Question

CONDUCT A PESTEL ANALYSIS OF COCA COLA COMPANY

Discuss the enviromental factors of technology, economic, political & legal, socioculture (consumer preferences), demographics..

Discuss the market characteristics (size and growth; segmented or concentrated; customers’ preferences)

Answer 1

PESTEL ANALYSIS OF COCA COLA COMPANY

Political Factors

Coca Cola is impacted by a set of political factors, both, in the US and abroad. These include, but not limited to the level of political stability in the country, impact of international pressure groups and domestic market lobbying groups and the government attitude towards the industry and the company.

There are few specific instances that illustrate the impact of political factors on Coca Cola performance. “One Day without Coca Cola” campaign launched by University organizations of the Social Nicaraguan Movement was a protest against the US-led invasion of Iraq with an inevitably negative impact on Coca Cola revenues in respective markets. Similarly, Israeli attacks on Gaza in 2014 have caused some of the businesses in Turkey and more than 100 hotels in Mumbai stop selling products of Coca Cola Company

Economic Factors

Coca Cola sales are impacted by a set of economic factors that beyond of company’s control. These factors include the level of economic growth in the country and in the industry, tax rates and currency exchange rates, interest rates, labor costs and others. The global economic and financial crisis of 2007 – 2009 is a relevant example of an economic factor that greatly impacted the majority of businesses around the globe. However, the crisis has impacted Coca Cola to a lesser extent compared to many other businesses. Its operating margin remained at industry-front 22% despite the crisis, although dividend yield was reduced to 2.6%.

Arguably, fluctuations in exchange rate is the most significant economic factor that has adversely impacted Coca Cola performance in recent years. For example, due to severe currency devaluation in Venezuela, Coca Cola’s reported profits in this market has to be reduced by 55% in the fourth quarter of 2014 and there are similar instances in other parts of the world.

Social Factors

The pursuit of healthy lifestyle and increasing level of consumer health concerns towards obesity fuelled by sugar and carbonated drinks can be specified as the most important social change that has direct and significant effect on Coca Cola performance. Specifically, as it is illustrated in Figure 2 below, the amount of soft drinks consumption in the US has experienced a steady decline during the past 15 years, at the same time when the level of consumption of bottled water and the sports drinks has increased substantially.

Coca Cola is also greatly impacted by additional range of social factors such as demographic changes, changing family values and family patterns, media perception of the brand and health and welfare of target customer segment…

Complete version of Coca Cola PESTEL analysis containing discussion of remaining factors is available in Coca Cola Company Report. The report also contains application of SWOT, Porter’s Five Forces and Value-Chain Analyses on Coca Cola , along with analysis of Coca Cola’s marketing strategy and company’s approach towards Corporate Social Responsibility (CSR).

Environmental

• In the UK, Coca Cola have called for a smarter producer responsibility scheme that boosts recycled materials in packaging, and has called upon the soft beverages sector to agree upon a common strategy and priorities for sustainable production (Latchem, 2017).
• While Coca Cola sell more than 100 billion single use plastic bottles per year, the organisation plans to increase recycled plastic use in its bottles to just 50%, signifying a lack of ambition from the organisation to tackle one of the largest environmental challenges presented by the plastic pollution in oceans (Sauven, 2017).

Legal

• With an increasing pressure lying upon food and beverage producers to regulate the ingredients of their products, and ensure that products are free of excessive levels of harmful chemicals, an increasing number of multinational enterprises have found themselves faced with legal disputes. Most recently, Coca Cola have found themselves on the end of a legal dispute in America, where two prominent pastors have filed a suit against both Coca Cola and the American Beverage Association with the claim that manufacturers of carbonated drinks knowingly deceive consumers about the health risks associated with beverages that are sugar-sweetened (Associated Press, 2017).
• All political contributions made my Coca Cola and their associated Political Action Committee are done so in compliance with laws, regulations and corresponding legal requirements for reporting, with senior government relations leaders and senior legal counsel leaders reviewing and approving all political contributions (Coca-Cola, 2017).

