the marketing review coke

7/27/2019 The Marketing Review Coke

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The Marketing Review, 2003, 3, 289-309 www.themarketingreview.com

Demetris Vrontis 1 and Iain Sharp 2

Manchester Metropolitan University Business School and Legal and General

The Strategic Positioning of Coca-Cola in theirGlobal Marketing OperationExamines how Coca-Cola has strategically positioned it self within the

worlds soft drinks market. Given that they operate in over 200 countries, they

are faced with a clear choice of whether to standardise their product offerings

globally and reap the potential benefits of economies of scale, adapt their

offerings to a particular market (which may facilitate increased market

specific penetration), or adopt an integrated approach utilising both

approaches simultaneously (Vrontis AdaptStand approach). There has been

much literature written regarding the external and often uncontrollable factorswhich may impact upon a firms positioning strategy; this paper looks at these

externalities and the internal controllables in order to derive a best fit

strategic and tactical approach. Moreover, this paper looks at the strategicinternational positioning of Coca-Cola by utilising a number of models.

Keywords: Coca-Cola, global, international, strategy, positioning,adaptation, standardisation, AdaptStand, AdaptStandation, international,

marketing,

Introduction

If we consider business to be akin to war, then perhaps there is no betterstarting point than the writings of Sun Tzu [circa 400-320 B.C.]. The Art of

War is the oldest formalised writing focusing on the concepts and principlesof warfare and military strategy. Written over two millennia ago, it is still valid

in the modern world, not only in military terms, but also in business.

Generally, he who occupies the field of battle first and awaits his enemyis at ease, and he who comes later to the scene and rushes into the fight is

weary. And, therefore, those skilled in war bring the enemy to the field of

battle and are not brought there by him. One able to make the enemy come

of his own accord does so by offering him some advantage. And one able to

stop him from coming does so by preventing him. Thus, when the enemy is

at ease, be able to tire him, when well fed, to starve him, when at rest tomake him move. Sun Tzu, The Art of War, The Oldest Military Treatise In

The World.

1

2

Senior Lecturer, Manchester Metropolitan University Business SchoolBusiness Planning Manager, Legal and General

ISSN 1472-1384/2003/3/00289 + 20 8.00 Westburn Publishers Ltd.


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290 Demetris Vrontis and Iain Sharp

It is perhaps not so unlikely, that writers such as Porter, Doyle and otheradvocates of strategic positioning have developed their models based upon

this ancient text.

According to Cummings (1993) the word strategy derives from the ancient

Athenian position of strategos. Strategos was a compound of

stratos - , which in Greek means army.

Moreover, tactiki - , in Greek meaning tactics, is the way in whichthe Greek strategoi (plural of strategos) where implementing their strategic

thinking and putting their plan to action.

This paper illustrates how Coca-Colas international strategy and tactics

work in harmony after an in-depth consideration of the external forces found

in the global environment.

Strategy and organisational effectiveness are essential to the success of

any organisation, but they are both very different. Strategic positioning, is a

unique approach that integrates both strategy and organisational

effectiveness in a way the serves to differentiate an organisation in its market

place and drive success.

To understand how Coca-Cola use strategic positioning in their global

marketing strategy we need to explore the term strategic positioning andthen to determine how a firm can utilise these strategies.

When it comes to product strategy, managing in a borderless worlddoesnt mean managing by averages it doesnt mean that the appeal of

operating globally removes the obligation to localise products (Ohmae

1990: 24).

The Coca-Cola Company: An Overview

The Coca-Cola Company, founded in 1886, is the world leadingmanufacturer, marketer and distributor of non-alcoholic beverage

concentrates and syrups. It currently operates in over 200 countriesworldwide and is most famous for the innovative soft drink, Coca-Cola, but

can now boast in the region of 230 different brands (www.coca-cola.com).

Its headquarters are in Atlanta, Georgia. Its subsidiaries employ nearly

30,000 people around the world. 70% of the company volume and 80% of

the company profit come from outside the United States. It is one of the most

visible companies in the world. Their Coca-Cola product is now available all

over the world and has resulted in the drink becoming the worlds favourite

soft drink.

But how has this been achieved and how does Coca-Cola continue to hold

their position in the soft drinks market?

The former chairman of the Coca-Cola Company, Douglas Ivester has

stated that being global is the main strength of the Coca-Cola Company.(Coca-Cola Company, Annual Report, 1998) It is a business with a popular,

affordable product, with a strong foothold in many countries


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The Strategic Positioning of Coca Cola 291

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

(www.foodlineweb.co.uk). This is illustrated in table 1 below.

