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The Marketing Review, 2003, 3, 289-309 www.themarketingreview.com
ISSN 1472-1384/2003/3/00289 + 20 £8.00 ©Westburn Publishers Ltd.
Demetris Vrontis1 and Iain Sharp2
Manchester Metropolitan University Business School and Legal and General
The Strategic Positioning of Coca-Cola in their
Global Marketing Operation
Examines how Coca-Cola has strategically positioned it self within the
world’s soft drinks market. Given that they operate in over 200 countries, they
are faced with a clear choice of whether to standardise their product offerings
globally and reap the potential benefits of economies of scale, adapt their
offerings to a particular market (which may facilitate increased market
specific penetration), or adopt an integrated approach utilising both
approaches simultaneously (Vrontis’ AdaptStand approach). There has been
much literature written regarding the external and often uncontrollable factors
which may impact upon a firms positioning strategy; this paper looks at these
externalities and the internal controllables in order to derive a ‘best fit’
strategic and tactical approach. Moreover, this paper looks at the strategic
international positioning of Coca-Cola by utilising a number of models.
Keywords: Coca-Cola, global, international, strategy, positioning,
adaptation, standardisation, AdaptStand, AdaptStandation, international,
marketing,
Introduction
If we consider business to be akin to war, then perhaps there is no better
starting point than the writings of Sun Tzu [circa 400-320 B.C.]. ‘The Art of
War’ is the oldest formalised writing focusing on the concepts and principles
of warfare and military strategy. Written over two millennia ago, it is still valid
in the modern world, not only in military terms, but also in business.
“Generally, he who occupies the field of battle first and awaits his enemy
is at ease, and he who comes later to the scene and rushes into the fight is
weary. And, therefore, those skilled in war bring the enemy to the field of
battle and are not brought there by him. One able to make the enemy come
of his own accord does so by offering him some advantage. And one able to
stop him from coming does so by preventing him. Thus, when the enemy is
at ease, be able to tire him, when well fed, to starve him, when at rest to
make him move.” Sun Tzu, The Art of War, The Oldest Military Treatise In
The World.
1 Senior Lecturer, Manchester Metropolitan University Business School
2 Business Planning Manager, Legal and General
290 Demetris Vrontis and Iain Sharp
It is perhaps not so unlikely, that writers such as Porter, Doyle and other
advocates of strategic positioning have developed their models based upon
this ancient text.
According to Cummings (1993) the word strategy derives from the ancient
Athenian position of strategos – στρατηγός. Strategos was a compound of
‘stratos - στρατός’, which in Greek means army.
Moreover, ‘tactiki - τακτική’, in Greek meaning tactics, is the way in which
the Greek strategoi (plural of strategos) where implementing their strategic
thinking and putting their plan to action.
This paper illustrates how Coca-Cola’s international strategy and tactics
work in harmony after an in-depth consideration of the external forces found
in the global environment.
Strategy and organisational effectiveness are essential to the success of
any organisation, but they are both very different. Strategic positioning, is a
unique approach that integrates both strategy and organisational
effectiveness in a way the serves to differentiate an organisation in its market
place and drive success.
To understand how Coca-Cola use strategic positioning in their global
marketing strategy we need to explore the term ‘strategic positioning’ and
then to determine how a firm can utilise these strategies.
“When it comes to product strategy, managing in a borderless world
doesn’t mean managing by averages… it doesn’t mean that the appeal of
operating globally removes the obligation to localise products” (Ohmae
1990: 24).
The Coca-Cola Company: An Overview
The Coca-Cola Company, founded in 1886, is the world leading
manufacturer, marketer and distributor of non-alcoholic beverage
concentrates and syrups. It currently operates in over 200 countries
worldwide and is most famous for the innovative soft drink, ‘Coca-Cola’, but
can now boast in the region of 230 different brands (www.coca-cola.com).
Its headquarters are in Atlanta, Georgia. Its subsidiaries employ nearly
30,000 people around the world. 70% of the company volume and 80% of
the company profit come from outside the United States. It is one of the most
visible companies in the world. Their Coca-Cola product is now available all
over the world and has resulted in the drink becoming the world’s favourite
soft drink.
But how has this been achieved and how does Coca-Cola continue to hold
their position in the soft drinks market?
The former chairman of the Coca-Cola Company, Douglas Ivester has
stated that being global is the main strength of the Coca-Cola Company.
(Coca-Cola Company, Annual Report, 1998) It is a business with a popular,
affordable product, with a strong foothold in many countries
The Strategic Positioning of Coca Cola 291
The global soft drinks market is dominated by 3 household names: Coca-
Cola, PepsiCo and Cadbury-Schweppes. Coca-Cola claims 47% of the
global market, compared with 21% for PepsiCo and 8% for Cadbury
Schweppes. Other major players include Cott and AmBev in Latin America
(www.foodlineweb.co.uk). This is illustrated in table 1 below.
