International Marketing: Coca Cola Company - Case Study Example

International Marketing: Coca Cola Company Table of Contents Marketing mix of Coca Cola brand 2 Product 2 Price 3 Place 4 Promotion 5 Summary 6 Internationalization process of Coca Cola brand 7 Main internationalization process theories 7 Best theory for Coca Cola Company 8 Advantages and disadvantages of the applied theory 9 Effect of country of origin on perception of Coca Cola brand 10 References 13 Marketing mix of Coca Cola brand Marketing mix is a product of microeconomic theory (White, 2009). The marketing mix is also known as 4Ps (product, price, promotion and place). The functions of marketing mix include making it easy to market products and separating marketing activities from other activities of the firm; allowing delegation of marketing activities to specialists;  making the company competitive and essential for allocation of resources to different devices of marketing mix. Product Products must be able to provide benefits, which enhance the situation of users. Coca Cola’s product provision is driven by consumer’s demand. The firm aims at providing products, which are in line with the needs of consumers based on the country of operation (Eldred, 2008). The company sells its products to businesses and as such, it strives to enhance value for their customers in addition to striving to help their customers to grow their beverage businesses. Coca Cola offers a wide range of products and it is estimated that the firm has over 450 brands (Jain and Griffith, 2012). The products are divided into sports drinks, juices and juice drinks, water, carbonated soft drinks and teas and coffees. Some of these products are only marketed in certain countries while others are found in most markets (Czinkota and Ronkainen, 2007). This is based on the firm’s believe that people are always interested in a drink that reflects who they are, where they live, how they work and play and how they relax and recharge (White, 2009). Thus, the firm strives to place the right product in the right market at the right time. The company’s main products are coke, sprite, fanta, diet coke and coke classic (Pendergrast, 2000). Marketing strategies for products include new product lines, innovation, product line extension, changes or improvements of the products that exist, repositioning products and cost reduction. Coca Cola invests enormous amount of funds in research and development (Marr, 2010). As such, it is often introducing new products in the market. In addition, the firm innovatively alters the packaging of products to meet special needs of different markets (Jain and Griffith, 2012). Thus, branding design is not standardized in the markets but rather is based on the needs of the country’s consumers of the Coca Cola products. In spite this, some of the products offered by the company such as coke, sprite, fanta, diet coke and coke classic are standardized in most markets and the only difference is the packaging which differs based on the needs of the local people (White, 2009). Most of the companies are positioned as being unique and quality. moreover, the firm positions its products on the basis of affordability in that the firm packages the products in different sizes that enables consumers of different segments to be able to get a product that they can afford (Czinkota and Ronkainen, 2007). The products usage is usually standard in that they are all non-alcoholic drinks some of them being used as sports drinks or soft drinks. Price Price is the only flexible element of marketing mix, which can be adjusted at any time. Different ways are used to price products and services (Bodden, 2008). These include premium pricing, penetration pricing, economy pricing, price skimming, psychological pricing, product line pricing, optional product pricing, captive product pricing and product bundle pricing. Coca Cola Company employs various pricing strategies (Onkvisit and Shaw, 2008). For instance, when the company was introducing the Mother Energy drink in Australian market, it employed penetrative pricing strategy. The company offered the product at a lower price that enabled it to enter Australian soft drink market that was known to be very competitive (White, 2009). The firm also uses product line pricing strategy. Since the firm has different products, the pricing of different products differ greatly. The firm also employs skimming pricing in some markets. For instance, the prices of company’s products are varied in Pakistan based on the season (Jain and Griffith, 2012). Summer is considered a good season in the firm’s product market and hence the products are offered at a higher price than in winter where the products are reduced to maintain sales and profits (Czinkota and Ronkainen, 2007). It is apparent that the product pricing of Coca Cola is not standardized globally but rather it is adapted to the various markets to reflect the demand for the product. However, it should be noted that prices in a specific country are often standardized. This is enabled by establishment of bottling plants in various regions of the country to enable the firm offer standard prices in that particular country. Place This refers to the physical distribution and marketing channels. It allows goods or services to be moved from the producers to the users (Muhlbacher, Leihs, and Dahringer, 2006). There are several basic channels from which businesses may choose from to distribute their products (Ferrell, Fraedrich and Ferrell, 2012). They include direct or indirect channels, single or multiple channels, cumulative length of the multiple channels, intermediary channels and companies as intermediary channels (White, 2009). To decide on the distributor the firm ought to consider market segment, changes during the product life cycle, producer-distributor fit, qualification assessment and the training and support that the distributor will require. Strategies for place include intensive distribution, exclusive distribution and selective distribution (Czinkota and Ronkainen, 2007). To ensure that their products reach their target consumer, Coca Cola Company usually employs both direct and indirect distribution channels. In direct distribution, the firm supplies its products to the shops using their own transportation means (Jain and Griffith, 2012). The firm has many vehicles in different countries that enable it to supply their products to different shops in each country. This allows the firm to earn a higher profit margin. On the other hand, in indirect distribution, the firm hires other transportation