Table 1: Global Carbonated Market Share

% valueCoca ColaPepsi Cola

Cadbury Schweppes

Cott

AmBev

Others

Total

Source: Adapted from www.foodlineweb.co.uk

4721

8

2

1

21

100

Coca-Colas international success can be attributed to many things butSergio Zyman, former chief marketing officer of the Coca-Cola Company

argued (1999) that in order to think globally, a company must act locally.

This message is emphasised many times over by the Coca-Cola Company.

The Coca-Cola Company is recognized all over the world. Their core

brand, Coca-Cola, leads this recognition, but when needed, they are also

very much a local operation, meeting the demands of local tastes and

cultures with more than 230 brands in nearly 200 countries. Whilst Coca-

Cola run a global business, it always emphasises that they wish to stay local.

Independent business people, who are native to the nations in which they are

located, (with some exceptions) locally own bottling and distribution

operations.

Consumers will have different experiences, given their personalpreferences and location. Coca-Cola is adjusting its approach (both at a

strategic and a tactical level) so that it can tap into these differences and

provide the appropriate marketing activities and beverages to connect with

consumers (www.coca-cola.com).

Coca-Colas effectiveness and profitability is obviously well supported bytheir strong competitive position and market share in their primary product

marketCoca-Cola.

Buzzell and Gale (1987) state that there is a definite correlation between

the size of a firms market share and the level of profitability i.e. the larger the

market share the greater the level of profitability.

They point to four reasons why market share might be linked to increased

profitability. Firstly, scale economies coupled with an increase in the learningexperience resulting in the most effective and efficient use of production

techniques and technology. Secondly, customers are unwilling to take risks

and will therefore stay with the main market player due to the comfort factor


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that prevails. Thirdly, due to the influence and dominance the leader has inthe market it is able to use its position to negotiate lower pricing with

suppliers and to command higher market price for its products. The fourth

reason is that the market leader has in place excellent management teams

and it has successful procedures and processes developed throughout the

organisation.

Global Marketing Strategy, Standardisation or/and Adaptation

Many have written on topics related to global strategy, but only a limited

number of conclusions have been reached.

Mesadag (2000) argues that global marketing is a particular form of

international marketing whichin its truest form does not exist. Its essence

is that it covers a broad spread of the worlds countries and that it strives to

consciously standardise its marketing strategy between those countries.

Svensson (2001), comments that a companys global strategy is closely

related to its corporate strategy. The corporate strategy guides the

performance of a companys overall business activities and the allocations of

resources to achieve established business goals.

Others state that when a company pursues a global strategy, it looks at

the world market as a whole rather than at markets on a country-by-country

basis (Jeannet and Hennessey, 2001).Levitt (1983) argues that the optimum global strategy is to produce a

single standardised product and sell it through a standardised marketing

programme. The challenge for the global corporation is to achieve low cost

operations and also to produce products of a high standard. This strive for

low cost through standardising products is key and will result in growth for the

corporation. Companies that dominate small domestic markets will gradually

be eased out by the low cost producing global corporation.

Kogut (1985) in his perspective of global strategy, emphasises strategic

flexibility, whilst Collis (1991) has summarised global strategy in the following

4 points:

A global strategy is required whenever there are important

interdependencies among a businesss competitive position in differentcountries. The acid test is whether a business is better off in one

country by virtue of its position in another.

The sources of these interdependencies can be identified, includingscale economies (Levitt, 1983), accumulated international experience,

possession of global brand name, a learning curve effect (Porter,1985), and the option value or cross-subsidisation (Hamel and

Prahalad, 1985) that a multi-market presence confers.

The critical issues that a global strategy must address include the

configuration and co-ordination of the businesss worldwide activities(Porter, 1986).

The organization structure should be aligned with and derived from the

global strategy.


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Douglas and Wind (1987) argue that the assumption of a consistent model ofmarket and customer behaviour existing across the globe is not universally

accepted. They claim that this outlook focuses on the product (product

orientation) and not on the customer (marketing orientation).

The factors that favour globalisation are issues such as cost economies,

transport costs and networks, learning and experience, technological and

operational capacity. These issues however have factors working againstthem that serve to fragment markets such as trade barriers and tariffs,

communication links, raw material differentials, different market demand and

differing competitive circumstances. It is therefore apparent that localised

(adapted) production and promotion is necessary and must remain.

The Strategic Environment and Strategic Positioning

The fundamental question that the term strategic positioning asks is, what isa good strategy? What factors should be considered in strategic positioning

and tactical implementation?

