Acknowledgement Co-operation and building up of moral are the essence of success. These are two factors that go a long way in achieving it. It is a Herculean task, which lacks these two determinants of success. It was an opportunity and great pleasure for me to be in such an environment and having interaction with concerned people. I express my heartly respect and thanks to Mr. Shrikant(A.S.M.) and Mr. S. Biradar (S.E.) for their informative and detailed guidance for the completing and evaluating of this project. Prof. V. V. Siddhanthi, Faculty, BLDEA’s MBA programme (Autonomous), Bijapur who was in the role of my Faculty Guide, left no stone unturned in guiding me along the course of my Summer Training Project work. I am grateful to them those given me this opportunity to work on such type of project, without their, it is not possible for me to complete the project. Finally, to my parents, for all the tea and care with which they overwhelmed me through these long months of creation. I sincerely hope that my first venue in this field is appreciated. Offering thanks. 1 | Page
Transcript
Acknowledgement
Co-operation and building up of moral are the essence of success. These are two factors
that go a long way in achieving it. It is a Herculean task, which lacks these two
determinants of success. It was an opportunity and great pleasure for me to be in such an
environment and having interaction with concerned people.
I express my heartly respect and thanks to Mr. Shrikant(A.S.M.) and Mr. S. Biradar
(S.E.) for their informative and detailed guidance for the completing and evaluating of this
project.
Prof. V. V. Siddhanthi, Faculty, BLDEA’s MBA programme (Autonomous), Bijapur
who was in the role of my Faculty Guide, left no stone unturned in guiding me along the
course of my Summer Training Project work.
I am grateful to them those given me this opportunity to work on such type of project,
without their, it is not possible for me to complete the project.
Finally, to my parents, for all the tea and care with which they overwhelmed me through
these long months of creation.
I sincerely hope that my first venue in this field is appreciated. Offering thanks.
Syed Faheem
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TABLE OF CONTENTS
1. Chapter 1
Literature Review
Introduction about the topic
Introduction about the company
2. Chapter 2- Research Methodology
Purpose of the study
Objective of the study
Scope
Data collection
Sampling methods
Limitations
3. Chapter 3- Data analysis and representation
4. Chapter 4- Findings
5. Chapter 5- Recommendations and suggestions.
6. Chapter 6- Conclusion
7. Chapter 7- Bibliography
8. Chapter 8 - Appendix
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CHAPTER-1
INTRODUCTION ABOUT THE TOPIC
AND
INTRODUCTION ABOUT THE COMPANY
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LITERATURE REVIEW
Global Strategy of Coca-cola:
(Zhang, 2010)
Indian market is one of the major developing economies in the world. The Coca-Cola
Company is mentioned as a global company with global products and global activities. In
1980 the company was moving towards centralized control. At that time the motive of the
company are to be global in order to expand geographical wise into many of the countries
in which the company does business today. In 1990 the world began to start smaller and
smaller as a town for the global companies. Globalization forced changes to appear so fast
that many countries could hardly manage the new global environment. “As a result, the
very forces that were making the world more connected and homogeneous were
simultaneously triggering and preservation of unique culture identity. The world is
demanding greater flexibility, responsiveness, local sensitivity, nimbleness, speed,
transparency and local sensitivity had become essential to success” (Draft, 2000). Coca-
Cola Company sees itself not as a global organization, but as a multi-local enterprise
(Swenson, 2001).
Coca-Cola Company historical strength came from operating as a “multi-local”
business that for a very long time relies mostly on the insight of local bottling partners.
That's why the global strategy of coca-cola allows its business in more than 200 countries
to act according for local laws, local culture, and local needs and so on. Coca-Cola pursues
an assumed global strategy, allowing for differences in packaging, distribution, and media
that are important to a particular country or geographical area. Hence, the global strategy is
localized through a specific geographic marketing plan. Instead of applying a global
strategy, it is likely to be a strategy of thinking globally, but acting locally. “The global
success of Coca-Cola is the direct result of people drinking it one bottle at the time in their
own local communities. So we are placing responsibility and accountability in the hands of
our colleagues who are closest to those billions of individual sales” (Draft, 2000). This
signifies that if their local colleagues develop an idea or a strategy that is the right thing to
do locally, and it fits within fundamental values, policies, and standards of integrity and
quality of the Coca-Cola Company, then they have the authority and responsibility to do
so.
