Current Issues in Management

Current Issues in Management

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nBrief Description of the Company

nCoca Cola Company is an American MNE dealing with production, marketing, and retailing of beverages across the world. One of its most popular soft drink brands is Coca Cola, but also manufactures other products such as Sprite, and Fanta. In addition, it also sells other products such as tea and coffee in different markets across the globe (Coca Cola 2016). It is one of the leading multinational companies in beverages and soft drinks because it provides a wide range of brands such as sports drinks, fruit juices and soft drinks. Coca Cola Company has operated in Hong Kong market for close to eight decades. Its bottling industry is situated in Quarry Bay and Tsuen Wan. In the 1970s, the company had a huge market share in Hong Kong and it introduced various products including Yeung Gwong, Schweppes, Fanta and Sprite as well as mineralized water (Coca Cola 2016). Moreover, the company has succeeded in the development of innovative products to meet the demands of the customers in Hong Kong. More recently, it has incorporated the health ingredients in its drinks to satisfy emerging preferences such as Coca Cola with zero levels of sugar (Coca Cola 2016). Currently, in Hong Kong it has the biggest share in the market concerning juice drinks, water, and sparkling brands.

nTarget Country

nHowever, there is need to enter into other markets where the company can utilize existing customer base (Staff 2014). One of these markets is in China since there is adequate opportunities to reach customers and to satisfy their favourite tastes at various locations, life stages and lifestyles. Coca Cola Company has existed in the Chinese market for over three decades after it re-opened its business in China in 1979. Research indicates that the firm was the first MNE to open operations in the China after market liberalization (Staff 2014). Its competitors such as Red-Bull and Pepsi also entered later in the market. Currently, in the Chinese market, it has more than 43 manufacturing plants and ten brands that serve the enormous countrys population. In order to succeed in the Chinese market, Strengths, Weaknesses, Opportunities and Threat (SWOT) analysis should be conducted.

nStrengths

nCoca Cola company has the largest international brand across the globe since it has a market value of more than $77 839 billion. In addition, it has the biggest market share in the world in terms of beverages. It has the capability to launch a robust advertising and marketing of its products in different parts of the world. Furthermore, the company has the most widespread channels of beverage distribution in the world (Prange ed. 2016). The firm also benefits from strong loyalty of the customers, hence has acquired huge bargaining power from its suppliers. Additionally, it has a good reputation of practicing corporate social responsibilities.

nWeakness

nThe company also has several weaknesses. Research highlights that Coca Cola Company has failed to diversify its brand portfolio because it has significantly concentrated on production of carbonated beverages. In addition, the company faces challenges in its operation due to high levels of debt because of many acquisitions. In some parts of the world, it has to deal with negative publicity associated it advertising due to disregard of peoples culture (Tolkamp 2012). Lastly, the firm has a wide range of brands, but some of them have insignificant levels of revenues.

nOpportunities

nThere are many opportunities in growing economies such as China. Moreover, China is the biggest consumer of beverages and food products in the world due to its large population base (EU SME Centre 2015). In the Chinese market, there is growing preferences for healthy drinks and food as opposed to carbonated drinks. Most people are continuously becoming conscious of their health and consumed foods. Furthermore, Coca Cola can utilize various opportunities in the emerging economies by acquiring more firms (Staff 2014).

nThreats

nCoca Cola Company faces several threats in its target market in China. Firstly, the firm faces stiff competition from its business rivals such as Pepsi Company in China. Similarly, there are local companies dealing with the carbonated beverages, which have led to a saturation of the markets (Wang 2010). Most importantly, there are changes in the preferences of customers as more Chinese demand healthy and sparkling drinks. Regulatory and legal challenges also affect the beverages market in China. In the dairy sector, the relevant authorities have imposed tougher regulations to maintain safety standards in the market. Other phytosanitary and sanitary barriers limit entry in the Chinese dairy drinks market (EU SME Centre 2015). Moreover, differences in culture affect the partnerships between Chinese partners and corporate leadership. Consequently, it can be a source of misunderstanding and the company leadership may view their business partners in China as not forthcoming or frank (EU SME Centre 2015).

nDescription of the New Product

nCoca Cola Company should initiate new product in Chinese market in order to increase its market share. In this regard, the firm should consider introducing more healthy drinks in the new market. For instance, it should introduce Dairy Drink in the Chinese market to meet the increasing desire for healthy drinks. Reports indicate that due to the sustained growth of the economy in China, there is higher demand for nutritious and healthy dairy products (Prange ed. 2016). Therefore, introducing the dairy drink would provide a key platform for growth in the Chinese market. Moreover, the new product would create new opportunities for Coca Cola Company in China as well as offer their customers a chance to enjoy healthy products (Moon and Jeong 2011).