For strategists and marketers alike, considering strategy development

(whether for the domestic or international market) ample considerationshould be given to those elements (external to the company) over which they

have little or no control.

These groups of elements are Macro, Meso and Micro factors and

comprise the PESTLE (Political, Economic, Social, Technological, Legal and

Environmental) macro factors, prevailing Trends and Concepts meso factors

and ITEMS (Information, Time, Energy, Money and Space) micro factors.

This is illustrated in figure 1 that follows.

SystemsPolitics

Macro

Meso

Economics Social TechnologyLegal Environment

Trends and Concepts

andStructures

Behaviour

and

Expressions

InformationMoney

Micro

TimeSpace

Energy IndividualResources

Figure 1. The Macro, Meso and Micro Environment

Businesses faced with the prospect of trading beyond the confines of their

national boundaries have to also decide whether to standardise, or adapttheir propositions for specific markets. This by default has implications for theassociated marketing mix and hence the overall strategic positioning and

tactical stance which is adopted.


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The question of whether to standardise or modify overshadows all the tacticaldecisions that are required from a strategist/international marketer. It

represents a very real tension between the profitability promised through cost

effectiveness, which is greater when activities are controlled centrally, and

the market effectiveness that is promised if the offering is differentiated to

meet the needs of each geographic segment.

Medina and Duffy (1998) are proponents of adaptation and define it as theprocess of extending and effectively applying domestic target-market-dictated

product standards - tangible and/or intangible attributes - to markets in

foreign environments.

The Marketing Mix (Product, Price, Place, Promotion, People, Physical

Evidence and Process Management) is a tactical toolkit with which any

multinational company can implement efficient and effective strategy. Each

element within the marketing mix can therefore be adjusted in order to gain

optimum environment fit and consequently meet customer diverse needs and

wants.

Levitt (1983) takes the opposite view and suggests that the global

competitor will seek constantly to standardise his offerings everywhere. He

will digress from this standardisation only after exhausting all possibilities toretain it and he will push for reinstatement of standardisation whenever

digression and divergence have occurred. He argues that the most effective

world competitors incorporate the same kind of products sold at home or in

the largest export markets.

Vrontis (2003), the main supporter of integration, argues that the debate

on adaptation and standardisation is a huge one and suggests that the

exclusive use of either approach is too extreme to be practical. The truth lies

in neither of these two polarised positions. Both processes,

internationalisation and globalisation, coexist and the decision on

standardisation or adaptation is not a dichotomous one between complete

standardisation and adaptation. Rather it is a matter of degree and there is a

wide spectrum in between that the international marketer should be aware.The international marketers should have to search for the right balance

between standardisation and adaptation and therefore determine the extent

of globalisation in a business and adapt the organisations response

accordingly. This is illustrated below in figure 2 in the Vrontis Framework of

AdaptStand Integration (Vrontis 1999).

We have developed Vrontis AdaptStand Framework further, adding the

following calculations, to illustrate a subjective view of where Coca-Cola is

positioned on the continua. Figure 3 illustrates the elements of the marketing

mix (7Ps) for Coca-Cola in international markets. It also reveals its level of

standardisation and adaptation with number zero describing completeadaptation and number five complete standardisation. Any other number lies

in the middle of the continuum.


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The Strategic Positioning of Coca Cola

Market PositionNature of Product/Service Target Market Organisational Factors

Consumer durable (electronics) Customer Similarity Internal stance to internationalism Market D evelopment

Consumer non-durable (food) Geographical distance(ethnocentric or not)Industrial goods (steel, chemicals) Stage of development

Consumer goods Stage of product life cycleTechnology intensive (scientific instruments)

Market Conditions

Cultural differences

Economic Differences

Differences in customer perceptions

Competitive Factors

Competitive practices

Level of competition

295

Macro/Meso/Micro Factors

P.E.S.TLE

Trends & Concepts

I.T.E.M.S

Political

Economic

Social

TechnologicalLegal

Environmental

Trends and Concepts

Information

Time

Energy

Money

Space

Meet differences in the stage of development

Meet differences in culture

Meet differences in consumer perceptions

Product Meet differences in the product life cycle

Meet differences in consumer habitsMeet local competition and competitive practices

Meet different legal/political requirements and restrictions

Meet consumer purchase and use motivational factors

Meet development stage differences

Meet exchange rate fluctuations

Market demand rate

PriceMeet competition and competitive practices

Meet differences in the product life cycle

Meet legal/political restrictions

1.

