Table of Contents
In the last decades, the level of competition among various firms has drastically surged. This is caused by the increased level of technological knowhow and reduced barriers to entry for businesses, as well as the increased population, which provides the required market for produced goods and services. Benson (2010) argues that an improvement in technology has contributed to the success of small businesses for the last five years, as they can compete on the same platform with big and well-established companies. For example, small companies, especially in developing countries, have embraced online marketing strategies for their goods. This way, they managed to increase their market share despite them lacking adequate capital to establish physical shops in certain geographical areas around the world. One such company, which has remained a market leader despite heavy competition in the industry, is the Coca-Cola Company. Established in late 19th century, it is the largest company in based on producing, distributing and selling of non-alcoholic beverages globally. The company operates in more than 200 countries and has developed more than 400 brands since its inception. Some of the famous brands sold by the company include Coke, Sprite, and Stony among others. It is clear that the firm has successfully kept competitors, such as Nestle, PepsiCo and others, at a bay because of various marketing strategies employed by the company. This paper seeks to critically analyse and evaluate Coca-Cola Company marketing plans, which have ultimately made it remain a market leader in the non-alcoholic beverages industry.
The Coca-Cola Company is the leading company as far as manufacturing, distributing, and selling non-alcoholic beverages in the U.S. and other parts of the world are concerned. The company was established in 1886, inAtlantaGeorgia by John Pemberton, who was a pharmacist, and combined soda water, shrub weeds from Brazil, cinnamon and lime water. These ingredients formed an original recipe of non-alcoholic beverages, which became the most consumed across the globe. The recipe was later purchased by Asa Chandler in 1891 at a value of US$ 2300, thus, turning Coca-Cola into a globally renowned brand, as it is in the present times. The Coca Cola Company manufactures and sells more than 400 brands of products across the world, making it the leading company in terms of market shares, which are at least 45%, and enjoys customers’ loyalty of approximately 90% as per 2010. The Coca-Cola Company has branches in more than 200 countries and operates through licensed independent distributors in these countries. This is an aspect that helps the company critically segment its customers, resulting into high profitability levels. Despite harsh economic times, which faced many companies across the world, the Coca-Cola Company remained profitable throughout this period. This is because of its ability to embrace new modern marketing strategies, such as the use of the social media, such as Twitter, Facebook, MySpace, among other notable forms of modern marketing, namely blogs and mini websites. Over the years, the company has been able to keep a reputable philanthropic history ranging from constructing wildlife preserves in such places as OssabawIsland to sponsoring the FIFA 2010 World Cup held in South Africa. These aspects combined with innovation and inventions constitute a corporate culture that has catapulted the Coca-Cola Company to be one of the best performing companies (Benson, 2010).
The company’s vision 2020 aims at creating sustainable long-term destinations for the business through the provision of roadmaps for a win-win situation for the firm and all its partners.
The mission declares the purpose of the company. It also serves as a standard, against which the Coca-Cola Company weighs its decisions and actions. The company has three main mission statements, which are as follows:
1) Refreshing the world;
2) Creating value and making a difference;
3) Inspiring moments for happiness and optimism.
The vision of the company serves as a framework, which guides each area of the business through describing what is required to accomplish sustainable quality growth in the short- and long-run. This falls under “6Ps” policies indicated below:
1) People: the Company aims to be a great place to work, where people are fully inspired, being the best they can.
2) Partners: the Coca-Cola Company has a strong winning network composed of suppliers and customers. This way, they create enduring values and mutual responsibility.
3) Portfolio: the organization produces the best beverage brands across the world, satisfying people’s needs and desires.
4) Productivity: its aim is to be lean, highly effective and a fast moving organization.
5) Profit: the company aims at maximizing long-term returns to shareholders, while carefully being mindful of the firm’s overall responsibility.
6) Planet: it aims to be a responsible corporate, who makes a difference by helping in supporting and building sustainable communities.
The company winning culture defines a behaviour and attitude requiring the firm to make the anticipated 2020 vision a reality.
The values of the Coca-Cola Company serve as a compass for actions taken by the firm and describe the way the company behaves across its various outlets located all over the world. Some of the aspects evaluated based on corporate values include leadership, collaboration, integrity, accountability, diversity, quality and passion by being committed in the mind and heart.