Table 1: Global Carbonated Market Share
% value
Coca Cola 47
Pepsi Cola 21
Cadbury Schweppes 8
Cott 2
AmBev 1
Others 21
Total 100
Source: Adapted from www.foodlineweb.co.uk
Coca-Cola’s international success can be attributed to many things but
Sergio Zyman, former chief marketing officer of the Coca-Cola Company
argued (1999) that in order to think globally, a company must act locally.
This message is emphasised many times over by the Coca-Cola Company.
The Coca-Cola Company is recognized all over the world. Their core
brand, Coca-Cola, leads this recognition, but when needed, they are also
very much a local operation, meeting the demands of local tastes and
cultures with more than 230 brands in nearly 200 countries. Whilst Coca-
Cola run a global business, it always emphasises that they wish to stay local.
Independent business people, who are native to the nations in which they are
located, (with some exceptions) locally own bottling and distribution
operations.
Consumers will have different experiences, given their personal
preferences and location. Coca-Cola is adjusting its approach (both at a
strategic and a tactical level) so that it can tap into these differences and
provide the appropriate marketing activities and beverages to connect with
consumers (www.coca-cola.com).
Coca-Cola’s effectiveness and profitability is obviously well supported by
their strong competitive position and market share in their primary product
market – Coca-Cola.
Buzzell and Gale (1987) state that there is a definite correlation between
the size of a firm’s market share and the level of profitability i.e. the larger the
market share the greater the level of profitability.
They point to four reasons why market share might be linked to increased
profitability. Firstly, scale economies coupled with an increase in the learning
experience resulting in the most effective and efficient use of production
techniques and technology. Secondly, customers are unwilling to take risks
and will therefore stay with the main market player due to the comfort factor
292 Demetris Vrontis and Iain Sharp
that prevails. Thirdly, due to the influence and dominance the leader has in
the market it is able to use its position to negotiate lower pricing with
suppliers and to command higher market price for its products. The fourth
reason is that the market leader has in place excellent management teams
and it has successful procedures and processes developed throughout the
organisation.
Global Marketing Strategy, Standardisation or/and Adaptation
Many have written on topics related to global strategy, but only a limited
number of conclusions have been reached.
Mesadag (2000) argues that global marketing is a particular form of
international marketing which – in its truest form does not exist. Its essence
is that it covers a broad spread of the world’s countries and that it strives to
consciously standardise its marketing strategy between those countries.
Svensson (2001), comments that a company’s global strategy is closely
related to its corporate strategy. The corporate strategy guides the
performance of a company’s overall business activities and the allocations of
resources to achieve established business goals.
Others state that when a company pursues a global strategy, it looks at
the world market as a whole rather than at markets on a country-by-country
basis (Jeannet and Hennessey, 2001).
Levitt (1983) argues that the optimum global strategy is to produce a
single standardised product and sell it through a standardised marketing
programme. The challenge for the global corporation is to achieve low cost
operations and also to produce products of a high standard. This strive for
low cost through standardising products is key and will result in growth for the
corporation. Companies that dominate small domestic markets will gradually
be eased out by the low cost producing global corporation.
Kogut (1985) in his perspective of global strategy, emphasises strategic
flexibility, whilst Collis (1991) has summarised global strategy in the following
4 points:
• A global strategy is required whenever there are important
interdependencies among a business’s competitive position in different
countries. The acid test is whether a business is better off in one
country by virtue of its position in another.
• The sources of these interdependencies can be identified, including
scale economies (Levitt, 1983), accumulated international experience,
possession of global brand name, a learning curve effect (Porter,
1985), and the option value or cross-subsidisation (Hamel and
Prahalad, 1985) that a multi-market presence confers.
• The critical issues that a global strategy must address include the
configuration and co-ordination of the business’s worldwide activities
(Porter, 1986).
• The organization structure should be aligned with and derived from the
global strategy.
The Strategic Positioning of Coca Cola 293
Douglas and Wind (1987) argue that the assumption of a consistent model of
market and customer behaviour existing across the globe is not universally
accepted. They claim that this outlook focuses on the product (product
orientation) and not on the customer (marketing orientation).
The factors that favour globalisation are issues such as cost economies,
transport costs and networks, learning and experience, technological and
operational capacity. These issues however have factors working against
them that serve to fragment markets such as trade barriers and tariffs,
communication links, raw material differentials, different market demand and
differing competitive circumstances. It is therefore apparent that localised
(adapted) production and promotion is necessary and must remain.
The Strategic Environment and Strategic Positioning
The fundamental question that the term strategic positioning asks is, what is
a good strategy? What factors should be considered in strategic positioning
and tactical implementation?
For strategists and marketers alike, considering strategy development
(whether for the domestic or international market) ample consideration
should be given to those elements (external to the company) over which they
have little or no control.