Meet consumer differences in taste, needs and wants

Meet differences in lifestyle

Meet differences in beliefs and consumer practices

Meet differences in consumer buying behaviour patterns

Meet differences in physical environment

Meet local packaging requirement issues

Psychological meaning and the effect on the c onsumer

Meet standards required

Production economies of scale

Economies of research and development

Stock cost reduction

Consumer mobility

Creates world-wide uniformity

Psychological meaning

Consistency with customers

Improved planning and control

Synergetic effects

Better control

Price uniformity and consumer mobility

2.

Meet different development stage and consumer buying behaviour patterns

StandardizationNumber and size of intermediaries involved

Meet market size requirements

Specialisation among channels of distribution

PlaceDifferences in distribution structures and patterns


Differences in logistics decisions

Meet differences in the product life cycle

Meet competition and competitive practices

Meet differences in the stage of development

Meet differences in physical environment


Meet cultural constraints

PromotionMeet differences in lifestyle

Meet differences in consumer perceptions

Meet differences in product life c ycle

Meet competition and competitive practices

Differing consumer buying patterns

Meet dissimilarityof buying motives

Meet lack of identical availability of media

Meet different consumer media usage patterns

Meet consumers differences in tast

People/Process/

Motivate and empower employees

Allow flexibility to meet consumer non-identical need and requirements

PhysicalMeet local competition and competitive practices

An Integrated Approach3.

Transfer of experience and efficiency

Economies of scale

Economies of scale

Consumer mobility and consistency with customers

Creates world-wide uniformity

Synergetic effects

Psychological meaning

Consistency with customers

Offer universal appeal, message and image

Achieve strong corporate identity

Allows better identification by the customer

Figure 2. Vrontis Framework of AdaptStand IntegrationSource: Adapted from Vrontis (1999)


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296

Adapt (in ternational)

Product

Price

Place

Promotion

People

Physical

evidence

Process

Demetris Vrontis and Iain Sharp

Standardise (global)Each bead can be moved in either

direction along the continuum

The mathematics underpinning this model is quite rudimentary.

Example:

Of the seven elements of the extended marketing mix a maximum

score of 35 points is possible (7*5=35).

If the positions of all the beads are summed, a score of 22.75 is

achieved (3.75+1+4.25+2.4.25+4+3.4.25=22.75)

22.75/35=0.65

0.65*5=3.25

Figure 3. Coca-Cola Quantified

This pictoral representation reveals that the mean is further towards the

standardised extreme than the adapted extreme. In this example 3.25

represents the mean position between adaptation and standardisation. Thus,Coca-Cola has deployed the tactical toolkit with a more standardised

approach to its overall marketing strategy.

Porter (1980) and Doyle (1983) are both proponents of positioning

strategy. Porter considers the external factors, which impact upon a firms

competitive positioning. Doyle refers to the choice of target market segment

which describes the customers a business will seek to serve and the choice

of differential advantage which defines how it will compete with rivals in the

segment.


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Porter claims that competition is at the core of success or failure of the firmand that a successful competitive strategy can establish a profitable and

sustainable industry position. He claims that there are two fundamental

questions underlying the choice of a competitive strategy: firstly, how

attractive is the industry with regard to profitability and secondly, what are the

determinants of competitive position within an industry.

According to Porter there are five competitive forces that will govern therules of competition and these rules will prevail in any industry both in

domestic and international markets. The five forces are:

The entry of new competition entering the market

The threat of substitutes or replacement products

The bargaining power of buyers

The bargaining power of suppliers

The rivalry of between firms of the same sector

Figure 4 that follows details these five forces in relation to Coca-Cola.

Porter 5 Forces ModelMain competition

Coca-Cola has high

brand dominance in mkt.

Low supplier bargaining

power due to scale of

Coca-Cola. Similar to

Entry Barriers

supermarkets

Supplier

Rivalry

Bargaining

Among Firms

Power

Substitutes

limited to small

number of big

players and COD

brands

Low buyer

bargaining

power. BUT

Coca-Cola do

Buyer

have to be

Bargaining

careful not to

Power

price

themselves out

of the market

Coca-Cola Company has wide product

portfolio low threat of brand substitution

non-alcoholic drink target sector.

Figure 4. Porter 5 Forces ModelSource: Porter, 1985

So, what is a good strategy? Can a firm position itself in order to gain

competitive advantage over its competitors? Is there a specific position a firm

should take in order for its strategy to be successful?

