Coca Cola Market Expansion - Business Plan Example

Marketing Plan for Coca Cola Company s Marketing Plan for Coca Cola Company Company situation Coco cola is a carbonated drink that is sold in restaurants, stores and vending machines globally. It is manufactured by the Coca Cola Company in Atlanta, Georgia. The Coca-Cola Company was established by DR. John Styth Pemberton in 1886. Currently, the firm is the leading manufacturer in the beverage industry globally. It is usually referred to as Coke, which is a registered trademark of the Coca Cola Company in the US since 1944 (Isdell, 2011, p.16). The firm produces a concentrate that is sold to licensed Coca-Cola bottlers across the globe. The bottlers have territorially exclusive contracts with the firm producing the finished products in bottles and cans from the concentrate after combining with sweeteners and filtered water. The bottlers then sell and distribute the products to retail stores and vending machines. Business objectives are goals that the business sets out to achieve as part of its overall aim. It usually includes maximizing of profit (Kotler et al., 2009, p.309). In relation to attaining its business goals, the firm has a mission and vision statements which it bases its objectives. The Coca-Cola company mission statement is “To benefit and refresh everyone who is touched by our business.” The vision statement of the firm is being a great place for the people to work in addition to being a responsible citizen by supporting and building sustainable communities. The company also state that they have the intention of maximising profit while maintaining their responsibilities and being a fast-moving and a highly effective and organization (Coca Cola Company, 2014). The firm sells over 500 brands globally in over 200 nations. Currently, Coca Cola beverages have grown to be the worlds ever-present brand, with more than 1.9 billion daily servings across the world. As of 2013, the firm had a revenue of US$ 46.854 billion, an operating income of US$ 10.228, and a net income of US$8.584 billion, as well as a total equity of US$ of 33.44 billion (Coca Cola, 2014). As of March 31, 2014, the firm had reported a gross profit of $30.19 billion. The operating profits are $ 21.3 billion. Majority of the revenue that is approximated to be 82.2 % and it usually comes from the sales of cans and bottles. Most people prefer canned and bottled drinks due to their ease for use. Due to its vast coverage, the firm has a large number of employees that is relative to the same market cap companies, with a consumer base of 18 million (Bell, 2012, p.23-28). As of December 2013, the firm had 130,600 employees. A large employee and customer base has significantly increased efficiecny in the firms operations. In the last three years, the efficiency ratios of the firm are as shown in the figure below. EFFICIENCY RATIOS Cash Conversion Cycle 129,886,420 Revenue per Employee 358,760 Net Income per Employee 65,727 Average Collection Period 129,886,420 Receivables Turnover 9.7 Days Inventory Turnover Ratio Inventory/Sales 7.0 Accounts Payble/Sales 40.20 Assets/Revenue 2.00 Net Working Capital Turnover 13.41 Fixed Assets Turnover 0.80 Total Assets Turnover 0.5 Revenue per $ Cash 4.50 Revenue per $ Plant 3.13 Revenue per $ Common Equity 1.41 Revenue per $ Capital Invested 0.67 Selling, General & Adm/tive (SG&A) as % of Revenue 36.9 SG&A Expense as % of Revenue - 3YEAR AVRG. 1.0 Research & Devlopment (R&D) as % of Revenue 0.0 R&D Expense as % of Revenue - 3YEAR AVRG. SWOT analysis SWOT analysis is a described as structured planning method that is used to evaluate the strengths, weaknesses, opportunities and threats that are involved in a business venture or project (Hill & Westbrook, 2007, p.11). It specifies the purpose, aims of the business venture and identifies the external and internal factors favourable and unfavourable to the business in attaining its goals and objectives (Armstrong, 2006, p.35). Figure 1: Showing SWOT analysis (Hill & Westbrook, 2007). A SWOT analysis carried out for Coca-Cola indicated that: Strength: Coca-Cola is recognizable firm, and popularity is its core strength and it is virtually incomparable. The other strength is large customer base due to brand loyalty. It also has an extensive beverage distribution channel thus having the globe’s largest market share. The firm has a website named EDI/ACH that coordinates the electronic payment for the Coke products. ACH is the new preferred method of payment since it eliminates paper billing to the customers. The other strength of the firm is its