These groups of elements are Macro, Meso and Micro factors and
comprise the PESTLE (Political, Economic, Social, Technological, Legal and
Environmental) macro factors, prevailing Trends and Concepts meso factors
and ITEMS (Information, Time, Energy, Money and Space) micro factors.
This is illustrated in figure 1 that follows.
Figure 1. The Macro, Meso and Micro Environment
Businesses faced with the prospect of trading beyond the confines of their
national boundaries have to also decide whether to standardise, or adapt
their propositions for specific markets. This by default has implications for the
associated marketing mix and hence the overall strategic positioning and
tactical stance which is adopted.
Macro
Meso
Micro
Politics Economics Social Technology
Legal Environment
Trends and Concepts
Information Time Energy
Money Space
Systems
and
Structures
Behaviour
and
Expressions
Individual
Resources
294 Demetris Vrontis and Iain Sharp
The question of whether to standardise or modify overshadows all the tactical
decisions that are required from a strategist/international marketer. It
represents a very real tension between the profitability promised through cost
effectiveness, which is greater when activities are controlled centrally, and
the market effectiveness that is promised if the offering is differentiated to
meet the needs of each geographic segment.
Medina and Duffy (1998) are proponents of adaptation and define it as the
process of extending and effectively applying domestic target-market-dictated
product standards - tangible and/or intangible attributes - to markets in
foreign environments.
The Marketing Mix (Product, Price, Place, Promotion, People, Physical
Evidence and Process Management) is a “tactical toolkit” with which any
multinational company can implement efficient and effective strategy. Each
element within the marketing mix can therefore be adjusted in order to gain
optimum environment fit and consequently meet customer diverse needs and
wants.
Levitt (1983) takes the opposite view and suggests that the global
competitor will seek constantly to standardise his offerings everywhere. He
will digress from this standardisation only after exhausting all possibilities to
retain it and he will push for reinstatement of standardisation whenever
digression and divergence have occurred. He argues that the most effective
world competitors incorporate the same kind of products sold at home or in
the largest export markets.
Vrontis (2003), the main supporter of integration, argues that the debate
on adaptation and standardisation is a huge one and suggests that the
exclusive use of either approach is too extreme to be practical. The truth lies
in neither of these two polarised positions. Both processes,
internationalisation and globalisation, coexist and the decision on
standardisation or adaptation is not a dichotomous one between complete
standardisation and adaptation. Rather it is a matter of degree and there is a
wide spectrum in between that the international marketer should be aware.
The international marketers should have to search for the right balance
between standardisation and adaptation and therefore determine the extent
of globalisation in a business and adapt the organisation’s response
accordingly. This is illustrated below in figure 2 in the Vrontis’ Framework of
AdaptStand Integration (Vrontis 1999).
We have developed Vrontis’ AdaptStand Framework further, adding the
following calculations, to illustrate a subjective view of where Coca-Cola is
positioned on the continua. Figure 3 illustrates the elements of the marketing
mix (7P’s) for Coca-Cola in international markets. It also reveals its level of
standardisation and adaptation with number zero describing complete
adaptation and number five complete standardisation. Any other number lies
in the middle of the continuum.
The Strategic Positioning of Coca Cola 295
Nature of Product/Service Target Market Organisational FactorsMarket Position
Market Development
•Stage of development
•Stage of product life cycle
Market Conditions
•Cultural differences
•Economic Differences
•Differences in customer perceptions
Competitive Factors
•Competitive practices
•Level of competition
Macro/Meso/Micro Factors
P.E.S.TLE
Trends & Concepts
I.T.E.M.S
•Consumer durable (electronics)
•Consumer non-durable (food)
•Industrial goods (steel, chemicals)
•Consumer goods
•Technology intensive (scientific instruments)
Customer Similarity
Geographical distance
•Internal stance to internationalism
(ethnocentric or not)
•Political
•Economic
•Social
•Technological
•Legal
•Environmental
•Trends and Concepts
•Information
•Time
•Energy
•Money
•Space
Figure 2. Vrontis’ Framework of AdaptStand Integration
Source: Adapted from Vrontis (1999)
Adaptation
Product
Price
Place
Promotion
People/Process/
Physical
•Meet differences in the stage of development Meet consumer differences in taste, needs and wants
•Meet differences in culture Meet differences in lifestyle
•Meet differences in consumer perceptions Meet differences in beliefs and consumer practices
•Meet differences in the product life cycle Meet differences in consumer buying behaviour patterns
•Meet differences in consumer habits Meet differences in physical environment
•Meet local competition and competitive practices Meet local packaging requirement issues
•Meet different legal/political requirements and restrictions Psychological meaning and the effect on the consumer
•Meet consumer purchase and use motivational factors Meet standards required
Standardiza tion
•Meet development stage differences
•Meet exchange rate fluctuations
•Market demand rate
•Meet competition and competitive practices