Rumelt (1980), states that competitive advantages can normally be foundin superior resources, superior skills or a superior position. Resources andskills enable a firm to do more, or do it better than the competition. Different

resources and skills will be required dependant on the industry or market

segment. Positional advantage is how the arrangement of these resources

and skills are used to out manoeuvre the competition. Positional advantage


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can be gained by forward planning, greater skill and resources, or luck! Oncea dominant position is gained it is difficult for the competition to dislodge the

incumbent firm provided the position merits continuation and that it is

extremely costly for competitors to take over.

As long as environmental forces remain constant position can remain

constant. Positional advantage can take the form of size or scale,

differentiation from competitors and successful trading names.To be successful, a company needs to get both its strategy and tactics

working in harmony to provide the optimum return bounded by efficiency

(McDonald and Leppard, 1993). Both strategy and tactics should be

designed after a careful consideration of the situational environment.

It is apparent from the following figure (figure 5) that businesses finding

themselves to the left of this matrix are destined to die, strategy being the key

factor as to how quickly.

Considering Coca-Colas international performance, we can argue that the

company is thriving as it is effective-doing things right (having the desired

effect, producing the intended result) and efficient-doing the right thing (able

to work well and without wasting time or resources).

Strategy

Effective

Ineffective

Die (slowly)

Efficient

3

Tactics

Die (quickly)Inefficient

4

Figure 5. Strategy Tactics GridSource: McDonald & Leppard, 1993: 7

Thrive

2

Survive

1

The firm has to consider more than the industry structure, it also has to take

an appropriate position within the industry. This positioning will determine the

competitive advantage a firm can have namely, low cost or differentiation

against competitive scope at the broad or narrow market (see figure 6).

The Coca-Cola Company has adopted both a Differentiation and a Cost

Leadership Strategy.


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Competitive Advantage

Lower Cost Differentiation

Broad

Cost LeadershipDifferentiation

Competitive Scope

*

*

DifferentiationCost Focus

Focus

Narrow

Figure 6. Porter Generic Strategy Grid

299

The use of a differentiation strategy is where the firm attempts to be diversefrom 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. The decision in

1999 to revitalise the contoured bottle design was Coca-Colas first global

marketing priority (Boutzikas, 2000). They capitalised on a resource thatnone of their competitors had or have as an asset. They can, therefore,

adopt a premium pricing policy in many markets where economic conditions

allow.

It should also be noted that Coca-Cola is positioned in the Cost

Leadership quadrant.

Aaker (1998) points out that there are several approaches a firm can take

to become a low cost producer, which can be used in isolation or as a

combination. The most basic way to a low cost is to remove all the extras

from the product and produce a no frills offering. The danger in this strategy

is that the way is paved for a feature war. The design or make up of the

product can create cost advantages, for example, the use of alternative

materials. The production and operational processes a firm employs can also

reduce costs. Another example would be the efficient use of distribution

networks, manufacturing systems or the use of low cost labour and product


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innovation.


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Focus for Success

Short term Medium term Long Term

Short-term profit

Productivity

Existing customers

Own staff

Cost Control

Price

Financial

Medium-term profit

Beat competition

Competitors

customers New

customers

Competition

Segmentation

Promotion/place

Innovation

New product/markets

The unknown future

Differentiation

Product

Entrepreneurial


Economies of scale is the obvious way of reducing costs as there are naturalefficiencies associated with size, although not necessarily so with firms that

will have multiple or diversified products. Aaker (1998) also points to the

experience curve whereby firms utilise knowledge and learning gained over

time as a way of cost reduction. For example, the more times a process is

carried out, the more efficient the process becomes. The use of technology

and plant will also be maximised over time.The Coca-Colas positioning in the Cost Leadership quadrant is achieved

not only through economies of scale in research, development and

promotion, but also through learning, knowledge and experience in

production and operational processes. It is also achieved through

effective/efficient distribution networks and manufacturing systems.

McDonald and Leppard (1993) have developed a strategic focus matrix

(see figure 7), which emphasises the impact of time on business activities.

The elements relating to the marketing mix have been emboldened to show

clearly, where they are positioned in relation to time. It is our view that Coca-

Cola adopts the following recommendations, not only at the short term, but

also in medium and long term.

Business activities

Objectives

Management focus

Target market

Energy directed at

Differential

advantage

Key component ofmix

Organizational

culture

Figure 7. Strategic Focus MatrixSource: McDonald and Leppard (1993)

As previously mentioned, The Coca-Cola Company has an impressivegeographic presence. If we consider Coca-Colas global strategy with

reference to Ansoffs (1957), illustrated in figure 8, it highlights a clear

strategic evolution in the case of the Coca-Cola Company.


