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The Marketing Review , 2003, 3, 289-309 www.themarketingreview.com

ISSN 1472-1384/2003/3/00289 + 20 £8.00 ©Westburn Publishers Ltd.

Demetris Vrontis1 and Iain Sharp2

Manchester Metropolitan University Business School and Legal and General

The Strategic Positioning of Coca-Cola in theirGlobal Marketing OperationExamines how Coca-Cola has strategically positioned it self within theworld’s soft drinks market. Given that they operate in over 200 countries, theyare faced with a clear choice of whether to standardise their product offeringsglobally and reap the potential benefits of economies of scale, adapt theirofferings to a particular market (which may facilitate increased marketspecific penetration), or adopt an integrated approach utilising bothapproaches simultaneously (Vrontis’ AdaptStand approach). There has beenmuch literature written regarding the external and often uncontrollable factorswhich may impact upon a firms positioning strategy; this paper looks at theseexternalities and the internal controllables in order to derive a ‘best fit’

strategic and tactical approach. Moreover, this paper looks at the strategicinternational positioning of Coca-Cola by utilising a number of models.

Keywords: Coca-Cola, global, international, strategy, positioning,

adaptation, standardisation, AdaptStand, AdaptStandation, international,marketing,

Introduction

If we consider business to be akin to war, then perhaps there is no betterstarting point than the writings of Sun Tzu [circa 400-320 B.C.]. ‘The Art of

War’ is the oldest formalised writing focusing on the concepts and principlesof warfare and military strategy. Written over two millennia ago, it is still validin the modern world, not only in military terms, but also in business.

“Generally, he who occupies the field of battle first and awaits his enemyis at ease, and he who comes later to the scene and rushes into the fight isweary. And, therefore, those skilled in war bring the enemy to the field ofbattle and are not brought there by him. One able to make the enemy comeof his own accord does so by offering him some advantage. And one able tostop him from coming does so by preventing him. Thus, when the enemy isat ease, be able to tire him, when well fed, to starve him, when at rest tomake him move.” Sun Tzu, The Art of War, The Oldest Military Treatise InThe World.

1 Senior Lecturer, Manchester Metropolitan University Business School

2 Business Planning Manager, Legal and General



290 Demetris Vrontis and Iain Sharp

It is perhaps not so unlikely, that writers such as Porter, Doyle and otheradvocates of strategic positioning have developed their models based uponthis 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 whichthe Greek strategoi (plural of strategos) where implementing their strategicthinking and putting their plan to action.

This paper illustrates how Coca-Cola’s international strategy and tacticswork in harmony after an in-depth consideration of the external forces foundin the global environment.

Strategy and organisational effectiveness are essential to the success ofany organisation, but they are both very different. Strategic positioning, is aunique approach that integrates both strategy and organisationaleffectiveness in a way the serves to differentiate an organisation in its marketplace and drive success.

To understand how Coca-Cola use strategic positioning in their global

marketing strategy we need to explore the term ‘strategic positioning’ andthen to determine how a firm can utilise these strategies.

“When it comes to product strategy, managing in a borderless worlddoesn’t mean managing by averages… it doesn’t mean that the appeal ofoperating globally removes the obligation to localise products” (Ohmae1990: 24).

The Coca-Cola Company: An Overview

The Coca-Cola Company, founded in 1886, is the world leadingmanufacturer, marketer and distributor of non-alcoholic beverage

concentrates and syrups. It currently operates in over 200 countriesworldwide and is most famous for the innovative soft drink, ‘Coca-Cola’, butcan now boast in the region of 230 different brands (www.coca-cola.com).

Its headquarters are in Atlanta, Georgia. Its subsidiaries employ nearly30,000 people around the world. 70% of the company volume and 80% ofthe company profit come from outside the United States. It is one of the mostvisible companies in the world. Their Coca-Cola product is now available allover the world and has resulted in the drink becoming the world’s favouritesoft drink.

But how has this been achieved and how does Coca-Cola continue to holdtheir position in the soft drinks market?

The former chairman of the Coca-Cola Company, Douglas Ivester has

stated that being global is the main strength of the Coca-Cola Company.(Coca-Cola Company, Annual Report, 1998) It is a business with a popular,affordable product, with a strong foothold in many countries



The Strategic Positioning of Coca Cola 291

The global soft drinks market is dominated by 3 household names: Coca-Cola, PepsiCo and Cadbury-Schweppes. Coca-Cola claims 47% of theglobal market, compared with 21% for PepsiCo and 8% for CadburySchweppes. Other major players include Cott and AmBev in Latin America(www.foodlineweb.co.uk ). This is illustrated in table 1 below.

