QUESTION 1: What “international strategy” and “modes of entry” did COKE/PEPSI use to penetrate the Chinese Market? How effective were these choices? When Chinese markets opened up in 1980’s, Coke/Pepsi focussed on defining several strategies to Differentiate, Market and distribute their Cola products to Chinese consumers. International Differentiation Strategy: Both used two main aspects of this strategy “Branding” and “Cost Leadership“to force local producers to withdraw from the market or establish joint ventures with them. They invested heavily in Brand recognition and used lots of advertising and sponsoring to support their cola brands. They replicated their global rivalry in China and initially were determined to seize market share from domestic cola producers, even at the cost of profitability. Later, Coke instituted the “Glocal” strategy which means “Think Local, act local but leverage global” but Pepsi instituted its positioning on young consumers. International Marketing Strategy: Coke spent heavily on Marketing to create a sound brand image and included Chinese cultural icons like windmills and dragons in its advertising. Local films and sports stars were engaged, sponsored National Soccer teams and International Olympic Committee as well with funding up to $1.1 Billion for Beijing Games. Pepsi also used a great deal of Marketing like using popular entertainers such as Faye Wang, Guo Fuchen as endorsers. Pepsi became the most popular soft drink brand for young consumers due to its focussed Marketing for this demographics. International Distribution Strategy: Both preferred to establish their own distribution networks while setting up Joint Ventures with bottlers and bottlers managing sales in their assigned territory. They set stringent sales targets for bottlers, and in turn bottlers would set targets for distributors. While in most of the joint ventures, Coke did not have majority shareholding but Pepsi sought a majority share in the joint ventures. Global vs. International Strategy: Coke/Pepsi both maintained a global image and product offerings with a strong level of standardization in terms of Product quality, taste and branding but adapted their marketing strategies as per local market. For Example, Coke has taken the “think local, act local” approach and localized their marketing activities to be in sync with Chinese consumers. They sponsored National Youth Soccer Team and also extended their sponsorship for Beijing Games to create a sense of belonging among the end consumers. International Collaborative Strategy: Both Coke/Pepsi did collaboration with local Chinese companies and set up joint Ventures which helped them understand cultural, political, competitive and economic differences among various provinces in China. They were also successfully able to reach end consumers through local companies and create accurate customer profiles which helped them understand complexities in Chinese market. International Diversification Strategy: Product diversification strategy entails any modification of a current product that serves to expand its potential. Product diversification is different from product development such that it involves creating a new customer base, which expands the market potential of the original product. Coke/Pepsi used this strategy quite effectively to widen their customer base and target new segments. They launched several local products specific to Chinese needs and culture and did marketing in localised manner. For Example: Coke launched Minute Maid Pulpy Super Milky drink and the Sprite Tea drink and both have been regional hits. Both drinks have been developed out by the research and development unit in China. These strategic choices made by Pepsi/Coke were quite effective in China as they had successfully implemented them in other countries and both companies gained combined market share of 71% in Chinese Cola market by 2000. QUESTION 2: What resources, capabilities and competencies...
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