Literature Review of Coca-Cola International Strategy
The Coca-Cola Company is the largest drink company in the world, serving customers from more than 200 countries with over 500 different brands. Although it is clear that Coca-Cola is best known for Coca-Cola, its total range covers both sparkling and still drives and its 14 billion dollar portfolio include both globally known and localised brands. (The Coca Cola Company, 2011a)
As a globalised multi-national corporation, Coca-Cola also focuses with commitment on the building of sustainability in its manufacturing plants. This is primarily done to reduce the carbon footprint and ensure a healthy environment. (The Coca Cola Company, 2011a)
“This Company is focused on initiatives that reduce our environmental footprint, support active, healthy living, create a safe, inclusive work environment for their associates, and enhance the economic development of the communities where they operate.” (The Coca Cola Company, 2011a)
Coca-Cola was established in 1886 by Mr John S Pemberton and now owns four of the largest 5 non-alcoholic brands worldwide. In December 2010 it amounted to nearly 140 thousand associates worldwide. The world penetration is such that it has been calculated that over 1.7 billion servings per day are consumed from the Coca-Cola portfolio. This covers more than three thousand different products ranging from juices to water to teas and coffer and clearly to soft drinks. (The Coca Cola Company, 2011b). Currently it employs 138600 (The Coca Cola Company, 2011c)
The Coca-Cola Mission is simple but in the same time vast. It approaches three main ideological concerts, that of refreshing the world (through higher penetration and increasing the variety through customized and localised marketing), to inspire “moments of optimism”, and to create value (for itself, for its share holders and for its customers) and to make a difference (again to all three stakeholders and also its employees) (The Coca Cola Company, 2011a)
(Trefis, no date)
The global soft drinks market is dominated by 3 household names: Coca-Cola, PepsiCo and Cadbury-Schweppes. Coca-Cola claims 47% of the global market, compared with 21% for PepsiCo and 8% for Cadbury Schweppes. Other major players include Cott and AmBev in Latin America This is illustrated in table 1 below. (Vrontis & Sharp, 2003)
(The Official Board, 2011)
b) Produce a literature review of a number of identified research sources for your assignment. Although your chosen company may make useful information available, it is necessary to also include non-company sources to ensure a balanced, objective report. (At least 5 separate sources must be included)
In the following short literature review, eight papers are going to be analysed. The main topic is the multinational giant Cola-Cola Corporation, the world's largest beverage company serving more than 200 countries at a massive consumption rate of nearly two billion serving per day. Several different aspects are going to be tacked from human resource methodologies employed, to marketing challenges in particular countries, to branding strategies and discussion on the strategic positioning in the global marketing world. The papers used are all taken from journals also ranging in their interest such as ‘The Marketing Review', ‘Thunderbird International Business Review' and the ‘Corporate Communications: An International Journal'. The following literature review is by no means the final one which will be used as more papers are constantly being found, read and analysed. The eventual literature review will surely differ from the following one, and the papers seen here could form part of the eventual literature review or could be moved to the bibliography section.
Coca Cola is currently the largest beverage company in the world having the widest spread of consumers, over 200 countries with nearly two billion servings per day. This huge network incorporates nearly one hundred and forty thousand company associates to distribute this huge amount of drink. It is important to note that we are not talking about one particular drink, for example Coca Cola or Diet Coca Cola but a whole range of beverages. In fact the Coca Cola Company has developed bought and conglomerated more than three thousand five hundred different drinks and has successfully or otherwise marketed and positioned these drinks in the global market. (The Coca Cola Company, 2011a)
Having such a huge portfolio of products and ranging such a different spectrum of customers, cultures and mind sets needs a very specific and energetic marketing approach both as a global marketing strategy, narrowing down to a more focused cultural approach to specific country particular marketing strategies. A strategy that works in one country could be irrelevant to another. The first paper to be discussed is one which was published in 2005 in the ‘Thunderbird International Business Review' called ‘Coca Cola's Marketing Challenges in Brazil: The Tubainas War'. In this paper, the author discusses the marketing challenges of the Coca Cola company as it combats its competitors, both its nemesis Pepsi but also hundreds of local brands (called tubainas), some which are supported by the government through specific tax incentives, thus effectively effecting the price. Brazil is clearly an important strategic country since it corresponds to Coca Cola third largest operation while having a significantly low consumption rate of only 144 bottles per day when compared with the bench mark of the US with 462 bottles per year. To try and grow in the emergent market, Coca Cola employed many different marketing strategies, from lowering the price of its products in 1999 (from R$1.80 to R$1.25) to expand the number of brands in the market. They also expanded on the particular type of drink that was more in line with the taste of the Brazilian population. In fact focus was given to Kuat, a particular drink flavoured with Guarana, a Brazilian popular Amazonian fruit. In fact the Brazilian subsidiary planted 200 hectares of this fruit to try and win back the Brazilian market. Eventually the ‘winning strategy' was a mix of price positioning, changing the bottling technology (from plastic going back to glass). To judge the effectiveness of the strategy that Coca Cola employed in Brazil, it is relevant to see the current consumption of the drinks under the Coca Cola umbrella. According to Coca Cola's own figures, last year's consumption for Brazil was 229 per capita, an increase from the 144 of 2005. This amounts to nearly 60% growth in five years, a mammoth growth in such a small time period. Clearly more work could be done to reach the consumption of other high consumers that hit the 675 per capita. It is interesting to note that in Malta, the Coca Cola consumption is the second highest in the world with a staggering 606 bottles per capita ! (The Coca Cola Company, 2011d)
