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An Assignment on

Macro Environment Influence on marketing decision making And Marketing Mix of Coca Cola

A report submitted to Kensington College of Business Masters in Business Administration

KCB Id Lecturer Word Count

: 15006 : JAS NAIDOO : 3284

Submitted on : 31-03-2011


We strive to refresh the world, inspire moments of optimism and happiness, create value and make a difference, with this mission from the last 125 years Coca-Cola today is the biggest beverage organisation in the world. Coke now have about 3500 beverages, 500 brands and sell 1.7 billion servings every day in over 200 countries. Coke is growing their reach, strengthening their brands and advancing their global momentum, every moment of every day. Coca Cola markets a variety of beverages which includes carbonated drinks, water, fruit juices, juice drinks, tea, coffees, energy drinks and sports drinks. Headquarters at Georgia, Atlanta, they employ more than 139,600 employees around the globe. The Companys main focus is to develop concentrates, beverage bases and syrups, which are then sold to bottling firms that comprise the worlds biggest beverage distribution system. In addition to product improvement, the organisation plays a major role in product marketing which enables them to figure out and meet the ever changing beverage wants and desires of their consumers around the world. Their focus is on promotional activities which include publications and electronic media, internet, sponsorship, hoardings, contests and package design. Coke is known as the globes most admirable brand. The company has been intensely successful in international marketing, and experts indicate that this success is largely based on product innovation and adaption (Lamb, Hair & Mc Daniels, p. 114). Coca Colas symbol is known worldwide, no matter in what language it is printed. Research have also shown that Coke is among the most popular and admired trademarks in the world. In fact, it is documented that Coca-Cola is the second-most widely understood term in the world, after okay.

Pestal Analysis of Coca Cola

The factors that take place outside the organisation which will have impact on the organisation are called Macro environmental factors. It is not possible for any company to survive without being affected by the environmental activities. Changes in the tax rates, laws, governmental policies, barriers in trade, in laws and demographic changes are all examples of macro environmental changes. Macro environmental factors referred by PESTAL are: Political Economic Social

Technology Legislation Environmental

Political Analysis for Coca-Cola Political factors refer to the changes in the government policies affecting the company in any ways. These include trade restrictions, tax policies, laws on recruitment, environmental policies, services provided by the government and amount of goods permitted by the government. Coke is not an alcoholic drink and hence it comes under FDA (Food and drug administration) which checks and certifies the ingredients used in manufacturing of Coke weather it is meeting the standard of that particular country. The company also has to follow the rules imposed by FDA for the plastic bottles used in their product. Apart from this the other political factors that influence the company are accounting standards and tax policies. The accounting standards used by the company changes time to time. Changes in income tax policies and excise duties has a major effect on profits of the company. Moreover, any changes in government or any kind of political protest may hamper the product demand. War in a country like Iraq can also have an adverse effect on International market of the firm. Economic Analysis for Coca-Cola Before venturing into any country the company first analysis the economic condition of the country as the purchasing power of the people depends on the economic growth of the country. It gives the marketer a good chance to market their product. Coke has identified this correctly and rightly started their distribution in various countries. Companys net operating profit outside US is 72% and it uses 63 various types of currency other than US Dollar. Hence there is a definite impact in the revenue due to the fluctuating foreign currency exchange rates. A strong and weak currency tends to affect the exporting of the products globally. Interest rates are the rates which are imposed on the company for the money they have borrowed from government. When there is an increase in the interest rates, it may deter the company in further investment as the cost for borrowing is higher. Coca Cola uses derivative financial instruments to cope up with the fluctuating interest rates. Interest rates and wage rate go hand in hand, when there is a rise in inflation, employee demand for a higher wage rate to cope up with the cost of living.

This comes as additional cost for the company which cannot be added in the price of the final product as the competition and the risk in this segment is higher. More over as the inflation rate rises there is a drastic fall in consumers purchasing power which is a threat to the industry and can force the consumer to change to other product for little cost or consequence. Social Analysis The Cultural outlook and attitude, health awareness among people, growth in population with age allocation, and importance to safety are all the examples of social factors. The organisation has to adjust itself to the changing society. The company adapts various management strategies to adapt to these social trends. Many people around the globe are now practising healthier life style. People are now switching to healthier options like juices, bottled water, diet colas etc. and this is affecting the demand of Coca Cola. Coke is facing a significant challenge from the growing awareness among consumers, government agencies and public health professionals of all the possible health problems associated with inactive lifestyle and obesity. Obesity is a critical and major health problem of the public, realising this the company has committed to their consumers with the wide range of products, which includes bottled water, diet, juice and energy drinks. Technological Analysis for Coca-Cola Technology is most important tool which can be used to create opportunity for newly launched products. It is also effective in marketing and promotion of any brand to a wide audience at a lightning speed for example television, internet and e-commerce. Also the special effects technology used on internet and television makes product look appealing and helps in selling of the products. Coca Cola sales have increased by introducing new plastic bottles and cans as they are easy to take away and one can bin them after the use. Introduction of certain machines from the latest advancement in technology has enhanced the production of the Coke tremendously helping them to meet the increasing demands. Coke had Europe's biggest soft drink factory which can produce Coke cans faster than bullets from a machine gun. Environmental factors: Environmental planning of Coke is focused on the areas like sustainable packaging, water stewardship, energy management and climate protection. Coca Cola used around 300 billion

