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The Marketing Review, 2003, 3, 289-309 www.themarketingreview.com
Introduction
1
Senior Lecturer, Manchester Metropolitan University Business School
2
Business Planning Manager, Legal and General
ISSN 1472-1384/2003/3/00289 + 20 £8.00 ©Westburn Publishers Ltd.
290 Demetris Vrontis and Iain Sharp
It is perhaps not so unlikely, that writers such as Porter, Doyle and other
advocates of strategic positioning have developed their models based upon
this ancient text.
According to Cummings (1993) the word strategy derives from the ancient
Athenian position of strategos – στρατηγός. Strategos was a compound of
‘stratos - στρατός’, which in Greek means army.
Moreover, ‘tactiki - τακτική’, in Greek meaning tactics, is the way in which
the Greek strategoi (plural of strategos) where implementing their strategic
thinking and putting their plan to action.
This paper illustrates how Coca-Cola’s international strategy and tactics
work in harmony after an in-depth consideration of the external forces found
in the global environment.
Strategy and organisational effectiveness are essential to the success of
any organisation, but they are both very different. Strategic positioning, is a
unique approach that integrates both strategy and organisational
effectiveness in a way the serves to differentiate an organisation in its market
place and drive success.
To understand how Coca-Cola use strategic positioning in their global
marketing strategy we need to explore the term ‘strategic positioning’ and
then to determine how a firm can utilise these strategies.
% value
Coca Cola 47
Pepsi Cola 21
Cadbury Schweppes 8
Cott 2
AmBev 1
Others 21
Total 100
Source: Adapted from www.foodlineweb.co.uk
that prevails. Thirdly, due to the influence and dominance the leader has in
the market it is able to use its position to negotiate lower pricing with
suppliers and to command higher market price for its products. The fourth
reason is that the market leader has in place excellent management teams
and it has successful procedures and processes developed throughout the
organisation.
Global Marketing Strategy, Standardisation or/and Adaptation
Many have written on topics related to global strategy, but only a limited
number of conclusions have been reached.
Mesadag (2000) argues that global marketing is a particular form of
international marketing which – in its truest form does not exist. Its essence
is that it covers a broad spread of the world’s countries and that it strives to
consciously standardise its marketing strategy between those countries.
Svensson (2001), comments that a company’s global strategy is closely
related to its corporate strategy. The corporate strategy guides the
performance of a company’s overall business activities and the allocations of
resources to achieve established business goals.
Others state that when a company pursues a global strategy, it looks at
the world market as a whole rather than at markets on a country-by-country
basis (Jeannet and Hennessey, 2001).
Levitt (1983) argues that the optimum global strategy is to produce a
single standardised product and sell it through a standardised marketing
programme. The challenge for the global corporation is to achieve low cost
operations and also to produce products of a high standard. This strive for
low cost through standardising products is key and will result in growth for the
corporation. Companies that dominate small domestic markets will gradually
be eased out by the low cost producing global corporation.
Kogut (1985) in his perspective of global strategy, emphasises strategic
flexibility, whilst Collis (1991) has summarised global strategy in the following
4 points:
• A global strategy is required whenever there are important
interdependencies among a business’s competitive position in different
countries. The acid test is whether a business is better off in one
country by virtue of its position in another.
• The sources of these interdependencies can be identified, including
scale economies (Levitt, 1983), accumulated international experience,
possession of global brand name, a learning curve effect (Porter,
1985), and the option value or cross-subsidisation (Hamel and
Prahalad, 1985) that a multi-market presence confers.
• The critical issues that a global strategy must address include the
configuration and co-ordination of the business’s worldwide activities
(Porter, 1986).
• The organization structure should be aligned with and derived from the
global strategy.
The Strategic Positioning of Coca Cola 293
Douglas and Wind (1987) argue that the assumption of a consistent model of
market and customer behaviour existing across the globe is not universally
accepted. They claim that this outlook focuses on the product (product
orientation) and not on the customer (marketing orientation).
The factors that favour globalisation are issues such as cost economies,
transport costs and networks, learning and experience, technological and
operational capacity. These issues however have factors working against
them that serve to fragment markets such as trade barriers and tariffs,
communication links, raw material differentials, different market demand and
differing competitive circumstances. It is therefore apparent that localised
(adapted) production and promotion is necessary and must remain.
