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Coca Cola In China - Think Local and Act Local!

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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Initially, the Chinese market was highly fragmented, and the wholesale and distribuHonal systems were outdated.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.

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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.
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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.

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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. 1. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     “THINK LOCAL – ACT LOCAL” COCA COLA IN CHINA
  2. 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. 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. 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. 5. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     5   Consumer Segment Coca Cola Consumer Segment Part-1
  6. 6. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     6   Consumer Sement Coca Cola Consumer Segment Part-2
  7. 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. 8. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     8   COCACOLA RE-ENTRY CHINA MarkeAng  Strategy  For    
  9. 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. 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. 11. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     11   PROMOTION APPROACH-1 How Cocacola’s Approach Market in China
  12. 12. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     12   PROMOTION APPROACH-2 How Cocacola’s Approach Market in China
  13. 13. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     13   PROMOTION APPROACH-3 How Cocacola’s Approach Market in China
  14. 14. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     14   PROMOTION APPROACH-4 How Cocacola’s Approach Market in China
  15. 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. 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. 17. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     17   MERCHANDISING PREVIEW-1 How Cocacola’s Approach Market in China
  18. 18. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     18   MERCHANDISING PREVIEW-2 How Cocacola’s Approach Market in China
  19. 19. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     19   MERCHANDISING PREVIEW-3 How Cocacola’s Approach Market in China
  20. 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. 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. 22. Abdi  Januar  Putra   NIK  –  2401150115  //  PJJ-­‐4  Telkom  University     22   Terimakasih Sudah Membaca Sampai Halaman Ini THANKS THANKS TERIMA KASIH

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