firms to distribute its products to the shops. This mode of transportation usually results in reduced profit margin although it enables the firm to reach target market even in remote areas and hence making its products available (Joshi, 2005). In addition to direct and indirect distribution channels, the firm also has various bottling plants in various parts of each country to ensure that the cost of transportation are highly reduced and products easily reach the target market (White, 2009). The firm also involved in establishment of point of sale (POS) to enable its products reaches its target consumers. When entering a new market, Coca Cola usually partners with established distributors to enable its products reach target market. This reduces costs of buying infrastructure to distribute the products. Promotion Promotional strategies are important in communicating the feature of the product to the target market (Jain and Griffith, 2012). It includes all tools that are at the disposal of the marketer for marketing communication. Promotional mix elements include sales promotion, public relations, personal selling, trade fairs and exhibitions, advertising and sponsorship. Coca Cola employs different promotional strategies. Most of these strategies seem to be standardized in most markets. One the strategies employed is getting shelves. This entails getting or purchasing shelves in big departmental stores to display their products. This enables Coca Cola to display their products in a style which show their products more clearly and more attractive for the consumers (White, 2009). The firm also offers freezers to their customers (shops stocking their products). These freezers and the firm’s products are position by the firm’s sales representative in eye-catching positions in most cases the freezers are kept near entrance of the stores. The firm also employs sponsorship strategy where it sponsors various sports events and activities that enable it increase its market share (Czinkota and Ronkainen, 2007). Moreover, the firm is involved in many corporate social responsibility activities that make it more acceptable to different communities in which the firm operates. Furthermore, in recent years Coca Cola has employed mobile marketing to promote its products (Jain and Griffith, 2012). An example is mobile marketing was utilized to market sprite in USA targeting mobile audiences made up mainly of youths. This allowed consumers to shake, tilt or tap their iPhone screens to create various track melodies that could be uploaded, web shared and listened to. In addition, for many years, Coca Cola has been employing creative excellence in its adverts and recently it has adopted content excellence in their adverts (Keegan and Green, 2002). This enables the firm to create ideas that are contagious in what is known as liquid content. TV and print media adverts are also utilized in the promotion of Coca Cola products throughout the globe. Summary The product diversification strategy employed by coca cola is appropriate because it has enabled the firm to meet different consumer needs in different markets. For instance, the firm introduced new mother energy drink in Australian market by altering the formulation of its original drink that was found to be distasteful in order to meet the needs of customers (Jain and Griffith, 2012). Moreover, this strategy has enabled the company to be accepted in various cultures across the globe. For instance, its joint venture with Chinese firm to produce Tianyudi enabled it to become accepted within Chinese population. Furthermore, the strategy has been in instrumental in enabling coca cola to enhance value for their customers. The strategy has also enabled the firm to increase its target market because it is now able to cater for all age groups found in the market. The skimming and low pricing strategy is appropriate since it enables the firm to remain competitive and at the same time maintain revenue flow as demand changes. For instance, the firm is able to maintain its revenue in winter in Pakistan by offering its products at a lower price and in summer by increasing its prices (Jain and Griffith, 2012). The distribution strategies employed are also effective in ensuring that coca cola attains its mission of getting their products to consumers whenever they need in and wherever they are. Promotional strategies employed by the firm have enabled it to make many people aware of its products and to connect with their customers. for instance the adoption of content excellence in recent years has enabled it utilize new modes of adverts such as mobile and web based advertising that has connected the firm more with its youthful target market. Internationalization process of Coca Cola brand Main internationalization process theories Internationalization theories refer to the process in which a company gradually becomes engaged in international business and makes entry into foreign markets (White, 2009). Firms often encounter high transaction costs when entering new markets especially if such markets are imperfect markets. One of the theories used to explain internationalization of firms is the stage theory. According to this theory, firms start selling products in their home markets prior to sequentially expanding into new markets. The stage theory has two main models: Uppsala internationalization model and product life cycle model. The Product Life Cycle theory asserts that internationalization process of a company follows the stages of product life cycle (Jain and Griffith, 2012). It argues that companies introduce new products only in their home market and when the product reaches its maturity in its life cycle; the product is introduced into new markets. On other hand, the Uppsala theory argues that the involvement of a company in international arena increases gradually. Another theory for internationalization process is born global. Firms that pursue this theory visualize the world as their market place from the time they are formed and domestic market is only seen as a support for their foreign business (White, 2009). It is argued that firms usually approach international markets from the beginning due to external conditions such as advances in technology and communication and entrepreneurs’ knowledge and experience of international market. Entrepreneurs are also pushed to international markets by trade liberalization in foreign markets, which cause intense competition. Such conditions are argued to be responsible for emergence of born global firms. Best theory for Coca Cola Company The best