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Therefore, their multi-local strategy approach is still going strong and adequately
for the company's worldwide business activities. In addition Gould (1995) states that coca-
cola has become a part of people's daily meal, a price at which anyone can buy and it is
available to people in any part of the world. The IR framework has been used to critically
analyze the global strategy of Coca-Cola. COCA-COLA COMPANY saw that there is an
opportunity in Asian market and their home market situation is saturated. COCA-COLA
COMPANY decided to re-enter in the Indian market in 1993. Indian government plays a
major role in every international company and had a law that any international company
has to become a partner in Indian market with an Indian company. To overcome this
problem COCA-COLA COMPANY acquisition of local Indian popular brands including
the THUMS UP (the most trusted brand in India), Mazza, Gold Sport, Citra and Limca
providing a good base not only in bottling, manufacturing and distribution assets but also
very good strong consumer preference(Kaul, 2003). From this acquisition the leading
Indian brands join the family of global brand and its products like coca-cola, diet coke and
others. From this acquisition Coca-Cola enables to exploit the benefits global branding and
global trends in taste while also tapping in other domestic markets (lane, 1998). Coca-Cola
adopted the standardization strategy to produce and sell its standardized products globally
(Rodrigues, 2009). Coca-Cola Company do franchise with the local manufacturing bottling
companies through which they have a local response and local touch.
In India COCA-COLA COMPANY have 46 bottling plant from which 22 are
company own and rest are the franchise operated plant (Coca-Cola, 2010). After re-
entering the Indian market in 1993 the COCA-COLA COMPANY operations grown
rapidly through a model that supports local business which includes over 1.3 million
retailers and over 7000 distributors across the country. Coca-cola has been successful in
the global market as well as Indian market because it follows the local strategies and is
able to deliver as per the needs of the local people by manufacturing and distribution by
the local company (Hill, 2009). In manufacturing the product the water which is used is
local from which the customers get the local taste. The company has an approach where in,
their business does not get influenced by the area of sales. Rodrigues (2009), states that
Coca-Cola pursues the global strategy of producing diverse products as per the local
culture. For instance in India people prefer sweeter coke. Also Coca-Cola launched
Georgia, a canned coffee specially intended for Indian market which captured 40% of the
market soon after its launch (Hill, 2009).
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According to Cokecce.com (2007), Coca-Cola trains their managers in their management
school, to make them aware of the global perspective of their operations.
Marketing is one of the back bones of any global industry in any country. As to stay in the
market ahead from the competitors, marketing plays the major role in Indian market for
soft drinks. The post- liberalization period in India saw the comeback of Cola but
Pepsi(one of the major competitor India) had already beaten Coca-Cola to the punch,
creatively entering the market in the 1980's in advance of the liberalization by the way of
joint venture. Coca-Cola Company benefited from Pepsi creating demand and developing
the market for soft drinks. (Kaul, 2004)
In 2001 Coca-Cola CEO Douglas Daft set the new direction for next generation of success
for global brand with a “Think global, act local” mantra. Recognizing that a single global
strategy or single global campaign wouldn't work, locally relevant executions became an
increasingly important element of supporting Coke's global brand strategy. Coca-Cola
Company re-examined its approach in an attempt to gain leadership in the Indian market
and capitalize on significant growth potential in the rural markets. The foundation the new
strategy grounded brand positioning and marketing communications in consumer insight,
acknowledging that urban versus rural India were two distinct markets on a variety of
important dimensions. (Kaul, 2004) In rural market, where both the soft drink category and
individual brands were undeveloped, the task was to broaden the brand positioning while
in urban markets, with higher category and brand development, the task was to broaden the
brand positioning while in urban markets, with higher category and brand development,
the task to narrow the brand positioning focusing on differentiation through offering
unique and compelling value. (Kaul, 2004)
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Coca-Cola used two different marketing strategies for each urban and rural market.
The first marketing “life ho to aisi” means life as it should be for urban market and the
other was “thanda matlab coca cola” which means cool or cold is coca cola which hit the
rural target very highly and gain the market very efficiently because the 96% of the
population are in rural and developing cities. Coca-Cola Company reduced its rate for the
rural market by providing 200ml bottle so that those customers and consumers whose
wages are not so high can also have it. (Kaul, 2004) At the same time, Coke invested in
distribution infrastructure to effectively serve a disbursed population and doubled the
number of retail outlets in rural areas from 80,000 in 2001 to 160,000 in 2003, increasing
market penetration from 13 to 25%. As a result of the marketing campaign, Coca-Cola
won Advertiser of the year and Campaign of the year 2003. (Kaul, 2004)
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INTRODUCTION ABOUT THE TOPIC
What is Horizontal Expansion?