Table 1: Global Carbonated Market Share

% valueCoca Cola 47Pepsi Cola 21Cadbury Schweppes 8Cott 2 AmBev 1Others 21

Total 100

Source: Adapted from www.foodlineweb.co.uk

Coca-Cola’s international success can be attributed to many things butSergio Zyman, former chief marketing officer of the Coca-Cola Companyargued (1999) that in order to think globally, a company must act locally.This message is emphasised many times over by the Coca-Cola Company.

The Coca-Cola Company is recognized all over the world. Their corebrand, Coca-Cola, leads this recognition, but when needed, they are alsovery much a local operation, meeting the demands of local tastes andcultures with more than 230 brands in nearly 200 countries. Whilst Coca-Cola run a global business, it always emphasises that they wish to stay local.Independent business people, who are native to the nations in which they arelocated, (with some exceptions) locally own bottling and distributionoperations.

Consumers will have different experiences, given their personalpreferences and location. Coca-Cola is adjusting its approach (both at astrategic and a tactical level) so that it can tap into these differences andprovide the appropriate marketing activities and beverages to connect withconsumers (www.coca-cola.com).

Coca-Cola’s effectiveness and profitability is obviously well supported bytheir strong competitive position and market share in their primary productmarket – Coca-Cola.

Buzzell and Gale (1987) state that there is a definite correlation betweenthe size of a firm’s market share and the level of profitability i.e. the larger themarket share the greater the level of profitability.

They point to four reasons why market share might be linked to increased

profitability. Firstly, scale economies coupled with an increase in the learningexperience resulting in the most effective and efficient use of productiontechniques and technology. Secondly, customers are unwilling to take risksand will therefore stay with the main market player due to the comfort factor




that prevails. Thirdly, due to the influence and dominance the leader has inthe market it is able to use its position to negotiate lower pricing withsuppliers and to command higher market price for its products. The fourthreason is that the market leader has in place excellent management teamsand it has successful procedures and processes developed throughout theorganisation.

Global Marketing Strategy, Standardisation or/and Adaptation

Many have written on topics related to global strategy, but only a limitednumber of conclusions have been reached.

Mesadag (2000) argues that global marketing is a particular form ofinternational marketing which – in its truest form does not exist. Its essenceis that it covers a broad spread of the world’s countries and that it strives toconsciously standardise its marketing strategy between those countries.

Svensson (2001), comments that a company’s global strategy is closelyrelated to its corporate strategy. The corporate strategy guides theperformance of a company’s overall business activities and the allocations ofresources to achieve established business goals.

Others state that when a company pursues a global strategy, it looks atthe world market as a whole rather than at markets on a country-by-countrybasis (Jeannet and Hennessey, 2001).

Levitt (1983) argues that the optimum global strategy is to produce asingle standardised product and sell it through a standardised marketingprogramme. The challenge for the global corporation is to achieve low costoperations and also to produce products of a high standard. This strive forlow cost through standardising products is key and will result in growth for thecorporation. Companies that dominate small domestic markets will graduallybe eased out by the low cost producing global corporation.

Kogut (1985) in his perspective of global strategy, emphasises strategicflexibility, whilst Collis (1991) has summarised global strategy in the following4 points:

• A global strategy is required whenever there are importantinterdependencies among a business’s competitive position in differentcountries. The acid test is whether a business is better off in onecountry by virtue of its position in another.

• The sources of these interdependencies can be identified, includingscale 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 andPrahalad, 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 theglobal strategy.




Douglas and Wind (1987) argue that the assumption of a consistent model ofmarket and customer behaviour existing across the globe is not universallyaccepted. They claim that this outlook focuses on the product (productorientation) 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 againstthem that serve to fragment markets such as trade barriers and tariffs,communication links, raw material differentials, different market demand anddiffering competitive circumstances. It is therefore apparent that localised(adapted) production and promotion is necessary and must remain.

The Strategic Environment and Strategic Positioning

The fundamental question that the term strategic positioning asks is, what isa good strategy? What factors should be considered in strategic positioningand tactical implementation?

For strategists and marketers alike, considering strategy development

(whether for the domestic or international market) ample considerationshould be given to those elements (external to the company) over which theyhave little or no control.

