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 Wahaha Future Cola Case Study Name: Institution: Wahaha Future Cola Case Study Problem The uncertainty of the company on how to deal with multinational competitors and their responses to Wahaha Future Cola’s strategies to increase the market share amidst of intensifying competition for the growing soft drinks market in China. Diagnosis In 2000,the World soft drink consumption reached 320.2 B liters including carbonated drinks(53 percent),packaged water ( 24%) and juices, ready to drink tea, and sports and energy drinks(23% combined). Local and multinational soft drink companies offer intense competition to Wahaha’s Future Cola, together with the shift in marketing strategies that require innovativeness to gain a competitive advantage. Proof of Diagnosis Evidence Action plan ideas Cause: Intense competition in the soft drink industry The World’s leading soft drink producers, Coca-Cola, PepsiCo, Nestle and Danone present in China dominated in carbonated drinks or tea and water production. Before the entrance of the Multinational companies Coca-Cola and Pepsi in 1980s, local manufacturers produced cola but were forced to quit or merge with the large companies later when the two dominated the carbonated drink market. Local manufacturers ventured into the growing market in 1998 tapping to weaknesses of foreign companies in local markets. Launch of new products in the food and beverage industry to increase revenues including bottled water, milk and tea. The wider product range also increased sales in cities, big stores and supermarkets. Acquisition of loss making and poorly managed companies to allow the company to produce locally in many provinces in its geographical expansion increasing the market share and the brand awareness. Joint ventures with Giant Food companies like Denone to enable acquisition high production technology to scale its operations. Cause: Shift in the marketing strategies Initially marketing aimed at building the brand name hence intense expenses on advertising and celebrity endorsements but use of similar strategy by multiple brands prompted distribution as the major success factor. Wahaha targeted the large rural population since they understood the population and were not targeted by multinational companies. Extensive research on products and marketing. Use of CCTV and other local TV channels to promote to both urban and rural population. Extensive advertisement using outdoor and point-of-sale adverts, wall paintings, roads and fairs banners, travelling troupes in countryside, and sponsoring of key festivities and events. Use of extensive nationwide distribution network to reach the rural population that involved partnerships with local distributors and promotional events aimed at both distributors and consumers. The distributors pay an annual advance deposit, from which they would get an interest and offered discounts for early payments. Cause: Differences in the preferences by the target market. The soft drink target market is the population segment aged 11-40, but have differing preferences. The younger choose brands the brands based on brand, lifestyle and fashion, the older health and nutrition. Children and women prefer sweet taste, the men-crisp taste and old light taste. Price and education levels influenced purchases. For quality product development, the company collaborated with Research &Development institutes and major flavor developers. The worldwide taste tests and beverage expert advice was conducted before developing the sweeter and stronger taste for Chinese consumers. To cater for lower income and price-sensitive rural populations, the Wahaha’s retail prices for soft drinks were lower compared competitors. Use of celebrity and event endorsements of products. Goals 1. To gain a significant market share. 2. To increase the brand awareness. 3. To gain a competitive advantage. 4. To build trust and rapport with distributors. Pros and Cons Pros Cons By gaining a big market share, means increased growth, revenues and profitability of the company. Venturing into market means encountering stiff competition from multinational and local companies and resorting to lower prices may render the company unprofitable if the alternative sources of revenue fail. Increased awareness promotes company’s reputation and consumption of its soft drinks. Increased expenses on advertising and promotional features, which may decrease profitability if not successful. Good rapport with distributors ensures that the Company products reach remote places of the vast Chinese Countryside faster. Accounts receivable and bad debt from distributors jeopardize the growth of the company and not all willing distributors are unable to pay the required advanced deposit for security. Major Risks and Responses Risk Response Changes in the soft drink industry with emergence of new drink categories pose a challenge and risk to the players in the industry. Adjusting to the changes accordingly, by use of extensive market research to gain consumer insights and developing of a quality product that is affordable and satisfies consumer tastes. Encroachment of the rural population by the giant competitors previously interested in urban populations posing a greater risk to the domination of Wahaha Future Cola in such areas. Increasing the sales representatives and distributors both in rural and urban areas to acquire consumer information while promoting the brand in previously ignored areas.