Coca-Cola Marketing System, Company's Growth and Environment - Case Study Example

Coca-Cola Case Study Introduction to Marketing systems The success of a business is highly dependent on its ability to come up with an effective marketing system. Accordingly, each business must ensure that all the aspects of production and marketing are incorporated into the system in order to enhance the delivery of quality goods and services to customers. A marketing system is a combination of management strategies and sales strategies aimed at meeting the overall company strategy and ensuring maximum profitability of the business (Stirtz 2006, p. 13). The marketing system details how a product or service is delivered by indicating the various functions in the company including the production process, marketing, resource allocation and coordination, company culture and management practices among other factors (Mentzer 2006, p. 218). It indicates how process flows fit into each other until the good or service is delivered to the customer (Mentzer 2006, p. 218). The marketing systems encompass various strategies including market segmentation, product life cycle and the marketing matrix. The marketing mix is comprised of the 4Ps of marketing namely price, product, promotion and place. It is imperative for every business to ensure that its goods are of the right quality (product); sold at reasonable prices (price); provided at convenient locations (place); and advertised in order to increase awareness of the product (promotion) (Sidhpuria 2006, p. 37). The marketing system also makes use of strategic models to analyze the market. Such models/tools include the SWOT analysis, Porter’s Five Forces analysis, PEST analysis, TWOS analysis and the grand strategy model among other models and tools (Herzog 2010, p. 22). A well formulated marketing system is a recipe to success hence its importance. The case study of Coca-Cola aims at illustrating how marketing systems operate and the major elements that they are likely to possess. The Coca-Cola Company Background The Coca-Cola Company is an international company whose main business involves the production of non-alcoholic beverages and syrups. The company’s main flagship is its Coca-Cola brand which was invented in 1886 by a pharmacist by the name John Pemberton (Pendergrast 2000, p. 7-8). The headquarters of the expansive company which is also in the S&P 500 Index is located at Atlanta, Georgia (Coca-Cola website). Further, its stock is listed on the NYSE. Coca-Cola was founded in 1892 by John Stith Pemberton in partnership with Ed Holland. Its initial name was J. S. Pemberton Medicine Company and sole products included Pemberton’s French Wine Cola which later came to be known as Coca-Cola, Pemberton’s Globe Flower Cough Syrup and Pemberton’s Indian Hair Dye. Asa Candler, bought the brand and formula in 1892. Since then, the company is a popular beverage manufacturer and currently operates in more than 200 countries, offering over 500 brands. The company’s mission is to refresh the world, inspire happiness and optimism and to create value while making a difference (Coca-Cola website). Coca-Cola is now a household name and has succeeded in being the most aggressive beverage firm in the market. A variety of brands are offered by the company including famous ones like Coca-Cola, Sprite, Fanta, Diet Coke, Minute Maid, Sprite, Mello Yello, Fresca and Nestea iced tea among others (Coca-Cola website). Coca-Cola has adopted a franchised system of distribution where the company only takes the role of producing the syrup concentrate which is then bought by various bottlers located around the world (Coca-Cola website). Coca-Cola’s global marketing strategy considers the world as a single market but leaves room for franchise managers to make decisions and engage in promotional activities that best favor their regions. Coca-Cola Marketing system The Coca-Cola marketing system encompasses a global marketing structure in which franchises manage functions in their area of operations (Coca-Cola website). This is known as the Manufacturer-sponsored wholesale franchise system (O'Shaughnessy 1995, p. 64). In this kind of franchising system, there is a contractual arrangement existing between an individual firm (franchisee) and the parent company (franchisor); such that the franchisee can operate a business using the established names while following specific rules provided by the franchisor (O'Shaughnessy 1995, p. 64). Coca-Cola only provides the syrup concentrate which it then distributes to the respective companies. These companies have their own management systems and distribution channels to fit their market needs. Coca-Cola has minimal influence of these systems and only provides rules regarding the quality of production. The marketing system draws on the franchise managers’ ability to ensure a smooth flow in the marketing process and in the eventual satisfaction of the customer. This combines the management and sales efforts with an objective of satisfying the organization’s mission and purpose (Pride et al 2009, p. 341). Marketing strategy is highly dependent on individual franchises. Notably however, they practice customer centrism strategy and therefore aim at ensuring maximum customer satisfaction (Coca-Cola website). The sales process is well organized and employees are well trained in order to handle the entire process with professionalism. This is accompanied by proper resource alignment and coordination in order to ensure that the sales process benefits the company. The marketing system at Coca-Cola and associated factors can be illustrated as shown below. Fig 1: Illustration of Coca-Cola marketing system Company growth The Coca-Cola Company growth level lies in Quadrant 1 which represents rapid market growth and a strong competitive position. It has positioned itself effectively in the market thus acquiring a large percentage of beverage customers (Pendergrast 2000, p. 38). Further, the brand name and availability of the products has promoted Coca-Cola’s competitive position. The growth of the company can be illustrated using the grand strategy matrix as follows: Figure 2: Growth model (Grand Strategy matrix) The customer groups involved in promoting this growth include soft drink customers, Figure 2: Growth model (Grand Strategy matrix) The company’s growth is dependent on customer groups such as customers seeking healthy drinks, energy drinks and water. Each of these customers influences the market significantly. The demand for healthy drinks for example has led to increase production of beverages such as minute maid and Nestea iced tea. Increasing demand for bottled water has also contributed to the company’s growth. Coca-Cola’s original target was the youth and therefore the company has always represented Coca-Cola with youthful vigor and energy. The company’s products however are also very popular with the older generation such that they have been incorporated as a co-target market.    