COCA COLA VIETNAM ANALYSIS
COCA COLA
I/ Coca Cola Vietnam Background
In 1886, Coca-Cola history began when the curiosity of an Atlanta pharmacist, Dr. John S. Pemberton, created a distinctive tasting soft drink that could be sold at soda fountains. He created a flavored syrup, took it to his neighborhood pharmacy, where it was mixed with carbonated water and deemed “excellent” by those who sampled it. Dr. Pemberton’s partner and bookkeeper, Frank M. Robinson, is credited with naming the beverage “Coca Cola” as well as designing the trademarked, distinct script, still used today. Coca-cola is distributed by 14 million distributors all over the world nowadays.
In 1960, Coca-cola was the first time introduced in Vietnam. After that, Coca-cola Indochina Pte Company was established officially in Vietnam on August 1995. Since then, Coca-cola has some locations in Vietnam, which were united as one Beverage Company called Coca-cola Vietnam with the head office located in Thu Duc District, Ho Chi Minh City
II/ Vision and Mission
In the strategic management model, clear vision and mission statements are very vital for alternative strategies to be formulated and implemented.
Vision statements have to answer the question “What do we want to become?” while a mission statement answers the question “What is our business?” A clear business vision will help the firm build a comprehensive mission statement and a clear mission is needed before alternative strategies can be formulated and implemented
So developing a good vision and mission is essential for any firm and a big company like Coca Cola is not an exception.
1. Vision
A good vision need to meet three components which are core values, core purpose and BHAG (Big Hairy Audacious Goal). Core values and core purpose are core ideology and BHAG can be considered as envisioned future which needs both 10-to-30-year BHAG(s) and a vivid description
Elements of a good vision
By Dr. Hoa Thi Thu Ho, Strategic Management Lecture
“To continue to thrive dispatched in the next 10 years and beyond, we must look ahead and understand the trends and forces will shape our business in the future and move quickly to prepare for what is to come. We have to get ready for today and tomorrow” . This is Coca Cola Vision in 2010; it creates one long-term destination for the business and provides a "roadmap" for winning together with bottling partners. The world is changing day after day. The world and the individual country are changing. To be suitable for the environment in each country, Coca cola poses a vision called “2020 Vision” as an improved vision for future aims.
The current vision is: “Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.”
No Components Identification Evidence/ Improvement
Yes No
1 Core values X Evidence
2 Core purpose X Evidence
3 BHAG X Evidence
Current vision: ““Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth.” (http://www.coca-colacompany.com/our-company/mission-vision-values, 21/12/2013)”
CORE VALUES
Core values are set to define the criteria, attitudes and behaviors that will be required to make the “2020 Vision” real in Coca vision. This vision and values are made throughout the years, most recently in 2020, also known as the “Coca Vision 2020” including:
First is Live Our Values. It serves as a compass for Coca cola company’s actions and describes how they behave in the world. In leadership, Coca Cola encourage employers to shape a better future by the best leading role in beverage industry. In collaboration, Coca is looking forward to operating collective power. Coca cola is also reality in integrity of every area they are and have responsibility for giving accountability. The passion is extremely important so that it is committed in heart and mind of every Coca cola member and inspire to people. Coca cola continuously support a diversity of products and it becomes a criterion inclusive as Coca Brand. Especially in quality, Coca cola has a slogan: “What we do, we do well”. It is proved that the quality of Coca Cola’s soft drinks is always in the best rate and favored by more people. The program promotes the highest standards in product safety and quality, occupational safety, and health and environmental standards across the entire Coca-Cola system. Coca-Cola does not contain alcoholic, and company do not add alcohol as an ingredient. Any traces levels of alcohol existing in Coke, governments and religious organizations have recognized that is a result of natural processes, are completely normal and are acceptable in non-alcoholic foods and beverages.
Secondly, Coca cola focuses on the Market, especially on needs of consumers, customers and franchise partners. Getting out into the market, listen and observe helping them to learn and understand more their business environment. They become a world view focusing on execution in the marketplace every day. However, the curiosity is never satiable because it is the factor stimulating the learning and development.
Thirdly, Work Smart is one of the most important core values. They always act with urgency, remain responsive to change, have the courage to change course when needed, remain constructively discontent, work efficiently. These are the smart way to work that brings more success to Coke in the future.
Fourthly, Coca cola act like an owner by understanding needs and what to do well for themselves and their customers. An owner must have a smart system to operate and must focus on building their values, positioning in the beverage market. The action of rewarding for people who take risks and find better way to solve problem is a good solution to increase and develop the loyalty. Learning form the outcomes is also a qualification of an owner. Finally, Coca cola inspire creativity, passion, optimism and fun as their brand.
CORE PURPOSE
Core purpose is the organization’s for being, and it is also a part of core ideology besides core values. With new vision, 2020 vision, Coca Cola has been set up a big aim to “continue achieving sustainable, quality growth” in the beverage industry
BHAG
As well as a good core ideology, Coca Cola includes it’s envisioned future with BHAGs and a vivid description below, which can conjure up pictures and images of a great leader as well as firm in beverage industry
• People: Be a great place to work where people are inspired to be the best they can. Attract, engage and retain the best talent by knowledge, inspiration of passion, recruiting, developing and advancing women, achieve true diversity.
• Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs with more than double in serving to over 3 billion a day. Coca cola accelerates growth, acts to ensure the next generation of youth fallings in love with Coke, continues to increase the values of portfolio with many actions such as developing the innovative premium brands, bringing this innovation to the market quickly, satisfying needs of consumers, using updated high technology and ensure the standard of products.
• Partners: To be the most preferred and trusted beverage partner, nurture a winning network of customers and suppliers, together we create mutual, enduring value. Thinking and acting like an integrated global enterprise.
• Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities toward to not only the global leadership in sustainable water use, the industry leadership in packaging, energy and climate protection as well.
• Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.
• Productivity: Be a highly effective, lean and fast-moving organization; manage people, time and money for the greatest effectiveness.
