“Adaptation & Innovation

Strategies By
The Coca Cola Company”

SUBMITTED TO:- PROF. HIMANSHU MOHAN

SUBMITTED BY:- VARUN MARK SHARMA

(PGDRM 2009-11)
Product Adaptation
To enter a foreign market successfully, a company may have to modify its
product to conform to government regulations, geographic and climatic
conditions, buyer preferences, or standards of living. The company may
also need to modify its product to facilitate shipment or to compensate for
possible differences in engineering and design standards.

Foreign government product regulations are common in international trade

and are expected to expand in the future. These regulations can take the
form of high tariffs or nontariff barriers, such as regulations or product
specifications. Governments impose these regulations to:

• Protect domestic industries from foreign competition;

• Protect the health of their citizens;
• Force importers to comply with environmental controls;
• Ensure that importers meet local requirements for electrical or
measurement systems;
• Restrict the flow of goods originating in or having components from
certain countries; and
• Protect their citizens from cultural influences deemed inappropriate.

It is often necessary for a company to adapt its product to account for

geographic and climatic conditions as well as for the availability of
resources. Factors such as topography, humidity, and energy costs can
affect the performance of a product or even define its use. For example, the
cost of petroleum products and the state of a country's infrastructure, may
indicate the demand for energy-consuming products.

Buyer preferences in a foreign market may also lead a manufacturer to

modify its product. Local customs, such as religious practices or the use of
leisure time, often determine whether a product is marketable. The sensory
impact of a product, such as taste or visual impact, may also be a critical
factor. For example, Japanese tend to desire beautiful packaging. This has
led many U.S. companies to redesign cartons and packages that are
destined for this market.
A country's standard of living can also determine whether a company needs
to modify a product. The level of income, education, and the availability of
energy are all factors that help predict the acceptance of a product in a
foreign market. If a country is less developed than the United States, its
market may be geared towards less sophisticated products. Certain high-
technology products may not be successful in some countries not only
because of their cost, but also because of their nature. For example, a
computerized industrial washing machine that might replace workers could
conflict with a country's employment goals. Another facet of this scenario is
that this product may need a level of servicing that is unavailable in some
countries.

Market potential must be large enough to justify the direct and indirect costs
involved in product adaptation. The firm should assess the costs to be
incurred and though it may be difficult, determine the increased revenues
expected from adaptation. The decision to adapt a product is based partly
on the degree of commitment to the specific foreign market; a firm with
short-term goals will probably have a different perspective than a firm with
long-term goals.
Important Considerations
# What foreign needs does the product satisfy?

# What product should the firm offer abroad?

# Should the firm modify its domestic-market product for sale abroad?
Should it develop a new product for the foreign market?

# What specific features, such as design, color, size, packaging, brand and
warranty should the product have?

# What specific services are necessary abroad at the pre-sale and post-
sale stages?

# Are the firm's service and repair facilities adequate?

The Coca Cola Company

About the Company:

It was 1886, and in New York Harbor, workers were constructing the Statue
of Liberty. Eight hundred miles away, another great American symbol was
about to be unveiled.

Like many people who change history, John Pemberton, an Atlanta

pharmacist, was inspired by simple curiosity. One afternoon, he stirred up a
fragrant, caramel-colored liquid and, when it was done, he carried it a few
doors down to Jacobs' Pharmacy. Here, the mixture was combined with
carbonated water and sampled by customers who all agreed -- this new
drink was something special. So Jacobs' Pharmacy put it on sale for five
cents a glass.

Pemberton's bookkeeper, Frank Robinson, named the mixture Coca-

Cola®, and wrote it out in his distinct script. To this day, Coca-Cola is
written the same way. In the first year, Pemberton sold just 9 glasses of
Coca-Cola a day.

A century later, The Coca-Cola Company has produced more than 10

billion gallons of syrup. Unfortunately for Pemberton, he died in 1888
without realizing the success of the beverage he had created.

Over the course of three years, 1888-1891, Atlanta businessman Asa

Griggs Candler secured rights to the business for a total of about $2,300.
Candler would become the Company's first president, and the first to bring
real vision to the business and the brand.
Ingredients
• Carbonated water

• Sugar (sucrose or high-fructose corn syrup depending on country of

origin)

• Caffeine

• Phosphoric acid v. Caramel (E150d)

• Natural flavorings

A can of Coke (12 fl ounces/355 ml) has 39 grams of carbohydrates (all

from sugar, approximately 10 teaspoons), 50 mg of sodium, 0 grams fat,
0 grams potassium, and 140 calories.

Formula of natural flavorings

The exact formula of Coca-Cola's natural flavourings (but not its other
ingredients which are listed on the side of the bottle or can) is a trade
secret. The original copy of the formula is held in SunTrust Bank's main
vault in Atlanta. Its predecessor, the Trust Company, was the underwriter
for the Coca-Cola Company's initial public offering in 1919. A popular myth
states that only two executives have access to the formula, with each
executive having only half the formula. The truth is that while Coca-Cola
does have a rule restricting access to only two executives, each knows the
entire formula and others, in addition to the prescribed duo, have known the
formulation process.

