Introduction
The research paper studies how Coca-Cola’s change of formula affected the corporation’s profit. The study also aims at finding out the major effects of the company and major controls that the business should have put in place. The economic factors relate to the type of market which is oligopoly and how it has been able to cope with the increasing competition. The data test will be to compare the financial performance of the company for the year. The findings will be used to give a recommendation on the best strategy that the company should have used in coming up with a new soft drink.
Coca-Cola Company needed to do a rebranding of their drinks and decided to take a market risk in the consumer good. The company in the year 1985 announced that they wanted to change the formula on the world’s most popular drink. The new change of the drink as per the marketing specifications was to be the best product the consumers have ever seen in the market. The company’s aim was to increase their target market since consumers would be attracted to the new changes made on the soft drink. The “new coke” as introduced in the market was meant to be an introduction of a new taste to the consumers ( Robertson, 2017) . When the product was launched, most consumers complained that they had left out the original taste. The customers did not feel the bond anymore with the new Coca-Cola as compared to the initial drink.
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The initial stage of marketing was successful since most of the buyers wanted to have a taste of the new drink in the market. After the taste, customers complained that they were not pleased with the new changes made and that the future generation will never get the bond one has when taking the drink. The whole transition process affected the company’s level of oligopoly, and other competing organization began taking over the market slowly. Coca-Cola Company realized that they had taken the biggest investment risk and decided to return the old drink ( Robertson, 2017) . The business had to rebrand their soft drink and market the old product again to inform the public of the changes. The transition process affected the business economically since they did not make any profits and incurred more expenses during market adverts.
Conceptual Framework
The soft drink companies are usually affected by different economic factors, and the three major indicators are the growth rate, size of the market, and level of profitability. The market size continues to change depending on the expectations of consumers. As per the recent statistics, provided by Datamonitor (2005) the market share of non-alcoholic drinks is at 46.8%. The industry may be facing a challenge in the current economic times since the number of producers has increased in the same market size. The increased producers in the market will affect the competition rate which will also affect the profit level of the companies. The demand for soft drinks is also increasing through the market faces challenges of demand when there are weather changes.
From the Coca-Cola financial report, the company reported low-profit level during winter as compared to the summer season. The changes in the environmental factors also contribute greatly to the sales and marketing level of the soft drink companies. The company is also expected to rebrand their products with the change in lifestyles in order to attract more consumers. The Coca-Cola branding mostly attracts the youth especially the energy drinks. Thus, the soft drinks companies are expected to keep up with the competition level and the market trends in order to meet their profit targets. Companies must thus consider the economic and financial factors that might affect the business before introducing change.
Research and analysis
The research conducted in relation to the new Coke in the market provided the different results that affected the economy of the company. The data samples were collected from the feedback of different consumers who tasted the new soft drink. The sampling method done will be based on the response made by customers who compared both the old and the new Coca-Cola. The importance of sampling is to come up with the different feedbacks provided. After the sampling, a correlation will be done to compare the production of the drinks and the sales in the market. The study relation will determine the level of sales in relation to the production and whether the profit is high or the company made a deficit.
From the report on the financial impact after the new coke was introduced, the company produced a large quantity of the drinks and distributed into the market to attract new sales. The organization also incurred very high marketing and sales cost since they had to advertise the new product to inform the customers. The business also incurred promotion cost at the launch of the drink to ensure that the branding was properly done. After the launch of the product, the sales immediately went high since the consumers wanted to taste the new product in the market. After most consumers had tasted the product, the sales level reduced, and they began complaining that the product is not satisfying their tastes. The low satisfaction level reduced the sales and demand level of the soft drink reduced and being an oligopoly market, the demand for soft drinks from competitors increased.
The correlation tests provided that the company eventually reported low profits since the expenses were more than the sales. The data analysis will be to compare financial report from the year 1985 and 1986. The company reported an income of $722.3 million which is less than the year 1986 of $934.3 million. The low income reported in the financial year proves that the revenue collection was less. The company also incurred a high operating expense for the year 1985.
Analysis
The findings from the income report show that the low level of sales in the company is related to the income generated in a financial year. In the correlation analysis, the change in one variable affects all other variables that are related. When the increase in one variable affects a decrease in another variable, the correlation is known as direct. Alternatively, when a change in one variable increase results in the same increase, there is an indirect correlation. Coca-Cola level of sales reduced since they did not provide quality drinks to the customers. The decision to introduce a new coke drink is directly correlated to the sales and revenue collection from the firm. If the company had made a favorable tasty drink, the sales for the year would be high which will significantly increase the revenue amount.
The company at that duration made fewer sales than their previous years. Also, the customers demand level reduced, and this resulted in demanding of other soft drinks that are produced by competing firms to increase . Pepsi Company which was the biggest competitor of coca cola attracted more customers. The soft drinks produced by Pepsi began to sell at a high rate, and this increased their target market. With the opportunity in the oligopoly market, Pepsi ensured that they could retain some of the customers who were loyal to Coca-Cola Company.
Conclusion
Form the data test and correlation analysis ; the oligopoly market is very competitive since the decrease in demand for one product increases the demand for another company’s product. From my findings, the company makes branding of new products so that they can make better sales and attract new customers. The process of branding was not successful and thus affected the image and performance of the business. A recommendation to Coca-Cola Company is that they should have created a specific marketing group which could have managed the transition process. Marketing strategies should also be implemented in the company which will act as a guide. The company should have created different tastes of the drink which will be easier to choose the best drink to sell. After the different manufacturers , it was necessary to test and give samples to different people. The samples will help to bring in feedback on the taste of the drink whether it will satisfy the taste of the customers. Different opinions given on the taste of the new drink will be later combined, and the best ideas will be put in place. Thus, it is advisable for the company to work as a team and contribute different ideas before making the final decision.
Financial plans should also be put in place to ensure that the company does not make losses during the rebranding process. Marketing department should work with the finance department where they provide their financial expenditure and costs during marketing. The company should also make financial projections of the revenue expected which will help them come up with a projected income statement. Coca-Cola Company should have retained the previous drink even after the introduction of the new coke to the give clients a variety of drinks to choose. By the sale of different flavors of the soft drink, the will be sure of retaining their customers as the clients will not make sales in the competing company.
References
Coca-cola Company Information Updated on: (2009). Behind the Coca-Cola brand, the Coca-Cola heritage timeline. Available from: http://heritage.coca-cola.com/
Datamonitor. (2005, May). Global Soft Drinks: Industry Profile. New York. Reference Code: 0199-0802.
Robertson, A. (2017). Coca-Cola's profits slide as consumers' tastes change. ABC. Retrieved from http://www.abc.net.au/news/2017-06-02/coca-cola-is-in-decline-as-consumer-tastes- change/8583028
