Coca-Cola in China

Think Local, Act Local

Product: Coca Cola Regular

Cranfield University 21/10/2010 Module : MSP

Presented by learning team 2: Ansuha Bhat Mohammad Aladalh Rita Batalha Tina Lai Victor Zhang

Is
Agenda _
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Mission Statement Corporate Objectives Value in Use Buying Criteria Consumer Segment Perceptual Map PESTLE Analysis Porters Five forces BCG Matrix Market Attractiveness Critical Success Factors Directional Policy Matrix Marketing Strategies: 4 Ps Marketing Strategies: CSF Assumptions New product Conclusions

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

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

Value-in-Use
Experience Surround Service
ingredients Product quality taste Social responsability Value-in-use: Hapiness and fun

Refreshing
Just for taste Social gathering Sense of belonging

Complementary product Enjoyment I feel close to my idol!

Buying Criteria
Motivators factors
Brand affinity* Taste Health awareness* Packaging

Hygiene factors
Refreshing Affordable Convenient location Quality

Consumer Segment
Who are we talking to?
Generation Y comprehends a group of people born aged between 15-35 years old. They have divided into subsequent trends, such as the Fashionists and Techno lovers.

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

Consumer Segment

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

In good shape:
Zhang is a young professional with 34 years old. He is very active and practice several sports.

Drinks Coca-Cola on daily basis and she would hardly change it for another brand.
Being fit its important, but it is not a requirement. She preferes to be updated about the latest trends in fashion or arts.

He is not a big fan of carbonated drinks, prefers natural juices or sports drinks.
He is very rational. Brands does not mean anything to him, however he prefers to consume local brands than international.

Consumer Segment

Brand Consumers:
Hong and Li are two best friends both at 18. For them Coca-Cola represents celebration/ party and a feeling of closeness with their idols. They see sports as hobbies and not a requirement for being fit.
They drink Coca-Cola in parties ,when they go to cinema or go shopping.

Light on the pocket:

Chen is a mid-age adult who cares how much is going out of his pocket. He neither cares for brands and health. He would prefer Coca-Cola to other health drinks because it would turn out cheaper.

Perceptual Map
high health awareness

In good shape

Genuine

low brand affinity

high brand affinity

Brand Consumer Light on the pocket

low health awareness

Consumer Insights - survey

Who are they? How old they are?
18-35: 53,73%
35-50: 34,33% >50: 11,94%

Female 44,75%

Male 55,24%

Weekly consumption*
< 2 bottles 55% 3- 5 bottles 22% > 8 bottles 12%

6-7 bottles 11%

*330ml

PESTLE Analysis
What changes in government policy have a big impact on the way Coca-Cola operates?

What economic factors effect Coca Cola ability to generate income?

What social and cultural aspects affect the customer needs?

Politcal Factors
What changes in the technological environment affects the production levels and the business in general?

Economical Factors
What significant legal changes may affect Coca-Colas behaviour?

Social Factors
What environmental factors can affect the consumers insights and choices?

Technological Factors

Legal Factors

Environmental Factors

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

PESTLE Analysis
Economic
Favorable government policies (Free-market economy) Developing the capital markets Undertaking significant bank reforms Rising unemployment In 2008, almost 70% of job seekers were unemployed 11 million people were laid off and are now without jobs

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

PESTLE Analysis
Technological
Larger number of R&D institutions: Coca-Cola opened its $90 million Innovation and Technology Center in Shanghai, 2009 China produces the second largest number of science and engineering graduates The increasing awareness of technology. (E.g. new bottle, new label, design etc.)

PESTLE Analysis
Legal
Increasing importance of anti-monopoly law: The acquisition of Huiyuan by Coca-Cola failed Facilitation of (Foreign Direct investment) FDI: Clear and fast procedures and processes for foreign investments Reporting and accounting standards; Only a very small group of certified accounting professionals Lack of modern financial reporting

PESTLE Analysis
Environmental
Increasing the importance of environmental policies: State Environmental Protection Administration Inspection of industrial companies on a regular basis Coca Cola will be inspected and supervised regularly to make sure that it meets the environmental standards in its industrial operations