•Meet differences in the product life cycle
•Meet legal/political restrictions
•Meet different development stage and consumer buying behaviour patterns
•Meet differences in physical environment
•Number and size of intermediaries involved
•Meet market size requirements
•Specialisation among channels of distribution
•Differences in distribution structures and patterns
•Meet legal/political restrictions
•Differences in logistics decisions
•Meet differences in the product life cycle
•Meet competition and competitive practices
•Meet differences in the stage of development
•Meet differences in physical environment
•Meet legal/political restrictions
•Meet cultural constraints
•Meet differences in lifestyle
•Meet differences in consumer perceptions
•Meet differences in product life cycle
•Meet competition and competitive practices
•Differing consumer buying patterns
•Meet dissimilarity of buying motives
•Meet lack of identical availability of media
•Meet different consumer media usage patterns
•Meet consumers’ differences in tast
•Motivate and empower employees
•Allow flexibility to meet consumer non-identical need and requirements
•Meet local competition and competitive practices
•Production economies of scale
•Economies of research and development
•Stock cost reduction
•Consumer mobility
•Creates world-wide uniformity
•Psychological meaning
•Consistency with customers
•Improved planning and control
•Synergetic effects
•Better control
•Price uniformity and consumer mobility
•Transfer of experience and efficiency
•Economies of scale
•Economies of scale
•Consumer mobility and consistency with customers
•Creates world-wide uniformity
•Synergetic effects
•Psychological meaning
•Consistency with customers
•Offer universal appeal, message and image
•Achieve strong corporate identity
•Allows better identification by the customer
An Integrated Approach
1.
2.
3.
296 Demetris Vrontis and Iain Sharp
Product
Price
Place
Promotion
Adapt (international) Standardise (global)
People
Physical
evidence
Process
Each bead can be moved in either
direction along the continuum
The mathematics underpinning this model is quite rudimentary.
Example:
Of the seven elements of the extended marketing mix a maximum
score of 35 points is possible (7*5=35).
If the positions of all the beads are summed, a score of 22.75 is
achieved (3.75+1+4.25+2.4.25+4+3.4.25=22.75)
22.75/35=0.65
0.65*5=3.25
Figure 3. Coca-Cola Quantified
This pictoral representation reveals that the mean is further towards the
standardised extreme than the adapted extreme. In this example 3.25
represents the mean position between adaptation and standardisation. Thus,
Coca-Cola has deployed the ‘tactical toolkit’ with a more standardised
approach to its overall marketing strategy.
Porter (1980) and Doyle (1983) are both proponents of positioning
strategy. Porter considers the external factors, which impact upon a firms
competitive positioning. Doyle refers to the choice of target market segment
which describes the customers a business will seek to serve and the choice
of differential advantage which defines how it will compete with rivals in the
segment.
The Strategic Positioning of Coca Cola 297
Porter claims that competition is at the core of success or failure of the firm
and that a successful competitive strategy can establish a profitable and
sustainable industry position. He claims that there are two fundamental
questions underlying the choice of a competitive strategy: firstly, how
attractive is the industry with regard to profitability and secondly, what are the
determinants of competitive position within an industry.
According to Porter there are five competitive forces that will govern the
rules of competition and these rules will prevail in any industry both in
domestic and international markets. The five forces are:
• The entry of new competition entering the market
• The threat of substitutes or replacement products
• The bargaining power of buyers
• The bargaining power of suppliers
• The rivalry of between firms of the same sector
Figure 4 that follows details these five forces in relation to Coca-Cola.
Porter 5 Forces Model
Rivalry
Among Firms
Entry Barriers
Supplier
Bargaining
Power
Buyer
Bargaining
Power
Substitutes
Coca-Cola has high
brand dominance in mkt.
Low buyer
bargaining
power. BUT
Coca-Cola do
have to be
careful not to
price
themselves out
of the market
Coca-Cola Company has wide product
portfolio ∴ low threat of brand substitution
non-alcoholic drink target sector.
Low supplier bargaining
power due to scale of
Coca-Cola. Similar to
supermarkets
Main competition
limited to small
number of big
players and COD
brands
Figure 4. Porter 5 Forces Model
Source: Porter, 1985
So, what is a good strategy? Can a firm position itself in order to gain
competitive advantage over its competitors? Is there a specific position a firm
should take in order for its strategy to be successful?
Rumelt (1980), states that competitive advantages can normally be found
in superior resources, superior skills or a superior position. Resources and
skills enable a firm to do more, or do it better than the competition. Different
resources and skills will be required dependant on the industry or market
segment. Positional advantage is how the arrangement of these resources
and skills are used to out manoeuvre the competition. Positional advantage
298 Demetris Vrontis and Iain Sharp
can be gained by forward planning, greater skill and resources, or luck! Once
a dominant position is gained it is difficult for the competition to dislodge the
incumbent firm provided the position merits continuation and that it is
extremely costly for competitors to take over.
