Venturing into new markets is often challenging for many firms due to a number of reasons. Different countries have distinct economies, laws, business strategies, and policies. Further, cultural variances can also impede the success of a company wishing to venture into a new market. Despite the fact that every firm or business must expect a huge learning load, venturing into the international market may be easier with the adoption of the right strategies. In this regard, entering a new market may require a company to alter its products in an effort to meet the tastes and preferences of the new consumers. In this sense, multinational corporations need to realize which strategies to apply in the new market, which stores to open, the features that the target market values, and the right price for selling their products (Fan, 2005). Companies such as Coca-Cola have been able to build a strong brand image and to remain at the helm of competition thanks to their international business strategies. Over the last fifty years, Coca-Cola has established operations in over 200 countries all over the world and has been the leading firm in the soft drink industry selling over 400 brands. For the purpose of the course requirements, this paper examines the international business strategy for the Coca-Cola Company. The work begins by giving a brief overview of the corporation and its global strategy. It then continues by looking at the strengths, weaknesses, threats, and opportunities facing the company before conducting Porter’s five force analysis on the firm. Competitor analysis and an examination of the company’s market entry strategy are then carried out before making recommendations for future growth.
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Background of the Company
Founded in 1886, the Coca-Cola Company is the leading manufacturer, distributor and marketer of soft drinks, concentrates and syrups. Currently, the corporation has established business operations in over 200 countries across the world and is famed for its main drink Coca-Cola and which is also its main brand. The company has its headquarters in Atlanta, Georgia, but 70 percent of its volume and 80 percent of its profits comes from its subsidiaries (Puravankara, 2007). Overall, the firm employs over thirty thousand employees worldwide and has its products distributed in virtually all the countries in the world.
The success of the Coca-Cola Company in the soft drink industry over the years can be attributed to a number of factors. The firm’s products are popular among consumers largely because of their uniqueness and affordability. Coupled with other factors, this has enabled the company to remain at the top of the competition in the soft drink industry. The ability of the firm to offer products designed to meet local tastes has helped it to succeed in local markets and to outdo local players. It is important to note that while the company is a multinational corporation, it has always emphasized on the need to act locally. In this context, the firm relies heavily on locally owned bottling and distribution business activities. Further, the company through market research emphasizes on the need to tap into consumers different experiences to design and market its products (Puravankara, 2007). Arguably, the mission and vision of the corporation play an important role in determining its effectiveness and profitability. The company’s mission is to offer customers with products that refresh their mind, body and spirit. Its vision is founded on various values including but not limited to providing an excellent working place, offering a portfolio of drinks, networking with partners and becoming a responsible global citizen (Coca-Cola Journey, 2016).
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The Coca-Cola Company has pursued differentiation and cost leadership strategies to expand its operations in the international market. The former approach, in this case, is used by firms to establish a strong identity in a given market. Also known as segmentation strategy, differentiation strategy helps businesses to introduce varieties of a given basic product under the same name in a specific product category in order to cover the array of products in that group (Onkvisit & Shaw, 2004). Firms use several methods to differentiate their products. Of importance to this discussion are cost leadership and branding. A brand is defined as a term, name, symbol, sign, design, or a combination of them to identify a product or service offered by a given company in order to distinguish it from those offered by rivals. For branding to be successful, it must clearly deliver the message, confirm the firm’s credibility, connect with the target market emotionally, motivate the consumer and inspire user loyalty (Passport, 2013). The objective of cost leadership is to be the lowest-cost producer in a given industry. The Coca-Cola Company employs product differentiation to market and distribute its products in the market.
In the home market, the Coca-Cola Company has differentiated itself by positioning itself as the country’s icon. To many consumers, the business is regarded as traditional, patriotic, friendly, and American. Together with its advertising slogan, these attributes have helped the company to maintain brand loyalty since its establishment in the 1880s (Puravankara, 2007). Essentially, the corporation has been able to successfully differentiate itself in a way that loyal customers tend to collect its brand items including but not limited to umbrellas, trays, calendars as well as complimentary novelties like bookmarks and toys. The company has a reputation for understanding the unique aspects of the market and developing marketing campaigns that are responsive to different opportunities.