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Curr ent products New Products

Market Penetration StrategiesProduct Development Strategies

Cur rent markets

Increase market share Product improvement

Increase product usage: Product line extensions

- increase frequency of use New products for same markets- increase quantity used

- new application

Diversification StrategiesMarket Development

StrategiesVertical Integration:

New markets- forward integration

Expand markets for existing

- backward integration

products

- geographic expansion

Diversification into related businesses

- target new segments

(concentric diversification)

Diversification into unrelated

businesses

(conglomerate diversification)

Figure 8. Ansoff MatrixSource: Ansoff, 1957

301

In the beginning there was Coca-Cola, a single core product, geographicallylocated in the US. Overtime, this singular core product had become

established in its home market by increasing market share and product

usage (Market Penetration Strategy).

Coca-Cola was later launched into foreign markets and competed within

the international arena. This Market Development Strategy was undertaken

by targeting new geographical areas and target segments.

As these foreign markets developed further, the Coca-Cola Company was

faced with the problem of how to further penetrate them. The solution was

simply to develop new products (Diet Coke, Fanta and Sprite), which over

time have also become core products (Product Development Strategy). How

does Coca-Cola increase market penetration still further?Again, the solution is to develop new products in new markets. Originally

Coca-Colas business was defined as one operating in the carbonated soft

drinks (CSD) market. In order to further penetrate these markets Coca-Cola

has broadened the definition of the business it is in to ready packaged liquid

refreshments. This has allowed the company to look beyond its traditional

CSD market, to markets such as bottled water, fruit juices and innovative

ready to drink tea markets. They have therefore successfully used a

Diversification Strategy.

Strategic marketing planning makes use of a number of analytical models

that help to develop a strategic view of the business, and thus can be used

as decision-making aids. The Boston Consulting Group Matrix (see figure 9)


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StarsSelecte

d few

High growth & share Profit potential

May need heavy investment

Require cash to hold

to grow

Question Marks

High growth, low share Build into Stars/ phase out

market share

Cash Cows

Low growth, high share Established, successful

SBUs

Produce cash

Dogs

Low growth & share Low profit potential


is one of these models. Its fundamental concept is that although products/Strategic Business Units (SBUs) may be managed as individual entities on

an operational basis, strategically they should be viewed as a portfolio. The

best portfolio is the one that best fits the companys strengths and

weaknesses to opportunities in the environment. The company must analyse

its current business portfolio or Strategic Business Units SBUs, decide which

SBUs should receive more, less, or no investment, and develop growthstrategies for adding new products or businesses to the portfolio.

Relative Market ShareHigh

Mar

Hk

Ieg

th

Grow

Lt

oh

w

R

ate

Low

Liquidated

Figure 9. The Boston Consulting Group Matrix

Looking at figure 10, consumption per capita being substituted as a closeproxy for market share (in its absence), it is clear that those countries to the

left of the matrix appear to have been managed in such a way so as toalmost have a uniform growth rate.


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Coca-Cola Operating Regions Per Capita Consumption (litres pa)1997 - 2000

Nordic &

60.0%Northern

Eurasia

40.0%

CAGR

20.0%Great Britain

Germany France

ChinaSpain

Mexico Japan

Southern Korea

USA Chile Aust ralia AfricaArgent ina Brazil

0.0%

Northern

PhillipinesAfrica

Central Europe Columbia

& Eurasia

Middle East &

North Africa

-20.0%

120%100% 80% 60% 40% 20% 0

Relative Market Share

303

Figure 10. Coca-Cola Consumption - Boston Consulting GroupMatrix

The problem child, Nordic & Northern Eurasia, has shown significant growthwhich eventually could see this region move into the star/cashcow quadrants

if critical mass is built up. If Coca-Cola were to follow the direction advocated

by the BCG matrix and liquidate those poorly performing countries in the

Dog area this would perhapshave implications for the Coca-Cola

Companys global presence. It is therefore unlikely that they would seek to do

this. It is possible that many of these Dogs might form the basis of emergingand growth markets in the future.

Further, if we consider Coca-Colas position as market leader within thepre-packaged liquid refreshments market and the relative profits derived

from this market, then it becomes clear that they are positioned in the

Protect Position quadrant of the Mckinsey Matrix (figure 11). This means

that the company should concentrate efforts on maintaining its existing

strength by investing to grow at maximum digestible rate.

It is also recommended that they can capitalise on first mover advantage

and therefore drive market innovation. This reflects the concepts of the

inside-out or competencies based approach (Prahalad and Hamel, 1990;

Sanchez, et al. 1996) or the capabilities based approach (Stalk, et al. 1992) -

i.e. because of their relative size in the market, Coca-Cola can to someextent drive the market.


