Controlling nearly 40% of the entire beverage market, Coca-Cola uses Boston Consulting Group Matrix strategies to market Coke. Boston Consulting Group Matrix commonly known as BCG is basically a framework that was developed by Boston Consulting Group to critically evaluate its business strategic position. Many companies in the United States use the BCG framework to develop marketing strategies. As one of the users of the BCG framework, Coca Cola has effectively used the BCG strategy to critically analyze its market strategies, strengths and drawbacks.
The Coca-Cola Company has a patent statement that has enabled it to grow from a small business entity in Atlanta Georgia in becoming a world class organization.
The BCG Matrix
The Boston Consulting Group (BCG) was designed in 1960 by its president Bruce Henderson to develop business strategies. There are four categories that products are positioned: stars, dogs, cash cows and question marks.
This category presents high growth and high market share. A lot of money is used to run the company, while its leaders who are its financers generate large amounts of cash to run and manage Coca-Coca every day. When Coca Cola Company is growing steadily and its share is high as well, it emerges the leader in the business. Coca Cola has a strong position in the market that is incomparable by other similar brands globally. It has a high market share and its growth rate is significantly high.
Cash Cows basically show low growth and high market share in the business. Consequently, Cash and profits generated in Coca-Cola should be high and therefore a low investment is needed in order to keep profits high. Coca Cola has significantly high market growth rate in the beverage market, however, the market growth rate of Coca Cola consumption is not very high as speculated due to stiff completion by other beverage companies in the market.
These represent a low market share and low growth of the company. It is depicted that for good progress in the company, Coca-Cola needs to avoid and minimize the number of dogs in the entity to maximize profits. Coca Cola is proffered to other brands because there are quite a number of developing countries that are not aware Coca Cola offers another variety of soft drinks aside coca Cola and Pepsi.
Question marks refer to the products that have the potential to penetrate into the market and do well though requiring a lot of resources for development. For instance, Coca Cola has limited variety in taste and is seen to majorly target the middle class market. Secondly, the fact that there are more companies that have emerged in the market that produce fresh fruit beverages, is a big challenge to Coca Cola to maintain itself in the market. Therefore, Coca Cola should critically look for other beverage alternatives to introduce in the market in order for it to maintain its status and strategy in the market.
Strategic Marketing Planning Process:
Coca Cola uses a strategic marketing process that enables it to cope with the stiff competition from its competitors in the beverage industry. Planning is a process of developing a rational plan, Coca Cola has incorporated a marketing plan that has successfully identified and captured its target market. This process basically involves determining target markets and the audience’s preferences of its products. Coca Cola has a very belligerent plan that has seen it reach great heights over the years. A marketing plan is therefore a detailed document with the company’s objects.
Ideally, Coca Cola Company would prefer all the above categories apart from Dogs. This could give it a balanced portfolio of its products (Lamb 34).
The main values of using the Boston Matrix include:
- It is a useful means of analyzing product variety decisions
- Easy to perform
- It creates a platform for organizations to analyze and strategic markets
- It has little predictive value
- It does not take account of environmental factors
- It is a good indicator of detecting flaws.
How to perform BCG matrix analysis
- Step 1. Choose the unit
The coca cola company uses the BCG matrix to analyze its products in the market. Among these are Coca Cola’s soft drinks like Coca Cola Vanilla and Coca Cola Strawberry. The unit chosen the company’s management has a significant effect on and impact on the whole product analysis. Therefore it is vital for Coca Cola to critically choose among its brands in the market that will lay a platform for analyzing that unit.
- Step 2. Define that market
Defining the market is a very important strategy for Coca Cola as it enables it carefully to strategize its analysis. Forming a base for analytical strategies is very crucial especially in a large organization like Coca Cola because issues like defining a market could lead to deprived clarification and consequently mislead the entire organization’s operation. For instance, an analysis for the Coca Cola beverage shows that in spite of the much revenues accrued from sales annually, close 20% relative market share is not accounted for and this would be a Cash cow in the beverage market. It is therefore an important factor to consider in defining the market so as to understand its portfolio position (Lussier 97).