Coca-Cola Marketing Communications: A Critical Analysis

Types of Media used to Promote Coca-Cola

Media can be defined as a “facilitating institution who suggest appropriate message within the operative constraints of space” (Tyagi and Kumar, 2004, p.341) and is considered to be one of the most effective advertisement methods among marketing practitioners. Spurgeon (2008) divides media into two categories: published media and visual/aural media. Published media includes newspapers, magazines, trade and professional press, as well as internet. Visual and aural media, on the other hand, include television, radio, cinema, posters, billboards, and direct mailing.

Various types of media are used in order to advertise the Coca-Cola brand in general, and Coca-Cola drink in particular.

Newspapers are one of the most popular forms of media advertising that is widely used by Coca-Cola. Pishko (online, 2011) informs that along with such global brand names as Campbell’s Soup, Kellogg’s, and Pepsi Cola, Coca-Cola Company is one of the companies that has stared media advertisement in its earlier stages, and by now the company has been engaged in media advertising for more than 100 years.

Similarly, magazines have also been widely used at a global level in order to advertise Coca-Cola. The choice of magazines to advertise the brand has been undertaken according to their readability by the target customer segment of the company, and the Coca-Cola advertisements usually occupy the whole page of magazines in order to maximise the positive impact of the marketing initiatives.

Internet is another platform where the various forms of Coca-Cola advertisements are placed. Specifically, the brand online advertisement is undertaken through the extensive use of banners, pop-up ads, on-site sponsorships and various other formats of online advertisements in thousands of websites along the globe. Moreover, there are specific forums and many websites globally that are dedicated to Coca-Cola fans and where users share their stories where Coca-Cola is involved.

Coca-Cola has been advertised through television many counties as well with the company spending a considerable amount of financial resources for this purpose. Coca-Cola TV ads in different countries vary from each other and they have been prepared taking into account the characteristics of a local culture in order to avoid any misunderstandings due to cultural differences, and maximise the positive impact of the TV advertisement initiatives.

The Coca-Cola is also advertised in cinema and this is undertaken in two ways. Firstly, there are Coca-Cola video advertisements played in cinemas for selected movies before the movie starts. Secondly, Coca-Cola is widely advertised through product placement in movies, where Coca-Cola drink features somewhere during the movie and in order to maximise the efficiency of the product placement, the drink is usually consumed by the leading role during the movie.

While the number of usage and importance of product placement is increasing among the businesses with Coca-Cola being among the leaders, there is a place for misunderstanding and contradiction as well. Specifically, the movie Falling Down can be mentioned as an example, where the leading role played by Michael Douglas was a highly depressed man and in one scene places a can of Coca-Cola to his forehead in attempts to stop the headache. According to Yang et al (2004) this specific example of product placement was highly unsuccessful and counter-productive for Coca-Cola.

Coca-Cola media advertisement through the radio usually does last only for few seconds, but nevertheless is considered to be highly efficient in terms of increasing the level of brand awareness and customer loyalty.

Posters and billboards are also widely used as an integral part of the Coca-Cola media promotion. Coca-Cola billboards are usually placed at the city centres around the globe as well as highways and some of the rural areas. Posters, on the other hand, are normally displayed at the public transport, some of the shops and restaurants.

Objectives of Coca-Cola Campaign

Coca-Cola advertisement campaigns have been launched in order to achieve specific objectives. It is clear that the main objective of Coca-Cola Company as a business entity is profit maximisation, and all of the efforts of the company are directed to the achievement of this primary objective. However, Coca-Cola advertisement campaigns contribute to the achievement of the primary objective of profit maximisation in several ways.

Varey (2002) informs that marketing communication campaign might have up to eight objectives. Each of these objectives can be analysed in order to identify if Coca-Cola marketing campaigns are aiming to achieve them.

Firstly, creating awareness of the company and its products. This specific marketing objective is pursued by Coca-Cola Company as a secondary objective. This is because the company already has a high level of brand recognition and its limited range of products is widely well-known within the countries the company is operating.

Secondly, informing and educating consumers and buyers. The relevance of this type of marketing objective to Coca-Cola campaigns is limited due to the fact that there are no positive informational and educational points associated with Coca-Cola drink, such as nutritional aspects and health benefits that could be communicated to the potential and existing customers.