Porters Five Forces

ThreathRivalry: of suppliers: WEAK of new STRONG WEAK Threat of substitutes: STRONG Bargaining power entrants: BargainingThreathof buyers: WEAK power of new entrants Brand Image / Loyalty: Coca-Cola has Pepsi taste: Pepsi has a similar taste with There is of the ingredients soft drinks can Availability a number of other on the Chinese consolidateconsumer may have little power Individual brand equity and loyal customer Coca-Cola easier substitute Cola. Eg. tea market over the companies Eg. Such as aspartame which many often is marketing: super markets shelf space: Pepsi Retailer andhas more successful marketing The increasing health awareness has leadBargaining to substitute for saccharine Bargaining Wholesalers,significant margins for themay Retailers require indistributers and retailer shelf strategy Rivarly than Coca-Cola China drinks, the trends of healthyamong such as milk or power of have certain poweroffer Coca-Cola power of over space competitors existing they juice Fluctuations in market price: buyers Future Cola: has flavored its advantage in coverage insuppliers Eg. Market turbulence increases Cokes Coca-Cola also has its own well-developed Advertising Spends rural areas where Coca-Cola has failed toever Consumers have more choices than step vulnerability to price fluctuations distribution channel 81.2 million in Eg. In 2008, Coca-Cola invested in China into before the Beijing Olympic Threath of

substitutes Substantial fixed cost

BCG Matrix
Market Share relative to competitors
HIGH
HIGH LOW

Brand Consumers

In good shape

Market Growth

Genuine

Light on the pocket LOW

Market Attractiveness
Score/weighted score Above Diagonal line: Score out of 10 Below the digonal line: Multiply score x weight

MAFs

Weights Genuine In good shape 6

2 1,5 6 0,5 1,5 5 1,25 7 0,6 9 0,4 1,8 5,4 6,1 4,1 5 1,0 2,1 4

Brand Consumer
7

Market Size Volume Growth Profit margin Risk Totals

25 25 30 20 100

8 2 4 1,2 2

1,75

Light on the pocket: 5 1,25 4 1,0

3

0,9 0,8
3,95

Critical Success Factors

C.S.F.Cs Weights

Product-market: Genuine Relative Business Strengh: 0,5

Score/weighted score Above Diagonal line: Score out of 10 Below the digonal line: Multiply score x weight Coca Cola Regular Future Cola 2 0.9 0,2 4 0,3 0,4 3 2,7 0,9 4 1,2 1,2 7 1,6 6,7 1,4 4,3 4 4 1,2 6 8 2,4 7 2,1 3 0,3 6 8 0,8 4 0.4 Pepsi Substitutes

Just for Taste Price

10 10

9 3 9 4

Brand affinity Health Awareness

Promotions Totals

30 30
20 100

0,8
5,5 6,2

Critical Success Factors

C.S.F.Cs Weights

Product-market: In good shape Relative Business Strengh: -2,25

Score/weighted score Above Diagonal line: Score out of 10 Below the digonal line: Multiply score x weight Coca Cola Regular Future Cola 2 0,45 0,3 6 0,5 0,6 3 1,4 0,6 3 1,2 1,2 3 0,9 4,45 0,45 3,15 5 3 1,2 5 5 1 9 3,6 0,75 6,7 5 0,5 5 1,0 3 0,45 3 0,3 Pepsi Substitutes

Just for Taste Price

15 10

3 5 7 3

7
1,05

Brand affinity Health Awareness

Promotions Totals

20 40
15 100

0,75
3,9

Critical Success Factors

C.S.F.Cs Weights

Product-market: Brand Cons. Relative Business Strengh: 1,30

Score/weighted score Above Diagonal line: Score out of 10 Below the digonal line: Multiply score x weight Coca Cola Regular Future Cola 4 1,4 0,8 3 0,2 0,3 4 2,7 1,2 3 0,2 0,3 6 2,4 6,9 1,8 4,4 7 3 0,3 7 6 1,8 4 0,4 2,1 3,9 3 0,4 3 0,3 5 1 3 0,3 Pepsi Substitutes

Just for Taste Price

20 10

7 2 9 2

4
0,8

Brand affinity Health Awareness

Promotions Totals

30 10
30 100

2,1
5,6

Critical Success Factors

C.S.F.Cs Weights

Product-market: Light on the pocket Relative Business Strengh: -0,2

Score/weighted score Above Diagonal line: Score out of 10 Below the digonal line: Multiply score x weight Coca Cola Regular Future Cola 3 0,4 0,3 8 2,1 2,4 4 0,4 0,4 5 0,5 0,5 8 3,2 6,6 3,2 6,8 7 5 0,5 6 3 0,3 5 0,5 2,4 4,2 7 2,1 3 0,3 4 0,4 2 0,6 Pepsi Substitutes

