Coca Cola In China - Think Local and Act Local!
Initially, the Chinese market was highly fragmented, and the wholesale and distribuHonal systems were outdated. This was further complicated because Coca- Cola was the de facto wholesaler of concentrate, and did not have access to the operaHon of the boVling plants. To add to this problem, the company’s local market agents were fully responsible for producHon and distribuHon during the iniHal stages of market entry.
.
Coca-Cola’s local partners played a passive role in the company’s market entry. Market agents acted out of self-interest and were opportunisHc in running the boVling business. They had neither a strong incenHve to acquire market share nor a long-term development strategy.
.
The Chinese government exerted Hght control over the development of the so[ drink industry and was careful to nurture domesHc brands. Coca-Cola was not permiVed to enter into a JV boVling business with its local partners unHl 1985, and even then it was restricted to a minority stake.
.
The local partners were too poor to finance further business expansion. As they were parHally owned by local governments or various ministries, the major investment decisions that were made by the JV partners had to gain official approval. These experiences explain why Coca-Cola’s market share increased but slightly before the early 1990s.
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Coca Cola In China - Think Local and Act Local!
1. Abdi
Januar
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2401150115
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“THINK LOCAL – ACT LOCAL”
COCA COLA IN CHINA
2. Abdi
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Agenda to see the whole contents
CONTENTS
1. Mission Statement
2. Corporate Objectives
3. Value in Use
4. Buying Criteria
5. Consumer Segment
6. Perceptual Map
7. PESTLE Analysis
8. Porter’s Five forces
9. BCG Matrix
10. Market Attractiveness
11. Critical Success Factors
12. Directional Policy Matrix
13. Marketing Strategies: 4 Ps
14. Marketing Strategies: CSF
15. Assumptions
16. New product
17. Conclusions
3. 3
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Corporate Objective Coca Cola
Corporate Objective
1. Aiming
to
increase
our
sales
in
China
by
15%
using
our
effecHve
strategy,
"think
local,
act
local“
by
2015
2. Establish
3
new
manufacturing
firms
in
the
rural
areas
3. Increase
market
share
by
5%
in
2015
by
targeHng
a
new
segment
of
customer
through
a
new
product
which
will
cater
their
needs
4. Exceed
USA
and
become
the
second
largest
market
in
terms
of
per
capita
consumpHon
of
Coca-‐Cola
products
by
2020
4. 4
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Mission Statements Coca Cola
Mission Statements
1. Coca
Cola
will
constantly
strive
to
provide
a
quality
range
of
flavoured
drinks
for
all
individuals
tastes
and
lifestyles
in
China.
2. We
will
maintain
sustainable
growth
and
aVracHve
returns,
through
the
development
of
a
profitable
product
line
and
our
operaHonal
excellence.
5. Abdi
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Consumer Segment Coca Cola
Consumer Segment Part-1
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Consumer Sement Coca Cola
Consumer Segment Part-2
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Consumer Sement Coca Cola
Consumer Segment Part-2
What changes in government
policy have a big impact on
the way Coca-Cola operates?
Politcal Factors
What social and cultural aspects
affect the customer needs?
Social Factors
What changes in the technological
environment affects the
production levels and the
business in general?
Technological Factors
What significant legal changes
may affect Coca-Cola’s
behaviour?
Legal Factors
What environmental factors can
affect the consumer’s insights and
choices?
Environmental Factors
What economic factors effect
Coca Cola’ ability to generate
income?
Economical Factors
8. Abdi
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COCACOLA RE-ENTRY CHINA
MarkeAng
Strategy
For
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Explaining Overview and Define Problems
OVERVIEW AND PROBLEMS
• Hi local pressure (from government)
• Bad infrastructure to distribution product
• People perception on china about cola product
• People perception on china about cola product
• Distribution must depend local bottler wholesaler.
• Cultural and communication barrier
10. Abdi
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3 ENTRY MODE IN CHINA
Coca-cola’s Choice Of Entry Mode in China
First Stage
1979 - 1984
Coca-‐Cola
sold
concentrate
to
its
franchised
Chinese-‐owned
boVlers.
Its
local
market
agents
were
fully
responsible
for
producHon
and
distribuHon.
Second Stage
1985 - 1992
Coca-‐Cola
bought
equity
shares
in
the
boVling
businesses
to
reduce
the
effect
of
uncertainty
and
to
restrict
the
opportunisHc
behaviour
of
its
local
partners.
Third Stage
1993 - Presents
Coca-‐Cola
teamed
up
with
two
foreign
boVlers,
the
Kerry
group
and
the
Swire
group,
under
a
franchise
agreement.
