Strategic Marketing at Coca Cola

Strategic Marketing at Coca Cola 1.0 Introduction Background: Coca Cola Company is one of the leading manufacturers of sort drink in the whole World. Coca Cola was launched in May 1986 by Dr. John S. Pemberton in Atlanta Georgia. The name Coca Cola was suggested by Dr. Pembertons bookkeeper, frank Robinson. He reserved the name Coca Cola in the flowing script that is well-known today. The Coca Cola is most important manufacturer, marketer, and distributor of non-alcoholic beverage concentrates and syrups, company in the World, which are used to produce nearly 500 beverage brands that make up for its wide portfolio. The market which I shall be investigating is the soft drink market in the UK, although I think its important that I consider the whole market including soft drinks and energy drinks. This is because soft drinks and Energy drinks are competing with other alcoholic mixer, (2008). This report will focus on a product part of this market and I have chosen the market leader for stimulant drinks, Coca Cola. I shall be examining marketing planning process, and its activities and justifications. Also, marketing environment is included, Internal audit, External audit, macro environment, and looking at the product with PESTLE, SWOT Analysis (Internal strengths and weaknesses). Furthermore, It Includes Porters five forces and Ansoffs Matrix, BCG Matrix and other tools and techniques. At the end, I have given three marketing options and recommended approach after these bibliography. 2.0 Strategic Marketing Planning Process: Strategic marketing is a process in which to develop a strategy to cope with competitors, identify market opportunities, develop and commercialize new products and services, allocate resources among marketing activities and design an appropriate organisational structure to ensure the performance desired is achieved. Corporate strategy is a process in which approach to future that involves examination of the current and anticipated factors associated with customers and competitors and the firm itself, aligning policies, practices, and resources to realize that vision, (2010). Planning and plans are two very different concepts. Planning refers to the process of developing a coherent plan, while the plan is the output from the process. A successful marketing campaign must incorporate strategic marketing planning. Strategic marketing planning is the process of researching a market and its environment to determine the target market. It involves determining what the target market wants and the types of messages that resonate with that audience. Marketing is one of the key elements in addition to other functions without which the company cannot get success. Therefore, marketing planning is a set of document in which details of action is given to achieve the objects set by the management for a period of one or up to five year. It could be based on selling of any kind of product. Its very important to have a very aggressive plan if you are not an introducer of new product and still you want to grab the market, (2010). 2.1 Marketing Planning Benefits: Marketing plan comes through a long process, it starts from a single department and ends up to management decision, plan must be always like easy to understand for management to approved it and realize the facts of market strategies for what they want from customer. Coca Cola always makes a attractive marketing plan which always looks different from others, for now this marketing plan which is very supportive for the organisation is just because it meets the need of customer in a very smart way like they introduced a new Cherry Coke flavour which is they want to be market the product by new style which a customer attract and also get some benefited for an organisation. If the plan is according to organisation and customer then it is easy to take decision for management. Plan should be compressed and productive for organization. Plan should be not so long time process and not to be very costly. Plan should be as per new techniques and 3D type as per new generation like Plan should be process after research Plan should be shows new market prices, long life and skill full. If the plan is according to companies favour so there is no any chance that it could be rejected. Always approach will be positive to make the plan competitive and advance. Coca Cola always looks in those matter which are highly skilled, attractive and sincere with the organisation, to gain the agreement for strategic plan for organization is a very important role for marketing department to extent their plans which are still are in favour of organisation and as before management like the approach to get always new marketing styles, the best approach for management is that to produced their best efforts to capture the market because now a days there are so many competitors in the market if they lack in the advertisement or promotion or introducing in new products then it could be easy for other competitors to overcome, (2010). Marketing Planning Process: There are ten stages of the Strategic Marketing Planning Process which are given bellow in tables. Table 1: The Marketing Planning Process Stages Description Stage 1 Mission Statement At this stage the board establish a long-term vision for the company. This entails communicating a memorable statement easily understood by employees and other key stakeholders. Stage 2 Corporate Objectives At Corporate Objectives the organisation setup the desired level of profitability, business boundaries, such as products/markets, facilities and size of labour force and other corporate objectives, such as social responsibility, corporate image, stock market image, employer image, etc. Stage 3 Marketing Audit Marketing Audit is a structured review of your current marketing