COMPANY to realize why events are happening
COMPANY OVERVIEW Coca-Cola, the world’s largest producer and marketer of nonalcoholic beverages claims a 10% market share worldwide selling about 500 million servings annually. On a worldwide scale, Coca-Cola divides and segments their operations into 5 different segments: •North America •Africa •Asia •Europe, Eurasia, and Middle East •Latin America As each segment is different, but equally important to their success, Coca-Cola’s largest driver comes from the Europe, Eurasia, and Middle East segment totaling $7,195,000,000 in net operating revenue in 2004.Trends over the years in net operating revenue can be seen in table 2 of appendix 1. The challenges faced by Coca-Cola in this situation are different than past experiences due to its international locations.
The issue is not located in the home state, or even the home country. Imagine how hard it was to overcome an obstacle when it was in the same country, the same kind of an obstacle is going to be much harder to overcome due to the cultural behaviors of each specific area of the world. Coca-Cola has to do much more research to realize why events are happening the way they are. Why are consumers boycotting their product?INDUSTRY OVERVIEW The nonalcoholic beverage industry in Europe, Eurasia, and Middle East has become highly competitive.
The political environment has increased the competition between beverage manufacturers since the year 2000. The turmoil in the Middle East has fueled competition between all brands, paving way for new manufacturers of “Muslim-friendly” drinks from Mecca Cola, Qibla Cola, and Zam Zam Cola to take out MNC’s like Coca-Cola and Pepsi. INTERNAL ANALYSIS The overall objective for Coca-Cola is to gain market with a differentiation strategy and their target market is Muslim community in the Middle-Eastern market.Coca-Cola’s product objective is to create a better brand image through product differentiation. Even though competitors products closely resemble the look and packaging, Coca-Cola still has an edge when it comes to overall brand recognition.
With an annual per capita consumption of 82 servings in the Europe, Eurasia, and Middle East market, Coca-Cola holds a sizable market share (table 1. ). Coca-Cola’s main price objective is to increase market share in the Europe, Eurasia, and Middle East market by following an at-market price strategy.With the political problems, Coca-Cola has put more emphasis on promotional activities to gain back market share. By reinforcing the brand image with support of local celebrities and a push and pull strategy, Coca-Cola can fight back against the boycott of these American products. Established companies and entrepreneurs have taken advantage of these political problems that the U.
S. is facing. Many of the competitors to Coca-Cola have acquired the same look and feel of their product to closely resemble the “real thing” with a statement of being “Muslim friendly”.COMPETITIVE ANALYSIS Coca-Cola has three main competitors in the Middle-East; Mecca Cola, Qibla Cola, and Zam Zam Cola. These three brands launched their campaigns to take advantage and ride the anti-American sentiments. Mecca Cola was launched by Tawfiq Mathlouthi in Paris in November of 2002.
Mecca Cola used an at-market price strategy with the objective to take market share away from Coca-Cola and provide a way for consumers in this market to stand up to American hypocrisy.A tactic that Mecca Cola is using to remain competitive is that they promised a 10% donation from profits will go to a Palestinian children’s charity and 10% to support charitable associations in the country where that product was sold. Mecca Cola didn’t have to spend any money on promotional activities because of the big boost the war in Iraq gave them.
They relied on word-of-mouth advertising to and build their brand name and were fortunate to receive donations from the Palestinians. Mecca Cola used real-life footage of the Intifada for promotional activity rather than spending more money on celebrity endorsers.Mecca Cola had a “niche” marketing image and focused on smaller, family-owned grocery stores with an indirect channel strategy.
This posed problems for Mecca Cola in ways of expansion of their brand. Since this company was geared more towards the smaller retailers, it limited them for expanding to mass merchandisers so they could compete with Coca-Cola. Even if Mecca Cola was to acquire a larger share of the market, MNC’s like Coca-Cola could buy them out and Mecca Cola wouldn’t exist in the long term.
