Coca-Cola is the world’s leading manufacturer, marketer and distributer of non alcoholic beverages and syrups. Coca Cola is the leading American multinational beverage corporation. The company is headquartered in Atlanta (Us.coca-cola.com, 2015). The company is known for its flagship product Coca-Cola. It operates a franchised system of distribution. The product of the company is the syrup concentrate which is sold to various bottlers all over the world. The company has become one of the leading beverages in the world by its long history of acquisitions (Associated Press, 2015). It has acquired various big brands like Minute Maid, Thumps Up and Barbq. Apart from these known brands it has also acquired other brands like Odwalla, Fuze Beverages. The company offers more than 500 brands across 200 countries. It was the first brand to introduce the concept of diet soft drink using saccharin and sugar substitute. Apart from its own brand it offers other soft drinks named as Sprite and Fanta (Cocacolaweb.online.fr, 2015). It has also launched some healthy brands which include Minute Maid juices, Nestea, Fruitopia, Dasani water and other juices like Simply Orange. It is one of the best selling brands in most of the countries. It was the number one global brand for the year 2010. Middle East is one of those regions where Coca-Cola is sold as the number one brand. In Japan the bestselling brand is Georgia instead of Coca-Cola. South Australia is the place where the milk product outsells the sale of Coca-Cola. The company has emerged as the global leaders in the production of beverages in the world. This has been possible as a result of strategic planning by the owners of the organization (Stamfordmercury.co.uk, 2015). They have been constantly innovating their product and the marketing strategy so that it is not affected from the severe competition from other beverage companies like PepsiCo (Jordan, 2012). It has expanded its beverage portfolio via innovation, strategic acquisitions. They undertook selective strategies for packaging to meet the increase in demand from the consumers. They undertook the best practices throughout the value chain. They adapted to the changes in the environment in a positive way and developed their asset structure. The company increased its geographic footprint in order to increase the economic growth of the company via strategic joint ventures, mergers and acquisitions. It has committed itself to the setting up of a multi cultural collaborative team. The company has powerful global brand presence (BBC News, 2012). It continuously monitors the beverage to the customers in order to capture the growth in the market. This will help to satisfy the need of the customers. It is venturing into strategies to satisfy the need of the customers. They offer a complete beverage portfolio to the customer including carbonated drinks, beverages, juices, tea etc. They are constantly in search for strategies to deepen their relationship with the customers. They have developed multi faceted relationship with the customers. They have entered into partnership with the customers on multiple fronts from the management of knowledge to the development of the market to ensure long term relationship with the customers (News.google.com, 2015).
Coca cola is the industry leader in global beverage market. Though it is based in United States, the products are available in more than 200 countries across the globe. In the dynamic international business environment, Coca cola has been focusing on adoption of effective strategies for confronting the market rivals in order to achieve sustainable growth in future. This section will emphasize on undertaking a comparative study though analysis of the competitive position of Coca Cola in various markets (Anderson and Vincze, 2004). This section has been structured to discuss the competitive position and strategy of the company in each market. It must be noted that the rise in earnings of Coca Cola and Pepsi has been leaded by the price rise of the beverages.
Coca cola has various brands in the market of United States. The popular brands include Coca Cola, Sprite, Fata, Diet Coke, Coca Cola Zero, Ciel, Simply Orange, Mello Yello, Dasani, Coca Cola Light, burn, Honest Tea, Fuze etc (Coca-Cola Company, 2015). Recently, it has been reported that the sales of Coca Cola in North America has grown in the last financial quarter (Rodriguez, 2015). However, it has been found that the sales in North America was up by 2% in the fourth quarter of 2014, it has been reported that the global earning of company has declines by 55% in the fourth quarter (Choi, 2015). In United States, the major competitor of Coca Cola is PepsiCo. In the US market, PepsiCo as been reported 1% rise in the business in the same quarter (Esterl, 2015).