activities. It is a systematic review of all the external and internal factors that have affected a companys commercial performance over a defined period. Stage 4 SWOT Analysis SWOT analysis is a tool for auditing an organisation and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. Stage 5 Assumptions At this stage assumptions are made on the basis of marketing audit and swot analysis. Marketing manager must keep in mind it should not too broad. Stage 6 Marketing Objectives and Strategies In this stage the objectives and strategies relate to the companies products/services and brands and to the markets you currently/ propose to operate in. Objectives are about deciding what you are offering (selling) and to whom. Strategies are about how you are going to achieve these things. Stage 7 Estimate Expected Results At this stage to employ judgement, analogous experience, field tests and so on. Also, to test out the feasibility of the objectives and strategies in terms of market share, costs, profits and so on. Stage 8 Identify Alternative Plans and Mixes In a strategic marketing plan, It is normally at this stage board identifies alternative plans and mixes are considered. Stage 9 Budget The budget is the process of documenting the expected costs of the proposed marketing plan. To justify all marketing expenditures from a zero base each year against the task that you wish to accomplish. In reality budgets are often incremental, that is, they are based on what was spent in the previous year. Stage 10 First Year Detailed Implementation Programme This may involve spending money on advertising, launching new products, interacting with potential new customers, opening new retail outlets etc. Its major function is to determine where the company is, where its wanted to go and how it can get there. It should be used as an aid to effective management, (McDonald 2006, p. 379-393). I have described all activities and justification in the Marketing Planning Process which are given bellow in table. Table 2: Activities and Justification in the Marketing Planning Process: Stage Activities Justification Stage 1 Mission Statement Board meetings Objectives discussion Target of the company Motivate employees and customers Lack of motivation and output It gives the direction to the company Stage 2 Corporate Objectives Financial forecast Provide long-term stability Profitability of the products Predict financial forecasting Overall company operations It gives review policies and desired level of profitability Stage 3 Marketing Audit Marketing environment objectives Perform STEEPLE Analysis Competition and Market share Competitive advantages Examine internal and external information and procedures Life cycles for major products and for market segments Policies and competitive advantages of other organisation Stage 4 SWOT Analysis Trend in the market Knowledge of the business Value added by competitors Setting objectives and strategies Data Collection Focusing internal and external key factors such as, internal strengths and weaknesses and external opportunities and threats. A summary of reasons for good and bad performance Stage 5 Assumptions Government policies Economic data Major competitors Price competition It is made on planning environment Pick the right market and sell the right products It emphasises on success factors Stage 6 Marketing Objectives and Strategies Sales promotion objectives Marketing objectives Pricing objectives Advertising objectives Social responsibility Marketing objectives and Strategies are made on marketing plan Advertising, pricing and promotion service levels Highlight sales value, sales volume, percentage penetration of outlets Stage 7 Estimate Expected Results Employ judgment Analogous experience Field test Gap analysis on actual and desired results To test out the viability of market share At this level managers set the expected results Stage 8 Identify Alternative Plans and Mixes Motivate alternative strategies Promote mixes Manage the business Choose the best tactics Understand what market works and what doesnt work From alternative plans managers select best suitable plan Stage 9 Budget Advertising cost and expensive Zero base Emphasis on yearly marketing budget Spend their budget more efficiently and effectively Get smart about market every year they are in business Budget prepare by board of director and marketing managers. Stage 10 First Year Detailed Implementation Programme Customer plans Sales promotion plans Goals are divided into sub goals. Market plans (McDonald 2006, p. 379-393) Target their primary customer Focus on achieving specific objectives In sub goals include pricing plans product plans, promotional plans and market plans with objectives The External Market Audit and External Environment (Macro) Analysis: In this section of the report, I have used some data, of tools and techniques that are relevant to Coca Colas current situation relevant examples. External environment is important to marketing decision making. Initially, I have shown data on market share and growth of UKs soft drink markets. 