When a company focuses on improving a product or service so as to create a new market, we speak of creative innovation. Over time, such improvements disrupt the already existing market. On the other hand, value innovation centers on improving a product or service. However, in this case, the market target is no different. The essence of improving the product or service is to make it suit the needs and demands of the already existing market. With disruptive innovation, the focus is on the target market (the customer). Here, the company offers to the customers what they want. With value innovation the focus is on the product or service. Disruptive innovation looks at new markets for a modified product, while value innovation looks at current markets for modified products.
One of the top fortune 1000 companies “Coca-Cola” is a global entity that has been in existence since 1892 operating in more than 200 countries. It is the world’s largest manufacturer and distributor of non-alcoholic beverages. Some of its brands include: Coke, Fanta, Sprite, Minute Maid, etc. With competition from brands such as Pepsi, Coca-Cola has to work on a competitive edge. As a result, it has taken to acquiring a mass market. Due to the diversity in the needs of the mass market, the company has put strategies in place to support disruptive innovations, which help the company acquire new markets. The company has had to consider the 7ps marketing mix (price, product, place, promotion, packaging, positioning and people). These help identify what a target market requires. In addition, the company devises strategies to maximize on profits.
Coca Colas disruptive innovation has been implemented through various strategies and opportunities. One of the strategies applied by Coca Cola is the price strategy. Coca Cola has introduced different prices for different packages and sizes of the same products. For example, the Coke drink of the same quantity has different prices depending on the packaging to suit the target market. A one-liter plastic bottled Coke costs more than a one-liter glass recyclable bottle, which targets different customers. In some countries, prices change depending on the seasons. During hot seasons, the prices are higher due to an increase in the demand whereas in the cold seasons, the prices are lower as the demand is low. Thus, the prices change depending on the demand.
Another strategy that has helped enforce disruptive innovation is the expanding of the target market. Instead of always introducing something new in the same market to gain a competitive edge, Coca Cola has explored new markets with their products. Coke as a brand is known in more than 200 countries across the globe. Exploring untapped markets provides a better chance of brand recognition as this helps to contain competitors. Once the new market targets are established, the product sales increase based on an expanding market.
The different forms of packaging for the same product have helped reach out to different market targets. The company also offers drinks in canned bottles, plastic bottles, and original glass bottles. To reach young children, who can easily break glass or injure themselves with the canned bottles, it is best to go with the plastic bottles despite the difference in the cost. The financially unstable would prefer the glass bottle, which is cheaper, as the bottle is eventually returned to the point of distribution.
The marketing strategy for Coca-Cola varies with the different target markets
For example, advertisements across different parts of the world for the same products are different. Advertisements in Africa are different from those in Asia due to the different cultures and beliefs. Business decisions are also based on improving the quality of life in places where the business wants to take hold.
As a disruptive innovation, Coca-Cola has to consider the different targets market. Looking at their promotion strategies, the Company has to package their products keeping in mind the market of their choice. For example, the Coke drink has different packaging in different countries in order to catch the eye of their customers. The first step towards good sales is attracting the customer. Therefore, Coca Cola has to consider the different preferences of its different customer groups. This includes the colors used in packaging the product, the design, and shape of the bottles.
There has never been a problem with distribution despite the large target market. As a result, consumers will never miss out on their favorite brand. In the event that customers do not access their brand, the possibility that they will switch to the competitors is relatively high. As a result, customer loyalty may never be achieved as customers would consider substitutes from time to time.
Coca-Cola being a worldwide company has a vast distribution network
This ensures that no matter how remote a region is, the products suitable for the target market are available. For example, Africa seems to have poor infrastructure as one moves away from the cities and towns. However, you will find the Coca-Cola product pretty much everywhere. The best part is that those products sell at the same price.
Coca-Cola Company also employs product differentiation. For example, the Fanta brand has: Fanta orange, Fanta pineapple, Fanta strawberry, and Fanta blackcurrant. All these were introduced to satisfy different customer tastes, but they still relate to the same brand. The Coke brand also offers ordinary coke and diet coke which has no sugar. The latter targets customers with diabetes. Coca-Cola has more than just sodas in their brands. It has water (Dasani), juices (Minute Maid) coffees, and tea. This is an attempt by Coca-Cola to ensure that they cover all non-alcoholic beverages that are acceptable across the world. The company is ready to satisfy the mass market with its diverse demands.
The opportunities for Coca-Cola as a company, which has helped it work well with disruptive innovation, rests on the fact that it is a market leader. Its well-known brand across the globe enables it to venture easily into new markets. Market leaders are well recognized and this fact brings a competitive edge for the company to explore new markets.
The Coca-Cola Company has partnered with Coca Cola FEMSA to venture into more new lines of beverages. The same also helps in the distribution of current products. The Coca Cola Company equally has a strong and wide brand, which gives it the opportunity to venture into new markets where they are already identified and recognized. The wide variety of the products fills the target market flexibly according to demand.
The Coca-Cola Company, being one of the largest profit making companies, has the capacity to advertise their products whenever the results fall below targets. Due to the availability of finances, the Coca-Cola Company has been able to buy out competition in some areas. Despite this process being very costly at the initial stage, the long-term effect is very beneficial and profitable. For example, buying “Fuze Beverage” in the year 2007 has proved beneficial.
Coca-Cola as a brand has taken root among customers
It has built up customer loyalty across the years, which in turn has ensured that profit margins are met. Customer loyalty acts as a motivational tool for the company to explore more markets. When a product is accepted by many from a region, the next thought would be to take the accepted product to another region as a means of entering a new market. The availability of the company’s products across the globe ensures that its customers do not divert their loyalty. Even when travelling from one country to another, consumers will always satisfy their needs and demands wherever they are and still identify with what they have always known.
With all the above opportunities, the Coca-Cola Company faces a major threat, whereby consumers are developing a health-conscious way of life following the need to obtain more healthy beverages. Thus, consumers are looking at improving their health. Despite this setback, Coca-Cola is trying to address the issue. Recently, the Company, under the brand ‘Coke’, has introduced “Coke Light”, which can be consumed by consumers with diabetes. It also introduced a green tea drink in 2006 to address this concern.
As a result of tapping into new markets, Coca-Cola has managed to increase its international volume up by 5% in the quarter and year to date in 2012 as compared to 2011. Net revenues increased by 6% in the year. Operating income also grew by 5%.
In recent years, the Coca-Cola Company has not experienced major failures in respect to the use of disruptive innovation. It seems impossible for a company with such a wide target market to miss out on targets. Coca-Cola as a company is therefore achieving its goals with the help of disruptive innovation. It has been able to identify untapped markets to explore and also has defeated its competitors in their own niche markets.