Development of Strategic and Comparative bases over time

Development of Strategic and Comparative bases over time Thinking big and applying scale is where we focus, we cant think about just one package or one brand, we have to think about this large portfolio and this large system that we work with Butler, D. (2009), the Vice President Global design, the Coca cola Company Introduction This report involves a brief description of strategic and comparative advantage. It also involves different kinds of strategies under taken by Coca Cola Company that have led it to be one of worlds market leaders compared to other multi-national companies. The strategic and comparative bases of advantage discussed based. The item that shall be looked is coca cola marketing strategy that has been developed for years and based on situations. The marketing strategy shall involve advertising, market segmentation, Equity investment and Branding. Though these strategies seem to be common in other companies either local or international, Coca-Cola Company implements them in a special way. Keywords: Strategy, comparative advantage, market segment, Branding Definitions Strategy Strategy refers to the creation of a unique and valuable position involving a different set of activities (Porter, 1996) whereas comparative advantage sometimes refers to a location of specific advantage that influences the decision of where to source and market (Kogut, 1985). A well-defined definition and a brief description are defined later after strategic advantage. Strategic advantage Strategic advantage occurs when there is equilibrium between three elements, when the brand, the consumer and the market fit together in the best way possible (Xavier,M.J. 2003) Brand-consumer fit is the extent that the brand values coincide with the consumers psychographic make-up. The psychographic elements are measured by the overall scoring and weighting of brand performance in terms of matching consumer needs, motivations, values, self-concept, and lifestyle. Brand -market fit is measured by the extent that price falls into the consumers acceptable price range, the to which the brand is cushioned against budget/trade/distribution influence, the rank-order of importance of the product in the budget/shopping list and finally the ease of access of the product. Consumer market fit: There is a third fit relationship that occurs, fit between consumer and market. This involves the needs and behaviors of consumers under certain market conditions such as specific price points. This relationship between consumer drives and market forces often has direct effect on brand choice. For example a brand might be considered as a good choice to fulfill a particular need or behavior at a particular price that the consumer is prepared to pay, while another brand might not be considered as a good choice for specific combination of need, behavior and price point. The company sets strategies so that it can outperform rivals and it can only do that by establishing a difference in delivering great value to customers or by creating comparable values at a lower cost or do both. Delivering greater value allows a company to charge a high average unit prices and efficiency results into lower average unit costs. All differences between companies in cost or price is derived from hundreds sets of activities required to create, produce, sell and deliver their products or services such as calling on customers, assembling final products and training employees (Porter, 1996) Comparative basis of advantage Deardorff, A. (2003, p. 6) defined Comparative Advantage as the relative cheapness of a good or service in a country that enables that country to export it. More precisely, a country has a comparative advantage in the good whose price in the absence of trade (autarky), relative to other goods in the same country, is lower than the relative price of that same good on world markets. Ricardian Model states that countries have comparative advantage in goods whose labor cost, relative to other goods in the same country, is lower than the relative labor cost of that good abroad. Therefore countries are said to have comparative advantage in a good if its labor requirements are relative to the labor requirement abroad. Ricardian model outlines two theoretical implications of Comparative Advantage and these are: firstly if countries are permitted to trade freely then they are undistorted markets and competitive, they will export the good or goods in which they have comparative advantage and import those in which they have comparative disadvantage, secondly under the same conditions, all countries will gain from trade, in the sense that those individuals who gain from trade within each country will gain enough that they could potentially fully compensate those individuals who lose, within the same country, and still remain better off than in autarky(Deardolff,2003). Business overview Coca-Cola is the largest manufacturer, distributor and marketer of concentrated syrup which is used for the production of non-alcoholic beverages. The company has a span of operations covering over 200 countries since its inception in 1886. It has an annual net income of 6.8 billion and employs the services of around 92,400 associates throughout