3.1 External Audit: For scanning external audit and external (macro) environment of Coca Cola I have used Porters five forces. In this part of report to scanning soft drink position in the UKs soft drink market two tables are given. Table 1: Market share in UK soft drink market in 2010 Name of Brand % of market share Coca Cola 44 Pepsi 23 Cadbury 16 Fruit Juice 9.4 Other Drinks 8 From the above table of UK soft drink market share in 2010, it is clear that Coca Cola is the market leader among competitors. Coca Cola hold 44% of soft drink market share whereas Pepsi is in the second position by holding only 23% (2010). Table 2: market growth in UK soft drink market between 2009 to 2010: Name of Brand 2009 (% of market share) 2010 (% of market share) % of growth Coca Cola 43 44 1 Pepsi 24 23 -1 Cadbury 15 16 1 Fruit Juice 9 9.4 0.04 Other Drinks 9 8 -1 From the above table we can see Coca Cola and Cadbury have the most significant growth rate by 1% in the last year and Pepsi and other drinks lose their share by -1%. Fruit Juice has only 0.04% growth in last year. For analysing external market in this part, I have given Porters (1985) five forces model which is given below: Barriers to Entry: It involves; Importance of economy of scale, for example, a new Coca Cola drinks. Challenging with established brands, for example, Coca Cola, Diet Coke. High upfront capital costs or legal requirements, for example, intellectual property protection, factories etc. UKs soft drink market is established by some well known brands, such as, Pepsi, Cadbury, Fruit juice etc. It is very difficult to enter in this market by other competitors. Coca Cola has a long history of heavy advertising and this has made it enormous amount of brand equity and loyal customers entire over the world. Substitutes: It contains; Large numbers of substitutes, for example, coffee, beer, juices, water etc are available in the market for customers but it is countered by brand equity, huge advertising, and making their product easily available for customers. Coca Cola expand its business in the UK by offering substitutes it selves to protect Coca Cola from competition. Its products and services can be easily substituted with another type of product and service such as public transport being used instead of private transport. Buyer Power: It consists of; Large amount of buyers, for example, Wal-Mart or Tesco. Undifferentiated brands and low switching costs. As there are many soft drinks in the UK, so the bargaining power of buyer is extremely very high. Buyers ability to walk away or get an alternative, if buyer does not satisfied with our products or services he can get an alternative products or services. Supplier Power: It includes; Supplier does not depend on one or a small amount of buyers. Supplier product is necessary to buyer. In the UK, soft drinks bargaining power of supplier is low, as the market size is large so suppliers always want to keep contracts by providing low price. A large number of buyers but a small number of suppliers. Most of the times raw materials needed to create concentrate are basic commodities, for example, colour, flavour, additives, sugar etc. Basically, these are the main commodities. Existing Competitors: It computes the degree of competition between existing competitors. Rivalry will be higher if; In the UK, there are a huge amount of similar sized companies, for example, Pepsi, Robina, Red bull etc. Competitors can lead to a dynamic periods of aggressive pricing and promotion in war for customers. Products and services are supposed as a commodity by consumers and resulting in low switching cost for consumers. 3.2 External (macro) Environment Analysis: PESTEL Analysis for external (macro) environment of Coca Cola. PESTEL Analysis undertaken to understand local, global factors influencing business and potential opportunity and threats. Here PESTEL analysis given bellow in a table: Table 1: PESTEL Analysis: Political Economical National Government Regulatory bodies Trade Associates Government Stability Newly Industrialised Employment Law Critical Global Market Important Political Events Market Structure Government Policy Taxation Interest Rates Personal Saving Rates Money Supply Inflation Disposal Income Social-Cultural Technological Population Demographics Culture Attitudes to Work and Leisure Current Issues Income Distribution Social Mobility Lifestyle Changes Level of Education Products Materials / Components Processes Distribution / Spending on Research Marketing/Administration Rates of Obsolescence New Discoveries / Developments / Product Innovations Legal Environmental Competition Law Health and Safety Employment Law National and World Legislation Trading Policies Regulatory Bodies Global Warming Environmental Issues Local and National Issues Current and Future Environmental Legislative Changes Recycling Considerations Source: http://www.slideshare.net/Jackieken/the-marketing-audit-download-ppt Political Factors: Coca Cola operates globally and their performance is influenced by the political stability and instability of these countries. There is currently political stability in the UK and Coca Cola business is flourishing, (2010). Economical Factors: High inflation in any of the counties will cause the price of Coca Cola to rise and consumption of Coca Cola may fall. The UK economy is recovering from recession and employment level is rising people will consume more Coca Cola products, (2010). Social Factors: Consumers in the different counties will have different taste and perception about Coca Cola. In the UK the brand is known for quality products and marketing it will be easier, (2010). Technological Factors: The present environment is technological driven and the need for dynamic development. Coca Cola has got experienced research and development (RD) team who find out new technologies to improve productivity, (2010). Legal Factors: The Coca Cola Company gets all the rights applicable in the nature of their business and every invention and product developments are always going into the copyright process, (2010). Environmental Factors: According to the data of the Coca Cola Company, all the services are strictly approved according to the environmental laws inflicted by the government, (2010). 