Coca-Cola’s Marketing Strategy in Europe vs. the U.S.A
Marketing strategies are the processes through which organizations concentrate their resources on optimal opportunities with the aim of bolstering a sustainable competitive benefit and increased sales. A marketing strategy will include both short-term and long-term activities. Organizations need to analyze their basic situations if they are to formulate, evaluate, as well as select market-oriented strategies. This helps companies such as Coca-Cola contribute to their organizational marketing objectives and strategic goals. Marketing strategies involve the art of high-level planning, which is tailor-made to achieve a single or even more goals under circumstances of improbability within an organization. It is vital since achievement of goals depends on limited resources (Tavana, 2013). Marketing strategy also entails attainment and maintenance of a competitive advantage over rivals through sequential exploitation of emergent or known possibilities. Business units develop products, while corporations manage business units so that products remain competitive for the achievement of corporate objectives.
This essay will further help understand why organizations tailor their marketing strategies with their strategic plans where they define their direction and strategies in order to make decisions relating to allocation of scarce resources. This essay will answer the question as to whether Coca-Cola’s marketing strategies in Europe are different from the marketing strategies in the U.S. This paper will again examine how marketing works in both the U.S. and in Europe. Moreover, this paper will delve into what has gone wrong on both continents in terms of marketing strategies. International marketing costs in both Europe and the U.S. will be a point of consideration.
Coca-Cola’s Marketing Strategies in both Europe and the U.S.
Coca-Cola is a US multinational beverage manufacturer, corporation, marketer, and retailer of nonalcoholic beverage syrups and concentrates. Coca-Cola Company’s headquarters are in Georgia, Atlanta. It deals with carbonated soft drinks sold in restaurants, vending machines, and stores all over the world. John Pemberton, a pharmacist, invented a Coca-Cola’s flagship product known as Coca-Cola in Columbus way back in 1886. However, Griggs Candler bought Coca-Cola’s brand and formula in 1889. Griggs incorporated the company back in 1892. Currently, Coca-Cola offers over 500 brands worldwide, making over 1.8 billion servings daily. It operates a franchised delivery system that dates from 1889. Coca-Cola sells over 1 billion servings daily. About 10,450 beverages are usually consumed every second. In 2003, Coca-Cola made $4,347,000,000 of earnings. Due to its presence on every continent, Coca-Cola is recognized by over 94% of the world’s population (Elearn, 2012). Coca-Cola has grown from a Georgia-based medicine into a global soft drink.
Using innumerable technologies, Coca-Cola’s rise to the top in the beverage industry has been defined by application of new-fangled technologies as well as establishment of paradigms that have popped up the Coca-Cola’s status quo. This has enabled Coca-Cola to tailor their marketing strategies in both Europe and the U.S. Perfection of Coke has been facilitated by Coca-Cola’s resilience towards the unprecedented advent of technology in the world today. It is today the largest beverage company in the world. Coca-Cola Company serves the beverage industry worldwide, including Europe and the U.S. The current CEO is Muhtar Kent. In 2012, Coca-Cola’s revenue was $48.01 billion with a profit of $9.01billion. Coca-Cola has over 146,200 people. Coca-Cola’s main competitors are Unilever, Nestle S.A., Kraft Foods Inc., PepsiCo Inc., Pepper Snapple, and Groupe Danone. It serves over 200 countries, offering over 500 brands. Frank Robinson, Pemberton’s bookkeeper, suggested the word Coca-Cola. Its mission statement, which constitutes an integral part of its strategic management, Coca-Cola aims at refreshing every person touched by the business. Coca-Cola’s goal is based on a basic proposition, i.e. solid, simple, and timeless business.