nResearch conducted by the Health and Nutrition Survey of China revealed out that approximately 90 per cent of the daily intake of dietary fibre in the country is below the recommended standards of daily intake. Consequently, there is a high prevalence of intestinal health problems between the Chinese (Tolkamp 2012). In this regard, Coca Cola Company can launch a new product that attempts to solve the health problem. Furthermore, the new dairy drink would not only help reach more customers, but would also assist Chinese to clean and safeguard their intestinal health (Staff 2014). Similarly, the dairy drink would also play a crucial role in the company because it would diversify its brand portfolio and take advantage of the growing demand for healthy products.

nDairy Drinks, Source (Moon and Jeong 2011)

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nResearch conducted by Lau, Chan, Tan and Kwek (2012) noted that in Chinese market, the value in the market for carbonated soft beverages reduced by close to 3 per cent. For instance, in 2014, the market value of these products was 7.3 billion Yuan as compared to that of 2013, which was 7.5 billion Yuan. However, in terms of functional drinks, there was significant growth in the market value by 11 per cent. In 2014, the market value was 5.2 billion related to that of 2013, which was 4.7 billion Yuan (Lau, Chan, Tan and Kwek 2012). The rise in the demand for healthy drinks has been influenced by the changes in tastes and lifestyles between the Chinese. Most of the people are now pursuing functional and health benefits of their preferred beverages (Vergari, Tibuzzi and Basile 2010).

nThe rise in demand for dairy beverages is higher than other kind of products. Reports demonstrated that this demand has increased by approximately 23 per cent generate close to $15 billion in revenue (Moon and Jeong 2011). Therefore, the new product by Coca Cola would be leveraging the health benefits associated with its consumption.

nThe retail market for dairy products in 2010 was about $36.6 billion and was anticipated to expand by 80 per cent by 2016 (Douphrate, et al 2013). Some of the products that have increased in terms of market preferences include butter, cheese, condensed milk, coffee whitener, ice cream and yoghurt (Prange ed. 2016). Additionally, baby milk formula and drinking milk are also popular. Consumption of dairy beverages, therefore, is expected to increase due to the growing demand.

nCustomers of the New Product

nSince there is increasing demand for healthy drinks between the Chinese, the new product by Coca Cola Company would attract many customers. China is only second to the United States with regard to dairy product retail market in the globe. Additionally, per capita expenditure in the country on milk beverages has also increased to $31 billion in 2011 (Vergari, Tibuzzi and Basile 2010). According to research, the changing trend in terms of preference of dairy drinks instead of carbonated soft drinks has been witnessed across all groups of people, social class, gender, and age groups (EU SME Centre 2015). For instance, reports highlight that parents have now adopted the practice of choosing milk drinks for their children aiming to promote healthy development. Unlike soft drinks, dairy beverages such as yogurt have gained popularity among younger people and middle-income earners in the Chinese market (Xu, Zheng and Zhou 2010). The consumer base in China has been growing as its people have now become conscious of their health. In addition, the dairy market is attracting support from the authorities in an attempt to reduce lifestyle diseases (Lau, Chan, Tan and Kwek 2012). Consequently, most of the Chinese were drinking more dairy beverages such as yoghurt as compared to their consumption level three to four years ago (Moon and Jeong 2011). Research also proposes that nearly 60 per cent of the women and men in China are tolerant to lactose.

nThe customer preferences among the young people, and the older generation has increased as they consider using dairy drinks such as yoghurt as more convenient. Both the spoonable and drinking yoghurt is expected to increase. Additionally, cheese is also popular in China, especially in large urban centres (Wang 2010). Most customers of this product include parents and children and are more attracted to it due to its health value. Currently, processed cheese drinks, are only available in form of cream cheese and cheese slices (Prange ed. 2016). Nonetheless, non-processed cheese is has not penetrated in the retail Chinese market. Most of these are found in the supermarkets and hypermarkets.

nCustomers of the Dairy Beverages in China, Source (Wang 2010)

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nThe New Products USP in the market

nThe new dairy drink introduced in the Chinese market has a unique selling point (USP) based on the rising levels of income, urbanization and population growth. In addition, due to health awareness in the country, the dairy beverage is anticipated to have a wider market share (Tolkamp 2012). Moreover, most of the customers prefer milk beverages to carbonated soft drinks because they have gastrointestinal health advantages.

