Introduction
Increasing competition among business organizations cause business organizations to become innovative and to pay keen attention to the trends in the market in order to maintain sustainability and ensure profitability. Many factors within the environment shape business organizations and market dynamics.
These factors determine the levels of competition in the market and hence the profits made by business organizations. This implies that business organization should modify these competitive forces to enable them gain competitive advantage in the market and thus improving their position in the market (Morrison 2008).
These factors may include entries of new competitors in the market or the threat of substitute product or service. Human beings are rational and would normally shift to substitute products or services especially when the cost of switching to the other product is low and again when the product or service has relative performance and price advantage.
They may also include the purchasing power of the buyers or even the bargaining power of the potential and actual suppliers. Another major force comes from the existing players in the market. The strength and the size of the existing competitors and the new players in the market must be given much consideration and should not be underestimated.
Business organizations tend to exploit the existing barriers to new players in order to maintain competitive advantage over them. They develop business tactics that enable them capture and maintain the loyalty of their customers (Ries and Trout 1981).
Strong competition in the market between existing businesses organizations normally lead to low returns especially if the existing players are almost the same size or when the products or services rendered by these companies are similar.
Analysis of Coca-Cola Company in China
Coca-Cola’s acquisition of Chinese leading juice company, Huiyuan Juice Ltd is a clear indication of its aspiration to conquer the world market. Coca-Cola Company owns businesses in almost all countries in the world either singly or through partnerships with other companies. According to Weisert (2001) today Coca-Cola owns 24 bottling joint-ventures in China.
It partly owns some of these companies and also operates as a corporate partner with some. Coco-Cola started its investment in the country by importing its products and selling them to foreigners in the country, but has stabilized in the market today to become one of the leading beverage producers in the country.
Its business strategies of focusing on localizing its productions as well as building infrastructure in collaboration with the Chinese government and other local companies has enabled it to establish itself throughout the country. Coca-Cola is a major player in the Chinese market today and according to Weisert (2001) it generates annual sales of about $1.2 billion.
Coca-Cola has survived in the Chinese market for a long time due to its innovativeness, its localization of production, its corporation with other companies and the government as well as its greater understanding of its customers, the market trends and the factors that influence its products in the market.
According to the case study, the company changes its products to suit the taste and preference of its customers. This implies that Coca-Cola Company carries out constant market survey that enables it understand the trends in the market as well as the factors that may impact on consumption of its beverage products. This is the reason which made possible for the company to divert its focus from production of carbonated beverages to fruit juice.
It realized that it was bound to lose its market share due to the respiratory infections that had affected Chinese citizens in 2003. The carbon gas from its beverage products was viewed to be a major contribution of that condition. They therefore had to be innovative in order to save its market share from falling.
This means that Coca-Cola does not generalize its customers but does as much as it can to retain its market share across the globe. It employs global-local approach in production that ensures that the taste and preference of all its customers are taken care of. This implies that Coca-Cola has the potential and capacity to develop a unique product for its customers in each region.
The global-local approach has enabled it escape the negative impacts of economic cycles (Perner 2008). It also applies the global-local approach in marketing its products. It ensures that its marketing strategies take into account diversity in the social cultural behavior of various communities. Its commercial advertisements meant for its Chinese customers cover almost all aspect of Chinese cultural festivals.
According to Weisert, (2001) it is the first foreign company to advertise on CCTV. The company has been able to effectively apply its ‘think local, act local’ approach in maintaining its market share in the country. It has been able to successfully balance its localization strategy while maintaining profitable product lines.
Its innovativeness enables it maintain sustainability in the market. Its ability to produce varieties of beverages and creative branding and packaging which match the market trends has enabled it to withstand the unending changes in the consumers’ taste and preference.
The company sells its international known brands such as fanta and coke to its Chinese customers as well as the Diet Coke and Tianyudi (a non-carbonated drink) brands which are also doing fairly well in the market. Its innovativeness enables it beat many beverage companies in the market including new players.
The company understands that taste and preferences are dynamic factors and therefore occasionally introduce a new brand in market after some time. For example, according to the case study, it acquired the Huiyuan Juice Ltd in order to diversify its product portfolio and as a result meet the demands of the various market segments within the country.
According to Weisert (2001) after introducing Tianyudi brand in the market in 1996, it introduced the Xingmu (Smart) brand in the market in 1997. Xingmu was able to outpace Tianyudi in the market since it was a new brand even though it was a carbonated drink.
Perhaps the major social factor that has greatly contributed to the company’s ability to conquer the Chinese market is its corporation with the government and other local companies in joint ventures. In 1970s the company was not allowed to sell its products to Chinese people.
Over time the company has been able to woo the government to allow it to fully operate in China; and today, the company’s products account for about 35% of the country’s carbonated beverages (Weisert 2001). It assisted the government in most of its facilities’ development by providing technical assistance and financial resources.
Most of the company’s bottling facilities are owned on joint venture collaboration with other companies including government agencies. This gives it a local image in the market which in turn gives it a competitive advantage over other companies.
Its interaction with the domestic companies and government agencies gives it an advantage in acquiring other firms such Huiyuan Juice Ltd which enables it expand its business operations in the country thereby increasing its revenue generating opportunities. Its collaboration with the government in some of the governments activities also enable it acquire a more local image.
Demographic factors also influence Coca-Cola’s investment in China. The Country has the highest population in the world with the total population being over one billion. Again, China also has one of the largest economies in the world which is estimated to be the second after US.
This has been a major reason as to why Coca-Cola seeks to expand its market share in the country by buying the leading juice producing company in China. It strong economic growth has increased the purchasing power of its population; therefore it is important to produce beverage products that deliver economic values to its customers and attracts the customers more to the company.
Although Coca-Cola Company seems to be enjoying monopoly in beverage production in some countries, it also faces challenges from other companies which are also established and others, upcoming. Pepsi is one such company that challenges Coca-Cola in competing for the market share in America.
The Adidas and Nike companies also compete against each other in order to gain competitive advantage over one another in the market. They are both struggling to come up with new fashions and technologies in sports.
One factor that worries the company’s management is the fickle-mindedness of their Chinese customers. They seem to have a very dynamic taste and preference which only focus on the present trends and not on the long term impacts of brands in the market. This implies that it is difficult to capture their loyalty.
Conclusion
Marketing sustainability requires flexible management and innovativeness in order to always match the market trends. International companies need to focus on a global-local approaches that are sensitive to consumers’ taste and preference. This means that business organizations have to put in place measures that enable them acquire an in-depth understanding of consumers’ trends.
Reference List
Morrison, M., 2008, Porter’s Five Forces: Competitor Analysis. London: Richard Byrd Company.
Perner, L., 2008, Introduction to Marketing. Los Angeles: University of Southern California
Ries, A, & Trout,J., 1981, Positioning, The battle for your mind, New York: Warner Books – McGraw-Hill Inc.
Weisert, D., 2001. Coca-Cola in China: Quenching the thirst of a Billion. The China Business Review, 2001.The US-China Business Council