economies of scale (Bodden, 2008, p.56). lastly, the firm also operates in the fastest growing markets in the world. Weaknesses: the firm may be satisfied with their dominant market resulting into the firm not pushing for further growth. As a consequence, Coke’s competitors may gain ground and supersede Coca Cola as the dominant firm in the beverage market, leading dropping sales. The bottling companies of Coca-Cola also face a weakness with the parent Coca-Coca Company. The bottling companies use fixed prices which Coca-Cola controls. This is disadvantageous when the competitors reduce their prices to gain competitive advantage. In the bottling business, pollution is another weakness. For instance, the bottles water had led to the pollution of the environment in the recent past. In 2009, the sales of water bottles fell due to consumer awareness of the pollution coming from these bottles. (Guenette, 2012) argues that the firm also produces products that are considered as not being healthy. The firm is also exposed to slow-growth and fast-growth markets alike. The other weakness is that even though the firm has expanded its soft drinks portfolio, it still remains highly reliant on the carbonates. Therefore, it is vulnerable in this category. Opportunities: beginning in 2005, Coca Cola started converting its shipping fleet of about 2,550 motor vehicles to hybrid ones. The firm’s shipping fleet travels an average of 40 million miles annually. With the rising costs of fossils fuels and less dependency on it, this makes a great opportunity for the firm. By converting the fleet into plug-in hybrids, the vehicles would be able to travel 100 miles on a single gas gallon. This will save the company millions that would have been spent on fuel costs annually presenting a good opportunity to reduce overhead costs within the firm. The other opportunity includes enhancing the growth in consumption of the bottled water. This will in turn increase sales. The extensive and effective distribution network makes the company take any product in its numerous stores in a short time (Guenette, 2012). Threats: one of the threats is reducing gross profit and net profit margins. Competition in the industry is a threat to the bottling companies. Firms such as Pepsi own soft drinks such as Sierra Mist, Mountain Dew, Pepsi, and Diet Pepsi causing product saturation in the market. It owns 29 % of the market share while Coca-Cola owns 42 %. The threat Pepsi poses to Coca-Cola bottling firms is that it takes the market share away from them making them produce less. Since the firm will continue introducing low calorie products, the brands may face direct competition with each other in addition to being at risk of cannibalisation (Bodden, 2008). Lastly, the high that are levied in the country of operation may impact negatively on the firms profit margins. Marketing mix for Coca-Cola Product: Coca-Cola produces, markets and distributes the sparkling beverages such as Coke, Sprite, Fanta among many others. The company has also exclusive rights to distribute and market their still beverages as well, for instance, Vitamin Water and POWERade (Bell, 2012, p,134). Price: the company sets all its prices that are charged to the company under the Incidence Pricing Agreement. This agreement allows Coca-Cola Company to set the price under which they charge the firm for using Coca-Cola concentrates and their allied beverages. Promotion: the firm mostly uses advertising to promote its products. The advertising media that are often used are radio and television. The firm has also been striving to encourage recycling of its bottles and cans as part of its corporate social responsibility. The bottling companies have come with programs that promote recycling. Place: Coca-Cola products are found across the globe. Currently, the company has bottling rights that expand to over 200 countries. The sales regions have about 4 distribution facilities that serve a population of about 1 to 5 million people (Bell, 2012). Competitor analysis Pepsi Company is the major competitor of Coca-Cola. It is second in sales after Coca-Cola. In some markets, Pepsi outsells Coke. In South and Central America, Kola Real is a growing competitor to the Coca Cola Company. In Peru, Inca Kola sold more than Coca Cola leading the firm to purchase the brand in 1999. In India, Coca Cola is ranked third after Pepsi-Cola and the local drink Thums up. The French brand Mecca Cola and the British brand Qibla Cola are the major competitors of Coca Cola in the Middle East (Foster, 2008). Figure 2: Showing the market share in