Coca-Cola invests widely in research on consumer needs and competitor tactics. In a major development, Coca-Cola realized that customers preferred chilled drinks and in that case did not consider which brand they took as long as it was cold. It is for this reason that Coca-Cola started providing coolers and freezers to its distributors without any charge; just to ensure that customers obtain the chilled drinks they preferred (Joelson 2006, p. 388). These coolers are regularly checked to ensure they are in a proper condition. Company’s environment The external environment is highly competitive such that Coca-Cola should maximize on its internal strengths to be able to survive in the market. Through these strengths, Coca-Cola needs take up processes that will ensure that its mission and objectives are met. The environment can be divided into internal and external environment as follows: Internal environment Strengths Strong product line consisting of over 500 brands - This is a major strength which could be used in dealing with increased competition. Strong international presence (more than 200 countries) - The company has a wide market coverage; a factor that could be useful in continued expansion due to brand recognition and loyalty in many countries. Coca-Cola can use this to remain at a competitive position in the market. Excellent brand recognition – Its brand recognition is responsible for the huge sales and is an advantage over others. As a household name, Coca-Cola could easily meet its objectives through increased advertising and sales. Established partnership in sporting events makes the company popular – Various sports that Coca-Cola sponsors such as the Olympics serve as a good source of publicity and this could be used as a marketing opportunity in order to meet objectives. The company has realized a dividend increase for the last 43 years – This indicates that the company is earning considerable profits. Such profits could be used to expand the operations of the business. Large supply partnerships e.g. McDonald’s – Coca-Cola has partnerships with food stores to supply beverages so that the drinks are well popularized. Weaknesses Limited product line of beverages only – Coca-Cola could face competition from other companies e.g. Pepsi which also produces foodstuff. The company therefore needs to expand its scope in order to increase profitability. Poor brand image in India following water issues – Coca-Cola must seek to address potential legal issues by identifying legal risks and dealing with them accordingly. Inventory turnover is low (5.4 as compared to Pepsi Co.’s 8.0) – This could threaten its profitability thus risking its market position. External environment Opportunities Increase in bottled water consumption, healthy drinks and energy drinks - The Company should take advantage of the rising demand to produce more water, energy drinks and natural juice. This will help the company in accomplishing its mission which involves providing customers with needed refreshments. Development in less developed countries – Increased development in these countries presents an opportunity for Coca-Cola to earn revenue from these countries. Increase in disposable income – Increased disposable income means that people are willing to spend more. This is a factor that Coca-Cola could capitalize on to earn profits. Threats Multiple law suits – This could threaten the attainment of the company’s goals and thus should be avoided at all costs. Existing and upcoming beverage companies – Competition is high and Coca-Cola must keep up with increased advertising, innovations and price changes in the market. Overall, the company should continue providing quality beverages. Demand for carbonated drinks could reduce due to health fears – people are increasingly becoming health conscious and this could lead to reduced soft drink sales. Increasing commodity prices - Increase in the cost of raw materials could affect the production cost thus leading to a rise in the prices of soft drinks. The company should buy bulk quantities to mitigate this and thus continue providing refreshing beverages at favorable prices to customers. Case Study Questions 1. What are the major elements of a marketing system as identified in the study? Justification This is the major concern of the case study and it is therefore important to determine whether the intended purpose of the case study has been fulfilled. If the student can answer this question effectively, the mission will have been accomplished. He or she should be able to identify elements such as the marketing mix, distribution channels, market segmentation, customer need satisfaction, sales maximization and marketing challenges among other elements. This will address issues of marketing segmentation and the marketing mix. The student needs to be familiar with how companies ensure that goods are produced and supplied to customers in the right form and at the right place. Further, identifying how the market is segmented and how a company ensures that each segment in the market gets the required attention is also an important lesson for the person answering the question (Pride et al 2009, p. 416). He or she is bound to learn that the marketing system is vulnerable to various challenges during the management and marketing process such that each needs to be addressed in order to enhance the success of the firm. 2. The global market is highly competitive yet the company maintains a strong niche in the market. Identify and explain different factors that have contributed to this. Hint: Utilize the SWOT analysis and Porter’s Five Forces analysis in answering this question Justification Coca-Cola has managed to stay ahead of competition and can be considered the most successful beverage company in the world. A marketing student would therefore be interested in identifying the internal factors and external factors that have led to the success of the company. An important factor would be the identification of the company’s major strengths which have probably helped it in maintaining its position. The SWOT analysis and the Porter’s Five Forces analysis which are contained in the marketing strategy models would be useful in answering this question (Herzog 2010, p. 22). The SWOT analysis analyzes the business’ internal and external environment and would therefore play a significant role in explaining how Coca-Cola has survived in the market. The Porter’s Five Forces analysis on the other hand explore a business’ external factors including the power of suppliers, power of customers, threat of new entrants, existing competition and threat of substitutes (Herzog 2010, p. 22-23). It would be interesting to establish how Coca-Cola is affected by each of these factors and what it does to mitigate them and hence retain its position in the market. This question would help a student in identifying major factor both in the internal and external environment that determine the success of a company and how challenges can be overcome to enhance market growth. 3. Using the information from question 2, devise a TWOS matrix and use it to analyze how Coca-Cola’s strengths and opportunities can be used to mitigate its weaknesses and threats. Justification The marketing system is often full of challenges that threaten the continuity of a business. In this respect, a company should always device ways to deal with the challenges and in turn promote the continuity of the business (Lüdicke 2006, p. 34). This question is therefore relevant as it will help the persons answering the question in identifying various measures that a company can take to address its challenges in the market. One of the most famous approaches in handling market challenges is the use of strengths and opportunities to counter weaknesses and threats. The TOWS matrix, a marketing strategy model, acts as the basis for this strategy which also ensures that resources within the company are well utilized to reduce chances of loss or eventual dissolution. Through the TOWS matrix, a student would be able to do an analysis of how the strengths can be used together with opportunities to improve the company’s growth; how strengths can be used to mitigate threats; how weaknesses within an organization can be eliminated in order to benefit from opportunities; and how weaknesses and threats can be eliminated to reduce business risk (Birkin 2000, p. 121). This question would provide a perfect insight into the marketing system and is therefore imperative. 4. What is Coca-Cola’s current growth position? Give a 5 year prospect of expected growth of the company. Justification The student will be able to prospect the market growth of the company by incorporating observations from the market such as the growth of competitors and the increase in demand. This question is important because it would be helpful to students by allowing critical thinking while requiring the use of marketing knowledge to forecast the future of Coca-Cola. From the way Coca-Cola handles its customers and how it satisfies them, it will be possible to gauge the success of the business in the next five years. Effective customer management and customer classification as theories in marketing will be applied to determine the future of the company through establishing potential growth. The Grand strategy matrix can be used to explain the stage of growth that Coca-Cola is in currently. From recent trends in the market, the student can identify whether Coca-Cola will remain in the same position or there is potential for growth. 5. Coca-Cola has adopted a franchising system in its global expansion strategy. Is this a favorable method for the company? If you were to recommend another system for Coca-Cola, which system would you recommend and why? Justification While this may not derive a direct answer from the case study, someone can possibly identify the benefits of the strategy through analyzing Coca-Cola’s success story as identified in the case study. This question will therefore promote inferential tactics in answering questions; given that business puzzles may not always provide a direct answer. Depending on the individual’s view of the franchising strategy and Coca-Cola’s capabilities and weaknesses, an alternative system may be recommended. The answer to this question will lean on the theories dealing with the marketing environment and market research. Competitor analysis needs to be conducted in order to establish whether an alternative strategy that would work for Coca-Cola. Importantly, the chosen strategy should be realistic and capable of meeting the strategic objectives of the company. References Birkin, M. A. M 2000, Building the integrated company, Gower Publishing, Ltd, Aldershot, Guildford. Coca-Cola website, Our Company, Growth , Leadership, sustainability, Viewed 29 September 2010, < http://www.thecoca-colacompany.com> Herzog, C 2010, Strategic Tools in Dynamic Environments: A Framework, GRIN Verlag, Munich, Germany: Joelson, M. R 2006, An international antitrust primer: a guide to the operation of United States, European Union, and other key competition laws in the global economy, Kluwer Law International, The Hague. Lüdicke, M. K 2006, A Theory of Marketing: Outline of a Social Systems Perspective. DUV, Germany. Mentzer, J. T 2004, Fundamentals of supply chain management: twelve drivers of competitive Advantage, SAGE, London. O'Shaughnessy, J 1995, Competitive marketing: a strategic approach, Routledge, London. Pendergrast, M 2000, For God, country and Coca-Cola: the definitive history of the great American soft drink and the company that makes it, Basic Books, New York, NY. Pride, W. M 2009, Business. Cengage Learning, London. Sidhpuria 2006, Retailing FranchisingTata McGraw-Hill, New York: Stirtz, K 2006, Marketing for Smart People, Kevin Stirtz, Burnsville, Minnesota. Read More