The vision 2020 is a great direction for Coca cola’s development in beverage industry. The company is aware of what they need to do in present and in the future. They concern not only in their profit or productivity but also in people. This can support them to develop in both quantity and quality.
2. Mission
Mission is also a vital part to build the image of the brand as well as vision. Mission have to reveal what an organization wants to be and whom it wants to serve so to develop a good mission, diverse managers need to participate to find out effectively establishing objectives and formulation strategies.
Coca Cola need a clear mission before setting up alternative strategies to be formulated and implemented. Mission will be analyzed based on nine main factors which are customers, products, markets, technology, concern for survival growth-profitability, philosophy, self-concept, concern for public image and employee
No Components Identification Evidence/ Improvement
Yes No
1 Customers X Evidence
2 Products X Evidence
3 Markets X Evidence
4 Technology X Improvement
5 Concern for survival growth, profitability X Improvement
6 Philosophy X Improvement
7 Self-concept X Evidence
8 Concern for public image X Evidence
9 Concern for employee X Evidence
Current mission: “Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.”(http://www.coca-colacompany.com/our-company/mission-vision-values, 21/12/2013)
“Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.”
• To refresh the world...
• To inspire moments of optimism and happiness...
• To create value and make a difference.
Above are three main factors that is inspiration for doing with Coke’s mission from current to the future, at least to 2020 with company’s expectation of serving people best.
Customers: Align for Coca cola’s franchise structure to create unsurpassed values for customers. For Coca cola, customers are the ones who need to be appreciated and offered the most quality products and the best of serving from Coca cola. The company serves the diversity of customers including their agencies, distributors and all the Coca cola users in a large scale.
Products: Coca cola towards to bring the safety and quality products which ensure about the natural alcohol levels, colorings and carbon dioxide level…Diversity in kind of drinks is also a criteria of Coca cola products. There are many kinds such as Coca-Cola Light (or Diet Coke), Coca-Cola Cherry... However, coca and cola is the main favor in drinks. Its major products are Coca cola soft drinks. Other kind of Coca cola products such as Diet Coke or Cherry…counts less in market.
Market: Expand the market of Coca cola, gain the aimed point of sales. Coca cola expand their consumption investment. They increase to participate and serve in local, provide more outlets and to many specific shoppers. They also focus on selling and merchandising. The company has competition with many beverage companies in the market. Pepsi Company is the most important competitor because of large market share in beverage industry.
Public image: Mission of Coca cola is not only a leader in offering the best drinks, but also a global leader in environment protection, in packaging and producing and disposing system.
Philosophy: Coca-Cola Enterprises provides products and services meeting the beverage and business needs of thousands of retail customers. Opening dialogue and ongoing relationships, Coca cola work to build mutual understanding and trust to pursuit the goals. Customer relationships are central to Coca cola’s effort and philosophy. Coca cola has a slogan: “Anywhere, anyone, anytime, always Coca cola”. However, this should be seen directly on the mission because it is the inspiration to cheer people use Coca cola.
Technology: In the mission, there has not been this segment yet. The company displays their direction of technology in the vision report as the purpose needed to achieve such as using the advanced and modern technology which contributes to increase the productivity. Coca cola produces the first-ever recyclable plastic bottle made from plants. In 2012, Coca cola managed to recycle 371M pounds of recovered aluminum and PET plastic beverage containers. This is a very important element which should be considered in company’s mission.
Self-concept that Coca cola is the firm which refreshes the world with the delicious and fresh drinks, inspires the people of the Coca cola’s passion, brings people on over the world the moments and feelings of optimism and happiness, creates the difference from other beverage in order that customers can remember and appreciate Coca cola’s values.
Concerns for employees: increasing people’s system knowledge and cross-system movement, inspiring employees to be passionate, recruiting, developing and advancing women, making better conditions for all employees to devote their creative and qualification for great drinks.
Concerns for growth, profit, survival: This element is not also demanded in the mission but generally the company displays what to do in a detail report. Coca cola boosts investment in sales and market execution, operate the lowest cost manufacturing and logistics in every market while maintain the quality standards; also use the size and expertise for creating the economic scale.
The Coca cola mission has huge inspiration which spreads company’s expectation to their employers as well as customers. Besides, Coca Cola mission statements also have some essential characteristics such as broad in scope, less than 250 words in length, inspiring, identify the utility of the firm’s product, enduring and include most of nine components discussed above
However, there are some important components that should be considered and put in the mission such as technology, philosophy and its concern for survival growth and profitability. The mission needs to be more detail, which would show the customers and employers know what Coca Cola’s aim, targets and big picture about it in future
III- External environment factors- PESTEL
While the internal environment of an organization is factors inside its firm and affect the organization’s performance as well as can control, the external environment factors are something outside of the boundaries of the company which can’t be controlled or forced to change. To be success, any company has to analyze both internal and external environment factors to have to most appropriated strategies forward the economy. By analyzing the internal environment, company will find out its Strengths and Weakness to change in a suitable way, while analyzing external environment will help the company figure out its Opportunities and Threats in the particular market that they are investing in.
Coca Cola is a well-known multinational company, they might know their Strength and Weakness clearly, but to have a good strategies forward Vietnam market, Coca Cola Company needs to analyze its Opportunities and Threats by PESTEL analysis. PESTEL analysis is a method focusing in the external factors of the business and the environment. PESTEL stands for Political, Economic, Sociological, Technological, Legal, and Environmental. All of those components will affect the company in a positive or negative way is up to a good analysis and strategy forward it.
Political Analysis
As we know, the government has the power to set fines for the companies not meeting their standard law requirements. The changes in laws and regulations, such as tax policy, government regulations, social welfare policies, political risks might affect the company as well as their entry in foreign countries. The political conditions, even the civil conflict can impact to the markets and other governmental changes that affect their ability to penetrate the developing and emerging markets that involves the political and economic conditions. However, Coca Cola continuously monitoring the policies and regulations set by the government.