The company focuses on the needs of customers, consumers, and franchise partners. To achieve this, the firm listens, learns and observes what is happening in the market. Moreover, it focuses on events happening each day in the market place. Being insatiably curious has been greatly important for the Coca-Cola Company.
To be smart in the working environment, the company remains responsive to changes, work efficient, and acts with urgency and courage of changing the course when required to remain constructively discontented. It also uses some other policies aimed at working smart and acting like owners.
Marketing Segmentation Undertaken by the Coca-Cola Company
It is important to note that the Coca-Cola Company fully understands various needs of its customers globally. By doing this, the firm has been able to retain a high number of customers, while still being able to get new customers despite stiff competition and tougher business environments. The company has shunned mass marketing strategies and embraced target marketing strategies. This is an aspect that has resulted into market segmentation.
In order to cater for the needs of customers from various regions, the company has come up with products having different packaging, tastes and colour, among others. For example, in regions having high levels of population density, especially in the Asia and Asia-Pacific regions, the company has introduced recyclable bottles, which are easy to carry. Hence, it helped the company cut down carbon emissions in line with MDGs (Millennium development goals) (Ghemawat, 2007). The sales for the company are frequently affected by weather patterns, especially in the European and American markets. As stipulated by Goldstein (2007), the consumption of products of the company drops by almost 30% during winter seasons and rises drastically to almost 92% during summers. To avert this problem, the company has ventured in the sale of hot beverages in an effort to streamline its sales figures despite weather conditions. In such areas as Pakistan, prices of products are low during winter seasons. This helps the company have steady sales figures in this country. Further research is still being carried out by the company to enable the production of better products to cater for the needs of customers from various geographic locations.
To deal with the market effectively, market segmentation according to gender, age, family size and nationality should be carried out. The Coca-Cola Company can attract customers of all age groups, mostly because of the fact that it produces non-alcoholic products. The Coke brand having low sugar levels have been produced to cater for children and elderly people. Coke with high levels of sugar is produced to make the youth feel full of energy. This is because they are involved in activities, which require a lot of energy, such as sports and studying among others. To cater for the sick and those under dietary restrictions, diet coke is sold. Different packaging, such as 12 cans packed in one box, is also important for those organising events, such as family outings, picnics and other events (Ghemawat, 2007).
The company segments its customers in line with their behaviours. Mostly Coca-Cola products are portrayed as energizers, thus they are highly recommended when one is fatigued or tired. As a result, many customers consume such products as Coke and Sprite in an effort to fell energized and refreshed after hard work (Kotler, & Armstrong, 2010). In the last three years, sales from the U.S., Asia and Europe markets were approximately 62% of the annual revenue generated by the company. The company has been focussing on these regions as it tries to reach light users in Africa and Latin America. Further, the company has segmented its markets, especially during such holidays as festive seasons, by lowering prices of its products with an aim of driving up sales figures.
This type of segmentation has been of high importance for the Coca-Cola Company. According to Webster (2009), psychographic segmentation comes about because of varying lifestyles and habits of customers. In such countries as Europe and the U.S., customers have the habit of increasing beverage intakes during summer times. To cater for the increased number of customers, the company introduces mobile shops and automated vending machines to make products available to customers at all times. The company has also introduced low-priced products aimed at catering for low spending of most customers as a result of the recent economic meltdown.
The company produces non-alcoholic beverages aimed at satisfying consumer needs. With more than 400 brands sold across the globe and with customer loyalty of at least 90%, it is evident that the products sold by the company are of high quality. Through market research, the company has come up with such products as juices, Diet Coke, Coffee with an aim of satisfying customer needs from various market segments. Through diverse products, the company has been able to achieve its mission of refreshing the world.
The company clearly indicates in its mission statement that it aims to offer products to all consumers worldwide. The company uses such intermediaries as distributors and retailers instead of distributing its products directly. To increase distribution in developed countries, the company uses automated vending machines in such places as concerts and schools among others. There have been an increase in distributional channels in the BRIC countries because of their high economic growth rate (Pareek & Moore).
