Executive summary
Giant soft drink company Coca Cola has come under intense scrutiny by investors due to its inability to effectively carry out its marketing program. Consequently it is seeking the help of Polianitis Marketing Company Pty Ltd to develop a professional marketing plan which will help the business achieve it’s objectives more effectively and efficiently, and inevitably regain there iron fist reign on the soft drink industry.
When establishing a re-birthed marketing plan every aspect of the marketing plan must be critically examined and thoroughly researched. This consists of examining market research, auditing business and current situation (situation analysis) and carefully scrutinising the soft drink industry and possibilities for Coca Cola in the market. Once Coca Cola have carefully analysed the internal and external business environment and critically examined the industry in general the most suitable marketing strategies will be selected and these strategies will be administered by effectively and continually monitoring external threats and opportunities and revising internal efficiency procedures.
Situation Analysis on Coca Cola
Market Analysis:
The market analysis investigates both the internal and external business environment. It is vital that Coca cola carefully monitor both the internal and external aspects regarding it’s business as both the internal and external environment and their respective influences will be decisive traits in relation to Coke’s success and survival in the soft drink industry.
Internal Business Environment
The internal business environment and its influence is that which is to some extent within the business’s control. The main attributes in the internal environment include efficiency in the production process, through management skills and effective communication channels. To effectively control and monitor the internal business environment, Coke must conduct continual appraisals of the business’s operations and readily act upon any factors, which cause inefficiencies in any phase of the production and consumer process.
External Business Environment
The External business environment and its influences are usually powerful forces that can affect a whole industry and, in fact, a whole economy. Changes in the external environment will create opportunities or threats in the market place Coca cola must be aware off. Fluctuations in the economy, changing customer attitudes and values, and demographic patterns heavily influence the success of Coka Cola’s products on the market and the reception they receive from the consumers.
SWOT stands for Strengths Weakness Opportunities Threats. SWOT analysis is a technique much used in many general management as well as marketing scenarios. SWOT consists of examining the current activities of the organisation- its Strengths and Weakness- and then using this and external research data to set out the Opportunities and Threats that exist.
Strengths:
Coca-Cola has been a complex part of world culture for a very long time. The product’s image is loaded with over-romanticizing, and this is an image many people have taken deeply to heart. The Coca-Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable branding is one of Coca-Cola’s greatest strengths. “Enjoyed more than 685 million times a day around the world Coca-Cola stands as a simple, yet powerful symbol of quality and enjoyment” (Allen, 1995).
Additionally, Coca-Cola’s bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and operated by independent business people who are authorized to sell products of the Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers.
Weaknesses:
Weaknesses for any business need to be both minimised and monitored in order to effectively achieve productivity and efficiency in their business’s activities, Coke is no exception. Although domestic business as well as many international markets are thriving (volumes in Latin America were up 12%), Coca-Cola has recently reported some “declines in unit case volumes in Indonesia and Thailand due to reduced consumer purchasing power.” According to an article in Fortune magazine, “In Japan, unit case sales fell 3% in the second quarter [of 1998]…scary because while Japan generates around 5% of worldwide volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35% of Coke’s volume and none of these markets are performing to expectation.
Coca-Cola on the other side has effects on the teeth which is an issue for health care. It also has got sugar by which continuous drinking of Coca-Cola may cause health problems. Being addicted to Coca-Cola also is a health problem, because drinking of Coca-Cola daily has an effect on your body after few years.
Opportunities:
Brand recognition is the significant factor affecting Coke’s competitive position. Coca-Cola’s brand name is known well throughout 94% of the world today. The primary concern over the past few years has been to get this name brand to be even better known. Packaging changes have also affected sales and industry positioning, but in general, the public has tended not to be affected by new products. Coca-Cola’s bottling system also allows the company to take advantage of infinite growth opportunities around the world. This strategy gives Coke the opportunity to service a large geographic, diverse area.