Tax policy
Tax is the issue which any business operating in Vietnam is under the impact of laws and regulations. However, the tax service has recently questioned for many large foreign companies in Vietnam. Tax Agency has written requests for consideration local inspection hole operations, profitability of the business to conclude if companies report losses for the purpose of increasing costs to evade taxes or not. Among them, Coca Cola Company reported losses in continuous operation for 20 years in Vietnam.
The biggest difficulty is prompted many experts to be the multinational corporations often use the " guise " of proprietary material or technology , that agency is difficult to determine the actual cost of inputs Vietnam businesses spend. Coca Cola, according to the tax agency costs flavorings imported from the parent company accounts for about 70-85 % of the cost of plant in Vietnam. The data cannot be determined by the agency because of not knowing whether the proportion of flavor additives from Coca Cola parent company in Vietnam is, compared to other markets to put conclusions. However, this is the major reason Coca cola Vietnam proves for their losses to dodge the government policy of tax. It also makes a bad reputation for Coca cola in Vietnam.
Government regulations
As a famous brand, manufacturer, distributor and seller in beverage industry, the Coca-Cola Company and other soft drink manufacturers are subject to antitrust laws of general applicability. The Company may have an exclusive right to manufacture, distribute and sell a soft drink product if its product is in substantial and effective competition with others of the same general class in the market. It is the general regulation in business in every country. However, there are some regulations strictly limited and prevent the expanding. For example, the Coca cola has experienced public policy which challenges them about the sale of soft drinks in elementary, middle and high schools. At January 1, 2006, a number of states had regulations restricting the sale of soft drinks and other foods in schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools. This regulation cares about the youth’s health as well as nutrition. This led to obesity among students and it affected directly to the business of Coke Company in that period. Moreover, the restrictive legislation, if it enacted for a long time widely, it could impact on the Company’s products, image and reputation as well.
Social welfare policies
Coca cola offer high-quality brands and reputation in many countries on over the world. Company significantly understand and believe that everyone should have benefit. The business should bring benefit and refreshment to the people, which is central to the way The Coca cola operate in communities around the world. The company plays the role as a good neighbor and responsible citizen by helping people. In Vietnam, the company set up many regional and local foundations, organized charity programs in local. Some reality programs such as “Vietnam pushcarts program” – helping economically disadvantaged women build sustainable livelihoods. In the first season, 2,000 women in Ho Chi Minh City and Hanoi are being given custom-built pushcarts to sell a selection of ice-cold Coca-Cola beverages. This program provides all the women with an initial quantity of discounted product and sales training to help get their new microbusinesses. “Supporting education and youth development” with projects and scholarships
To support students in orienting and developing career in the future, The Coca - Cola Vietnam organized the "Open Entrance To Success" for final year students at universities of HCMC. These educational supporting activities the company held typically such as Success Skills Workshop – to train soft skills for over 6,000 students throughout the country in the 2008 - 2010, to help students complete the interview skills and workplace integration quickly. In addition, the workshop program in Business Skills (2010) and Class Selling Skills Training ( 2013 ) in HCMC and Hanoi also has support for nearly 350 small business about management capacity, sales and expand business operations in the future. In addition, Coca - Cola Vietnam has cooperated with The newspapers of Youth to provide Nguyen Thai Binh scholarship for students who have good academic achievements with a total value of 300 million.
The political risks are impact to change in its business. The complicated as political conflicts, disagreements cabinet and sluggish affect the development and sales. Typically, the recent global credit crisis and its effects on credit and equity market apparel conditions affect the Coke’s financial performance adversely and Coca cola Vietnam as well. This reduces the consumption of soft drinks from the stores and outlets. Departments and other sectors of society focus on solving crisis, revive the economy. However, it takes time and efforts. Fortunately, Vietnam has a steady political condition. However, some affairs such as economic crisis, East Sea conflicts also affect to Coca cola Vietnam, but not too much.
Overall, the opportunities for Coca Cola are Social welfare policies and the threats are Tax policy, government regulations and political risks
All above pose opportunities for Coca cola Vietnam to develop the reputation with social programs. They do these well to gain the people support. However, political situation or state regulation is also the important point that Coca cola Vietnam must notice. It can prevent their operation effectively in the future.
Economic analysis
Economics has a huge impact to not only the business of Coca cola company but also any other companies. The main factors include interest rates, inflation rates, tax rates or consumption patterns ... These agents can both benefit, even difficult for company's operations.
Inflation rate affects the business, especially the prices of products. I use the chart to analyze for inflation’s impact to the products’ prices of Coke.
Coca-cola inflation adjusted price from 1997 to end of May - 2013
The blue line is Coke’s nominal price and the red is the inflation adjusted price. We can see the inflation make the price increase. However, this adjusting is not equal for anytime. It is up to the economic situation and the state’s current inflation rate forcing price of products to increase dramatically or slightly.
Above is the total of inflation of Coca cola. In Vietnam, this condition might be worse because Vietnam has a high inflation rate per year. It is also control by the government but its level still impact to the company’s operation, and particularly affects to the price of products
In addition, the inflation rate of Vietnam economy also has been fluctuating for years, which also affect directly to Coca Cola consumption in an unexpected way.
Income Tax
The Company adopted the provisions of this accounting guidance and changed the accounting policy effective January 1, 2007. As a result, they recorded an approximate $65 million increase in accrued income taxes in consolidated balance sheet for unrecognized tax benefits. The Coca cola’s annual tax rate is based on income, statutory tax rates and tax planning opportunities available in the various jurisdictions in areas they operate. The Company's effective tax rate is expected to be approximately 23.0 percent to 23.5 percent in 2010. This estimated tax rate does not reflect the impact of any unusual or special items that may affect our tax rate in 2010.
Consumption patterns
The economy in Vietnam is growing rapidly. It is advantages for the company's operations. Announced $ 300 million investment in Vietnam in the next 3 years, president of Coca-Cola, Muhtar Kent said that this was still an attractive market as consumption of new people with 20% of the average world.
