Amity Business School

COCA COLA - UNIVERSAL APPEAL

Amity Business School

INTRODUCTION

It is one of the Largest and the most profitable brand. Operates in 200 countries and planning to expand even more. Employs 32000 people worldwide and expected to generate more employment. Enjoys operating margins of 23%.

Amity Business School

Revenues of $ 18 billion in 1995.

In 1995 - Return on equity - 56%. 1996-Internationally had 47% market share.

Amity Business School

Q1. What is Coca-Colas international strategy?

Coca-Colas strategy had always been to take risks in emerging markets. It had always understood the need to be first in new markets to gain competitive advantage. To establish greater brand awareness and preference through advertising on a scale similar to that of the domestic market. To make their brand as accessible and ubiquitous as they are in US. For this CM intervention is required to secure improvements in the efficiency, cooperation, and competitive aggressiveness of overseas bottlers.

Amity Business School

Companys Strategy for sustaining its brand image is 3 Ps: Pervasive Penetration in the marketplace. Offering consumers the best Price relative to value. Making Coca-Cola the Preferred beverage every where.

Amity Business School

Q2. What competitive advantages does Coca-Cola have over its major rival, PepsiCo?

Coca-Cola was 50 years older than PepsiCo which was a great advantage.
Coca-cola operating income margin outpaced its major competitor, PepsiCo significantly.
PepsiCos beverage segment operating margin was 10 % for 1995. Coca-Colas was 23%. Coca-Colas income was $18 billion while PepsiCo was $10.5 billion. Coca-Colas net income $3 billion while PepsiCo was $1.6 billion.

Amity Business School

Coca-Cola had 41% of the retail market & PepsiCo had 31% in US market. In 1995, Coke outsells Pepsi 3:1 in overseas market.

Coca-Cola had spent $1.3 billion on advertising only for beverages segment as compared to PepsiCo which has to allocate its funds i.e. $1.8 billion for its restaurants and snack food as well.
Coca-Colas overseas revenue was 71 % while PepsiCos was only 13%.

Amity Business School

Q3. What are the pros and cons of Coca-Colas investing further in Indias market?

PROS:1. Healthy Growth in The Indian Economy 2. Pure Commitment in The Indian Economy. 3. Amazing growth figures 4. Availability of Funds 5. Foreign companies can increase their investment from 40% to 51% to have a majority stake.

Amity Business School

Cons:1.Political Scenario BJP protested the multinationals by introducing the Hindu right . They used phrase Microchips, not potato chips to describe what sort of investment should be allowed.
2.These economic reforms have not increase living standard of people below poverty line.

3.Soaring interest rate coupled with competition from foreigners have hurted the local business.
4.Indian legal system, though it may be slow, provide some resource against some failure to perform in contracts.

Amity Business School

Coca Cola in China

Amity Business School

In 1979, Coke sold its concentrate to its franchise chinese owned bottlers In 1984, only 3 bottling plants in China By 1985, Cokes market share was less than 2%

In 2000, the share of Coca Cola (Fanta & Sprite) in Chinas market was 40 %

Amity Business School

Q4. What are the pros and cons of Coca-Colas investing further in Chinas market?

Pros:1.Market potential is vast as total population was 1.2 billion and the opportunities were infinite. 2 Economy set to double in the next 6 yrs 3.China would liberalize its economy by dropping many trade barriers as being a member of WTO.

Amity Business School

Cons
1.Tax preference for foreign investor have been scaled back, which puts the foreign business at a disadvantage to local ones.

2. We have got milk in China.

3. Problems of Opportunism 4. No wholesale network 5. Tight control on the soft drink industry

Recommendations

Amity Business School

Q5. What should Douglas Daft recommend to the senior executive committee concerning further investment in the emerging markets of China and India? Why?

CHINA Promoting industries in rural china for development & growth. Tie up with local Chinese beverage companies. Giving the bottling business to local Chinese bottlers. Acquiring the local soft drink companies in China Investing earlier to get tax benefits. Providing local population employment opportunities.

Amity Business School

INDIA
Set up more plants to produce more volume. By recruiting more of top level management from India. Adopting the Indian culture. Maintaining good relations with the labor union.

Cont.

Amity Business School

Introduction of various bottle sizes.. The companies should position itself as an Indian brand emotional attack. The rural market should be tapped on early.

Amity Business School

What is your Perception?

Amity Business School

Thank You