Threats:
Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea, coffee, juices, milk, and hot chocolate. Even though Coca-Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into these markets, allowing them to have further significant market shares and offset any losses incurred due to fluctuations in the market. Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produce a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the competition. Furthermore, consumers can easily switch to other beverages with little cost or consequence.
Product Life cycle:
When referring to each and every product or service ever placed before the consumer i.e. in the long term all the existing products and services are dead. For e.g.:- Replacement of Ford Cortina ( a highly successful car) by Ford Sierra, the replacement of sierra by the Ford Mondeo and the replacement of the old Mondeo by the new Mondeo in 2001. So every product is born, grows, matures and dies. So in the commercial market place products and services are created, launched and withdrawn in a process known as Product Life Cycle.
To be able to market its product properly, a business must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers.
Furthermore, cost management, product differentiation and marketing have become more important as growth slows and market share becomes the key determinant of profitability. In foreign markets the product life cycle is in more of a growth trend Coke’s advantage in this area is mainly due to its establishment strong branding and it is now able to use this area of stable profitability to subsidize the domestic Cola Wars.
Insert the picture of the product lifecycle
Marketing Objectives
The objective is the starting point of the marketing plan. Objectives should seek to answer the question ‘Where do we want to go?’. The purposes of objectives include:
-> to enable a company to control its marketing plan.
-> to help to motivate individuals and teams to reach a common goal.
-> to provide an agreed, consistent focus for all functions of an organization.
All objectives should be SMART i.e. Specific, Measurable, Achievable, Realistic, and Timed.
Specific – Be precise about what you are going to achieve
Measurable – Quantify you objectives
Achievable – Are you attempting too much?
Realistic – Do you have the resource to make the objective happen (men, money, machines, materials, minutes)?
Timed – State when you will achieve the objective (within a month? By February 2010?)
1.Market Share Objectives:
To gain 60% of the market for soft drink industry by September 2007.
2.Profitability Objectives:
To achieve a 20% return on capital employed by August 2007
3. Promotional Objectives
To increase awareness of the product on the market.
4. Objectives for Survival
To survive the current market war between competitors.
5. Objectives for Growth
To increase the size of the worldwide Coca Cola enterprise by 10% .
Selecting Target Market
Once the situation analysis is complete, and the marketing objectives determined, attention turns to the target market. The soft drink market is very large, and the business cannot be “all things to all people”, so it must choose which market segments have the greatest potential. The target market is the group of customers on whom the business focuses attention. The target market is where Coca Cola focuses its marketing efforts as it feels this is where it will be most productive and successful. The target market for Coca cola is very wide as it satisfy’s the needs for many different consumers, ranging from the healthy diet consciousness through Diet Coke to the average human through its best selling drink regular Coke. Most Coke products satisfy all age groups as it is proven that most people of different age groups consume the Coca Cola product. This market is relatively large and is open to both genders, thereby allowing greater product diversification.
There are four broad ways which Coca Cola can segment its market:
-> Mass marketing
-> Concentrated marketing
-> Differentiated marketing
-> Niche marketing
The most apparent method used by Coca Cola is with no doubt the differentiated marketing method as Coke satisfy’s a range of different markets. Diet coke satisfy’s the weight consciousness, regular coke, sprite, fanta the average human, coffee, iced tea etc. Each group of beverages satisfy a particular group of people but majority the average human.
Developing The Marketing Mix
The marketing mix is probably the most crucial stage of the marketing planning process. This is where the marketing tactics for each product are determined. The marketing mix refers to the combination of the four factors(price, promotion, product, place) that make up the core of a business’s marketing strategy. In this step of the marketing planning process, marketing mix must be designed to satisfy the wants of target markets and achieve the marketing objectives. The most successful businesses have continually monitored and changed their marketing mix due to respective internal and external factors and have monitored the external business environment in order to maximise their marketing mix components.
Product:
Many Products are physical objects that you can own and take home. But the word product means much more than just physical goods. In marketing, product also refers to services, such as holidays or a movie, where you enjoy the benefits without owning the result of the service.