The consumers are becoming more health conscious and there is decline in the sales of carbonated beverages. Coca cola ad its rival PepsiCo both has launched zero calorie drinks. Additionally, the market rival Pepsi can have a sight buffer from the declines in sales though its popular juice products such as Tropicana. On the other hand, Minute Maid of Coca Cola is not so popular. It must be noted that diversification of Coca Cola in Gold Peak and Fuze brand are found to be an effective competitive strategy for the US market. Energy drinks of Coca Cola such as Red Bull and Monster has not been able to achieve significant growth (Arnett, 2015). In the extremely competitive US market, Coca Cola has adopted price cutting strategy for enhancing its market share (Esterl, 2015).
Carbonated soft drinks are one of the most popular non-alcoholic beverages in Australia. The Australian beverage market is consisted of wide range of products (Australian Beverages, 2013). Coca cola has been able to gain significant market share in the Australian market. Pepsico is the major competitor of Coca cola in this market. However, some local soft drink brands such as Back o’ Bourke, Tarax, Woodroofe, LA Ice Cola etc. are popular in the regional markets of Australia. Coca cola offers wide range of products including coca cola, coca cola zero, diet coke, Fanta, Lift, Sprite, Pump, Powerade, Glaceau, Goulbburn Valley, Mother, Nestea, Barista Bros etc (Coca Cola Australia, 2015).
The beverage company Coca Cola has been receiving significant challenge from its international rival Pepsi in the Australian market. Pepsi along with some soft drinks sold in the supermarkets of blue collar areas are cheaper. In the last financial year, the revenue of the company has demonstrated that it has declined due to price war of the low priced Pepsi and some local soft drinks (Mitchell, 2013). It has been found that in the lower socio-economic areas, the sales of Coca Cola has been affected due to low consumer confidence. However, the MD of Coca Cola, Terry Davis has identified that the overall business in the major districts of Australia has exhibited good result. Coca Cola had to decline its prices as Pepsi has been offering huge discounting. Additionally, the price has been declined for posing a threat to the new product Pepsi Next (Williams, 2013). It has been found that the consumers are seeking value and choosing cheaper products in the grocery stores such as Smart Buy cola which costs 1/3 rd of the price of Coca Cola (Mitchell, 2013). Presently, in order to respond to the competition in the Australian market Coca Cola has focused on cost cutting by launching new products such as iced coffee, low sugar Coke. Additionally, it has focused on spending more in marketing activities (Mitchell, 2015).
The soft beverage market of United Kingdom is significantly competitive. It has been found that the major competitors of Coca Col are PepsiCo, Classic Cola, Bing, red Col, Maine, Lucozade, Cocofina, Evoca Cola, Tango etc. It has been found that Coca Cola has started losing its market share in United Kingdom since 2012. On the other hand, it must be noted that the sales volume along with value of share of PepsiCo in the market of United Kingdom. In 2012, it has been reported that the sales volume of Coca Cola has declined by 3.3%. Coca Cola has been putting significant effort by investing in marketing activities for achieving greater market share in United Kingdom. For example, Coca Cola has made significant investment for sponsoring the London 2012 Olympics. On the other hand, it has been found, competitive marketing position of PepsiCo is better than Coca Cola since 2012. In 2012, it has been reported that the sales value of Pepsi had increased by 7.4% and sales volume was increased by 10%. The marketing and promotional strategies of PepsiCo have been found to be highly effective. It has been found that Red Bull has been able to enhance its popularity in the recent years (Wilson and Gilligan, 2005). Additionally, Lucozade is gaining significant market share in the beverage market of United Kingdom (Bouckley, 2013).