theory for Coca Cola is the Uppsala theory. Prior to 1906, Coca Cola first sold its products in US before expanding into new markets such as Canada, Cuba and Panama. Thus, it seems during this early times Coca Cola adopted stage theory in expanding into new markets. The life cycle theory is unlikely to be adopted by Coca Cola since some products introduced in foreign markets may not be able to be introduced in USA (Jain and Griffith, 2012). On the other hand, Coca Cola was not initially meant for transacting in foreign markets when it was incepted and as such, it cannot be a born global firm (Lussier, 2011). According to Uppsala theory psychic distance that is influenced by differences in language, political system and culture often disturbs a firm’s entry into new markets and as such, a firm need to start internationalization process from markets, which are considered psychologically near it (Doole and Lowe, 2008). Coca Cola seems to have had this in mind when it started its expansion ventures from countries, which were situated near US such as Canada, Panama and Cuba. The theory further argues that as a firm acquires new knowledge it can gain stronger commitment to actual markets and enter other new markets. By using this theory, Coca Cola can utilize its experience acquired in the markets it currently operates in to expand into neighbouring countries. This is exactly what Coca Cola seemed to have done in its initial expansion activities. The knowledge gained in initial ventures will provide Coca Cola with experiential knowledge that can help it to reduce psychic distance. Advantages and disadvantages of the applied theory Uppsala theory is advantageous because it will enable Coca Cola became acquainted to the new markets. It will also enabler it to reduce transaction costs since initial ventures will enable it to develop distribution channels that will eventually be utilized when the firm finally decides to set a plant in the foreign country (Asongu, 2007). Moreover, this theory will enable Coca Cola to develop communication networks essential for its expansion (White, 2009). Furthermore, the firm will be in a position to analyze the perceived risk of investing in the foreign country. One clear example of how Coca Cola has utilized stage (Uppsala theory) is when it was entering Chinese market. Between 1979 and 1984, Coca Cola sold concentrate to its franchised Chinese owned bottlers. Thus, local market agents were responsible for production and distribution. Coca Cola then bought shares in the bottling business (between 1985 and 1992) to cut on the uncertainty effect and to restrict the opportunistic behaviour of its local partners. In the third stage, from 1993 to present, the firm teamed up with two foreign bottlers under a franchise agreement (Jain and Griffith, 2012). The firm internalized management control, procurement transaction and the labour section of its bottling business (Hagstrom, 2010). This involved localization of its management team and upstream suppliers. This resulted in cost reduction and Coca Cola products are now available to 80% of Chinese population. This theory has however been criticized for being deterministic, oversimplifying a complex process, ignoring the impact of exogenous variables and acquisition and that some firms often skip stages. For instance, Coca Cola may decide to set up a plant in a new country without necessary have to export its products first to that country (Thomas, 2009). Effect of country of origin on perception of Coca Cola brand Country of origin (COO) is defined broadly as a multidimensional construct whose main dimension includes factors that relate to the image of national versus imported products; the evoked image by the geographic origin of the brand; categories of merchandise that are known to derive from a certain country or provenance, the national image of producers and the influence of “made in” concept in the perception of the product. It is the influence that the country of manufacture has on a consumer’s perception of a product, whether positive or negative. Thus, the country, product type, company image and the brand of the company influence the magnitude of the country of origin effect upon the global consumer (White, 2009). Research has shown that a strong brand name is not likely to overcome the negative effect of COO and hence marketers need to understand COO effect when marketing their products. Most studies have indicated that COO impacts on consumer perception and behaviour through the image of the product’s COO (Jain and Griffith, 2012). The image of a country is a result of series dimensions, which positively qualify a nation in terms of its production profile. Dimensions, which influence the production profile of a country, include innovative approach, prestige, design and workmanship. Having originated in USA, Coca Cola products are viewed to have the highest quality. Coca Cola however received negative effect of country of origin from Beijing authorities. To overcome this, the firm entered into joint ventures with a Chinese company to produce a fruit soda called Tianyudi. In spite the negative effect from the authorities, Chinese consumers usually prefer western brands to Chinese brands owing to decades of buying poor quality products from sate owned factories. Consequently, Coca Cola has been able to penetrate Chinese market successful and it is estimated that currently 80% of Chinese are able to access Coca Cola products. References Asongu, J. 2007. Strategic Corporate Social Responsibility in Practice. London: Greenview Publishing Co. Bodden, V. 2008. The Story of Coca-Cola. London: The Creative Company Czinkota, M., and Ronkainen, I. 2007. International marketing, 8th Ed. London: Cengage Learning Doole, I., and Lowe, R. 2008. International marketing strategy: analysis, development and implementation, 5th Ed. London: Cengage Learning EMEA Eldred, M. 2008. The Emperors of Coca Cola. London: Lulu Ferrell, O., Fraedrich, J., and Ferrell, L. 2012. Business Ethics: Ethical Decision Making & Cases, 9th Ed. London: Cengage Learning Hagstrom, R. 2010. 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For God, country and Coca-Cola: the definitive history of the great American soft drink and the company that makes it, 2nd Ed. London: Basic Books. Thomas, M. 2009. Belching Out the Devil: Global Adventures with Coca-Cola. London: Random House UK. White, M. 2009. A short course in international marketing blunders [electronic resource]: mistakes made by companies that should have known better, 3rd Ed. New York: World Trade Press Read More