As long as environmental forces remain constant position can remain
constant. Positional advantage can take the form of size or scale,
differentiation from competitors and successful trading names.
To be successful, a company needs to get both its strategy and tactics
working in harmony to provide the optimum return bounded by efficiency
(McDonald and Leppard, 1993). Both strategy and tactics should be
designed after a careful consideration of the situational environment.
It is apparent from the following figure (figure 5) that businesses finding
themselves to the left of this matrix are destined to die, strategy being the key
factor as to how quickly.
Considering Coca-Cola’s international performance, we can argue that the
company is thriving as it is effective-doing things right (having the desired
effect, producing the intended result) and efficient-doing the right thing (able
to work well and without wasting time or resources).
Die (slowly)
3
Survive
1
Die (quickly)
4
Thrive
2
Strategy
Efficient
Inefficient
Ineffective Effective
Figure 5. Strategy Tactics Grid
Source: McDonald & Leppard, 1993: 7
The firm has to consider more than the industry structure, it also has to take
an appropriate position within the industry. This positioning will determine the
competitive advantage a firm can have namely, low cost or differentiation
against competitive scope at the broad or narrow market (see figure 6).
The Coca-Cola Company has adopted both a Differentiation and a Cost
Leadership Strategy.
Tactics
The Strategic Positioning of Coca Cola 299
Cost Leadership
*
Differentiation
Focus
Cost Focus
Differentiation
*
Competitive Advantage
Competitive Scope
Lower Cost Differentiation
Broad
Narrow
Figure 6. Porter Generic Strategy Grid
The use of a differentiation strategy is where the firm attempts to be diverse
from its competitors by adding something to its product that will provide a
unique value to its customers. There are also various ways a firm can
differentiate depending on the industry it is in, however the costs of this
differentiation policy must be lower than the additional pricing the firm can
obtain.
Differentiation for Coca-Cola is achieved through perceived superior
quality product, which surpasses their nearest rivals, and high brand image
and recognition. The company has also used their promotion and packaging
as a means of further differentiation, for example, the Coca-Cola bottle,
which has become an internationally recognised symbol. The decision in
1999 to revitalise the contoured bottle design was Coca-Cola’s first global
marketing priority (Boutzikas, 2000). They capitalised on a resource that
none of their competitors had or have as an asset. They can, therefore,
adopt a premium pricing policy in many markets where economic conditions
allow.
It should also be noted that Coca-Cola is positioned in the Cost
Leadership quadrant.
Aaker (1998) points out that there are several approaches a firm can take
to become a low cost producer, which can be used in isolation or as a
combination. The most basic way to a low cost is to remove all the ‘extras’
from the product and produce a no frills offering. The danger in this strategy
is that the way is paved for a feature war. The design or make up of the
product can create cost advantages, for example, the use of alternative
materials. The production and operational processes a firm employs can also
reduce costs. Another example would be the efficient use of distribution
networks, manufacturing systems or the use of low cost labour and product
innovation.
300 Demetris Vrontis and Iain Sharp
Economies of scale is the obvious way of reducing costs as there are natural
efficiencies associated with size, although not necessarily so with firms that
will have multiple or diversified products. Aaker (1998) also points to the
experience curve whereby firms utilise knowledge and learning gained over
time as a way of cost reduction. For example, the more times a process is
carried out, the more efficient the process becomes. The use of technology
and plant will also be maximised over time.
The Coca-Cola’s positioning in the Cost Leadership quadrant is achieved
not only through economies of scale in research, development and
promotion, but also through learning, knowledge and experience in
production and operational processes. It is also achieved through
effective/efficient distribution networks and manufacturing systems.
McDonald and Leppard (1993) have developed a strategic focus matrix
(see figure 7), which emphasises the impact of time on business activities.
The elements relating to the marketing mix have been emboldened to show
clearly, where they are positioned in relation to time. It is our view that Coca-
Cola adopts the following recommendations, not only at the short term, but
also in medium and long term.
Objectives
Management focus
Target market
Energy directed at
Differential
advantage
Key component of
mix
Organizational
culture
Short-term profit
Productivity
Existing customers
Own staff
Cost Control
Price
Financial
Medium-term profit
Beat competition
Competitor’s customers
Competition
Segmentation
Promotion/place
Marketing
Innovation
New product/markets
New customers
The unknown future
Differentiation
Product
Entrepreneurial
Business activities Short term Medium term Long Term
Focus for Success
Figure 7. Strategic Focus Matrix
Source: McDonald and Leppard (1993)
As previously mentioned, The Coca-Cola Company has an impressive
geographic presence. If we consider Coca-Cola’s global strategy with
reference to Ansoff’s (1957), illustrated in figure 8, it highlights a clear
strategic evolution in the case of the Coca-Cola Company.
