Coca-Cola’s Ongoing Expansion in China
Write a clear, concise, well organized analysis of a business case using correct grammar, composition
and spelling. Please use theory, concepts, models, and research findings that you have been studying in
our MGT 489 class to enrich your view of the case and help you to identify problems and support your
analysis. In addition to the above criteria, you will be assessed on your ability to think creatively.
The assignment should include a maximum of three pages text double spaced 12 point Times-Roman
font with one inch margins all around. You can also include an additional three pages of tables and or
figures. Please completed assignment by December 15, 2014 with the subject heading MGT 489 (your
section #) Individual Business Case Analysis
The elements of your business case analysis should include:
I. A Problem (or Opportunity) Statement
- Please describe the most important strategic issue facing Coca-Cola�s ongoing expansion in China in
2014.
II. Elements of Analysis
- Please describe the key economic and policy issues and trends in the China where the firm is
operating.
COCA-COLA’S ONGOING EXPANSION IN CHINA 2
- Please describe the industry in which Coca-Cola is operating perhaps including information such as
competitors, new entrants, substitute products, suppliers, the buyers and the intensity of industry rivalry. - Please identify the relevant stakeholders.
I. A Problem Statement
Coca Cola similar to other firms operates with the objective of increasing its profit value
over a specified period. To attain this objective, the company creates a value for very constraint
it serves, such as, its customers, stakeholders, creditors and so forth. China is undeniably the best
investment environment for Coca Cola Company. Therefore, re-investing in China in 2014 has
eventually become the strongest brand. However, besides expanding its operations in China,
Coca Cola is facing the strategic issue of advancing its product diversification plan so as to
engross a wider customer base. Currently, Coca Cola has exhausted the key sectors in the soft
drink industry, including the carbonated dinks, bottled water and juice products. All these
products are available in the China Markets. Although Coca Cola Company may ha the potential
to diversify its product lines, the escalating health awareness of customers is a major threat
towards the expansion (Rudarakanchana, 2013).
II. Elements of Analysis
- Key economic and policy issues and trends in the China
Coca-Cola’s market distinguishes its market using location and age factors. Location
relates to determining where the consumers come from. Although, most of the viable customers
COCA-COLA’S ONGOING EXPANSION IN CHINA 3
come from rural regions, Coca Cola customer’s base is within the urban regions. China’s
economic diversity supports such segmentation. Economy analysis investigates the local and the
international economy in addition to the inflation and recession crisis. Essentially, economic
factors take into account factors that influence the production process as well as the output. As
much as Coca Cola Company has already developed a marketing plan to expand its operations in
China in 2014, the economic condition is uncertain. Therefore, the company would encounter
great hostility from the already existing firms when setting up the price. Besides this, income
inequality is another economic issue that is affecting the success of Coca Cola Company in
China. The inequality in terms of economic growth in different locations impacts the purchasing
ability of the consumers. Another key issue is the policy issue. Currently, Chinese customers are
very conscious about their health based on the global campaign against sugary products.
Therefore, industries in China have implemented a policy to avoid sugary products. Therefore,
fast food restaurants which sell most of Coca Cola products are not avoiding Coca Cola products
for fear of loosing their customers (Rudarakanchana, 2013).
- Industrial Analysis in which Coca-Cola operates
to determine the likelihood of success of Coca Cola Company in China, it is important to
conduct an industrial analysis to have an insight of the Porter’s 5 forces affecting the company.
Threat of New Entrants/Potential Competitors
Entry barriers for Coca Cola Company in China are comparatively low. The consumer
switching expenditure is insignificant and no capital is required. However, there are relatively
new brands entering into the market with even lower prices than Coca Cola products. Coca Cola
Company, nevertheless, offers its products as beverages and brand in order to embrace a larger
market share. Therefore, the loyal customers are unlikely to try any substitute brand.
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Threat of Substitute Products:
Energy drinks and beverages are diverse and numerous in the market. In this regard, Coca
Cola Company is yet to produce an entirely incomparable flavor. Therefore, customers rarely
note the difference between the flavors produced by Pepsi and Coca Cola.
The Bargaining Power of Buyers:
The bargaining power of Coca Cola Company has no influence on the company, whether in
terms of production or setting up of prices.
The Bargaining Power of Suppliers:
Coca Cola Company has always used the same ingredients since its started operating. The major
ingredients include carbonated water, phosphoric acid, sweetener, and caffeine. The company
does not change its suppliers, and is probably the largest customer to its suppliers.
Rivalry among Existing Firms:
The key competitor is the Pepsi Company, which as well offers a variety of soft drink products
using its brand. Other brands in the market that are yet to gain momentum are such as Dr.
Pepper.
- The relevant stakeholders.
In China, the objective of the Coca-Cola Company is to engage in direct distribution of
its products by establishing a sales centre in a strategic location with a population density of
about one million people. These distribution centres also operate as storage houses. The owners
of these centers become stakeholders to the company and, therefore, controls them distribution
process within a confined location. Other important stakeholders include the large wholesalers
COCA-COLA’S ONGOING EXPANSION IN CHINA 5
with vast experience in retailing process as well as private wholesalers that distribute the
products to the local customers. Besides, Coca Cola company as well partners with the
government. Furthermore, Coca Cola Company forms an association with fast food restaurant
which helps in selling and promoting the products to their customers (Rudarakanchana, 2013).
III. List Strategic Recommendations
- For Coca Cola Company to thrive in Chinese soft drink market should implement a
reward system technique that serves as a motivation to its employees that promotes the
product locally and internationally. - Coca Cola Company should improve its consumer relationship initiatives, especially in
markets where government intervention is intense. - Coca Cola Company needs to market segment its products in order to understand the
insight of consumer tastes and preferences. - Demographic issues are as well a major factor that the top management should explore.
Each market environment has diverse culture and traditions which are significant in
determining the strategic measure to include.
IV. Make a Final Recommendation - Coca Cola Company should diversify and target growth segments in major markets.
This is a key recommendation over the rest. As illustrated, Coca Cola Company faces stiff
competition from other large companies like Pepsi. Therefore, unless the company diversifies its
product, that is, launching a new product in the market
V. Learning Reflection
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Coca Cola is constantly increasing its reputation globally as it continuous expanding its
operations in China in spite of the economic recession. It is apparent that its operations in China
are almost a success since the company has already adopted the economic and policy issues
required. Furthermore, their contributions to economic development in China, in terms of
employment opportunities have compelled the Chinese government and other partners to
collaborate for the wellbeing and prosperity of China (Rudarakanchana, 2013).
COCA-COLA’S ONGOING EXPANSION IN CHINA 7
Reference
Rudarakanchana, N (2013). Coca-Cola (KO) Continues China Expansion.