These groups of elements are Macro, Meso and Micro factors andcomprise the PESTLE (Political, Economic, Social, Technological, Legal andEnvironmental) macro factors, prevailing Trends and Concepts meso factorsand ITEMS (Information, Time, Energy, Money and Space) micro factors.This is illustrated in figure 1 that follows.

Figure 1. The Macro, Meso and Micro Environment

Businesses faced with the prospect of trading beyond the confines of their

national boundaries have to also decide whether to standardise, or adapttheir propositions for specific markets. This by default has implications for theassociated marketing mix and hence the overall strategic positioning andtactical stance which is adopted.

Macro

Meso

Micro

Politics Economics Social TechnologyLegal Environment

Trends and Concepts

Information Time EnergyMoney Space

Systemsand

Structures

Behaviourand

Expressions

IndividualResources




The question of whether to standardise or modify overshadows all the tacticaldecisions that are required from a strategist/international marketer. Itrepresents a very real tension between the profitability promised through costeffectiveness, which is greater when activities are controlled centrally, andthe market effectiveness that is promised if the offering is differentiated tomeet the needs of each geographic segment.

Medina and Duffy (1998) are proponents of adaptation and define it as theprocess of extending and effectively applying domestic target-market-dictatedproduct standards - tangible and/or intangible attributes - to markets inforeign environments.

The Marketing Mix (Product, Price, Place, Promotion, People, PhysicalEvidence and Process Management) is a “tactical toolkit” with which anymultinational company can implement efficient and effective strategy. Eachelement within the marketing mix can therefore be adjusted in order to gainoptimum environment fit and consequently meet customer diverse needs andwants.

Levitt (1983) takes the opposite view and suggests that the globalcompetitor will seek constantly to standardise his offerings everywhere. He

will digress from this standardisation only after exhausting all possibilities toretain it and he will push for reinstatement of standardisation wheneverdigression and divergence have occurred. He argues that the most effectiveworld competitors incorporate the same kind of products sold at home or inthe largest export markets.

Vrontis (2003), the main supporter of integration, argues that the debateon adaptation and standardisation is a huge one and suggests that theexclusive use of either approach is too extreme to be practical. The truth liesin neither of these two polarised positions. Both processes,internationalisation and globalisation, coexist and the decision onstandardisation or adaptation is not a dichotomous one between completestandardisation and adaptation. Rather it is a matter of degree and there is a

wide spectrum in between that the international marketer should be aware.The international marketers should have to search for the right balancebetween standardisation and adaptation and therefore determine the extentof globalisation in a business and adapt the organisation’s responseaccordingly. This is illustrated below in figure 2 in the Vrontis’ Framework of AdaptStand Integration (Vrontis 1999).

We have developed Vrontis’ AdaptStand Framework further, adding thefollowing calculations, to illustrate a subjective view of where Coca-Cola ispositioned on the continua. Figure 3 illustrates the elements of the marketingmix (7P’s) for Coca-Cola in international markets. It also reveals its level ofstandardisation and adaptation with number zero describing completeadaptation and number five complete standardisation. Any other number lies

in the middle of the continuum.




Nature of Product/Service Target Market Organisational FactorsMarket Position

Market Development

•Stage of development

•Stage of product life cycle

Market Conditions

•Cultural differences•Economic Differences

•Differences in customer perceptions

Competitive Factors

•Competitive practices

•Level of competition

Macro/Meso/Micro Factors

P.E.S.TLE

Trends & Concepts

I.T.E.M.S

•Consumer durable (electronics)•Consumer non-durable (food)

•Industrial goods (steel, chemicals)

•Consumer goods•Technology intensive (scientific instruments)

Customer SimilarityGeographical distance

•Internal stance to internationalism

(ethnocentric or not)

•Political•Economic

•Social

•Technological•Legal•Environmental

•Trends and Concepts

•Information

•Time

•Energy•Money

•Space

Figure 2. Vrontis’ Framework of AdaptStand Integration Source: Adapted from Vrontis (1999)

A d a p t a t i on

Product

Price

Place

Promotion

People/Process/

Physical

•Meet d if fe rences in t he s tage o f developm ent M eet consum er d if fe rences in t as te , needs and wants•Meet differences in culture Meet differences in lifestyle

