Soft Drink Case Study: Possible Approaches And Global Strategies For Market Leaders

Rationale for International Expansion

Soft drink case study: possible approaches

International market research. The soft drinks organisation may start by defining the market research problem e.g. “how do we identify the new soft drink consumers” or “what are the new trends in terms of lifestyle, health, fitness etc.” This could be informed by considering what business decisions the organisation will have to make and mapping back from them e.g. “what is the lowest cost soft drinks market to enter?”

The organisation will consider different sources of data collection and the role of quantitative/qualitative formats.

An effective marketing information system is essential in this FMCG market. The organisation may be scanning for:

• emerging markets
• per capita spend on soft drinks
• purchasing behaviours around take away or on site/packaging preferences/cultural issues on tastes, drinking norms etc.
• strengths of competitors and substitutes e.g. tea, coffee, fruit juices etc. etc.

A market research brief would be constructed to make the data collection and analysis cost effective and focused.

Global marketing segmentation. The market research findings and the current marketing strategy should reveal the critical criteria for segmentation. This would cover geographical markets as well as local and global consumer profiles. “Technical” factors such as internet coverage and mobile phone penetration could be core segmentation criteria alongside “Social” factors such as levels of interest in health, fitness and lifestyle. A “Brand Strategy” may be emerging to coordinate marketing segmentation e.g. Coca Cola are dropping the price of Coke in India where it is not the top cola and attempting to make it a year round drink.

Methods of entry. The nature of the product i.e. low price with high production and distribution costs may shape thinking around method of entry. Local production and supply chains may be unavoidable leading to join ventures and partnerships. Established food and drinks agencies may also offer cost effective entry to markets with food and drink regulations and high levels of competition and substitutes. Parallel marketing in conjunction with other established local organisations targeting the same consumer segments e.g. music, sport, fashion etc. may also contribute to a method of entry.

1. Effective and sustainable strategies are essential if a global organisation is to survive and grow in a changing environment.

2. Evaluate how the following factors would impact on the global strategies of the market leaders in the soft drinks industry namely Coca Cola, PepsiCo & Cadbury Schweppes.

• The emergence of the new economic powerhouses

• The emergence of the new consumer

• The changing nature of competition

• Technological changes

• The emergence of global media.

It has been a common experience of all major global companies that the existing allure of the global markets is mesmerizing. Multinational companies that operate within the intensely competitive rather saturated markets at home countries are forced to expand themselves abroad. However, the decision of international expansion is not to be taken in a light mood. The organizational managers are required to convince themselves that the expansion decision would create value for the shareholders.

This report aims at analyzing the given case study on global market and discussing two related statements. The first states that effective and sustainable strategies are essential if a global organization is to survive and grow in a changing environment (Banalieva and Dhanaraj, 2013). The second states that any global player must fully evaluate marketing opportunities before making their choice of which markets to enter. The report provides a deep insight into the case study of Coca Cola and reflects upon the global market strategies of the Company.

Ansoff Growth Matrix

Coca Cola is regarded as the topmost soft drink producing firm globally. It was initially founded by Dr John Pemberton, a famous pharmacist within Atlanta. The firm has been increasingly successful over last century. It even started its partnership with bottlers across the globe (Chang, 2012). As in case of one of the leading soft drink marketers, Coca Cola, the firm has been on a continuous attempt to adopt ever changing innovative strategies to survive the adverse conditions of market at times of crisis. With implementation of some of the greatest sustainable strategies in global marketing, Coca Cola has maintained its successful position within the soft drink industry. In terms of approaches to market entry, Coca Cola has been in the forefront too. It is famous for its marketing expertise (Chinomona and SibandaVaal, 2012). The key business strength of Coca Cola is its brand image. It has undertaken great efforts as well as effective strategy for creating wide-reputed brand.

Multinational companies like that of the soft drink industry embarks upon innovative expansion strategy for some reasons, namely, for improving the effectiveness of cost of their operations, for expanding into new markets for capturing new customers, and also for following global customers. As firms seek for growth in the new regions across the globe, they basically prioritize those countries that they aim at entering into. Since several markets seem appealing owing to their market size or lower cost of production, it is quite important for the companies to select and prioritize which countries to enter first and evaluate all advantages (Choi, 2010). For instance, some of the international markets may be small in size but their strategic complexity is much lower, and this may render them convenience in easy entrance to the markets. Often there are some regional differences in a particular country, and so it is better to conduct a careful investigation, planning, research, and formulation of strategies before entering into any market.