The Strategic Positioning of Coca Cola 301
Current products New Products
Current marketsNew markets
Market Penetration Strategies
•Increase market share
•Increase product usage:
- increase frequency of use
- increase quantity used
- new application
Product Development Strategies
•Product improvement
•Product line extensions
•New products for same markets
Diversification Strategies
•Vertical Integration:
- forward integration
- backward integration
•Diversification into related businesses
(concentric diversification)
•Diversification into unrelated
businesses
(conglomerate diversification)
Market Development
Strategies
•Expand markets for existing
products
- geographic expansion
- target new segments
Figure 8. Ansoff Matrix
Source: Ansoff, 1957
In the beginning there was Coca-Cola, a single core product, geographically
located in the US. Overtime, this singular core product had become
established in its home market by increasing market share and product
usage (Market Penetration Strategy).
Coca-Cola was later launched into foreign markets and competed within
the international arena. This Market Development Strategy was undertaken
by targeting new geographical areas and target segments.
As these foreign markets developed further, the Coca-Cola Company was
faced with the problem of how to further penetrate them. The solution was
simply to develop new products (Diet Coke, Fanta and Sprite), which over
time have also become core products (Product Development Strategy). How
does Coca-Cola increase market penetration still further?
Again, the solution is to develop new products in new markets. Originally
Coca-Cola’s business was defined as one operating in the carbonated soft
drinks (CSD) market. In order to further penetrate these markets Coca-Cola
has broadened the definition of the business it is in to ‘ready packaged liquid
refreshments’. This has allowed the company to look beyond its traditional
CSD market, to markets such as bottled water, fruit juices and innovative
ready to drink tea markets. They have therefore successfully used a
Diversification Strategy.
Strategic marketing planning makes use of a number of analytical models
that help to develop a strategic view of the business, and thus can be used
as decision-making aids. The Boston Consulting Group Matrix (see figure 9)
302 Demetris Vrontis and Iain Sharp
is one of these models. Its fundamental concept is that although products/
Strategic Business Units (SBU’s) may be managed as individual entities on
an operational basis, strategically they should be viewed as a portfolio. The
best portfolio is the one that best fits the company’s strengths and
weaknesses to opportunities in the environment. The company must analyse
its current business portfolio or Strategic Business Units SBU’s, decide which
SBU’s should receive more, less, or no investment, and develop growth
strategies for adding new products or businesses to the portfolio.
Figure 9. The Boston Consulting Group Matrix
Looking at figure 10, consumption per capita being substituted as a close
proxy for market share (in its absence), it is clear that those countries to the
left of the matrix appear to have been managed in such a way so as to
almost have a uniform growth rate.
Question Marks
• High growth, low share
• Build into Stars/ phase out
• Require cash to hold
• market share
Stars
• High growth & share
• Profit potential
• May need heavy investment
to grow
Cash Cows
• Low growth, high share
• Established, successful
SBU’s
•Produce cash
Dogs
• Low growth & share
• Low profit potential
Relative Market Share
High Low
M
a
r
k
e
t
G
r
o
w
t
h
R
a
t
e
H
I
g
h
L
o
w
Liquidated
Selected few
The Strategic Positioning of Coca Cola 303
Coca-Co la Operat ing Region s Per Capi ta Consumpt ion (li tres pa)
020%40%60%80%100%120%
Relative Ma rket Share
Nordic &
Nor th er n
Eurasi a
G
reat Bri tai n
Spain
Germany
Central Europe
& Eurasia
France
Nor th er n
Afri ca
Mid dle Ea st &
North Africa
Mex ico
Chil e Argentina Brazil
Colu mb ia
USA Australia
Jap an
Phillipines
Korea
Chin a
Souther n
Africa
-20.0
%
0.0%
20.0
%
40.0
%
60.0
%
1997 - 2000
CAGR
Figure 10. Coca-Cola Consumption - Boston Consulting Group
Matrix
The ‘problem child’, Nordic & Northern Eurasia, has shown significant growth
which eventually could see this region move into the star/cashcow quadrants
if critical mass is built up. If Coca-Cola were to follow the direction advocated
by the BCG matrix and liquidate those poorly performing countries in the
‘Dog’ area this would perhaps have implications for the Coca-Cola
Company’s global presence. It is therefore unlikely that they would seek to do
this. It is possible that many of these ‘Dogs’ might form the basis of emerging
and growth markets in the future.
Further, if we consider Coca-Cola’s position as market leader within the
‘pre-packaged liquid refreshments’ market and the relative profits derived
from this market, then it becomes clear that they are positioned in the
‘Protect Position’ quadrant of the Mckinsey Matrix (figure 11). This means
that the company should concentrate efforts on maintaining its existing
strength by investing to grow at maximum digestible rate.
