Strategic Marketing Management of Coca-Cola Coursework

Introduction

Starting up a new product is taking a risk; however if the decision is well thought there are numerous benefits that come up with launching new products. Before one is set to start a new product there are short and long terms parameters that he should consider to ensure that there will be continuity in the business. The future is unpredictable and so even the smallest details about something should be interpolated before starting up.

This paper focuses on the introduction of a new brand of soft drink called poppy by the Coca Cola enterprises limited in the UK. Most of the drinks manufactured by the enterprise are carbonated and this does not go well with some people. The introduction of a drink (poppy) that is purely manufactured from fresh fruits would attract a significant number of consumers because fruits are recommended for health.

The enterprise’s strength is ventured in its strong brand name that is internationally recognized. It is a subsidiary of the Coca cola Company that manufactures and distributes Coca cola products such as Sprite and Fanta not only in the UK but in many parts of the world. There is a wide recognition of its products in all parts of the world.

The strength of the company is undoubtedly engineered by its internal managerial mechanisms. In order to have a competitive edge in selling its new product, it will be advisable for the company to take advantage of its ability to compete favourably with equal players in the market. A strategic marketing plan is the only way out.

Corporate Objectives

Corporate objectives are statements that identify plans within an organization that need to be improved. This includes both long-term and short-term goals. For them to be achievable, they have to be SMART (Specific, Measurable, Attainable, Realistic, and Time bound). The following are some of the corporate objectives for Coca Cola Enterprises limited.

Customer Loyalty

The company aims to make and retain its customers through having appropriate marketing, advertising, and customer services. To do this, there is a call centre that operates 24hours in a day and handles customers’ complaints. The company aims to have a customer -company intimate relationship whereby through the products; it derives a win-win situation (Paley 1999).

Profit

The goal of all businesses is to make profits. The approach taken by the company is one that facilitates trade and customer loyalties to enable them buy its products and in the process it stands to benefit. It uses the 4Ps of marketing where it ensures that there are affordable products for all its customers, when they need them.

Growth

Coca Cola is an international company, which targets global markets. To remain competitive the company aims at having the highest growth as compared to its competitors and has its products distributed all over the world (Coca cola Enterprises ltd, 2010).

Commitment to Employees

The company respects its employees and has made policies that are aimed at getting employees loyalty. The rate of compensation is high and employees’ view is respected. The human resource department is given the mandate of ensuring that adequate employees are available at all times. It has the mandate of planning, deploying, employing, training, retaining, and dismissal of employees (Masterman & Wood 2006).

Market Overview

Coca Cola Company is the largest manufacturer and distributor of soft drinks and non alcoholic drinks in the world. Its headquarters is in Atlanta, Georgia where products are manufactured and sold to bottlers for packaging. Coca cola’s operations are distributed in more than 200 countries (the UK being one of the biggest markets for the product) and produce more than 3000 products.

The Coca Cola Enterprises limited based in the UK specializes in soft drinks, energy drinks, water, and fruit drinks. British consumers can enjoy over 80 different flavours of soft drink manufactured by the Coca Cola Enterprises limited. This includes brands such as Fanta, Sprite and the popular Coca Cola brand. Coca Cola Enterprises is the leading manufacturer and distributor of soft drinks and recorded the highest sales in 2009.

Its biggest competitor is Britvic soft Drinks followed by GlaxoSmithKline and PepsiCo. Coca Cola products remain to be the most favoured soft drinks by majority of people in the UK and this has resulted in an increase in the sales volume for the product. Figure 1 in the appendix is a list of the top ten manufacturers of soft drinks in the UK (Anon 2009).

However, the company lags behind in the production and sale of non-alcoholic beverages where Unilever takes the lead. In 2004, Coca cola recorded total sales amounting to 13.7 billion litres of soft drinks in the UK market and sales worth over £9.2 billion in 2005.

In terms of market share, Coca cola occupies approximately 45% of the entire market in the UK (Anon 2005). Figure 2 in the appendix shows the sales value of the top brands of soft drinks in the UK.