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304

High

Market

Attractiven

ess

Medi

um

Low

Demetris Vrontis and Iain Sharp

Protect Position Invest To Build Build Selectively

Invest to grow at Challenge for leadership Specialize around limited

maximum digestible rate Build selectively on strengths

Concentrate effort on strengths Seek ways to overcome

maintaining strength Reinforce vulnerable areas weaknesses

Withdraw if indications

of sustainable growth are

lacking

Build Selectively Selectively Manage Limited Expansion

For Earnings Or HarvestInvest heavily in most

Protect existing program Look for ways to expand

attractive segments

Concentrate investments without high risk;

Build up ability to counterin segments where otherwise, minimise

competition

profitability is good and investment and rationaliseEmphasize profitability by

risk is relatively low operationsraising productivity

Protect And Refocus Manage For Earnings DivestManage for current Protect position in most Sell at time that will

earnings profitable segments maximise cash value

Concentrate on attractive Upgrade product line Cut fixed costs and avoid

segments Minimise investment investment meanwhileDefend strengths

Strong Medium Weak

Competiti ve position of f irm

Figure 11. The Coca-Cola Companys Position in the MckinseyMatrixSource: Day (1986)

Markides (1999) further states that, behind every successful company, thereis superior strategy. The company may have developed this strategy through

formal analysis, trial and error, intuition, or even pure luck. No matter how itwas developed, it is the strategy that underpins the success of the company.

To understand corporate success, the logic of successful strategies must

be understood. It would be quite incredible to identify two people who sharethe same definition of strategy from the concept of strategy as positioning to

strategy as visioning.

Conclusion

The Coca-Cola Company, founded in 1886, is the world leadingmanufacturer, marketer and distributor of non-alcoholic beverageconcentrates and syrups. Today, Coca-Cola has an international presence,

operating in more than 230 brands in nearly 200 countries, with around 70%of the company volume and 80% of the company profit come from outside

the United States.

A number of uncontrollable elements affect Coca-Colas internationalmarketing strategy and tactical implementation. These groups of elements

are Macro, Meso and Micro factors and comprise the PESTLE (Political,

Economic, Social, Technological, Legal and Environmental) macro factors,

prevailing Trends and Concepts Meso factors and ITEMS (Information, Time,

Energy, Money and Space) micro factors. This makes the exclusive use of


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either approach too extreme to be practical and urges multinationalmarketers to search for the right balance between standardisation and

adaptation.

Coca-Colas core global brands are mainly standardised, but with a

number of adaptations taking place. Although the company may strive for a

completely standardised strategic approach, drawing on the associated

economies of scale, in reality they are following the Integrated AdaptStandapproach as advocated by Vrontis (2003).

The companys effectiveness and profitability is obviously well supported

by their strong competitive position and market share in their primary product

marketCoca-Cola. Other brands like Diet Coke, Sprite and Fanta have

also been internationally recognised and profitable. Its international success

is achieved by the companys strategy and tactics, which complement each

other and work in harmony providing the optimum return bounded by

efficiency. The company is thriving as it is both effective (doing things right)

and efficient (doing the right thing).

Coca-Cola is adopting Differentiation and Cost Leadership strategies

(Generic Strategies). In terms of Differentiation, the firm attempts to be

diverse from its competitors by adding something to its product that willprovide a unique value to its customers. This is achieved through well-

designed and managed marketing activities resulting to perceived superior

quality product and high brand image and recognition. Further, Cost

Leadership is achieved not only through economies of scale, but also through

learning, knowledge and experience in production and operational

processes, and through effective/efficient distribution networks and

manufacturing systems.

In relation to Ansoff, Coca-Cola is using a number of strategies. Initially, it

used the Market Penetration Strategy and become established in its home

market by increasing market share and product usage. Then, it used a

Market Development Strategy by expanding its operations into foreign

markets. Later, it developed new products, both at a national andinternational level (Product Development) and then started operations in the

carbonated soft drinks market (Diversification Strategy).

This also ensures that Coca-Cola has a comprehensive product portfolio

in each market, increasing the likelihood of a purchase of a Coca-Cola

Company branded product. This portfolio is well managed and enables the

best fit between the companys strengths and weaknesses to the

opportunities found in the environment.