Price is one of the most flexible elements that can be changed through the market mix (Pareek & Moore, 2009). The Coca-Cola product varies in prices depending on its size. Prices of vending machines in such areas as gas stations are usually fixed, while those in retail outlets are varying. The company employs both competition and psychological strategies of pricing. That makes the customer perceive that company products are relatively cheaper than those of its competitors.
Since the Coca-Cola Company operates on the global scale, its promotional strategies focus on the need of considering external environmental factors, such as economy, culture, natural resources, demographic makeup, political structures and technological developments (Hitt & Ireland, 2008). Across the globe, the company has participated in various promotional activities, especially in educating children from poor backgrounds in Latin America, Asia, and Africa and other continents. The company has also participated in CSR activities. For example, in 2010, the company was the main sponsor of the FIFA World Cup that was held in South Africa. Through these CSR activities, the company can promote its products among customers, increasing the market share globally (Kotler, & Armstrong, 2010).
Current Industry Analysis
The non-alcoholic beverage industry has changed in the recent years. The emergence of new entrants on the daily basis because of such reduced barriers to entry as minimal business taxations from governments in an effort to boost economic developments has resulted into increased competition. This has affected the way the Coca Cola Company, among other notable competitors, such as PepsiCo, carries out its business activities across the globe. New technology resulting into e-marketing has also affected this industry. Other challenges facing the industry include political instability and increased operation costs caused by high fuel costs in the international market, among others.
Innovation of a New Product
It is evident that the Coca Cola Company is one of the most innovative companies in the world. The company has highly invested in such areas as research in order to improve its products. It has enhanced the company’s profitability to attain the 2020 vision. It is on this note that the company has been able to come up with such products as Coca-Cola Zero, which is highly sold, as compared to any other product sold for the the last 25 years of the firm’s history (Kotler & Armstrong, 2009). Further, the company has been conducting research on how it can come up with organic products that can substitute carbonated sodas, which are drastically loosing market value, since customers’ behavioural patterns change mainly because of health reasons. The company has also come up with an innovative way to market its products across various customers’ segments across the world. For instance, it has greatly embraced the online marketing strategy. This is a factor that has increased the firm’s sales level by at least 15%, as witnessed in 2010, when the company made whooping US$ 35.118 as a sales figure (Coca Cola Company, 2012). It is evident that the company will remain profitable, even if it continues carrying out its business operations at the same levels of innovation and inventions.
It is clear that the main strength of the Coca Cola Company is a strong brand recognizable in all parts of the world. The company is the leading one in terms of its brand portfolio and creating value as far as non-alcoholic beverages are concerned. This is one of the factors, which has enabled the company to be ahead of its close competitors, such as Pepsi and Starbucks among others. Among the products manufactured by the firm, Coca-Cola, Diet Coke Sprite and Fanta are the top five soft drink brands across the world. Coca-Cola Zero, having zero calories and launched in 2009, has been one of the most successful beverages manufactured and sold by the company for its history. This product highly boosted the Coke brand as it is witnessed by more than 650 million cases. The product retails in more than 130 countries with the highest sales figures in Latin America countries, in particular Mexico, where cases of obesity caused by high sugar consumption are rampant. The Coca-Cola Company has strength of having a large scale of operations. This is evidenced by its high revenues amounting over US$ 23Billion in 2010. As a result, this has made the company to be the largest manufacturer, distributor and seller of non-alcoholic concentrates and beverages in the U.S. and other parts of the world (Murden, 2010). Having the largest distribution rate in various countries has increased the company’s market share in the recent years. For example, at least 6% of all products equal to 45 billion beverages served on the daily basis come from the Coca-Cola Company. These operations are supported by strong infrastructures possessed by the company in various parts of the world. The company owns and operates 32 beverage and syrup manufacturing plants globally. The other strength of the company is fast revenue growth in the Asian, Latin American and Asia-Pacific regions (Hitt & Ireland, 2008). Some countries in these regions have experienced double-digit growth in their economies for the last decade. For example, the economic development of Brazil, China and India has drastically surged for the last five years. These countries have joined the BRICS (Brazil, Russia, India, China, and South Africa), which represents the fastest emerging countries controlling 25% of the global economy and 40% of landmasses of the world. With perfect distribution networks in these counties, the Coca-Cola Company has been able to tap on the development of these countries. For example, in 2010, sales revenues increased by 17% in the BRIC countries. This is an aspect that promoted the profitability up to US$12B attained by the company in 2010. To tap on the growing demand of Coke products in the North American market, the company acquired the North American bottling plant in 2009. This was in an effort to link its distribution units with the mainstream company. By doing this, the firm minimized operation costs and maximized quality improvement in the region. That has improved performance in these regions.
