Coca-Cola in China

Coca-Cola in China“Think Local, Act Local”

Product: Coca Cola Regular

Cranfield University 21/10/2010 Module : MSP

Presented by learning team 2: Ansuha Bhat Mohammad AladalhRita BatalhaTina LaiVictor Zhang

Is _1. Mission Statement2. Corporate Objectives3. Value in Use4. Buying Criteria5. Consumer Segment6. Perceptual Map7. PESTLE Analysis8. Porter’s Five forces9. BCG Matrix10. Market Attractiveness11. Critical Success Factors12. Directional Policy Matrix13. Marketing Strategies: 4 Ps14. Marketing Strategies: CSF15. Assumptions16. New product17. Conclusions

Agenda

Mission Statement

Coca Cola will constantly strive to provide a quality range of flavoured drinks for all individuals tastes and lifestyles in China.We will maintain sustainable growth and attractive returns, through the development of a profitable product line and our operational excellence.

Corporate Objectives

We aim to increase our sales in China by 15% using our effective strategy, "think local, act local“ by 2015Establish 3 new manufacturing firms in the rural areasIncrease market share by 5% in 2015 by targeting a new segment of customer through a new product which will cater their needs Exceed USA and become the second largest market in terms of per capita consumption of Coca-Cola products by 2020

Value-in-Use

Product

Service

Experience Surround

qualitytaste

Social responsability

ingredients

Value-in-use:

Hapiness and fun

Refreshing

Just for taste

Social gathering

Sense of belonging

Enjoyment

Special Offers

Complementary product

I feel close to my idol!

Packaging

& labelling

Buying Criteria

Motivators factors

Brand affinity*

Taste

Health awareness*

Packaging

Hygiene factors

Refreshing

Affordable

Convenient location

Quality

Consumer Segment

Who are we talking to?

Generation Y(http://en.wikipedia.org/wiki/Generation_y)

Generation Y comprehends a group of people born aged between 15-35 years old. They have divided into subsequent trends, such as the Fashionists and Techno lovers.

Consumer Segment

Genuine:Ting is a marketing student with 27 years old . She loves Coca Cola more than her

mother.

Drinks Coca-Cola on daily basis and she would hardly change it for another

brand.

Being fit its important, but it is not a requirement. She preferes to be updated about the latest trends in fashion or arts.

In good shape:Zhang is a young professional with 34

years old. He is very active and practice several sports.

He is not a big fan of carbonated drinks, prefers natural juices or sports drinks.

He is very rational. Brands does not mean anything to him, however he

prefers to consume local brands than international.

Consumer Segment

Brand Consumers:Hong and Li are two best friends both at

18. For them Coca-Cola represents celebration/ party and a feeling of

closeness with their idols.

They see sports as hobbies and not a requirement for being fit.

They drink Coca-Cola in parties ,when they go to cinema or go shopping.

Light on the pocket:Chen is a mid-age adult who cares how

much is going out of his pocket.

He neither cares for brands and health.

He would prefer Coca-Cola to other health drinks because it would turn out

cheaper.

Perceptual Map

high brand affinitylow brand affinity

high health awareness

low health awareness

Genuine

Brand Consumer

In good shape

Light on the pocket

Consumer Insights - survey

Female44,75%

Male55,24%

Who are they?

18-35: 53,73% 35-50: 34,33%

>50: 11,94%

How old they are?

< 2 bottles55%

Weekly consumption*

6-7 bottles11%

> 8 bottles12%

3- 5 bottles22%

*330ml

PESTLE Analysis

What changes in government policy have a big impact on the way

Coca-Cola operates?

Politcal Factors

What social and cultural aspects affect the customer needs?

Social Factors

What changes in the technological environment

affects the production levels and the business in

general?

Technological Factors

What significant legal changes may affect

Coca-Cola’s behaviour?

Legal Factors

What environmental factors can affect the

consumer’s insights and choices?

Environmental Factors

What economic factors effect Coca Cola’ ability

to generate income?

Economical Factors

PESTLE Analysis

Political Bureaucracy, corruption and a lack of transparency are key obstacles to conduct a business in China Tax incentives are offered to foreign investors as part of the "open door" development strategy Lack of coordination between central and local authorities • Lack of federal structure • Investment climate to be insecure

PESTLE Analysis

Economic Favorable government policies (Free-market economy)• Developing the capital markets • Undertaking significant bank reforms

Rising unemployment • In 2008, almost 70% of job seekers were unemployed• 11 million people were laid off and are now without

jobs

PESTLE Analysis

Social Quality of lifestyle is increasing as the increasing of purchasing power and education level Decline in poverty, per capita income was $6,500 which is one of the highest in Asia in 2009 One child policy to reduce population rate and decrease the pressure on the resources of the country

PESTLE Analysis

Technological Larger number of R&D institutions: • Coca-Cola opened its $90 million Innovation and

Technology Center in Shanghai, 2009• China produces the second largest number of science

and engineering graduates The increasing awareness of technology. (E.g. new bottle, new label, design etc.)