Marketing Audit

Marketing Mix

Price

• Competitive international pricing strategy (Hooley & Saunders 1993).
• Price-wars- Price-ranges (Customers select products & the price range that suit them).
• Limit pricing strategies

Promotion

• Cross-advertising advantage (vertical integration)
• Service promotion through corporate image (efficient products)

Products

• Diversified range products.
• Inter-linked products for customer use delivering the content that customer’s desire (identifying customer preferences through surveys)

Place

• Open market operations (expansion through merges/acquisitions)
• Effective distribution channels through advanced technology (Hitt et al 2009)
• Accessible locations

External Analysis

SWOT Analysis

Strengths

1. A strong brand name
2. Strategic leadership and effective management
3. Strategic expansion through customer-focused innovations
4. High technological innovativeness
5. Strong value chain and business model- reliable and speedy fulfilment activities

Weaknesses

1. Prioritising the customer over strategic relationships
2. Inflexibility
3. Low profit margins
4. Disloyalty in partnerships

Opportunities

1. Merging with global retailers
2. International business expansion
3. Market development
4. Increasing technological advancements.
5. Emerging markets.

Threats

1. Global competition
2. Intense rivalry
3. Political problems
4. Price competition
5. Counterfeit products
6. Government regulations
7. Seasonality of business
8. Intellectual property infringement

Coca Cola has a strong and close relationship between its suppliers and distributors. It has expanded its markets in the social and cultural contexts and this has contributed to its success. Coca Cola has been using high technology, which has been rising over the years leading to success in all its activities. Most of its products are advertised over the internet making it easy for all people to access information.

Coca Cola’s innovativeness is facilitated by the use of decentralized structures where managers are allowed to experiment new products. An effective procedure is followed in order to establish new and attractive ideas for the success of the organization.

Some times it is not able to make the expected profit margins due to competition. It has an opportunity of merging with global retailers and to expand into other countries. However, Coca Cola is often faced by the threat of intense rivalry, price competition, and government regulations (Carolyn 2010).

PESTEL Analysis

Political

• Government regulation
• Taxation Policies
• Tariff barriers
• Restrictions on foreign ownership

Economical

• Seasonality issues
• Interest rates, exchange rates against U.S. Dollar
• New economic powerhouses
• Import/Export ratios

Socio-cultural

• Lifestyle trends and consumer preferences
• Demographic changes
• Major events and influences

Technological

• Innovation capacity
• Replacement technology and rate of system redundancies
• Timing, effectiveness, and costs of upgrades and Technological developments

Environmental

• Natural disasters
• Environmental awareness
• Environmental lobby

Legal

• Competition regulation
• Intellectual property regimes- patenting
• Technical standards
• International pressure groups

The external forces outlined above could help determine the retailer market growth or decline and the implications for a business like Coca Cola, which has a rapidly evolving business model that responds to trends in the economy, technology, and the industry in general.

An economic downturn could see economic factors having a considerable bearing on future strategies through ripple effects on socio-cultural and political factors (Pahl & Ritchter 2009). Furthermore, if the UK Congress and other states successfully challenge current state tax policies like New York has done, it could have a significant impact on Coca Cola’s operations.

That being the case; lower tariff barriers have improved international trade particularly with emerging markets like China. UK’s economic growth potential due to its demographic advantage could therefore open up opportunities for industry development.

Porters Five Forces Model

Buyer’s bargaining power

Buyers have the ability to determine which products will move first and which will not. It is through buyers that a company realizes its competitive advantage in the market. Coca Cola Enterprises limited have the following buyers’ power.

• Low switching costs
• Buyers are many but they are not concentrated

Competitive Rivalry in the Industry

Within an industry, there are businesses that compete with each other for the available market share. These businesses either specialize in the production of similar products or differentiated products. Coca Cola’s rival firms compete with one another on the basis of:

• Low prices
• Quality
• Performance
• High exits barriers
• High investment intensity

Though there are several companies which offer high quality and low cost services, there is still great rivalry in the industry as products are close substitutes for each other.

Threat of Substitutes

A substitute product is a product that meets the same needs as those met by a product produced by the industry. Coca cola’s products have many substitutes in the market produced by other companies such as PepsiCo.

