Competitive Strategies for Coca-Cola and PepsiCo Companies

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05.06.2012

Coca-Cola Market Analysis

For a company to be successful it must be competition oriented. A good competition strategy should focus on the weaknesses of the competitor but avoiding the strengths. The company then launches attacks against the weak points of the competitor. This would enable one company to gain a competitive advantage against the other companies. Differentiation, differentiation focus, cost focus and cost leadership are some strategies put forward (Michael,2006). Such strategies can be adopted by a company to gain favor in the market. For example Coca-Cola and Pepsi, two similar companies competing for the same market can employ these strategies to outdo each other.

Differentiation is a marketing strategy where a company produces goods that are different from those offered by other companies. Coca-Cola for instance may decide to produce products different from those of Pepsi by simple modification of the ingredients. Coca-cola can increase the quality of its products and therefore can charge slightly higher prices.  This would make it stand a high chance of winning the consumer’s confidence. The high premium charged covers the additional cost of production (Porter, 2006).

In the differentiated focus, the company seeks to produce different products just within a narrow market section. This strategy is best for competitors who offer products targeting a broader group of customers with different tastes and preferences. The company like PepsiCo would look for special needs of the consumers. Nice packaging and different labeling for instance in a given part of the market would allow PepsiCo to sell more than Coca-Cola in that section of the market.

With cost leadership strategy, the main aim is for the company to produce its products at the lowest cost. By PepsiCo trying to minimize the cost of production, it can sell at low price in the market. As long as the achieved selling price can be equal or close to the market price, PepsiCo would enjoy more profit due to economies of scale.

In cost focus, Coca-Cola may notice it wise to charge low price on the same product some sections of the market. This strategy is usually associated with large scale production companies with products accepted to the majority of consumers. The company may decide to label differently the same product and low prices tagged for the benefit of specific consumers. This would lead to more sale hence can outdo PepsiCo in the same market environment (Jack, 2009).

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Flavored drinks have existed since ancient times, but the carbonated beverages drinks were discovered in the 1900’s. Coke is a company in the soft drinks industry, and its products have become numerous throughout the years, involving different consumers (Czinkota & Ronkainen, 2010). This paper thoroughly examines the various aspects of marketing strategy for coke, including market analysis, market segmentation, product positioning, impact on the consumer, decision process of the customers, marketing mix, and market plan assessment. Despite permanent competitiveness between coke and Pepsi, Coca-Cola is a leader in the market share with 41.9%, while Pepsi is the second at 29.9%.

Coca-Cola Company, being the largest marketer, manufacturer and distributor of nonalcoholic beverage, has been selling its brands in the United States since 1886. The Coca-Cola Brand currently exports its products into 200 countries and is the leading soft drink brand there (Coca-Cola, 2012). Marketing of Coca-Cola has transformed tremendously since the era of Goizueta. Marketing of Coke was the most successful in 1980s, when the company had an intensified loyalty for its Coca-Cola Classic (Garrison, et al. 2012).

However, this marketing strategy faded in 1990s when the then marketing head named Ivester shifted most of the company’s resources from advertising into delivery trucks, vending machines and refrigerated coolers, etc. In the recent years, marketing of the brand began to regain its foothold in the marketing notch under the leadership of Heyer. However, the departure of Heyer in June 2012 was viewed as huge loss for the company (Coca-Cola, 2012).

Currently, “Creative Excellence” marketing strategy of Coke is being evolved to “Content Excellence”. This is the logic behind Coke’s present marketing and innovation strategy. Mary Minnick who is responsible for marketing at Coca-Cola Company has played a crucial role in the transforming the strategy and commerce of the Coke brand. The marketing strategies that Mimick has used to position the company on the cutting edge of the consumer trends includes Customer Anticipation, Retooling of Weary Brands, Engaging Partners, Retailer’s Feedback, Accountability, and Advertising (Czinkota & Ronkainen, 2010).

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Market performance is an important tool in conducting the market analysis of the company. For example, in 2012 Coca-Cola reported $2.06 billion profit equivalent to 88% a share, which amounted to $1.9 billion of profit (81% a share) as reported in 2011. PepsiCo, on the other hand, earned $1.60 billion after the 2nd quarter in 2012 or 98 % per share where its first full quarter was linked to its largest bottlers (Garrison, et al. 2012). This reveals that Coke is still the most valuable brand of the soft drink market.

Notwithstanding, according to consultancy firm Interbrand, concerned with measuring levels of the company’s brands, sales and profits, the value of Coke has declined by 20% since 1999 to $67 billion in 2012. In compliance with the information provided by Interbrand, it was the largest decline among multinational companies during the specified period. However, Coca-Cola remains the company with the highest annual profit as compared to its main rival Pepsi, PepsiCo Inc. (Garrison, et al. 2012). Moreover, Coke was successful in many other important areas such as in stock performance, growth earnings, and talent development.

These are several core strategies developed by the department of marketing of Coca-Cola headquarters in Atlanta in order to ensure consistence of communication in every market. Thus, Coca-Cola system of marketing aims at maximizing its resources for leadership in the market and enhance profit growth.