The growing health consciousness has dropped the popularity of high calorie soft drinks. It has been observed that PepsiCo has been challenging the sales of Coca cola by launching low calorie drinks. 68% of the retail sales of PepsiCo are generated from the low calorie drinks. However, Diet Coke and Coca Cola Zero are the low calorie carbonated beverages launched by Coca Cola. PepsiCo has signed the Public Health Responsibility Deal (Bouckley, 2013). Therefore, Pepsi has reduced amount of sugar by 4% in the regular Pepsi. Additionally, it has started to use sugar free Pepsi MAX for effective marketing communication with the health conscious audience (Britvic Soft Drinks Ltd, 2015). In response to the marketing strategy of PepsiCo, Coca Cola has decided to cut the calorie by 30% through reformulation of its product lines and decided to invest 15 million pound. Presently, Coca Cola has been focusing on promoting the no calorie drinks through enhancing the marketing budget by 25% at the end of 2014. In September 2014, in the highly competitive UK market, Coca Cola has launched Coca Cola Life which has lower calorie than normal Coke. Additionally, in order to respond to the changing lifestyle trends, Coca Cola has innovated plant based sweetener named Stevia. Coca Cola has aimed to communicate the health conscious values by shifting to the natural green labeling (Whitwell, 2014).
Coca Cola has been focusing on adoption of expansion strategy in the emerging markets of Asia. It has been identified that Russia, China and the emerging markets of Asia is considered to be a booming market for soft drinks. According to the International president of Coca Cola, 2/3 rd of the business is significantly reliant on the emerging market (Kotabe and Helsen, 2008). The strategic marketing position of the Coca Cola in developed countries has focused on the large profit margin as well as innovation (Parry, 2005). On the other hand, Coca cola has been focusing on enhancing the sales as well as customer loyalty as the competition is intense in these markets (Buckinx and Van den Poel, 2005). China and India has huge opportunities and Coca Cola has been focusing on attracting the middle class in Asian market (Rudarakanchana, 2015). Pepsi is the major rival of Coca Cola in the Asian market. Coca Cola has decided to launch new product lines as well as establish factory in China by investing 4 billion dollars for meeting the growing demand along with addressing the growing level of competition. On the other hand, Pepsi has been focusing on expansion in Chinese market through improving distribution strategy by tying up with Tingyi Cayman Islands Holding Corp. In order to compete in the Asian market, Coca Cola has launched fruit drinks and encouraging the consumers for incorporating carbonated beverages in the local cooking (Lin, 2013). Earlier, Coca Cola was losing market share to Wang Lao Ji as it produces herbal tea for the Chinese consumers. Hence, the decision of Coca Cola of buying Huiyuan has helped in developing a positive healthy image to the health conscious consumers (Rein, 2009). India is the sixth largest market of Coca Cola and the market position of the company is growing stronger through increasing sales (Bhushan, 2012).
Coca-Cola is one of the most globally active international companies. The majority of the sales of the company are outside United States. It is one of the experienced in dealing with the international markets which includes Egypt and Pakistan (saylor.org, 2015). The political tension in the country affects the business environment in these two places which has established an uncertain business environment for the company. But it has thrived hard to prove itself in the international market. The right key behind the success of the organization is its perfect blend of the local business strategies with the international business strategy. The franchisee system has been favorable for the organization. Thus the effectiveness of the organization depends on the relationship with the other brands and the bottlers (Ajc.com, 2015).
Entering into the foreign market is like discovering the new territory for the owners of the business. There are different laws, business strategies, economies and currency in the foreign country. There are cultural differences that impede the success of the organization. According to the Krishna (2005), the nature of every business is to achieve a huge learning curve on entering the foreign market by adoption of new strategies of business (pwc.com, 2013). Coca cola can venture into the new markets by using potential strategies for international business. The market share of Coca-Cola in Africa and Middle East is 29%. Africa and Middle East can be a potential market for Coca-Cola (gov.uk, 2015).
From the business point of view Africa is a potential market. There are growing opportunities for business in Africa (Hri.org, 2015). Coca- Cola has emerged as the business leader in United States and Europe. But the market share of the company in Africa is comparatively low. After the global financial crisis, the sub Saharan region has maintained an overall GDP growth rate of more than 5 %. The trend of strong GDP growth of the country has facilitated the GDP growth in the country. The sub Saharan region continues to attract highest rates of foreign direct investment. The complexity of the African region has been too kept in mind while developing the business model (Amechi, 2015). Coca-Cola can make their presence in the African market by venturing into the cities like Cape Town. The target market of Coca- Cola will be the middle income earners (Falola and Achberger, 2013). They tend to spend. The purchasing power of the middle income earners is increasing as a growth of the GDP of the country. One of the effective ways in which the challenges and complexities in the African market can be explored is via targeting the small sized national markets in the continent (Oppong, 2011). There is possibility of free trade in these areas where the tariffs on internal trade is close to zero. The multinational companies venturing into Africa have hubs established in Nigeria and South Africa. The regional operations are managed from these areas (Hope, 2002).