Businesses must think about products on three different levels, which are the core product, the actual product and the augmented product. The core product is what the consumer is actually buying and the benefits it gives. Coca Cola customers are buying a wide range of soft drinks. The actual product is the parts and features, which deliver the core product. Consumers will buy the coke product because of the high standards and high quality of the Coca Cola products. The augmented product is the extra consumer benefits and services provided to customers. Since soft drinks are a consumable good, the augmented level is very limited. But Coca Cola do offer a help line and complaint phone service for customers who are not satisfied with the product or wish to give feedback on the products.
Positioning
Once a business has decided which segments of the market it will compete in, developed a clear picture of its target market and defined its product, the positioning strategy can be developed. Positioning is the process of creating, the image the product holds in the mind of consumers, relative to competing products. Coca Cola and Franklins both make soft drinks, although Franklins may try to compete they will still be seen as down market from Coca Cola. Positioning helps customers understand what is unique about the products when compared with the competition. Coca Cola plan to further create positions that will give their products the greatest advantage in their target markets. Coca Cola has been positioned based on the process of positioning by direct comparison and have positioned their products to benefit their target market. Most people create an image of a product by comparing it to another product, thus evident through the famous battles between Coca-Cola and Pepsi products.
Branding
It is often hard to say exactly why we buy one company’s product over another. Companies such as Nike and Adidas spend large amounts of money trying to win consumers away from their competitors who make products that are very similar. The popularity of the brand is often the deciding factor. Over the time Coca Cola has spent millions of dollars developing and promoting their brand name, resulting in world wide recognition. ‘Coca-Cola’ is the most recognised trademark, recognised by 94% of the world’s population and is the most widely recognised word after “OK”. Coca Cola’s red and white colours and special writing are all examples of world-wide trademarks.
There are a number of branding strategies: Generic brand strategy, Individual brand strategy, Family brand strategy, Manufacturer’s brand strategy, Private brand strategy and Hybrid brand strategy. Coca Cola utilizes the Individual brand strategy as Coca Cola’s major products are given their own brand names e.g Fanta, Sprite, Coca Cola etc although they maybe presented as different lines they operate under the name of Coca Cola.
Packaging
Packaging, which is not as highly perceived by businesses, is still an important factor to examine in the marketing mix. Packaging protects the product during transportation, while it sits in the shelf and during use by consumers, it promotes the product and distinguishes it from the competition. Packaging can allow the business to design promotional schemes, which can generate extra revenue and advertisements. Coca-Cola has benefited from packaging the product with incentives and endorsements on the labelling as a promotional strategy to increase it’s volume of sales and revenue.
Price:
Price is a very important part of the marketing mix as it can effect both the supply and demand for Coca Cola. The price of Coca Cola’s products is one of the most important factors in a customer’s decision to buy. Price will often be the difference that will push a customer to buy our product over another, as long as most things are fairly similar. For this reason pricing policies need to be designed with consumers and external influences in mind, in order to effectively achieve a stable balance between sales and covering the production costs.
Price strategies are important to Coca Cola because the price determines the amount of sales and profit per unit sold. Businesses have to set a price that is attractive to their customers and provides the business with a good level of profit. Long before a sale was ever made Coca Cola had developed a forecast of consumer demand at different prices which inevitably determined whether or not the product came on the market, as well as the allocation of adequate money and resources to produce, promote and distribute the product.
Pricing Strategies And Tactics
The pricing Strategy a business will use will have to focus on achieving the marketing plan’s objectives and support the positioning of the product, and take external factors such as economic conditions and competitors in to account. There are 5 strategies available to business: Market skimming pricing, Penetration pricing, Loss leaders, Price Points and Discounts. Over the years Coca Cola has used Penetration Pricing as a way of grabbing a foothold in the market and won a market share. It’s product penetrated the marketplace. Once customer loyalty is established as seen with Coca Cola it is then able to slowly raise the price of its product. There has been a fierce pricing rivalry between Coca Cola and Pepsi products as each company competes for customer recognition and satisfaction. Till now it appears as if Coke has come up on top, although in order to gain long term profits Coke had to sacrifise short term profits where in some cases it either went under of just broke even, but as seen it has been all for the best.
