire moments of optimism and happiness; to create value and make a difference.” The company’s extensive Vision includes a section that reveals its overall marketing philosophy. The philosophy contains the following five components: To focus on the needs of customers and franchise partners, To listen and learn from the market, To utilize a world view, To emphasize market execution, To maintain an insatiable appetite for curiosity. Coca-Cola employs 93,000 people world wide. Its distribution network is massive with 300 bottling partners located around the world. The company sells 1.6 billion of its products every day (coca-cola.com). The company is governed by a fourteen member Board of Directors that includes Muthar Kent, the Chairman and Chief Executive Officer. In 2009, the company earned $8.2 billion in profits from total global revenues of $37.5 billion and paid out $3.2 billion in dividends to its shareholders (Annual Report, 2009). The Micro and Macro Environment The soft drink and beverage industry is one of the most competitive in the world. As the global demand for beverage products continues to increase, the successful beverage companies of the future must be able to identify and respond to market demand in a rapidly changing industry environment. If it is to remain competitive, it is critical that Coca-Cola be positioned to respond to the micro and macro-level environmental factors that will determine its future success or failure as a company. Understanding the internal and external environmental factors impacting a company is a primary tool used by marketing professionals. This in-depth knowledge of the environmental factors allows the company to develop strategies to meet changes in market conditions. The microeconomic environment relates to the firm’s ability to make internal adaptations in meeting the needs of its customers. Examples include quality and availability of suppliers, knowledge of the competitor’s products, consumer demand indictors, the effectiveness of the company’s distribution networks, internal research and development activities and product branding and other marketing initiatives (Gilligan & Wilson, 2009). For the most part, Coca-Cola does an effective job at managing the technical components of its internal environment such as supply chain management and product distribution. The company has a reputation for quality products especially in the area of soft drinks. Coca-Cola is also solid financially with easy access to large amounts of capital for investments in global infrastructure and new product development. The company’s 2009 total revenue exceeded $37.5 billion and its return to shareholders was $2.56 per share (Annual Report, 2009). There are several areas related to the microenvironment that are of concern that need to be brought the attention of the company leadership. First, the company has been slow to respond to changes in consumer demand. The company continues to focus the majority of its marketing efforts in developing countries on its soft drink products. Second, the company “brand” for products other than Coke is not well known throughout Asia, South America and Africa. Third, the company has some challenges with its marketing efforts through digital media. These issues are discussed in more detail in the SWOT analysis; Macro environmental factors are the external forces that present both opportunities and challenges for the company. Often referred to in the marketing literature by the acronym SLEPT, these include changing demographics, income distribution and macro economic policy, government regulation of business, technological advances, the relationship between business and the natural environment and social issues such as corporate social responsibility. In many respects, Coca-Cola has been more successful in recognizing the macro-level issues than it has with addressing the micro-level environment described above. The company has played a leadership role in raising the level of corporate awareness around the new public expectations surrounding corporate social responsibility. In addition, the company devotes a special link on its web site to the need to protect the natural environment and opportunities arising out of the new “green economy.” (coca-cola.com). The macroeconomic impact of the global recession and banking crisis which began in 2008 and continues today has affected all companies. Although Coca-Cola’s sales in certain market segments have declined during the recession, the impact has been manageable. Government regulation does not appear to have a negative impact on the beverage industry in general although the recent financial reform legislation passed in Britain and the United States may affect private sector firms’ access to capital on international financial markets. A SWOT analysis reveals that PepsiCo continues to be Coca-Cola’s main competitor. However, utilizing Porter’s industry competitiveness model, it becomes immediately apparent that other companies, particularly in the growth markets in India, China and Latin America, are rapidly gaining market share in specific market segments within the beverage industry (Porter, 1980). In China, Kangtai Cactus Bio-Tech and China Nutrifruit Group are becoming leaders in the manufacturing and distribution of health conscious beverage products. Indian company, Nirmitea, has captured a growing market share for its herbal tea and other beverage products in Europe, Canada, the Middle East and Asia. Two Latin American companies are dominant in the health and mineral water industry. GEMEX in Mexico and Columbia-based