In the recent past, the Coca-Cola Company has received negative publicity, especially in the Asian region. In 2006, the company was accused of distributing and selling some beverages having residues pesticides in New Delhi and its environs by the Centre for Science and Environment. With high levels of cancer reported in New Delhi at that period, the company was highly blamed for this. This factor highly damaged the company’s performance in these regions. Other weakness of the company is slow performance rates in Canada and other countries in the North American region. Despite acquiring the North American Bottling Unit in 2009, the region has recorded low sales volumes, since the onset of the global financial crises in 2008 (Hitt & Ireland, 2008). Previously, the region provided 25% of the annual sales revenues obtained by the company. Thus, any decreased activities will affect the performance of the company both in the short- and long-run. As indicated by Kotler & Armstrong (2010), a healthy cash flow is a vital aspect of the operations of any company. It is evident that cash helps in financing short-term projects, which are important to any firm. These projects include settling down debts to suppliers and creditors and paying salaries to the staff, among other notable activities. Even though a firm may be profitable, the lack of adequate cash may highly impede its development. Despite posting recommendable profits for the last five years, the Coca-Cola Company has experienced drastic reduction in its cash flow. For instant, cash flows in 2009 and 2010 declined by 5.4% and 5.1% respectively, resulting from some accruals incurred in 2008. As a result of this, the ability of the Coca-Cola Company to fund and finance its activities have drastically increased. This factor has increased the firm’s exposure to market debts and fluctuating interest rates. It is now clear that for the Coca Cola Company to remain the market leader and enjoy such a high market share across the globe, these weaknesses must be clearly dealt with in order to restore investors’ and customers’ confidence to the company (Hitt & Ireland, 2008).
Acquisitions are one of the opportunities possessed by the Coca-Cola Company resulting into a fast rate of growth. For instant, in 2006, the firm acquired Kerry Beverages ltd. in China. The acquisition highly extended the control of the firm over manufacturing and distribution in more than seven Chinese provinces. In such countries as Germany, the company acquired the Appolinaris Company selling mineral water. Other notable acquisitions made by the company include the TJC Holdings, a bottling company based in South Africa. It is evident that acquisitions have continuously increased the strengths of Coca-Cola in the international market, making it easier for the company to launch new products in all regions. In North America, the the Hispanic population has been drastically increasing. This group of people is considered wealthy, as its spending increased to US$ 1.4 trillion, representing a 34% increase from 2007. Another opportunity facing the company is the expansion of its activities to the bottled water segment, which has been rapidly increasing, as compared to other sectors of non-alcoholic drink segments. For the Dasani water brand, there is a big need for the company to increase its marketing activities both online and offline in order to increase the awareness of this product.
The Coca-Cola Company faces an increased competition from upcoming manufacturers, as well as bottlers of non-alcoholic beverages. In North America, the company faces stiff competition from such companies as PepsiCo, Schweppes, Cadburys, and Nestle among others. In different market environments all over the world, such as China, competition becomes fierce, since local beverage companies have clearly segmented their business, as compared to the Coca-Cola Company. This results in their better performance.. Another threat facing the Coca-Cola Company is high levels of dependency on bottling partners across the world. For instant, in 2010, 80% of the sales revenues made by the company originated from bottling partners. This is quite risky for the company bearing in mind that it does not have direct control of activities carried out by the partner. The company also faces the threat of growth of carbonated beverages (Ghemawat, 2007). For example, in Latin America, particularly in Mexico, Argentina, Peru, Brazil among others, the consumption of carbonated beverages has reduced by 335 for the last five years. This is due to high levels of obesity cases mainly associated with high levels of the consumption of sugars. This has resulted into a 12% decrease in market share in the region for the Coca-Cola Company. This may increase, if the firm fails to venture into the organic beverages sector in the near future (Gupta, 2010).
