Coca Cola

Coca Cola Case Study

Virginia Commonwealth University

Advanced Cost Accounting

Professor Epps

Presented By:

Coca Cola is an international player in the carbonated beverage market and is continually growing. One important factor that it considers when penetrating a market is price discrimination. Price discrimination centers on existing economic conditions, location, and price sensitivity of consumers. We will examine Coca Cola’s pricing strategies in the US, India, and China.

Consumer segmentation by income level is a reality of the market in India, Coca Cola and its competition tried to combat this with price cutting. The price war between Coca Cola and Pepsi lead to Coca Cola reducing its price nationwide 25%. This lowering price strategy was not successful because competition soon matched the prices. However, income segmentation goes hand-in-hand with housing and the consumer division by rural and urban areas. The populations in the urban areas are less priced sensitive. The untapped markets in the rural areas are also beneficial because of new revenues and potential growth. Rather than focusing on the urban market Coca Cola decides to take a risk by focusing on the rural areas. I agree with the decision to focus on the rural areas because it represents72.2% of the population. Although the rural areas do not have the purchasing powers of urban areas the quantity of potential consumers makes up for it.

The pricing strategy for Coca Cola China is opposite from its pricing strategy in India because it leaves the doors of rural areas open for domestic competition. The main reason is that in order to penetrate rural areas in China prices must be incredibly low. The difference in incomes between the populations living in urban China compared to those living in rural China is large. I disagree with this pricing strategy because as urbanization reaches the rural areas those consumers will have already built a relationship with the competition. Brand...