Integration of corporate, business, functional, and operational strategies is very important if the business strategy is going to be effective at all. Strategic management has enabled Coca-Cola to lay down its mission and vision statements, which set out the direction the company takes explicitly. Operation managers ensure efficiency and effective running of the organization in the United States. When all these strategies are accorded the requisite attention, business strategies work towards organizational success. Coca-Cola Company was incorporated in September 1919 as a beverage company in the United States. It manufactures, licenses, owns, and markets over 500 nonalcoholic brands of beverages (Coca-Cola, 2013). Coca-Cola also produces beverages such as enhanced waters, water, juice drinks, juice, ready-to-drink coffees and teas, sports and energy drinks. The nonalcoholic brands of beverages include Sprite, Coke, Fanta, and Coca-Cola. The company’s market segments are in North and Latin Americas, Africa, Eurasia, and the Pacific.
Coca-Cola has evolved into the world’s largest soft drink producer. However, due to the adoption of dissimilar marketing strategies, sales are bound to vary from country to country. On average, America consumes about 190 12-ounce Coke servings per annum. However, most Europeans are not frequent consumers of Coca-Cola. For instance, there are about 111 12-ounce Coke servings in Germany, 61 in Great Britain, 35 in France, but 215 in Iceland. This has prompted Coca-Cola to undertake vigorous marketing campaigns in a bid to bolster consumption in Europe. It has deemed it important to replace complacent local franchisees with more market-driven and active sellers. In France, Pernod, which is a Coca-Cola’s franchisee, has been made to sell some operations to Coke. It has also seen a new-fangled marketing manager appointed. Coca-Cola’s prices are being lowered as well as product advertising is being bolstered. Consequently, consumption levels have been skyrocketing. Integration of the hierarchy of stratagems determines the success of a business strategy.
In England, Grand Metropolitan and Beecham were national bottlers for Coke. Today, it has been forced to turn towards Cadbury Schweppes popular for Schweppes mixers. As a new marketer, Schweppes is running contests as well as sponsoring events, including sports events in the entire country. In just three years, these marketing strategies have seen the consumption of Coca-Cola products triple in England. In Germany, this pace is faster. As people crossed the West and East Germany border in 1990, Coca-Cola’s representatives distributed free samples. Hitherto, there are plans to invest $140 million, especially in the East Germany bottlers. Marketing strategies have been dramatic. Today, Coca-Cola has emerged as the Germany’s largest soft drink. Germany is the Coca-Cola’s most profitable market in the entire European market. Corporations manage business portfolios.
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Coca-Cola’s current strategy is handing back the distribution networks in the US using the refranchising strategy to autonomous bottlers. This move aims at bolstering its profitability in North America. These bottling companies include Swire Coca-Cola USA, Corinth Coca-Cola Bottling Works, Coca-Cola Bottling Company Consolidated, Coca-Cola Bottling United, and Coca-Cola Bottling Company High Country (Lawrence, Weber, & Post, 2013). This is done with the intention of cutting costs as well as streamlining distribution operations. After three years, Coca-Cola has resorted back to the franchise model through definitive agreements. Besides, Coca-Cola has adopted frantic efforts to ensure that it becomes the Europe’s strongest foothold. This has been facilitated by elimination of internal tariffs in the European Community. Coca-Cola has established chain stores in Netherlands, Italy, Germany, and France. Import duties incurred for shipping are little. This has been coupled with rapid delivery in most European countries.
Marketing Strategies Used by Coca-Cola
The Ansoff Method
The Ansoff method is a strategic planning and marketing tool linking a businesses’ marketing strategy to its generic strategic direction. This approach provides four different growth strategies in a tabulated format. Coca-Cola has utilized these important strategies to attain business growth. Firstly, Coca-Cola has pursued market penetration earnestly through pushing prevailing products to their existing market segments (Campbell and Craig, 2005). Secondly, development of new markets for Coca-Cola’s products has been pursued so that it is able to sell its products on all the world’s seven continents. Thirdly, product development has ensured new products are developed targeting current existing markets. Lastly, diversification has been another impeccable development of new products. The Ansoff method has been an important ingredient in Coca-Cola’s decision-making processes.