Continuing on the marketing aspect but now going over to the European side of the globe, more specifically to Spain, one can appreciate the different marketing techniques employed to enter into the Spanish market. In the paper ‘Brand communities on the internet - A Case Study of Coca-Cola's Spanish virtual community', the authors Maria Sicilia and Mariola Palazon discussed the ‘technological' approach the Coca Cola took to penetrate this market. The innovative approach was the use of virtual communities as an alternative strategy. The paper first deals with what are virtual communities and how they function. The data that the authors collected was from the period September 2006 to July 2007. The paper is offers a very interesting exposition of this virtual reality, social networking concept when seeing the growth from 2000 to 2010, the Spanish consumption grow from 251 to 284, a growth of 13% whereby the overall European market grow by 20% and the Worldwide market grow by 33% ! (The Coca Cola Company, 2011e)
The third paper discussed in this literature review deals with the strategic positioning of Coca Cola in their Global Marketing Operation. This means that now we are going to zoom out from the individual country and go to the less specific. The paper written in 2003 by Demetris Vrontis and Iain Sharp is titled ‘The Strategic Positioning of Coca-Cola in their Global Marketing Operation' and was published in the Marketing Review journal. This paper examines how Coca-Colas has strategically positioned itself within the world's softdrink marketing. The paper focusing at the models that Coca Cola has utilized for such a ‘global take over'. This paper explains that the Coca-Cola Company has adopted both a Differentiation and a Cost Leadership Strategy. The use of a differentiation strategy is where the firm attempts to be diverse from its competitors by adding something to its product that will provide a unique value to its customers. There are also various ways a firm can differentiate depending on the industry it is in, however the costs of this differentiation policy must be lower than the additional pricing the firm can obtain.
Differentiation for Coca-Cola is achieved through perceived superior quality product, which surpasses their nearest rivals, and high brand image and recognition. The company has also used their promotion and packaging as a means of further differentiation, for example, the Coca-Cola bottle, which has become an internationally recognised symbol. (Vrontis and Sharp, 2003) These are basically the two overall methods that Coca Cola employees for its strategic management and direction. With these measures, Coca Cola managed to diverse from its competitors and create a product which provided a unique value to its customer. The products generated were well incorporated into a comprehensive product portfolio which enabled world penetration and the ability to hold on to this huge market share. It is clear that to manage a corporation this big, involves challenges in Human Resource management which are not to be disregarded. Specifically in this line of literature, the next paper will discuss aspects of Human Resource management specifically with respect to mentoring and coaching. The paper is called ‘Case Study: Mentoring and Coaching as part of a human resource development strategy: an example at Coca-Cola Foods'.
This paper, written by David J Veale and Jeffrey M Wachtel, published in the Management Development Review in 1996 highlights the three approaches that Coca Cola took to this aspect of training. These three approaches include the need to strengthen the link between their business strategy and development focus, the need to involve leadership of the organisation in all aspects of development and to use of a variety of development tools to match personal and organisational needs better. The three approaches were employed to reach the first of the companies' vision:
‘People: Be a great place to work where people are inspired to be the best they can be'. (The Coca Cola Company, 2011f)
This paper explains that Coca Cola manages to use both coaching and mentoring methods concurrently for the benefit of its employees. Coaching is a relationship activity designed to increase performance of the particular company. Coaching is a more informal method and occurs between the employee and his or her employer. Mentoring is more formal. It is based on a one-to-one relationship with someone who normally is not in the same department or area. A mentor can or normally uses all of the coaching types, but the purpose of mentoring is much broader. Coca Cola believes that both mentoring and coaching have their own important role in the HR development effort. Coca Cola ascertains that people (staff) development is a main key to ensure building competitive advantage and to create as high a performing organisation as possible. (Vaele and Wachtel, 1996)
The final paper that will be discussed in this short literature review leaves the previous studies and focuses on the way Coca Cola ‘manages' crisis. he Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.