3.3 Changes in the External (Macro) Environment: The Coca Cola Company has faced many changes in the external environment that have changed the management of the company. During the World War II, the Coca Cola was able to continue the position of the company, at the same time. The Coca Cola was able to enter fresh markets despite of the environment. The company turned out to be more aggressive through supplying free drinks for the GIs in the World War II. During this the corporation was able to hit two birds at one stone. First, because the carbonated drinks sent by the company, it became a loyal symbol by the United States soldiers in which guided to consumer loyalty. Second, the Coca Cola was able to get benefit of the situation and determined the product in newly occupied countries by the Helper forces and due to the company created plants in different locations in the whole World paving the method for its post war expansion. Another thing is that, the external environment is the change of flavour and believes of the consumers. In the mid-1980s where the Americans favoured the sweet flavour of the competitor product, the company made its complement but it turned into a commercial failure. Coca Cola changed its management strategy and restored the old formula, and just changed its name, such as, Coca Cola Classic. After that Coca Cola got its position again and it released latest versions of Coke that address the needs of these kinds of customers, These products are included by Diet Coke and Coca Cola Zero. According to Bool, (2008) companies, for example, Coca Cola is necessary to change due to trends that have a huge impact on its business; another trend is health and fitness. Many people are spending extra money on their health; In addition, Coca Cola launched its new products which are a calorie burning soft drinks, such as, Enviga, Diet Coke, Coca-Cola Zero, and Coke. Furthermore, Coca Cola is working together with the Swiss company Nestle. Coca Cola is contracting with innovation and change. For the duration of the Asian Financial Crisis, Coca Cola was also prompted to change its courses of management in that specific region. The responses and reactions of Coca Cola with the external environment are its internal changes. Organisational Change Management: This theory presents a general process for managing the change in the side of the people at an organisational level (Kotter, 1996). According to Hiatt and Creasey, the organisational change management is contains three stages, which are, preparing for change, managing change and reinforcing change. The theory of organisational change management was efficiently used by Coca Cola. Various managers in different branches of the World have operated organisational change management in order to address the matters that the Coca Cola faced. According to the current stage, the main emphasis of the Coca-Cola is to get the needs of their consumers with outstanding product developing and product distribution. Coca Colas change management is very weak since Coca Cola forecasted that there are a number of marketing challenges in the near future that they have to face. 3.4 Internal Audit (SWOT Analysis: Strengths and Weaknesses Analysis of Coca Cola): This part of report provides information about current and previous years profit and loss account data, market share data, performance graph which have indicated internal or operational strengths and weaknesses of current marketing strategy and BCG Matrix. Table 1 Profit and Loss Account: Year ended 31, December 2010(Â £millions) 2009(Â £millions) 2008(Â £millions) Net operating revenues 21,959 ($35,119) 19,377 ($30,990) 19,974 ($31,944) Gross profit 14,022 ($22,426) 12,011 ($19,209) 12,862 ($20,570) Operating income 5,283 ($8,449) 5,146 ($8,231) 5,281 ($8,446) Income before taxes 8,906 ($14,243) 5,593 ($8,946) 4,693 ($7,506) Profit after tax 7,415 ($11,859) 4,318 ($6,906) 3,673 ($5,874) Source: http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf Profit and loss account indicates operational excellence of current marketing strengths. We see a consistent growth in the profit margin. In 2009 profit after tax was 4,318 and in 2010 it became 7,415. It is increased by 3,097 million pounds in a year. Market share of UKs soft drinks: Analysing market share of UK soft drinks, it is clear that Coca Cola is the market leader by getting 44% of total market.ÂÂ  The comparative positioning of Coca Colas market share with respect to other leading players in the market has been illustrated as follows, (2010). Figure 1: Coca Cola and other competitors Market Share Performance Graph: Performance graph of Coca Cola and Pepsi over the last five years can be summarised with the help of growth in following key indicators, (2010). Figure 2: Coca Cola Last Five Years Market Growth This graph clearly shows that Coca Cola in 2006, it was slight increase in profit margin but in 2007 it was slightly decrease. From 2008 to 2010 market growth of Coca Cola was increase year by year. Internal Strengths of Current Marketing Strategy: Coca-Cola has been an intricate part of American culture for over a century. The products image is laden with sentimentality, and this is an image many people have taken deeply to heart. Coca Cola is a very recognizable firm. Its products/brands are available everywhere in the World. Its popularity is one of greater strength is virtuallyÂÂ  incomparable. Coca Cola deals with huge amounts of money every year. Similarly, whole businesses they have had their ups and downs monetarily, but Coca Cola has done very well in this section and Coca Cola will go on to do well and make better than its competitors (Pepsi). The money they are earning, it is significantly better than most beverage companies (competitors), they use into their own company so that they can get well, (2010). Everybody is knownÂÂ  very well Coca Cola in the World. Its image is displayed on hats, collectible memorabilia and t-shirts. There is no doubt,ÂÂ  no beverage firm (competitor) compares to Coca Colas social popularity status. And this extremely recognizable branding is one of Coca-Colas