Embotellador Andina enjoy considerable support from their respective governments. European companies are also increasing market share in the bottled water and health beverage segments of the market. France’s Groupe Danone, noted primarily for its Evian brand of sparkling water and Red Bull, the Austrian-based company that now controls seventy-percent of the global energy drink market provide two examples. Japan’s Eto En is dominant in the Asian markets with growing demand for its green and herbal teas as well as for its franchises that sell vegetable and fruit juices. The list goes on and also includes The Gatorade Company and Nestle (Beverage World, 2010). Table 1 presents a SWOT analysis for Coca-Cola within the context of the extremely competitive soft drink and beverage industry as presented above. There is a reason why Coca-Cola is the number one beverage company in the world and few rational individuals would argue with its success. That said, however, there are several areas where the company needs to play close attention if it wants to maintain its market share throughout the next decade. Clearly, the company’s experienced senior management team, its comprehensive global product supply chain network, its current market share in the soft drink segment of the beverage industry, its secret recipes fro Coke, Coke Zero and Diet Coke and Coca-Cola’s fiscal strength will all serve the company well into the future. The company does have some weaknesses that can be exploited by its competitors. Outside of its soft drink products such as Coke and Fanta, few individuals would associate many of the company’s products with Coca-Cola. In some respects, the 125 year history of the Coke brand is a detriment to the company. This is especially so as consumers world wide substitute to more health conscious beverages (Noble et al, 2009). Second, from a public relations perspective in general and from a marketing approach in particular, the company’s website is poorly designed. This is important because the majority of consumers in many global markets rely on the internet f or their information. Websites must be simple, easy to navigate and to the point with regard to message. Interactive links are useful for those who wish to explore a particular topic in more detail (Ryan & Jones, 2009). The company must also re-visit how it engages in digital marketing through the social media networks. Chris Curtain, former Disney digital marketing guru, and current Vice-President Table 1 SWOT Analysis Coca-Cola Category Attributes Strengths Market share Financial resources Company management Product recipe Distribution network Weaknesses Brand recognition beyond Coke Website Digital marketing Generational marketing Vision and marketing goals Opportunities New product development Corporate acquisition Economies of scale Threats Competition in China, India and South America Foreign government investment Next-generation products for public relations and digital marketing at Hewlett Packard argues that social media networks are quickly becoming the foundation for successful marketing plans (Huffington Post, 2010). The company’s public marketing materials do not make a clear distinction between marketing soft drink products in Coca-Cola’s traditional market and generational marketing to younger customers and professional individuals who are increasingly demanding healthier beverage products. As one reads Coca-Cola’s mission and vision statements on the company’s website, the words conjure up images of a Hallmark greeting card jingle. Mission and vision statements form the foundation for all strategic initiatives that the company undertakes. They must be clear, concise, and measurable (Montgomery et al, 2009). The analysis reveals that there are three major opportunities that are available to Coca-Cola. The company is already dominant in the soft drink market segment. Where it has opportunities for significant expansion relates to the health beverage, energy supplement and organic beverage segments of the market. As Coca-Cola develops new products to meet demand in these emerging markets, the company can leverage the economies of scale that it enjoys through its global supply chain network to drive down costs making it difficult for other companies to compete. Coca-Cola enjoys significant advantages given its financial strength and its access to capital. Strategic acquisitions of beverage companies in Asia and Latin America will help to increase Coca-Cola’s international market share. Coca-Cola’s major threat over the next five years will come from two areas. The first relates to the increasing global demand for healthier beverage products. The reality is that in the developed countries at least, consumers are substituting away from soft drinks. As noted earlier, there a number of companies in Europe, Asia and Latin America that are focused on the healthy beverage market. The second major threat is specific to China and India, although countries like Brazil may also move in this direction in the future. The governments of India and China have both publicly stated that they will utilize the state’s fiscal resources to ensure that domestic companies have a competitive advantage in the market. To put this in perspective, Coca-Cola’s profits in 2009 were $8.2 billion. The Chinese government could spend that amount every day for the next year supporting Chinese companies and not even exhaust its accumulated foreign reserves. Coca-Cola’s Global Marketing Objectives Over the past several decades, Coca-Cola has done a masterful job in marketing its soft drink products. Most