Monthly Average Consumption Expenditure per Capita at current Prices in Vietnam
Totally, 3.1% of all beverages consumed around the world are Coca-Cola products. Of the 55 billion servings of all kinds of beverages drunk each day (other than water), 1.7 billion are Coca-Cola trademarked/licensed drinks. That proves the average person consuming at least one Coca-Cola product every four days, with more than 3 percent of all beverages that are consumed coming from the Coca-Cola firm. Here is a look at the average per capita consumption by country of Coca-Cola drinks, including the company's bottled waters, sports drinks and various sodas, according to the company based on a serving size of 8 ounces. Number of servings per year: India: 12, China: 38, Kenya: 40, Russia: 73, South Korea: 84, France: 149, Japan: 179, Germany: 190, Great Britain: 210, Brazil: 230, South Africa: 247, Canada: 259, United States: 403, Mexico: 728 . These shows the Western countries are the big market and Mexico is the country drinks Coke most.
In Vietnam, the amount of Coca cola users is competitive with many other beverage companies. Vietnam is a attractive market for domestic and foreign beverage companies. Internal company operating in this industry such as Tan Hiep Phat is very successful in touching consumers. The competitor, PepsiCo always plays important role in sharing the marketing with Coca cola Vietnam. There are both opportunities and challenges in consumption in Vietnam market.
The opportunities: consumption patterns
The threats: Inflation rate, income tax
During 20 years operating in Vietnam, Coca cola has many scandals about the taxation which get their reputation down. The economic contribution of Coca cola Vietnam is not as much as its leaders say. Besides, the inflation is also a threat for Coca cola Vietnam because its level and changing in Vietnam is very complicated.
Social, demographic analysis
Healthier lifestyles has strongly influenced the sales of non-alcoholic beverage sector for many customers desiring to bottled water and diet colas like Coca-Cola Light or Zero, instead of beer or other beverages. Most of the population is within the youth. Many customers are more concerned about their health in a long term. It becomes the needs which manufacturers must notice. Some other factors are demography, income distribution, people habits, social class... In Vietnam, young people more and more prefer to use soft drinks nowadays. Vietnam market of drinking Coca cola is catching up with the world.
Demography is an important factor. In the international market, the population of the country affects to the consumption for beverage. Over the next 12 years, changing demographics will drive strong growth in the beverage industry
Above are the fast-growing nonalcoholic ready-to-drink (NARTD) beverage industries. We can see in urban, the growth of NARTD is very higher than average of the world and in the middle-class population, the growth is dramatically rising. It is expected to continue growing more strongly for the next 12 years for retail sales. It is believed the industry will add more than 60 billion unit cases and expand retail sales by nearly $600 billion by 2020. This growth will increase retail sales to more than $1 trillion by 2020. This projected growth is being fueled by an unprecedented increase in middle-class consumers and fast-growing urban societies, despite today’s economic climate. These trends indicate that there will be more people with more income paying ability who potentially will tap into refreshment and convenience from Coke. Besides, the general poverty rate and food poverty rate are decreasing, which also a positive sign for Coca Cola
Income distribution is a quite impact on business of Coke. The ability of paying for beverage depends on income. People who have a high income are willing to pay for beverage more usual. Income distribution is not equal among all people. However, in urban and industrial areas, where has economic development capita income is higher than other places. In Vietnam, HCMC, Hanoi and other big cities have more amounts of people using Coca cola. Consequently, sales of Coke generally higher in urban areas than rural, in developed countries higher than developing and underdeveloped countries.
Additionally, another factor is the buying habits. Retailers can use consumer buying habits to facilitate their own product placement and retail strategy. Buying habits can be understood with the mean of the buying habits of different people. Coke’s price is not expensive which adapt to most of people in every class. However, people who have ability to pay have more chance to choose Coke for their beverage than someone who can’t afford and do not want to spend their money for entertainment beverage. Otherwise, the youth trend to drink Coke more than the older or the kids.
Different shopping behavior exits across categories
Source: Statistical Yearbook 2011
Increase in middle-class consumers. The Coca cola produces various kinds of products with the suitable price for almost people in every social class. Sales of Coke concentrate on the middle class most. However, with the suitable price, Coke supplies a suitable choice for consumers who have ability to pay and adapt to their hobby or habits of beverage, except for people who are too poor to think about a bottle of soft drink. The Coca cola also set up foundations or charity program to bring fresh Coke to these people through charity programs
The rise in Vietnam middle class and its consumer segment and spending in 2011
Source: Statistical Yearbook 2011
The opportunities: Demography, Income distribution, buying habits and the middle class
The threats: Demography, income distribution (the less crowded the places are, the less products company can sale.)
This factor generally is similar to the rest of the world about the distribution, habit, hobby….Therefore, in Vietnam, if the company points to the opportunities and solve the limitation, coca cola Vietnam will develop with correct direction.
Technological analysis
Technological techniques are valued. This creates opportunities for new products and advanced products. High and modern technology will increase the company’s productivity and produces best drinks for the market. Technology includes science research, efforts for advanced technology, new discoveries or products, internet….
Researches are necessary for the understanding customers and create the new products. Coca cola company always observe and update information from their customers. This aims to satisfy customers. The studies were conducted to investigate the habits or income, ability to pay, including taste and health needs. From the study of mass, Coca Cola launched products and services best suited to the age and needs of the customer. Diet Coke is an example.
High technology offers many advantages for producing, packaging. In order to continually grow the business, The Company need to be increasingly efficient in use of resources. This is required new investments in technology, innovation, a significant amount of collaboration throughout the Coca-Cola system. Acceleration of innovations around water, packaging, equipment, energy and agricultural resources will enable Coca cola’s system to meet the new market demands. In 2008, The Coca cola took many steps as a system to minimize our environmental impact. We also introduced and started for operate a new global system sustainability targets for water conservation and climate protection.
Vietnam has one staff eager to learn to receive advances of science and technology in production and business where should be a potential place for Coca cola activities. To prove this, Coca-Cola Vietnam has opened a new production line in Da Nang. The investment in infrastructure has created a lasting positive impact through the cooperation and support of local suppliers in many different industries such as packaging industry. In addition, to expanding activities in Da Nang, Coca-Cola Vietnam continues to conduct investment projects in 2 factories in Hanoi and Ho Chi Minh City from 2013 to 2015, and the company investors also focused on local projects with the goal of developing new sustainable communities.