But while venturing into the potential market of Africa, the major thing that has to be considered is the shortage of skilled labor in the country. There is shortage of talent curbed innovation in Africa (BBC News, 2013). The talent cost has tripled over the years. It is challenging to recruit and retain the skilled laborers and middle managers in the country. But there are some companies in Africa that have trained their workforce. But the cost of training is high. One of the potential ways in which Coca-Cola can succeed is via building proactive relationships with the local people in the countries in which they are operating. The local financial institutions can participate for the success of the organization (BBC News, 2013). This will drive the success of Coca-Cola in Africa and increase its market share. The African market is not different from the other market of the developing market in terms of infrastructure, markets, politics and opportunities.
South Africa is one of the most unequal countries in the world. But there is potential distribution of income. The middle class continues to expand. There has been a robust growth in the consumption expenditure (The Economist, 2014). The consumer flock of the country is increasing tremendously. There has been rapid growth in the population of Africa. There is large bulge of youth in the country. They will form a potential workforce for the country. The growth of the population has been attributed with the growth of the disposable income of the consumers. The youth will form a potential market for Coca-Cola (afdb.org, 2015). The company can gain market share in Africa by competitive pricing policy and extensive advertisements. This will increase the market share of the company in Africa(Karen Gaia Pitts and Karen Gaia Pitts, 2015).
The cultural factors play an important role in International business. It is important for Coca-Cola to understand the diversity in the culture of the country before venturing into the country. The population in the country is diverse. The cultural diversity has to be addressed by Coca-Cola in order to open a store in the country (Africanculturalcenter.org, 2015). The ethics and values of the culture of Africa have to be nurtured. The cultural regeneration has been the major attribute of the country post independence. Africa is rich in arts and crafts. Coca-Cola can venture into the African market via promotional activities depicting their culture, arts and crafts. The consumers will find associated with the brand and they will prefer Coca-Cola over the other soft drink brands in the country.
Coca- Cola has been struggling to venture into the Arab world. The business of the company in Middle East during the period of 1968 to 1991 as it was boycotted by the Arab League (Heritage.org, 2015). The business of the company was affected. But the company has increased its market share in the Arab world even after having close association with the American values. The largest market of Coca- Cola in the Middle East is in Egypt. It is one of the oldest operating sites in Egypt. It can explore the other potential markets in Egypt. This will increase the market share of the company in the world (OECD, 2014). Coca-Cola can explore the other parts of Middle East. Since the economy of the Middle East is diverse, it can venture into other countries like Iran , Israel , Iraq , United Arab Emirates and Qatar (Feiler, 2000).
The economy of the Middle East is diverse. Each country is unique economic performance. The individual economies differ. The economies range from socialist economies to free market economies. It is known for its oil production (Saudiembassy.net, 2015). Among the several countries in the Middle East, Saudi Arabia, United Arab Emirates can become a potential market for Saudi Arabia. The GDP growth of these two countries has been sound. Saudi Arabia has a bund of young population (Heritage.org, 2015). They will potential customers for Coca-Cola. UAE is the second largest Arab world and it is one of the successful diversified economies. The 71% of its GDP comes from the non oil sector. Coca-Cola can form a potential market in the economy. UAE is making continuous effort to attract foreign direct investment in the country. Investments will boost the economic growth of the country. Thus it will be a potential market for Coca-Cola. Thus , analysis of the economic and political factors plays an important role in the international business.
