Coca Cola In China - Think Local and Act Local!

1. Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University “THINK LOCAL – ACT LOCAL” COCA COLA IN CHINA

2. Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 2 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 Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 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 Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 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 Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 5 Consumer Segment Coca Cola Consumer Segment Part-1

6. Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 6 Consumer Sement Coca Cola Consumer Segment Part-2

7. Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 7 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 Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 8 COCACOLA RE-ENTRY CHINA MarkeAng Strategy For

9. Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 9 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 Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 10 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 Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 11 PROMOTION APPROACH-1 How Cocacola’s Approach Market in China

15. 15 Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 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 Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 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

20. 20 Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 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 Abdi Januar Putra NIK – 2401150115 // PJJ-‐4 Telkom University 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 Putra NIK – 2401150115 // PJJ-‐4 Telkom University 22 Terimakasih Sudah Membaca Sampai Halaman Ini THANKS THANKS TERIMA KASIH