Analysis of the Market of Coca-Cola Product - Case Study Example

A analysis of the market of Coca Cola product Coca Cola is a product manufactured by the Coca Cola company, which is a nonalcoholic multinational soft drink manufacturer headquartered in Georgia. The company occupies the ownership rights to Coca cola carbonated drink that the company invented in 1886, in Columbus. Coca Cola as a brand and product is sold across several continents, including Asia, Europe, the Americas, Australia and Africa. The product is a nonalcoholic drink to which hits inventor has managed to keep the formula of the product secret many years after its invention. Further, Coca Cola is a branded commodity that helps in influencing its differentiation strategy making it to be a global force against its competitors. One of Coca Cola,’s chief competitor is Pepsi, but the product has been successful at outdoing Coca Cola in terms of sales and market share (Haig 2005, p. 10). In recent times, the Coca Cola company has experienced numerous lawsuits and controversies regarding unethical work practice that varies from monopoly to discrimination. For instance, certain environmentalists alleged that they had found cancer causing elements within the beverage in 2003. Subsequently, Coca Cola sales plummeted with these allegations in sight, although the allegations were not substantive. However, Coca Cola experienced numerous lawsuits and controversies in the UK regarding unethical work practice that varied from monopoly to discrimination. For instance, certain environmentalists alleged that they had found cancer causing elements within the beverage in 2003. Subsequently, Coca Cola sales plummeted with these allegations in sight, although the allegations were not substantive. In order for Coca Cola to continue staying relevant to its market, it applies strategies such as innovativeness and technology in order for the product to be appealing to its targeted market. Essentially, Coke applies a five point marketing strategy that includes packaging, partnerships, products and equipments, consumer provocations and cultural leadership, which are modern and effective purpose (Moye 2013). For one, the Coca Cola product is packaged in a customized way that requires tailoring as per a specific market, which requires the application of technology. Essentially, a campaign known as ‘Share a Coke’ in Australia was an innovative strategy in which consumers were able to send Coke products to their friends with their first names printed on the bottle. The campaign was a success on social media, which led to the spread of the concept across the globe and also led to the increase of Coke sales during the same time. Secondly, Coca Cola through its company has also partnered with communities as part of its corporate social responsibility that includes the delivery of clean water to communities that are dire need of the commodity hence winning the hearts of more consumers during this process. The third marketing tool that Coca Cola applies is that of customization and influencing customer related creating that has led to the development of products such as the diet Coke (Moye 2013). Therefore, Coca Cola relies on consumer needs and ideas during the process of product development to ensure that they meet the same. Coca Cola began the concept of creating happiness among its consumer market, but it has moved to actually provoke the happiness by allowing them to share their stories of joy. This is more of a story telling concept in which Coca Cola consumers are allowed to share their stories of joy with others, hence making the happiness to come from them, which is the fourth marketing strategy. Lastly, Coca Cola applies TAOS strategy of marketing that includes Authentic, Transport, Sustainable, and Organic approach that helps in influencing change in life styles (Moye 2013). Essentially, Coke has been at the forefront of advocating for healthy progress by stirring the obesity dialogue through the production and sale of low calorie products. Coke also advocates for those that have excessive weight to engage in physical activities that can help them achieve healthy weights hence attracting and retaining more customers. 2. The Coca Cola distribution channel is one that trickles down to the level of the consumer, hence involving quite a number of middlemen. This means that the parent company sells the syrup to bottling companies with exclusive selling rights across various territories. Sequentially, the bottling companies then sell to distributors who later sell the commodities to wholesalers then they sell to retailers who in turn sell to the average consumer. However, the long chain of distribution tends to have minimal effect on the price of the consumer product, meaning that the price is standard across the various regions (Mullin, 2010: 45). This makes it possible for consumers to enjoy products from the Coca Cola company at unbeatable and recommended prices. In terms of competition, Coca Cola has a competitive rivalry with Pepsi, which is another world leading bottler and seller of carbonated drinks making the company to exist in a perfect competition. Coca Cola comes second to the products manufactured by Pepsi in terms of product sales and profitability across the globe. However, Coca Cola prides itself on being the leader in terms of customer satisfaction through the addition of value to their products. As a result, Coca Cola commands a market share of about fifty nine percent of the global soft drink industry. Accoding to IES Business Strategy, Coca Cola has dominated the carbonated drinks market for many years as it has been able to create a large barrier to entry for new entrants through its rigorous advertising campaigns that have discouraged new competition. The implication of this is that Coca Cola invests heavily in the advertising and also in developing innovative tools that are able to bar new entrants from trying to venture into this market. Coca Cola, just like any pother product abides by the rules and regulation set by the government that they operate in that touch on food safety standards and also being tax compliant in every of the countries that it sells in. Coca Cola understands the implications that the failure to abide to these regulations and requirements may have on its brand and image as it is rebuilding these two aspects might be quite costly in terms of rebuilding the same. Therefore, the market that Coca Cola operates in is heavily regulated and protected by their respective governments mainly because it operates in a market that deals with food and beverage production. 