Pricing Methods
Good pricing decisions are based on an analysis of what target customers expect to pay, and what they perceive as good quality. If the price is too high, consumers will spend their money on other goods and services. If the price is too low, the firm can lose money and go out of business.
Pricing methods include: Cost based Pricing, Market based pricing and Competition based Pricing. Over the years Coca has lost ground here in it’s pricing but has regained it’s strength as it employed the Competition-based pricing method which allowed it to compete more effectively in the soft drink market. Leader follower pricing occurs when there is one quite powerful business in the market which is thought to be the market leader. The business will tend to have a larger market share, loyal customers and some technological edge, thus the case currently with Coke, it was first the follower but through effective management has now become the leader of the market and is working towards achieving the marketing objectives of the Coca Cola. Survival in the market place, own 60 % of market share by 2007, increase further awareness of product and a return on 20% on capital employed for August 2007.
Promotion:
In today’s competitive environment , having the right product at the right place in the right place at the right time may still not be enough to be successful. Effective communication with the target market is essential for the success of the product and business. Promotion is the p of the marketing mix designed to inform the marketplace about who you are, how good your product is and where they can buy it. Promotion is also used to persuade the customers to try a new product, or buy more of an old product.
The promotional mix is the combination of personal selling, advertising, sales promotion and public relations that it uses in its marketing plan. Above the line promotions refers to mainstream media:Advertising through common media such as television, radio, transport, and billboards and in newspapers and magazines. Because most of the target is most likely to be exposed to media such as television, radio and magazines, Coca Cola has used this as the main form of promotion for extensive range of products. Although advertising is usually very expensive, it is the most effective way of reminding and exposing potential customers to Coca Cola Products. Coca Cola also utilizes below the line promotions such as contests, coupons, and free samples. These activities are an effective way of getting people to give your product a go.
Place and Distribution:
The place P of the marketing mix refers to distribution of the product- the ways of getting the product to the market.The distribution of products starts with the producer and ends with the consumer.
One key element of the “Place/Distribution” aspect is the respective distribution channels that Coca Cola has elected to transport and sell its product.
Selecting the most appropriate distribution channel is important, as the choice will determine sales levels and costs. The choice for a distribution channel for any business depends on numerous factors, these include:
• How far away the customers are;
• The type of product being transported;
• The lead times required; and;
• The costs associated with transport;
There are four types of distribution strategies that Coca Cola could have chosen from, these are: intensive, selective, exclusive and direct distribution. It is apparent from the popularity of the Coca Cola’s product on the market that the business in the past used the method of intensive distribution as the product is available at every possible outlet. From supermarkets to service stations to your local corner shop, anywhere you go you will find the Coca Cola products.
Physical Distribution Issues
Coca Cola needs to consider a number of issues relating to the physical distribution of its soft drink products. The five components of physical distribution are, order processing, warehousing, materials handling, inventory control, transportation. Coca Cola must further try to balance their operations with more efficient distribution channels.
Order Processing- Coca Cola cannot delay their processes for consumer deliveries (i.e. delivery to selling centers), as this is inefficient business functioning and is portrays a flawed image of the product and overall business.
Warehousing and inventory control- warehousing of Coca Cola products is necessary. Inventory control is another important aspect of distribution as inventory makes up a large percentage of businesses assets. Choosing the correct and desired inventory measure that Jackson’s sees as most effective is vital. Jackson’s must remember though that there are factors involved with inventory control that can hinder the products sales and customer perceptions (hazards, distribution from storage facilities, etc…).
Materials handling- this deals with physically handling the product and using machinery such as forklifts and conveyor belts. When holding products, then Coca Cola has benefited from purchasing or renting respective machinery.
