By: Holly Green, Ashley Parker and Sasiya Supprakit

History of Coca-Cola

History of Coca-Cola

Coca-Cola distributed over 5 billion bottles of Coca-Cola to American troops

Case Introduction

“Putting cold bottles on shelves is the best marketing we can do,

we don’t have to ask ourselves if our product will sell, only, how do

we get it to the consumer?”

Case Introduction

•Entered China in 1920•Exited China in 1948•Re-Entered 1979 with the “Open Door Policy”

Case preview

Re-Enter or Not that is the

question?

• PESTELI Analysis• Five-Forces Model

External Environmental Analysis

• 1. Political – Communist government forbade FDI– Bottling plants were nationalized– 1978, “Open Door” policy

• 2. Economic– China is a large market for long-term

investment– Coca-Cola agreed to build bottling plants and

be taken over by the government

PESTELI Analysis

• 3. Sociocultural– Localization– Language barriers and

cultural differences – Red-canned Dragon for

the Chinese New Year

• 4.Technological– Importing supplies and

built bottling plants

PESTELI Analysis

PESTELI Analysis• 5. Environmental

– Bottling plants created pollution to the environment

• 6. Legal– Correlated with political system– Restricted policies on foreign companies

• 7. International– Aggressive in expanding globally– Plants in Japan, India, Thailand, etc.

Five-Forces Model• 1. Power of Buyers

– Chinese consumers prefer non-carbonated beverages

– Strong power of buyers

• 2. Power of Suppliers– Attempted to get local suppliers– Trained Chong Fu Industrial Group

• 3. Rivalry– Few rivals due to the restricted

policies

Five-Forces Model• 4. Threats of New Entrants

– High legal requirements for new entrants– Takes time to build connection with the government

• 5. Substitutes– No substitute in the Chinese market during that time

• 6. Complementary– Music, art, sports are together with Coca-Cola– Sponsored first Asian Cup and FIFA

Internal Environmental Analysis

• Internal Factors

• VRINE Analysis

• Michael Porter’s VCA

Internal Environmental Factors

• Exclusive Contracts• Financial Resources• Market Share• Brand Awareness• Operational Efficiency• Access to resources• Position on the experience curve

VRINE Analysis

• Is it valuable?– Allows for product differentiation

• Is it rare?– Resources are not accessible to competitors

• Is it inimitable?– Is not easily copied or replicated

• Is it non-substitutable?– Equivalent resources are not readily available

to competitors• Is it exploitable?

– Aids in creating a competitive advantage

Value Chain Analysis• Primary Key Activities

– Research & Development• Alternative non-carbonated beverages

– Production/Operations/Manufacturing• High technology process

– Marketing & Sales• Advertised before introducing products

– Post-Sales & Service• Created relationships with the people

Value Chain Analysis

• Secondary Key Activities– Management Infrastructure

• High quality management

– Human Resource Management• Best suppliers

– Information Technology and Information Systems• Utilized technology in bottling plants

– Materials Management• Inbound logistics, purchasing function, and

outbound logistics in sync

Strategies

• Corporate Strategy– Localization

• Business Strategy– High effectiveness and

competitive position

• Functional Strategy– New brand to support

product development

Strengths

• Equity and recognition-logo is recognized worldwide

• Image-dragon advertisements

• Product Diversification-soft drinks, non carbonated drinks, water, juices, and sport drinks

• Not only sold in grocery stores, but food retailers-increase market equity

Weaknesses

• Credit rating• Customer

concentration-weak in China– potential customers are

located in the West where Coca-Cola has yet to reach because of the failing infrastructure of rural China

Opportunities

• Expanding the non-carbonated and bottled water industries-gain larger profits

• Importance of health• Finding a way to expanding

westward

Threats

• Commodity price growth-prices are increasing, Coca-Cola is not a necessity

• Image perception- not always positive • Domestic issue for local businesses-worry

the Chinese government• Chinese government- unstable

environment– threat that they will change their mind about

foreign companies and remove Coca-Cola from their country

Problems and Issues

• Chinese Government• Culture• Suppliers• Infrastructure

Problem Identification

• Chinese Government– Closed borders in 1948

• Remained closed until 1978

– Many rules and regulations

• Culture– Chinese preferred non-carbonated

beverages– Language

• Needed to keep identity– Coca Cola cannot be translated

Problem Identification

• Suppliers– Did not meet company standards

• Infrastructure– Difficult to distribute outside major cities– Especially in the west

Discussion of Solutions

• Chinese Government– Follow the rules

• Waited until the borders reopened• Did everything the government asked

• Culture– Created “Tian Yu Di”

• Fruit juices, ready-to-drink teas

– Settled on K’o K’ou K’o Le^• “to permit the mouth to be able to rejoice”

Discussion of Solutions

• Suppliers– Gave technical training to local

companies

• Infrastructure– Created new distribution system

specially for China

What would we have done differently?

• Coca-Cola only had two choices– Wait until government reopened borders– Not re-enter China at all

• Made the right decision – In 2008, China had 2nd highest unit case

volume for the past five years (19%)

Learning Insights

• Specializing Marketing

Moral

• Patience– Cooperate with the Chinese

Government – Waiting to Re-opening– Dealing with poor info structure

from developing country

Update

• Main sponsor 2008 Olympics

• Moved into Western China

• More than 30% of Coca-Cola’s sales are in China

Update

• 27% of Coca-Cola workforce and bottling investments are in the

Pacific.

•simple vs. complex industry

Update

More 30% Coca-Cola’s sales in China 2006 2008