The Coca-Cola Company is a worldwide leading company in the production of soft drinks and beverages. The company operates in more than two hundred countries selling different brands of beverages. It has been serving its millions of customers since 1886 and has successfully managed different economic situations in different countries. It has an organization structure running from top management, subsidiary companies, bottlers, distributors, and retailers ( Tonkova, 2017) . The firm packages its drinks in various bottle sizes, including the regular bottle, disposable bottle, Coca-Cola can, 1.5 liters, and 2.25liter bottle. Considering their competition from different beverage manufacturing companies like Pepsi, Coca-Cola has been much careful with the pricing of its drinks. To ensure that it does not go so high that people shift to other beverage options in the market or so low that people start questioning its quality and credibility to the consumers.
Pricing Strategy Management
The company makes use of different policies in managing their pricing strategies. First, there is promotional pricing, including the issue of discounts or special prices for special events and occasions. Secondly, it has new product pricing policies; because the new products are somehow different and come with their different prices. The other one is geographical price policies depending on the areas and the proximity to distribution centers ( Tonkova, 2017). The Coca-Cola Company’s process to price their products includes: first, selection of a pricing objective for their specific product. Then, it determines the demand for that product in a particular chosen area or country. It enables the company to estimate what prices to use where and where not. The third step is estimating the costs of the product, including all the fixed and variable costs and the activity-based cost in the area. Besides, the company analyzes the presence of any competitors, their values, prices, and offers to help them determine their rates. Lastly, it selects a pricing method and then settle for a price.
Delegate your assignment to our experts and they will do the rest.
Incremental costs are the expenses that a company incurs when producing more or additional products. On the contrary, avoidable costs are expenses that a company can eliminate by reducing or not engaging in certain activities in the company. Among the best selling products of Coca-Cola Company include Coca-Cola classic, diet Coke, Coca-Cola zero, Minute Maid, and Fanta, among others. A contribution margin is the number of revenues minus all variable expenses, which is then divided by revenues to give a percentage contribution margin. A breakeven analysis is essential for businesses to determine the minimum output that they must achieve to make profits ( Bärsch et al., 2019) . I feel Coca-Cola should not invest in the breakeven analysis because it only analyses the supply side. It will be costly for them yet gives inadequate information about the product. The breakeven analysis does not consider what the sales are actually to be for the product at various prices. Besides, breakeven analysis has an assumption that fixed costs are constant. However, for a company like Coca-Cola, which is operating at a vast scale and keeps on increasing in the level of production, fixed costs are likely to rise and change from time to time, hence working with constant fixed costs will not work well for them. The breakeven analysis assumes that average variable costs are regular per unit of output ( Gersen & Hemphi, 2019) . While this is different for Coca-Cola as it produces different variations of sixes per unit output. The various bottles and cans are of different sizes hence cannot be constant in any way. It assumes that the quantity of goods produced is equal to the number of goods sold without considering the products that may still be in stores for a more extended, period hence affecting the results.
Pricing Decision
The overall marketing strategy of the Coca-Cola Company is the product, price, promotion, and place. Their pricing decisions affect the entire marketing strategy. Being a global company, Coca-Cola serves different people from different backgrounds with different preferences. Various products are preferred in different areas by different ethnic, hence when pricing, they have to consider the type of the product and its place. Some customers prefer some products to others; thus, they may be able to pay more for what they value more. Promotion of products in different places also vary, thus, Coca-Cola considers all the aspects when pricing their various products.
When implementing new pricing strategies or when it wants to update their pricing strategy, Coca-Cola faces challenges. First, there is customer resistance because some customers may perceive it to be unfair to them. Second, there is marketing segmentation and determining segment-specific prices: sometimes, it is challenging to separate prices in relation to different markets ( Seele et al., 2019) . The other issue is communicating the new prices to customers without conflicting with them also poses a challenge.
Coca-Cola products are declining in consumption due to the number of sugars and the carbonates in the drinks. Their main competitor, the Pepsi Company, is coming up with innovative ways to consumer health trends and giving customers a better option from Coca-Cola ( Gupta et al., 2020). Coca-Cola should ensure it competes aggressively in the non-carbonate beverages market for their energy drink, bottled water, and other non-carbonated drinks. The company should make use of parity to keep a particular small difference in the prices with their main competitors. The Coca-Cola Company needs to ensure accurate measurement of consumers’ price sensitivity because not all of the customers understand business. Some will feel the company wants to exploit them, and others may even opt for other options to avoid spending extra money. Potential ethical implications on pricing may occur when a company decides to price its products quite high than its production costs. It will lead to making huge profits at the expense of their customers.
References
Bärsch, S. E., Heckemeyer, J. H., & Olbert, M. (2019). Transfer pricing and the decision-making authority of the tax function in multinational companies. SSRN 3271267 .
Gersen, J., & Hemphi, C. S. (2019). 33 Coca-Cola bottle. In Claudy, K., & Dan, H. (Eds.), A history of intellectual property in 50 objects (pp. 273).
Gupta, V., Ivanov, D., & Choi, T. (2020). Competitive pricing of substitute products under supply disruption. Omega , 102279. https://doi.org/10.1016/j.omega.2020.102279
Seele, P., Dierksmeier, C., Hofstetter, R., & Schultz, M. D. (2019). Mapping the ethicality of algorithmic pricing: A review of dynamic and personalized pricing. Journal of Business Ethics , 1-23. https://doi.org/ 10.1007/s10551-019-04371-w
Tonkova, E. (2017). Applied aspects of automated pricing in b2c marketing. International Conference on Marketing and Business Development Journal , 1 (1), 68-73. https://pdfs.semanticscholar.org/10dd/34f210135579731dec6887314508d20cec05.pdf?_ga=2.28660219.677764995.1590914640-1078898262.1590914640
