Marketing Strategy Analysis of Coca Cola

INTRODUCTION

This report serves as a comprehensive marketing audit of Coca-Cola. This audit examines the internal and external operating environment, the varied strengths, weaknesses, and other market forces driving change at Coca-Cola. To effectively conduct this analysis several tools and techniques were used to thoroughly examine the environment. They include:

P.E.S.T and SPICC Analysis, which was used to examine the external environment.

4 P’S of Marketing and McKinsey 5 S which examine the internal environment, and;

S.W.O.T Analysis

Additionally consideration of the market size, structure and current trends were analysed to make informed recommendations.

AUDIT OBJECTIVES

The objective of this marketing audit is;

To review the current marketing environment of Coca-Cola and prepare recommendations to improve Coca-Cola’s market share and competitive advantage.

Utilise the results of the audit to create at least one new marketing objective for Coca-Cola.

P.E.S.T. ANALYSIS

Having examined the political, economic, social and technological trends, useful information was generated for a strategy formulation, at Coca-Cola. The following represents a summary of the findings: _(REFER TO APPENDIX 1 FOR DEFINITION OF PEST ANALYSIS)._

POLITICAL

Manufacturers of soft drinks are increasingly guarded by legislation affecting health and safety. It is now mandatory that ingredients must be clearly labelled and an increasing amount of additives are not allowed. Coco- Cola must adapt to meet changing legislative requirements.

There has been increased focus on using international standards and benchmarks such as standards developed by the International Organisation for Standardisation(ISO).

ECONOMIC

Significant economic growth in non-traditional or developing markets has taken place, economies such as China, Russia and Latin America.

The economic environment impacts on the purchasing power of consumers. For example, when the average income decreases a consumer has less buying power and vice versa. Additionally, there have been increases in the minimum wages in several jurisdictions.

SOCIAL

The population is becoming more educated on health issues; greater emphasis is now placed on healthier lifestyles, increasing demand for, healthy beverages. Globally, the greatest concern to which the food and beverage industry must respond is the rise in obesity.

Additionally, issues of global warming and other environmental concerns are receiving more attention. Pressures for reducing waste and using environmentally friendly products give rise to the need for using more recyclable material.

Increasing consumer awareness of ethical responsibilities in manufacturing and distributing, food and beverages requires responsiveness by Coca-Cola.

TECHNOLOGICAL

Advancing technology has :

Paved the way for new techniques in microbiology, allowing opportunities, to develop previously difficult, new product formulations.

Conceived new ideas and methods in marketing and advertising that can capture wider markets, such as, e-marketing using the internet.

Changed business boundaries, making it more feasible and profitable for businesses to expand their operations globally.

SPICC ANALYSIS

The SPICC Analysis (suppliers, publics, intermediaries, competition and customers) analysed the company’s immediate environment and their competitors. The following is a summary of the findings:

SUPPLIERS

Coca-Cola is heavily dependent on its supplier base. These relationships need to be properly managed to assure that the required inputs are available and accessible on demand. Coca-Cola key suppliers are the producers of carbonated water, kola nuts, concentrated juice syrups, caffeine, sugar and water.

PUBLICS:

The company publics consist of its shareholders and other stakeholders who include the government, media, community, financial organisations, employees and its consumers. These groups should be properly segmented to identify their needs, thereby enabling Coca-Cola to satisfy those needs and deliver a superior investment through consistent increases in profits and sales volumes.

INTERMEDIARIES:

Coca-Cola intermediaries’ consist largely of their bottlers. Coca-Cola has constructed a worldwide bottling network; consisting both privately and jointly owned bottling operations. Banks and insurance companies are critical intermediaries. These relations must not be overlooked in the new market strategy.

CUSTOMERS

Coca-Cola has approximately 1.4 millions customers throughout its countries. These customers range from small, independent retailers to large international supermarkets and restaurants chains. The changing needs and requirements must be continually assessed so that Coca-Cola can adapt and remain relevant.