•Meet d i ff erences in consumer percept ions M eet d if fe rences in bel ief s and consumer p ract ices•Meet d i ff erences in t he produc t l if e cyc le M eet d if fe rences in consumer buy ing behaviour pat te rns• Me et di ff ere nce s i n c on su me r h ab it s Me et di ffe re nce s in phy si ca l e nvi ro nme nt

•Meet loca l com peti tion and com peti ti ve p rac tices M eet local packag ing requi rement is sues

•Meet different legal/political requirements and restrictions Psychological meaning and the effect on the consumer •Meet consumer purchase and use motivat ional factors Meet standards required

S t a n d a r d i z a t i on

•Meet development stage differences

•Meet exchange rate fluctuations•Market demand rate•Meet competition and competitive practices

•Meet differences in the product life cycle

•Meet legal/political restrictions

•Meet different development stage and consumer buying behaviour patterns•Meet differences in physical environment•Number and size of intermediaries involved

•Meet market size requirements

•Specialisation among channels of distribution•Differences in distribution structures and patterns•Meet legal/political restrictions

•Differences in logistics decisions•Meet differences in the product life cycle

•Meet competition and competitive practices

•Meet differences in the stage of development•Meet differences in physical environment•Meet legal/political restrictions

•Meet cultural constraints•Meet differences in lifestyle

•Meet differences in consumer perceptions•Meet differences in product life cycle

•Meet competition and competitive practices•Differing consumer buying patterns

•Meet dissimilarity of buying motives•Meet lack of identical availability of media

•Meet different consumer media usage patterns•Meet consumers’ differences in tast

•Motivate and empower employees

•Allow flexibility to meet consumer non-identical need and requirements•Meet local competition and competitive practices

•Production economies of scale•Economies of research and development

•Stock cost reduction•Consumer mobility•Creates world-wide uniformity

•Psychological meaning

•Consistency with customers•Improved planning and control•Synergetic effects

•Better control•Price uniformity and consumer mobility

•Transfer of experience and efficiency

•Economies of scale

•Economies of scale

•Consumer mobility and consistency with customers•Creates world-wide uniformity

•Synergetic effects•Psychological meaning

•Consistency with customers•Offer universal appeal, message and image•Achieve strong corporate identity

•Allows better identification by the customer

An Integrated Approach

1.2.

3.




Product

Price

Place

Promotion

Adapt (international) Standardise (global)

People

Physical

evidence

Process

Each bead can be moved in either

direction along the continuum

The mathematics underpinning this model is quite rudimentary.

Example:

Of the seven elements of the extended marketing mix a maximumscore of 35 points is possible (7*5=35).

If the positions of all the beads are summed, a score of 22.75 isachieved (3.75+1+4.25+2.4.25+4+3.4.25=22.75 )

22.75/35=0.65

0.65*5=3.25

Figure 3. Coca-Cola Quantified

This pictoral representation reveals that the mean is further towards thestandardised extreme than the adapted extreme. In this example 3.25represents the mean position between adaptation and standardisation. Thus,Coca-Cola has deployed the ‘tactical toolkit’ with a more standardisedapproach to its overall marketing strategy.

Porter (1980) and Doyle (1983) are both proponents of positioningstrategy. Porter considers the external factors, which impact upon a firms

competitive positioning. Doyle refers to the choice of target market segmentwhich describes the customers a business will seek to serve and the choiceof differential advantage which defines how it will compete with rivals in thesegment.




Porter claims that competition is at the core of success or failure of the firmand that a successful competitive strategy can establish a profitable andsustainable industry position. He claims that there are two fundamentalquestions underlying the choice of a competitive strategy: firstly, howattractive is the industry with regard to profitability and secondly, what are thedeterminants of competitive position within an industry.

According to Porter there are five competitive forces that will govern therules of competition and these rules will prevail in any industry both indomestic 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

Rivalry

Among Firms

Entry Barriers

Supplier

Bargaining

Power

Buyer

Bargaining

Power

Substitutes

Coca-Cola has high

brand dominance in mkt.

Low buyer

bargaining

power. BUT

Coca-Cola do

have to be

careful not to

price

themselves out

of the market

Coca-Cola Company has wide product

portfolio ∴ low threat of brand substitution

non-alcoholic drink target sector.

Low supplier bargaining

power due to scale of

Coca-Cola. Similar to

supermarkets

Main competitionlimited to small

number of big

players and COD

brands

Figure 4. Porter 5 Forces ModelSource: Porter, 1985

So, what is a good strategy? Can a firm position itself in order to gaincompetitive advantage over its competitors? Is there a specific position a firmshould take in order for its strategy to be successful?