11. Abdi
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PROMOTION APPROACH-1
How Cocacola’s Approach Market in China
12. Abdi
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PROMOTION APPROACH-2
How Cocacola’s Approach Market in China
13. Abdi
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PROMOTION APPROACH-3
How Cocacola’s Approach Market in China
14. Abdi
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PROMOTION APPROACH-4
How Cocacola’s Approach Market in China
15. 15
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Implication Of Cocacola’s Choice Of Entry Mode
IMPLICATION OF COCACOLA’S ENTRY MODE-1
• IniHally,
the
Chinese
market
was
highly
fragmented,
and
the
wholesale
and
distribuHonal
systems
were
outdated.
This
was
further
complicated
because
Coca-‐
Cola
was
the
de
facto
wholesaler
of
concentrate,
and
did
not
have
access
to
the
operaHon
of
the
boVling
plants.
To
add
to
this
problem,
the
company’s
local
market
agents
were
fully
responsible
for
producHon
and
distribuHon
during
the
iniHal
stages
of
market
entry.
• Coca-‐Cola’s
local
partners
played
a
passive
role
in
the
company’s
market
entry.
Market
agents
acted
out
of
self-‐interest
and
were
opportunisHc
in
running
the
boVling
business.
They
had
neither
a
strong
incenHve
to
acquire
market
share
nor
a
long-‐term
development
strategy.
16. 16
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–
2401150115
//
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Telkom
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Implication Of Cocacola’s Choice Of Entry Mode
IMPLICATION OF COCACOLA’S ENTRY MODE-2
• The
Chinese
government
exerted
Hght
control
over
the
development
of
the
so[
drink
industry
and
was
careful
to
nurture
domesHc
brands.
Coca-‐Cola
was
not
permiVed
to
enter
into
a
JV
boVling
business
with
its
local
partners
unHl
1985,
and
even
then
it
was
restricted
to
a
minority
stake.
• The
local
partners
were
too
poor
to
finance
further
business
expansion.
As
they
were
parHally
owned
by
local
governments
or
various
ministries,
the
major
investment
decisions
that
were
made
by
the
JV
partners
had
to
gain
official
approval.
These
experiences
explain
why
Coca-‐Cola’s
market
share
increased
but
slightly
before
the
early
1990s.
17. Abdi
Januar
Putra
NIK
–
2401150115
//
PJJ-‐4
Telkom
University
17
MERCHANDISING PREVIEW-1
How Cocacola’s Approach Market in China
18. Abdi
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2401150115
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18
MERCHANDISING PREVIEW-2
How Cocacola’s Approach Market in China
19. Abdi
Januar
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–
2401150115
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PJJ-‐4
Telkom
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19
MERCHANDISING PREVIEW-3
How Cocacola’s Approach Market in China
20. 20
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Conclusions of How Cocacola Think Local and Act Local in China
CONCLUSIONS COCACOLA’S IN CHINA-1
• China
is
the
biggest
market
for
every
organizaHons.
That’s
why
Cocacola
should
approach
them
to
enlarge
their
market
share.
• This
paper
applies
the
internalizaHon
theory
to
explain
the
entry
mode
choice
of
Coca-‐
Cola
in
China
since
1979.
The
findings
not
only
have
implicaHons
for
the
applicability
of
the
internalizaHon
theory,
but
also
provide
an
insight
into
the
market
expansion
strategy
of
a
global
so[
drink
manufacturer
in
China.
• To
examine
the
change
in
Coca-‐Cola’s
mode
of
market
entry
from
franchises
to
JVs,
and
then
to
the
current
combinaHon
of
franchises
and
JVs,
we
have
employed
internalizaHon
theory
to
address
the
issue
of
how
and
to
what
extent
shi[s
in
various
investment
modes
can
reduce
the
effects
of
market
imperfecHons.
21. 21
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Conclusions of How Cocacola Think Local and Act Local in China
CONCLUSIONS COCACOLA’S IN CHINA-2
• Furthermore,
the
empirical
data
that
we
have
presented
suggest
that
adjustments
in
Coca-‐
Cola’s
modes
of
investment
have
contributed
to
a
steady
growth
in
• market
share
and
a
high
degree
of
market
penetraHon
in
China.
• This
paper
complements
the
exisHng
literature
on
Coca-‐Cola’s
business
in
China,
e.g.
Nolan
(1995)
and
PU-‐TU-‐USC
(2000),
and
argues
that
internalizaHon
theory
is
a
useful
conceptual
framework
for
the
analysis
of
its
modes
of
investment
in
China.
• However,
the
applicaHon
of
any
theoreHcal
approach
to
firm-‐level
study
may
be
affected
by
deviaHons
at
the
sectoral
level,
and
by
government
policies.
Moreover,
naHonal
culture
at
the
macro-‐level
is
also
influenHal.
Hence,
any
generalizaHons
that
are
drawn
from
the
present
study
of
Coca-‐Cola’s
experiences
in
China
must
be
treated
with
care.
22. Abdi
Januar
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22
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