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FACULTY OF BUSINESS

Course: BA Business Studies

Unit: Marketing Management And StrategyCoursework: The Situation Analysis

Student: Daniel Gyamfi Tutor: Charles Graham

Student ID: 2726711 Word Count: 1500 EXCLUDING TABLES

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  Table of ContentIntroduction ………………………………………………………….………...…… 3

Background information ………………………………………………...….…….. 3

Mission Statement ………………………………………….……………...……… 3

Market Trend ………………………………………………………………………. 3 & 4

Competitors Analysis ……………………………………………………………... 4

TOWS MATRIX …………………………………………………………..…….…. 4 & 5

Core Competence …………………………………………………….………..…. 5 &6

Conclusion ……………………………………………………………….……….... 6

References ………………………………………………………………….…..…. 6 & 7

 Appendix …………………………………………………….………..……………. 7-9

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Introduction

This report will analyse the marketing environment of Coca-Cola brand. In the report I will

look at the external and internal strategy of the brand both in global and in the UK market.The report was to be submitted to Charles Graham by 18th February 2010.

Background information

Coca-Cola is one of the world famous and largest brands in beverages industry. Thecompany was established Doctor John Pemberton who was a pharmacist in 1886 in Atlanta,Georgia USA. The brand has since become household drink in over 200 countries acrossthe globe. Carbonate drinks are the single largest component in Coca-Cola Company whichaccount for about 78% of the total volume sold in the 2008. The company has over 3000beverages products and has about 500 brands in its portfolio these includes Coca-Cola/DietCoke family, Coca-cola enterprise (CCE) wide range of carbonates includes Fanta, Lilt,

Sprite and Powerade, plus the Schweppes brand in the UK according to keynote report.

The company’s operations in the UK are divided between CCE and Coca-Cola Great Britain(CCGB). CCE is the manufacturer and distributor, whereas CCGB owns the brands and isresponsible for marketing. The company's beverages are generally for all consumers.However, there are some brands, which target specific consumers. For example, Coca-Cola's diet soft drinks are targeted at consumers who are older in age, between the years of 25 and 39. PowerAde sports water target those who are fit, healthy and do sport. Winnie thePooh sipper cap Juice Drink target children between the ages 5-12.

Mission statement of Coca-Cola Company.

In order for the company, to achieve its objectives and maximising stakeholder’s value, the

company is creating value by executing comprehensive business strategy guided by key

actions and decisions. These include:

• To refresh the world...• To inspire moments of optimism and happiness...• To create value and make a difference. (www.thecoca-colacompany.com)

Market trends

Technology- With the growing use of the internet and other electronic technologies, globalcommunication is rapidly increasing. This is allowing firms to collaborate within the countryand international market. It has driven competition greatly as companies strive to be first-movers. Specifically, the global soft drink market’s compound annual growth rate (CAGR) isexpected to expand to 3.6% from 2004 to 2009 (Datamonitor, 2005).

Socio-Cultural – the growing trends societal concerns, attitudes, and lifestyles are importantto consumers. For instance, in the United States and Europe, people are becoming moreconcerned with a healthy lifestyle. “Consumers awareness of health issues such as obesityand inactive lifestyles represent a serious risk to the carbonated drinks sector” (Datamonitor,2005, p.15). The trend is causing the industry’s business environment to change, as firmsare differentiating their products in order to increase sales in a stagnant market.

The low growth rates are of concern for soft drink companies, and several are creating newstrategies to combat the low rates. Buyers want innovation with the products they buy. Intoday’s globalizing society, being plain is not good enough. According to Barbara Murray

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(2006c), Firms are already differentiating by taste, e.g. Coca-Cola company product lineincludes regular Coca-Cola, Diet Coke, Diet cherry Coke, cherry Coke, Vanilla Coke, Coca-Cola with Lime, Coca-Cola with lemon and many more (Murray, 2006a).(www.thecoca-colacompany.com)

Competitors Analysis

Coca-Cola Enterprise is the UK subsidiary for the Coca-Cola Company. In 2008 UKcarbonate was valued about £6billin; with which Coca-Cola (GB) hold about 60% value inboth retail and on-trade. Britvic soft drink which is UK subsidiaries of PepsiCo and is themain competitor was second place in terms of market shares of 15% retail sales accordingto mintel. PepsiCo's flagship brands in soft drinks are Pepsi, Pepsi Max, Diet Pepsi,Gatorade and Mountain Dew, and the company also owns Tropicana and Dole, the world'sleaders in fruit juice. GlaxoSmithKline PLC, a giant in healthcare products, is the UK thirdlargest carbonate drink and is also on a different scale from most drinks companies. Thecompany specialised in medicines and oral care, as well as three famous drinks brands:Lucozade, Ribena and Horlicks.

