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Market Segmentation

November 17th, 2020
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Analytical Business Report

Introduction

In the current market dynamics, one common feature within all markets is the increasing competition as long as more players are getting into the market. This aspect has brought a serious challenge to the management since every organization tries to establish its present in the market. To ensure a stable position of an organization within a competitive market, the management needs to make sure that they have a detailed understanding of the prevailing competition in the market to realign better accordingly (Kotler & Keller, 2015)/ (Schermerhorn, 2013). The intention is to guarantee that the organization’s operations are not only efficient but lead the organization to meet the changing demands of the market (Kotler, 2012). There is a demanding expectation to the management to provide all the relevant data on the competitors, consumer preferences, and existing market gaps to ensure that any competitive decision is based on concrete data (Jaklič et.al, 2015)/(Armstrong & Kotler, 2013). Once the organization obtains the information, it becomes possible to engage in a market in a more competitive manner (Daniel, 2012). In appreciation of this demand, the current paper presents an in-depth analytical report of how Coca-Cola Company can exploit the tool of market segmentation in enhancing its competitive edge within the highly competitive non-alcoholic beverage industry.

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Background

Company Analysis

Coca-Cola is the dominant non-alcoholic beverage company, whose operations have a great depth of reach that has seen it become one of the most recognised brands in the world. The company was founded in Atlanta, Georgia in 1886, and has grown to become a world leader in the soda industry. Moreover, despite the high entrant of other players like Pepsi, Coca-Cola has remained unmatched both regarding brand recognition and geographical reach with the company operating 300 subsidiaries in different countries (Coca Cola, 2012).

Market Analysis

The non-alcoholic beverage industry is swelling in terms of competition since there are no barriers to entry a phenomenon that has made companies within the industry compete in all manners in an attempt to remain in the market. Furthermore, due to the influx of producers in the markets (Pepsi, RC Cola, and Inca Kola), sales have been on the decline (Kell, 2015). The mentioned condition has pushed companies to make diligent operational changes to remain profitable. Any company willing to flourish has to apply strategies that help to attract the competitors’ customers, retain one’s customers, and operate in an efficient way within the market. Coca-Cola can meet the above requirements through a well-planned market segmentation that will see the company gain a competitive edge within the industry.

Market Segmentation Analysis

Marketing segmentation represents one of the marketing strategies that a company can use to accelerate the demand of the consumers (Wooliscroft, 2011). It entails a deep market analysis with the intention to identify a portion of the larger market that has a higher probability of demanding the products being availed (Xia et.al, 2015). The aim is to ensure that the company can identify the areas with the more prospective purchase rate and thereby realign the operations or the product to suit the needs of the targeted customers. Moreover, the strategy is helpful when it comes to dividing the consumers into groups of common demands (Lee, 2013). The aforementioned strategy provides double edge benefits where an organization is not only able to identify areas of higher profit margins, as a result of high levels of sales, but also minimizes the organization’s marketing expenses by upholding segment-specific operations.

Relevance of Market Segmentation to the Coca-Cola Operations

With the high level of competition existing in the non-alcoholic beverage industry, there is the need for Coca-Cola to prevent haphazard operations within its market. Being a multi-national company, Coca-Cola needs to appreciate that in the majority of the markets, the high level of competition is not from another multi-national enterprises but the local companies that are supported by their local loyal customers. Moreover, to protect the local companies, governments may impose taxes that making the companies’ operations more expensive than the local one’s. Coca-Cola needs to ensure that all operations are not only market-specific but efficiency-centred as well. Proper market segmentation will ensure that the company puts more effort in areas of good returns, which will improve its competitive edge since the company will be focusing all its efforts on the actual consumers (Stevens, 2007). Another reason why the market segmentation is relevant to Coca-Cola is because it has a wide range of products that attract different customers. Therefore, market segmentation will help the company to identify the demand patterns of different consumers and thereby serve them in a manner that meets their preferences (Kerin, 2006).

Gaining Competitive Advantage Through Market Segmentation

Market segmentation presents a platform for Coca-Cola to analyse the market and realign its operations to suit the dynamics of the market. One of the crucial inputs brought by market segmentation is consumer identification. When a company can pinpoint its client base, it becomes easier to change the way the company will operate in the market to make the best out of it (Eagle, 2015). It is possible to identify their demands, lifestyle, and standard of living and, therefore, provide the ways to ensure that the products are affordable and attractive to the intended market (Emery, 2012). Conforming to meet the demands of the market ensures that the company respects the demands of the consumers. Such an approach has an attractive effect that helps the company to increase its sales. Moreover, delivering the product in the right package to ensure affordability helps to cater for customers with varying purchasing power.

In addition, competitive advantage is gained through market segmentations by the mere fact that it aids a company to identify the taste and preferences of the intended market (Kerin, Hartley & Rudelius, 2015). In the Coca-Cola’s case, with its diverse products, segmenting the market by taste and preference will ensure that they exploit better the varying taste to the advantage of the company. In addition, the segmentation will minimise the element of unprofitable distributions when a company suffers loss due to dead stock in their distribution centres. Market segmentation brings a competitive advantage to a company via reduced marketing expenses as a result of exercising concentrated marketing (Keegan & Green, 2015). The mentioned above is made possible since the company is aware of prevailing tastes and preferences not mentioning the geographic coverage of the potential consumers. With the significant level of understanding the tastes and preferences within a market brought about by market analysis and the actual market analysis, the company can invest accordingly thereby conducting its operations in a manner that improves the market share (Elliott, Waller & Rundle-Thiele, 2014).

In general, market segmentation ensures that a company operates only in areas of its strength, which are full of consumers ready to consume the products being availed (Grewal & Levy, 2010). Likewise, the company can cease the competition by ensuring that it is only providing more of the products that are highly competitive in a given area compared to the ones being offered by the prevailing competitors. The above analysis clearly demonstrates that a diligent market segmentation analysis is a tool which not only provides insights on where to avails one’s product but helps a company to operate with reduced marketing expenses. Coca-Cola can exploit the described strategy in different markets that can help it to operate at reduced costs and thus ensuring increased revenue even though the non-alcoholic beverage sales are on the decline. Such approach will ensure that the company upholds more competitive operations across the world.

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Conclusion & Recommendations

Recommendations

Market segmentation ensures that a company operates in a more efficient manner through concentrating in segment-specific operations (Martin & Schouten, 2012). Being a multi-national company in the intensive competition within the non-alcoholic beverage, Coca-Cola needs to exploit the market segmentation tool since it presents a platform where the company can reduce its marketing expenses and observe caution in areas of operation. To exploit the tool effectively, before producing various products to different markets, Coca-Cola needs to perform a priori market segmentation aimed at:

  • Identifying the prevailing taste and preference
  • Identifying the different possible segmentation
  • Ensuring that the identified segment is reachable
  • Ensuring that the segment demands can be quantified
  • Creating clear guidelines on the most effective way of serving the identified segments

Adhering to the above-mentioned will help Coca-Cola to continue its path of being a world leader in the industry through improved efficiency and reduced cost of operations.

Conclusion

It is clear that the analysis of market segmentation provides a path to increase a company’s competitive edge through reduced cost of operations and improved efficiency. Moreover, it is evident that market segmentation helps a company to identify where, how, and what to avail to its target market. Such an approach minimises the losses from trial operations. It is a tool that provides helpful information about consumers that helps a company to efficiently exploit the market. Therefore, market segmentation presents a tool that Coca-Cola can utilize to operate in different markets in a more competitive manner.

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