Coca-Cola Still Number One
Coca-Cola has long been a world leader in cola products, with Pepsi being the only competitor coming even remotely close to removing them from their number one spot. However, with increasing globalization comes increasing fear that the success of domestic products may falter. In turn, this results in an increase in domestic producers of similar products in an effort to increase domestic success and limit control of foreign producers. Regardless of these subsequent growths in domestic competitors, Coca-Cola may never truly be outdone.
In the early 2000’s, domestic competitors began to arise in Europe and the Middle East in response to Coca-Cola’s control of the cola market. Mecca Cola was launched in an effort to become the new choice of cola for Muslims worldwide, as well as to provide a substitute for the American cola product. This new company pledged to donate twenty percent of its profits to Muslim and Palestinian charities, and even sponsored the peace march in London that demonstrated against the U. S. involvement in the war against Iraq (Gillespie & Hennessy, 2011).
Coca-Cola Still Number One Essay Example
During that peace march, 36,000 bottles of Mecca Cola were given out along with 10,000 T-shirts bearing the Mecca Cola logo and anti-war slogans. They even equipped a vehicle with a twenty-foot high Mecca Cola can pulling a trailer with an advertisement board bearing the slogan “Human beings are all born free and equal… and should think before they drink” (Britt, 2003). However, even with Mecca Cola’s pledge to domestic charities and its anti-war campaign, it was not strong enough to overthrow Coca-Cola’s hold on the market. Yet another European competitor was born with the creation of Qibla Cola, which launched in Britain in 2002.
Like Mecca Cola, Qibla vowed to donate a percentage of its profits to humanitarian efforts worldwide, and was against the U. S. led war in Iraq. Qibla even went as far as to call for a boycott of all American-made products as a result of the Iraq war. But, like Mecca Cola, Qibla was not strong enough to compete against a world leader like Coca-Cola. Even domestic producers like Zam Zam cola, Iran’s alternative to Coke, couldn’t compete. As Zam Zam expanded further into Middle Eastern markets, Coca-Cola began reintegrate itself into Iran’s markets.
None of the European or Middle Eastern producers had what it takes to compete with a global leader like Coca-Cola (Gillespie & Hennessy, 2011). In Latin America, however, Coca-Cola faced a legitimate threat in Kola Real, which was produced by Peru natives Eduardo and Mirtha Aranos-Jeri, founders of the Ajegroup. Kola Real was created in response to the rebels in Latin America routinely hijacking Coca-Cola delivery trucks. As a result of these hijackings, the Ajegroup decided to produce its own cola product and distribute it locally.
As they did not have the large overhead costs, such as advertising, that Coke did, they were able to sell their cola product at a price considerably lower than that of Coca-Cola. This lower price is what helped the Ajegroup to take a considerable share of the Latin American cola market out of the hands of American-made Coca-Cola. Kola Real was by far more competitive with Coca-Cola than its European and Middle Eastern counterparts (Gillespie & Hennessy, 2011). There is a reason that Kola Real was more competitive than both Mecca and Qibla Colas.
Compared to Coca-Cola, Mecca Cola and Qibla Cola had some strengths, but had far more weaknesses. The strengths that these two domestic producers contained were simply that they were domestic, they pledged to local charities in an effort to enhance their own communities, and they refused to support American war efforts in Iraq. These factors helped these domestic companies to have slight success in their local markets. However, their lack of price competitiveness, as well as their lack of capital, marketing plans, and knowledge of global integration strategies restrained them from becoming truly competitive with the global leader.
In comparison, Ajegroup contained more of the strengths required to compete with a global producer of this magnitude. Being that it was a family business, they were able to avoid some of the costs incurred by larger corporate ventures. For instance, they did not advertise, which permitted them to avoid a considerable production cost. This was a major factor in their ability to price their cola product far below that of Coca-Cola, which in turn allowed them to be competitive in the Latin American cola markets. Also, Ajegroup distributed and sold their products in the smaller mom-and-pop stores that made up the Latin American market.
In Mexico alone, these small mom-and-pop type stores make up 75 percent of all cola sales (Gillespie & Hennessy, 2011). Ajegroup’s competitive pricing and its locale have contributed to its success in Latin American markets. With its competitive edge, I do think that Ajegroup’s cola product has the potential for success if expanded outside of Latin America. I think if distributed in European or Middle Eastern countries, it may have a chance at being competitive with Coca-Cola in those markets if they can continue to remain competitive with their prices.
I also think that they have an opportunity to be successful in those markets as there is no animosity between the areas, whereas there is animosity between these areas and the U. S. Also, Ajegroup has the potential to be competitive if expanded into the U. S. , partially due to its competitive pricing, and partially due to the Hispanic population that would prefer to buy products from their home country. As it is, Ajegroup has already successfully expanded into sixteen different countries with its product “Big Cola,” including areas in Central and South America, as well as Southeast Asia (Positive Publications, LLC, 2012).
Any company has the potential to be competitive when expanding, and with Ajegroup’s already competitive edge in the Latin American markets, I believe they just may have what it takes to expand successfully. Given Ajegroup’s success in the Latin American markets, and the threat it imposed on Coca-Cola’s share, Coke began to retaliate. Coca-Cola began to threaten some of the smaller Latin American stores, stating that if they sold this new cola product, they would pull their own product out of their stores.
Coke also “bought” its distributers’ loyalty by providing things such as free refrigerators to chill their Cokes and life insurance policies for the store owners. Obviously this is something that Ajegroup was in no position to do, so many stores refused to sell their Kola Real product as a result of the threats and/or bribes from Coca-Cola (Gillespie & Hennessy, 2011). Coca-Cola abused their market power over distributors in an attempt to retain their power over the Latin American cola markets.
I think Coca-Cola could have retained their power over Latin American markets with several strategies that did not involve abusing their power over their distributors. For instance, Coca-Cola has the ability to mass-market, and could have retained a local celebrity or athlete to promote their product. They also could have revamped their product image, making their product more attractive in that particular market. They also could have tried discussing the possibility of partnering up with Ajegroup, which would give them the ability to have not one, but two products dominating the Latin American Markets.
Although making the most of the power you already have is most likely the easier route, there are always more ethical options. In conclusion, although domestic competitors arise in response to global competition, Coca-Cola may never truly be outdone. Even though increasing globalization results in an increasing fear of domestic failure, domestic producers may never truly have what it takes to compete against the global giant. Coca-Cola has been, and continues to be the world leader of cola products in markets around the world. References