Wahaha Case Study

query 1 What international scheme and modes of door did COKE/PEPSI use to penetpace the Chinese Market? How impressive were these choices? When Chinese foodstuffs opened up in 1980s, setback/Pepsi focussed on defining some(prenominal) strategies to Differentiate, Market and distribute their weed products to Chinese consumers. internationalist Differentiation outline Both utilize two main aspects of this dodging chumping and Cost Leadershipto force local anesthetic anesthetic anesthetic producers to pull in ones horns from the market or establish phrase ventures with them.They invested heavily in Brand light and used divide of denote and sponsoring to support their pinhead faults. They replicated their domain(a) competitor in china and initially were determined to seize market portion out from domesticated cola producers, even at the cost of profitability. Later, nose empennagedy instituted the Glocal dodge which means Think Local, operate local but leverag e global but Pepsi instituted its moorageing on young consumers. internationalist Marketing Strategy bump spent heavily on Marketing to create a sound spot image and included Chinese heathenish icons standardized windmills and dragons in its advert.Local films and sports stars were engaged, sponsored National soccer teams and supranational Olympic Committee as well with funding up to $1. 1 Billion for Beijing Games. Pepsi too used a spectacular deal of Marketing manage utilise popular forecasttainers such as Faye Wang, Guo Fuchen as endorsers. Pepsi became the or so popular finespun drink brand for young consumers due to its focussed Marketing for this demographics. transnational dispersal Strategy Both preferred to establish their take in distribution networks while setting up enunciate Ventures with bottlers and bottlers managing gross revenue in their assign territory.They set stringent gross sales events targets for bottlers, and in turn bottlers would set targets for distributors. era in most of the joint ventures, century did not fit out mass shargon guardianship but Pepsi sought a majority share in the joint ventures. orbicular vs. International Strategy Coke/Pepsi both binded a global image and product offerings with a ardent level of normalization in terms of Product quality, taste and stigmatization but vary 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 contemporize with Chinese consumers. They sponsored National Youth Soccer Team and in addition elongated 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 different provinces in mainland mainl and mainland china.They were in like manner successfully able to reach end consumers by means of local companies and create accurate node profiles which helped them understand complexities in Chinese market. International Diversification Strategy Product diversification system entails both(prenominal) 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 sooner effectively to widen their customer base and target new segments.They launched some(prenominal) local products specific to Chinese needs and culture and did marketing in focalised manner. For Example Coke launched Minute Maid Pulpy extremely Milky drink and the Sprite Tea drink and both have been regional hits. Both drinks have been developed out by the look for and development unit in China. The se strategic choices made by Pepsi/Coke were quite effective in China as they had successfully implement them in other countries and both companies gained combined market share of 71% in Chinese smoke market by 2000. misgiving 2 What resources, capabilities and make outncies enabled Wahaha to fight successfully against Coke and Pepsi when most other local Chinese low-key drink manufacturers had failed? Wahaha was able to successfully compete against Coke and Pepsi due to these factors Wahahas Leadership Wahaha Group was managed by Zong Qinghou who had a great vision and deeply association of markets and consumers in various regions. He had 20 historic period of sales experience in Chinese unsophisticated markets and Wahaha launched emerging smoke in folksy areas first which was untapped.Wahahas Marketing Marketing, research and development (R&D) and logistics guidance were centralized at headquarters, while the subsidiaries were engaged in ware. Wahahas marketing was clearly home gr suffer and pitched the product as a Chinese low-down creating a sense of patriotism among end consumers. Wahahas Advertising Wahahas advertising targeted the mass market, and not just the wealthier urban consumers. The prices of its products were usually lower than those of comparable products from its multinational competitors.They spent half of their advertising on CCTV which had huge artless coverage and credibility among consumers. Wahahas Distribution Network Wahaha had developed unique relationships with distributors over last 10 years and was able to quickly deliver its products, reaching even remote corners of China within days. Wahaha established offices in more than 30 provinces with sales stave co-ordinating operations with the distributors.Wahaha JVs and Acquisitions In order to obtain world class output signal technology and survive competition from both local and multinational companies, Wahaha chose to partner with