Qibla Cola launched its brand in the British market in February of 2003.An opportunity was seen and Qibla utilized and cashed in on the anti-American sentiment. Their objective was to provide an ethical alternative for Muslims and used it in a way to promote their product. They use catchy slogans like “Liberate Your Taste” as tactics to gain the attention of consumers in the market. Qibla took an indirect approach and signed an agreement with Mighty Beverages Ltd. to exclusively handle Qibla products. To create a positive brand image, Qibla announced that they would donate 10% of profits to charity.
This failed when the charities claimed that they haven’t received a donation.Zam Zam Cola, founded in 1954 as the Iranian partner of Pepsi became independent in 1979 as their contract was terminated. They held market share in the local markets throughout Iran. With the boycott of American products, Zam Zam became even larger in the Middle East and sold millions of cans to Saudi Arabia and other Gulf states.
Zam Zam’s objective was to ride the anti-American sentiment and take full advantage of the opportunity to increase brand recognition. With the unexpected move authorities in Saudi Arabia made against Zam Zam Cola in banning imports, Zam Zam seemed to be out of the competition.Even though Zam Zam had the best chance to become a major competitor to the American companies, there seemed to be no future for them. With the three competitors in the Europe, Eurasia, and Middle Eastern markets, Coca-Cola didn’t seem to stand a chance with the continuing boycott of their products.
All three competitors were engaging in the exploitation and commercialization of Islam. The only problem that these companies had were that they were all targeting such small niche markets and didn’t seem to be able to expand into the mass merchandising markets.If this were to happen, I think that all of these companies would have a good chance to obtain a sizable share of the market and eventually push Coca-Cola and other MNC’s out the door. EXTERNAL ANALYSIS The external environment plays a large part in the success of Coca-Cola. As an international brand, Coca-Cola will face economic, political, cultural/social, and technological factors.
Economic factors will consist of the currency exchange between different countries and economic changes and conditions. Exchange rates and the value of the US Dollar could have a big influence on how far Coca-Cola’s money and investments will take them.Economic conditions and disposable income could effect purchases and push consumers to seek a lower cost alternative or substitute. Political and regulatory factors will consist of government regulations restricting imports and closing off the market to Coca-Cola. Wars and turmoil in the Middle East has had and will have a big effect on how Coca-Cola and generate consumer resentment. Regulatory restrictions and requirements on recycling could become an issue as many European countries adopt a “green” lifestyle.
The cultural and social environment factors will consists of obesity concerns, water quality and availability, and changing consumer preferences. Concerns with obesity and overall health will hinder competitors in the industry to effectively market their products. Changing consumer preferences could create competition and make it hard for companies to hold a consistent market share. As technological advances are made, competitors have opportunities to become more efficient with the production process and produce the product at a lower cost. Transportation costs could increase or decrease, effecting all ompanies in a positive or negative way. PROBLEM DEFINITION The problem is clear when it comes to Coca-Cola in the Middle Eastern countries.
Since the second Palestinian Intifada and the second Gulf war, an anti-American sentiment has been created. Combining the political forces and these wars, consumers have started to boycott Coca-Cola products, resulting in the decline in market share and revenue. It is not only Coca-Cola that is feeling this decline in sales, it is most American Multi National Corporations that have started selling products in the Middle East, for example; KFC, McDonald’s, Pizza Hut, Marlboro, and Starbucks.Due to the boycotting of Coca-Cola, it is allowing established local companies as well as entrepreneurs to produce beverages that might be better marketed towards the community. This causes more competition for Coca-Cola if they were ever to try to gain market share once again after the turmoil in these countries has decreased and the boycott against American made products end.
ALTERNATIVES Potential alternatives that Coca-Cola could resort to would be different marketing techniques, partnerships, or to just wait and see what happens.Referring to different marketing techniques, it would be beneficial for Coca-Cola to revise these techniques and double check that they are targeting the correct market that would increase their market size to its full potential. It was a great idea for them to run a promotion with the Arab celebrity because the market they are trying to reach can identify with the person they are seeing and positively relate it to the product. Coca-Cola should research more into what other celebrities the local consumers look up to, and attempt to advertise more thoroughly.They may also want to advertise the company donating to local charities because it would show local consumers that even though it is an American based company, they still care about charities around the world. The second alternative that Coca-Cola could use, is partnering up with a local beverage company like Mecca Cola for example.