its operations worldwide (Coca-Cola annual report, 2009). Advertising Advertising can be defined as as any paid form of non-personal presentation and promotion of ideas, goods or services through mass media such as newspapers, magazines, television or radio by an identified sponsor (Kotler et al, 2008 p.737). Advertising is a practical way of informing and persuasion as well as a means of stimulating response from a target audience. The response could be perceptual where the consumer develops, believes or views about the product or it could be behavioural where the consumer purchases the product or increases his purchases of the product in question (Kotler et al, 2008). Advertising is a process which gives information to the public about the product. It is persuasive, controlled, and identifiable as well as influences the target audience. The basic objective of advertising is to increase sales volume and profit. We shall look at several types of advertising which runs hand in hand with the advertising objectives. Informative advertising appears at the early stages of a particular product and is meant to develop the primary demand of the customers. Persuasive advertising is applicable at the competitive stage where a selective demand is built for a particular category of product (Kummer and Mittar, 2008). Comparison advertising is used to establish the superiority of a particular brand through the use of evaluation with one or more other brands in the product line. Reminder advertising is used to refresh the memory of the consumer regarding messages, ideas etc of a particular product. Reinforcement advertising is used to assure the current buyers that they made the right choice regarding their decision to buy the product. The advertising objective should not be arbitrary but should be developed after a thorough evaluation of the current market situation (Kummer and Mittar, 2008). Coca Cola advertising Advertising is a major element of the promotion mix. Personal selling, sales promotion, publicity and advertising are the four elements of the promotion mix. Advertising has been thought of as the best method of promotion because it stimulates sales, creates demand and reaches customer quickly and effectively (Kummer and Mittar, 2008). Coca-Cola has over the years consolidated its leadership position as the worlds most famous and largest beverage company with huge investments in advertising targeted at its existing and potential consumers worldwide. Coca-Cola works in partnership with leading advertising agencies and market research institutes the world over to develop effective advertising campaigns that conforms to current trends in information technology like the use of internet based mediums like face book and twitter to connect with technology loving target audience (Coca-Cola annual report, 2009). The successful advertising strategies used by Coca-Cola over the years in their operations shall be analysed.( Wieden and Kennedy,1996 ) an advertising agency that worked in partnership with Coca-Cola for the 1996 summer Olympics in Atlanta Georgia came up with four main advertising strategies designed for Coca-Cola for the summer games namely: a home based strategy, a fan based strategy, a global growth strategy and the Olympic torch relay. The home based strategy used by coke was primarily as a result of the fact that Atlanta is the main headquarters of Coca-Cola and so people in Atlanta would readily identify with the brand since they are well familiar with it. Coca-Cola launched several advertisements for the games which include installing 70 new billboards, several street-pole banners and signs in 9 Marta stations (the citys public transportation system). Coca-Cola created a theme park known as the Coca-Cola Olympic city with countless different coke advertisements including a 165 feet coke bottle in the canter of the park (Wieden and Kennedy, 1996). The companys signature colour red was the main colour seen throughout the Coca-Cola Olympic city. Coca-Cola deviated from the traditional practice of using athletes for advertising for the games to focus instead on a fan-based strategy where commercials, print advertisements and posters where used to demonstrate the difference made to the outcome of the games by the enthusiasm of the fans. Coca-Cola used the games as a global growth strategy used to target the worldwide audience tuned in for the games. Coca-Cola also used one of the most efficient strategies for gaining exposure in advertising history which is the sponsoring of the 1996 Atlanta Olympic torch relay (Wieden and Kennedy, 1996). The impact of Coca-colas advertisements during the Olympics was so immense that people dubbed the event the Coca-Cola Olympics. The event served as a means for the company to effectively advertise its brand to a worldwide audience. In 2003, Coca-Cola used the marketing platform tagged real to enhance the image of the brand through the use of television advertisements. This particular advertising strategy was specifically targeted for the teenagers and young adults with resounding success. In the same year, the tropical sprite remix television advertisements which was intended to increase and reconnect the sprite trademark was also targeted at the young, urban consumer base (Coca-Cola