Thirdly, encouraging a liking for the company’s products over those of the competitors of the company. This is one of the main objectives Coca-Cola marketing campaigns aim to achieve. Global market of beverage products is highly competitive, and of the main strategies adopted by Coca-Cola Company involves engaging in intensive marketing initiatives.

Fourthly, encouraging product trial among potential new customers. This form of marketing objective is pursued by Coca-Cola very occasionally and only in new markets the company is entering.

Fifthly, increasing short-term sales by the means of stimulating action. This specific marketing objective is often pursued by Coca-Cola. Accordingly, seasonal and other sales are often introduced in major supermarkets, and relevant information is communicated to the potential and existing customers.

Sixthly, reassuring customers and reinforcing their particular desirable buying behaviour. This type of marketing objective is pursued by Coca-Cola campaigns through integrating the consumption of the drink to the lifestyle of the customers, thus achieving their lifelong loyalty.

Seventhly, generating information from customers. Such type of marketing objective is not very popular with Coca-Cola marketing campaigns due to the size of the company as well as the nature of the business.

Eighthly, creating sales lead. The marketing objective of creating sales lead is popular with the types of businesses that operate with the push strategy, i.e. the companies that direct their marketing initiatives mainly to the distributors and wholesalers, not the final consumers. Coca-Cola Company, on the other hand, operates under the pull strategy and directs its marketing efforts and communication to the final consumers, and therefore, does not have a necessity to generate sales leads.

Analysis of Images and Words used in Coca-Cola Advertising and Their Appeal

Coca-Cola marketing campaign materials have been devised according to the messages they aim to convey, and images, words and sounds featuring within them have been perfected by marketing professionals in order to serve the same purpose.

Messages sent through images, words and audio materials promoting Coca-Cola can be classified into three categories: Coca-Cola helps to best satisfy the thirst, drinking Coca-Cola is stylish, and drinking Coca-Cola is part of a lifestyle.

Marketing initiatives, words, images, audio and video materials Coca-Cola employs tries to communicate a message that this drink satisfies the thirst in the best possible manner and partially for this reason Coca-Cola is consumed by millions of people per day. However, a range of scientists as well as marketing authors such as Bsonera (online, 2009) cast a doubt about the ability of Coca-Cola to satisfy the thirst efficiently, and argue that ‘thirst’ for Coca-Cola has been created by company marketing professionals in the first place.

In other words, ‘thirst’ created for Coca-Cola is fundamentally different from the natural thirst for water, and the ‘thirst’ for Coca-Cola is more a want than a thirst in a virtual meaning of the word.

Moreover, Kotler and Keller (2006) state that the most effective marketing messages are presented by companies as a solution to a problem potential customers experience. This idea finds its confirmation in case of Coca-Cola in a way that the drink is being associated with a style and being ‘cool’ and trendy and at the same time the drink is consumed by successful and famous personalities such as Wayne Rooney, Cristina Aguilera, and Jessica Sarah-Parker. The linkage between these two points requires more detailed explanations that is provided below.

According to Freud (2005) in whatever they do people are motivated by two forces: sexual satisfaction and the willingness to be great. These two issues can be viewed as a problem and need that need to be satisfied. Specifically, some people aim to satisfy the need of the willingness to be great by trying to be stylish and trendy and associating themselves with established, famous, and successful personalities.

This fact is used by businesses such as Coca-Cola Company by paying famous individuals perceived to be successful such as Wayne Rooney, Cristina Aguilera, and Jessica Sarah-Parker to publicly associate themselves with the products and services the company is offering. As a result, other people will purchase these products and services because they want to be famous and successful as well. This is a partial explanation for the contents of some Coca-Cola advertisement materials where celebrities are featured.

Apart from the above discussed points of the Coca-Cola being positioned as a drink to satisfy thirst, and attribute of style and success, the contents of various marketing materials used to promote Coca-Cola also try to make the existing and potential customers believe that Coca-Cola is a necessary component of everyday life. This is achieved by making potential and existing customers exposed to intensive marketing campaigns through various channels.