litres of water in 2007 in manufacturing of beverages in their plants. In order to meet the water needs and to improve community water access, the company made an effort towards water stewardship. Coca cola in 2007, announced that the company will return to the community, the same amount of water which is used in the production and their beverages. The company calls this as water neutrality. The company did this by reducing the water usage in their beverage production, recycling the water used in manufacturing process and stock water from nature and communities through various projects and partnerships. Coke also advanced their packaging framework in such a way that the packaging can be re used in future. The company in addition also eliminated forty million pounds of plastic every year in U.S alone by setting specific global targets of smaller cap for pet bottles. Legal factors: Advances in the legal and political environment strongly affect marketing decisions of a firm. Changes in government policies and laws comprise of legal factors. In 1970's, Coke denied and stopped working in India for almost 16years. India wanted to know the formula from Coke so as to do the business in India. In Belgium 100 children got food poisoning with the consumption of Coca Cola because of this the Commission of Europe has suggested European countries to ban Coke and the reason behind was the higher amount of carbon dioxide used in the drinks. In India there was a protest against Coca Cola production. People believe that Coke is depleting groundwater. Not only this there also was a controversy of the existence of harmful chemicals and pesticides in bottled products including Coca Cola. Production and sale of Coke, along with other soft drinks was initially banned in Kerala, state in India before the High Court overturned the ban stating that only the federal government can ban food product.

Coca Cola will have to concentrate on environmental safety and sustainability. These are the major treats that organization is facing than any other matters. Expansions of markets and finding new market are important for any business in order to maintain the No 1 position and hence Coca Cola should also expand in rural areas as rural areas are more potential and Coca Cola will be able to grow their market share easier to capture the market share. Avoiding Controversies and building good image is also essential. Focusing on health awareness by introducing advanced and healthy drinks will help the company to sustain in future.

Marketing Mix for Coca-Cola

Marketing Mix is the most important level of Marketing Planning. The marketing strategy for all brands are discovered here. The marketing mix mentions the blend of the four Ps and they are product, promotion, price and place that forms the base of marketing strategy. Marketing mix is made to satisfy the desire of the target market and also to achieve the goal of the company.

Product: In marketing the product not only deals with physical object but it also means services, such as holiday package, insurance, telecom service, or a movie, which can satisfy consumers needs where a consumer can get all the benefits without owning any physical product. Consumers buy a particular product considering its quality and standards. Coke over a period of time has proved its high standard and quality to its consumers. Coca Cola also has a variety of products for all types of markets such as diet coke, juices, sports drink and water for health conscious people, tea and coffee etc. Coca Cola for its products feedback and to improvise on it has also offered a call centre service to their consumers. Positioning: Once a firm has a complete knowledge of its target market, product and has the market segments to compete with, the positioning strategy can be established. Positioning is making an image of the product in the mind of consumers, comparative to competing products. Positioning attracts the customers and also helps them to understand the uniqueness about the products when compared to other competitive product. Coca Cola has used the direct comparison with other competing products technique in order to position their products in the target segment of market. People have a tendency to remember a product by comparing it to another, and hence the well-known battle between Coke and Pepsi came into picture.

Branding: It is difficult to know what makes a consumer purchase one product over another. Every company spends huge amount of money to win the consumers and take them from their competitors who market similar products, but no doubt that the deciding factor is more often the popularity of the brand. Coke has spent millions in promoting and developing their brand name, resulting in worldwide acceptance. Packaging: Packaging, which is taken very seriously by all businesses, is a major factor to be considered in marketing mix. Proper Packaging protects the product from damaging during transportation and during display; it also attracts the consumers to buy a particular product over another. It also promotes the product and helps consumers to distinguish it from the competition. Promotional schemes can be designed with the help of packaging, which can generate good revenue. Coke has made good profits by its unique packaging with has endorsements on it which increased its sales. Price: Supply and demand of Coke depends on the price of its beverages hence price is a major factor to be considered during marketing mix strategy. A consumers decision to buy a particular product mostly depends on the price of that product. Coke has to keep a competitive price in order to push the customer to buy its product over other similar products and this is the reason why to the pricing policies are designed keeping consumers and external influences in mind, prising is also important to effectively achieve revenue targets and covering the manufacturing and promotion costs. Price tactic are substantial to Coke as it is the price which decides the demand and sales of the product. Companies have to keep a price that looks reasonable to the consumers and to make good amount of profit. An example of a good prising strategy is the fight between Coke and Pepsi as all companies tries to compete with one other to give the best pricing in the market for customer acceptance and satisfaction. Coke is the top most in the industry, and the reason behind this is Coke had sacrificed many short term profits to gain recognition and make long term profits in future. Pricing Methods: Right Pricing methods are based on an evaluation of what target customers want to pay, and quality of the product. For a higher price, consumer may not buy that product and would switch or find other similar kind of products or services which are cheaper. If the price is very low, It will be difficult for a firm to make profits or even to cover the cost of production and promotion and the business can be in loss.

