Investigation of Coca-Cola Company in China (Essay Sample)

COMPANY ANALYSIS – THE COCA-COLA COMPANY IN CHINA
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Executive Summary
The 126 year-old Coca-Cola Corporation has its roots in Atlanta, USA and bears the most outstanding trademark in the world. The company owns over four hundred brands that positively satisfy customers’ tastes all over the world (Bell 2004, p. 4). The vast products of Coca-Cola appeal to diverse people of different backgrounds, genders, ages, and other factors. Prior to Coca-Colas wide range of products, the company has spread its wings internationally. Statistics claim that its products are sold in more than two hundred countries worldwide, where more than 1.7 billion non-alcoholic beverages are consumed on daily basis. The Coca-Cola brand is outstanding because it surpasses all the other beverage companies, and yet the company is showing more progress in the future. Coca-Cola possesses various aspects that places the company in a strong competitive position, and these aspects ranges from promotional techniques all the way to corporate structure.
Introduction
The Coca-Cola Company was formed later after the Coca-Cola drink was invented. The Coca-Cola beverage was born in Atlanta, Georgia, USA, in 1836 when a doctor bearing the name Dr. John Smith Pemberton, a local pharmacist invented a caramel-colored liquid through his own experiments. The doctor carried the liquid in a jug down the street to Jacobs’s pharmacy where the drink was combined with carbonated water and the end product was sampled by customers who agreed that the drink was special. The Jacob’s pharmacy put the product on sale and sold it in glasses until later when the doctor and his colleague, named Frank Robinson, invented a name and lettering for the product which remained the same ever since. The little experimental discovery of a beverage led to a multinational company that specializes in vast products. Currently, the company has operated in the business market for 125 years, employs 139,600 people, has 400 products, and sells in 200 countries worldwide.
Company Profile
The Coca-Cola Company is generally a beverage company. The company licenses and markets more than 500 non-alcoholic beverage brands as well as still beverages globally. The company’s segments include Africa, Europe, Asia, America, and other parts of the continent. Coca-Cola’s mission is to refresh the world, inspire moments of optimism and happiness and create value as well as make a difference in the beverage industry. The vision that the Coca-Cola Company possesses applies to various fields in the company (Fernando 2011, p. 38). First, the company values its employees and it looks forward to creating a favorable environment where its workers can work comfortably and be inspired to become the best they can be. More so, Coca-Cola is customer-focused because it nurtures a winning network of customers and suppliers, so as to create a mutual and enduring value. Additionally, Coca-Cola aims to bring a portfolio of quality beverage brands to the world in order to meet and satisfy people’s desires and tastes. The other aim of the Coca-Cola Company is to foster corporate social responsibility by being responsible and helping build and support sustainable communities. The company’s core shared values are integrity, passion, leadership, and innovation.
Industry Profile
The soft drink industry produces and markets vast products that range from concentrates, juices, sparkling juices bottled water, ready to drink tea, and coffee among other beverages. The industry exists all over the world with America, Europe, and China taking the lead in production and sales. The industry portrays tremendous growth rates and approximates claim that it will hit 310 billion dollars by 2015. This growth explains why companies like Coca-Cola are progressing and hitting all corners of the global market.
Coca-Cola Financial Summary
This table explains the Coca-Cola financial summary of the year 2010


Source: (Schmitz 2012)
The Global Market Share for Coca-Cola
Coca-Cola’s strong competitive advantage in the soft drink industry has exposed the company to the largest market share. The growth is tremendous because statistics claim that Coca-Cola controls 59% of the world market, and the global unit sale has been increasing for the past ten years. The success has also been accelerated by the vast geographical market that the company possesses. The best performing products in the Coca-Cola industry is the carbonated soft drink and the non-alcoholic ready to drink beverage category. Nevertheless, the company is putting more effort in building its relationship with the bottling partners and bridging a closer coordination of operations in customer relationship as well as production and logistics with an aim of realizing shared opportunities and growth in future.