annual report, 2003). In 2006, the make every drop count advertising in the United States was purposely designed to create awareness among consumers on the health benefits of Coca-colas beverage portfolio in a response to growing concerns by consumers regardless of age on health concerns like calorie intake and obesity. The coke side of life campaign which was the first ever integrated marketing campaign for trademark Coca-Cola was intended to signify the unifying role of Coca-Cola in daily life and has performed better than previous Coca-Cola advertisements and was launched in almost 100 markets in 2006 with great success. The happiness factory television commercial is part of this global campaign (Coca-Cola annual report, 2006). In 2009, Coca-Cola commenced the design for advertisement strategies to be used for the 2010 Fifa world cup campaign which included colourful television advertisements for the soccer fiesta in South Africa in 2010 as a means of uniting Coca-colas exuberance with the worldwide love of soccer thereby utilizing the soccer fiesta as a veritable means of connecting with consumers worldwide who have immense passion for the love of football (Coca-Cola annual report, 2009). Coca-Cola develops its advertising campaigns based on a communications strategy that uses means to end research to gain greater insight of current and potential customers and other factors like product attributes, keeping specific marketing goals in mind, taking into account competitive advertising and positioning as well gaining attention and interest by connecting with real needs(Reynolds and Olsen,2008) Market segmentation Market segmentation has been described as essential to marketing(Sheth 1967).Market segmentation implies the division of large heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs(Kotler et al, 2008 .p.410) There is no single way to segment a market. A marketer apparently has to try different segmentation variables alone or in combination in order to come up with how best to view the market. Markets could be segmented into either business markets or consumer markets. Consumer markets entail those markets that deal on products and services that are used directly by the consumers whereas business markets have to do with transfer of products and services from one point to the other. Market segmentation could be based on the following major variables: demographic, psychographic, behavioural, geographic etc. Demographic segmentation entails segmenting the market based on age, gender, income and education. Psychographic segmentation is based on personality, lifestyle and motives of the population involved. Geographic entails segmenting the market on the basis of regions, city or country. Behavioural involves segmenting the market on benefits sought, product usage, price sensibility or situations (Kotler et al, 2008). Coca cola market segmentation Coca Cola Company has been conquering markets worldwide overtime, through its network of Bottlers, distributers and whole sellers, and later joint ventures. The market network has grown to include most of the world territories and this market has been divided into market segments. Coca-Cola the worlds most famous and leading beverage company has been shown in their operations to vary the sweetness level of their product, its size as well as effervescence on local conditions and preferences which implies that the company employs the use of behavioural and geographical variables in their market segmentation strategies the world over (Hart et al,2008). Coca-Cola Company has operating segments on continental basis involving Eurasia and Africa, Europe, Latin America, North America and the pacific areas. This strategy is clearly a geographical approach in terms of market segmentation by Coca-Cola which is influenced by the fact that these different geographical areas will have diverse preferences and wants (Coca-Cola annual report 2009). Coca-Cola market segmentation strategies regarding diverse consumers base starts with a process of understanding consumer trends within the multicultural marketplace and then developing depth and breath communications which is based on that knowledge. The Coca-Cola Company has a diversity business development team which serves the purpose of providing diverse consumers with the right beverage portfolio. In 2009, the diversity business development team worked closely with the multicultural marketing team to develop marketing strategies as well as integrating multicultural elements into general market programmes for greater reach (Coca-Cola annual report 2009). The diversity business development team during this period also identified significant opportunities in emerging markets including Asian and disabled consumers. The Asian consumers were subsequently integrated into the existing framework of communications. Coca- colas multicultural consumer marketing team develops and carries out relevant marketing plans targeted at multicultural consumers while working closely with brand and customer teams as well as the bottling system. Coca-Cola North America had their multicultural consumer marketing team refocused on African-American marketing as well as expanded its reach to Hispanic consumers (Coca-Cola annual report 2009). The company is now