PESTLE Analysis

Legal Increasing importance of anti-monopoly law: • The acquisition of Huiyuan by Coca-Cola failed

Facilitation of (Foreign Direct investment) FDI:• Clear and fast procedures and processes for foreign

investments Reporting and accounting standards;• Only a very small group of certified accounting

professionals• Lack of modern financial reporting

PESTLE Analysis

Environmental Increasing the importance of environmental policies:• State Environmental Protection Administration • Inspection of industrial companies on a regular basis• Coca Cola will be inspected and supervised regularly

to make sure that it meets the environmental standards in its industrial operations

Porter’s Five Forces

Rivarly among existing competitors

Threath of new entrants

Bargaining power of suppliers

Bargaining power of

buyers

Threath of substitutes

Threath of new entrants: WEAK

• Brand Image / Loyalty: Coca-Cola has consolidate brand equity and loyal customer

• Retailer and super markets shelf space:Retailers require significant margins for the shelf

space they offer

• Advertising SpendsEg. In 2008, Coca-Cola invested €81.2 million in

the Beijing Olympic

• Substantial fixed cost

Bargaining power of buyers: WEAK

• Individual consumer may have little power over the companies

• Wholesalers, distributers and retailer may have certain power over Coca-Cola

• Coca-Cola also has its own well-developed distribution channel in China

Threat of substitutes: STRONG

• There is a number of other soft drinks can easier substitute Cola. Eg. tea

• The increasing health awareness has lead to the trends of healthy drinks, such as milk or

flavored juice

• Consumers have more choices than ever before

Bargaining power of suppliers: WEAK

Availability of the ingredients on the Chinese market

Eg. Such as aspartame which many often is substitute for saccharine

Fluctuations in market price: Eg. Market turbulence increases Coke’s

vulnerability to price fluctuations

Rivalry: STRONG

Pepsi taste: Pepsi has a similar taste with Coca-Cola

Pepsi marketing: has more successful marketing strategy in China than Coca-Cola

Future Cola: has its advantage in coverage in rural areas where Coca-Cola has failed to step

into

BCG Matrix

HIGH LOW

HIGH

LOW

Mar

ket G

row

thMarket Share relative to competitors

Light on the pocket

Genuine

Brand Consumers In good shape

Market Attractiveness

MAFs Weights

Score/weighted scoreAbove Diagonal line: Score out of 10

Below the digonal line: Multiply score x weight

Genuine In good shape

Brand Consumer

Light on the

pocket:Market Size 25

Volume Growth 25

Profit margin 30

Risk 20

Totals 100 4,1 5,4 6,1 3,95

82

20,5

41,2

20,4

61,5

61,5

20,6

91,8

71,75

51,25

72,1

51,0

51,25

41,0

30,9

40,8

Critical Success FactorsProduct-market: Genuine

Relative Business Strengh: 0,5

C.S.F.C’s Weights



Coca Cola Regular

Future Cola

Pepsi Substitutes

Just for Taste 10

Price 10

Brand affinity

30

Health Awareness

30

Promotions 20

Totals 100 6,7 4,3 5,5 6,2

90.9

30,3

92,7

41,2

81,6

20,2

40,4

3 0,9

41,2

71,4

80,8

30,3

82,4

41,2

40,8

7

40.4

6

72,1

6

Critical Success Factors Product-market: In good shape

Relative Business Strengh: -2,25

C.S.F.C’s Weights



Coca Cola Regular

Future Cola

Pepsi Substitutes

Just for Taste 15

Price 10

Brand affinity

20

Health Awareness

40

Promotions 15

Totals 100 4,45 3,15 3,9 6,7

30,45

50,5

71,4

31,2

60,9

20,3

60,6

3 0,6

31,2

30,45

30,45

50,5

51

31,2

50,75

7

30,3

5

93,6

5

1,05

1,0

0,75

Critical Success Factors Product-market: Brand Cons.

Relative Business Strengh: 1,30

C.S.F.C’s Weights



Coca Cola Regular

Future Cola

Pepsi Substitutes

Just for Taste 20

Price 10 2

Brand affinity

30

Health Awareness

10

Promotions 30

Totals 100 6,9 4,4 5,6 3,9

71,4

0,2

92,7

20,2

82,4

40,8

30,3

41,2

30,3

61,8

51

30,4

61,8

30,3

72,1

40,8

30,3

30,3

40,4

72,1

Critical Success Factors

C.S.F.C’s Weights



Coca Cola Regular

Future Cola

Pepsi Substitutes

Just for Taste 10

Price 30

Brand affinity

10

Health Awareness

10

Promotions 40

Totals 100 6,6 6,8 6,1 4,2

40,4

72,1

40,4

50,5

83,2

30,3

82,4

40,4

50,5

83,2

40,4

72,1

30,3

50,5

72,8

40,4

20,6

30,3

50,5

62,4

Product-market: Light on the pocket

Relative Business Strengh: -0,2

Directional Policy Matrix

HIGH LOWHIGH

LOW

Mar

ket A

ttac

tiven

ess

Relative Business Strenght

Light on the pocket

In good shape

+2 -2

3

4

5

6

7

01 -1

Brand Consumer

Genuine

Marketing objectives

Genuine: Increase revenue by 5% in 3 years

In good shape: Increase sales by 3% in 3 years

Brand Consumer: Maintain market attractiveness by 4% in 3 years

Light on the pocket: Increase market share by 2% in 3 years

Directional Policy Matrix “future”