Source: (Moen et al., 2009)

1. With reference to the provide case study, the statement that effective and sustainable strategies are essential if a global organization is to survive and grow in a changing environment is completely compliable. It is true that for any organization the choice for an entry mode is important, but it does not necessarily guarantees its success. Post entrance strategies termed as growth strategies hold similar great significance (Chung and Wang, 2007). In the context of global environment and era of advancement, it is a natural process that firms operates on a continuous trial to keep doing innovative undertakings to surpass their competitors in the race of success. This constant change in the environment leads every business firm to adapt to the changing environment with effective and innovative strategies of development. The same holds true for soft drink industry which is even more vulnerable to strict competition (Delios and Henisz, n.d.). Leading marketers like Coca Cola, PepsiCo, etc compete with each other to acquire the largest market share. So, in order to operate in align to market conditions, firms are required adopt sustainable strategies to survive and also rule the market.

Impact of Various Factors on Global Strategies of Market Leaders

Ansoff Growth Matrix – This model suggests that firms can successfully grow the business with existing or new products in the existing or new markets. Market penetration strategy refers to the idea that firms are selling increased number of products in the existing market. This may be attained by either acquiring shares from competitors or by attracting new customers (Etgar and Rachman-Moore, 2010). The firm may even develop new products (product development) or targeting the existing market (segmentation). Diversification refers to the concept of entering new markets with new products. Companies  

As in case of one of the leading soft drink marketers, Coca Cola, the firm has been on a continuous attempt to adopt ever changing innovative strategies to survive the adverse conditions of market at times of crisis. With implementation of some of the greatest sustainable strategies in global marketing, Coca Cola has maintained its successful position within the soft drink industry. Some of the innovative strategies of Coca Cola have been the following:

Innovative advertising to communicate – The firm has utilized every possible media available to advertise its products along with its technological back up. Right from the use of radio in the early days, the Company has transformed every media to be its own platform to promote its products (Ghorbal-Blal, 2011). The Company has always been portraying itself as a refreshing as well as pleasurable drink. It has launched some of its own campaigns successfully. These include “The Coke adds life” and “Have a coke and smile” in 1970s, “Coke is it!” and “Can’t beat the feeling” in 1980s, and finally “always life” and “Open happiness” in 2000s.

The Company sponsors major sport events across the globe and even recruits top celebrities and sportsmen to endorse its brands. These celebrities as brand ambassadors add extra glamour to its already created brand image. Through internet facilities, the company has been promoting its products to millions of population across the globe. In terms of approaches to market entry, Coca Cola has been in the forefront too (Gülsoy, Özkanlı and Lynch, 2012). It is famous for its marketing expertise. The key business strength of Coca Cola is its brand image. It has undertaken great efforts as well as effective strategy for creating wide-reputed brand

Distribution:

The distribution network of Coca Cola follows two strategies; first is direct selling and another is indirect selling. In case of direct selling, the firm supplies different products to retailers. They may be retail stores, multiplex, malls, restaurants, etc. This brings only a small portion of the revenue. However, most of the revenue comes from indirect selling. The Company engages into partnership with several distributor agencies (Lee, 2013). These distributors are supplied with company products, and they in turn deliver those to the retailers.

Source: (Woodside, 2010)

Prior to initiation of operations in any nation, a Company must determine the method they plan to staff their facilities. Three frameworks exist for a firm to staff international operations, namely ethnocentric, polycentric, and geocentric. The approach of ethnocentric is when people belonging to home company are charged with managing of operations in foreign lands. Polycentric approach is when local people of foreign lands manage operations (Mavondo, 2001). Finally, geocentric approach is when a firm selects its best people to incorporate functions. So, this can be an amalgamation of home, host country, and third party managers. The success of Coca Cola can be linked to the choice of geocentric staffing approach.

This strategy entails some changes in the current products which serve towards expansion of its potential. It is different product development such that it creates new customers that expand the market capability of actual products. This is almost conducted by creation of new brands. All the product lines that are offered by Coca Cola are enjoyable drinks and maintain effective hydration.

2. With reference to the given case study, it has been rightly stated that any global player must completely evaluate marketing opportunities before making their choice of which markets to enter. This may be examined with one of the leading soft drink companies within the industry and that is Coca Cola (Moen et al., 2009). The company y is well aware that its major business decision in selecting any specific market relies upon three factors, namely, the process of international market research, global market segmentation, and the approaches of market entry. All the above mentioned factors are well managed by Coca Cola.