In considering the strong competitive position of the firm in a highly

attractive market, it is suggested that Coca-Cola should Protect its Position

(Mckinsey Matrix). This can be achieved by concentrating efforts onmaintaining its existing strength by investing to grow at maximum digestible

rate.Coca-Cola should maintain its marketing orientation not only in its

strategic approach but also in its tactical day-to-day operations. It should

constantly undertake market research to enable it understand the


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environment in which it operates and allow it develop products that satisfycustomer needs. This goes in line with the definition of marketing (both at a

national and international level), which is about identifying, anticipating and

satisfying consumer requirements.

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www.foodlineweb.com

Appendix

Country Speci fic Examples

Polandin 1994 there were groups of Polish youths and young adults who lookeddown on the American way, and preferred to preserve their own identity andheritage. Many would rather support a local cola brand than buy Coke.


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(Dana and Oldfield, 1999)Evidence of adaptation within regions of countries (i.e. one bottling plant)

was very much aligned with western ideals e.g. the first baseball diamond -baseball represented the American way.

Is Coca-Cola guilty of imposing these ideals and adopting an ethnocentricviewpoint? (Thomas and Hill, 1999)

Lublin bottlers adopted a much more localized approach and bottled,packaged and marketed differently to appeal to the consumer preferenceswithin Lublins territory.

Asia PacificLong Term objectives concentrated in Chinese/Japanese markets wherethere are growth opportunities.

Purchasing power and income per head in Asian countries will exceed thatof the US in 2010 (Coca-Cola Company Annual Report, 1998).

VietnamTarget audience, primarily teenagers, (people under 20 = 50% ofpopulation). Target audience anxious for freedom and associated ideals(perhaps due to events of past) (Dana and Oldfield, 1999). Hence,

marketing adapted and focussed towards this segment. Also due toNorth/South division advertising has to reflect cultural and politicalsensitivities.

Pepsi entered the Vietnamese market first and they (Vietnamese) in turnbecame brand loyal.

When introducing its product, Pepsi was very sensitive to the traditions andvalues of the Vietnamese people. The company utilised Miss Vietnam(favourite role model in traditional dress playing classical music - sceneswitches to western style bar where seen drinking Pepsi - depictsinternationalism. This gave Pepsi a huge leap in market share.

Coca-Cola thus needed to adopt a similar but differentiated strategy inorder to gain market share.

ChinaProduct quality, consumer trust and perceived value are traits Chineseconsumers look for in leading brands. Coca-Cola developed a number ofmarket specific brands in order to further penetrate local markets, e.g.Smart was the first soft drink developed for the Chinese market. Due towidely dispersed consumer preferences are in this region (www.coca-cola.com).

We are developing relationships with consumers and getting Coke andother beverages into their lives. (Douglas Daft, CEO, 2000)

Latin AmericaWe are continuing to focus on developing our core brands and introducinglocal CSD brands. We entered the water segment in Latin America in 1995;

however, beginning this year, we are putting some real marketing muscleinto this category (Douglas Daft, CEO, 2000).


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Argentina

309

Due to the prevailing economic conditions (income tax increases) Coca-colahave adjusted certain strategies to offer more affordable packaging optionsto facilitate greater competition with other local brands (www.coca-cola.com).

About the Authors

Demetris Vrontis is a senior lecturer at the Manchester MetropolitanUniversity Business School (MMUBS) and teaches marketing andinternational marketing across the Business School in both under and

postgraduate level. At the same time he is the course leader at the

Postgraduate Certificate and Diploma in Strategic marketing and supervises

postgraduate research students at MA, MPhil and Ph.D. level. Other

activities include being an external examiner, moderator for Nottingham Trent

University (in its cooperation with a number of Greek Business Schools) and

a visiting lecturer at a number of Universities. Dr Vrontis is an active memberof the IMRG (International Marketing Research Group) centre, undertaking

research and providing consultation to a numer of national and internationalcompanies, in both consumer and trade markets. His prime research interest

is international marketing planning and specifically to investigate

multinational companies tactical and strategic marketing behaviour, an areathat he had widely published and presented papers to conferences on a

global basis. He is currently acting as a guest editor and reviewer in a

number of books and academic journals and he is the author of a number of

book in international/global marketing and strategic marketing planning.

Iain Sharp is Business Planning Manager for Legal & Generals (major UKLife Assurer) Retail Distribution Division. Iain is responsible for the

production of the divisions annual Business Plan, monitoring progress

against key objectives and is thus heavily involved in overall strategicanalysis and strategy formulation. His primary interest lies in market

positioning and the associated strategies and tactics, marrying up internal

company aspirations and their resultant market impacts. This has proven to

be a very detailed and involving process given a business environment which

is greatly influenced by weak equity markets and the number of regulatory

reviews currently impacting the Financial Services sector.

the marketing review coke

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