New discoveries, products to reduce the impact of our packaging, maximize the use of renewable, reusable and recyclable resources, and recover the equivalent of 100% of our packaging, the Coca cola produces recycled PET (polyethylene terephthalate) plastic with the high tech
Internet contributes for operations, which leads to the efficiency of company's advertising, marketing and promotional programs. The new technology advances of television and internet that use incomparable effects for advertising through the use of media. Those advances make the products seem attractive. This supports the selling promotion of the products. Coca-Cola in media tends to use this technology so, to sell effectively its products.
However, the internet is a 2-edged knife. It may have brought the fame, and also easy to spread quickly notoriety. Typically, Coca cola Vietnam is ostracized because of suspicion of tax evasion during 20 years of operation in Vietnam. This goes the notoriety further thanks to the spread of the Internet. Even on social network, there is a page of Association of boycott Coca cola Vietnam. This shows that, in a country like Vietnam, information is very sensitive. Once communication keep an eye, with the great help of the internet, the scandal will surely happen.
The opportunities: Researches, high technology, new discoveries/ products, internet
The threats: Internet have a bad sight also (any scandals can spread widely and quickly)
Technology is good and bad too. It can contribute to the improvement but getting down if carelessly. The important is how to use it.
Environmental analysis
This is the concerning issues in the current. These factors include conditions of weather, seasons and other natural ones. Therefore, it is relevant to products manufacturing, packaging, disposing….. These processes affect directly to outside environment in every countries.
Waste disposal: Waste of the Coca cola is all cover, can, bottle that are metal, plastic…Reducing landfill is a top priority. 99.5 per cent of the waste produced at our factories is now recycled, with just 0.5 per cent going to landfill. We've also joined forces with the Waste & Resources Action Program (WRAP) to create nationwide Recycle Zones, making it easier for people to recycle on the go - while our online Cyclometer tool is designed to help demonstrate the positive impact that everyday recycling can have
Waste management including the management of waste from production, post-use products, bottles, cans ... To manage intelligently needs a smart system consists of modern equipment, a team of professional engineers to classify and recycle waste. With the reusable is not only a saving, but also environmental protection. Besides these most delicious products of coca cola, it is also required a system to handle wastes from the process of making it.
Energy consumption
The Coca cola work for low carbon products, zero waste business, and inspire and lead change for a more sustainable future. Coca Cola worked with the Carbon Trust to calculate the carbon footprint to make the business more environmentally responsible. Since 1994, the Company has managed to reduce the weight of our plastic bottles by 38.5%. At the same time, Coke’s glass bottles are already 37% recycled and cans are 50% recycled aluminum. The Company also introduced Plant Bottle packaging in 2011, which is 100% recyclable and made partly from sustainable plant materials, reducing the reliance on fossil fuels for plastics.
Recycling aims to the most efficient use of limited natural resources available, while at the same time aims to reduce the solid waste produced, which is a by-product of all industrial processes. To achieve this objective, the Company collaborates with licensed recycling organizations and governmental institutions. In 2008, the total quantity of solid waste created in the bottling factories was 22,677 tons. This represents an increase of 25% compared to the previous year, contrary to the reduction of 2% we aimed for. Most part of this increase, is attributed to restructurings of factories and renewal of equipment for reused glass bottles , and was balanced by the increase of the materials recycled, as described below.
Solid waste disposal and recycling from 2006 to 2008
In a country like Vietnam, Coca cola must notice the situation, the law and the viewpoint of Vietnamese. In certain issues, especially in food and drinks, they are quite difficult to choose the good brands. Therefore, unsafe environment and product are threats for Coca cola Vietnam for operation.
Legal analysis
These factors include discrimination law, competitive law, environmental protection laws, product and health safety…The Coca cola business is subjected to many laws in different countries they have entry.
Competitive laws are the important laws for business and their same sector companies for a healthy market. However, competitive in Vietnam has not developed completely. The role around the advertisements, unhealthy competition or limit of competition… However, it more perfect day by day. Government has built a system of legal to solve these problems. Equally exacting was the need to adhere to Coke's design guidelines – after all, this is one of the best protected brands in the world. Meeting these challenges, The Coca cola designed and printed a 36 page perfect-bound booklet which succeeds in engaging the reader; bringing the text to life through a consistent layout and bold use of vibrant color throughout.
Environmental protection laws are a mandatory rule for manufacturing enterprises, especially the production of food and drinking water. The fuel, chemicals, gases released from the manufacturing process can negatively pollute the environment of land, water, air ... The law stipulates the allowed level of the toxic wastes into the environment. If exceeded, these businesses can be fined, or suspended business if toxic levels harm to environment unacceptably. Vietnam put a great concern in these issues nowadays. There are many company violated this law of environment protection. Especially, it is very important in a crowded country like Vietnam. Aware of this issue, Coca cola usually organize program for environmental protection such as the Happy Recycling which is supported by people.
Health and safety: The Coca cola are committed to conducting business in ways that provide all personnel with a safe and healthy work environment. Coke’s Safety Management System Standards and supporting requirements are for worker safety and loss prevention (TCCSMS). TCCSMS defines the systematic approach to managing occupational safety and health and loss prevention. The system globally operates under the same standards and requirements. The Company also has a statement of occupational safety and establishes the Safety Board of the Company as a body authorized to solve and cares about health and working conditions of employees.
Product safety is the most concerned issues of consumers. The Coca cola always cares about the safety and quality in every parts from products to services. The core criteria of Coke are to ensure safety and quality through strong governance and compliance with applicable regulations and standards.