Rumelt (1980), states that competitive advantages can normally be foundin superior resources, superior skills or a superior position. Resources and

skills enable a firm to do more, or do it better than the competition. Differentresources and skills will be required dependant on the industry or marketsegment. Positional advantage is how the arrangement of these resourcesand skills are used to out manoeuvre the competition. Positional advantage




can be gained by forward planning, greater skill and resources, or luck! Oncea dominant position is gained it is difficult for the competition to dislodge theincumbent firm provided the position merits continuation and that it isextremely costly for competitors to take over.

As long as environmental forces remain constant position can remainconstant. 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 bedesigned after a careful consideration of the situational environment.

It is apparent from the following figure (figure 5) that businesses findingthemselves to the left of this matrix are destined to die, strategy being the keyfactor as to how quickly.

Considering Coca-Cola’s international performance, we can argue that thecompany is thriving as it is effective-doing things right (having the desiredeffect, producing the intended result) and efficient-doing the right thing (ableto work well and without wasting time or resources).

Die (slowly)

3

Survive

1

Die (quickly)

4

Thrive

2

Strategy

Efficient

Inefficient

Ineffective Effective

Figure 5. Strategy Tactics GridSource: McDonald & Leppard, 1993: 7

The firm has to consider more than the industry structure, it also has to takean appropriate position within the industry. This positioning will determine thecompetitive advantage a firm can have namely, low cost or differentiationagainst competitive scope at the broad or narrow market (see figure 6).

The Coca-Cola Company has adopted both a Differentiation and a CostLeadership Strategy.

Tactics




Cost Leadership

*

Differentiation

FocusCost Focus

Differentiation

*

Competitive Advantage

Compe

titiveScop e

Lower Cost Differentiation

Broad

Narrow

Figure 6. Porter Generic Strategy Grid

The use of a differentiation strategy is where the firm attempts to be diversefrom its competitors by adding something to its product that will provide aunique value to its customers. There are also various ways a firm candifferentiate depending on the industry it is in, however the costs of thisdifferentiation policy must be lower than the additional pricing the firm canobtain.

Differentiation for Coca-Cola is achieved through perceived superiorquality product, which surpasses their nearest rivals, and high brand imageand recognition. The company has also used their promotion and packagingas a means of further differentiation, for example, the Coca-Cola bottle,which has become an internationally recognised symbol. The decision in1999 to revitalise the contoured bottle design was Coca-Cola’s first globalmarketing priority (Boutzikas, 2000). They capitalised on a resource thatnone of their competitors had or have as an asset. They can, therefore,adopt a premium pricing policy in many markets where economic conditionsallow.

It should also be noted that Coca-Cola is positioned in the CostLeadership quadrant.

Aaker (1998) points out that there are several approaches a firm can taketo become a low cost producer, which can be used in isolation or as acombination. The most basic way to a low cost is to remove all the ‘extras’from the product and produce a no frills offering. The danger in this strategyis that the way is paved for a feature war. The design or make up of theproduct can create cost advantages, for example, the use of alternative

materials. The production and operational processes a firm employs can alsoreduce costs. Another example would be the efficient use of distributionnetworks, manufacturing systems or the use of low cost labour and productinnovation.




Economies of scale is the obvious way of reducing costs as there are naturalefficiencies associated with size, although not necessarily so with firms thatwill have multiple or diversified products. Aaker (1998) also points to theexperience curve whereby firms utilise knowledge and learning gained overtime as a way of cost reduction. For example, the more times a process iscarried 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 andpromotion, but also through learning, knowledge and experience inproduction and operational processes. It is also achieved througheffective/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 showclearly, 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, butalso in medium and long term.

Objectives

Management focus

Target market

Energy directed at

Differential

advantage

Key component of mix

Organizational

culture

Short-term profit

Productivity

Existing customers

Own staff

Cost Control

Price

Financial

Medium-term profit

Beat competition

Competitor’s customers

Competition

Segmentation

Promotion/place

Marketing

Innovation

New product/markets

New customers

The unknown future

Differentiation

Product

Entrepreneurial

Business activities Short term Medium term Long Term

Focus for Success

Figure 7. Strategic Focus MatrixSource: McDonald and Leppard (1993)

As previously mentioned, The Coca-Cola Company has an impressivegeographic presence. If we consider Coca-Cola’s global strategy withreference to Ansoff’s (1957), illustrated in figure 8, it highlights a clear

strategic evolution in the case of the Coca-Cola Company.