HIGH LOWHIGH

LOW

Mar

ket A

ttac

tiven

ess

Relative Business Strenght

Light on the pocket

In good shape

+2 -2

3

4

5

6

7

01 -1

Brand Consumer

Genuine

+ 5%

- 4% + 3%

+ 2%

New segment 1

New segment 2

Marketing Strategies: 4 Ps

Element Current Future

Product Coca-Cola Coca-Cola

Price Competitive pricing Competitive pricing

Promotion Internet, Sponsorship, Press Internet, Sponsorship, Press

Place Cities and large towns- Vending machines; outlets, bars,

cafés, restaurants, supermarkets

Cities and large towns (the same)Rural areas - local stores

Segment: Genuine

Marketing Strategies: 4 Ps

Element Current Future

Product Coca-Cola + Pepsi Coca-Cola

Price Competitive Competitive

Promotion TV, internet, events sponsorships, outdoors, press

TV, internet, outdoors, press, sampling activities

Place Vending machines; retailers, supermarkets, pubs, cafés, restaurants

Vending mahines; retailers, supermarkets, pubs, cafés, restaurants..

Segment: Brand Consumer

Marketing Strategies: CSF

Segment: Genuine CSF: Brand Affinity Score: 7 (current) 8 (objective)

Description of Strategy

Increase revenue by 5% from this segment.

Actions to achieve the

strategy

1) Increase brand affinity and make taste more differentiable from other carbonated drinks

2) Get feedback on what this segment wants and is looking for

Responsability Market Research, Marketing and R&D

Approx. cost Meddium


Segment: Brand Consumer CSF: No change Score: N/A (current) N/A (objective)


1) No change in CSF’s since we want to maintain the relative business strength

2) Decrease in market attractiveness (maintain revenue)


strategy

1) Reduce cost on TV advertising and celebrity endorsement2) Target mutual branding with ohter big brands

Responsability Marketing

Approx. cost Low/Meddium


Segment: In good shape CSF: Health Awareness Score: 3 (current) 5 (objective)


This segment is a very profitable one as it promises returns. Increase relative business strength and thus, profits by 3% in 5yrs.


strategy

1) Introduction of a new product to cater to this segments' health and taste needs.

Responsability Marketing, Operations and Market Research and the whole company

Approx. cost High


Segment: Light on the pocket CSF: Promotions/Price Score: 7/7 (current) 8/8 (objective)


Increase revenue from his segment by 2% in 5yrs.


strategy

1) Promote Coca-Cola with other brands/items on a regular basis2) Increase bulk packaging in off-trade sales

Responsability Finance, Marketing and R&D

Approx. cost Meddium

New Product

Coca-Cola TeaThe taste of coke with the goodness to tea!茶

Coca-Cola Tea

Features: Coca-Cola FlavourCaffeine FreeHot drinkTea bags

Needs: Who is our target?Tea lovers; Health conscious segment ; Coca-Cola Fans; What is the consumer’s needDrink a non-carbonated drink with Coke flavour

Benefits:HealthStress ReliefCloseness with Chinese culture

茶

Assumptions

Corruption and bureaucracy in China may affect Coca Cola in the near future. Increase in purchasing power of the people will lead to increased sales of Coca Cola. Inflation in prices may not affect sales of Coca Cola as we are assuming purchasing power of people will also increase Anti-monopoly law affecting ban on further acquisitions. New entrants, both local and international, will not be able to compete with Coca Cola's growing markets. Shift of industries to the rural areas will increase markets and thus market share for Coca Cola.

Conclusions1st Coca-Cola aim provide a quality range of flavoured drinks and exceed USA in per capita consumer of Coca-Cola products

2nd The genuine segment is the most profitable. We intend to maintain the market attractiveness and increase the business strenght

3rd The brand consumers required huge investments, so we intend to invest less in promotions (reducing market attractiveness) and maintain the business relative strengh and revenue

4th The good shape segment provide negative cash flows despite the market is growing. We want to increase the market attractiveness and relative business strenght, by introducing the Coca-Cola tea product

5th The light on the pocket segment experienced low market growth and relative market share. Despite that, we believe that we can increase in market attractiveness and business strenght by investing more in off-trade promotions and synergies

Thank You.Let’s discuss!