COMPETITORS

One of Coca-Cola’s main competitors is PepsiCo. “In 2005 PepsiCo market capitalisation reached 98.4bn and the market valued rival Coca-Cola at 97.9bn”. PepsiCo has reported increases in market capitalisation by 1.23% while Coco- Cola decreased-0.23% during the same period. Additionally, the non-alcoholic beverage industry is constantly growing.

Other competitive factors include merchandising productivity, distribution, sales method, and promotional activities. Coca-Cola faces strong competition form companies that produce and sell products to consolidating retail stores where buyers are able to choose freely. Local bottlers of competing products are also a force to be reckoned with.

MARKET SIZE

On an average day over 1 billion bottled drinks is consumed. This is a significantly large and thriving market. This estimate is developed utilizing the market capitalization figures reported by PepsiCo and Coca-Cola as these companies currently dominate the market. The market capitalisation figures indicate that Coca-Cola now distributes (97.9BN) and PepsiCo(98.4BN) indicating the extent of the beverage industry. PepsiCo is now leading the market. However based on the magnitude of such a market it is not impossible for Coca-Cola to regain dominance by recapturing loss markets and exploring developing ones.

MARKET STRUCTURE

The market structure of the beverage industry consists mainly of bottlers, consumers, retailers, wholesalers, marketing alliances, manufacturers and franchise holders.

4’PS OF MARKETING

The 4 P’s of marketing approach was used to analyse the impact of the marketing strategy in achieving Coca-Cola objectives. The following is the summary of the analysis:

PRODUCTS

Coca-Cola offers over four hundred brands of products to meet the taste and needs of varying consumers. The non alcoholic portfolio includes:

Carbonated soft drinks

Waters

Juices

Ready- to- drink teas and coffees

Sports and energy drinks

People lifestyles and taste are continuously evolving and Coca- Cola strives to offer a wide choice of beverages to meet those changing needs. Additionally Coco-Cola has developed different flavours and sizes, thus making full use of the market to maximise sales.

PROMOTIONS

Coca-Cola uses a pull strategy in their promotions. That is, they promote to the customer to create a want for their products, which in turn creates a demand. For example, in supermarkets Coco-Cola has their own fridge, which contains only their product. There is little PERSONAL SELLING but this is compensated through PUBLIC RELATIONS and corporate image.

Coca-Cola sponsors various events; World Cup Soccer, NASCAR, Rugby World Cup and The Olympics. All these create significant awareness of your product. The use of competitions, such as check under the lid for an instant prize, encourages consumers to buy.

Coca-Cola has developed an image for its product as convenient and eye catching with its bight red colour and uniquely designed bottle shape. Coco- Cola promotions effectively attracts consumers to their products. The company’s immense media advertising schemes creates a good corporate image of the company.

PLACE

Although Coca-Cola was first sold in the United States in 1886, it is presently sold in more than two hundred countries worldwide. The company operation is segmented in five main geographial areas: North America, Latin America, Asia, Africa and “Europe, Eurasia and Middle East.” Coca-Cola operates four hundred and twenty eight (428) production and distribution facilities. The company has been successful in marketing its products to various counties through its successful bottling process, which has vastly increased its market exposure. This distribution strategy is effective, however there are some emerging markets requiring exploration.

In supermarkets and convenient stores Coco-Cola products are readily identifiable making it a viable and preferred option to a large segment of the consumer base.

PRICE

Coca-Cola’s value based pricing strategy works well. Just as their products differ in size and price compared to its competitors the ability to control cost and maximise on the ECONOMIES OF SCALE creates consumer perception of better quality.

MCKINSEY 7’S FRAMEWORK

The McKinsey Seven -S framework was used to review seven key interrelated areas that affects Coca-Cola’s organisational performance namely- strategy, structure, systems, style, skills, staff and shared value. However, this report focuses on five main S’s summarised hereunder:

STRATEGY- The business strategy of the company requires review if Coca-Cola is to widen its customer base and increase market share. Greater emphasis on consumer information is needed especially as it relates to their changing needs and expectations. However, the $400mllion being committed to market research and other strategies to address emerging markets, is a step in the right direction.