In addition, Ansoff method is instrumental in enabling Coca-Cola to get into the right place and the right time with the right product. Coca-Cola has been hedged at the capacity to create the right marketing mix both in Europe and in the U.S. This has enabled Coca-Cola to get acceptability in both markets in terms of making Coca-Cola brands the most preferred soft drink in both Europe and the U.S. due to its affordability, ubiquity, and availability.
Coca-Cola operates a global franchise system. This enables it to supply concentrates and syrups in over 1,300 bottling operations. In the U.S., there are over 350 bottling operations. Coca-Cola has an effective distribution network and sophisticated technology in both Europe and the U.S. and indeed elsewhere in the world. Coca-Cola has adopted a corporate strategy that seeks to construct a definite strategy for an organization through resource configuration. No matter how challenging the environment is, Coca-Cola in Europe and the U.S. has always come up with strategies to meet diverse market needs as well as fulfilling expectations of stakeholders. Ansoff’s matrix enables business managers to choose growth strategies, depending on markets and products. Coca-Cola has been able to penetrate markets and increase sales in the existing markets to achieve business growth. This has been done through increased promotions, brand building, price changes, and loyalty schemes has lured customers away from competitors. They become more loyal and then buy frequently. This is one of the few less risky strategies adopted by Coca-Cola.
Coca-Cola has become the world’s most widespread and largest distribution and production network. Product development has also seen Coca-Cola develop new products. These products are then launched into the existing markets. Coca-Cola has ample understanding and knowledge of market needs and buyer behavior (Isdell & Beasley, 2011). This has been achieved through extensive market research. Development of new products and adaption of products in existing markets has helped Coca-Cola increase sales substantially. Coca-Cola has been able to adopt emerging technologies to bolster its products. Innovations have also helped the beverage company reap innumerable benefits.
Coca-Cola has been able to introduce existing products to dissimilar geographical or international markets through effective market development strategies. It has been able to expand the existing markets through targeting varied market segments. Customer satisfaction is Coca-Cola’s prime objective. Through matching customer requirements and product specifications, Coca-Cola has been able to address specific market requirements in new markets globally. In Nordic countries and North Western Europe, Coca-Cola’s business units serve over 180 million customers. About 35% of the products sold by Coca-Cola are in Europe. There are business units all over France, Finland, Sweden, Norway, Netherlands, Ireland, Iceland, Great Britain, Denmark, and Belgium. Such business units influence Coca-Cola’s marketing strategies in the wider European market through proper blending that eliminates cultural differences. The locals are incorporated to enable addressing of the tailored needs of their multicultural market. Coca-Cola Enterprises cover France, Great Britain, Netherlands, and Belgium, Vififell serves Iceland, and Coca-Cola Hellenic serves Ireland as bottling companies.
Product diversification entails production of new products for new markets. However, this strategy is very risky. This is because a company may not have the requisite experience regarding the new market. Coca-Cola has incurred immense development and research costs for the production of the new-fangled product. Through global advertising, Coca-Cola has been able to create some kind of universal appeal and strong brand personality both in Europe and in the U.S. This has made it a globally recognized brand. Coca-Cola has both sports and bottled water to widen its market base even further. This is in line with the creation of liquid content. This has largely given Coca-Cola market dominance over other soft drink companies in Europe and in the U.S.
Porter’s 5 Forces Model
Coca-Cola has been able to use the Porter’s 5 Forces Model as a marketing strategy in the U.S. Porter’s 5 Forces Model was developed by Michael Porter in 1979 as a framework to use in the development of business strategy and industry analysis (Porter, 2000). Porter’s five forces include a threat from substitute services or products, threat from rivals, threat from new entrants, and the customers’ and suppliers’ purchasing power. Coca-Cola face threats from other products. However, Coca-Cola’s main threats stem from its rivals. Coca-Cola’s main competitors are Unilever, Nestle S.A., Kraft Foods Inc., PepsiCo Inc., Pepper Snapple, and Groupe Danone. The companies’ products commodities are more or less similar to the Coca-Cola’s products with some of them being perfect substitutes.