Market Segmentation

Coca-Cola Company, being the world’s marketer and distributor of soft drinks applies multisegment targeting strategy. This means that the company has multiple well-defined market segments. It has developed a marketing mix for each segment. This explains why Coca-Cola has more than 400 different lines of products and a total of 3,500 product mix (Garrison, et al. 2012).
Coca-Cola brand targets different demographics such as age groups, sexes, ethnic groups, lifestyles, among other demographics. For example, Oasis- Juice targets the younger adults aged between 20 and 30. The product come in different flavors including berry, orange tangerine, and lemon. This product is mostly common in Ireland and Britain (Garrison, et al. 2012).

Demographic environment refers to population elements such as gender, age, ethnic background, sex, race, and social class. This is one of the market forces, which has strongly influenced the product. For example, the existence of huge population groups of all ages has forced the company to develop healthy beverages, which is quickly redefining the image of Coca-Cola (Coca-Cola 2014). The organization has always targeted the entire population unlike new soft drink entrants that mainly target the youths. The company does not discriminate its customers based on the financial status since there are schemes to accommodate all class levels of the consumers.

Coca-Cola endeavors to thrive in its corporate culture that has faced several changes. There are people who consume the products if Coca-Cola daily while others purchase it weekly and even more rarely. Thus, the other market segmentation is based on the consumers who take the drink daily or regularly.

Product Positioning

Coca-Cola has succeeded in strategically positioning its products in the global soft drink market. The vital question that arises is whether the company will continue to keep the same product positioning or adjust it based on the 200 countries where the brand is sold. The principle of the company that states “think global, act local” reveals that Coke is willing to keep the same product positioning and adapt the offer to local needs. The strategic positioning used by the company is helpful in keeping the same image of the brand worldwide(Barney, 2009). This shows the success of the brand positioning because the market analysis reveals the customer’s perception as a part of their daily life. This impact of the product positioning is a high degree of loyalty from the consumers, which also makes the purchasing decision easier for the company. Such position as “Live the coke side of life”, which relates to joy and happiness associated with the product, is a unique selling element that the company uses while marketing its product globally.

Coca-Cola has promised to revitalize the physical and mental fatigue of its consumers after stressful and draining events. Red Bull Red edition brand of cranberry, lime and will increases performance, vigilance, metabolism, and enhances concentration using the healthy conscious energy-based ingredients (Garrison, et al. 2012).

The managers of the Coca-Cola have a brand-positioning map that they follow, which helps them to present the Coke brand in an easily accessible manner to the customers. Coca-Cola uses brand-positioning maps to understand the organization of the consumers’ purchase behaviors. Brand-positioning maps are powerful tools used by the business managers to understand the consumer’s purchases behavior in order they can present the brand according to the consumer preferred behaviors (Pearce, et al., 2011). Consumer’s product usage as well as their buying behaviors are important attributes considered by the company’s management. The brands of the competitors is another element considered when modeling a brand-positioning map. The brand positioning entails the management’s understanding of strengths and weaknesses of the product, which forces them to involve strategic approaches in order to increase the sales of the Coke brand (Pearce, et al., 2011). Developing perceptual map is the technique used by Coke managers to establish a marketing strategy for the Coke brand and other attributes which require improvements (Czinkota & Ronkainen, 2010).

Impact on Consumer Assessment

The impact on consumer assessment is based on the activities such as event attendance as well as type and amount of feedback received from the consumers. Motivational objectives will not be difficult to measure because they will depend on sales and consumer attendance. The promotional objectives and products sales are used to determine the impact of the product on the consumers. The company records are prepared at the end of the fourth quarter of the financial year. The social media pages are closely monitored to see the feedback of the clients pertaining to the products while those of the consumers are assessed and used to improve the products based on the consumer needs. Consequently, this has increased the consumer’s loyalty and sales, which enhances profit growth of the product.

Consumer Decision Process

Social media has set a prominent consumers purchase decisions for Coca-Cola Company. According to a research conducted by UConn Research Firm, which intended to study the impact of social media on carbonated soft drink producers, the researchers found connection between social media online conversations and the demand of the products. An example that the campaign used in conducting the 18 brands of carbonated soft drinks in 12 market areas during the period from April 2011 to October 2012 was Coca-Cola’s “Share A Coke.” This is the company’s social media campaign that appeared in Facebook in 2011.

The campaign would enable the consumers to order their personalized Coke bottles via a Facebook app. The results was that the traffic for the Facebook site increased by 870%. Coca-Cola reported earnings of 18 million due to media impressions while the sales of the Coca-Cola brand recorded an increase of 7 % of the total sales. The report of that research by UConn was titled “Impact of Social Media in Consumer Decision Process on Brand Choices.” This reveals the importance of social media in influencing the decision-making process to purchase the products (Barney, 2009).