Just for Taste Price

10 30

4 7 4 5

4
0,4

Brand affinity Health Awareness

Promotions Totals

10 10
40 100

2,8
6,1

Directional Policy Matrix

Relative Business Strenght
HIGH
HIGH 7
Brand Consumer

LOW

Market Attactiveness

In good shape

5
Genuine

Light on the pocket

LOW

+2

-1

-2

Marketing objectives
Genuine:
Increase revenue by 5% in 3 years

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

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

Light on the pocket:

Increase market share by 2% in 3 years

Directional Policy Matrix future

Relative Business Strenght
HIGH
HIGH 7
Brand Consumer - 4%

LOW
New segment 1

Market Attactiveness

+ 3%

In good shape

New segment 2

5
+ 5%

4
Genuine

+ 2%

Light on the pocket

LOW

+2

-1

-2

Marketing Strategies: 4 Ps
Segment: Genuine
Element Product Coca-Cola Current Coca-Cola Future

Price
Promotion Place

Competitive pricing
Internet, Sponsorship, Press Cities and large towns - Vending machines; outlets, bars, cafs, restaurants, supermarkets

Competitive pricing
Internet, Sponsorship, Press Cities and large towns (the same) Rural areas - local stores

Marketing Strategies: 4 Ps
Segment: Brand Consumer
Element Product Current Coca-Cola + Pepsi Coca-Cola Future

Price
Promotion Place

Competitive
TV, internet, events sponsorships, outdoors, press Vending machines; retailers, supermarkets, pubs, cafs, restaurants

Competitive
TV, internet, outdoors, press, sampling activities Vending mahines; retailers, supermarkets, pubs, cafs, restaurants..

Marketing Strategies: CSF

Segment: Genuine CSF: Brand Affinity Score: 7 (current) 8 (objective)
Description of Strategy Increase revenue by 5% from this segment.

Actions to achieve the strategy Responsability

Approx. cost

1) Increase brand affinity and make taste more differentiable from other carbonated drinks 2) Get feedback on what this segment wants and is looking for Market Research, Marketing and R&D
Meddium

Marketing Strategies: CSF

Segment: Brand Consumer CSF: No change Score: N/A (current) N/A (objective)
Description of Strategy 1) No change in CSFs since we want to maintain the relative business strength 2) Decrease in market attractiveness (maintain revenue) 1) Reduce cost on TV advertising and celebrity endorsement 2) Target mutual branding with ohter big brands

Actions to achieve the strategy Responsability Approx. cost

Marketing Low/Meddium

Marketing Strategies: CSF

Segment: In good shape CSF: Health Awareness Score: 3 (current) 5 (objective)
Description of Strategy This segment is a very profitable one as it promises returns. Increase relative business strength and thus, profits by 3% in 5yrs.

Actions to achieve the strategy Responsability

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

Marketing, Operations and Market Research and the whole company

High

Approx. cost

Marketing Strategies: CSF

Segment: Light on the pocket CSF: Promotions/Price Score: 7/7 (current) 8/8 (objective)
Description of Strategy Increase revenue from his segment by 2% in 5yrs.

Actions to achieve the strategy Responsability

Approx. cost

1) Promote Coca-Cola with other brands/items on a regular basis 2) Increase bulk packaging in off-trade sales

Finance, Marketing and R&D

Meddium

New Product

Coca-Cola Tea

The taste of coke with the goodness to tea!

Coca-Cola Tea
Features:
Coca-Cola Flavour Caffeine Free Hot drink Tea bags

Needs:
Who is our target? Tea lovers; Health conscious segment ; Coca-Cola Fans; What is the consumers need Drink a non-carbonated drink with Coke flavour

Benefits:
Health Stress Relief Closeness with Chinese culture

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

Conclusions
1st Coca-Cola aim provide a quality range of flavoured drinks and exceed USA in per capita consumer of Coca-Cola products 2nd The genuine segment is the most profitable. We intend to maintain the market attractiveness and increase the business strenght 3rd The brand consumers required huge investments, so we intend to invest less in promotions (reducing market attractiveness) and maintain the business relative strengh and revenue 4th The good shape segment provide negative cash flows despite the market is growing. We want to increase the market attractiveness and relative business strenght, by introducing the Coca-Cola tea product 5th The light on the pocket segment experienced low market growth and relative market share. Despite that, we believe that we can increase in market attractiveness and business strenght by investing more in off-trade promotions and synergies

Thank You.
Lets discuss!