global soft drinks between Coca-Cola and Pepsi in the years 2007 to 2012. The other competitor of Coca-Cola is Dr. Pepper Snapple Group Inc. It is the brand owner, manufacturer and distributor of several non-alcoholic beverages in America, Mexico and Canada with numerous portfolios of flavoured carbonated soft drinks as well non-carbonated beverages. Finally, the other major competitor of Coca-Cola is Cott Corporation. The firm engages in the manufacture and distribution of retailer brand, branded bottled and canned soft drinks in North American and across the globe. It also produces clear sparkling flavoured waters, bottled water, and ready-to-drink teas. Cott has its manufacturing facilities strategically located around the globe including 21 in the US, 5 in Canada, 4 in the UK, and 2 in Mexico (Wikinvest, 2014). Porters 5 forces model of Coca-Cola Competitive rivalry: in the beverage industry competition is very high. Competitors such as Pepsi and Mecca Cola are consistently looking for new ways of introducing new products to the market. With a high level of product differentiation in the market, competition becomes very stiff. Threat of substitute products: for the bottling companies, the threats of substitute products are high. This is because they are numerous types of beverages that consumers can buy (Allen, 2009, p.34). As a result, the consumers can easily switch to products that retail cheaply Bargaining power of buyers: even though the bargaining power of one customer is low, when Coca-Cola raises their prices, consumers could easily switch to another brand since there are many choices that they can choose from. In the beverage industry, the buyer’s bargaining power is lowered down because of differentiated products. Bargaining power of suppliers: Coca-Cola has more bargaining power compared to other suppliers. This makes the firm to very crucial to the buyer industry. The firm also has constant innovative bottling and distribution methods; this will assist the firm to guard its profits from any future price increases from the suppliers within the industry (Bell, 2012, p.45). Barriers to entry: in the beverage industry, there are not many barriers to entry. This implies that it is easy for a company to start their own operations and start selling beverages to the customers. On the other hand, there are numerous established producers and supplier of beverage products such as Coca-Cola and Pepsi. These firms have created brand image as well customer loyalty. A firm like Coca Cola is established with a consumer base of ove18 million. This makes it difficult for a new entrant to stand out due to the fact that the firm needs to advertise and market more its products so that the consumers can choose it too. Huge promotional costs are deleterious to the growth of a firm (Allen, 2009). In 2001, Coke, Pepsi and their bottlers invested an estimated $ 2.59 billion in marketing and advertising. This makes it very difficult for a new competitor to stand out in the current market. A new product for the company With the growing trend in soft drinks, many people are now shifting to products that promote health and wellness. The consumers are increasingly having an understanding on the significance of healthy diets and are looking for healthier drinking options. This implies that many consumers are aware of the risk posed by high sugar content. That is why the firm will switch to also producing healthier food and drink options. The concept of having zero calorie is increasingly being well received as consumers since most of them like the idea of enjoying their cola without having to worry about any calorie intake. The company will continue developing low calorie products as a result of the competitive pressures. For instance, Pepsi has established a nutrition company that will be tasked with designing and overseeing the development of its health and wellness business. It comprises of wellness beverages and healthy snacks that are low in calorie content. For the new product, it targets the health conscious consumers. A 20-ounce serving of the low calorie soda is made up of 100 calories, which is less than half of the calories that are contained in a 12-ounce can/bottle of regular Coke. As noted by Doran (2001), the introduction of this low-calorie Coca-Cola product is projected to increase sales by 10 % using the SMART objective. The low calorie product will the health conscious consumer and it is also part of the firm’s objective to provide healthy foods and drinks. In relation to quantifying the progress of the product, a product analysis will