In Vietnam, the problem of product safety is extremely important. There are so much food poisoning in current time that make people worry and not believe in undefined drinks and foods. There are many scandals about product safety not only domestic company but also the foreign ones. Coca cola also has this. In details, Coca-Cola Vietnam customers accused of being "prime" the bottle mold Minute Maid Teppy (fresh orange juice) type of 240ml, affecting the health of consumers. In the document dated October 29, Coca-Cola unexplained mold floating on the water bottle containing anything, whether hazardous or not, which shows that the two bottles of orange juice Minute Maid Teppy client was found Long An is only present in the "isolated incident" occurred in manufacturing shipment. This document is for that reason "error" in the bottle is due to the can "no longer make bottle cap security tightness. This is unreasonable.
All above is to link to the success of The Company so that they surely keeps the promise of quality products and services. Documents of laws or regulation, statements help The Coca cola maintain and improve their reputation. However, it also requires the continuous efforts to adapt these laws to brings the best products and services, especially in a sensitive market like Vietnam.
The opportunities: Competitive laws, Product safety
The threats: Environmental protection laws, health and safety concern
The law system in Vietnam may not be completed like other developed country. This may be a chance for some company. However, this system is more and more perfect. Moreover, the citizen, government and the press’s concern is the help to treat the violation. Therefore, this factor is both opportunity and threat.
IV- EFE Matrix
No. Factors Weight Rating Evidence for rating Weighted score
Opportunities
1 Consumption Expenditure Increase 0.9 4 Increasing purchasing ability among customers 0.36
2 Increase in middle-class consumers 0.8 4 Increasing number of customers in Coca Cola’s strategic segment 0.32
3 High Technology in the system of producing and packaging 0.7 3 0.21
4 Wide-spreading internet and gadgets 0.6 3 0.18
5 Political stability 0.9 4 Widen market through most of the provinces in Vietnam 0.36
6 Widen market 0.8 4 Use the widen market effectively to distribute products 0.32
7 Vietnamese labor is cheap in large scale 0.9 4 Use Vietnamese labor to reduce manufacturing cost 0.36
8 Changing taste among youth 0.7 3 0.21
9 Health conscious consumers 0.9 3 0.27
Threats
1 Tax policy for foreign companies 0.8 3 0.24
2 Inflation rate 0.7 3 0.21
3 Economic crisis 0.8 3 0.24
4 Intense competition such as Pepsi 0.8 4 Effective Marketing strategies forward 0.32
5 Low-skilled labor 0.7 4 High skill training 0.28
6 Increasing demand for non-carbonated products e.g juices 0.7 4 Develop more non-carbonated products 0.28
7 Increasing price of raw material such as sugar and metals 0.8 3
8 Many smaller players are furious competitors 0.6 3
V- Used Strategies
1. Price strategy toward integration
During the long time, the price of Coke always pursues 3A and 3P aimed at achieving the main market in Viet Nam. In the 3P strategy, it consists of Price to value, Pervasiveness and Preference. Firstly, Price to value means that customers not only buy the Coke with the suitable price but also gain the real value from it. Secondly, throughout the Pervasiveness, Coke makes sure that the customers can find and buy it every time at any places. They want to supply and deliver Coke in every store, supermarkets. Finally, they want customers not only to accept and enjoy coke but also choose Coke as a first choice. Moreover, in the 3A strategy, it is illustrated by affordability, availability and acceptability. The company want to sell the coke with a suitable price which everyone can afford buying it. Besides, Coke company also deliveries their products in everywhere for the customer to satisfy their demand. In particular, the company enjoys the feeling which everyone can have a wonderful drink, means that the customer can be happy with each Coke product. In Vietnam, Coca- cola Company have a creative mixture in the marketing mix. Furthermore, Coca- cola Company has still formed the strategies by many ways. It surveys the customer attitude and demand, so the price strategy based on the customers psychology. For example, the housewives also prefer to buy the cheaper products, so they produce the big PET is more economic than others. Coke Company has the price according to the price of counter partner, especially Pepsi Company. Although Coke goes behind in the beverage field in the world, it is a pioneer in the Vietnam market. And up to now, coca- cola has much success in Viet Nam.
Price strategy of coca in order to provide appropriate price to consumers and make them comfortable about price and product quality, short the distance between introduce products and customers. They would exchange information about each product by themself, creating an effect to clients. Vertical integration which company select is bringing the price to the customer directly, the product is reduced, everything based on customer review and respond to the essential needs of customers and then make them feel good about their choice.
2. Marketing and local strategy in Viet Nam
Part of the success of any company can most likely be attributed to its marketing strategies. Coca-Cola has successful marketing techniques over the time, but has also scratched a few marketing techniques. Customers respond to marketing techniques and Coca-Cola has learned to recognize what they should work or and not work. This has no doubt partially contributed to the success of Coca-Cola.
Coca cola logo is one of the top favorite logo because of its classical nature both in terms of design and the taste of the product. International marketing: the way companies get out the world and targeting audiences who may not be local to the United States. When marketing outside of the US, your company needs to think outside of the box. There’s a difference between marketing nationally and marketing to a specific country or region, and Coca-Cola’s about to show some of the reasons for their success. Coca - Cola will add $ 300 million poured into Vietnam in the period 2013-2015, bringing the total investment to $ 500 million commitment to improve the investment performance of the plant in Vietnam, found brand and market development , as well as human resource development and reseller support. With new investments of Coca – Cola, the market once again shows the comparison between the two embankments giant Coke - Pepsi. Because, previously, Pepsi also announced formation of a strategic alliance with Suntory (Japan) in Vietnam, through the agreement, Suntory will hold 51 % stake in Vietnam Pepsi and Pepsi hold 49 % remaining stake in the project. Previously, Pepsi plant opened with a total investment of $ 73 million in VSIP Bac Ninh. The move this capital increase of Coca - Cola is causing much buzz in the context of ongoing Coca-Cola reported losses in Vietnam market.
According to the HCM City Department of Taxation, the losses of Coca - Cola stood at around 100 billion / year in the past 10 years, nearly five third turnovers. According to the specialized magazine Digest Beverage, the market share of the carbonated beverage Coca - Cola is 52 % of PepsiCo . Although Pepsi lead on the global market, but in Vietnam market, due to later extend the system to the distribution of Coca - Cola showed weaker . After it is slow in supermarkets and restaurants to hold the position, Coca- Cola has developed distribution channels tactically "guerrilla" hit retail around alleys and side streets, constant encouragement sales discounts, dealer incentives... For fast product supply strategies in the market , especially transport costs , price competition , Coca - Cola was quick to invest in the construction of the plant is the key area of HCMC , Da Nang , Ha Noi .