There are various methods of pricing which includes, Market based, Cost based and Competition based Pricing. Coke has been using Competition based prising method where it has made major loses but also over a period of time regained its strength as this method allowed Coke to compete more efficiently in the beverage industry. Promotion: In todays competitive environment where there are thousands of companies with the wide range of products are in a rat race to maximise their market share and giving a tough competition to each other. Persuasive communication with the aimed market is important for the success of the product and organisation. Promotion in marketing mix is designed to convince, attract and inform the target market about the product or a service of the company. Promotion is also used to brainwash the customers to except a new product, or to stick to an old product. Product promotion is the blend of advertising, sales, public relations and sales promotions. Promotions refer to advertising through the means of television, hoardings, transport and radio, in magazines and newspapers. As the target audience is most likely to be exposed to media such as TV, radio, newspapers and magazines, Coke is using these source in its promotion for the majority of its products. Even though advertising is a major expense to the company, it is the most productive way of brain storming and exploring potential customers to Coke Products. Coke also utilizes promotions such as free samples, contests and coupons. These activities are an effective way of selling your product to people at a go. Place and Distribution: Distribution of the product- the ways of getting the product to the market is one of the critical factors in the marketing mix. One main feature of the Place and Distribution factor is the distribution channels that Coke has selected to sell and its product. Selecting the most effective distribution channel is very important, as it will determine the cost and sales levels. Coca Cola had a choice of four distribution strategies, these are: selective, intensive direct and exclusive distribution. Coca Cola used the intensive distribution method to capture the market share extensively within a shorter time and this was done by making the product available everywhere at every possible place.

Competitive Advantage
Leadership: Coke FEMSA is the biggest bottler of Coca-Cola beverages in America in terms of total sales volume in 2006, hence the firm is also the worlds second largest CocaCola bottler. Management Expertise: Coca-Cola FEMSA also offers world class management training to executives to enhance the capabilities and exchange experiences. Innovative partnership: Coca-Cola FEMSA together with Coke works to cultivate advanced business models and to maximise sales revenue. Joint-venture : Coca-Cola FEMSA together with Coke agreed to takeover Jugos del Valle, the biggest juice manufacturing company in Brazil and Mexico this will considerably increase their presence in Latin Americas under-captured beverage segment. Customer Relationships: Coca-Cola FEMSA is excellent in its customer relationships. The companys Focus is to tailor its extensive portfolio of beverages and packages according to the consumer requirements. Strong brand portfolio: The Company offers a good portfolio of beverages to its customers and keeps on adding new promising beverage categories to capture larger market share in different segments of market. In order to get closer to its customers and satisfy there changing needs, Coke has opened many one-stop shops for its consumers in Brazil by offering a complete range of beverages - like sparkling drinks, packaged water, juices, and beer. Dedicated organizational, production processes: Cokes has a dedicated team members involved in processes related to organization and production and they are very prompt in handling any kind of competitive, socio political and economic, changes in environments. Inventive business solutions: Coke continuously tries to increase its manufacturing and distribution capacity to maximize operating efficiency. Flexible Structure: Coke has a strong structure to take care of all the challenges related to cost cuttings across the industry and to maximise profit with strong branding and promotion.

Coca Cola should concentrate on safety and sustainability rather than profit and revenue generation. There are many environmental and legal issues which Coke is facing in India regarding ground water depletion and pollution which is not only giving negative publicity to Coke but is also a threat for its sustainability in India . In 2003 the Pollution Control Board of India has charged Coca Cola saying that, sludge from Cokes unit was found with high cadmium levels, lead and chromium which Coke denied but this kind of charges has major impact on the customers buying behavior and people are avoiding Coke. These publishing benefits the competitors to large extend. These are viewed as exploitation by the competitors making use of the situation. Coca Cola should also focus on health problems and changing lifestyle of their consumers. Increasing awareness among people and growing health problem like obesity and diabetes is a major challenge to the company. As Coca Cola contains soda and sugar which is the main source of calories, most of the nutritionist advice to avoid drinking Coca Cola. Also drinking of Coke on a daily bases is harmful to health in a long run.

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