Current products New Products

C u r r e

n t m a r k e t s

N e w m a r k e t s

Market Penetration Strategies

•Increase market share

•Increase product usage:

- increase frequency of use

- increase quantity used

- new application

Product Development Strategies

•Product improvement

•Product line extensions

•New products for same markets

Diversification Strategies

•Vertical Integration:

- forward integration

- backward integration

•Diversification into related businesses

(concentric diversification)

•Diversification into unrelated

businesses

(conglomerate diversification)

Market Development

Strategies

•Expand markets for existing

products

- geographic expansion

- target new segments

Figure 8. Ansoff MatrixSource: Ansoff, 1957

In the beginning there was Coca-Cola, a single core product, geographicallylocated in the US. Overtime, this singular core product had becomeestablished in its home market by increasing market share and productusage (Market Penetration Strategy).

Coca-Cola was later launched into foreign markets and competed withinthe international arena. This Market Development Strategy was undertakenby targeting new geographical areas and target segments.

As these foreign markets developed further, the Coca-Cola Company wasfaced with the problem of how to further penetrate them. The solution wassimply to develop new products (Diet Coke, Fanta and Sprite), which overtime have also become core products (Product Development Strategy). Howdoes Coca-Cola increase market penetration still further?

Again, the solution is to develop new products in new markets. OriginallyCoca-Cola’s business was defined as one operating in the carbonated softdrinks (CSD) market. In order to further penetrate these markets Coca-Colahas broadened the definition of the business it is in to ‘ready packaged liquidrefreshments’. This has allowed the company to look beyond its traditionalCSD market, to markets such as bottled water, fruit juices and innovativeready to drink tea markets. They have therefore successfully used aDiversification Strategy.

Strategic marketing planning makes use of a number of analytical modelsthat help to develop a strategic view of the business, and thus can be usedas decision-making aids. The Boston Consulting Group Matrix (see figure 9)




is one of these models. Its fundamental concept is that although products/Strategic Business Units (SBU’s) may be managed as individual entities onan operational basis, strategically they should be viewed as a portfolio. Thebest portfolio is the one that best fits the company’s strengths andweaknesses to opportunities in the environment. The company must analyseits current business portfolio or Strategic Business Units SBU’s, decide which

SBU’s should receive more, less, or no investment, and develop growthstrategies for adding new products or businesses to the portfolio.

Figure 9. The Boston Consulting Group Matrix

Looking at figure 10, consumption per capita being substituted as a closeproxy for market share (in its absence), it is clear that those countries to theleft of the matrix appear to have been managed in such a way so as toalmost have a uniform growth rate.

Question Marks

• High growth, low share

• Build into Stars/ phase out

• Require cash to hold

• market share

Stars

• High growth & share

• Profit potential

• May need heavy investmentto grow

Cash Cows

• Low growth, high share

• Established, successful

SBU’s

•Produce cash

Dogs

• Low growth & share

• Low profit potential

Relative Market Share

High Low

Marke

t

Growth

Ra

te

HIg

h

Lo

Liquidated

Selected few




Coca-Cola Operating Regions Per Capita Consumption (litres pa)

020%40%60%80%100%120%

Relative Market Share

Nordic&

Northern

Eurasia

reat Britain

Spain

Germany

Central Europe

& Eurasia

France

Northern

Africa

Middle East &

North Africa

Mexico

Chile Argentina Brazil

Columbia

USA Australia

Japan

Phillipines

Korea

China

Southern

Africa

-20.0

0.0%

20.0%

40.0%

60.0%

1997 - 2000

C A G R

Figure 10. Coca-Cola Consumption - Boston Consulting GroupMatrix

The ‘problem child’, Nordic & Northern Eurasia, has shown significant growthwhich eventually could see this region move into the star/cashcow quadrantsif critical mass is built up. If Coca-Cola were to follow the direction advocatedby the BCG matrix and liquidate those poorly performing countries in the‘Dog’ area this would perhaps have implications for the Coca-ColaCompany’s global presence. It is therefore unlikely that they would seek to dothis. It is possible that many of these ‘Dogs’ might form the basis of emergingand 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 derivedfrom this market, then it becomes clear that they are positioned in the‘Protect Position’ quadrant of the Mckinsey Matrix (figure 11). This meansthat the company should concentrate efforts on maintaining its existingstrength by investing to grow at maximum digestible rate.