people will recall as they were growing up the famous Coke jingles and radio and television commercials that made the Coke brand a household name around the world. The company recently launched a new marketing campaign called 2020 Vision and Roadmap for Winning Together. Borrowing from the classic 5 Ps of marketing mix, Coca-Cola launched its 6Ps marketing vision at a November, 2009 conference in Atlanta, Georgia attended by the company’s senior management team and its bottling and distribution partners. The new marketing plan includes: Profit: the company will double global revenues by 2020, People: Coca-Cola will be a great place to work. Employees are the best marketing advocates, Portfolio: Coca-Cola will double its number of daily servings to over 3 billion per day. Coca-Cola products will become the number one, non-alcohol beverage in every market and in every product category, Planet: become the world leader in sustainable water use; demonstrate industry leadership in energy use and climate protection, Productivity: effectively manage people, time and money (Vision 2020). Muthar Kent, the Chairman and CEO of Coca-Cola, captured the essence of the company’s marketing vision for 2020 when he stated that: We know that winning in 2020 and beyond is going to require new capabilities, new models and new innovations. We are laser-focused on targeting the right consumers with fully integrated marketing campaigns that work on many levels, across many geographies and cultures, and leverage a variety of media and channels. The achieve the marketing vision outlined by Mr. Kent, the Board of Directors has committed $20 billion over the next ten years (company press release, Nov 16, 2009). Analysis of the 2020 Marketing Objectives No one will accuse Coca-Cola of lacking ambition and vision and an investment of $20 billion in support of the marketing plan is a scale that is unprecedented in the industry. However, these marketing objectives are going to be difficult if not impossible to achieve, even over a ten year period. Moreover, they are inconsistent with the macro-environmental and SWOT analyses provided earlier in the report. How, for example, given the macro-level indicators and the increased level of international competition that the company will face over the next decade, can Coca-Cola expect to become number one in every market for all 500 plus product brands that it currently sells? Brian Gaudet (2010) did the math and concluded that Coca-Cola would need to generate an annual rate of return of 14 percent to meet its 2020 sales goal. Effective market planning must be based on rigorous research that yields achievable goals that are easily measured in relation to established marketing metrics. The actual planning document that one assumes will provide operational objectives for each of the goals approved by Coca-Cola’s Board of Directors has not yet been disclosed to the public. The objectives need to be reviewed to determine how realistic they are given the market research. Conclusion This report provided a comprehensive, research-based analysis of Coca-Cola’s current situation, its competitive environment and the strengths, opportunities, weaknesses and threats that face the company. A number of strategies around web design, digital marketing, generational marketing and social network marketing were recommended for consideration by Coca-Cola’s senior management team and the Board of Directors. It is critical to the overall marketing message that the digital media be managed appropriately. Coca-Cola recently was the subject of intense public criticism in the U.K. over a Facebook promotion for the product Dr. Pepper that was found to be linked to a pornographic website (Sweeney, 2010). There is no doubt that the company leadership fully understands that marketing is the life blood of any successful company. Its commitment to a marketing budget of $20 billion dollars over the next decade will assure that the company’s brand will continue to be dominant in the global soft drink and beverage industry. References Coca-Cola Company History, [online] Available at: http://www.coca-cola.com [accessed 14 August 2010]. Coca-Cola Company, 2009Annual Report, [online] Available at: http://www.coca-cola.com [accessed 14 August 2010]. Coca-Cola Company, 2020 Vision and Roadmap for Winning Together, [online] Available at: http://www.coca-cola.com [accessed 15 August 2010]. Curtain, Chris, 2010. Top Social Media and Marketing Trends. The Huffington Post, [online] Available at: http://www.huffingtonpost.com [accessed 14 August 2010]. Gaudet, Brian, 2010. Can Coca-Cola Realize Their 2020 Vision? [online] Available at: http://www.seekingalpha.com [accessed 15 August 2010]. Gilligan, Colin, & Wilson, Richard, M.S., 2009. Strategic Marketing Planning, 2nd ed., Oxford: Butterworth-Heinemann. Montomery, Kathryn, C., & Chester, Jeff, 2009. Interactive Food and Beverage Marketing: Targeting Adolescents in the Digital Age, Journal of Adolescent Health, 45(3), pp. 18-29. Noble, Stephanie, M., Haytko, Diana, L., & Phillips, Joanna, 2009. What Drives College-Age Generation Y Consumers? Journal of Business Research, 62(6), pp. 617-628. Porter, Michael, E., 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: The Free Press. Ryan, Damian, & Jones, Calvin, 2009. Understanding Digital Marketing: Marketing Strategies For Engaging the Digital Generation, London: Kogan Page. Sweeney, Mark, 2010. Coca-Cola Considers Dropping Agency Behind Facebook ‘Porn’ Campaign, The Guardian, [online] Available at: http://www.guardian.co.uk [accessed 15 August 2010]. Read More