It means opening new outlets. It is done to increase the market share and to increase the
visibility of product in the market which will ultimately lead to higher sales volume and
larger market share. In microeconomics and strategic management, the term Horizontal
Expansion describes a type of ownership and control. It is a strategy used by a business or
corporation that seeks to sell a type of product in numerous markets.
Horizontal Expansion in marketing is much more common than Vertical Expansion is in
production. Horizontal Expansion occurs when a firm is being taken over by, or merged
with, another firm which is in the same industry and in the same stage of production as the
merged firm,
For e.g. Pepsi has adopted strategy of Vertical Expansion by which Pepsi wants to improve
it’s sale from Coke monopoly outlets, means Coke’s monopoly outlets are being taken
over by Pepsi now in this condition to improve its sale Coke need to open new outlets
which is called Horizontal Expansion Strategy. A monopoly created through Horizontal
Expansion is called a Horizontal Monopoly.
This is the expansion of a firm within an industry in which it is already active for the
purpose of increasing its share of the market for a particular product or service.
Reason of Horizontal Expansion
The ultimate objective of coke is to acquire more customers and serve them properly.
While doing Horizontal Expansion take care to the competitor’s strategy. The main
competitor is PEPSI, who has opted Vertical Expansion to generate more sell however
Coke do not believe on Vertical Expansion because Vertical Expansion has limited
preview so COKE is great believer in Horizontal Expansion and this strategy helped to the
company to maintain its leadership in the soft drink industry.
India is a big country having diversified taste and appearance and same character is
reflected in their demography. Horizontal Expansion helps the company to serve the more
people and more customers touch point because in the waste country many customers
commute.
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Benefits of horizontal expansion:
Provides Incremental Volume & Revenue for Business.
By horizontal expansion there will be more outlets of our product In the market
which will sell our product in more quantity. This will generate incremental
revenue for the business.
Helps Improve Route Productivity.
There are pre determined routes through which product is transported and delivered
at the coke outlets. If we open more outlets on the routes it will increase the
productivity because more outlets will be covered and more products will be
delivered with a negligible increase in time and efforts. Hence it will improve
productivity of the route.
Improves Profitability of Our Distributors Expenses on routes and delivery of
product are incurred by the distributers. Opening new outlets will give more
revenue to our distributors also. With the increase in route productivity will
improve profitability of the distributors.
Reduced Dependence on Large Customers, We know that coke products have a
very good demand. To comply with this we have to provide large amount of
supply. In case we have few outlets a large amount of stock is gathered at few
retailers. In this case they become monopolistic and demand many things like
coolers refrigerators discounts margins etc. from the company. So it is very
necessary to reduce dependence on large retailers by opening new outlets.
Increase market visibility selling at more outlets give more market visibility of the
product which gives higher product recognition and brand value to the products.
Increase in market power over supplier and downstream market channels.
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Advantage of horizontal expansion over vertical expansion:
Both expansion techniques are meant for increasing sales volumes. But in
horizontal expansion company can earn more profits by spending less. Let’s see the profit
story of horizontal expansion
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Measure 2008 2009
Number of Existing Outlets 10000 10000
Total Volume (in Lac Phy Cases) 50 55
VPO in Phy Cases 500 550
Number of New Outlets 2000
New Outlet VPO 125
Incremental Volume (in Lac Phy Cases)
2.5
Grand Total Volume in Lac Cases)
50 57.5
Horizontal Growth Horizontal Growth
New Outlet OpeningNew Outlet Opening
Impact of New Outlets on BusinessImpact of New Outlets on Business
Above tables clearly indicate the importance of opening new outlets. By doing vertical
expansion only growth in profit was not very effective but because of opening just 200
new outlets sales increased to a large extent. Total profit margin and return on investment
also increased.
