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FACULTY OF BUSINESS

Course: BA Business Studies


Unit: Marketing Management And Strategy
Coursework: The Situation Analysis

Student: Daniel Gyamfi Student ID: 2726711

Tutor: Charles Graham Word Count: 1500 EXCLUDING TABLES

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Table of Content
Introduction .... 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. The company 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 across the globe. Carbonate drinks are the single largest component in Coca-Cola Company which account for about 78% of the total volume sold in the 2008. The company has over 3000 beverages products and has about 500 brands in its portfolio these includes Coca-Cola/Diet Coke 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 companys 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 is responsible for marketing. The company's beverages are generally for all consumers. However, there are some brands, which target specific consumers. For example, CocaCola'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 the Pooh 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 stakeholders 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, global communication is rapidly increasing. This is allowing firms to collaborate within the country and international market. It has driven competition greatly as companies strive to be firstmovers. Specifically, the global soft drink markets compound annual growth rate (CAGR) is expected to expand to 3.6% from 2004 to 2009 (Datamonitor, 2005). Socio-Cultural the growing trends societal concerns, attitudes, and lifestyles are important to consumers. For instance, in the United States and Europe, people are becoming more concerned with a healthy lifestyle. Consumers awareness of health issues such as obesity and inactive lifestyles represent a serious risk to the carbonated drinks sector (Datamonitor, 2005, p.15). The trend is causing the industrys business environment to change, as firms are 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 new strategies to combat the low rates. Buyers want innovation with the products they buy. In todays globalizing society, being plain is not good enough. According to Barbara Murray 3 |Page

(2006c), Firms are already differentiating by taste, e.g. Coca-Cola company product line includes regular Coca-Cola, Diet Coke, Diet cherry Coke, cherry Coke, Vanilla Coke, CocaCola with Lime, Coca-Cola with lemon and many more (Murray, 2006a).(www.thecocacolacompany.com) Competitors Analysis Coca-Cola Enterprise is the UK subsidiary for the Coca-Cola Company. In 2008 UK carbonate was valued about 6billin; with which Coca-Cola (GB) hold about 60% value in both retail and on-trade. Britvic soft drink which is UK subsidiaries of PepsiCo and is the main competitor was second place in terms of market shares of 15% retail sales according to 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's leaders in fruit juice. GlaxoSmithKline PLC, a giant in healthcare products, is the UK third largest carbonate drink and is also on a different scale from most drinks companies. The company 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, Britvic PLC 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 brand with around 42.7% in 2008. PepsiCo was second, with 30.8%, however these market shares for both Coca-Cola and PepsiCo have slightly decreased from 2007 to 2008. Coca-Colas volume has also decreased 1.0% since 2007, whereas PepsiCos volume has increased 0.3%. Strong growth of Coke range in the UK is probably due to the introduction of coke zero and Diet coke product. Coke Zero is the most significant of KO's new innovations. This beverage is marketed as a "calorie-free" version of Coca-Cola Classic, omitting the diet label in an attempt to appeal to new demographics. This brand alone accounted for nearly one third of all 2006 growth for beverages bearing the Coca-Cola trademark. TOWS Matrix analysis of Coca-Cola

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Core competence

Strength Strong leading brands with high level of consumer acceptance this allow the company to extend it product to attract new customers. Large scale of operations Coca-Cola product already sold in 200 countries. In addition it recorded revenue of $31million making the largest manufacturer in the industry. Leading market position the brand large market about 5% ahead of its main competitor PepsiCo. Strong cash flows from operations- the brand is able to create over $ 50million a day.

Weakness Financial market volatility impacting pension assets and in turn the liquidity position of the company. Big slow decision making can give competitive advantage to the competitor such as PepsiCo by being the first to introduce a product for example.

Opportunities

SO Good global market image can help to take advantage of the growing non-alcoholic ready-todrink beverage. Growing market for bottle water market, Coca-Cola can be a leader in this market by extends its product line and campaign for healthy drink in the industry. Coca-Cola has the largest sponsorship in games such as football, Olympic etc, by launching energy of their own brand. It could be the fastest selling product if use some of the famous stars in the game to advertise for the product. Can renewed focus on ageing and affluent consumers globally.

WO With their experience staff they should be able to make an instead market decision explore the new market. Failing to conduct further market research into new market can give an advantage to competitors by extend to the new market.

Global growth in nonalcoholic ready-todrink beverage industry- this trend is set to generate retail sale in the industry to more than $1trillion by 2020.
Growing global bottle water market. Intense competition Booming global functional drinks market e.g. energy drink. Target the ageing customers and the young and more environmental concern people.