The fundamental question that the term strategic positioning asks is, what is
a good strategy? What factors should be considered in strategic positioning
and tactical implementation?
For strategists and marketers alike, considering strategy development
(whether for the domestic or international market) ample consideration
should be given to those elements (external to the company) over which they
have little or no control.
These groups of elements are Macro, Meso and Micro factors and
comprise the PESTLE (Political, Economic, Social, Technological, Legal and
Environmental) macro factors, prevailing Trends and Concepts meso factors
and ITEMS (Information, Time, Energy, Money and Space) micro factors.
This is illustrated in figure 1 that follows.
Systems
Macro Politics Economics Social Technology and
Legal Environment Structures
Behaviour
Meso Trends and Concepts and
Expressions
Businesses faced with the prospect of trading beyond the confines of their
national boundaries have to also decide whether to standardise, or adapt
their propositions for specific markets. This by default has implications for the
associated marketing mix and hence the overall strategic positioning and
tactical stance which is adopted.
294 Demetris Vrontis and Iain Sharp
Market Position Nature of Product/Service Target Market Organisational Factors Macro/Meso/Micro Factors
P.E.S.TLE
Trends & Concepts
I.T.E.M.S
Market Development •Consumer durable (electronics) Customer Similarity •Internal stance to internationalism •Political
•Consumer non-durable (food) Geographical distance (ethnocentric or not) •Economic
•Stage of development •Industrial goods (steel, chemicals) •Social
•Stage of product life cycle •Consumer goods •Technological
•Technology intensive (scientific instruments) •Legal
•Environmental
Competitive Factors
•Competitive practices
•Level of competition
•Meet differences in the stage of development Meet consumer differences in taste, needs and wants •Production economies of scale
•Meet differences in culture Meet differences in lifestyle •Economies of research and development
•Meet differences in consumer perceptions Meet differences in beliefs and consumer practices •Stock cost reduction
Product •Meet differences in the product life cycle Meet differences in consumer buying behaviour patterns •Consumer mobility
•Meet differences in consumer habits Meet differences in physical environment •Creates world-wide uniformity
•Meet local competition and competitive practices Meet local packaging requirement issues •Psychological meaning
•Meet different legal/political requirements and restrictions Psychological meaning and the effect on the consumer •Consistency with customers
•Meet consumer purchase and use motivational factors Meet standards required •Improved planning and control
•Synergetic effects
2.
1. •Meet different development stage and consumer buying behaviour patterns
Standardization
•Meet differences in physical environment
•Number and size of intermediaries involved
Adaptation
3. An Integrated Approach
Product
Price
Place
Promotion
People
Physical
evidence
Process
Porter claims that competition is at the core of success or failure of the firm
and that a successful competitive strategy can establish a profitable and
sustainable industry position. He claims that there are two fundamental
questions underlying the choice of a competitive strategy: firstly, how
attractive is the industry with regard to profitability and secondly, what are the
determinants of competitive position within an industry.
According to Porter there are five competitive forces that will govern the
rules of competition and these rules will prevail in any industry both in
domestic and international markets. The five forces are:
• The entry of new competition entering the market
• The threat of substitutes or replacement products
• The bargaining power of buyers
• The bargaining power of suppliers
• The rivalry of between firms of the same sector
Figure 4 that follows details these five forces in relation to Coca-Cola.
Porter 5 Forces Model
Coca-Cola has high Main competition
brand dominance in mkt. limited to small
number of big
Low supplier bargaining
players and COD
power due to scale of
brands
Coca-Cola. Similar to
Entry Barriers
supermarkets Low buyer
bargaining
power. BUT
Supplier Coca-Cola do
Rivalry Buyer have to be
Bargaining
Among Firms Bargaining careful not to
Power
Power price
themselves out
of the market
Substitutes
So, what is a good strategy? Can a firm position itself in order to gain
competitive advantage over its competitors? Is there a specific position a firm
should take in order for its strategy to be successful?