CCE, had a turnover of £1.43bn in the year ending 31st December 2006, up 2.4%on the previous year whereas For the year ending 30th September 2007, BritvicPLC recorded total branded revenues of £716.3m, up by 5.7% on 2006. According to John Sicher of Beverage Digest (2009), Coca-Cola was the number one brandwith around 42.7% in 2008. PepsiCo was second, with 30.8%, however these market sharesfor both Coca-Cola and PepsiCo have slightly decreased from 2007 to 2008. Coca-Cola’svolume has also decreased 1.0% since 2007, whereas PepsiCo’s volume has increased0.3%. Strong growth of Coke range in the UK is probably due to the introduction of cokezero and Diet coke product. Coke Zero is the most significant of KO's new innovations. Thisbeverage is marketed as a "calorie-free" version of Coca-Cola Classic, omitting the diet labelin an attempt to appeal to new demographics. This brand alone accounted for nearly onethird of all 2006 growth for beverages bearing the Coca-Cola trademark.

TOWS Matrix analysis of Coca-Cola

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Core competence

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Strength

• Strong leading brands withhigh level of consumer acceptance – this allow thecompany to extend it productto attract new customers.

• Large scale of operations –Coca-Cola product alreadysold in 200 countries. Inaddition it recorded revenueof $31million making thelargest manufacturer in theindustry.

• Leading market position – the

brand large market about 5%ahead of its main competitor PepsiCo.

• Strong cash flows fromoperations- the brand is ableto create over $ 50million aday.

Weakness

• Financial market volatility impactingpension assets and in turn theliquidity position of the company.

• Big slow decision making can givecompetitive advantage to thecompetitor such as PepsiCo bybeing the first to introduce a productfor example.

Opportunities

• Global growth in non-alcoholic ready-to-drink beverageindustry- this trend is

set to generate retailsale in the industry tomore than $1trillion by2020.

• Growing global bottle water market.

• Intense competition

• Booming global functionaldrinks market e.g. energydrink.

• Target the ageing customersand the young and more

environmental concernpeople.

SO

• Good global market imagecan help to takeadvantage of the growingnon-alcoholic ready-to-drink beverage.

• Growing market for bottlewater market, Coca-Colacan be a leader in thismarket by extends itsproduct line and campaignfor healthy drink in theindustry.

• Coca-Cola has the largestsponsorship in gamessuch as football, Olympicetc, by launching energyof their own brand. It couldbe the fastest sellingproduct if use some of thefamous stars in the game

to advertise for theproduct.

• Can renewed focus onageing and affluentconsumers globally.

WO

• With their experience staff theyshould be able to make aninstead market decision explorethe new market.

• Failing to conduct further marketresearch into new market cangive an advantage tocompetitors by extend to thenew market.

Threat

• Economic climate - countriesfrom all over the world have feltthe impacts of the currentrecession. This may be aproblem for Coke, which derivesapproximately 75% of its salesfrom outside North America.

• Health and wellness has createdconcern for carbonated productespecially in the USA andEurope.

• Overdependence on bottlingpartners

• Intense competition – either local or global market.

ST

•  A number of people havelimited disposable income;the company can still takeadvantage through their economy of scale byreducing the price of their 

product at the currenteconomic climate.

• Do research and knowwhat the consumers wantby this they will be able toextend their product line toinclude sugar free productand by this they will beable to attract newcustomers.

WT

• The company slow in makingdecision can cost them in termsof their market if the keycompetitor takes the lead inproviding what the consumerswant it will be difficult for Coca-

Cola to win back the customers.• If for instance the Coca-Cola

sugar level exceed therequirement of the Healthauthorities this could lead to fallin sales hence the company willlose market share to the Pepsi.

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The large customer base of the company gives them competitive advantage. Thecompany’s distributors have the ability to negotiate with stadiums, universities andschool systems, making them the exclusive supplier for a specified period of time. Additionally, they have the ability to purchases in bulky that significantly lower their costs. Furthermore, established brand loyalty is a large aspect of the soft drink

industry. Many consumers of carbonated beverages are extremely dedicated to aparticular product, and rarely purchase other varieties. This stresses the importanceof developing and maintaining a superior brand image.