Franchised production model

The actual production and distribution of Coca-Cola follows a franchising

model. The Coca-Cola Company only produces a syrup concentrate, which
it sells to bottlers throughout the world, who hold Coca-Cola franchises for
one or more geographical areas. The bottlers produce the final drink by
mixing the syrup with filtered water and sweeteners, and then carbonate it
before putting it in cans and bottles, which the bottlers then sell and
distribute to retail stores, vending machines, restaurants and food service
distributors.

The Coca-Cola Company owns minority shares in some of its largest

franchises, like Coca-Cola Enterprises, Coca-Cola Amatil, Coca-Cola
Hellenic Bottling Company (CCHBC) and Coca-Cola FEMSA, but fully
independent bottlers produce almost half of the volume sold in the world.
Independent bottlers are allowed to sweeten the drink according to local
tastes.

The bottling plant in Skopje, Macedonia, received the 2009 award for "Best
Bottling Company".

Product Adaptataion & Innovation

Coca Cola is a company with rich history and tradition that has build an

iconic brand. The company prides itself with being a leading innovator in

the soft drinks industry and being able to turn customer demands to

products. Being in step with customer trends and being able to anticipate

what lies ahead as well as marketing innovation has always been a

hallmark of The Coca Cola Company, helping the brand evolve with time

and keep in step with consumers’ changing lifestyles.

 In 2006, Coca Cola introduced another innovative product – the

Coca Cola Zero (Coke Zero). Cokes zero is now a part of the Coca Cola

core family with Classic Coke and Diet Coke. Complementing these, and

meeting consumers’ desire for new ways to enjoy the great taste of Coke,

the company also introduced brand extensions such as Coke with Citrus

Zest and Diet Coke with Cherry.

Selected Product Innovations

In this section, I will discuss some product innovations that Coca

Cola introduced.

1. No-Calorie Drink (Coke Zero) – the introduction of Coke Zero was

motivated by the increasing consumer demands for healthier products.

Consumers are increasingly seeking more choices and order to keep up

with the demands of the consumers and their lifestyles, Coca Cola
launched Coke Zero. Coke Zero offers the same taste as Coca-Cola with

no calories. Coca cola added more sugar for the Indian locals.

2. Calorie Burning Tea (Enviga) – as part of the company’s commitment to

keep up with the changing lifestyles of the consumers, Coca Cola

introduced a calorie-burning tea named Enviga in 2006. This product is

intended to complement healthy lifestyles. By drinking three cans of Enviga

each day, consumers can burn an extra 60-100 calories daily. This

innovative product is added with a powerful antioxidant EGCG that speeds

up metabolism and increase energy use, especially when combined with

caffeine.

Reasons behind the Innovation

1. Changes in Customer Demands and Requirements (Lifestyles)

Changing consumer concerns, attitudes, and lifestyles have

tremendous impacts in Coca-Cola. In the United States and in Europe,

consumers are becoming more concerned with a healthy lifestyle. The soft

drinks sector is threatened by the increase in consumer awareness of

health problems arising from obesity and inactivity. In order to satisfy the
new consumer demands and requirements, Coca Cola is introducing new

products that compliments healthy lifestyles.

2. Expansion of Noncarbonated Category and Bottled Water

Noncarbonated drinks is a dynamic, fast-growing category. The

growing demands for noncarbonated drinks is pushing soft drinks

companies such as Coca-Cola to introduce noncarbonated drinks. The

bottled water market is also expanding. The expansion and developments

of these segments presents an opportunity for Coca-Cola. The company

started its exploration of these segments and have been successful in

creating new products.

3. First Mover Advantage

One of the reasons why Coca-Cola engages in product innovation

is to gain first mover advantage. By being the first to introduce a product

category, Coca-Cola is able to define competitive rules, to gain reputation

advantage, to gain superior access to channels and inputs, to influence

industry standard and to develop skills advantage.

4. Fill the Gaps between the Markets and Coca Cola’s Products
 As customer demands and requirements change and as customers

become more health conscious, a gap between the markets and Coca

Cola’s products begin to surface. A new market has emerged composed of

consumers who are health conscious and have a high demand for healthy

products. Health reports emphasizing the possible negative health effects

of Coca-Cola’s and other similar company’s products abound.

5. Growth in Emerging Markets

Coca-Cola is attracted with new emerging markets such as China,

Russia and Brazil. In order to successfully penetrate these markets, Coca

Cola needs to have a first mover advantage and to introduce differentiated

products.

6. To Strengthen Brand Image

By introducing new products, Coca-Cola aims to strengthen its

brand image as the home of quality beverages.

Internal Analysis

Current Growth Strategy

 To compete in the global beverage market, Coca-Cola employs a

differentiation strategy to create value for its consumers. The mission

statement of Coca Cola reflects its growth strategy “To refresh the world.

To inspire moments of optimism”.

1. Grow Core Global Carbonated Soft Drink Brands – Coca-Cola is seeking

to expand its core brands in each market through immediate consumption

opportunities.