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Measure 2008 2009
Number of Existing Outlets 1000 1000
Total Volume (in Lac Phy Cases) 3 3.5
VPO (in Phy Cases) 300 350
Numer of New Outlets 200
New Outlet VPO 150
Incremental Volume from New Outlets(in lac Phy Cases)
0.3
Grand Total Volume 3 3.8
Margin Per Case 12 12
Gross Total Margin (in Rs 000's) 3600 4560
Operating Expense (in Rs 000's) 7 6.5
Net Total Return (in Rs 000's) 1500 1925
Investment (in Rs Lac) 80 85
ROI 19% 23%IncreasedIncreased
ROIROI
MoreMore ReturnsReturns
BetterBetter MarginMargin
Impact of New Outlets onImpact of New Outlets on DistributorsDistributors
How to Do Horizontal Expansion
To do Horizontal Expansion more efficiently I made a profit story and talk to the shopkeepers according to that story.
Story
Salesperson – hello sir, I am from Coke and I have a proposal that will surely increase your income. May I present you?
Shopkeeper – yes please present it
Salesperson - Sir if you will start to sell coke then your overall sale will be increased and it is not tough to sell coke because Coke is the leader in beverage industry and a very well known brand.
Shopkeeper- yes, but how it can increase my overall sale?
Salesperson - Sir, you are selling Chips, Pastry and snacks. And these products have a very good combination with cold drink. If a person wants to purchase any of these products then it is quite possible that he will purchase Coke and vice versa.
Shopkeeper – But how Coke can increase my profit?
Salesperson – Sir if you are really interested to explore through Coke, you may be able to sell 2 cases of 200ml, 1 case of 300ml, 1 case of 6oo ml and 1 case of 2 liter. And for start selling Coke you need to invest only Rs. 420. We will provide you 3 empty carets
Weight of Product (ML)
Rate of case (Rs.)
QTY M.R.P.
(Rs.)
Revenue
(Rs.)
Profit
(Rs.)
200 168 24 8 192 24
300 214 24 10 240 26
600 488 24 22 528 40
2000 455 9 55 495 40
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Sir your daily profit from coke (in Peak season) = Rs. 154
Profit per month (in Peak season) = Rs. 4620
Profit of whole season = Rs. 13860
(Because the peak season for Coke is only of 3 months)
Profit of rest of the 9 months = Rs. 20790
(Because as per the Coke assumption income in the off season is decreased by half in comparison to the Peak season)
Profit of whole year = Rs.34650
Your investment = Rs. 1913
Your ROI = 34650 * 100/1913
= 1811.29%
Shopkeeper – But I do not think this much will work what about those stuffs that needs to support trading of Coke and I have to provide them like electricity, ice etc.
Salesperson – Sir that’s a really nice question, we can understand your anxiety and we have to offer much more for this. We have minimum Rs. 10 offer on 200 and 300 ml and Minimum Rs. 20 on Pet bottles. More over if you are keeping your refrigerator for the storage purpose of Coke if will be all right as the refrigerator can work by consuming power as low as 2 units per day which will cost you Rs. 8 per day.
So, what you have to say about our offer?
Shopkeeper – Yes, I think it will be a nice idea to accept your offer.
Salesperson – Thank you sir and Congratulation (Shaking Hands) I will be dropping my products within 10 minutes as I have the carrying vehicle with me and within next 15 minutes you are all set to go for selling Coke.
On some shops we set refrigerators and to keep a refrigerator we need to collect 1 photo copy of Voter ID card or Ration Card, 1 photo copy of electricity bill and 1 passport size photo of shopkeeper.
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Introduction of the Company
Every person who drinks a Coca-Cola enjoys a moment of refreshment and shares an experience that millions of others have served. All of those individual experiences combined have created a worldwide phenomenon – a truly global brand.
On the distribution front, 10-tonne trucks, open-bay three wheelers that can navigate the narrow alleyways of Indian cities, ensure availability of our brands in every nook and corner of the country.
The company-owned Bottling arm of the Indian Operations, Hindustan Coca-Cola Beverages Private Limited is responsible for the manufacture, sale and distribution of beverages across the country. A career at Hindustan Coca-Cola Beverages Pvt. Ltd. is truly a one-of-a-kind experience. Come taste life at Coca-Cola.
HISTORY
Coca-Cola Company, nourishing the global community with the world’s largest
selling soft drink since 1886, returned to India in 1993 after a gap of 16 years giving a new
thumbs-up to the Indian Soft Drink Market. In the same year, the Company took over
ownership of the nation's top soft-drink brands and bottling network. No wonder, our
brands have assumed an iconic status in the minds of the consumers. Coca-Cola serves in
India some of the most recalled brands across the world including names such as Coca-
