1/9/2018 level soft drinks company. The business model

1/9/2018
 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARKETING SEGMENTS AND DECISION MAKING

 

Executive summary

The research is presented here based on marketing segment and
decision making in the perspective of coca cola. The research study also
highlights on several the macro factors that can influence the customers.
However, each company is aware of making proper business plan and taking
effective decision so that they can run the company for a long time. As coca
cola is a leading giant company in beverage industry, the employees are more
aware of the factors so that they can meet all the needs.  

 

Table of Contents

(1) Industry trends. 4

(2) Market segments overall 10

3.  Involvement in Primary segmentation and
decision-making. 11

(4)     Competition. 12

(5) Positioning map for organization considering the primary
segment with its     involvement 14

Reference list 16

 

 

(1) Industry trends

a. Growth: Coca – Cola can be stated as a most popular, gold level soft
drinks company. The business model of this company is tremendously strong. In
the year of 1886, Mr. John S. Pemberton founded a most ordinary pharmacy, which
later on converted to a far cry in today’s operation. More than in 230 countries
it has successfully spread its business. A survey analysis conducted by soft
drinks control board of Australia directs that, in every second around human
being consumes about 22,000 beverage of Coca-Cola. Another survey hold by the
company directs that, from all of the warehouses daily 1.9 billion Coca – Cola
product are dispatches. The main theory of such success is that, this world
famous brand follows a diverse business model for its business operation
(Solomon, 2014). The shareholders of coca cola are also facilitated by free
cash flow as the company follows divertive business model. A survey analysis
directs towards that, in the last 5 years about 39 million dollar from the cash
flow sector have returned back to the company. With the excessive cash return to
the company, it faced more and more profitability. Additionally,  one concept of business growth can be
described such that, company equally distributes the cash return to the
stakeholder and the rest for purchasing share; so that, at the time of
financial crisis, company can get back the cash by selling the purchased share
(Rezaei, 2015).

Figure 1: Coca Cola Revenue Growth

(Source: Solomon, 2014)

b. Profitability: Main profitability related strategy
of this company goes with the concept that, the company follows strategic
pumping method to control its product cost. Apart from this some a big
percentage are invested for advertisement and for employee promotion. Net
volume of total profit the company has already acquired 42% of the US market.
The method of non carbonate lineup has successfully expanded its profit. For
increase the profit of the soft drinks company, it has taken entry in the
market field of fairylike component with milk. Apart from this Coca Cola
follows the best alignment of operation, by changing its product quality
structure following up consumer requirements.

 

Figure 2: Coca cola Profitability

(Source: Rezaei, 2015)

For in detail profitability analysis
of the company the researcher have to analyze some of the terminology, with a
brief discussion about them (Rice, 2014).

?       Ratio: This ratio analysis going
with two topics, first one is sales return and the other one is investment
return.

Figure 3: Financial Ratio Analysis of financial year 2016

(Source: Collier, 2015)

?       Gross profit margin: This factors
mainly put light on the available revenue percentage, comprises its expenditure
and operating cover. Improved from 2014-2015 financial years to 2015-2016
financial years, as directed in the next diagram. From the benchmarking
calculation of penultimate financial year, 2016, it is fixed to 60.67%.

Figure 4: Gross Profit Margin of financial year 2016

(Source: Collier, 2015)

?       Net Profit Margin: It is the
fundamental indicator of profitability. The ratio of revenue and net income of
Coca cola is summarized in chart format in the nest figure. This indicator,
slightly fall in the latest financial year compared to the previous year. It
can be said that, it will not reach to the expected level even in the 2016-2017
financial year (Karimi et al. 2016).
From the benchmarking calculation of penultimate financial year, 2016, it is
fixed to 15.6%.

Figure 5: Net Profit Margin of financial year 2016

(Source: Collier, 2015)

?       ROA: This is the total assets and
income ratio. The ROA of Coca Cola has upgraded in the financial year 2015 as
compared to its previous year. Unfortunately for the financial year 2016, both
the annual and the quarterly data shows that, as the deterioration occurred in
net profit margin, assets return has also deteriorate. From the benchmarking
calculation of penultimate financial year, 2016, it is fixed to 7.4%.

Figure 6: Return on Assets of financial year 2016

(Source: Collier, 2015)

?       ROE: The equity analysis of the
company shareholder is done in this section. From the latter given excel chart
of  Coca cola financial data shows that,
though in 2014 it was slightly gone down, it has improved the last financial
year. From the benchmarking calculation of penultimate financial year, 2016, it
is fixed to 28.3% (Karimi et al. 2016).