Coca Cola has attempted to enhance production capacity and distribution by adding modern production lines, providing new refrigeration equipment for consumers and support local businesses increase sales product which product extensions focus on areas such as leisure and sports, fast food restaurants and chain restaurants... The location has good impact and fastest to promote the brand new product. According to the Association of Beer - Alcohol and Beverages Vietnam , total 2010 sales of PepsiCo and Coca - Cola account for over 80% of the beverage market in Vietnam, with roughly equal market share . Up to the present time , Coca - Cola Vietnam has achieved over 25 % growth compared to the plan . However, to date, Pepsi has a better advantage than proactive Coca - Cola in developing distributed system
Coca - Cola has penetrated the international market that is very unique, they invest into the Vietnamese market, increasing investment in factories and services, then they develop market and product quickly. Investment in human resources is to create good quality products, then distribute the agents have created good effects to customers about business.
VI- SWOT
STRENGHTS
1) The best global brand in the world in terms of value. The Coca Cola Company is the most valued ($77,839 billion) brand in the world .
2) World’s largest market share in beverage. Coca Cola holds the largest beverage market share in the world (about 40%).
3) Strong marketing and advertising. Coca Cola’ advertising expenses accounted for more than $3 billion in 2012 and increased firm’s sales and brand recognition.
4) Suitable price with almost social class. Vietnamese buy Coke regularly as their habits. Moreover, Coke is bought with the suitable price in Vietnamese Market, just 7 thousand dong for a small 500ml Coke.
5) Customer loyalty, especially it enjoys having one of the most loyal consumer groups. It has also many fanpages in social network such as facebook, twitter…
6) Bargaining power over suppliers. The Coca Cola Company is the largest beverage producer in the world and exerts significant power over its suppliers to receive the lowest price available from them.
7) Corporate Social Responsibility (CSR). Coca Cola is increasingly focusing on CSR programs, such as recycling/packaging, energy conservation/climate change, active healthy living, water stewardship and many others, which boosts company’s social image and result in competitive advantage over competitors. In Viet Nam, it conducts a lot of social programs for children with many gifts for Tet holiday…
Weaknesses
1) Significantly focus on carbonated drinks. The business is still focusing on selling Coke, Fanta, Sprite and other carbonated drinks. This strategy works in short term as consumption of carbonated drinks will grow in emerging economies but it will prove weak as the world is fighting obesity and is moving towards consuming healthier food and drinks.
2) Undiversified product portfolio. Unlike most company’s competitors, Coca Cola is still focusing only on selling beverage, which puts the firm at disadvantage. The overall consumption of soft drinks is stagnating and Coca Cola Company will find it hard to penetrate to other markets (selling food or snacks) when it will have to sustain current level of growth.
3) High debt level due to acquisitions. Nearly $8 billion of debt acquired from CCE’s acquisition significantly increased Coca Cola's debt level, interest rates and borrowing costs.
4) Decreasing gross profit and net profit margins. Coca Cola’s gross profit and net profit margin was decreasing over the past few years and may continue to decrease due to higher water and other raw material costs.
OPPORTUNITIES
1) 13rd population country in the world. It is big market for Coca cola to take advantages from the local labors and the customers.
2) High technology offers many advantages for producing, packaging. In order to continually grow the business, The Company need to be increasingly efficient in use of resources. This is required new investments in technology, innovation, a significant amount of collaboration throughout the Coca-Cola system.
3) Growing beverages consumption in emerging markets. Consumption of soft drinks is still significantly growing in emerging markets, where Coca Cola could increase and maintain its beverages market share. In Viet Nam, a majority of youth really like Coke because of its taste and the suitable price.
THREATS
1) Changes in consumer tastes. Consumers in Vietnam become more healthy concern and reduce their consumption of carbonated drinks that have large amounts of sugar, calories and fat. This is the most serious threat as Coca Cola is mainly serving carbonated drinks.
2) Waste disposal: Waste of the Coca cola is all cover, can, bottle that are metal, plastic…Reducing landfill is a top priority. 99.5 per cent of the waste produced at our factories is now recycled, with just 0.5 per cent going to landfill.
3) Legal requirements to disclose negative information on product labels. Some Coca Cola’s carbonated drinks have adverse health consequences. There many negative information about Coke qualification. Legal requirements to disclose negative information on product labels. Some Coca Cola’s carbonated drinks have adverse health consequences. There many negative information about Coke qualification. the Coca cola has experienced public policy which challenges them about the sale of soft drinks in elementary, middle and high schools. At January 1, 2006, a number of states had regulations restricting the sale of soft drinks and other foods in schools. Many of these restrictions have existed for several years in connection with subsidized meal programs in schools. This regulation cares about the youth’s health, nutrition. This led to obesity in business of Coke Company in that period
4) Competition from PepsiCo. PepsiCo is fiercely competing with Coca Cola over market share. Although Coke goes behind in the beverage field in the world, it is a pioneer in the Vietnam market. And up to now, coca- cola has so much success in Viet Nam.
5) Negative publicity. The firm is often criticized for high water consumption in water scarce regions and using harmful ingredients to produce its drink.
SO STRATEGIES
Use Strengths to take advantages of Opportunities S1. The best global brand in the world in terms of value ($77,839 billion)
S2. World’s largest market share in beverage
S3. Strong marketing and advertising
S4. Most extensive beverage distribution channel
S5. Customer loyalty
S6. Bargaining power over suppliers
O1. 13rd populated country.