Profitable markets obviously yield higher returns than the non-profitable ones. Entrance of many organizations in the beverage industry has heightened competition and has consequently led to decreasing profitability levels. Coca-Cola no longer enjoys abnormal profits, especially due to PepsiCo Inc.’s competition within the beverage market. Coca-Cola’s resilience to competition has only been anchored on customer loyalty and brand equity. All Coca-Cola’s rivals providing perfect substitutes increase customer’s propensity to switch to alternatives and, thus, switching costs are incurred by Coca-Cola. Output market is determined by the customers’ bargaining power. Customers globally are sensitive to prices changes. However, through loyalty schemes, Coca-Cola has been able to account for its customers’ call for a price reduction in its products. Equally, suppliers’ bargaining power subsumes firms sometimes. Suppliers of labor, components, expertise (services), raw materials, and other resources have also affected Coca-Cola’s profit margins due to switching costs.
There are low entry barriers in the beverage industry since there are no switching costs. Capital requirement is also zero. Coca-Cola is not only a brand, but also a beverage. Lately, there has been the emergence of completely new brands, which are cheaper than Coke products and, hence, customers easily switch to other substitutes (consumers) (Marquard & Birchard, 2007). Threats by new entrants and other potential customers therefore pose a great challenge to Coca-Cola. Again, Pepsi and Coca-Cola are almost the same in terms of taste. Hence, Coca-Cola has no unique flavor. Large retailers such as Wal-Mart have a higher bargaining power. Coca-Cola’s main ingredients are phosphoric acid, caffeine, sweetener, and carbonated water. The suppliers of Coca-Cola’s products are neither concentrated nor differentiated. Pepsi provides Coca-Cola with the major competition. The predominance of Pepsi and Coca-Cola in the beverage industry is primarily due to their carbonated water. Dr. Pepper is another threat for Coca-Cola’s products though it has a unique flavor (Wright, 2006).
McKinsey 7S Model
In Europe, McKinsey 7S Framework has been very instrumental as Coca-Cola’s marketing tool. McKinsey 7S Framework is primarily a management model that was developed by business consultants Thomas Peters and Robert Waterman Jr. in the mid-1980s under the excellence theory. Since then, academicians and practitioners have applied the McKinsey 7S Model in organizational analysis. It is a strategy vision for business units, businesses, and teams or generally groups (Rao, 2001). The 7S include systems, structure, skills, shared values, staff, and structure. McKinsey 7S Framework entails assessment and monitoring of changes within the internal circumstance of organizations. Most importantly, understanding the dissimilarities among cultures and again appreciating the diversity of cultures, Coca-Cola’s marketing strategy has tailored its approach to address different needs.
To bolster business performance, Coca-Cola has over time restructured itself to include new processes and systems through leadership change. This is done with the intention of bolstering organizational performance. Moreover, future changes within Coca-Cola in Europe have likely effects usually examined by McKinsey 7S Framework. The seven elements are interdependent and are divided into hard and soft elements. Structure, systems, and strategy are hard elements while staff, style, shared values, and skills are soft elements. These elements, values, and capabilities constitute a corporate culture. Strategic management has helped Coca-Cola place a marketing strategy as an important tool to be used by its top management to analyze company’s major initiatives at the behest of business owners. This process entails utilization of resources and external as well as internal performance. The specification of organization’s objectives, vision, mission, and development of plans and policies, mostly in the form of programs and projects, are the cornerstone of strategic management.
Balance Scorecard (BSC)
Using the Balance Scorecard (BSC), evaluation of the organization’s overall performance is done as well as progress made towards achievement of objectives (Kaplan and Norton, 2001). Recent management theories and current studies demonstrate that strategic management strategy must begin with the expectations of stakeholders. Coca-Cola Company in both Europe and the U.S. focuses on skills, staff, style, and shared values as soft variables, which it has the capacity to change. Coca-Cola reportedly links its business strategies, systems, and structure with soft variables. These variables should be altered to be in congruence with the business goals and long-term objectives (Sadler, 2003). Strategies are action plans that an organization plays as a response to expected changes in the external environment. Strategy is different from operational actions and tactics due to its premeditated nature.