Figure 7: Return on Equity of financial year 2016

(Source: Collier, 2015)

?       Operating Profit Margin: Secondary
analysis of profitability is calculated in this section taking help from
company annual revenue. From the later given analysis, it can be noticed that,
the profit margin has increased in 2015 rather than 2014; but unfortunately the
profit margin has lowered in the current financial year 2016 (Greenfield, 2016).
From the benchmarking calculation of penultimate financial year, 2016, it is
fixed to 20.6%.

 

Figure 8: Operating Profit Margin of financial year 2016

(Source: Collier, 2015)

c. Macro Environment (PESTLE)

The soft drinks global empire has snatches
away the first place due to effective customer serving technology. In the next,
some factors are given for macro environment analysis of the company.

 

Political
Factors

?      Sometime changes of taxation
policy affect its business.
?      Pricing policy are affected due to
expansion of non alcoholic business
?      Political alliance for entering in
business market.

Economical
Factors

?      Low cost loan is too much helpful
for business expansion. Company took loan to upgrade its research and
development sector (Luo et al. 2016).

?      Product handling method sometime
faces a failure due to economical changes
?      Out marketing from US the company
acquired 70% of its income

Social
Factor

?      US inhabitants pay more attention
to their health, compared to others.
?      Coca cola has expanded its
business for non alcoholic product
?      Baby boomers population are
targeting towards healthier drink, a threat to Coca Cola.

Technological
Factor

?      Company efficiency increased due
to promotional program, marketing advertising.
?      Packaging design acts as a core
competency of the company
?      In Europe Company has founded a
lot of factories and warehouse, helpful for business operation.

Legal
Factor

?      The company follows strict
regulation of different food controls of different country (Hoewe and Hatemi,
2017).
?      The warehouse store production technology
is made abiding by the rules of government.

Environmental
Factor

?      In winter season due to extreme
lowering of temperature the company faces problem due to absence of distilled
water, which is the main ingredients of soft drinks.
?      Sometime environmental laws affect
its manufacturing.

Table 1: PESTLE Analysis

(Source: Hoewe and Hatemi, 2017)

(2) Market segments overall

a. Major Market Segment

Geographic
segmentation

Targeted
towards different lifestyle, sex, ethnic groups and age group
?      ‘Oasis juice’ is for young adults
in the age 20 to 30
?      ‘Coca cola’ is for mass age
?      ‘Diet cola’ is for adults in the
age 40 to 60
?      ‘Coca Cola Zero’ is for calorie
lessening
?      ‘Powerade sports’ is for  13-27 age
?      ‘Minute Maide’, the healthy drink
is for baby and 60 plus age

Demographic
segmentation

?      Two types of division. First one
is for under 25, second one is for 40 plus
?      Different drinks for male and
female
?      Income variation
?       Low level: returnable glass bottle
?       High level: coke in tins

Psychographic
segmentation

?      Educational level differs a lot.
?      Flex and banner advertisement is
for the high educational society (Hoewe and Hatemi, 2017).
?      Celebrity endorsement is for low
educational level.

Table 2: Major Market Segmentation

(Source:

Figure 9: Coca Cola Market Segmentation

(Source: Rice, 2014)

b. Primary and Secondary Target Market

The company faces total revenue of
176 billion dollar in the year of 2016, as reported by its financial data
sheet. ‘Product line-up’ is the main strategy of the world famous company.
There are more or less 20 soft drinks brands are present in market. Out of
them, 14 brands are static brands of soft drinks. Coca cola brand have acquired
the best portfolio of non carbonate soft drinks. The company has set its
primary target market towards the people who are greater than the age of 12
years and lesser than the age of 40 year (Reddy et al. 2016). It is a fact that, 35% of total inhabitants are under
the age of 12; but the fact is that, for that type of people healthy drinks are
needed. Therefore the company has made its ‘Minuter Miad’ and ‘Georgia Coffee’
respectively for the young and adult age of people and thus set a secondary
target market towards them.

 

3.  Involvement in Primary segmentation and
decision-making

Many factors can influence the behaviour of the customer,
though depending upon the requirements of the customers the companies often
launch new products. The companies need to consider all the major factors that
can influence customer behaviour. The company takes decision-based on the
customer experience and preference. However, decision-making is a vast part of
the profit and image of the company
depends on it. The involvement level reflects the effort and engagement of the
employees. To make a fair decision, the employees of coca cola are involved in
the decision-making and they are contributing a major part in decision-making (Rezaei, 2015).

In the process of segmentation, the company did not engage
its consumers. Segmenting products into ranges is an essential part as this
also helps to acquire more consumers and it is helpful in attracting new
customers.

The consumers mainly focused on getting quality product at
low price.  The company inspires its
employees to take part in all the decision, as it is helpful for a buyer. High
involvement may lead to social risk and psychological risk.

Low involvement decisions are normally straightforward and
less risky. The consumers are not involved much in decision making too. As per
the employees of the coca cola, the consumers buy the product out of their
habit. Especially, in the western countries, the products of coca cola are used
as the everyday product.