The Company Coca Cola is well-known for its marketing expertise and also it is said to implement innovative marketing strategy which is responsible to lead to success of the company over a century. The Company understands the need to undertake effective market research before plunging into any business decision (Rhee, 2008). This is the reason the company conducts thorough market research and studies nationally as well as internationally to understand its current position and also to assess its future position in the market. Often, market personnel of Coca Cola reach out to the market themselves and collect information directly from their customers. This provides them with unbiased and raw data about their products and customer feedback.

Market segmentation refers to the technique of portioning market in groups of potential customers having similar needs or attributes and also exhibit same buying behavior (Timmor and Zif, 2005). It aims at analyzing as well as understanding market, finding key opportunities and also developing competitive advantage to capitalize on all opportunities. Coca Cola is said to segment its customers as per the following conditions:

Geographical condition – The Company has segmented its global market based on varied geographies. Several divisions have been created across the globe and heads of each division report to the parent company. Each division is bestowed with lot of autonomy for running various operations (Vrcelj, JurÄÂić and Zakić, 2013).

Place of consumption – The firm has been selecting specific locations such as multiplex, railway stations, restaurant, and also at homes. Different product sizes are available for different areas of selection.

Demographics – The Company selects demographic base for its segmentation as it selects as per the age groups and also income level to promote its products.

Product type – The Company is said to segment its products based on product type of those products that are bought by the customers (Woodside, 2010). The whole market is grouped into cola products and non cola products. Presently the cola products produce major revenues, but that of non cola products are also on a rise.

Coca Cola Company is said to target various segments with its multi-facet ads. The Company’s primary market is youth with age limit 10-25 years and 25-40 years are secondary market. The cola products are targeted to people who seek for strong flavor, whereas diet cola as well as other variants are preferred by the health conscious ones. It uses non cola products for targeting the health-oriented target groups of the market.

In terms of approaches to market entry, Coca Cola has been in the forefront too. It is famous for its marketing expertise (Zarankin and Senatore, 2005). The key business strength of Coca Cola is its brand image. It has undertaken great efforts as well as effective strategy for creating wide-reputed brand. Some of the strategies that enabled the firm to attain competitive advantage amidst all its competitors are:

Marketing & branding strategy – Brand reflects a promise of satisfaction and quality on behalf of a company. Coca Cola has utilized all its marketing resources for creating a strong brand for itself that has been successful in attracting brand loyal customers across the globe. This is nothing but the result of sustained market efforts. Besides usual advertisements in newspapers, television and bill boards, it laid emphasis on promoting its products on universities, organizations, institutions to result in enhanced sales revenues.

Global cum local strategy – The Company has utilized its capability to adopt such a strategy that is a perfect blend of central as well as local market functions for achieving optimum marketing as well as distribution efficiency  (Vrontis and Sharp, 2003). With this, the company maintains a potentially strong brand across the globe with introduction of local elements within the marketing to ensure that product image is aligned to that of the local culture and flavors.

Introducing new product – The Company has always preferred accounting for customer preferences as well as designing products as per their choices and demands. This is achieved by the company by an internal approach whereby the firm takes a stock of the internal assets as well as expertise in producing something that the customers would buy. Producing new products is essential for firms to survive in the competitive market (Ghosh, 2010). The Company sponsors major sport events across the globe and even recruits top celebrities and sportsmen to endorse its brands. These celebrities as brand ambassadors add extra glamour to its already created brand image.

Conclusion:

From the detailed discussion on strategic management of multinational firms, it may be concluded that in the present scenario of ever rising competition in the global trends and environment, it is a natural phenomenon that these companies need to ensure that they adopt more and more innovative strategies in the changing environment to survive and also grow sustainably in the competitive environment. An instance that is highlighted in the report is from the soft drink industry. As referred to in the given case study, Coca Cola is one of the leading soft drink marketer that captures largest market share through its products and services. One of the greatest strengths of the firm has been its brand image that has been built by the firm over the last few decades with strong commitment and persistence (Enserink, 2008). Some of the effective strategies have been contributing factors in case of Coca Cola. Marketing as well as advertising have been two most significant operations of the firm. Innovative marketing approaches have been adding on its success right from the beginning. The Company understands the need to undertake effective market research before plunging into any business decision. This is the reason the company conducts thorough market research and studies nationally as well as internationally to understand its current position and also to assess its future position in the market. It aims at analyzing as well as understanding market, finding key opportunities and also developing competitive advantage to capitalize on all opportunities.

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