Rumelt (1980), states that competitive advantages can normally be found
in superior resources, superior skills or a superior position. Resources and
skills enable a firm to do more, or do it better than the competition. Different
resources and skills will be required dependant on the industry or market
segment. Positional advantage is how the arrangement of these resources
and skills are used to out manoeuvre the competition. Positional advantage
298 Demetris Vrontis and Iain Sharp
can be gained by forward planning, greater skill and resources, or luck! Once
a dominant position is gained it is difficult for the competition to dislodge the
incumbent firm provided the position merits continuation and that it is
extremely costly for competitors to take over.
As long as environmental forces remain constant position can remain
constant. Positional advantage can take the form of size or scale,
differentiation from competitors and successful trading names.
To be successful, a company needs to get both its strategy and tactics
working in harmony to provide the optimum return bounded by efficiency
(McDonald and Leppard, 1993). Both strategy and tactics should be
designed after a careful consideration of the situational environment.
It is apparent from the following figure (figure 5) that businesses finding
themselves to the left of this matrix are destined to die, strategy being the key
factor as to how quickly.
Considering Coca-Cola’s international performance, we can argue that the
company is thriving as it is effective-doing things right (having the desired
effect, producing the intended result) and efficient-doing the right thing (able
to work well and without wasting time or resources).
Strategy
Ineffective Effective
Tactics
The firm has to consider more than the industry structure, it also has to take
an appropriate position within the industry. This positioning will determine the
competitive advantage a firm can have namely, low cost or differentiation
against competitive scope at the broad or narrow market (see figure 6).
The Coca-Cola Company has adopted both a Differentiation and a Cost
Leadership Strategy.
The Strategic Positioning of Coca Cola 299
Competitive Advantage
Lower Cost Differentiation
Broad
* *
Differentiation
Cost Focus
Focus
Narrow
Economies of scale is the obvious way of reducing costs as there are natural
efficiencies associated with size, although not necessarily so with firms that
will have multiple or diversified products. Aaker (1998) also points to the
experience curve whereby firms utilise knowledge and learning gained over
time as a way of cost reduction. For example, the more times a process is
carried out, the more efficient the process becomes. The use of technology
and plant will also be maximised over time.
The Coca-Cola’s positioning in the Cost Leadership quadrant is achieved
not only through economies of scale in research, development and
promotion, but also through learning, knowledge and experience in
production and operational processes. It is also achieved through
effective/efficient distribution networks and manufacturing systems.
McDonald and Leppard (1993) have developed a strategic focus matrix
(see figure 7), which emphasises the impact of time on business activities.
The elements relating to the marketing mix have been emboldened to show
clearly, where they are positioned in relation to time. It is our view that Coca-
Cola adopts the following recommendations, not only at the short term, but
also in medium and long term.
Current markets
•Increase market share •Product improvement
•Increase product usage: •Product line extensions
- increase frequency of use •New products for same markets
- increase quantity used
- new application
Diversification Strategies
Market Development
Strategies •Vertical Integration:
New markets
- forward integration
•Expand markets for existing - backward integration
products
- geographic expansion •Diversification into related businesses
- target new segments (concentric diversification)
40.0%
CAGR
Germany France
Spain China
Mexico Japan
Southern Korea
USA Chile Aust ralia Africa
Argent ina Brazil
0.0%
Northern
Phillipines
Africa
Central Europe Columbia
& Eurasia
The ‘problem child’, Nordic & Northern Eurasia, has shown significant growth
which eventually could see this region move into the star/cashcow quadrants
if critical mass is built up. If Coca-Cola were to follow the direction advocated
by the BCG matrix and liquidate those poorly performing countries in the
‘Dog’ area this would perhaps have implications for the Coca-Cola
Company’s global presence. It is therefore unlikely that they would seek to do
this. It is possible that many of these ‘Dogs’ might form the basis of emerging
and growth markets in the future.
Further, if we consider Coca-Cola’s position as market leader within the
‘pre-packaged liquid refreshments’ market and the relative profits derived
from this market, then it becomes clear that they are positioned in the
‘Protect Position’ quadrant of the Mckinsey Matrix (figure 11). This means
that the company should concentrate efforts on maintaining its existing
strength by investing to grow at maximum digestible rate.
It is also recommended that they can capitalise on ‘first mover’ advantage
and therefore ‘drive’ market innovation. This reflects the concepts of the
‘inside-out’ or competencies based approach (Prahalad and Hamel, 1990;
Sanchez, et al. 1996) or the capabilities based approach (Stalk, et al. 1992) -
i.e. because of their relative size in the market, Coca-Cola can to some
extent drive the market.