STRUCTURE- Coca-Cola has decentralised its organisational structure which from all appearances is effective in assisting the organisation to achieve its mission and purpose. However, the company structure for information collection, analysis and use, requires review. The company should explore putting structures or a department in place to address this critical gap.

STAFF – As of December 31, 2005 Coco- Cola company’s staff strength is approximately 73,000 people. This group is very diverse in terms of knowledge, and culture, strategies should be developed to ensure consistency of practices and products across borders.

STYLE- The CEO’ s current management style is appropriate to achieving short-term success, however a more participative and empowering leadership style is desirable for sustainability of results. The company’s demonstration of commitment to social responsibility through philanthropy, sponsorships and good citizenship is commendable.

SYSTEMS- Coco-Cola has embraced the use of technology in its operations to full potential. Also, by inserting user-friendly services, Coco-Cola is better able to connect with consumers. Systems for production of products appear very robust.

S.W.O.T. ANALYSIS

The following SWOT analysis (_REFER TO APPENDIX 2 FOR FURTHER DETAILS)_ briefly summarises the various strengths, weaknesses, opportunities and threats of Coca-Cola:

STRENGTHS:

STRONG BRAND NAME – Coco-Cola has been an intricate part of the American culture for over a century. Coco-Cola brand image has a competitive advantage.

FINANCIAL CAPABILITY – It was not until December 1, 2005 that PepsiCo was valued more than Coca-Cola. In 2000 Coca-Cola market capitalisation was about $128 billion and PepsiCo was valued only $44billion .The company has the financial capabilities to improve its marketing strategies, tap into new market and develop new products.

BOTTLING SYSTEM – Coco-Cola’s bottling system affords them the advantage of infinite growth opportunities around the world. This strategy allows Coca-Cola the opportunity to service a large geographic area.

TECHNOLOGY – Coca-Cola has embraced some of the most state of the art technology into their processes enhancing its efficiency and effectiveness in production.

ADVERTISING – This is another avenue in which Coca-Cola shines. When watching sports on television one can hardly miss Coca-Cola banners and painted logos. Coca-Cola has recognised the importance of keeping their product in the public domain.

NEW CEO AND NEW VISION – The appointment of Mr. Isdell has had a major impact in seeking to identify the direction that the company needs to adopt and strategies that need to be implored.

CEO’S AWARENESS OF CURRENT STATE – Coco-Cola’s new CEO is aware of and takings appropriate action in respect to their current market position. An additional 400 million is now being used for marketing.

CONSUMER LOYALTY – Coco-Cola has been successful in establishing a strong, loyal consumer force in their established markets.

DIVERSIFIED BRAND – Coca-Cola has a wide variety of brands to choose from ranging from soft drinks, juices, sport drinks, water and tea

WEAKNESSES:

POOR CONSUMER INTELLIGENCE – Coca-Cola has missed customer’s trends. Consumers are now placing an increasing emphasis on healthier products.

DAMAGED REPUTATION – Press releases suggesting that Dasani water brand was inferior and unhealthy damaged the reputation to the point of being pulled from shelves. Additionally, India’s contention of the questionable water supply to manufacture the soft drinks resulted in a decrease in sales.

POOR MANAGEMENT CAPABILITY AND DECISION MAKING – Poor investment decisions has plagued the company’s growth. For instance, pulling out of the bidding on Gatorade, this subsequently became a profitable venture for PepsiCo.

INSUFFICIENT SUCCESSION PLANNING – The Guardian Newspaper revealed that it appeared that Coca-Cola problems began with the death of its chief executive office Roberto Goizueta. This indicates poor succession planning practices.

OPPORTUNITIES:

EXPLORING AND CAPITALIZING ON NEW MARKETS – India, China, Russia and Britain.

INFORMATION EXCHANGE – Coco-Cola has dedicated more capital to gather executives from around the world to exchange ideas.

BENCHMARKING OF PEPSICO – Coca-Cola now has the opportunity to benchmark PepsiCo marketing strategy and processes to see what gives them a competitive advantage.