It is also recommended that they can capitalise on ‘first mover’ advantage
and therefore ‘drive’ market innovation. This reflects the concepts of the
‘inside-out’ or competencies based approach (Prahalad and Hamel, 1990;
Sanchez, et al. 1996) or the capabilities based approach (Stalk, et al. 1992) -
i.e. because of their relative size in the market, Coca-Cola can to some
extent drive the market.
304 Demetris Vrontis and Iain Sharp
Protect Position Invest To Build B uild Selectively
Build Selectively Selectively Manage
For Earnings
Limited Expansion
Or Harvest
Protect And Refocus Manage For Earnings Divest
•Invest to grow at
maximum digestible rate
•Concentrate effort on
maintaining strength
•Challenge for leadership
•Build selectively on
strengths
•Reinforce vulnerable areas
•Specialize around limited
strengths
•Seek ways to overcome
weaknesses
•Withdraw if indications
of sustainable growth are
lacking
•Invest heavily in most
attractive segments
•Build up ability to counter
competition
•Emphasize profitability by
raising productivity
•Protect existing program
•Concentrate investments
in segments where
profitability is good and
risk is relatively low
•Look for ways to expand
without high risk;
otherwise, minimise
investment and rationalise
operations
•Manage for current
earnings
•Concentrate on attractive
segments
•Defend strengths
•Protect position in most
profitable segments
•Upgrade product line
•Minimise investment
•Sell at time that will
maximise cash value
•Cut fixed costs and avoid
investment meanwhile
Strong Medium Weak
High
Medium
Low
Competitive position of firm
Market Attractiveness
Figure 11. The Coca-Cola Company’s Position in the Mckinsey
Matrix
Source: Day (1986)
Markides (1999) further states that, behind every successful company, there
is superior strategy. The company may have developed this strategy through
formal analysis, trial and error, intuition, or even pure luck. No matter how it
was developed, it is the strategy that underpins the success of the company.
To understand corporate success, the logic of successful strategies must
be understood. It would be quite incredible to identify two people who share
the same definition of strategy from the concept of “strategy as positioning” to
“strategy as visioning”.
Conclusion
The Coca-Cola Company, founded in 1886, is the world leading
manufacturer, marketer and distributor of non-alcoholic beverage
concentrates and syrups. Today, Coca-Cola has an international presence,
operating in more than 230 brands in nearly 200 countries, with around 70%
of the company volume and 80% of the company profit come from outside
the United States.
A number of uncontrollable elements affect Coca-Cola’s international
marketing strategy and tactical implementation. These groups of elements
are Macro, Meso and Micro factors and comprise the PESTLE (Political,
Economic, Social, Technological, Legal and Environmental) macro factors,
prevailing Trends and Concepts Meso factors and ITEMS (Information, Time,
Energy, Money and Space) micro factors. This makes the exclusive use of
The Strategic Positioning of Coca Cola 305
either approach too extreme to be practical and urges multinational
marketers to search for the right balance between standardisation and
adaptation.
Coca-Cola’s core ‘global’ brands are mainly standardised, but with a
number of adaptations taking place. Although the company may strive for a
completely standardised strategic approach, drawing on the associated
economies of scale, in reality they are following the Integrated AdaptStand
approach as advocated by Vrontis (2003).
The company’s effectiveness and profitability is obviously well supported
by their strong competitive position and market share in their primary product
market – Coca-Cola. Other brands like Diet Coke, Sprite and Fanta have
also been internationally recognised and profitable. Its’ international success
is achieved by the company’s strategy and tactics, which complement each
other and work in harmony providing the optimum return bounded by
efficiency. The company is thriving as it is both effective (doing things right)
and efficient (doing the right thing).
Coca-Cola is adopting Differentiation and Cost Leadership strategies
(Generic Strategies). In terms of Differentiation, the firm attempts to be
diverse from its competitors by adding something to its product that will
provide a unique value to its customers. This is achieved through well-
designed and managed marketing activities resulting to perceived superior
quality product and high brand image and recognition. Further, Cost
Leadership is achieved not only through economies of scale, but also through
learning, knowledge and experience in production and operational
processes, and through effective/efficient distribution networks and
manufacturing systems.
In relation to Ansoff, Coca-Cola is using a number of strategies. Initially, it
used the Market Penetration Strategy and become established in its home
market by increasing market share and product usage. Then, it used a
Market Development Strategy by expanding its operations into foreign
markets. Later, it developed new products, both at a national and
international level (Product Development) and then started operations in the
carbonated soft drinks market (Diversification Strategy).
This also ensures that Coca-Cola has a comprehensive product portfolio
in each market, increasing the likelihood of a purchase of a Coca-Cola
Company branded product. This portfolio is well managed and enables the
best fit between the company’s strengths and weaknesses to the
opportunities found in the environment.
In considering the strong competitive position of the firm in a highly
attractive market, it is suggested that Coca-Cola should Protect its Position
(Mckinsey Matrix). This can be achieved by concentrating efforts on
maintaining its existing strength by investing to grow at maximum digestible
rate.