It is also recommended that they can capitalise on ‘first mover’ advantageand 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 someextent drive the market.




Protect Position Invest To Build Build Selectively

Bui ld Select ively Selectively Manage

For Earnings

Limited Expansion

Or Harvest

Protect And Refocus Manage For Earnings Divest

•Invest to grow at

maximum digestible rate

•Concentrate effort on

maintaining strength

•Challenge for leadership

•Build selectively on

strengths

•Reinforce vulnerable areas

•Specialize around limited

strengths

•Seek ways to overcome

weaknesses

•Withdraw if indications

of sustainable growth are

lacking

•Invest heavily in most

attractive segments

•Build up ability to counter

competition

•Emphasize profitability by

raising productivity

•Protect existing program

•Concentrate investments

in segments where

profitability is good and

risk is relatively low

•Look for ways to expand

without high risk;

otherwise, minimise

investment and rationalise

operations

•Manage for current

earnings

•Concentrate on attractive

segments

•Defend strengths

•Protect position in most

profitable segments

•Upgrade product line

•Minimise investment

•Sell at time that will

maximise cash value

•Cut fixed costs and avoid

investment meanwhile

Strong Medium Weak

H i g h

M e d

i u m

L o

w

Competitive position of firm

M a r k e t A t t r a c t i v e n

e s s

Figure 11. The Coca-Cola Company’s Position in the MckinseyMatrixSource: Day (1986)

Markides (1999) further states that, behind every successful company, thereis superior strategy. The company may have developed this strategy throughformal analysis, trial and error, intuition, or even pure luck. No matter how itwas developed, it is the strategy that underpins the success of the company.

To understand corporate success, the logic of successful strategies mustbe understood. It would be quite incredible to identify two people who sharethe same definition of strategy from the concept of “strategy as positioning” to“strategy as visioning”.

Conclusion

The Coca-Cola Company, founded in 1886, is the world leadingmanufacturer, marketer and distributor of non-alcoholic beverageconcentrates and syrups. Today, Coca-Cola has an international presence,operating in more than 230 brands in nearly 200 countries, with around 70%of the company volume and 80% of the company profit come from outsidethe United States.

A number of uncontrollable elements affect Coca-Cola’s internationalmarketing strategy and tactical implementation. These groups of elementsare 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 makes the exclusive use of




either approach too extreme to be practical and urges multinationalmarketers to search for the right balance between standardisation andadaptation.

Coca-Cola’s core ‘global’ brands are mainly standardised, but with anumber of adaptations taking place. Although the company may strive for acompletely standardised strategic approach, drawing on the associated

economies of scale, in reality they are following the Integrated AdaptStandapproach as advocated by Vrontis (2003).

The company’s effectiveness and profitability is obviously well supportedby their strong competitive position and market share in their primary productmarket – Coca-Cola. Other brands like Diet Coke, Sprite and Fanta havealso been internationally recognised and profitable. Its’ international successis achieved by the company’s strategy and tactics, which complement eachother and work in harmony providing the optimum return bounded byefficiency. The company is thriving as it is both effective (doing things right)and efficient (doing the right thing).

Coca-Cola is adopting Differentiation and Cost Leadership strategies(Generic Strategies). In terms of Differentiation, the firm attempts to be

diverse from its competitors by adding something to its product that willprovide a unique value to its customers. This is achieved through well-designed and managed marketing activities resulting to perceived superiorquality product and high brand image and recognition. Further, CostLeadership is achieved not only through economies of scale, but also throughlearning, knowledge and experience in production and operationalprocesses, and through effective/efficient distribution networks andmanufacturing systems.

In relation to Ansoff, Coca-Cola is using a number of strategies. Initially, itused the Market Penetration Strategy and become established in its homemarket by increasing market share and product usage. Then, it used aMarket Development Strategy by expanding its operations into foreign

markets. Later, it developed new products, both at a national andinternational level (Product Development) and then started operations in thecarbonated soft drinks market (Diversification Strategy).

This also ensures that Coca-Cola has a comprehensive product portfolioin each market, increasing the likelihood of a purchase of a Coca-ColaCompany branded product. This portfolio is well managed and enables thebest fit between the company’s strengths and weaknesses to theopportunities found in the environment.