Trends and Forces
The trends and forces that Coca-Cola Company faces are external factors that include the global economic recession that might affect the overall demand of the company’s product due to uncertain economy experienced by the customers. The other force that threatens the company is the health issue where most health organizations enlighten consumers about the effects of consuming soda due to its unhealthy contents. In the same health consciousness issue, the company’s bottled water Dasani is declining in sales because people’s trends are changing from bottled water to tap water which is believed to be healthier. Additionally, the effect of the dollar affects the overall performance of Coca-Cola products in the international market due to the strength of the US dollar, which weakens the other currencies that relate to the dollar hence, lowering earnings.
Coca-Cola in China
China is among the countries with business opportunities due to various reasons. First, the country has an enormous population and high growth rate of GDP, especially when considered that the average GDP in 1979 was standing at 9%. Historically, Coca-Cola ventured into the Chinese market in 1979 through franchise entry mode where the bottling plants were wholly owned by China’s state-owned enterprises. This happened immediately after China launched its open door policy in 1979 and the Coca-Cola Company began negotiations with the Chinese government seeking permission to access the market. The outcome of the negotiation was that Coca-Cola Company would only import its soft drink to foreigners in China’s three major cities that included Beijing, Guangzhou, and Shanghai. However, the policies changed in 1986 when the Coca-Cola Company was allowed to build three bottling plants in Beijing, Guangzhou, and Xiamen and then had its ownership rights transferred to diverse Chinese state owned enterprises as required by government policy on the beverage sector (Harvard Graduate School of Business Administration, 2006: 83). This means that though Coca-Cola built bottling plants, the company did not own them.
Coca-Cola continued to import concentrate to Chinese owned bottling plants in China, where the Chinese plants added water, sugar, syrup, and gas into the imported concentrate and the end product was carbonated soda. This depicts how the Coca-Cola Company acted as the wholesaler, while the bottling plants became the market agents. This process limited the profits of the Coca-Cola Company. The Chinese strict policies on foreign soft drinks were aimed to nurture the local brands that had inadequate funds to compete with the foreign soft drinks. Years later, the Coca-Cola Company decided to turn things around by internationalizing its market transactions in 1993. More so, the company internationalized procurement transactions and labor market in its bottling business. Later on, the Coca-Cola Company teamed up with two foreign bottlers namely, Hong Kong’s Swire group and Malaysia’s Kerry group. This arrangement shaped the basic features of the third stage of Coca-Cola’s business progress in China, which has led the company’s progress in the market to date.
Introduction
The Coca-Cola brand existed in the Chinese market since 1979 and has pitched its roots in the market, evidence portrayed by its strong competitive position in the market in spite of the stiff competition from Pepsi and other local beverages. This means that Coca-Cola in China has managed to win customer loyalty because it is not only a corporation but also a partner in Chinese events and cultural activities.
Current Situation
The Coca-Cola Company has extended its market position to China because the company shares 50% in the Chinese beverage market. Additionally, the company’s success progresses each year and the most current progressive measures are that the company is opening two new bottling plants in Nanchang, Jiangxi province, and Urumqi an investment that cost the company 210 million Yuan. These expansions would increase Coke’s geographical presence in China. Prior to expansion in production the company plans to venture into the rural Chinese areas where only the local brand sells. This will create awareness of Coca-Cola brands and bring in more sales.
Products in China
The Coca-Cola Company produces vast varieties of beverage products that sell globally with China included. However, Coca-Cola has modified some of its products to befit the Chinese market, meaning that China has exceptional products from Coca-Cola. Among these products are Coke classics, Sprite, Fanta, and beers like Barq’s root Beer and Dr. Pepper (Liu 2013, p. 181). The local brand names are Qoo, Sensation, Tianyudi, and SMART, which are ready-to-drink tea drinks and juice drinks that are a result of adjustment to meet the local preferences.
Market Share
Coca-Cola is the first US based company to distribut...