In 1997, the financial outcome of the Asian Crisis began to be felt in most Asian countries, but clearly not felt equally in all. Countries such as Indonesia, South Korea, Thailand and Malaysia were very badly damaged in this crisis. On the other hand other countries like Singapore, Vietnam, the Philippines, Taiwan, Burma and China were not crushed even though they felt the financial hit of the crisis. (Pempel, 1999)
The Coca Cola factory in Indonesia saw a plunge in their sales of 30% just after this Asian crisis but it managed to survive by employing very specific actions which might have been seen as unrealistic or unreasonable at that point in time. In their paper ‘Strategic Lessons from the Asian Crisis', Singh and Yip explain the main actions taken by Coca Cola Indonesia. The companies first response was a price increase (to increase profitability), then a change in the mix of packaging (from high cost aluminium to a lower cost glass), to reduce manufacturing cost and increase further more the profitability. Finally, having assured itself of a certain amount of cash (following the above actions), Coca Cola Indonesia focused on asset buying. In fact Coca Cola was one of the very first companies to buy assets immediately after the Asian Crisis. Coca Cola raised its investment in its Thai bottling plant from 5 per cent to 49 per cent, acquiring its South Korean and Philippines bottling plants and expanded operations in India, Vietnam and other countries. (Singh and Yip, 2000)
Basically Coca Cola show its ability of turnaround from crisis to potential growth. This was after all in line with the mission and vision of this massively huge international colossal which again managed to find solutions in adverse situations which could easily have damaged or even broke down the Asian side of this company. (Singh and Yip, 2000)
Gertner, A., Gernter, R., & Guthery, D. (2005). Coca Cola's Marketing Challenges in Brazil: The Tubainas Wall. Thurnderbird International Review , 47 (2), 231-254.
Pempel, T. J. (1999). The politics of the Asian economic crisis. New York: Cornell University Press.
Sicilia, M., & Palazon, M. (2008). Brand communities on the Internet: A Case Study of Coca-Cola's Spanish Virtual Community. Corporate Communications: An International Journal , 13 (3), 255-270.
Singh, K., & S, Y. G. (2000). Strategic Lessons from the Asian Crisis. Long Range Planning , 33 (5), 706-727.
The Coca Cola Company (2011a), The Coca Cola Company Fact Sheet, [online] available at : www.thecoca-colacompany.com/ourcompany/pdf/Company_Fact_Sheet.pdf (accessed at :3 June 2011)
The Coca Cola Company (2011b), Coca-Cola 125 years. [online] available at: http://www.thecoca-colacompany.com/heritage/pdf/Coca-Cola_125_years_booklet.pdf (accessed at: 4 June 2011)
The Coca Cola Company (2011c), Coca Cola Home Page, [online] available at: http://www.thecoca-colacompany.com/ourcompany/index.html (accessed at: 4 June 2011)
The Coca Cola Company (2011d), Per Capita Consumption of Company Beverage Products, [online] available at: http://www.thecoca-colacompany.com/ourcompany/ar/pdf/2010-per-capita-consumption.pdf, (accessed at: 3 June 2011)
The Coca Cola Company (2011e), Europe Operating Group 2010 At-a-glace, [online] available at: (http://www.thecoca-colacompany.com/ourcompany/ar/pdf/2010-operating-group-europe.pdf), (accessed at: 3 June 2011)
The Coca Cola Company (2011f), Mission, Vision & Values, [online] available at: www.thecoca-colacompany.com/ourcompany/mission_vision_values.html (accessed at: 3 June 2011)
The Official Board (2011), Coca Cola Enterprises, [online] available at: http://www.theofficialboard.com/org-chart/coca-cola-enterprises (accessed at: 3 June 2011)
Trefis (no date), Coca Cola: Overview, [online] available at: http://www.trefis.com/company?hm=KO.trefis# (accessed at :3 June 2011)
Veale, D. J., & M, W. J. (1996). Mentoring and coaching as a part of human resource development strategy: an example at Coca-Cola Foods. Leadership and Organisational Development Journal , 17 (3), 19-29.
Vrontis, D., & Sharp, I. (2003). The Strategic Positioning of Coca-Cola in their Global Marketting Operation. The Market Review , 3, 289-309.