One of the strengths of the Coca-Cola Company emerges from its size and financial possibilities. The business wields considerable financial might and has a strong acquisition capability. Further, the company has enough funds for marketing, one of the crucial necessities for expansion and establishing and maintaining customer loyalty, especially during tough economic times. Another strength of the firm is its global presence in the international market. As aforementioned, the company’s operations span over 200 countries across the world (Banutu-Gomez, 2012). The corporation’s strong brand image helps in increasing sales, especially outside the domestic market, which, in turn, helps to improve its resilience to regional economic challenges.
In terms of weaknesses, the company is over-reliant on carbonates which makes it vulnerable to competition from substitutes. Whilst the business has an expansive portfolio of soft drinks, it remains dependent on carbonates making it vulnerable to products such as tea and coffee. Additionally, increased consumer awareness in regard to the negative effects of high sugar content has had a negative impact on the company’s sales. In this context, most consumers view Coca-Cola products as containing excess sugar and have switched their agenda to the consumption of healthier diets.
Despite the above weaknesses, the growing awareness among consumers of the importance of healthier diets presents an opportunity for the company to reposition itself. More than ever, customers have started to realize the importance of consuming healthier drinking options. To tap into this opportunity, the company needs to redesign its products to fit the new consumption trends. Additionally, there are many emerging markets that the business can tap into in an effort to increase its sales volume. Markets such as China and India present a good opportunity for the company to expand.
Still, the threat of competition from firms such as Pepsi and Dr. Pepper should serve as a warning for the Coca-Cola Company. Notably, Pepsi stands as one of the biggest competitors for Coca-Cola, especially in the home market. With such competitors, stealing a march in relation to bottle buyouts, they have an advantage in regard to reposition themselves in a marketplace that is undergoing tremendous redefinition. At times and, especially in low-calorie soft drinks, the company’s products are in direct competition presenting the risk of cannibalization.
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Porters Five Force Analysis
The threat of new entrants in the soft drink industry is low. Arguably, this market segment is dominated by Coca-Cola and PepsiCo with the help of their strong brands and advanced distribution channels. Further, the soft drink industry is approaching saturation with smaller companies filling for the market demand. This, in turn, makes it relatively difficult for new players to enter and compete with existing firms. In addition, establishing of a new business in the industry requires high fixed cost to cater to production costs, distribution, and economies of scale (Banutu-Gomez, 2012). Notably, it would be difficult for new entrants to compete on price in the absence of economies of scale. Market saturation and high capital requirements make it hard for new players to enter the industry.
The threat of substitutes, especially non-carbonated products, is, however, very high. Sports drinks and bottled water are becoming increasingly popular with the growing awareness of the need for healthier diets. The awareness trend is characterized by the growing consumption pattern of aging baby-boomers. Currently, there exists a variety of sport drinks and bottled water products to cater for different consumers tastes. These substitutes are being advertised as healthier products as compared with existing soft drinks (Puravankara, 2007). Further, tea and coffee are other competitive substitutes and are liked for their caffeine content. Specialty blend tea and coffee are gaining popularity with companies such as McDonald’s and Starbucks coming up with a variety of flavors to offer to the customers. The low cost of switching further makes the threat of substitutes to be high.
The bargaining power of suppliers in the soft drink industry is also high. For Coca-Cola, the main suppliers include manufacturers of bottling equipment and secondary packaging. Despite the fact that the corporation does not engage in bottling activities, it does own 36 % of the Coca-Cola Enterprises. The remaining 64 percent constitute a publicly-traded company. Coca-Cola Enterprises is the largest bottler in the market. It should be noted that the fact that the Coca-Cola Company owns the majority share may create a false sense that the bargaining power of the supplier is low (Douglas, Craig, & Nijssen, 2001). Simmering tensions between the bottler and the firm coupled with a high rate of introducing new products is creating distributional and operational complexity which, in turn, is affecting the company’s relationship with bottlers.