3. The Coca Cola product is one that is in high demand drawing from the fact that it is affordable to many and also because it is tailored as per the needs of its target market. This means that Coca Cola’s development of low calorie drinks that met the health requirements of its market has also pushed for an increased demand for their products. Therefore, Coca Cola’s ability to address the wellness concerns makes the product to be in demand within the liquid refreshments market. Coca Cola’s price elasticity draws from a number of aspects such as the availability of substitutes such as Miranda, Thumbs Up, Pepsi among a list of other products meaning that an increase in product price will translate to heavy losses. The implication of this is that consumers are likely to shift their loyalty to other products if they feel aggrieved by the price of Coca Cola products to consume those that are friendly to their pockets. Income level is also a factor influencing demand elasticity for the Coca Cola product, especially for the middle income earning target market when the price goes up. This means that an increase in the product price would lead to a decrease in the demand for the product for the middle income target group. Based on this, the Coca Cola product presents itself as an elastic product because an increase in product price influences the demand attached to the same by decreasing it because of the availability of substitutes in the same market. Further, Coca Cola falls under the category of substitute goods, meaning that it is neither a luxury good or essential product as people can do without it. The product is a substitute good because it has products such as Pepsi that can substitute one another in case there is an increase in price in one of them. The implication of this is that these substitute goods tend to have the cross elasticity of demand that it is positive as an increase in price for one commodity increases demand for the substitute product. Presently, Coca Cola capitalizes on advertising as a way of increasing brand loyalty for their products, which has so far worked for them. Therefore, increasing its allocation for innovative advertising can go a long way in making sure that the product stays relevant in the beverage industry and also gain a competitive advantage (Petretti 2008, p. 18). This can translate to increased global sales even without factoring other factors that can influence sales such as applying product promotion strategies. 4. Coca Cola operates in a market in which competition may not be much, but new entrants have also posed a threat to the product. Essentially, Starbucks and Costa coffee have ventured the carbonated drinks market and present tough competition to Coca Cola because they offer healthier drinks in their chain stores. Further, energy drinks such as Gatorade and Red Bull have also penetrated the market and consumers prefer them more as compared to the Coca Cola meaning that there is some preference attached. These products offer indirect competition to Coca Cola hence posing as a threat to the product’s sustainability in the market. As much as Coca Cola continues to experience stiff competition from new products, the product also has opportunities that can influence it to remain relevant. One opportunity lies in the fact that Coca Cola can diversify into producing healthier foods so as to attract the fraction of the market that focuses on living healthy lifestyles. In so doing, Coca Cola will be able to generate better revenues for the sake of the new products and also to venture into bottled water, which is another market that has immense prospects. The carbonated drinks market is not an easy market as without investing in advertising, then chances are that developing a product for this market would fail. For Coca Cola and other players in this industry, developing products that are in line with the needs of the market is key and also focusing on products that promote healthy living. In so doing, these firms will be able to generate more profits from product diversification and also engaging in promotion campaigns that would be able to push the product to the market. Lastly, Coca Cola cannot grab the market share because of the substitutes that are available in the market, but it should strive to maintain its current position not to go low and remain relevant in the market. Work cited Business Strategy ‘Barrier to entry’, IES. Available from http://strategicthinker.wordpress.com/barriers-to-entry/ [23 November 2014] Haig, M 2005, Brand failures: the truth about the 100 biggest branding mistakes of all time, London, Kogan Page. Moye, Jay 2013, ‘Marketing to Millenials: 5 ways Coca Cola is embracing creativity’, Coca Cola Journey 29 October. Available from http://www.coca-colacompany.com/stories/marketing-to-millennials-5-ways-coca-cola-is-embracing-creativity-and-innovation [23 November 2014] Mullin, R. 2010. Sales promotion: how to create, implement & integrate campaigns that really work. Philadelphia, Kogan Page Limited. Petretti, A 2008, Petrettis Coca-Cola collectibles price guide, Lola, WI, Krause Publications. Read More