Threat Economic climate - countries from all over the world have felt the impacts of the current recession. 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 product especially in the USA and Europe. P ge a Overdependence on bottling partners Intense competition either local or global market. ST

WT A number of people have limited disposable income; the company can still take advantage through their economy of scale by reducing the price of their product at the current economic climate. Do research and know what the consumers want by this they will be able to extend their product line to include sugar free product and by this they will be able to attract new customers. The company slow in making decision can cost them in terms of their market if the key competitor takes the lead in providing what the consumers want it will be difficult for CocaCola to win back the customers. If for instance the Coca-Cola sugar level exceed the requirement of the Health authorities this could lead to fall in sales hence the company will lose market share to the Pepsi.

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The large customer base of the company gives them competitive advantage. The companys distributors have the ability to negotiate with stadiums, universities and school 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 a particular product, and rarely purchase other varieties. This stresses the importance of developing and maintaining a superior brand image. Price, however, is also a key factor because consumers without a strong brand preference will select the product with the most competitive price. Because of their economy of scale Coca-Cola can afford to match up the competitors price or can undercut prices whiles they can still maximise profit. Thus, the brand global acceptance 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 a reflection 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 health and wellbeing awareness have seen the bottled water, sports and energy drink segments enjoy strong demand, at the expense of carbonated, sugary, soft drinks. This mature industry is characterized by increasing competition and consolidation, which have moderated revenue growth. In order to prevent this industry from going flat, continued innovation of non-carbonated drinks, coupled with heavy and effectively targeted promotion is needed. Coco-Cola has all the resource to actively exploring new ingredients new 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 the majority of their profits. If they lose global market share, their profits will decrease dramatically. References http://0-web.ebscohost.com.lispac.lsbu.ac.uk/ehost/pdf?vid=3&hid=107&sid=a0ccf11f-fcb34f14-881a-e2b7a2fb9905%40sessionmgr111 (Accessed 5/02/2009) http://0-www.marketlineinfo.com.lispac.lsbu.ac.uk/library/DisplayContent.aspx? R=45C0AF28-BCDC-435B-AB8A3F87FBC251E1&N=4294840655&selectedChapter=IDA1EMH#IDA1EMH 5/02/2010) 6 |Page

(Accessed

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 9/02/2009) (Accessed

http://0-www.keynote.co.uk.lispac.lsbu.ac.uk/market-intelligence/view/product/2097/softdrinks--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.thecocacolacompany.com/investors/pdfs/2008_annual_review/2008_annual_review.pdf 17/02/2009) (Accessed

http://www.thecoca-colacompany.com/ourcompany/index.html (Accessed 17/02/2009) Datamonitor Mintel Market 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 level of consumer acceptance this allow the company to extend it product to attract new customers. Large scale of operations Coca-Cola product already sold in 200 countries. In addition it recorded revenue of $31million making the largest manufacturer in the industry. Leading market position the brand large market about 5% ahead of its main competitor PepsiCo. Strong cash flows from operations- the brand is able to create over $ 50million a day.

Weakness
Financial market volatility impacting pension assets and in turn the liquidity position of the company. Big slow decision making can give competitive advantage to the competitor such as PepsiCo by being the first to introduce a product for example.

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Opportunities
Global growth in non-alcoholic ready-todrink beverage industry- this trend is set to generate retail sale in the industry to more than $1trillion by 2020. Growing global bottle water market Intense competition Booming global functional drinks market e.g. energy drink. Target the ageing customers and the young and more environmental concern people

Threat
Economic climate - countries from all over the world have felt the impacts of the current recession. 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 product especially 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 the pressures; that from rival sellers within the industry, new entrants to the industry, substitute products, suppliers, and buyers. Competition Coca-Cola largest competitors in this soft drink industry comes from Pepsi Co., and Cadbury Schweppes 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, Diet Coke, 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, PepsiCo dominated 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 Loyalty Leaders 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 to their brands. The new competition between rival sellers is to create new varieties of soft drinks, such as vanilla 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-Cola and Pepsi Co dominate the industry with their strong brand name and large distribution channels. Furthermore, the soft-drink industry is fully saturated and growth is small. This makes it very difficult for new, unknown entrants to start competing against the existing firms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labour, and economies 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 strong competitive force (Murray, 2006c). Substitute Products

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Substitute products are those competitors that are not in the soft drink industry. Such substitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea. Bottled water and sports drinks are increasingly popular with the trend to be a more health conscious consumer. There are progressively more varieties in the water and sports drinks that appeal to different consumers tastes, but also appear healthier than soft drinks. In addition, 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, Diet coke, 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 to Coca-Cola is bottling equipment manufacturers and secondary packaging suppliers. Although Coca-Cola does not do any bottling, the company owns about 36% of Coca-Cola Enterprises 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 bargaining power. In terms of equipment manufacturers, the suppliers are generally providing the same products. The number of equipment suppliers is not in short supply, so it is fairly easy for a company 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). Porters 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 the industry. Of the five forces, rivalry within the soft drink industry, especially from PepsiCo, is the greatest source of competition for Coca-Cola.

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