DEVELOP AND OFFER NEW INNOVATIVE PRODUCTS- With a greater awareness of the current market trends Coca-Cola now has the opportunity to develop healthier and more innovative products.

THREATS

SUBSTITUTE PRODUCTS – The threat of a new viable competitor is not substantial at this time. However, the threat of a substitute is very real. Possible substitutes that put pressure on both PepsiCo and Coca-Cola include tea, coffee and juices.

INCREASING CONSUMER CONFIDENCE IN RIVAL – PepsiCo current market dominance, improved brand name and product diversification demonstrate increasing consumer confidence in their products. This rivalry has produced a very competitive environment requiring Coca-Cola’s management to be responsive to the changing attitudes, needs and preferences of consumers or continue losing its market share to PepsiCo.

VARIED NATIONAL CULTURES – Cultural factors such as perceptions, preference, beliefs and behaviours may also pose a threat to Coca-Cola for example people who are patriotic to their country may only buy products manufactured in their country.

BOX THINKING – Coca-Cola is losing ground because of PepsiCo’s complete dominance in the snack food industry. PepsiCo’s Frito-lay dominates the snack food industry, which Coke is not even a competitor. Coca-Cola needs to consider redefining itself “in terms of mission and objectives” and compete by introducing innovative products in these “non traditional” product lines.

CONCLUSION

RECOMMENDATIONS:

MARKETING OBJECTIVE:

To increase Coca-Cola’s market share by 10% by introducing a three new health drinks and five snack bars by December 1, 2006

MARKETING STRATEGY:

The PEST analysis revealed that a market is emerging with increasing emphasis towards healthier products. The Ansoff Matrix highlights four useful tools for exploring growth opportunities. However, I recommend a NEW PRODUCT DEVELOPMENT with the emphasis on a Health Line.

TACTICAL PLAN

JANUARY 1, 2006 – DECEMBER 31, 2006

4’PS OF MARKETING

PRODUCT:

The product developed is going to categorise as Coca-Cola new line of Health products, which focuses specifically on Health Drinks and Snack Bars.

PRICING:

A method of Competition- Driven Pricing and Psychological Pricing mechanism could be adopted. Over the next six months vast research has to be conducted on competitor’s prices and evaluating if odd-even pricing actually affects customer buying power example will customers be more apt to purchasing something that cost $5.99 or $6.00.

PROMOTIONS

The SWOT analysis revealed that one of Coca-Cola main strengths is its promotional and advertising capabilities. The company should continue making maximum use of this capability. _(REFER TO TACTICAL PLAN TABLE FOR PROMOTIONAL ACTIVITIES).

PLACE

Coca-Cola has a vast market share, the HEALTH LINE is going to be specifically targeted to its current market share and vast markets such as India and China that has not been fully explored.

TACTICAL PLAN

OBJECTIVE: INTRODUCE NEW HEALTH PRODUCTS BY DECEMBER 2006

ACTIVITY/TASK

START DATE

END

DATE

RESPONIBLE

PERSONS

COST (US)

M

PRODUCT RESEARCH & DEVELOPMENT

Market Research

Focus Groups

Prototype development and specifications documentation

Supplier Negotiations and Planning

Jan 1 ’06

March 30,06

-Product Development & Research unit/Manager

-Customer Service Manager

10.0

PILOT LAUNCH NEW PRODUCTS

Distribute new products for consumer opinion

Review consumer feedback

Review product specifications as required/if necessary

April 20, ’06

April 30, ’06

-Marketing & Sales Department Managers

-Quality Manager

1.0

ADVERTISING & PROMOTIONS

Initiate branding strategy

Media Campaigns

Internet Marketing

Community Outreach Programs

Contract premier and emerging athletes

April 1, ’06

Ongoing

-Marketing and Public Relations Department Managers

12.0

DISTRIBUTION OF NEW PRODUCT LINES

Conduct Negotiations and contracting activity

Distribute new product line to intermediaries in old and new markets

May 10, ’06

December 1, ’06

-Order Processing Manager

-Customer Service Manager

-Sales Manager

-Production Manager

-Materials Manager

-Marketing Manager

-Procurement Manager

-Delivery Manager

-Finance Manager

20.5

Product Monitoring and Evaluation

Monitor Financial Performance in terms of sales and Market Capitalization indices etc

