Coca Cola

COCA COLA вЂ" A case analysis

1. In the 1980s, under CEO Roberto Goizueta, Coca-Cola was a global brand with a growing presence in global-emerging markets like Europe, Russia, and South East Asia. It beat back its main rival Pepsi to be a leader in the carbonated beverage market with a 70% market share. During the 1990s however, under new CEO M. Douglas Ivester, the company’s market share started declining due to political (regulatory), economic, social (consumer), and technological (operations) challenges in the marketplace.

While Coca-Cola was trying to consolidate its position in it’s core cola market, there was an increasing shift in consumer tastes in favor of non-carbonated beverages such as juice, tea, and bottled water. Local brands in local markets moved in to fill the gap in Coca-Cola’s product lineup, and to cater to the growing local tastes and nationalistic preferences of consumers.

Coca-Cola’s global bottling & distribution system, consisting of ten anchor bottlers, was one of its greatest strengths. These independent bottlers like CCE, in which Coca-Cola held a significant minority stake, enjoyed a good run till the currency crises in Russia, Asia and Latin America in 1998 put a strain on the bottlers’ profit margins and on Coca-Cola’s profits in turn.

European regulatory authorities scuttled Coca-Cola’s growth and acquisition plans by invoking anti-monopolistic regulations against the company. The nationalistic and protectionist governments took a political stance against Coca-Cola, which was perceived to be a symbol of domineering, American businesses. Health and hygiene issues related to Coca-Cola’s products in Belgium & France further dented the company’s prospects in Europe. Domestic (US) and global rivals like RC Cola and 7Up bottlers, and Pepsi, became legally combative in protecting their territories and fair-market rights. Coca-Cola also faced a great deal of negative publicity from a race discrimination suit filed by African-American employees.

Coca-Cola’s response: In pursuing a goal of retaining global preeminence and a 15-20% earnings growth, Coca-Cola took on too much, simultaneously, in expanding its markets. Ivestor employed stopgap measures to correct Coca-Cola’s image. He personally apologized for the missteps in Europe & lobbied with the French & Belgian governments. He attempted to streamline the organizational structure by realigning his direct reports on a regional basis. However, these changes were not enough, and it was only under Daft that Coca-Cola effectively tackled environment and performance related issues in meeting its goals.

Internal effectiveness: Daft decentralized operational & marketing functions to give local managers more authority over product portfolio development.

Emotional health measure: Daft was an amiable personality, and in an effort to settle Coca-Cola’s racial discrimination suit he rehired Carl Ware to head the company’s Africa unit.

Systems resource effectiveness: Daft formed strategic alliances with other companies like the Creative Artists Agency, Ifuse.com to gauge customer & market preferences.

Stakeholders’ satisfaction: Daft attempted to repair relations with European regulators by being more culturally sensitive.

2. Coca-Cola’s strategy, under Ivestor, can be broadly analyzed using Hambrick & Fredrickson’s model, and not surprisingly, we find that not all elements of the strategic model were given equal consideration.

Arenas: Coca-Cola invested heavily in emerging markets to retain its growth rate of 15-20%. Its central focus was its cola business.

Vehicles: Coca-Cola’s global bottling & distribution system, consisting of ten anchor bottlers, was one of its primary profit drivers. Coca-Cola attempted to grow in new markets through acquisition and tried strong-arm tactics in existing markets to deny its competitors.

Differentiators: Coca-Cola’s ubiquitous brand image & marketing clout helped it to beat back its main rival, Pepsi.

Staging: Coca-Cola took on too much, simultaneously, in expanding to new markets, while ignoring its internal affairs, and signals from its market environment.

Economic logic: Coca-Cola relied entirely on economies of scale and it’s presence in global markets to drive profits.

Coca-Cola followed a highly centralized organizational structure. Decisions on entry into new markets and on new product development were centralized, primarily taking place in Atlanta. Ivestor himself was personally involved in all decision making. All strategic marketing and advertising campaigns were planned in the Atlanta headquarters. It’s network of bottlers handled soft drink production distribution. Through this structure, Coca-Cola was able to reap the benefits associated with the efficiencies of scale economies. However, this structure did not allow Coca-Cola to assess & respond quickly to evolving local markets and preferences.

3. Coca-Cola enjoyed an initial pre-eminence in the global marketplace. Towards the late 1990’s, consumer tastes had started to shift away from the carbonated beverages that had been the backbone of its business. Drinks such as Gatorade and Powerade and bottled water were gaining market share. Local brands in the foreign markets were capitalizing on the public relations problems that Coca-Cola was facing. The company was losing money quickly. Changes were needed to keep the company solvent.

Under CEO Ivester, the company was very centralized, with all decisions coming from the headquarters in Atlanta. Opportunities that were apparent to the local markets could not be acted upon without approval from a very slow moving corporate entity. Alternative categories of beverages were not embraced. The globalization strategy failed to reap the full benefits of the local market.

When Douglas Daft took over as CEO, the strategy of the company changed from a strict globalization strategy to a multi-domestic strategy. The focus went from “Always Coca-Cola” to “think local, act local.” Individual regional business units were given more authority to make decisions, market their products, and drive their local businesses. There was a clear

...