French giant Groupe Danone and b oth established several production oriented Joint Ventures(JVs) which resulted into revenues and profits growing more rapidly. Wahaha also made several acquisitions such as loss making companies which were large but poorly managed and it supported geographic expansion and production in local provincial markets.Wahahas R&D Wahaha co-operated with R&D institutes and leading domestic flavor producers to ensure that its cola would be of a high quality and conducted thousands of taste tests worldwide. Its taste was designed to be adjoining to international colas, but a little bit sweeter and stronger to cater to the Chinese consumers taste. Wahahas Production Unlike Multinational companies, Wahaha had set up its own bottling plants as subsidiaries which allowed it great flexibleness and also opened 68 production lines over China in various provinces.Wahahas Competitive abut The longgest competitive advantage which Wahaha had over Coke/Pepsi is that being a local caller it understan ds the Chinese culture diversity pretty well and also their unique relationship with distributors in even remote parts of China. They set the opportunity in unsophisticated markets which was untapped by big multinationals and announce heavily on local TV Channels, especially CCTV to create a solid Brand image in minds of Chinese consumers.Above all, since Wahaha had successfully change many products like bottled water, flavoured milks, childrens nutritious drinks before launching Future Cola so it had enough experience, network and capital to support its Marketing, advertising expenses unlike other local Chinese soft drink manufactures who failed. QUESTION 3 What were the relative Strengths & Weaknesses of the three competitors in the Chinese Cola state of war? Strengths WeaknessCoke International ExperienceStrong presence in urban areasExcellent sales force Huge capital to support price warsWide Range of productsIncreased local market knowledge Weak Rural presenceCross territ ory sales by distributorsRivalry with Pepsi Pepsi International ExperiencePopular among young consumersProven Strategy in other marketsStrong hold on main cities Weak Rural presenceJoint Venture conflictsRivalry with Coke Wahaha Understanding Chinese Culture DiversityRelationship with distributors in rural areas68 Production lines over ChinaJoint Venture with DanonePricing flexibility due to production by own subsidiariesChinas own Cola Week attendees in main citiesSales forceWahaha recoverms to be winning the Cola war if they build on the strategies and implement them successfully in urban areas as well where multinationals have strong presence and also keep nurse their current market share in rural areas. another(prenominal) reason why Wahaha seems to be winning over because it has branded its products as Chinas own Cola Made in China products and which resulted into a sense of belonging and trueness among the Chinese consumers and it can be successfully implemented in big cit ies like Beijing, Hong Kong as well. QUESTION 4 Describe the Competitive Strategies and Tactics each companionship (Wahaha/Coke/Pepsi) used to gain Market Share in China.Did any company appear to be winning the cola war? Support your answer. We can describe the competitive Strategies and Tactics used by each company to gain market share using Porters fivesome Force model. Industry Rivalry When Chinese markets opened up in 1980s, Coke and Pepsi 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. They either forced local producers to withdraw from the market or establish joint ventures with them.Wahaha decided to target the rural market first because it knew and understood this market, and because it was not the focus of Coca Cola and PepsiCo. It focussed on the m ass market of 1. 1 billion mint in rural areas. Suppliers Pepsi and Coke preferred to establish their own distribution networks while setting up Joint Ventures with bottlers and bottlers managing sales in their depute territory. They set stringent sales targets for bottlers, and in turn bottlers would set targets for distributors. They used this model successfully in many countries. Their bottlers will map all place where their products can be sold and create one of them most accurate customer profiles.Coke had 28 bottling plans with Joint ventures (Minority shareholding) but Pepsi had 16 bottling plans with Joint ventures (Majority shareholding). Bottlers had little Supplier Power since they were into joint ventures with Coke and Pepsi. Wahaha did not had any suppliers since it had set up its own bottling plants as subsidiaries which allowed it great flexibility with its sales team and resulting into more price flexibility. It had more than 40 WOS and majority holding companies in 23 provinces. Buyers Chinese cola consumers were segmented into two wide areas urban and rural, while urban market was captured mostly by Coke and Pepsi and Wahaha had excellent rural reach due to its unique relationship with its distributors in remote parts of China.Coke target market was large population centres, turn over out its products in cities based on population with up to 85% distribution penetration, Pepsi focused on key markets and cities, youth segment and had 65% distribution