- Step 3. Calculate the relative market share
The relative market share is calculated in regards to revenues or market share. The Coca Cola Company has a market share accrued from its brand revenues. It is calculated by dividing Coca Cola’s revenues by the revenues of its biggest competitor (Pepsi). For instance In the US PepsiCo simply known as Pepsi had a market share of 25% while that of Coca Cola was 30% in 2012. Coca Cola’s brand market share was 1.2.
- Step 4. Find out the rate of the market growth
Coca Cola’s market growth rate as indicated in its brands’ reports is calculated by assessing the revenue growth of the leading beverage companies. Measured in percentage terms, the midpoint of the Y-axis is normally set 10% growth rate though it may vary. Annually, Coca Cola has grown at an average of 1- 2%.
- Step 5. Draw circles on a matrix
Marketing Planning Process
There are several stages of the Strategic Marketing Process that outlined below.
At this level, Coca Cola’s board establishes a long term vision for the company. This vision is a statement of communication that is easily understood by all key stakeholders and employees.
At this stage, Coca Cola’s objectives setup the intended level of business boundary, level of profitability and other corporate objectives.
Marketing Audit is basically the structured revenue of Coca Cola’s current marketing activities. It is therefore a systematic review of all the internal and external factors that have directly or indirectly affected Coca Cola’s Company overall commercial performance over a given span of time.
This a tool used by Coca Cola to audit its organization and environment as well. It is the initial stage of planning that helps Coca Cola marketers to focus on key issues pertaining management and organization.
Budget is documentation of the expected costs of Coca Cola’s proposed marketing plan. It is a method used to justify all marketing expenditures every year against targeted goals from a zero base.
First Year Detailed implementation Program
This is a program that involves Coca Cola’s expenditure in advertising, interacting with new potential customers, launching new products and also opening new retail outlets. The Coca Cola Company uses this program to enable it strategize its management.
Marketing Planning Benefits
Usually, a marketing plan is a long process that starts from one department and goes through a procedure in management decision for approval. Coca Cola has always made a very attractive marketing plan that has always been different from others. Certainly, Coca Cola Company is not without challenges and drawbacks. Among its drawbacks is the recent constant shift to health products like natural fruit juices that can be a big challenge to the company. Consequently, it has also reported several declines in brand volumes in Thailand and Indonesia due to the reduced consumer purchasing power. In addition to that, Coca Cola has produced 500 different types of brands and some of these brands are a result of nonexistent advertising or low profile. Also in regards to health, Coke has a high concentration of sugar and caffeine content and this factor drives away quite a great deal of consumers.
Ways to Improve Coca Cola’s Marketing Strategy
There are measures that the Coca Cola Company could take to resolve and improve this depriving state. Among these are: introducing healthy sugar free natural soft drinks. This will capture a great number of consumers who do not consume sugar. Similarly it should introduce a variety of drinks in regions that have registered a decline in its revenue and similarly advertise more. This will to a large extent popularize its brands. Possibly, Coca Cola support ought to strictly and critically analyze its marketing strategy drawbacks and incorporate a more rational strategy that detects pitfalls. This way, its management will be in a good position to improve on its weak strategies and enable it to discover radical trends in the market.
Harrison, Jeffrey S, and John C. H. St. Foundations in Strategic Management. Mason, Ohio: South-Western Cengage Learning, 2010. Print.
Lamb, Charles W, Joseph F. Hair, and Carl D. McDaniel. Mktg5: Student Edition. Mason, OH: South-Western Cengage Learning, 2011. Print.
Lussier, Robert N. Management Fundamentals: Concepts, Applications, Skill Development. Mason, Ohio: South-Western, 2012. Print.
Pride, William M, and O C. Ferrell. Marketing. Australia: South Western Cengage Learning, 2010. Print.