Consumers would see this as the company trying to do what is best for their drinkers. This would be in Coca-Cola’s best interest because not only would they continue to gain revenue from the partnership, they would gain consumer loyalty.If Mecca Cola were to ever have a downfall of sales, Coca-Cola would be able to potentially buy out their portion of the company, and by them consumers would already have brand loyalty to the beverage. The third alternative is that they could just wait out the boycott and see what happens. Hopefully, the boycott would end and sales would increase by themselves again. Ideally, this is what would be the best, but realistically it would still take an increase in advertisement to show consumers that Coca-Cola is still around and that they should try it once again.Potentially the boycott could end, and politics and war could suffice, and the company wouldn’t have had to make any changes to the original marketing plan.
It was a good business decision for the Coca-Cola Company to distance itself from the U. S/Middle East Policy. Because of this, the target market of Muslims were able to make an informed decision of what soft drink they would rather consume. Coca-Cola had been in the Middle East for a while before the communities started boycotting their beverages. Because Coca-Cola removed themselves from the Middle East, it shows that they are willing to make sacrifices.
As a company, they could realize that they just did not have the market for the beverage. Maybe some day they will be able to re enter the market, but with hesitation to make sure they don’t move to fast into a market that is just going to refuse to purchase. RECOMMENDATIONS One recommendation that Coca-Cola should consider is to acquire a partnership with one of the beverage distributors from the local community. Since the market share in the Middle East counts for 7 billion dollars in Net Operating Revenue, this is not a market that Coca-Cola wants to lose.If the company could pair up with Mecca Cola, Zam Zam or Qibla, not only would it benefit Coca-Cola it would also benefit the other company. Doing this, would allow Coca-Cola to maintain market share in the Middle East, and allow the home company to prosper as a company.
Even though the consumers in this market have boycotted American products, they would be able to still get a beverage that is made in their home country, and proceeds could still go to charities that are in the Middle East, for example the charities that Mecca Cola had announced they would be donating to.A partnership, in this case, would benefit both companies and consumers. This would also allow Coca-Cola to branch out, once the boycott of American products ceases to a lower amount, resulting in an increase of sales once again. APPENDIX 1 Table 1. Market Characteristics of the Segments Table 2. Coca-Cola Performance Overview of Europe, Eurasia, and Middle East APPENDIX 2 As a company that has only been around for a couple of years, there is a lot that the company could have done to increase their sales as well as just improve as a company as a whole.There were minimal issues, as well as larger problems, that could have been solved and implemented very easily that would have helped them last as a company for continuous years.
The first recommendation is that Mecca Cola should have spent a small portion of their revenue and earnings toward advertisements. They say that they use word of mouth rather than advertisements; this might have been a major fall on their behalf. Only spending a small amount could have boosted their sales even more, as well as increased and continued brand loyalty.The recommendation would have been to advertise by newspaper, television, and billboards on major highways. Even if they would have advertised in any sort of way, their brand loyalty would have most likely increased, and they would have been able to ship to stores more often so local stores wouldn’t be afraid that they wouldn’t have the product in stock for the consumers. The second recommendation would have been to do their research.
It seems that if the company would have looked how other companies that were producing the same product, they would have succeeded a little longer. For xample, even though Coca-Cola did not succeed in the market, they failed because they were a American made company, everything else that they did seem to have worked in their favor. In 2004 they spent quite an amount on airing a commercial across the Middle East featuring Arab pop star Nancy Ajram. They saw an immediate in increase in consumer likeness after that commercial. This recommendation ties back in with the advertisements, small adjustments in the company could have changed it from breaking it to making it.
The third and last recommendation for Mecca Cola is to do surveys of the market they are trying to reach.The ideal result that they would get from the survey’s are what consumers actually look for in a soft drink. Mecca Cola gave certain amounts of their revenue to local groups that did benefit from the proceeds, but the community might not base their drinking decisions on which company is giving back, especially for a newly developed company. They might have wanted to wait to proclaim their plan of donations until they were more of an established company.
This way they would have increased their revenue, as well as been able to ask their customers which charities they think would benefit the most.