International Strategy Case: Coca-Cola
International Strategy Case: Coca-Cola
In the business field, strategy enables the management to know areas where the company can thrive well and areas that will make it vulnerable and weak. In simple terms, business strategy refers to plans, decisions and choices that are used by business organizations to realize higher growth and profitability (Kourdi, 2009). Policy ought to be clear and well communicated to all stakeholders obliged in its implementation role. In this context, business strategies call for a better understanding to ensure that not all decisions and plans are labeled strategic. A well formulated and implemented business strategy will clearly show where the firm is making more profit and why. As a result, the management can understand where resources in the form of people, finance and efforts should be concentrated. This paper critically examines the case study of Coca-cola Company regarding business strategies pursued from the 1980s to 2000s to answer the specific questions raised by drawing a conclusion.
Reasons why Coca-Cola switched from localization to global standardization strategy under CEO Roberto Goizueta and the essential benefits
In the 1980s, the Coca-Cola brand development strategy was primarily aiming at enhancing the product availability, affordability, and acceptability (Madalina, 2010). However, as revealed in the case study, Coca-Cola market penetration was higher in the United Sates compared to the international market. Therefore, the main idea was to bring more customers from every continent in the world that will accept and makes the brand their unique product for any occasion. However, the CEO knew that pursuing a global strategy will only be affordable if the company adopted a uniform approach. The success of the standardization approach became evident after Diet Coke emerged as the most successful new soft drink since the introduction of Coca-Cola itself.
One of the biggest advantages of standardization emphasized global strategy is its efficiency. This is achieved as the company can leverage economies of scale (Kourdi, 2009). For instance, Coca-Cola was able to use the same advertising message worldwide such as “Coke Is It”, “Can’t Beat the Feeling” among others that enabled the company penetrate the international market with ease. The capacity to sell the same product worldwide also allows the company to purchase raw materials in bulk. In this context, economies of scale enable the company to save costs related to labor, marketing, and packaging. The global strategy also plays the crucial role with regards to maintaining the product life cycle. In this context, the company can release its products. For instance, Coca-Cola was able to introduce its older products such as normal Coke in newer markets that saved the launch of Diet Coke in the United States market. The blueprint is to get lid of the old stock in the older markets by introducing it in, the newer markets. As a result, Coca-Cola was able to match competition in the new markets eventually easing penetration in the international markets.
Shortcomings of Goizueta global strategy which persuaded Daft to pursue Localization emphasized strategy that also failed to materialize.
As the case study reveals, Goizueta global strategy success did not last for long, which saw Coca-Cola fail to meet its financial targets in the 1990s. This forced Goizueta successor, Douglas Ivester to resign earlier. The failures of standardized emphasized global strategy encouraged investors successor, Douglas Daft, to pursue localization emphasized policy as an alternative. One of the shortcomings of a standardized approach is the macroeconomic risk. Markets have varying tastes and sensitivity to pricing may also differ (Kourdi, 2009). As a result, the company’s product will appear to be more popular in one country compared to another. For instance, canned coffee drinks were more popular in the Japanese market compared to other markets. Secondly, global strategy is also prone to operational risks. Operational risks related to employee laws, common accidents, employees go-slows among others happening in the country where the company manufacturing plants are located will hurt operations in the entire market.
As standardization ultimately failed, Daft opted to pursue a localization strategy as an alternative. Daft was trying to achieve preference, price value and pervasive penetration of the Coca-Cola products in the global markets. Realizing customer’s tastes and preference in local markets profoundly influenced customers purchasing rate. Daft wanted to tailor marketing to meet the local needs. However, his localization emphasized strategy did not yield the expected results as revealed in the case study. One of the shortcomings of localization strategy is that too much of it tends to corrupt the brand eventually leading to ballooning costs (Madalina, 2010). As a global brand, Coca-Cola required a market leadership where brand originality should be traceable which cannot be guaranteed by pursuing a pure localization strategy.
Understanding the global strategy pursued by Coca-Cola under the leadership of CEO Neville Isdell.
As it is revealed in the case study, the global strategy pursued by the Coca-Cola under the leadership of Neville Isdell represented a midpoint between standardization and localization strategy. The two strategies were pursued by the previous CEOs, but did not yield long lasting success. The global strategy pursued by Isdell administration had distinct features that made it appears more efficient compared to the previous approach. For instance, the marketing decisions and product development operations were coordinated at the Coca-Cola headquarters in Atlanta. However, the global strategy incorporated the needs and tastes of local markets. This is observable as key strategy features such as pricing, product offering and advertising messages captured the preferences of the local customers (Kourdi, 2009).
The fundamental reason Isadell opted to strike a balance between localization and standardization approach is to match the needs of the local customers while remaining profitable. In this context, Coca-Cola was trying to increase its penetration in the international markets without diluting its brand strength. Moreover, the company was also attempting to leverage good ideas across the globe to ensure that it realizes maximum profit from them. A notable difference between Isdell global strategy and policies pursued by his predecessors is that his strategy did not only bring a balance, but also it involved strategic alliances with the local soft drinks companies. For instance, Coca-Cola entered into a merger with Illycaffe, an Italian giant coffee maker company in 2007 (Kaushik, 2008). One of the benefits of the integration strategy pursued by Isdell administrations was that it allowed more efficient economies of scale. Moreover, the originality of the Coca-Cola brand was maintained, ensuring market dominance. However, local customization has a longer payback duration as striking a balance between localization and standardization will always be time-consuming.
Convergence of tastes and preferences in the modern global economy as its observed in the Coca-Cola case study.
The evolution of Coca-Cola business strategy, as it is revealed in the case study, clearly shows the significance of matching consumers’ tastes and preferences. The case study proves that tastes and preferences are not rigid, thus any company should strive to be ahead of consumers’ thoughts and desires. The two concepts highly determine the marketing functions of any business as they shape the customers’ needs and wants. For instance, in the Japanese market, Coca-Cola success was highly fueled by Georgia coffee drink compared to other brands. In this context, tastes and preferences shaped the needs and wanted of the consumers in the Japanese market that Coca-Cola had to adhere to to remain fruitful and competitive in the long run.
However, as demonstrated in the case study, customizing products to meet the local customers’ tastes and preferences can be costly and derail the company’s roadmap to success. While local managers have a vast knowledge about the domestic market, they make lack sufficient skills to make consistently smart decisions about the firm operations (Kaushik, 2008). As a result, it is important to create a balance between standardization and localization strategy to create more efficient economies of scales. Finally, the case study shows that tastes and preferences have an upper hand in establishing and maintaining customers’ satisfaction and loyalty. For instance, Neville Isdell approach that had a deeper focus on local customers’ tastes became more successful for the Coca-Cola Company compared to strategies pursued by his predecessors.
The above discussion clearly shows that strategic management should be a continuous process. The managers should review the formulated strategies to ensure that they match the consumers’ needs and wants over time. Moreover, the discussion shows that strategies highly determine the areas that will make the business more competitive or vulnerable to the competitors. In this context, business strategies call for a better understanding by the senior management to ensure that they understand the tastes and preferences of the target customers. While pursuing a global strategy, it is important for the management to consider striking a balance between localization and standardization in order to achieve a lasting compromise.
Kaushik, M. (2008). Coca-Cola’s branding strategies in India. ICFAI Journal of Brand Management, 5(1), 34-48.
Kourdi, J. (2009). Business strategy: A guide to taking your business forward. New York: John Wiley & Sons.
Madalina, M. (2010). The “positioning” concept and the fight between two well known brands Coca-Cola and Pepsi. Journal of Media Research, 13(2), 47-62.
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