Final Topic:
Exporting U.S. products to developing countries is more challenging than exporting to more developed markets
Today’s competitive market caused firms' needs to produce more special products to keep their own position. My intended major is marketing; learning how to analyze market tendency is a very important part of my academic area. When I first came to America, I was totally shaken by American brands. Why are there the same products but they have different prices compared to products in China with America? There are some brands like Nike, Levis, and Coach which have very high prices; we need to buy them in exclusive shops in China. On the contrary, we can find these brands in American easily. Therefore, if we are going deeper to think about it, why are some of the products and brands sold by different prices? The paper will begin by analyzing Coca-Cola company‘s products to developing countries is more challenging than exporting to more developed markets. I agree with this idea. For developing countries, I use China as an example.
We are familiar with the soft drink brand “Coca-Cola” which is one of the leaders in the global soft drink industry. The Coca-Cola has nearly 30,000 employs around all over the word. Its world headquarters is located in the United States in Atlanta, Georgia. Globally. According to the research that “ Syrups and beverage concentrates for Coca-Cola and over 160 other soft drink brands, are manufactured and sold by The Coca-Cola Company. Subsidiaries operate in nearly 200 countries around the world. There are Approximately 70% of Coca-Cola’s volume comes from sales outside of the United States, which is account 51% sales carbonated beverage in the world market.” (Tyler. 2000) As we can see that outside country sell bring a huge part of profit to Coca-Cola Company.
Coca-Cola entered the European market at 1920 early, and dominated the European market. With the development of economy, Coca-Cola is approaching the limitation in the developed markets, and in North American markets scale had only been improved 300 million dollars since 1980 when the Coca-Cola’s market share was 2.6 billion dollars (sine business). So Coca-Cola shift focus on the developing market, such as north Asian, Latin American and Africa, but Compared to early European markets, they have to face more challenge. The culture difference is a big issue. The people in different cultures have different taste on beverage. When Coca-Cola enters a new market, they have to find the best flavor to satisfy the local people. They need to do a lot of investigation and research to hit the market with new product (Khan). For example, they produce tea beverage to Chinese people’s liking. The tea beverages are getting popular, Coca-Cola impresses Chinese people with the good taste of the tea beverage. This company kept double-digit growth during last eight years So if new product enters new market, especially developing market; they have a lot of problems to conquer to achieve success.( (Khan)
The competition from local brands is also huge topic for the foreign brands. Three parties mainly shared the market in China, which are domestic famous companies taking Huainan and Wahaha as leading brands, Taiwan enterprises, such as Unit-President Group and Dingxin Group, also multinational group, Coca-Cola and Pepsi. Now domestic market is occupied by some famous brands, i.e, Wahaha, Huiyuan, Nongfu Juices, President Orange juice, Minute Maid orange juice and Qoo(Coca-Cola Enterprises Inc., 2010). These brands have been in China for almost 15 years, they have indigenous advantage, such as, low costs for production elements, they know the original culture and so they can make more impressive advertisements, but foreign brands have their own traits. Among consumers in developing countries, brands perceived as having a nonlocal country of origin, especially from the west, are attitudinally preferred to brands seen as local, for reasons not only perceived quality but also of social status. We found that this perceived brand nonlocalness effect was greater for consumers who have a greater admiration for lifestyles in economically developed countries, which is consistent with findings from the cultural anthropology literature, the effect was also found to be stronger for consumers who were high in susceptibility to normative influence and for product category familiarity, but not by consumer ethnocentrism (Rajeev Batra, 2000). Compete with local brands in developing countries; foreign brands have some strength in developing markets.
For the domestic beverage market, Chinese government prevented the foreign brands forestall the domestic beverage market, so they made a series of protection policy for the native beverage brands. Coca-Cola has a limited development in China. in the early 1987, the official document issued for the foreign investment in beverage industry: “stop relying on export the original fluid carbonated beverage and producing foreign brands carbonated beverage as investment, joint venture and compensation trade. A domestic beverage company imports advanced technology from abroad for development shall be subject to examination and approval by the State Economic and Trade Commission. “The Chinese government attitude to the foreign investment was restricted. Although, the foreign investment is not completely banned, its proneness to limitation remains serous. That had made a great impact on Coca-Cola entered the Chinese market. In the 1993-1994, the State Economic and Trade Commission signed a contract with Coca-Cola and PepsiCo for developing Chinese beverage industry. When Coca-cola and PepsiCo built new joint ventures in China, they have to produce at least 30% native brands beverage. So the foreign investment of carbonated beverage was controlled by the Chinese government. In order to promote the new situation of accession to the WTO of China, the State Economic and Trade Commission updated the clause about producing the foreign brands beverage: cancel the registration system of exporting the carbonated beverage of condensation; the State Economic and Trade Commission is not examination and approval procedures for foreign-funded projects, the foreign beverage company can scheme and worked out the development plan without Chinese government control. For protecting the China’s interests, the State Economic and Trade Commission were built the price limitation in the export the carbonated beverage of condensation. These policies bring about enormous pound and influence on Coca-Cola.
In conclusion, this paper has addressed why exporting U.S. products to developing countries is more challenging than to developed countries. Coca-Cola for example; different countries have different cultures. According to different people, soft drink companies produce different tastes to satisfy the customer's needs and create customer's values. In addition, compared with early European markets, there have been more kinds of beverages that compete with local brands. Coca-Cola shares the market with other foreign brands. However, foreign brands have some strength in developing markets. It is still a big challenge for foreign brands to enter developing markets. At last, protecting policies in developing countries and government interventions are the key issues obstructing development of foreign brands enter the developing markets.
References:
Coca-Cola Enterprises Inc. Company profile. Retrieved from http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=3&hid=12&sid=abb90a66-491f-4233-8a58-e64cae37d795%40sessionmgr11
Khan, Sami Ullah . "Marketing strategies of Coca Cola." Retrieved from http://www.scribd.com/doc/10552013/Coca-Cola-Marketing-Strategies
Rajeev Batra, Venkatram Ramaswamy, Dana L. Alden, Jan-Benedict E. M. Steenkamp, and S. Ramachander. (2000). Journal of consumer psychology publication info [Vol. 9, No. 2, Cultural Psychology (2000), pp. 83-95]. (Effects of Brand Local and Nonlocal Origin on Consumer Attitudes in Developing Countries), Retrieved from http://www.jstor.org/stable/1480401
Sina Business, "Coca-Cola in Africa." Business Weekly Nov 2010. Retrieved from http://www.chinaacc.com/new/184_186_201012/02de589619488.shtml.
Taylor, Maureen. (2000). Public relations review. Unpublished manuscript. Department of Communication, Rutgers University, New Brunswick, NJ.