2. Grow Other Core Brands – Coca-Cola is seeking to expand its profitable

noncarbonated products such as coffee, energy drinks and sports drinks.

3. Create Customer Value – Coca-Cola employs different strategies for it to

understand the customers’ needs and wants. Understanding its customers

can help Coca-Cola in focusing different products to different markets.

Product Strategy

Coca-Cola practices a high degree of product adaptation and

modification across every market it serves. Rapid product testing, and

adaptation are the foundation of Coca-Cola’s product strategy. Coca-Cola

performs product testing and development in each individual market. This is

primarily because of the different market trends in every country. In order to

compensate with the stagnating sales in the carbonated drinks category,

Coca-Cola embarked on product development to widen its product

offerings. With increase consumer interest in healthier drinks such as

bottled water, fruit juice, energy drinks, ready-to-drink teas and coffees, the

company has embarked on an ambitious program of product launches.

Some of the recent popular product launches are:

1. Coke Zero – In 2005, Coke Zero was launched in North America. Coke

Zero is a zero-calorie cola.

2. Coca-Cola with Lime – This was introduced in 2005 as a brand extension

for Coca-Cola. Following the introduction of Coca-Cola with Lime is the

launch of Diet Coke with Lime.

3. Enviga – In 2006, a delicious sparkling green tea containing green tea

extracts, calcium and caffeine, Enviga was launched.

4. Gold Peak – In 2006, Gold Peak was launched in North America. Gold

Peak is a premium ready-to-drink iced tea. With its fresh homemade taste,

Gold Peak revives the timeless flavour of classic, authentic iced tea.
5. DASANI – This was launched in 2007. DASANI is a vitamin-enhanced

flavored water. The line, with zero calories per serving, comes in three

varieties namely Refresh+Revive, Cleanse+Restore and Defend+Protect.

Context for Adaptataion

1. Industry

The state of the industry is one of the important factors in

determining the strategies that a company will employ.

Threat of New Entrants

New entrants do not pose as serious threats to Coca-Cola. The

soft-drink industry is primarily dominated by Coca-Cola and PepsiCo which

have string brands and superior distribution channels. New entrants cannot

compete directly with Coca-Cola.

Threat of Substitutes

Coca-Cola products can be substituted by bottled water, sports

drinks, coffee, and tea. The increasing emphasis on health and healthy

living makes bottled water and sports drinks a desirable substitute to Coca-

Cola’s products. Consumers are becoming more health conscious and they

are looking for healthier substitutes. There are a growing number and

varieties of water and sports drinks that appeal to different consumers’

tastes. These products are marketed and heavily advertised as healthier

than soft drinks.

Bargaining Power of Suppliers

Coca-Cola works with bottling equipment manufacturers and

secondary packaging suppliers. Because Coca-Cola introduces new

products frequently, tension between the company and its suppliers is

building. Some bottlers are refusing to bottle new Coca-Cola products.

Bargaining Power of Buyers

 The significant buyers of Coca-Cola and other soft drinks are mainly

large grocers, discount stores and restaurants. The soft drinks company

distributes the beverages to these stores for resale to the consumer. The

bargaining power of the buyers is high. Large grocers and discount stores

buy large volumes of soft drinks allowing them to buy at lower prices.

Competitive Rivalry

The competition that Coca-Cola faces from its rivals is the greatest

challenge to the company. Coca-Cola, PepsiCo, and Cadbury Schweppes

are the largest competitors in the soft drinks industry with global presence.

PepsiCo is the main competitors for Coca-Cola and the rivalry between

these two brands is more than a century-old.

2. Industry Life Cycle

Industries according to (2000) have life cycles. Industries, like

products progress through their life cycles and as they do so the nature of

competition and consumer demand changes. The soft drink industry is a

mature industry that is experiencing change.

3. Competition
 Perhaps a big reason why Coca Cola continues to implement

product innovation is because of the intense competition in the non-

alcoholic beverage industry. In order to remain competitive and to maintain

its leadership position, Coca Cola introduces innovative products that

create value for the customers and shareholders.

The nonalcoholic beverages segment of the commercial beverage

industry is highly competitive. Coca Cola competes with major international

beverage companies that, like Coca Cola operate in multiple geographic

locations, as well as numerous firms that are primarily local in operation. In

order to withstand competition form numerous rivals, Coca Cola uses its

resources in creating new products.

4. Role of National and International Institutions

As a company that operates in more than 200 locations around the

world, national and international institutions such as government bodies

have significant impact on Coca-Cola’s product innovation. Changes in

laws and regulations relating to beverage and packaging could increase

costs and reduce demand for the company’s products. Another area where
national and international institutions influence the company is through

health issues. Over the years, there have been a growing concern over

health and the possible health risks that Coca Cola’s products carry. One

main concern is the impact of Coke and similar products on Obesity

particularly in Children. In order to address health issues, the company has

developed products which complements healthy lifestyle. Innovative

products such as Coca-Cola Zero and Enviga have been introduced.