Coca-Cola should maintain its marketing orientation not only in its
strategic approach but also in its tactical day-to-day operations. It should
constantly undertake market research to enable it understand the
306 Demetris Vrontis and Iain Sharp
environment in which it operates and allow it develop products that satisfy
customer needs. This goes in line with the definition of marketing (both at a
national and international level), which is about identifying, anticipating and
satisfying consumer requirements.
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www.coca-cola.com
www.foodlineweb.com
Appendix
Country Specific Examples
Poland
“…in 1994 there were groups of Polish youths and young adults who looked
down on the American way, and preferred to preserve their own identity and
heritage. Many would rather support a local cola brand than buy Coke”.
308 Demetris Vrontis and Iain Sharp
(Dana and Oldfield, 1999)
Evidence of adaptation within regions of countries (i.e. one bottling plant)
was very much aligned with western ideals e.g. the first baseball diamond -
baseball represented the American way.
Is Coca-Cola guilty of imposing these ideals and adopting an ethnocentric
viewpoint? (Thomas and Hill, 1999)
Lublin bottlers adopted a much more localized approach and bottled,
packaged and marketed differently to appeal to the consumer preferences
within Lublin’s territory.
Asia Pacific
Long Term objectives concentrated in Chinese/Japanese markets where
there are growth opportunities.
Purchasing power and income per head in Asian countries will exceed that
of the US in 2010 (Coca-Cola Company Annual Report, 1998).
Vietnam
Target audience, primarily teenagers, (people under 20 = 50% of
population). Target audience anxious for freedom and associated ideals
(perhaps due to events of past) (Dana and Oldfield, 1999). Hence,
marketing adapted and focussed towards this segment. Also due to
North/South division advertising has to reflect cultural and political
sensitivities.
Pepsi entered the Vietnamese market first and they (Vietnamese) in turn
became brand loyal.
When introducing its product, Pepsi was very sensitive to the traditions and
values of the Vietnamese people. The company utilised Miss Vietnam
(favourite role model in traditional dress playing classical music - scene
switches to western style bar where seen drinking Pepsi - depicts
internationalism. This gave Pepsi a huge leap in market share.
Coca-Cola thus needed to adopt a similar but differentiated strategy in
order to gain market share.
China
Product quality, consumer trust and perceived value are traits Chinese
consumers look for in leading brands. Coca-Cola developed a number of
‘market specific’ brands in order to further penetrate local markets, e.g.
Smart was the first soft drink developed for the Chinese market. Due to
“widely dispersed consumer preferences are in this region” (www.coca-
cola.com).
“We are developing relationships with consumers and getting Coke and
other beverages into their lives”. (Douglas Daft, CEO, 2000)
Latin America
“We are continuing to focus on developing our core brands and introducing
local CSD brands. We entered the water segment in Latin America in 1995;
however, beginning this year, we are putting some real marketing muscle
into this category” (Douglas Daft, CEO, 2000).
The Strategic Positioning of Coca Cola 309
Argentina
Due to the prevailing economic conditions (income tax increases) Coca-cola
have adjusted certain strategies to offer more affordable packaging options
to facilitate greater competition with other local brands (www.coca-cola.com).
About the Authors
Demetris Vrontis is a senior lecturer at the Manchester Metropolitan
University Business School (MMUBS) and teaches marketing and
international marketing across the Business School in both under and
postgraduate level. At the same time he is the course leader at the
Postgraduate Certificate and Diploma in Strategic marketing and supervises
postgraduate research students at MA, MPhil and Ph.D. level. Other
activities include being an external examiner, moderator for Nottingham Trent
University (in its cooperation with a number of Greek Business Schools) and
a visiting lecturer at a number of Universities. Dr Vrontis is an active member
of the IMRG (International Marketing Research Group) centre, undertaking
research and providing consultation to a numer of national and international
companies, in both consumer and trade markets. His prime research interest
is international marketing planning and specifically to investigate
multinational companies’ tactical and strategic marketing behaviour, an area
that he had widely published and presented papers to conferences on a
global basis. He is currently acting as a guest editor and reviewer in a
number of books and academic journals and he is the author of a number of
book in international/global marketing and strategic marketing planning.
Iain Sharp is Business Planning Manager for Legal & General’s (major UK
Life Assurer) Retail Distribution Division. Iain is responsible for the
production of the division’s annual Business Plan, monitoring progress
against key objectives and is thus heavily involved in overall strategic
analysis and strategy formulation. His primary interest lies in market
positioning and the associated strategies and tactics, marrying up internal
company aspirations and their resultant market impacts. This has proven to
be a very detailed and involving process given a business environment which
is greatly influenced by weak equity markets and the number of regulatory
reviews currently impacting the Financial Services sector.