Are They Working: Analysis of Success Associated with Coca-Cola Marketing Initiatives

There are different criteria against which the success of a marketing campaign can be assessed. According to Koekemer and Bird (2004) integrated marketing communication assessment criteria include customer loyalty, market share, and the amount of revenue that were generated as a result of the marketing campaign. The same criteria can be applied in case of Coca-Cola in order to analyse the effectiveness of its marketing

When evaluated from the criteria of customer loyalty Coca-Cola marketing initiatives can be considered to be highly successful. There are millions of people worldwide who consume Coca-Cola regularly. It has been even stated that “every second of every day, people everywhere – 13,000 of them – pop open a Coca-Cola product” (Bodden, 2008). And some of these consumers drink Coca-Cola regularly.

The extent of efficiency of Coca-Cola marketing initiatives can be evaluated on the basis of market share criteria as well. The company is selling its products in more than two hundred countries employing 139,600 employees and is a market leader in the majority of these markets (Growth, Leadership, Sustainability, online, 2011). This fact can be pinpointed to as an evidence of success of Coca-Cola integrated marketing communication initiatives.

Moreover, if the efficiency of company marketing campaign is to be evaluated from the viewpoint of profitability it can be seen that partially as a result of effective integrated marketing communication strategy Coca-Cola was able to generate $8.2 billions from operations during the year of 2009 (From Our Leadership, online, 2009).

However, there is also an alternative approach in terms of evaluating the success of marketing campaigns involving media. For instance, marketing initiatives involving media relations can be assessed through a range of media tools such as advertising equivalency, number of total audience that has been reached through a specific publication, numbers of journalists hosted, articles published etc.

The evaluation of media marketing campaigns conducted through the internet, on the other hand is conducted by application a different range of assessment tools such as the total number of unique visitors to the website, length of visit to the website, natural (free) search engine results, paid search engine results, and others.

Similarly, there are specific sets of efficiency level evaluation tools that can be applied to each individual method of integrated marketing communication initiatives. The application of these measures to Coca-Cola marketing campaigns proves the campaigns to be efficient and positively contributing to the achievement of their aims and objectives.

Conclusion

Having an effective integrated marketing communications strategy and efficiently to implement it is one of the necessities for companies in a modern business world without which the chances for company’s long-term growth will be compromised. In order to be successful the components and all elements of marketing campaigns, including images, texts audio and video materials need to be effective.

This article has studied the related issues in the case of Coca-Cola Company in general, and their core products Coca-Cola soft drink in particular. The company relies on media extensively in order to conduct its integrated marketing communication strategy. The choice of media used by Coca-Cola includes newspapers, magazines, internet, television, cinema, radio, posters and billboards.

Marketing campaigns initiated and conducted by Coca-Cola has a range of objectives to achieve that include encouraging a liking for Coca-Cola, increasing short-term sales, forming buyer behaviour and others.

Analysis of images and words used in Coca-Cola marketing campaigns has identified that these marketing efforts aim to communicate three types of messages. Firstly, Coca-Cola marketing initiatives aim to communicate a message that this drink is a best solution to satisfy the thirst. Secondly, Coca-Cola marketing campaigns aim to communicate a message that drinking Coca-Cola is associated with style, being ‘cool’ and trendy. Thirdly, marketing campaigns devised by Coca-Cola aim to communicate the message that drinking Coca-Cola is a part of everyday life and that the drink is a part of a lifestyle.

However, the most interesting part is that all of these three types of benefits that Coca-Cola is offering its potential and existing customers are only perceived benefits. Specifically, the statement that Coca-Cola satisfies thirst better than any other drink is justifiably under high degree of suspicion. And it is also absolutely clear that Coca-Cola does not make anyone stylish, trendy and ‘cool’ in reality and all the promised benefits of such a nature are only perceived benefits.

The above stated facts reveal the huge amount of potential of marketing in a way that Coca-Cola Company offers mainly perceived benefits to its customers, however, with the effective choice of components of integrated marketing communication and their efficient use the company was able to become one of the most successful multinational corporations in the world.