The other strategy that Coke uses to influence the consumers’ decision process is its social environment. The company has demonstrated a strong sense of CSR (Corporate Social Responsibility) over the years. The core elements of Coca-Cola in its social responsibility include the following: (1) Community Based CSR with a full-blown Charity Committee and set out Helping Hand Programmes (2) Environment Based CSR where the company is fully committed to protection of the environment and conservation about natural resources, endeavoring to reduce environmental pollution. The emphasis on environmental sustainability preservation of natural resources such as water, energy, as well as the focus on packaging and solid waste is a noble strategy that influences positively the consumers and their loyalty to the brand (Cola-Cola, 2014).

In addition, Coca-Cola as a commitment to corporate social responsibility is recorded through an annual press release referred to as Annual Sustainability Reports. This report is used to highlight the company’s social responsibility achievements as well as its plan. For example, in 2013, the company gave $2.5 million for Typhoon Relief Aid (Coca Cola, 2014).

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Marketing Mix

This deals with the pricing, sales and distributing of the Coca-Cola products. This strategy involves four “P”, namely place, price, promotion, and product.

  • Place

This refers to the geographical area and distribution points where Coca-Cola markets its products. From the history, one can see that Coca-Cola began in a single point in America in 1896, in Atlanta, but has continually expanded to international markets where it had thousands of retail stores and branches by 2007 in over 200 countries (Garrison, 2012).

  • Promotion

Coca-Cola has always been promoting its products in advertisements, catalogs, and media. Coke is well known for creation of great advertisements such as I’d like to teach the World to sing jingle in the 1970s. Coca-Cola is still developing great promotion campaigns such as the “Coke Side of Life” which was unveiled in 2013. In 2014, the company has introduced Coke Studio in the African Market. Coke Studio is a campaign, which sponsors African musicians to record deals and perform events in the region. This program is aimed at promoting the Coke brand to great extent, especially through the social media. The reason is that the company has taken an aggressive marketing strategy through You Tube to advertise the program (Coca-Cola, 2014).

  • Price

Coca-Cola is known for reducing regularly its prices in order to fit the customer’s needs. Thums Up, for example, has been decreased to Rs. 5 in Asia due to the low capital involved in the production of the brand in the region.

  • Products

Brand name, bottle shape, and symbol are distinctive product features that helps Coca-Cola prevail over its rivals. People can easily identify Coke’s, Fanta’s, and Sprite’s bottle from the others without a name. It is hard to copy or imitate these products.

Market Plan Assessment

The consumer needs for Coke in the modern times has shifted from sodas to vitamin sport drinks, fortified waters, energy drinks, herbal tea, coffee and other non-carbonated products. Since 2012, Coca-Cola has been developing the new drinks with aim of countering the non-carbonated rivals that have emerged including Snapple and Gatorade. Some of the new products positioning include Nordic Mist developed in the US and Canada to counter a rival of non-carbonated brand, Clearly Canadian (Garrison, 2012).
The Market Plan Assessment reveals the commitment of Coca-Cola to the improvement of quality of life to the communities where the product is being marketed. The impact of this market plan is a unique issue and offered sustainable services to the communities served. This Change Factors have had a positive influence and increase market share, which has enhanced the profitability of Coca-cola (Patch, 2011). The forecast is the transition from creative excellence to the use of social media not only as a change factor, but also as a social issue for the company.
The response of Pepsi to this market plan is using social media as its strategy to deal socially with its consumers. Pepsi’s senior vice president Robert Dixon said that the possibility of people to purchase Pepsi-Cola for fans is ten times more as compared to the non-fans.

Conclusion

Coca-Cola has a good connection with the sports arena through sponsoring major sports events and advertisement campaigns. For example, numerous sports companies connected with soccer, football, basketball, rugby, and other sport events such as Soccer World Cup 2014 in Brazil has helped Coca-Cola to develop and make its products well recognized worldwide. Advertising campaigns, such as the remarkable slogan of World Cup in 2014namely ‘everyone is invited’, in combination with other cartoon animations advertisements, has been successful strategy that has attracted the attention of the public and influenced Coca-Cola sales this year. In addition to the economic success, Coca-Cola has been able to break the existing geographical barriers as well as other fundamental social and cultural issues such as race and ethnicity (Coca-Cola, 2014).

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References

Barney, H. (2009). Strategic management and competitive advantage, concepts. (3rd ed.). Upper Saddle River, NJ: Prentice Hall, 28-63.

Coca-Cola. (n.d.). Audit Committee Charter. Retrieved from http://www.thecocacolacompany.com/investors/governance/audit.html

Czinkota, M., & Ronkainen, I. (2010) International marketing: 2010 custom edition (9th ed.). Mason, OH: Thomson Cengage.

Garrison, R., Noreen, E., & Brewer, P. (2012). Managerial accounting. New York: McGraw-Hill Irwin.

Gwartney, J. D., Stroup, R. L., Sobel, R. S., & Macpherson, D. A. (2013). Microeconomics: Private and public choice. (14th ed.). Stamford, Connecticut. Cengage Learning.

Pearce, J. A., & Richard B. R. (2011) Strategic management: Formulation, implementation and control (12th ed.). New York. McGraw-Hill.