penetration but change magnitude faster than Coke. Wahaha focus initially was on smaller cities and rural areas which was yet untapped by big multinationals. Wahaha priced its products quite lower than Coke and Pepsi since rural consumers had more price aesthesia than urban buyers. It spent heavily on CCTV advertising which had huge rural coverage and credibility among consumers. They did the Marketing of their products as Made in China which made consumers more loyal towards it.Pepsi/Coke made money from sale of concentrate while Wahaha made it from sale of final products due to its own subsidiaries doing production and so Wahaha had high pricing flexibility than Coke/Pepsi and was able to undercut multinationals. Potential Entrants Coca Cola and PepsiCos success against the domestic Cola producers in the early stages and their strong brand name and sales network in big cities formed a high entry barrier for new competitors. However, later Wahaha successfully competed against them due to good knowledge of Chinese culture, sound distribution network and excellent Brand worry and timely launch of quality products in rural areas which was untapped by big companies. But, still sector has high entry barriers there by resulting into limited potential entrants.Substitutes There are several substitutes to Cola like Iced Tea, Sports and Energy drinks, Non Carbonated drinks, juices, packaged water etc which pose a great challenge to Cola Industry and growing at a higher(pren ominal) rates up to 10% in comparison to 2-4% growth rate in Cola drinks. This has resulted into Coke, Pepsi and Wahaha launching several other products in these categories assess Creation for Shareholders While Coke/Pepsi endorsed local film stars, included cultural icons in its advertising and sponsored various Chinese Sports programs to localise their marketing as per Chinese consumers but Wahaha focussed on advertising using TV Ads especially on CCTV which had huge coverage and credibility and also sponsored Soccer World Cup and spring festivals. QUESTION 5 What future strategies should Wahaha get hold of to compete successfully against such large multinational enterprises?There should be a Four Step Action Plan which Wahaha should consider to compete successfully against such large multinational enterprises Step1 Wahaha need to maintain and protect its leading position in Rural market since both multinationals Pepsi/Coke are going to improve their distribution network, produc t offerings and further localise their Marketing to penetrate rural market. It can do it by increasing Marketing activities in rural areas and projecting its Chinese Cola brand image more comprehensively. Step2 It need to target main cities where multinationals have strong presence and fetch market share so that it can maintain its overall market share in case of downside in rural market share. Step3 It needs to explore new markets which are yet untapped fully by multinationals and are standardised to Chinese ulture since it can brand its products successfully in similar manner as it did in China Step4 It needs to broaden its product line and enter into other substitutes social class like Iced Tea, Bottled water etc which are posing a threat to Cola segment by registering higher growth rates. It can also start research on new product segments like Alcoholic drinks etc to see if market potential exists or not. Strategy Actions Protecting and maintaining leading position in Rural Ma rket * Increase Marketing activities in rural areas( Sponsor for local events and ads) * Offer Bounce system to maintain distributors loyalty . Market Penetration * Target Main cities first where Wahaha has good report card like Beijing, Hong Kong etc. Promotional campaign every quarter for Brand Recall Market Development * Expand in neighbour countries with similar Chinese culture since it can use similar marketing and branding strategies in those countries which Wahaha has successfully implemented in China. * Use the Danone JV to enter in markets where Danone has good presence. Product Development * Prepare new production line for non carbonated soft drinks since other substitutes like Iced Tea, Juices, Bottled waters are showing a higher growth rates than Cola segment. * initiate Study to produce alcoholic drinks like Beer. References 1 International heap & Academic Research Conference (ITARC ), 7 8th November, 2012, London. UK. on COCA-COLA International Business Strateg y for Globalization 2 Porters atomic number 23 Force model of Competition http//www. managementstudyguide. com/porters-model-of-competetion. tm 3 Cola Wars in China Case Study synopsis Source Strategy Analysis and Practice 2005 McGraw Hill Education Europe 4 Cola Wars in China The Future is Here Case Study by Nancy Dai at Richard Ivy School of Business. 5 Cola Wars UTS 21715 Strategic Management shoot the breeze 3 University of Technology Sydney 6 Alon, I. , Littrell, R. F. , & Chan, A. K. (n. d. ). Branding in China Global product strategy Alternatives. http//www. aabri. com/OC09manuscripts/OC09002. pdf 7 Espitia E. , Manuel and Ramires A. , Marisa The impact of product diversification strategy on the corporate performance of large Spanish firms. Spanish sparing Review Volume 4 Number 2. P. 119-137 2002.