As in the case with suppliers, the bargaining power of buyers is high. The Coca-Cola products are mainly bought by restaurants, discount stores, and large grocers. Soft drink products are distributed to the stores from where they are redistributed to the consumer. The former usually buy large volumes of products which allows buying them at relatively low prices (Vrontis & Sharp, 2003). With the number of consumers going for soft drinks shrinking, decreasing buyer demand could further increase buyers bargaining power.
One of the competitive pressures facing Coca-Cola emancipates from the rivalry with its major competitors being PepsiCo and Cadbury. Despite the fact that the company has high volumes globally, it is facing stiff competition in the home market particularly from PepsiCo. The increasing global presence of its competitors and the growth in their brand images is also creating competitive pressure for Coca-Cola.
As aforementioned, Coca-Cola’s main competitors include PepsiCo, Cadbury, Cott Corp. Hansen Natural Group and National Beverage Corp. Despite the fact that Coca-Cola has the largest market share in the soft drink industry, competition from these and other rivals is high. To overcome this strategic challenge, the company will need to be proactive in terms of product innovation. This will help the business to remain on top of firms such as PepsiCo, which also have parallel differentiation strategies and which have proved to be innovative in regard to product design. In addition, the company needs to rethink its low-cost strategy in order to remain on top of the competition. Businesses such as Cadbury have adopted a focus strategy and this has enabled them to increase their market share over the last couple of years (Taylor, 2000). Still, differentiation strategy appears to be helping firms in the industry to increase their sales volume and create brand loyalty. In the line with this argument, the Coca-Cola Company needs to be more proactive in offering its consumers unique products as a ticket to remain at the top of other players in the industry.
Market Entry Strategy
Over the years, the Coca-Cola Company has used a mixture of market entry strategies depending on the target market. In this context, the corporation has applied different entry modes to venture into new markets. The entry mode adopted is usually dependent on the culture of the new market and existing laws and regulations. For example, in order for Coca-Cola to enter the Indian market, the company entered into a strategic alliance with the Parle Group (Moye, 2013). In the same way, the business has a strategic alliance with IHG (InterContinental Hotels Group) to help it sell its products to guests staying in the over 3200 hotels owned by the group in the United States (PR Newswire, 2014). In the same way, the company has acquired brands such as Minute Maid, Thumbs Up, and Barq’s which has, in turn, helped it to easily establish itself in new markets. Other strategies used by the firm to venture into new markets include new establishments and joint ventures.
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Conclusion and Recommendations
Through differentiation and cost leadership strategies, the Coca-Cola Company has been able to establish a strong brand in over two hundred countries worldwide. The corporation which sells over four hundred brands in these states remains the best performing firm in the soft drink industry with major competition coming from PepsiCo. When venturing into new markets, the company emphasizes the need to remain local. This way, the firm can design its products to meet the needs of the local market rather than using a standardization approach. With a strong brand image and years of experience, Coca-Cola has managed to remain on top of the competition despite the periodical shocks hitting the global economy. This is especially so because much of the company’s volume comes from the international market as compared with the home market. In entering the international market, the corporation has relied on a mixture of entry methods including but not limited to acquisitions and strategic alliances.
Still, there is a need for the company to continue being innovative and invest in low-calorie products to counter changes in consumption behavior which have arisen mainly due to increased awareness of healthier diets. In addition, the firm needs to tap into major emerging markets in an effort to increase its volumes and counter the increase in competition. Equally, the company needs to take advantage of the wider health and wellness movement within the soft drink industry and offer consumers products that are health conscious. Finally, the business should spread the risk from carbonates by venturing into other beverage categories.