In 2010, Coca-Cola bought Coca-Cola Enterprises assets to align operations strategically. It therefore took additional costs stemming from bottling of beverages. In the 2011 Coca-Cola’s annual review, there were 403 Coca-Cola servings in the United States per capita while India and China had 12 and 38 servings respectively. Thus, Coca-Cola can increase investments in India and China as well as other countries, including the European countries. Coca-Cola internal processes are elaborated to ensure maximum effectiveness. Coca-Cola’s organizational structure within the United States is hierarchical and a systems approach has been instrumental as far as its success is concerned. Traditionally, Coca-Cola has a bureaucratic management style.
Procurement of goods requires intricate business processes. Coca-Cola’s management strives to ensure that there is the requisite congruence between organizational goals and individual goals by the employees through customer satisfaction strategies such as provision of discounts and rewards (Hays, 2004). This is done in a bid to ensure employees’ psychological satisfaction. People come together in order to attain goals, which they cannot achieve at all when working together. As employees pursue organizational goals, it is important that they satisfy their individual goals. This is a significant difference between the marketing strategies in Europe and those in the U.S.
Coca-Cola’s organizational culture has undergone intensive change to ensure that hierarchies are smaller and that the chain of command is smaller. In recruitment processes, Coca-Cola’s Human Resource Manager ensures that meritocracy remains the single-most important criteria during recruitment of employees. A knowledge-based staff ensures that Coca-Cola has a competitive advantage over its competitors. Extraordinary emphasis is placed on hiring of employees (Suryani, 2000). These employees then undergo intensive training after recruitment. Coca-Cola has a number of shared values that ensure teamwork within the organization. Coca-Cola has emerged as a global brand with an estimated value of $77.839. In the beverage industry, Coca-Cola commands the biggest market share. Strong advertising and marketing as well as extensive distribution strategies have contributed to this. Coca-Cola engages in Corporate Social Responsibilities (CSRs) (Cragg, Schwartz, & Weitzner, 2009). Moreover, it has strong customer loyalty and strong bargaining power.
Growth of bottled consumption of water and escalating requirements for beverage and healthy food provide opportunities for expansion, especially in the emerging markets in Brazil, Russia, India, and China (BRIC). Growth via acquisitions is another opportunity Coca-Cola can adopt to expand even more. However, Coca-Cola’s specialty in the U.S. on carbonated drinks has overshadowed all other viable business ventures such as focus on bottled water. Coca-Cola’s product portfolio is also undiversified. Moreover, there have been high debt levels caused by acquisitions coupled with negative publicity, which has equally posed a major weakness for Coca-Cola. It has also focused on many brands with some having a very insignificant revenue amount. Brand failures and uncertain consumer preferences, strong dollar, PepsiCo competition, water scarcity, disclosure as a legal requirement, and declining net and gross profit margins are Coca-Cola’s main threats. The market for carbonated drinks is also very saturated.
PESTEL analyzes economic, social, technological, environmental, and legal factors affecting the operation of an organization such as Coca-Cola. PESTEL analysis is important in strategic management and environmental scanning. PESTEL entails the analysis of macro-environmental factors. It is important when carrying out external analysis as well as when conducting a market research. It provides an insight into what macro-environmental factors a business organization has to consider (Cook, Macaulay, & Coldicott, 2004). It is an important strategic tool utilized for comprehension of business position, market growth/decline, direction, and potential for business operations. The emergence of green business underscores the growing significance of ecological or environmental factors in business.