Price, however, is also a key factor because consumers without a strong brandpreference will select the product with the most competitive price. Because of their economy of scale Coca-Cola can afford to match up the competitor’s price or canundercut prices whiles they can still maximise profit. Thus, the brand globalacceptance is vital factor in the success of being market leaders in the industry(Datamonitor, 2005).

Coca-Cola effective communication with the local people gives them knowledge of 

the entire spectrum of taste and occasions. What people want in beverages is areflection of who they are, where they live, what kind of work they do and how they

relax and recharge. Therefore Coca-Cola is able to change flavour of its soft drink to

conform to local taste. For instance Coke in the US taste different from Coke in the

UK, which in turns tastes different from Coke in India. The brand is determined not

only to make great drinks but also to contribute to the communities around the world

through their commitment to education, health, wellness and diversity. Coke strive for 

the best by being a good neighbour and constantly shaping everyday business

decisions to improve the quality of life in the community in which we do business. For 

example Coca-Cola is involved in number of sponsorship in many activities UK

League One championship, FIFA World Cup etc.

Conclusion

In my opinion, health concerns drive product innovation. The increase in consumer healthand wellbeing awareness have seen the bottled water, sports and energy drink segmentsenjoy strong demand, at the expense of carbonated, sugary, soft drinks. This matureindustry is characterized by increasing competition and consolidation, which havemoderated revenue growth. In order to prevent this industry from going flat, continuedinnovation of non-carbonated drinks, coupled with heavy and effectively targetedpromotion is needed. Coco-Cola has all the resource to actively exploring new ingredientsnew functionality and new occasion. Coca-Cola is very well-established globally, and is the

global soft-drinks leader. This is very important to sustain because it is the source of themajority of their profits. If they lose global market share, their profits will decreasedramatically.

References

  http://0-web.ebscohost.com.lispac.lsbu.ac.uk/ehost/pdf?vid=3&hid=107&sid=a0ccf11f-fcb3-

4f14-881a-e2b7a2fb9905%40sessionmgr111 (Accessed 5/02/2009)

http://0-www.marketlineinfo.com.lispac.lsbu.ac.uk/library/DisplayContent.aspx?

R=45C0AF28-BCDC-435B-AB8A-

3F87FBC251E1&N=4294840655&selectedChapter=IDA1EMH#IDA1EMH (Accessed

5/02/2010)

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http://www.docshare.com/doc/8487/An-Analysis-of-The-Coca-Cola-Companys-Markets 

(Accessed 7/02/2009)

http://www1.csbsju.edu/liBRary/local/5thYear/zeigler_paper.pdf  (Accessed 9/02/2009)

http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html  (Accessed9/02/2009)

http://0-www.keynote.co.uk.lispac.lsbu.ac.uk/market-intelligence/view/product/2097/soft-

drinks--carbonated-%26-concentrated/chapter/6/competitor-analysis?highlight= (Accessed

15/02/2009)

http://www.beverage-digest.com/pdf/top-10_2009.pdf  (Accessed 15/02/2009)

http://www.thecoca-

colacompany.com/investors/pdfs/2008_annual_review/2008_annual_review.pdf  (Accessed

17/02/2009)

http://www.thecoca-colacompany.com/ourcompany/index.html (Accessed 17/02/2009)

Datamonitor MintelMarket week

 Appendices

Swot Analysis of Coca-Cola. This is a simple module use to evaluate organisation Strength,

Weakness, Opportunities and Threats.

Strength

• Strong leading brands with high levelof consumer acceptance – this allow thecompany to extend it product to attractnew customers.

• Large scale of operations – Coca-Colaproduct already sold in 200 countries. Inaddition it recorded revenue of $31million making the largest

manufacturer in the industry.• Leading market position – the brand

large market about 5% ahead of itsmain competitor PepsiCo.

• Strong cash flows from operations- thebrand is able to create over $ 50milliona day.

Weakness

• Financial market volatility impactingpension assets and in turn the liquidityposition of the company.

• Big slow decision making can givecompetitive advantage to the competitor such as PepsiCo by being the first tointroduce a product for example.

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Opportunities

• Global growth in non-alcoholic ready-to-drink beverage industry- this trend is setto generate retail sale in the industry tomore than $1trillion by 2020.