O2: High technology
O3. Bottled water consumption growth
S1S6O1
Expand many retail channel through store or shop. (Market penetration)
Build the Coca cola retail outlets (Forward Integration)
S2S3O3
Provide the products with high qualification (product development)
S5S6O1O3:
Develop new functional products which have potential growth (related diversification)
Enhance new beverage following the healthy trendy (unrelated diversification)
WO STRATEGIES
Improve weaknesses by taking advantages of Opportunities W1. Significant focus on carbonated drinks
W2. Undiversified product portfolio
W3. High debt level due to acquisitions
W4. Decrease gross profit and net profit margins.
O1. 13th populated country
O2. High technology
O3.Growing beverages consumption.
W1W2O1O2:
Diversified product portfolio, besides carbonated drinks to care the healthy consumers with amazing advertising programs. (related diversification).
Products made from healthy materials (related diversification)
W3W4O1:
Bargaining with the suppliers with suitable price (backward integration)
ST STRATEGIES
Use the Strengths to reduce/avoid the impact of Threats
S1. The best global brand in the world in terms of value ($77,839 billion)
S2. World’s largest market share in beverage
S3. Strong marketing and advertising
S4. Most extensive beverage distribution channel
S5. Customer loyalty
S6. Bargaining power over suppliers
T1. Changes in consumer preferences
T2. Waste disposal
T3. Legal requirements to disclose negative information on product labels
T4. Competition from PepsiCo
T5. Negative publicity.
S3S5 T1:
Provide many thank you programs or build up the customer service well. (unrelated diversification)
Create a fan page in social network (forward integration)
S4S6T5:
Take advantages of bargaining suppliers to enhance products for folio. (related diversification)
Buy with the suitable price to compete with Pepsi Co (market development)
WT STRATEGIES
Reduce weaknesses and avoid threat’s impacts
W1. Significantly focus on carbonated drinks
W2. Undiversified product portfolio
W3. High debt level due to acquisitions
W4. Decrease gross profit and net profit margins.
T1. Changes in consumer preferences
T2. Waste disposal
T3. Legal requirements to disclose negative information on product labels
T4. Competition from PepsiCo
T5. Negative publicity.
W1W2T2T5
- Diversified with a lot of kinds products (product development)
- Protect the environment, especially the water resources.
An appropriate Strategy
WO Strategy W1W2O1O2:
W1. Significantly focus on carbonated drinks
W2. Undiversified product portfolio
O1. 13th populated country
O2. High technology
Coke Company offers many advantages for producing, packaging. In order to continually grow the business, the Company needs to be increasingly efficient in use of resources. This is required new investments in technology, innovation, a significant amount of collaboration throughout the Coca-Cola system. With the high technology available, Coca-Cola uses subtle yet effective online advertising to make customers in Viet Nam enjoy and desire to buy its products. Targeted advertisements on websites mean that Coca-Cola has greater control over who sees their ads and when they see them. For instance, when you're perusing the online menu of a local eatery, Coke ads may appear, making you associate that restaurant with a tall, icy glass. Or, when you're researching local beaches, you may see an ad for Coca-Cola products, thereby associating heat with the refreshment of Coke. It is really suitable for Coke Company because Coca-Cola plans to make a system investment of $300 million in Vietnam over the next three years to build new infrastructure, create jobs, develop strong partnerships and build its brands in the country. With this additional investment, which will begin in 2013, Coca-Cola and its bottling partners’ total investment in Vietnam will shoot up to $500 million between 2010 and 2015. With this investment, Coke should invest in the online advertising for the effective brand in Viet Nam. Besides, Coke needs to diversify product portfolio, besides carbonated drinks, to care the healthy consumers. Now, the Vietnamese concern more about their health, so it is high time to think about the healthy products to meet the Vietnamese market where has many people with their loyalty to Coke.
No Alternative Strategies Suitability Feasibility Acceptability Ave score Explanation
1 Expand many retail channel through store or shop.
Build the Coca cola retail outlets 4 4 4 4.00 Reduce the cost as well as price of products
2 Provide the new products with high qualification 4 3 4 3,67
3 Develop new functional products which have potential growth.
Enhance new beverage following the healthy trendy 4 3 4 3.67
4 Diversified product portfolio, besides carbonated drinks to care the healthy consumers with amazing advertising programs.
Products made from healthy materials 4 3 4 3.67
5 Bargaining with the suppliers with suitable price 4 3 3 3,33
6 Provide many thank you programs or build up the customer service well.
Create a fan page in social network 4 4 4 4.00 Great number of people using internet to be advertised, which is cheaper ad cost
7 Take advantages of bargaining suppliers to enhance products for folio.
Buy with the suitable price to compete with Pepsi Co 4 3 3 3.33
8 Diversified with a lot of kinds products 4 4 4 4.00 Meet diversity of needs, which increases the competitive ability
9 Protect the environment, especially the water resources 3 2 4 3.00 High cost
Appropriate strategies
No Alternative Strategles Suitability Feasibility Acceptability Ave score Explanation
1 Expand many retail channel through store or shop.
Build the Coca cola retail outlets 4 4 4 4.00 Save cost of delivering and reduce the price of products
6 Provide many thank you programs or build up the customer service well.
Create a fan page in social network 4 4 4 4.00 Great number of people using internet to be advertised, which is cheaper ad cost
8 Diversified with a lot of kinds products 4 4 4 4.00 Meet diversity of needs, which increases the competitive ability
Conclusion and Recommendation
The strategy in Coca cola Company used effectively is marketing and advertising strategy, so I strongly believe in the future the company continuously conducts such more effective strategy. However, it knows how to control the negative publicity through the social network. Moreover, although development is always higher, it makes a big concern in terms of environment and social activities.
I am encouraged by the company’s global reach, strong brand power, expanding presence outside the U.S. and its solid cash position. Moreover, the company’s acquisition of Coca-Cola Enterprises bottling business and its productivity initiatives are expected to result in significant cost savings. In particular, in the Viet Nam market, Coke Company plays an important role in the beverage field. The customer really love their advertisings which is meaningful and colorful, it also attracts with the lively music. In the future, I think Coca cola Company should create much more advertisings to meet the Vietnamese customer demand. However, Coca-Cola needs to ramp up its advertising spending to match arch competitor PepsiCo Inc.
REFERENCE