 

(4)     Competition

a.    
Organization place in the market

Soft drink
industries now become a major part of the global soft drinks and beverage
industry market. Many research scholars have done research on the soft drink
industry. Coca-cola is a brand, which does not need any introduction due to its
popularity and customers demand. To identify the changes in the beverage
industry, analyzing of macro factors is important. The soft drink industries
are engaged in manufacturing mainly non-alcoholic, mineral waters, and syrups (Shepherd et
al. 2015).

However, the new
trend of this century soft-drink battleground now turned into new market where
competition is even tougher than before. Besides, when in United States, Japan
and in the states of Western Europe, the market growth of soft drink companies
slowed down dramatically, then also the coca cola and its other brands was an
important market. From the decades, the coca cola brand is satisfying its
customers by providing new products; now India, Mexico, Saudi Arabia and Europe
become a hot spot for the two joint venture company Pepsi and coca cola.

The two companies started
working as joint Venture Company to increase growth in the global beverage
market.

 

 

b.    
Strengths and weaknesses of the main competitor

Coca-cola is known
as the beverage giant in the global market and it is a global brand. The iconic
logo of coca cola is familiar to the whole world. However, before working as a
joint venture, Pepsi was the competitor of the company. As it was the leading
beverage brand due to its position in the global market. It has offered a
diverse product and the unique marketing strategies have made it the leader of
the global market. The product offered by the company was highly popular due to
added unique flavor to it (Collier, 2015). Later on, due to the global financial
turmoil, the company was facing the problem and then it affects the profit of
the company heavily. This time, coca cola has also faced major problem due to
changes in customer preference. The existing and new customers are opting for
health drinks in the place of soda. Then coca cola has adopted many strategic
challenges. They have also added many low-calorie products to its product list.

The strength of the
company:

?      
Largest market share

?      
Customers are loyal to the company

?      
Strong brand image

?      
Extensive and strong distribution network

?      
Company valuation is way too much high than
other companies

?      
Advertising and investment

?      
Segmentation of products

Weakness of coca
cola 

?      
Product diversification is low

?      
Issues regarding water management

?      
Customers are aware of the health

?      
High carbonate products

 

With the passage of
time, the competition in the commercial beverage industry is most competitive.
Their numerous companies are present which are well established. To increase
the growth of the business the companies are moving their market into other
geographical areas and they are including different products into the existing
product line like healthy juices, fruit drinks, and flavored waters. Though the
main competitor is PepsiCo, the other major competitors are nestled, mondelez
international Inc, DPSG, the Unilever group and many others.

There some beer
companies are also there which are also included in the market competition with
coca cola. The company is competing with numerous local and regional companies.
Besides, now some retailers are also developing their own store and they are
competing with the giant companies to enter into the global market.

 

(5) Positioning map for organization considering the primary
segment with its     involvement

Segmentation of the
products enables the brand to define various products accurately and
appropriately as per the demand of the customers. Being the global brand in the
beverage industry, coca cola never targets for segmenting product in a specific
way rather the company is looking for adopting innovative services, which help the
company to bring new products. Generally, the company does not take a specific
target which to be achieved but the company set their target in such a way so
that they can meet the preferences of the various customers. The main consumer
of coca cola brand are the people aged between 12 to 30 (Karimi et
al. 2015). However, there no specific product is available for the
people who are less than 12. Still, the company has achieved to reach top
position through partnership, for instance with fast food restaurants such as
pizza hut, dominoes and Mcdonald’s. The customers are also loyal to the company
mainly the youngster or the youths.

As the leading
brand in the soft drink industry, the company considers its all customers are a
potential consumer. All age groups including the kids are being targeted as a
potential customer but the age group of 18 to 25 is covering around 40 to 50
percent of the total segment of age.

Coca-cola is taking
new strategic policies to make the brand better. However, it has the competitive
advantage, as 94 percent of people among all the population are familiar with
the brand. The company is aware of the brand image and they know what the
customers want from them. Being the global icon, it never takes any competitors
in a low manner. The campaigns organized by coca cola also help in order to
expand the brand value in more than 50 countries.

Coca-cola, being
the leading brand icon in soft drink industry has placed itself in the global
soft drink market successfully. A vital question arises here does the company
will remain in the same position or it will move to other position. The company
has adopted the basic principle of manufacturing products; the company follows
the principle act local but thinks global. To fulfill the need of the customers,
the company keeps the same product for its customers, which is coke, besides it
added offers to the products (Solomon, 2014). The company use strategic positioning to
maintain same brand image everywhere they are operating. This is the main
reason of the success of the company. This perception helps the company to
leads to a high degree of trust and loyalty. 
This enables purchasing decision unique and automatic. The coca cola is
remaining successful in its position by adopting unique selling proposition.

 

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