coca-cola case study presentation
DESCRIPTION
This is a case study in my senior seminar class at Hood College. It is on Coca-Cola in China and discussed their success story/market entry strategies.TRANSCRIPT
By: Holly Green, Ashley Parker and Sasiya Supprakit
History of Coca-Cola
History of Coca-Cola
Coca-Cola distributed over 5 billion bottles of Coca-Cola to American troops
Case Introduction
“Putting cold bottles on shelves is the best marketing we can do,
we don’t have to ask ourselves if our product will sell, only, how do
we get it to the consumer?”
Case Introduction
•Entered China in 1920•Exited China in 1948•Re-Entered 1979 with the “Open Door Policy”
Case preview
Re-Enter or Not that is the
question?
• PESTELI Analysis• Five-Forces Model
External Environmental Analysis
• 1. Political – Communist government forbade FDI– Bottling plants were nationalized– 1978, “Open Door” policy
• 2. Economic– China is a large market for long-term
investment– Coca-Cola agreed to build bottling plants and
be taken over by the government
PESTELI Analysis
• 3. Sociocultural– Localization– Language barriers and
cultural differences – Red-canned Dragon for
the Chinese New Year
• 4.Technological– Importing supplies and
built bottling plants
PESTELI Analysis
PESTELI Analysis• 5. Environmental
– Bottling plants created pollution to the environment
• 6. Legal– Correlated with political system– Restricted policies on foreign companies
• 7. International– Aggressive in expanding globally– Plants in Japan, India, Thailand, etc.
Five-Forces Model• 1. Power of Buyers
– Chinese consumers prefer non-carbonated beverages
– Strong power of buyers
• 2. Power of Suppliers– Attempted to get local suppliers– Trained Chong Fu Industrial Group
• 3. Rivalry– Few rivals due to the restricted
policies
Five-Forces Model• 4. Threats of New Entrants
– High legal requirements for new entrants– Takes time to build connection with the government
• 5. Substitutes– No substitute in the Chinese market during that time
• 6. Complementary– Music, art, sports are together with Coca-Cola– Sponsored first Asian Cup and FIFA
Internal Environmental Analysis
• Internal Factors
• VRINE Analysis
• Michael Porter’s VCA
Internal Environmental Factors
• Exclusive Contracts• Financial Resources• Market Share• Brand Awareness• Operational Efficiency• Access to resources• Position on the experience curve
VRINE Analysis
• Is it valuable?– Allows for product differentiation
• Is it rare?– Resources are not accessible to competitors
• Is it inimitable?– Is not easily copied or replicated
• Is it non-substitutable?– Equivalent resources are not readily available
to competitors• Is it exploitable?
– Aids in creating a competitive advantage
Value Chain Analysis• Primary Key Activities
– Research & Development• Alternative non-carbonated beverages
– Production/Operations/Manufacturing• High technology process
– Marketing & Sales• Advertised before introducing products
– Post-Sales & Service• Created relationships with the people
Value Chain Analysis
• Secondary Key Activities– Management Infrastructure
• High quality management
– Human Resource Management• Best suppliers
– Information Technology and Information Systems• Utilized technology in bottling plants
– Materials Management• Inbound logistics, purchasing function, and
outbound logistics in sync
Strategies
• Corporate Strategy– Localization
• Business Strategy– High effectiveness and
competitive position
• Functional Strategy– New brand to support
product development
Strengths
• Equity and recognition-logo is recognized worldwide
• Image-dragon advertisements
• Product Diversification-soft drinks, non carbonated drinks, water, juices, and sport drinks
• Not only sold in grocery stores, but food retailers-increase market equity
Weaknesses
• Credit rating• Customer
concentration-weak in China– potential customers are
located in the West where Coca-Cola has yet to reach because of the failing infrastructure of rural China
Opportunities
• Expanding the non-carbonated and bottled water industries-gain larger profits
• Importance of health• Finding a way to expanding
westward
Threats
• Commodity price growth-prices are increasing, Coca-Cola is not a necessity
• Image perception- not always positive • Domestic issue for local businesses-worry
the Chinese government• Chinese government- unstable
environment– threat that they will change their mind about
foreign companies and remove Coca-Cola from their country
Problems and Issues
• Chinese Government• Culture• Suppliers• Infrastructure
Problem Identification
• Chinese Government– Closed borders in 1948
• Remained closed until 1978
– Many rules and regulations
• Culture– Chinese preferred non-carbonated
beverages– Language
• Needed to keep identity– Coca Cola cannot be translated
Problem Identification
• Suppliers– Did not meet company standards
• Infrastructure– Difficult to distribute outside major cities– Especially in the west
Discussion of Solutions
• Chinese Government– Follow the rules
• Waited until the borders reopened• Did everything the government asked
• Culture– Created “Tian Yu Di”
• Fruit juices, ready-to-drink teas
– Settled on K’o K’ou K’o Le^• “to permit the mouth to be able to rejoice”
Discussion of Solutions
• Suppliers– Gave technical training to local
companies
• Infrastructure– Created new distribution system
specially for China
What would we have done differently?
• Coca-Cola only had two choices– Wait until government reopened borders– Not re-enter China at all
• Made the right decision – In 2008, China had 2nd highest unit case
volume for the past five years (19%)
Learning Insights
• Specializing Marketing
Moral
• Patience– Cooperate with the Chinese
Government – Waiting to Re-opening– Dealing with poor info structure
from developing country
Update
• Main sponsor 2008 Olympics
• Moved into Western China
• More than 30% of Coca-Cola’s sales are in China
Update
• 27% of Coca-Cola workforce and bottling investments are in the
Pacific.
•simple vs. complex industry
Update
More 30% Coca-Cola’s sales in China 2006 2008