Coca-Cola's marketing mix: a comprehensive review

Author: Iloka Benneth Chiemelie

Published: 27th December 2017
TO: The Board of Directors of Coca-Cola

FROM: Global Solutions plc.

DATE: December 2012

RE: International Marketing Report

Introduction

The Coca-Cola Company is the proud owner of majority of the world’s most recognized brands. It tops the Business Week annual list of top-100 brands in the world and beats the likes of Microsoft, IBM, Apple and General Electric with its US$ 67.3 Billion value (Coca-Cola, 2010). The company has been able to define itself as an icon of Americanism through its brand recognition which is spread across the globe as a cult image.

Founded in 1886 by John Pemberton a civil war veteran and Atlanta pharmacist, the company houses 500 brands and 3,500 beverage products and sell 1.7 billion servings per day in over 200 countries (Coca-Cola, 2010). The company also has huge financial capability following its continued financial growth which rose to US$ 11 billion in 2010.

Figure (1): Coca-Cola products consumption in 2010 (Coca-Cola, 2011).

From the figure (1), it was illustrated that the consumption of Coca-Cola’s products continues to increase across the globe and this has been linked to the company’s strategic marketing and advertisement campaigns. Its high brand value also makes the company’s products one of the most preferred in terms of beverage.Coca-Cola is the world’s market leader in beverage products after its closest rival PepsiCo.

The company continues to showcase its global power with employment of some of the most talented and skilled staffs the industry has to offer, constant adoption of new technologies and production system meant to help the company leverage its economies of scales and meet customers demand and constant product innovation for increased sustainability and competitiveness in the industry. With a global workforce of 139,600 as illustrated in the figure (2) below, the company maintains a corporate image that its competitors find very difficult to match.

Figure (2): Coke’s global workforce (Coca-Cola, 2011).

Coca-Cola’s Marketing Mix

The marketing concept of 4Ps was formulated by McCarthy in 1975. The 4Ps is an element used to represent products, prices, promotion and place in the marketing mix. For over decades, these elements have been adopted as the root from which marketing plans are developed. In any case, with recent attention offered to service marketing in recent years, theorists have developed extra Ps to the basic concept. Fifield and Gilligan (1996) are the authors who recognized the need to include over variables – process, physical, and people to form the 7Ps of service marketing –, but only the initial 4Ps will be used to illustrate how marketing mix stimuli in Starbucks influence cognitive process, affective and behavioural response of customers as the company deals more on products rather than services. These 7Ps are:

1.      Product – features, quality and quantity

2.      Place – the location where the products are sold, number of outlets.

3.      Price – strategy, determinants, levels.

4.      Promotion – advertisement, sales promotion, public relations

5.      People – quantity, quality, training, promotion.

6.      Process – principles, automation, control measures.

7.      Physical- cleanliness, décor, ambience of the service

The focus of this paper however will be on understanding only marketing mix as it related to product base firms like Coca-Cola and as such, the analysis will be based only on the product mix, place mix, price mix, and promotion mix.

Product mix

Coca-Cola products are the most famous of any brand in the world, and it has been attributed to the company’s continued growth because it allows them to penetrate new markets easily. Its products are very wide and earlier discussion has noted that the companyhouses 500 brands and 3,500 beverage products across its markets (Coca-Cola, 2012). Its top brands include Coke, Fanta, Sprite and Diet Coke. The company has also spent heavily over the course of the past century in building a brand that maintains high customers’ value and recall to enhance the recognition and adoption of its products across the world. Its products have also been innovated in certain areas to handle issues such as high carbonization and sugar. Some of the products that have addressed this issue include Diet Coke which is more of low sugar and low carbon. Sugar free soda brands are always available across the globe.

Price – this is one of the factors that have helped the brand increase its market value and sales. This is based on the understanding that Coca-Cola brands are competitively priced. A can of Coca-Cola brand in the Malaysian market goes for as low as RM1 – RM1.50 depending on the place and specific brand purchased.

Promotion – based on the definition presented by Healey (2008), a brand is the promise made by a company towards customers’ satisfaction and branding has been linked to increased reputation for the company, loyalty and quality assurance. Across the globe, only few companies have been able to develop such a great brand like Coca-Cola has. The company has been able to adopt numerous marketing resources since the 20^th century in creating one of the worlds most renowned and known brand and this is a very strong competitive advantage. The company has adopted all advertisement medium towards promoting its self and it positions itself as a pleasurable and refreshing drink. Some of its most successful campaigns include “The Coke adds Life” and “Have a coke and smile” of the 1970s; “Can’t beat the feeling” and Coke is it!” of the 1980s; “Can’t beat the real thing” of the 1990s; and “Always life” in the 200s. The company sponsors major events across the world and seeks the service of top sportsmen, celebrities and models in promoting the Coca-Cola brand across the world.