Analysis of the availability of potential workforce in Middle East is an important factor to be considered for International business. The major agenda of Saudi Arabia is to develop the education system of the country. It is making huge investments in education and training program (Cadmus.eui.eu, 2015). It is developing the youth of the country to become the potential workforce of the future in order to make Saudi Arabia knowledge based economy. It has welcomed abundance of foreign workers in the country which includes highly skilled professionals and the cost of labor is low. Thus it can be a potential market for Coca-Cola (migrationpolicy.org, 2004).
Unlike PepsiCo, Coca-cola can establish a strong market in Saudi Arabia. The beauty about Middle East is that it has expanded vastly over the past years. The significant growth of the size of the Saudi Arabian market will open up new opportunities for Coca-Cola.In terms of demography; the dominant population in Saudi Arabia is the younger population. The population of Saudi Arabia is young. There is tremendous possibility of growth in this country. The younger population will form the potential customers for Pepsico. The economy of Saudi Arabia is recovering. With the GDP growth of the country, the purchasing power is increasing. This will increase the sale of the company in Saudi Arabia (escwa.un.org, 2015).
Business will be successful internationally if the company can adapt to the culture of the foreign country. The culture of Saudi Arabia and United Arab Emirates is based on their Islamic religion. It has transformed into a rich commodity producer in the recent years. There are various forms of restrictions in the country. Coca-Cola has to keep it in mind before starting the International business in Saudi-Arabia (U.S. Department of State, 2015).
Competitive position of an organization can be substantiated with the aid of different academic theories. In the dynamic, international business environment, Coca Cola has adopted various competitive strategies for confronting with the market rivals and ensuring sustainable growth across the globe. First of all, Porter’s Generic Strategy Grid can be applied in case of competitive strategies of Coca Cola. According to the Porter’s Generic Strategy Grid theory, there are four strategies for achieving competitive advantage for responding to the high level of competition in different terms across 200 countries in the world (Kotler and Keller, 2008). The following diagram illustrates the four competitive strategies proposed by Porter:
Cost leadership strategy is one of the effective strategies for gaining competitive advantage. This strategy majorly focuses on enhancing profit through cost reduction which can charge the average pricing of the industry (Prajogo, 2007). It significantly helps in achieving increased market share through offering same value at lower price. The enhanced sales help in compensating the reduced profit margin. Efficient logistics, low cost labor, materials and adoption of new technology can contribute in achievement of cost leadership (Mohan Das Gandhi, Selladurai and Santhi, 2006). Differentiation strategy is associated with making the products distinct from its competitors in order to attract the consumers. It requires significant investment in research and innovation (Hutt and Speh, 2007). It needs to differentiate its product in terms of quality or introduce a new feature which caters the unfulfilled or unidentified demand of the customers. Additionally, effective marketing strategy must be adopted by the company for communicating the advantages of the differentiated products. Focus strategy emphasizes on concentrating n the niche market through understanding the market dynamics and the exclusive demands of the customers so that well specified products at affordable price of the niche market can be developed. It may be cost focus or differentiation focus (Winer, 2007).
In case of Coca Cola, both cost leadership and differentiation strategy has been adopted for gaining competitive advantage in various markets. In case of US, the company has adopted cost cutting strategy for achieving cost leadership (Kotabe and Helsen, 2008). It aims to achieve greater market share in the extensively competitive market. In the Australia, cost leadership as well as differentiation strategy has been adopted by Australia for responding to the marketing strategies of rivals. Cost cutting as well as introduction of new product line for meeting the need of the health conscious Australians has been adopted by Coca Cola. On the other hand, in case of UK, differentiation strategy is adopted by analyzing the preference of UK market for healthy beverages (Hutt and Speh, 2007). The emerging markets of Asia have been found to be extremely competitive. Hence, cost leadership strategy will be appropriate for enhancing the market share (Li and Li, 2008). Additionally, according to the need too different market such as health conscious Chinese consumers, Coca Cola has adopted differentiated strategy for confronting rivals producing healthy beverages (Anderson and Vincze, 2004).