nThe need for consumption of healthy products is increasing between the Chinese. Research demonstrates that most of the products that suggest providing health advantages are increasing in the market (Douphrate, et al 2013). For instance, functional drinks, premium water and functional biscuits sustained a growth of over 10 per cent. Dairy beverages are unique to the Chinese market since they provide a wide range of health advantages because it is a key source of essential minerals such as calcium. Similarly, it has a lower level of fat. Chinese companies such as Yili Meiyitian and Mengniu YouyiC, which deals with production of dairy beverages, have sustained a huge growth in the sector. The use of probiotic idea is behind the rising demand for such beverages. The health advantages associated with dairy beverages are likely to increase in prominence for consumers in the Chinese market (Ortega, et al 2011). In addition, the Chinese government has scaled up health education and awareness as companies such as Coca Cola Limited initiate more innovations (Granato, et al 2010). In this respect, it can offer a huge chance for Coca Cola Company to launch dairy beverage if it can strategize well in the market.

nDealing with the Potential challenges

nFor Coca Cola Company to succeed in the production, marketing and distribution of its new dairy drink, it should work with other players in the Chinese market. Partnership would assist in understanding the cultural values and attitudes of the people concerning milk beverages (Lam, et al 2013). According to Hofstede theory, international companies must be aware of the cultural differences between the new market and the host market. In this case, the Coca Cola management should initiate both informal and official business occasions and social forums in order to establish trust and understanding (Lee, et al 2014). The theory also suggests that through such initiatives, Coca Cola would also benefit from strategic advice and safe expansion deals. For instance, ensuring that the representatives of the firm are present at all business operations will play a crucial role in minimizing errors and misunderstanding (Lam, et al 2013). Finally, such partnerships help the firm to design milk drinks packages in a way that attract domestic customers. It would also create a network of working relationship that would help to secure influence and contacts among the partners.

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nReferences

nCoca Cola, 2016. Coca-Cola Hong Kong. [online] Coca-cola.hk. Available from: http://www.coca-cola.hk/en/workplace/our_heritage.html [Accessed 15 Dec. 2016].

nDouphrate, D.I., Hagevoort, G.R., Nonnenmann, M.W., Lunner Kolstrup, C., Reynolds, S.J., Jakob, M. and Kinsel, M., 2013. The dairy industry: A brief description of production practices, trends, and farm characteristics around the world. Journal of agromedicine, 18(3), pp.187-197.

nEU SME Centre, 2015. The Food & Beverage Market in China. Sector Report, 10 (1).

nGranato, D., Branco, G.F., Nazzaro, F., Cruz, A.G. and Faria, J.A., 2010. Functional foods and nondairy probiotic food development: trends, concepts, and products. Comprehensive reviews in food science and food safety, 9(3), pp.292-302.

nLam, P.Y., Chan, A., Gopaoco, H., Oh, K. and So, T.H., 2013. Dual branding strategy for a successful new product launch in China. Business Horizons, 56(5), pp.583-589.

nLau, T.C., Chan, M.W., Tan, H.P. and Kwek, C.L., 2012. Functional food: a growing trend among the health conscious. Asian Social Science, 9(1), p.198.

nLee, P.Y., Lusk, K., Mirosa, M. and Oey, I., 2014. The role of personal values in Chinese consumers food consumption decisions. A case study of healthy drinks. Appetite, 73, pp.95-104.

nMoon, J. and Jeong, J., 2011. The Present and Future of Food Market in the Northeast Asia: Drinks Market. Advisory Board Members, p.1.

nOrtega, D.L., Wang, H.H., Olynk, N.J., Wu, L. and Bai, J., 2011. Chinese consumers demand for food safety attributes: a push for government and industry regulations. American Journal of Agricultural Economics, p.aar074.

nPrange, C. ed., 2016. Market Entry in China: Case Studies on Strategy, Marketing, and Branding. Springer.

nStaff, J., 2014. Celebrating 35 Years of Coca-Cola in China. [online] The Coca-Cola Company. Available from: http://www.coca-colacompany.com/stories/celebrating-35-years-of-coca-cola-in-China [Accessed 15 Dec. 2016].

nTolkamp, J.W., 2012. Chinas Dairy Chain (Doctoral dissertation, MSc-thesis Wageningen Univeristy and Research).

nVergari, F., Tibuzzi, A. and Basile, G., 2010. An overview of the functional food market: from marketing issues and commercial players to future demand from life in space. In Bio-Farms for Nutraceuticals (pp. 308-321). Springer US.

nWang, J., 2010. Brand New China. Harvard University Press.

nXu, P., Zheng, S. and Zhou, S., 2010. Family and Western-style fast food: influences on Chinese college students’ dairy consumption. Journal of Food Products Marketing, 17(1), pp.1-24.