Place – In the development of a world class distribution network for its world class brand, the company adopts two strategies in the form of:

1.      Direct selling: This is the method the company uses to make available its products to retailers across the globe. These retailers can be in the form of retail stores, restaurants, cinema halls, shopping malls and so on. In terms of the delivery, the company makes use of its own vehicle in distributing the products.

2.      Indirect selling: This approach is adopted by the company in the form of partnership with numerous distributor agencies that then make their products available to the retailers. In terms of revenue, the distribution agencies rank in most of the revenue for the company because they make purchase on bulks and sometimes in tons.

Besides the traditional distribution approach of delivering the products from the manufacturing plant to the distributor agencies, the company also adopts a unique distribution approach in the African continent and it is known as Manual Distributor Centers (MDCs). They function like a mini distributor agency in which the company delivers their products to these MDCs and the retailers then come from these MDCs to make purchases or the MDCs delivery the products on their own to the retailers. This distribution network as developed by the company is in line with the definition of UNDP (Unite Nations Development Program) that calls on companies to find ways of helping SMEs in the developing and underdeveloped nations in order to help meet the Millennium Development Goal of poverty eradication in these parts of the world.

Summary of the Coca-Cola’s marketing mix

Kotler (1991) and Porter (2008) represents some of the most significant ideas in understanding the concept of marketing mix and they are of the opinion that the success of any company is hugely dependent on how they understand their market and apply the mix towards creating the right products, at the right price and for the right people.

This is exactly what the company has done with its marketing mix that dates back to the 20^th century. That Coca-Cola is presently the most known brand in the world is not because of chances, instead it is because of the continued innovation in marketing mix that the company has adopted over the years. This can further be validated by the fact that the brand has been adopt to change its products with changes in market demand (for instance the Diet and Soda cola that are designed to meet the demand for a more healthy and less sugar products). A reliable distribution network and innovation in the design of its distribution network as presented in the above discussion also account for the brand’s continued growth and success. Overall, Coca-Cola as illustrated in the above analysis has been able to standardize its marketing mix and this have hugely influenced their growth positively.

Coca-Cola’s Internationalization process Theories

In terms of understanding the internationalization process of firms, literatures that surround such process can be divided into two streams of theories as: economic approach and behavioral approach (Andersson, 2000; Benito and Gripsrud, 1992; Mort and Weerawardena, 2006).

Economic approach

The notion of understanding presented by the economic theories is that companies are very much ration in their decision of new markets to enter and that the decision maker has perfect access to information needed to understand the new market and make the decision to enter the market (Andersson, 2000; Buckley et al., 2007; Seifert and Machado-da-Silva, 2007). The decision to enter new market as noted in existing literatures are purely made with the main objective of increase the profitability of the company (Buckley et al., 2007; Glückler, 2006). Some of the economic approaches adopted by Coca-Cola in internationalization of its business are as discussed below.

Electric paradigm in Coca-Cola – the electric paradigm stresses on three advantages that a firm must purpose in order to successfully internationalize into another country. First, the firm must have ownership advantage (well-known brand) that will allow it to mitigate the liabilities of newness in the market. Secondly, the firm must identify the location advantage and make sure it fits’ within its firm strategy. Lastly, the firm needs to access where O-advantage is possible through internationalization (Aurdur, 2010). This is basically the concept adopted by Coca-Cola in internationalization. As a result of its global marketing strategy, the brand has established a well-known name in the beverage industry, and it houses one of the most renowned R&D facilities that are used to study their new markets and changes in customers demand in order to introduce new products that meets these changes and better serves the needs of these customers. This is has advantage of increase competitiveness because by going directly into FDI as a result of brand familiarity, the company will be able to compete directly in the market, understand the needs of the customers and tailor their products to meet these needs. However, it also have the advantage of market unfamiliarity in the sense that since they are new in the market, they might not be in the position to properly understand the market and this will influence their success chances negatively.

International product life-cycle Model – the notion presented in this idea is that internationalization should be done in such a way that cost is reduced by first initiating the in production of the products in the form country (following introduction) and then exporting it to the international market until the products has gained needed awareness (growth), then establish a production facility to meet increase in demand (maturity) (Almor et al., 2006; Lou, Zhao and Du, 2005; Melin, 1992). Basically, this is the strategy adopted by Coca-Cola in most countries. They first introduce their products into these countries (e.g. Malaysia) through importation, then establish a production firm once they have establish themselves within the market. This is of numerous advantages because it allows the company to understand the market through exportation before deciding to venture into FDI. Such a gained understanding will help them to draft the needed competitive strategy that will ensure success. However, it limits their chances of profit because since they don’t deal directly with the customers as they sale through distributor agencies, they might not be in the best position to understand the needs of the customers and as such

Behavioral approach

Theories about the behavioral approach views the organization as comprising of individual learning in which the top management are very important towards understanding how the firm behaves (Andersson, 2000). The focus of this approach is on understanding the impact of international experience on the pace and direction that the company adopts for internationalization. The important definition presented by this approach is the role of organizational knowledge in the internationalization process (Clercq, Sapienza and Crijns, 2005).