Monitor consumer preferences

April 20 ’06

December 31, ’06

-Quality Manager

-Marketing Manager

-Finance Manager

5.0

Total

48.5

TOTAL BUDGET HAS BEEN ESTIMATED AT 48.5(US) MILLION

REFERENCES

BOOKS:

Kotler et al (2003) _Principles of Marketing,_ 11th Edition: Upper Saddle River, NJ: Prentice Hall

Peter J.P et al (1998) _Consumer Behaviour and Marketing Strategy_, New York: McGraw Hl/Irwin

WEBSITES:

Coca-Cola (2005) _Interesting Facts about Coke_: (WWW) http:/www. cfo. com / article. cfm (10 May, 2006)

Coca-Cola (2005) _Annual Report Coca-Cola Enterprise Inc_. (WWW) http://www.cokece.com (10 May, 2006)

Coke Homepage (2005) _Interesting Coca- Cola Facts_ (WWW) http:/www.yip. org/coke/facts.htm (15 May, 2006)

Carmichael E. (2005) _Coca- Cola Marketing Strategy News_ 🙁 WWW) http:/www. evancarmichael.com /marketing-strategy/coca-cola marketing strategy (16 May,2006)

NEWSPAPER ARTICLE

Teather. D (2005) ” _Bubble_ _burst for the real thing as PepsiCo oust Coke from_ _top spot: Emphasis on healthy living beats Coke’ fizz focus in battle of the colas.”_ New York: Guardian Newspaper Limited

�

BIBLIOGRAPHY:

BOOKS

Barker, M. J (1999) _The Marketing Book_, London: Butterworth-Heinemann

Chinsnall, P. (1995) _Strategic Business Marketing_, London: Pearson

Diamantopoulos, A et al. (1995) _Marketing Pricing Decisions_: _a Study of_ _Managerial Practice_, London; Thomson Learning

Dibb S, et al (2001) _The Marketing Casebook: Cases and_ _Concepts_: 2nd Edition: London Thomson Learning

Doyle P. (1998) Marketing _Management and Strategy_, London: Pearson

Kotler et al (2003) _Principles of Marketing,_ 11th Edition: Upper Saddle River, NJ: Prentice Hall

Peter J.P et al (1998) _Consumer Behaviour and Marketing Strategy_, New York: McGraw Hl/Irwin

Rosenbloom, B (1999) _Marketing Channels: A Management View_, Forth Worth: Dryden

NEWSPAPER

Teather. D (2005) ” _Bubble burst for the real thing as PepsiCo oust Coke fro top spot_: _Emphasis on healthy living beats Coke’ fizz focus in battle of the colas_.” New York: Guardian Newspaper Limited

WEBSITES

Coca-Cola (2005) _Interesting Facts about Coke_: (WWW) http:/www. cfo. com / article. cfm (10 May, 2006)

Coca-Cola (2005) _Annual Report Coca-Cola Enterprise Inc_. (WWW) http://www.cokece.com (10 May, 2006)

Coke Homepage (2005) _Interesting Coca- Cola Facts_ (WWW) http:/www.yip. org/coke/facts.htm (15 May, 2006)

Carmichael E. (2005) _Coca- Cola Marketing Strategy News_ 🙁 WWW) http:/www. evancarmichael.com /marketing-strategy/coca-cola marketing strategy

(16 May, 2006)

Centre for Management Research (2004) _Coco-Cola India in 2004: Marketing_ _Strategy_: (WWW) http://www.icmr.icfai.org/casestudies/catalouge/marketing (20 May, 2006)

News Target (2005) _Soft Drink Company Marketing Tactics: the expert sound_ _off_. (WWW) http://www.newstarget. Com/003914.html (20, May, 2006)