304 Demetris Vrontis and Iain Sharp
High
•Concentrate effort on strengths •Seek ways to overcome
maintaining strength •Reinforce vulnerable areas weaknesses
•Withdraw if indications
of sustainable growth are
lacking
Market Attractiveness
Build Selectively Selectively Manage Limited Expansion
For Earnings Or Harvest
•Invest heavily in most
Medium
attractive segments •Protect existing program •Look for ways to expand
•Build up ability to counter •Concentrate investments without high risk;
competition in segments where otherwise, minimise
•Emphasize profitability by profitability is good and investment and rationalise
raising productivity risk is relatively low operations
•Manage for current •Protect position in most •Sell at time that will
earnings profitable segments maximise cash value
Low
•Concentrate on attractive •Upgrade product line •Cut fixed costs and avoid
segments •Minimise investment investment meanwhile
•Defend strengths
Markides (1999) further states that, behind every successful company, there
is superior strategy. The company may have developed this strategy through
formal analysis, trial and error, intuition, or even pure luck. No matter how it
was developed, it is the strategy that underpins the success of the company.
To understand corporate success, the logic of successful strategies must
be understood. It would be quite incredible to identify two people who share
the same definition of strategy from the concept of “strategy as positioning” to
“strategy as visioning”.
Conclusion
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www.coca-cola.com
www.foodlineweb.com
Appendix
Poland
“…in 1994 there were groups of Polish youths and young adults who looked
down on the American way, and preferred to preserve their own identity and
heritage. Many would rather support a local cola brand than buy Coke”.
308 Demetris Vrontis and Iain Sharp
Asia Pacific
Long Term objectives concentrated in Chinese/Japanese markets where
there are growth opportunities.
Purchasing power and income per head in Asian countries will exceed that
of the US in 2010 (Coca-Cola Company Annual Report, 1998).
Vietnam
Target audience, primarily teenagers, (people under 20 = 50% of
population). Target audience anxious for freedom and associated ideals
(perhaps due to events of past) (Dana and Oldfield, 1999). Hence,
marketing adapted and focussed towards this segment. Also due to
North/South division advertising has to reflect cultural and political
sensitivities.
Pepsi entered the Vietnamese market first and they (Vietnamese) in turn
became brand loyal.
When introducing its product, Pepsi was very sensitive to the traditions and
values of the Vietnamese people. The company utilised Miss Vietnam
(favourite role model in traditional dress playing classical music - scene
switches to western style bar where seen drinking Pepsi - depicts
internationalism. This gave Pepsi a huge leap in market share.
Coca-Cola thus needed to adopt a similar but differentiated strategy in
order to gain market share.
China
Product quality, consumer trust and perceived value are traits Chinese
consumers look for in leading brands. Coca-Cola developed a number of
‘market specific’ brands in order to further penetrate local markets, e.g.
Smart was the first soft drink developed for the Chinese market. Due to
“widely dispersed consumer preferences are in this region” (www.coca-
cola.com).
“We are developing relationships with consumers and getting Coke and
other beverages into their lives”. (Douglas Daft, CEO, 2000)
Latin America
“We are continuing to focus on developing our core brands and introducing
local CSD brands. We entered the water segment in Latin America in 1995;
however, beginning this year, we are putting some real marketing muscle
into this category” (Douglas Daft, CEO, 2000).
The Strategic Positioning of Coca Cola 309
Argentina
Due to the prevailing economic conditions (income tax increases) Coca-cola
have adjusted certain strategies to offer more affordable packaging options
to facilitate greater competition with other local brands (www.coca-cola.com).
Iain Sharp is Business Planning Manager for Legal & General’s (major UK
Life Assurer) Retail Distribution Division. Iain is responsible for the
production of the division’s annual Business Plan, monitoring progress
against key objectives and is thus heavily involved in overall strategic
analysis and strategy formulation. His primary interest lies in market
positioning and the associated strategies and tactics, marrying up internal
company aspirations and their resultant market impacts. This has proven to
be a very detailed and involving process given a business environment which
is greatly influenced by weak equity markets and the number of regulatory
reviews currently impacting the Financial Services sector.