Threat of Entry

The threat of new entrants to an industry depends on the number of entry barriers available. The higher the entry barriers, the fewer the number of competitors will be in the industry. Coca Cola Enterprises limited enjoys the following barriers:

• Strong economies of scale
• Brand loyalty of customers
• Strong capital cost on entry
• Legal constraints
• Mergers and acquisitions

It stands to win over the threat of entry in the market because; the government has put strong entry barriers.

Supplies’ Bargaining Power

• Flexibility to the industry’s request
• Volume and price provided
• Concentrated suppliers
• High switching cost

The suppliers bargaining power is weak over the buyers’ and could always lower their prices to ensure a share of the buyers’ prospective profit.

Assumptions

For the last decade, inflation has been on the rise in many parts of the world with the highest rate recorded in Britain. The rate is expected to rise even further and this is being caused by the increased pressure of demand which has resulted in a rise in commodity prices.

To respond to this situation, the UK has raised interest rates which are expected to slow down the growth rate and this is a major threat to Coca Cola Enterprises as it intends to introduce new products. The current account is not stable and it keeps fluctuating from time to time weakening the exchange rate and rates of interest.

Marketing Objectives

Coca Cola Enterprises aims at being the UK’s largest soft drinks manufacturer. To attain this, it has to improve its products with the needs of customers (Hooley & Saunders 1993). It has a research department, which advises the company on the kind of products it manufactures for better customer satisfaction. Some of its objectives after the introduction of poppy drinks would be:

1. To increase the sales value to £12 by the end of 2011
2. To increase its market share to 50%
3. To sell more than 10 million litres of poppy in 2011

Growth Strategy

Expansion of the company’s product in the domestic as well as the international market could ensure increased returns for Coca Cola Enterprises limited. By capitalizing on its existing potency and unique resources, the company could effortlessly gain a competitive advantage in the UK and realize high returns on the capital invested given that UK’s economy is forecast to surpass most of the world’s economies (Moschis 1994).

This strategy could be the gold mine that Coca Cola needs to improve the balance of its portfolio and to boost its international profit margins (Harvard Business School Press 2006).

Marketing Mix

The price of a commodity is an element of total cost plus a profit margin. When a target market has been established for poppy drinks, there is need to determine the price that the target customer will afford comfortably. A marketer should be aware of the consumer trends and their potential. The social class that the product is targeted will influence the price of the products.

The price parameter can be approached from the actual product price or the possibility that the product can be divided into smaller parts, not necessarily cheap, but the need for this is to enhance affordability. From a broader point of view the market can be divided into three sections; the high class, the middle class and the lower class. The product target customer will be executives and corporate bodies (Bryson 2004).

Alternative Plans

Although the UK’s economy has been doing so well and the future is promising, Coca cola has to overcome some obstacles before it realizes it’s potential. First there is the government requirement that it has to adhere to before being allowed to expand its products, increased capital costs, requirement of skilled labour force, and rivalry from other firms.

Corporate diversification through growth further boosts the marketing strategy, creates a strong brand name and targets a wider set of customers through introducing the use of new mediums (Ebbena & Johnson 2006). To have a sustainable competitive advantage, there is need to improve the products with time.

The company will have a research and development team which will be mandated to survey the market and advice the management on measures to take to ensure that it remains competitive (Anctil 2008).

Promotion Program

A promotion plan is aimed at increasing sales, launching new products, positioning an organization, or creation of good corporate image. The promotion plan for poppy drinks from Coca cola enterprises limited is aimed at supporting the push strategy, the pull strategy, and the profile strategy.

The first step will be to issue a press release that outlines the activities of the company as well as introducing the new product to the market. This can be done before the product is launched in the market (Lodato 2008). This is not a very costly exercise since the company will only cater for the advertising costs; this is estimated to cost about £10, 000.

Press Release

At Coca cola, we sell soft drinks with different flavours. Our products are fresh and healthy for consumption by all age groups. Our drinks are original and are packed in bottles of various shapes and sizes. We have focused on the labelling of our products to bring a clear and a simple picture that reflect our natural ingredients.