in the process of implementing a long term strategy targeted at consumer markets on the basis of ethnicity in the United States. Coca-Cola in North Americas operating segment reported in 2009 positive results in its works with its bottling partners to create price and package strategies that will ultimately strengthen their financial results, provide value for customers and provide consumers with choices that meet their needs. This strategy is apparently based on behavioural variables which puts price and preferences of the consumers into consideration Coca-Cola Company introduced the coke zero brand in response to consumer health concerns regarding excess calorie intake (Coca-Cola annual report 2009). The product did well in the market and in 2009, the company made sales on the product on an excess of 600 million cases globally. Currently there are over 800 low and no- calorie beverages in the Coca-Cola portfolio (Coca-Cola annual report 2009). In 2008, the company and foundation spent around 9million dollars to support active, healthy lifestyle programmes. These strategies by Coca-Cola are geared towards effective market segmentation of the target population on behavioural and psychographic basis putting into account the health choices and lifestyle of the consumers. In order for Coca-Cola to meet the diverse and ever changing beverage needs of its consumers worldwide, the company has intensified efforts to add more value for customers in its portfolio of beverages ranging from added benefits of vitamins and minerals to calorie reductions, new ingredients, sweeteners and taste depending on the preferences and wants of the consumers concerned (Coca-Cola annual report 2009). Coca-Cola also has another segmentation strategy which entails different strategies for developing and developed markets. The companys main strategy for the developed markets like the United States is to maximize value and profit which can be achieved by delivering more value to consumers so that they will continue their patronage of the companys products at a premium price. In this regard, Coca-Cola are growing the core beverages-trademark namely: coke, sprite, fanta, powerade and improving their benefits and value to the customers through adding vitamins and nutrients to reduced or no calorie options(Coca-Cola annual report 2009). In developing markets Coca-Cola devised a strategy of making the products affordable to the consumers; in Brazil the company offers consumers 26 package options for brand Coca-Cola at different brand points to meet the needs of an economically diverse consumer base (Coca-Cola annual report 2009). In 1963, the product tab was launched and was specifically targeted at the female consumers but subsequently the company in order to broaden its customer base by appealing to the men folk as well as the entire family had to introduce diet coke to achieve the above mentioned objectives. In 1983, Coca-Cola introduced the caffeine- free versions of Coca-Cola, diet coke and tab which were specifically targeted at health conscious consumers. Coca-Cola also introduced the minute maid soda which was positioned to attract a market segment that prefers fruit juice as well as health and nutrition conscious consumers (Mochmen and Maze,1998). The Coca-Cola Company today through its market segmentation strategies offers a diverse portfolio of products to identified market segments based on different consumer preferences for flavours, calories and caffeine content effectively which continues to add to their success story globally (Lamb et al, 2008). Equity investment Coca Cola Company has over time been making equity investment in selected bottling companies with the intention of maximising companys strength and efficiency in its systems, production, distribution, and marketing capabilities around the world. The level of investment generally depends on the bottlers capital structure and its available resources at the time of investment. Coca cola Company in some instances finds it necessary to acquire a controlling interest. Such controlling interest allows coca cola Company to compensate for limited local resources and enables it to focus on bottlers sales and marketing programs. Equity investment also assists in the development of bottlers business and information systems and the establishment of appropriate capital structures. One of examples of coca cola equity investment is that of Coca Cola Enterprise Inc. (C.C.E) In 2009, Coca Cola Companys ownership in Coca Cola Enterprise Inc.