be done to determine the consumer’s response to the product. The people who will be tasked with developing the product will be based at the Coca-Cola Company as well as at the bottling companies so as to ensure all the bottlers globally are able to come up with a similar product from the concentrate. Given the available resources at the firm, the results are realistic since many people practice self-care and wellness living. Majority of the consumers are aware of consuming high calories foods an drinks, thus the low-calorie products will be a perfect fit for them. With regard to the time period, the results need to be attained in a year’s time. Marketing Strategy for the new product For a product to stand out in the market, it needs a marketing strategy. The marketing strategy involves the process of the placement of the four P’s: (product, placement, pricing, and promotion) as shown in the figure below (Laermer & Simmons, 2007, p.67). Figure showing marketing mix (Laermer & Simmons, 2007, p.68). These four items are the pillars of the marketing mix and need to be considered in any marketing strategy. This marketing strategy will help gain an understanding of how one can position his/her-self in the market offering. Moreover, the 4Ps will be used to show the manner in which low-calorie Coca-Cola product will be the right product in the right place, price and time. Product: The new product is a low calorie Coca Cola product. It will packaged in bottles of various sizes including 300ml, 500 ml, 1.5 litres and 2 litres. Additionally, they low calorie product will also be available in cans of 375 ml. This ensures that consumers can access the product in whatever size they like. Pricing: By having the knowledge of how pricing is perceived in the target market, it is easy to come up with a pricing strategy. However, in this case, the Coca Company will set the prices that the will be charged by the bottling companies around the globe. However, the firm will also adopt the meet-the –price pricing meaning that the low calorie Coca Cola product will be sold at around the same price as its competitors such as Pepsi, Thums up, Qibla, and Mecca Cola (Geehardy, 2013). Promotion: the Company mainly uses advertising as its core source of increasing consumer awareness. Mainly, it utilises the television. The firm will post numerous advertisements of the low-calorie product both on television and radio. These sources will permit the company to reach a larger audience. The firm will also use the upcoming 2014 World Cup in Brazil to market this product. Millions will be watching this global showcase. In addition, social media such as Facebook, Twitter, and LinkedIn will be used to market the product so as to easily reach the online global audience. Placement: the parent company will sell the product to the canning and bottling operators. These firms will then distribute to wholesalers and other fountain retailers. These business operators will then sell to retail outlets, corner stores, new agents, petrol stations, restaurants and milk bars in the areas of operation. Target market The target market for this low-calorie product will be the general consumers, but those who prefer healthy foods and drink. The product targets consumers who are old in age between the years of 25 to 55 years. Since the majority of this target population have embraced technology, the firm will use both electronic and print media; television, radio and internet and newspaper and magazines respectively. In that respect, the low-calorie Coca Cola product will be advertised on social media such as Facebook, Twitter, and LinkeIdn. This will improve the sales to $32.5 billion by 2017 since most consumers will be aware of the product. Three (3) year financial forecast With the introduction of this new brand of soda, it is projected that, in the coming three years, the firm will sell over 650 brands globally. This will also improve the Coca Cola beverages daily servings to 2 million daily across the world, with 1.8 servings by 2015. As of 2015, the firm is projected to realise a gross profit of $33 billion and an operating profit of $ 25.60 billion. The revenues will increase from US$ 46.854 billion to US$ 47.101, with the total equity increasing from US$ of 33.44 billion to US$34. By 2017, the firm is projected to realise a gross profit of $35. 