The PEST identifies the political, economic, social and technological factors that have to be considered in International Business. Coca-Cola will explore the potential market of Africa and Middle East.
Political factors play an important role in analyzing the business opportunities in the foreign country. The factors that have to be considered while venturing into the foreign markets are the standards set by the Government in the foreign country. Coca Cola has to adapt to the Occupational Safety and Health Act. It is important for the company to consider the political factors while venturing into the foreign country. The government regulation in Africa is in favor of international business. Saudi Arabia and UAE promotes international business. Thus it is feasible to expand the business in these two markets.
Economic factors play a major role in setting up the business in the International market. The economy of the chosen countries has shown potential growth in the past years. The economic factors play a major role in the growth of the economy. The GDP of the country, inflation, employment rate are potential factors for judging the economic condition of the country.
It is imperative to analyze the social and cultural factors existing in the foreign country. The business venture in the foreign country will be successful if the social and the cultural factors are coherent with the values and ethics of the corporate. Coca- Cola will venture into the two broad economies of Africa and Middle East. Thus it is important for the company to explore the social and cultural factors. The company will be able to formulate its advertising and marketing strategy on the basis of its unique cultural and social attributes. This will widen the approach of the commercials and the company will be able to address to a larger share of the market. The availability of labor force is one of the potential factors for growth of the company in the foreign country. There is potential workforce in Africa as well as in Middle East countries. Thus these two countries will form a potential market in terms of labor force and manpower.
The company has to consider the technological factors for establishing the business in the foreign market. The business will not be able to survive in the foreign market with the absence of adequate technological advancements. Thus the company has to explore the foreign market and make an analysis of the development of technology in that market. This will help the company to survive in the long run in the country. Africa is a developing country. The technological advancement in the country has been positive for the growth of the companies. The Middle East countries are known for its richness in oil. At the same time, these countries are technologically advanced. This will be a positive factor for the growth of the business in the International market.
This paper has provided significant insight to the competitive marketing strategy in the international business activities of Coca Cola. First of all, a comparative analysis has been conducted through extensive research for analyzing the competitive position of Coca Cola in different markets. Coca Cola is the leading soft beverage brand of the globe and it needs to continuously assess the competitive market for responding to the changing needs of the customers along with the different strategies of the competitors.
This paper has indentified that in North America, the competitive position of the company is better but the overall sales have declined. The strongest competitor of Coca Cola is Pepsi. The company has adopted cost leadership strategy for boosting up sales in the US market. Analyzing the competitive position of Coca Cola in Australian market, it has been found that the products are high priced. Hence, the consumers prefer low priced Pepsi and other supermarket brands as the Australian consumers are looking for value. Coca Cola has decided to adopt cost cutting strategy to sustain in the price war among the competitors. Additionally, it has been focusing on launching low calorie products for attracting the health conscious consumers. In case of the UK market, it has been found that the position of Coca Cola has been declining. On the other hand, the biggest rival, Pepsi has been able to enhance its market volume through launching low calorie soft drinks. Hence, Coca Cola has focused on adoption of differentiated strategy by launching Coca Cola Life. Additionally, the company has focused on effective marketing communication strategy to make the customers aware of the healthy soft beverages launched by Coca Cola. Emerging market of Asia has been found to have significant potential for growth and almost two third of the company’s revenue is dependent on the sales in emerging markets. Especially, in China and India the competitive position of Coca Cola is good but the markets are extremely challenging due to high level of competition. Hence, it has to keep the prices low for sustaining in the price war. Additionally, for confronting with the rivals producing healthy beverages has been addressed by innovation and differentiation.
Second part of this paper has focused on discussing the factors that need to be considered at the time of considering integration of business activities in the foreign markets. In this paper, the business expansion of Coca Cola in the Middle East and African markets has been discussed. In this paper has identified the importance of economic factors of that nation such as GDP, income per capita, income distribution etc. Additionally, social and cultural factors are considered in this paper for developing effective business expansion strategies in foreign markets. Psychological factors of the target market and their need to be analyzed for developing effective marketing strategies.
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