• Growing global bottle water marketIntense competition

• Booming global functional drinks markete.g. energy drink.

• Target the ageing customers and theyoung and more environmental concernpeople

Threat

• Economic climate - countries from all over the world have felt the impacts of the currentrecession. This may be a problem for Coke,which derives approximately 75% of its sales

from outside North America.• Health and wellness has created

concern for carbonated productespecially in the USA and Europe.

• Overdependence on bottling partners• Intense competition – either local or 

global market.

Five Competitive Forces for Coca-Cola Company

The soft drink industry is very competitive. The companies involve have think about thepressures; that from rival sellers within the industry, new entrants to the industry, substituteproducts, suppliers, and buyers.Competition

Coca-Cola largest competitors in this soft drink industry comes from Pepsi Co., and CadburySchweppes and they are also globally established which creates a great amount of competition. Though Coca-Cola owns four of the top five soft drink brands (Coca-Cola, DietCoke, Fanta, and Sprite), it had lower sales in 2005 than did PepsiCo (Murray, 2006c).However, Coca-Cola has higher sales in the global market than PepsiCo. In 2004, PepsiCodominated North America with sales of $22 billion, whereas Coca-Cola only had about

$6.6billion, with more of their sales coming from overseas. PepsiCo is the main competitor for Coca-Cola and these two brands have been in a power struggle for years (Murray,2006c).

Brand name loyalty is another competitive pressure. The Brand Keys’ Customer LoyaltyLeaders Survey (2004) shows the brands with the greatest customer loyalty in all industries.Diet Pepsi ranked 17th and Diet Coke ranked 36th as having the most loyal customers totheir brands.The new competition between rival sellers is to create new varieties of soft drinks, such asvanilla and cherry, in order to keep increasing sales and enticing new customers (Murray,2006c).

New Entrants

New entrants are not a strong competitive pressure for the soft drink industry. Coca-Colaand Pepsi Co dominate the industry with their strong brand name and large distributionchannels. Furthermore, the soft-drink industry is fully saturated and growth is small. Thismakes it very difficult for new, unknown entrants to start competing against the existingfirms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labour, andeconomies of scale. New entrants cannot compete in price without economies of scale.These high capital requirements and market saturation make it extremely difficult for companies to enter the soft drink industry; therefore new entrants are not a strongcompetitive force (Murray, 2006c).

Substitute Products

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Substitute products are those competitors that are not in the soft drink industry. Suchsubstitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea. Bottledwater and sports drinks are increasingly popular with the trend to be a more healthconscious consumer. There are progressively more varieties in the water and sports drinksthat appeal to different consumers’ tastes, but also appear healthier than soft drinks. Inaddition, coffee and tea are competitive substitutes because they provide caffeine. For consumers to switch for substitute product, Coca-Cola also has it own bottled water, Dietcoke, Coke zero counters for such products.It is also very cheap for consumers to switch to these substitutes making the threat of substitute products very strong (Datamonitor, 2005).

Suppliers Suppliers for the soft drink industry do not hold much competitive pressure. Suppliers toCoca-Cola is bottling equipment manufacturers and secondary packaging suppliers. Although Coca-Cola does not do any bottling, the company owns about 36% of Coca-ColaEnterprises which is the largest Coke bottler in the world (Murray, 2006a). Since Coca-Cola

owns the majority of the bottler, that particular supplier does not hold much bargainingpower. In terms of equipment manufacturers, the suppliers are generally providing the sameproducts. The number of equipment suppliers is not in short supply, so it is fairly easy for acompany to switch suppliers. This takes away much of suppliers’ bargaining power.The buyers of the Coca-Cola and other soft drinks are mainly large grocers, discount stores,and restaurants. The soft drink companies distribute the beverages to these stores, for resale to the consumer.

Bargaining Power 

The bargaining power of the buyers is very evident and strong. Large grocers and discount

stores buy large volumes of the soft drinks, allowing them to buy at lower prices.Restaurants have less bargaining power because they do not order a large volume.However, with the number of people are drinking less soft drinks, the bargaining power of buyers could start increasing due to decreasing buyer demand (Murray, 2006a).Porter’s Five Forces Model identifies the five forces of competition for any company.The recognition of the strength of these forces helps to see where Coca-Cola stands in theindustry. Of the five forces, rivalry within the soft drink industry, especially from PepsiCo, isthe greatest source of competition for Coca-Cola.

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