Transportation- transporting Coca Cola products is the one most important components of physical distribution. Electing either to transport the sports drink by air, rail, road or water depends on the market (i.e. global, or domestic?) and depends on the associated costs. The most beneficial transportation method for Coca Cola would be ROAD if the product were moved around from storage to the cost centers.
Implementing, Monitoring And Controlling
Financial Forecasts
Financial forecasts are predictions of future events relating strictly to expected costs and revenue costs for future years. There are five major marketing expenditures, which include research costs, product development costs, product costs, promotion costs and distribution costs.
Sales force composite is the most logical method in forecasting revenue. This involves estimates from individual salespeople to sell to work out a total for the whole business. Once these costs and revenues are forecasted, management can then decide which combination of marketing mix strategies will deliver the most sales revenue at the lowest cost.
Implementing
Implementation is the process of turning plans into actions, and involves all the activities that put the marketing plan to work. Successful implementation depends on how well the business blends its people, organisational structure and company culture into a cohesive program that supports the marketing plan.
For its further success, Coca Cola must impose several key changes. Production needs to be on time and meet the quota demanded from wholesalers. It must also be efficient so as not to build inventory stocks and inventory prices. The marketing needs to be motivated and knowledgeable about the product. The forms of promotion such as advertising must be attracting and enticing to the target market to get the greatest amount of exposure possible for the product. This will ensure the success of the product in the stores. Distribution of the product must be efficient. This problem has already been taken care of with convenient transport routes to commercial areas and transport already being arranged.
Monitoring And Controlling
Monitoring and controlling allows the business to check for variance in the budget and actual. This is important because it allows Coca Cola to take the necessary actions to meet the marketing objectives. There are three tools Coca Cola should use to monitor the marketing plan. They are the following:
i. Sales Analysis
The sales analysis breaks down total business sales by market segments to identify strengths and weaknesses in the different areas of sales. Sellers of Coca Cola products vary from major retail supermarkets to small corner stores. This gives the its products maximum exposure to customers at their convenience.
ii. Market Share Analysis
Market share analysis compares Coca Cola’s business sales performance with that of its competitors. Coca Cola looks to increase its market share by over 60%. With the changes Coca Cola is currently undergoing, they aim to regain an iron fist control of the market. Target market various age groups and lifestyles from high school students too universities, and male or female.
Marketing Profitability Analysis
This analysis looks at the cost side of marketing and the profitability of products, sales territories, market segments and sales people. There are three ratios to monitor marketing profitability; they are market research to sales, advertising to sales and sales representatives to sales. The results of these three tools can help Coca Cola determine any emerging trends, such as the need for a different product. Comparing these results with actual results gives the business an idea on when to change.
Market Research
When attempting to implement a new Marketing plan a business must address its target market and conduct the relevant information to insure the new marketing plan both differs from the old and is better for the business. When conducting market research a business must first define the problem and then gather the appropriate information to solve the problem. There are 3 types of information a business can gather to solve its problems.
->Exploratory Research which clarifies the problem an d searches for ways to address it.
->Descriptive Research is used to measure and describe things like the market potential for a product and characteristics of the target market.
->Casual Research is used to test a hypothesis about a cause and effect relationship.
Coca Cola through its market research has addressed all three types of research to define the problem raised by shareholders and gathered information to serve their needs.
Factors Influencing Consumer Choice
When making decisions on products a business must look at factors that influence consumer choice such as psychological factors, Sociocultural factors, Economic factors and Government Factors.
Psychological Factors: such as motivation, perception, lifestyle, personality and self concept, learning , and attitudes influence the consumers behaviour towards a product and Coca Cola has addressed this issue by introducing Diet Coke to satisfy different lifestyles.
Sociocultural factors: such as culture, subculture, socio-economic status, family and reference groups influence the consumers behaviour towards a product.
Economic factors: such as Disposable income and discretionary income. Coca Cola has addressed this side of the influence by maintaining a low price on the price of its products.
Government Factors: such as new regulations, inflation, interest rates all influence consumer spending and choice.