PESTEL analysis involves six factors. First, political factors entail the extent of government interference in the markets. Political factors may entail labor laws, environmental laws, tax policy, and trade restrictions. It may also include provision of public goods such as infrastructure, education, and health. Second, economic factors entail interest rates, exchange rates, inflation rates, and economic growth. Third, social factors include cultural aspects relating to the rate of population growth, health consciousness, safety issues, and age distribution. Coca-Cola adapts management strategies to address social trends as a multinational corporation. Fourth, technological factors involve technological aspects like Research and Development (R&D), technological barriers, technology incentives, and automation (Oliver, 2006). They determine entry barriers, outsourcing decisions, and innovation.
Fifth, environmental factors involve environmental and ecological aspects like climate, climate change, and weather. These factors mostly affect insurance, farming, and tourism sectors. Disposal of Coca-Cola’s broken bottles is an important environmental factor to consider. Businesses should discard waste in a manner to avert environmental degradation (Fleisher & Bensoussan, 2007). Lastly, legal factors revolve around consumer law, employment law, safety and health law, discrimination law, and antitrust law. These factors influence Coca-Cola’s operations as well as product demands and costs. Coca-Cola is a non-alcoholic beverage and, thus, it falls under Food and Drug Administration (FDA) category (Hickmann, 2003). The FDA category products are under governmental control as far as manufacturing procedures are concerned. In some international markets, civil unrest, government restrictions, and changes influence Coca-Cola’s ability in terms of relocation of the capital. In 2010, Coca-Cola bought Coca-Cola Enterprise’s assets to align operations strategically. It therefore took the additional costs stemming from bottling of beverages. Coca has significantly failed in instituting policies that will promote environmental sustainability as far as discarding of broken bottles is concerned both in Europe and in the U.S.
Coca-Cola’s ability to penetrate new markets depends on the political climate. Economically, the economic recession of 2001 greatly influenced Coca-Cola’s operations. However, the US government’s aggressive measures ensured that Coca-Cola was able to borrow enough funds to diversify its investments. Socially, since most Americans prefer healthy lifestyles, they have affected non-alcoholic beverage sales as people turn more to diet colas and bottled water. New-fangled technological advances continue to influence Coca-Cola’s promotional, marketing, and advertising efforts. Cans and plastic bottles are products of technological advancements. They are preferred over glass bottles. CCE-Coca Enterprises use modern technological equipment in six Britain factories. This has facilitated quick delivery and production of high quality products. In 1990, CCE was able to produce cans very fast due to the advent of technology making the production process very effective. It has an elaborate bottling made up of up to 275 companies. Coca-Cola should wade off competition posed by other soft drinks if it is to remain the world’s leading soft drink.
To make its marketing strategies effective, Coca-Cola spends on radio, television, print, as well as forms of advertisements. Advertisement costs are included in administrative, selling, and general expenses and amount to about $9 billion in total per annum. Advertisements costs account for over $288 million while production costs are about $195 million. This is in over 26.7 billion units in the world. Out of these units, 22% are in North America, 15% in Europe, 29% in Latin America, 18% in the Pacific region, and 16% in Africa and Eurasia. The operating income has been increased in all these units. It spends about $2 billion on marketing services in Europe and about $4.5 billion in the U.S. per year.
The current paper has shown that indeed Coca-Cola products have a limited threat posed by other nonalcoholic drinks in the United States. The strongest competition for Coca-Cola stems from Pepsi. While Pepsi may be another substitute for Coca-Cola’s products, their substitutability is not perfect like that of Pepsi and Coca-Cola’s products. The present essay has demonstrated that Coca-Cola should tap more into the bottled water market since this product line has not been exploited enough. While it has instituted proper software to safeguard its trade secrets and expertise, advanced software can be used to aid logistics as far as distribution of products is concerned both in Europe and in the U.S. This has helped Coca-Cola cater for varied consumer tastes in dissimilar regions and cultures. The number of Coca-Cola servings in the United States can also be increased. Dasani bottled water also constitutes a significant source of revenue for Coca-Cola and, thus, preference should be given to it since juice and water constitute its biggest opportunities if properly harnessed.
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