-bottling company, was 34%. Coca cola Enterprise Inc. is the worlds bottler company of trade mark beverages. The sales of concentrates, syrups, mineral waters, juices, sweeteners and finished products by coca cola Company to C.C.E were approximately 6.6 billion by the year end 2009. The Coca Cola Enterprise Inc. estimates its market beverage products to retailers which include a portion of 46 states of USA, Columbia district of USA, Virgin Islands, Caribbean islands, Canada, Great Britain, Continental France, Netherlands, Luxembourg, Belgium and Monaco. Therefore Coca Companys investment strategy in CCE was to take advantage of this vast market for it to sell concentrates, syrups and different coca cola product brands through C.C.E (Coca cola annual report,2009). Branding Coca cola has many kinds brands sold worldwide. In developing a company brand, coca cola conducts product and packaging research to establish brand positioning, develop precise consumer communication and solicit consumer feedback. The Coca-Cola brand development strategy emphasizes on price, preference, and persuasive penetration (Annual report, 2009) The Coca Cola Company main brand products are Coca cola classic, diet coke and coca cola zero whereas the main branding strategies at Coca Cola Company include but not limited to Joint brand strategy, brand diversification strategy, personal branding strategy, and packaging/redesigning strategy (Annual report, 2009) Joint brand strategy involves a situation in which two different brands are linked to form joint promotion, as a consequence one product may sell the other examples in early 1990s Bacardirum and Coke cola brand were jointly marketed together. Coca cola, the common known brand was used to market Barcadirum, the new product on the market. The benefits of this strategy is that if the first brand name gives a certain quality signal, then the second brand quality signal is believed to be as powerful as the first one, hence attracting more buyers. (Akshadf and Ruekert, 1994) Brand portfolio/diversification strategy: Coca Cola Company continues to diversify its portfolio and growing sales with new and acquired brands. The some of the diversified brands are vitamin-enhanced water energy brand, and its star water brand Glaceau. The powerade and Nestiea iced tea brand products, a joint venture of Coca Cola Company with Nestle. The importance of this strategy is that multiple brands allow the company to offset cokes gradual decline with newer, more appropriate brands while removing future potential rivals through acquisition. The strategy also allows coca cola to maintain relatively large market share irrespective of how market changes (VanAnken and Derick Daye, 2007) Personal branding strategy refers to a set of human characteristics as associated with a brand. Users view it as a key way to differentiate a brand in a product category as a central driver of consumer preference and usage that can be used to market a brand across cultures. In coca cola company personal traits associated with coca cola are Cooling, all-American, and real. These three personal traits differentiate coca cola from its competitors. Besides these traits, Coca Cola Company uses slogans, graphic designs, color schemes and trademarks. As a result of personal branding, different categories of people from different denomination find themselves attracted to the brand hence increasing its demand (Aaker, 1997). Packaging/redesigning strategy: Coca Cola Company keeps on redesigning its packaging and visual identity systems. One of examples is its newly identity visual system for its flagship brand introduced in 2008 and contour aluminum bottle initially commercialized in 2005. The nonalcoholic beverage in this new aluminum bottle attracted many buyers especially in 2005 Olympic Games in Beijing-China. (Butler, 2009) Packaging redesigning also continues making coca cola brand a new product in the face of consumers. Comparative advantage The most crucial comparative advantage is that the company has over time built a network bottling partners, wholesalers and distributers spread over in many parts of world. These act as marketing agents of coca cola company products worldwide. Bottling partners pray two major roles, Firstly they act as consumers of the concentrates and syrup which they use in manufacture of coca cola products and later sell these products locally or in foreign market, secondary they act as marketer of company brands. (Annual report,2009) Through a network of bottling companies, Coca Cola Company has been able to access cheap raw materials, for example the high fructose corn syrup, a sweetener, one of the component used in manufacture of concentrates and syrups is available at a cheaper price in all countries where coca cola factories are.(Annual report 2009) The company is the owner and marketer of more than 500 nonalcoholic brands sold over the world, giving the company a wide range of customers. With these brands, consumers are provided with a wide variety of choices to meet their desires, needs and their life styles. As the sole manufacturer of coca cola concentrates and syrups, the company enjoys world monopoly Conclusion The Coca Cola Company has a unique network of bottling partners, distributers, wholesalers and joint ventures spread all over the world which act as channels through which the company promotes and markets its brands. Coca Cola as a result of operating in partnership or in cooperation with foreign companies, it enjoys economies of scale such as cheap labor, land and transport costs. Transport costs are reduced due to the fact its brands are brought closer to customers through a network of bottling partners, wholesalers and distributers. The coca cola companys leading brands with high level of acceptance, a worldwide network of bottlers and distributers of companys products, sophisticated marketing capabilities and talented group of dedicated associates are unique companys achievements overtime compared to other multi-national organizations. (3970 Words)