greatest strengths, (2010). Even though, Coca Cola controls almost 44% of the whole drinks market, the changing health-consciousness attitude of the market could have a serious effect on Coca Cola. In addition, according to Bettman (1998), Coca-Colas bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and managed by independent business people who are authorized to sell products of the Coca-Cola Company. Because, Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers, (2010). Internal Weaknesses of Current Marketing Strategy: Coca Cola has many weaknesses; they need to be finished these weaknesses, if they want to increase the next level. Now a days, constant shift to health products, some products could probably lose customers. This fresh focus on weight and health might be a problem for the item that is labelled detrimental to your health, (2010). Coca-Cola has recently reported some declines in unit case volumes in Indonesia and Thailand due to reduced consumer purchasing power. According to an article in (Fortune magazine), in Japan, unit case sales fell 3% in the second quarter scary because of Japan produces around 5% of worldwide volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35% of Cokes volume and none of these markets are performing to expectation (Mclean, 1998). Word of mouth unluckily is something that is very difficult to control. Although, people would have their views, Coca Cola has to try to control their negative views. If bad views are extinguish to people who have yet to try Coca Cola products, after that could create lost of customers which shows why word of mouth is a weakness, (2010). Coca Cola produces many drinks, some are very popular such as, Coke, Diet Coke and Sprite but Coca Cola has approximately made 500 different types of brands, such as, carbonates, energy drinks, sports drinks, fruit juices, water etc. Most of them unknown and rarely seen for available purchase. These drinks do not mostly taste bad, but are rather a result of low profile or nonexistent advertising, (2010). As we know, health is a significant matter in 21st century. Coke have high level of sugar and caffeine content. Boston Consulting Group Matrix (BCG Matrix): The BCG matrix method is the theory to determine list of priorities that should be given in the product portfolio of a business unit. There are two dimensions should be analyzed in the implementation of this method; market share and market growth. There are four characters in this diagram represent four categories of products in companys portfolio, which are given bellow. Stars: It represents the products that have a high market growth and high market share. Products in this class usually need a fairly high cost in the process of development. For example, Coca Colas bottled water (Dasani). Question Marks: It represents the products that have a high market growth and low market share. In this category, products have the worst cash characteristics because they have high level of the demand but low returns because of their low market share. For example, Coca Colas energy drink brand (Full Throttle). Cash Cows: Cash cows represent the products that have low market growth and high market share. In this class products should have huge level of profits and cash generation. In order to achieve that result, company should keep their level of investment low because the market growth for these products also low. Such as, namesakes soft drink (Coca-Cola). Dogs: Dogs represent the products that have low market growth as well as market share. Products in this category will absorb a lot of cash but low level of returns because low provided market share and weak market growth. For example, sweetened juice drinks (Hi-C), (2010). Coca Cola would use income from Coke to invest their primarily in Dasani and Full Throttle, whereas, looking to sell off Hi-C to some private equity fund with huge amount of cash on its hands. It is able to standard product life cycle tends to have five stages which are given bellow. Development Introduction Growth Maturity Decline As a result, Coca-Cola is presently in the maturity stage, which is evidenced mainly by the fact that they have a large, loyal group of stable consumers. In addition, cost management, product differentiation and marketing contain more important as growth slows and market share becomes the key determinant of profitability. In international markets the product life cycle is in more of a growth trend Cokes advantage in this section is primarily due to its establishment strong branding and it is now able to use this part of stable profitability to support financially the domestic Cola Wars, (2010). 4.0 Ansoffs Matrix: This Matrix was developed by Igor Ansoff; it is one of the most well known frameworks for deciding upon strategies for growth. It is a tool that helps the company to decide their product and market growth strategy. It is determined by two scopes of option which are products and markets. It consists of market penetration, product development, market development and diversification. Market Penetration: Selling more of an existing product to an existing market. It is going deeper into a market, such as, coke and diet coke. Coca Cola in UK is doing market penetration through the selling its products to the business buyers and retailers who are huge multinational organizations like Tesco, Asda, McDonalds, Subway, KFC and many more. Market Development: Selling an existing product in a new market, for example, taking out various bottle sizes to attract different buyers. It is called market development. Many flavours of Coca Cola are not being sold in every shop, retailer market and other business buyers. Coca Cola can develop a new market if they introduce those flavours in their market. Product Development: Selling a new product to an existing mark