In considering the strong competitive position of the firm in a highlyattractive market, it is suggested that Coca-Cola should Protect its Position(Mckinsey Matrix). This can be achieved by concentrating efforts onmaintaining its existing strength by investing to grow at maximum digestible

rate.Coca-Cola should maintain its marketing orientation not only in its

strategic approach but also in its tactical day-to-day operations. It shouldconstantly undertake market research to enable it understand the




environment in which it operates and allow it develop products that satisfycustomer needs. This goes in line with the definition of marketing (both at anational and international level), which is about identifying, anticipating andsatisfying consumer requirements.

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Appendix

Country Specific Examples

Poland “…in 1994 there were groups of Polish youths and young adults who lookeddown on the American way, and preferred to preserve their own identity andheritage. Many would rather support a local cola brand than buy Coke”.




(Dana and Oldfield, 1999)Evidence of adaptation within regions of countries (i.e. one bottling plant)

was very much aligned with western ideals e.g. the first baseball diamond -baseball represented the American way.

Is Coca-Cola guilty of imposing these ideals and adopting an ethnocentricviewpoint? (Thomas and Hill, 1999)

Lublin bottlers adopted a much more localized approach and bottled,packaged and marketed differently to appeal to the consumer preferenceswithin Lublin’s territory.

Asia PacificLong Term objectives concentrated in Chinese/Japanese markets wherethere are growth opportunities.

Purchasing power and income per head in Asian countries will exceed thatof the US in 2010 (Coca-Cola Company Annual Report, 1998).

VietnamTarget audience, primarily teenagers, (people under 20 = 50% ofpopulation). 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 toNorth/South division advertising has to reflect cultural and politicalsensitivities.

Pepsi entered the Vietnamese market first and they (Vietnamese) in turnbecame brand loyal.

When introducing its product, Pepsi was very sensitive to the traditions andvalues of the Vietnamese people. The company utilised Miss Vietnam(favourite role model in traditional dress playing classical music - sceneswitches to western style bar where seen drinking Pepsi - depictsinternationalism. This gave Pepsi a huge leap in market share.

Coca-Cola thus needed to adopt a similar but differentiated strategy inorder to gain market share.

ChinaProduct quality, consumer trust and perceived value are traits Chineseconsumers 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 andother beverages into their lives”. (Douglas Daft, CEO, 2000)

Latin America“We are continuing to focus on developing our core brands and introducinglocal CSD brands. We entered the water segment in Latin America in 1995;

however, beginning this year, we are putting some real marketing muscleinto this category” (Douglas Daft, CEO, 2000).




ArgentinaDue to the prevailing economic conditions (income tax increases) Coca-colahave adjusted certain strategies to offer more affordable packaging optionsto facilitate greater competition with other local brands (www.coca-cola.com).

About the Authors

Demetris Vrontis is a senior lecturer at the Manchester MetropolitanUniversity Business School (MMUBS) and teaches marketing andinternational marketing across the Business School in both under andpostgraduate level. At the same time he is the course leader at thePostgraduate Certificate and Diploma in Strategic marketing and supervisespostgraduate research students at MA, MPhil and Ph.D. level. Otheractivities include being an external examiner, moderator for Nottingham TrentUniversity (in its cooperation with a number of Greek Business Schools) anda visiting lecturer at a number of Universities. Dr Vrontis is an active memberof the IMRG (International Marketing Research Group) centre, undertaking

research and providing consultation to a numer of national and internationalcompanies, in both consumer and trade markets. His prime research interestis international marketing planning and specifically to investigatemultinational companies’ tactical and strategic marketing behaviour, an areathat he had widely published and presented papers to conferences on aglobal basis. He is currently acting as a guest editor and reviewer in anumber of books and academic journals and he is the author of a number ofbook in international/global marketing and strategic marketing planning.

Iain Sharp is Business Planning Manager for Legal & General’s (major UKLife Assurer) Retail Distribution Division. Iain is responsible for theproduction of the division’s annual Business Plan, monitoring progress

against key objectives and is thus heavily involved in overall strategicanalysis and strategy formulation. His primary interest lies in marketpositioning and the associated strategies and tactics, marrying up internalcompany aspirations and their resultant market impacts. This has proven tobe a very detailed and involving process given a business environment whichis greatly influenced by weak equity markets and the number of regulatoryreviews currently impacting the Financial Services sector.

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