We intend to introduce a new product called poppy that is manufactured entirely with fruit extracts that are available in the UK. We have competent staffs who uphold business ethics. We are guided by the principle of corporate social responsibility and we believe that it is our duty to respect individuals well being.

We would like to pass our sincere gratitude to our valued customers, shareholders, our committed members of staff, management team, board of governors and all stakeholders for contributing to the success of our company. Without you we could not have made it this far. We would like to urge you to continue supporting us and we will see Coca Cola Enterprises limited raise to higher grounds

In Support of Push Strategy

After launching the product, the company can introduce a promotion plan that supports the push strategy. The poppy drinks will be offered at a discount to wholesalers and retailers, which ensure that the customers get them at affordable prices (Shimp 2008). This is quite expensive and can cost the company about one million pounds.

In Support of the Pull Strategy

This strategy aims at attracting more consumers so as to increase the sales of the new products (Saad, 2007). This is also expensive and can only be offered for a very short period of time. It can cost the company over one million pounds

Often, marketers are faced with some challenges when it comes to showing results in terms of numbers of the activities they have been involved in as well as the budget consumed. Many companies find it difficult to measure performance and even to manage it.

For the Coca Cola poppy drinks manufactured and sold in the UK, the marketing department will first prepare a good plan that will be implemented and coordinated so as results can be measured and evaluated easily.

After measuring the results, they will be diagnosed and collective action taken to ensure that the product remains in the life cycle. After the successful introduction of the new product, the marketing department will also be responsible for preparing annual control plans to evaluate the performance of the company in terms of achievement of objectives.

The market, distribution channels, and customers will be reviewed to ensure that expected profit margin is met (Kotler 2002). Vigorous advertisement and promotional program will also be undertaken to ensure that the product reach the target market which will be audited regularly to ensure that marketing ethics are adhered to and the social responsibility is not compromised.

Reference List

Anctil, E. (2008). Marketing and Advertising the Intangible. ASHE Higher Education Report, 34(2), 31-47.

Anon. 2005. Market Share- Date Sheet. Web.

Anon. 2009. The Top Selling Soft Drinks Companies. Web.

Bryson, M. J. 2004. Strategic planning for public and non-profit organizations: a guide to strengthening and sustaining organizational achievement jossey bass public administration series Volume 5 of Bryson on Strategic Planning. Australia: John Wiley and Sons

Carolyn, B. 2010. Organizational Theory. Web.

Coca Cola Enterprises ltd, 2010. Brands We Make. Web.

Ebbena, J. and Johnson, A. 2006. “Bootstrapping in small firms: An empirical analysis of change over time”, Journal of Business Venturing, Volume 21, Issue 6, November 2006, Pages 851-865

Harvard Business School Press. 2006. Essentials of Strategy Harvard Business Literacy for HR Professionals’ Series. Harvard, Harvard Business Press.

Hitt, H., et al. 2009. Strategic management: competitiveness and globalization: concepts & cases. New York, Cengage Learning.

Hooley, G., & Saunders, J. 1993. Competitive Strategy: the Key to Marketing Strategy. New York, Prentice Hall.

Kotler, P. 2002. Marketing Management, Millennium Edition. Custom Edition for University of Phoenix, Pearson Custom Publishing, Boston, MA

Lodato, M. 2008. Management of New Product Launches and Other Marketing Projects. London, AuthorHouse.

Masterman, G., and Wood E. H. 2006. Innovative Marketing Communications: Strategies for the Events Industry. New York, Butterworth-Heineman

Moschis, G. P. 1994. Marketing Strategies for the Mature Market. London, Greenwood Publishing Group.

Pahl, N., and Ritchter, A., 2009. SWOT Analysis – Idea, Methodology and a Practical Approach Akademische Schriftenreih. London, GRIN Verlag

Paley, N. 1999. The Manager’s Guide to Competitive Marketing Strategies. New York, CRC Press.

Saad, G. 2007. The Evolutionary Bases Of Consumption Marketing And Consumer Psychology Series. London, Routledge.

Shimp, T. A. 2008. Advertising Promotion and Other Aspects of Integrated Marketing Communications. New York, Cengage Learning.

Appendices

Figure 1. The top 10 manufacturers of soft drinks in the UK

Figure 2