The Coca- Cola Company financial strengths indicated in the annual balance sheets continue to grow. The table below indicates financial strengths of the company for the last five years.
|Year||Sales revenues in million US$||Gross profit in million US$||Operating income in million US$||Net income in million US$||Dividend per share||Debt-to-equity ratios|
|2011||38, 129||24, 456||9,522||13,006||1.86||0.80|
Projected growth in the next three years
|Year||Sales revenues in million US$||Gross profits in million US$||Operating income in million US$||Net income in million US$||Dividend per share||Debt-to-equity ratios|
Sources; (Coca Cola Company, 2012)
Large profits will be achieved basing on the fact that the firm will invest in the non-traditional area, such as the Latin American and Asia-Pacific regions, as it has been previously concentrating on the American, European and North American markets. From the above table, it is evident that sales volumes rose drastically by 13.32% in 2010 to US$35.119 billion. This rise is caused by various acquisitions made by the company in the Asian and Asia-Pacific regions among other notable places. The company has also diversified its product range by manufacturing organic products and being able to reach the dwindling markets in North and Latin America. It is also evident that the divided per share rose impressively by 7.31% to 1.76 up from 1.64 in 2009. This resulted into the increase in net profit by 73.05% to US$11.809B in 2010. The value of debt-to-equity ratio dropped in the last year from 0.82 in 2009 to 0.77 in 2010 (Gupta, 2010). The ratio indicates the value, which the firm is leveraging in debts through the comparison of what is owed to the value owned. For example, the above figure indicates that for every US$ 0.77 of debt, Coca-Cola has US$1 of equity. This indicates that Coca-Cola has a room of borrowing more funds to cover cash requirements arising in the course of carrying out business activities. In 2011, the company projects to raise sales revenues to US$ 39.5 billion, ultimately raising the net income to approximately US$ 13B and divided per share to 2.0 (Coca Cola Company, 2012).
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Despite having a market share of over 50%, it is evident that the Coca-Cola Company faces a stiff competition from various well-established beverage companies across the globe. Since 2008, the stocks of Coca-Cola have been on a gradual increase as compared to those of the main competitor PepsiCo. For example, PepsiCo share prices have increased to US$ 63.56 up from US$45.78 in 2008. During this period, Coca-Cola shares have increased from US$ 52.35 in 2008 up to US$ 65.39 (Coca Cola Company, 2012). A quick increase in share values of PepsiCo, as compared to that of Coca-Cola, can be caused by the diversification of PepsiCo products. After the acquisition of the South Beach Company, the company has diversified its products to non-carbonated beverages, such as Gatorade sport drinks and herb spirited fruits among other products (Webster, 2009). This factor has increased investors’ confidence because of brighter market prospects facing PepsiCo.. Another close competitor of Coca-Cola is FIZ (a National Beverage Company), which operates in the North American region, being Coca-Cola’s main stronghold. The company manufactures distinct flavours, such as Faygo, Shasta, and Flagship brands, which heavily compete with Coca-Cola soft drinks. Cadbury Schweppes and all its subsidiary products also offer a stiff competition to the Cola Company, especially in the Asian and African markets. The group focuses on the beverages business, managing extensive brand portfolios. The Cott Corporation, which operates in the U.S., manufactures and sells organic beverages, bottled water and iced tea, also offering a stiff competition to the Coca-Cola Company (Gupta, 2010). The company has subsidiaries in Canada through the BBC USA Corporation. It is clear that the Coca-Cola Company faces strong competition from these and other emerging companies. This necessitates the need for continuous market research to enable innovation and invention, and come up with products that will satisfy customers’ needs globally now and in the future.
For a company to perform well in the international market, such aspects as marketing segmentation, continuous market research, and market mix organisational structures should be clearly analyzed. It is clear that the Coca-Cola Company remains one of the best performing companies in the non-alcoholic beverages industry despite heavy competition in this sector. This is clearly indicated by high sales revenues of US$ 35.119 billion posted in 2010. The company’s share value has also been on an increase, resulting into an improvement in investor’s confidence across the globe. In general, the Coca-Cola Company should invest in such areas as organic products in order to cater for changing consumer lifestyles in such areas as the U.S., Europe and Latin America.