In terms of the behavioral approach, the most directly related method when it comes to Coca-Cola is the Uppsala Model. This is probably the most cited model in internationalization process with Johanson and Wiedersheim-Paul (1975, 2004) making the discovery that when internationalizing into a new market, the firm adopts more of a progress approach through distinct functions that come in the form of: no export to export, then to independent representatives (agents), and then to the establishment of sales subsidiaries before finally moving into the establishment of shared or owned production facilities in the country. Another understand presented in this framework is that the flow of information between the firm and the market where it is operating is very important in the internationalization process as heavy emphasis can be laid on the concept of “physic distance”, in which the level of cultural distance that exists between the firms will separate the firm into several unit within the same system. On the side of Coca-Cola, this can be illustrated with their entrance into Malaysia. Initially, the brand was not available to the Malaysian market, but as time went on, importation of the Coca-Cola brand was initiated in the country. Following success, subsidiaries where created in the form of direct selling agents that made the products available to the Malaysian market. On that ground, Coca-Cola continued its quest for growth in the Malaysian market by establishing a shared ownership plan in Nilai in which Malaysian investors owns about 15% of the plant investment (Packaging-gateway.com, 2013). The plant has begun operations since June 2010 (Packaging-gateway.com, 2013). The decision to choose Nilai as the location for the new plant was based on the gained understanding gathered from study that it will allow for easier logistics of raw materials that will be used for production and also the distribution of finished goods.

Influence of COO on consumer perception of Coca-Cola

It shouldn’t come like a surprise to see companies that originated from the USA topping the 100 list of most powerful brands in the world. This is because the US is very much renowned for producing high quality brands that have been used to meet the increasing needs of customers in numerous segments. Additionally, the US government has also been renowned for its increased commitment towards creating a world that is favorable for everybody irrespective of race or country – and this can be demonstrated in their continued investment for peace in different regions of the world. Even when the view is taken from the management perspective, US has some of the most capable, competent and reliable  managers that have turned around companies in different segments of the markets and returned high value in numerous cases where failure was almost the ultimate fate of the company involved. Marketing wise, US has been marketed across the globe in different forms and through different mediums, with Hollywood representing the most famous, sort after, and interesting media conundrum in the world. It seems that everything about US has always been linked to quality, efficiency, effectiveness, reliability and friendly. As such, the country of origin is expected to have high influence on the internationalization of firms that originates from the US.

In the case of Coca-Cola, it is one of the earliest brand in soft drink across the world and helped in building the current sphere of ingenuity that the US is presently renowned for. On that account, the country of origin influences their internationalization positively. This is because value is constantly being communicated to the global market when it comes to US products because the quality is always expected to be high and the ingredients is also expected to be exactly as stated in the product. Well established legal system and consumer protection Acts means that US based corporations cannot toil with the live of the customers in the country and thus, these corporations are expected to carry the same embargo in the global market.

Based on the above analysis, trust and perceived quality has been instilled in the minds of the global markets for consumption of Coca-Cola because of the attribute influence that US as a country of origin has laid on the brands. As such, this can be linked to their continued growth because the governments of these countries are always willing to do business with US corporations in order to maintain good relationship with US government and the consumers prefer US brands to other brands because of the shared view of quality that they have been linked to.

Conclusion

The need for companies to manage the marketing aspect of their international brands cannot be overemphasized and this is based on the gained understanding that the marketing approach adopted by a company can influence their success. In cases where the influence is not successful, the company will be on the pathway of failure and this is basically the need why it is very important that companies take extra time to understand the market they intend to internationalize in, as a way of measuring their potential growth in that market. Even while the company might have internationalize into the market successfully, it is also important that it adopted a well refined marketing mix that is designed with focus on customers in order to offer them the best quality at the lowest possible price. The outcome of such is that the company will be better positioned to meet the needs of the customers and gain high loyalty, which will positively influence their financial performance through a subsequent increase in repurchase.

From the above analysis, a number of discoveries where made with respect to the company analyzed. The finding is that since the 20^th century, Coca-Cola has adopted some of the most renowned practices in terms of marketing and product differentiation. They have gained high market share as a result of their continued product innovation that are designed to meet the ever changing needs of customers. They also adopted internationalization strategies that are designed to suite their business strategies and this have also helped their internationalization process positively. In order to communicate the value of their products, Coca-Cola makes use of celebrities and other value added promotional means and this have also influence their market share positively. In conclusion, it will be stated that the proper management of marketing practices in the international stage is very important and the management of international marketing in Coca-Cola is the factor behind the company’s continued growth in its international market. Additionally, the perception of value from customers was also influenced by the country of origin because US has been renowned for quality and the government of US maintain quality relationship with most governments of the world.

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