50 billion and an operating profit of $ 26.30 billion. The revenues will increase to US$ 47.567 and the total equity increasing to US$35.008. This will be as a result of rigorous promotional activities of the new product as well as increased economies of scale as shown in the table below. Table showing 3-year financial forecast for Coca-Cola 2014 2015 2017 500 brands globally 580 brands globally 650 brands globally 1.5 billion beverage daily servings 1.8 billion sales 2 billion daily servings Revenue: US$ 46.854 billion Revenue: US$47.101 Revenue US$ 47.567 Total equity: US$ of 33.44 Total equity: 34.00 billion Total equity: S$35.008. Gross profit of $30.19 billion and operating profits are $ 21.3 billion. Gross profit: US$33.00 and operating profit of 25.60 Gross profit of $35. 50 billion and operating profit of $ 26.30 billion. Assuming that it sells around 20.6 billion litres of the low-calorie product in its first year and 25.8 in its second year, the company is likely to have gross sales of approximately 142.1 billion dollars in its first year of operation. Assuming that the low-calories Coca-Coca product sales will rise at a rate of 8% starting from the second year onwards, with the cost of goods sold being approximately 40%, operating expenses 20%, and fixed expenses 35% of the total revenue, by varying the sales volume or the number of litres sold per year, we find that the net profit of the company will increase to $ 31.15 billion by 2017. Future marketing strategy The future marketing strategy is defined as the scope of an organization over the long term which achieves advantages for the organization through its configuration of resources within a changing environment in order to meet the needs of market and to fulfil shareholder expectations (Johnson and Scholes, 2006, p.9). First, the firm hopes to continue developing products such as lemon and Vanilla coke in addition to the healthy products. This extension is as a result of consumer demands. Secondly, the firm needs to establish online stores that will enable customers buy the Coca Cola products online. This will not only reach a wide customer base, but also be very convenient and flexible to the consumers. Thirdly, as cited by (OReilly, 2014), the company intends to shift to using smaller bottles so as to increase sales. For instance, Coca Cola intends to move from the 2litre bottle to a 1.75-litre bottle. The company also plans to unveil their global campaigns to enhance their ties to football ahead of the 2014 World Cup in Brazil (Joseph, 2014). Reference List Armstrong. M. 2006. A handbook of Human Resource Management Practice (10th edition).London: Kogan Page. Allen, F. 2009. Secret Formula: How Brilliant Marketing and Relentless Salesmanship Made Coca-Cola the Best-Known Product in the World. New York: Harper Business. Bell, L. (2012). The Story of Coca Cola. New York: Barnes & Noble. Bodden, V. (2008). The Story of Coca Cola. London: Cengage Learning. Coca Cola Company. (2014). Retrieved April 26, 2014, from Mission, Vision and Values: http://www.coca-colacompany.com/our-company/mission-vision-values Doran, G. T. (2001). Theres a S.M.A.R.T. way to write managements goals and objectives. Management Review, Volume 70, Issue 11(AMA FORUM), pp. 35–36. Foster, Robert. 2008. Coca-Globalization: Following Soft Drinks from New York to New Guinea. New York: Palgrave Macmillans. Geehardy. (2013, March). Retrieved April 26, 2014, from Coca Cola Marketing Mix: http://www.studymode.com/essays/Coca-Cola-Marketing-Mix-1526103.html Guenette, R. (2012, November 5). Retrieved April 26, 2014, from The Coca-Cola Company: Strengths, Weaknesses, Opportunities, and Threats: http://beta.fool.com/makinmoney2424/2012/11/05/coca-cola-company-strengths- weaknesses-opportuniti/15796/ Hill, T. & R. Westbrook (2007). "SWOT Analysis: It’s Time for a Product Recall". Long Range Planning 30 (1): 46–52. Isdell, Neville. 2011. Inside Coca-Cola: A CEO’s Life Story of Building the World’s Most Popular Brand. With the assistance of David Beasley. New York: St. Martin’s Press. Johnson, G., and Schloes, K. 2006. Exploring Corporate Strategy, Halow: Prentice Hall Joseph, S. (2014, April 2). Retrieved April 26, 2014, from Coke and Pepsi face off for World Cup brand win Video: http://www.marketingweek.co.uk/brands/coca-cola/ Kotler, et al. 2009. Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA. Laermer, R., & Simmons, M. 2007. Punk Marketing, New York: Harper Collins. Oliver, Thomas. 1996. The Real Coke, The Real Story. New York: Random House OReilly, L. (2014, April 15). Retrieved April 26, 2014, from Coca-Cola: http://www.marketingweek.co.uk/brands/coca-cola/ Wikinvest. (2014, April 25). Retrieved April 26, 2014, from Coca-Cola Bottling Co. Consolidated (COKE): http://www.wikinvest.com/stock/Coca- Cola_Bottling_Co._Consolidated_%28COKE%29 Read More