International Business Strategy

Coca-Cola

Question 1

As a consultant who works for Coca Cola, you are invited by the CEO to identify the
historical evolution of the internationalization business strategy (strategies) adopted by
the company Coca Cola since its creation (based on your theoretical knowledge and on
information presented in this case).

Question 2

What are the most important cultural factors on which Coca Cola has founded its
strategy?

The company

Coca-Cola, the iconic American soda maker, has long been among the most international of
enterprises. The company made its first move outside the United States in 1902, when it
entered Cuba. Until the 1980s, Coca-Cola’s strategy was one of considerable localization.
Coke was marketed in 76 countries. Local operations were granted a high degree of
independence to manage their own operations. In World War II, Coca-Cola struck a deal to
supply the U.S. military with Coca-Cola wherever they are in the world. During this era, the
company built 63 bottling plants around the world. Its global push continued after the war,
fueled in part by the belief that the U.S. market would eventually reach maturity and by the
perception that huge growth opportunities lay overseas. By 2012, more than 59,000 of the
company’s 71,000 employees were located in 200 countries outside of the US, and over 70%
of Coca-Cola’s case volume was in international markets.

Between 1980s and 1990s, under the leadership of Roberto Goizueta, a talented Cuban
immigrant who became the CEO in 1981, the company renewed emphasis on the its’ flagship
brands, which were extended with the introduction of Diet Coke, Cherry Coke, and the like.
His prime belief was that the main difference between the United States and international
markets was the lower level of penetration in the latter, where consumption per capita of colas
was only 10-15% of the U.S. figure. Goizueta pushed Coca-Cola to become a global
company, centralizing a great deal of management and marketing activities at the corporate
headquarters in Atlanta, focusing on core brands, and taking equity stakes in foreign bottlers
so that the company could exert more strategic control over them. This strategy was built
around standardization and the realization of economies of scale by, for example, using the
same advertising message worldwide.

Goizueta’s global strategy was adopted by his successor, Douglas Ivester, but by the late
1990s the drive toward Coca-Cola’s strategy was running out of steam, as smaller more
nimble local competitors marketing local beverages began to halt the Coke growth engine.
With Coca-Cola failing to hit its financial targets for the first time in a generation, Ivester
resigned in 2000 and was replaced by Douglas Daft.

Daft instituted a 180-degree shift in strategy. Daft’s belief was that Coca-Cola needed to put
more power back in the hands of local country managers. He thought that strategy, product
development, and marketing should be tailored to local needs. He laid off 6,000 employees,
many of them in Atlanta, and granted country managers much greater autonomy. In a striking
move for a marketing company, he announced the company would stop making global
advertisements, and he placed advertising budgets and control over creative content back in
the hands of country managers. Ivester’s move was in part influenced by the experience of
Coca-Cola in Japan, the company’s second most profitable market, where the best-selling
Coca-Cola product is not a carbonated beverage, but a canned cold coffee drink, Georgia, that
is sold in vending machines. The Japanese experience seemed to signal that Coca-Cola’s
products should be customized to local tastes and preferences, and that Coca-Cola would do
well to decentralize more decision-making authority to local managers. However, the shift
toward localization didn’t produce the growth that had been expected, and by 2002 the
pendulum was swinging back toward more central coordination, with Atlanta exercising
oversight over marketing and product development in different nations. But this time it was
not the one-size-fits-all strategy of the Goizueta era.

Under the leadership of Neville Isdell, who became CEO in March 2004 and retired in July
2008, Coca-Cola reviewed and guided local marketing and product development but adopted
the belief that strategy, including pricing, product offerings, and marketing message, should
be varied from market to market to match local conditions. Isdell’s position represented a
midpoint between the strategy of Goizueta and that of Daft. Moreover, Isdell stressed the
importance of leveraging good ideas across nations. An example is Georgia coffee. Having
seen the success of this beverage in Japan, in October 2007, Coca-Cola entered into a strategic
alliance with Illycaffe, one of Italy’s premier coffee makers, to build a global franchise for
canned or bottled cold coffee beverages. Similarly, in 2003 the Coca-Cola subsidiary
in China developed a low-cost, non-carbonated orange-based drink that rapidly became one of
the best-selling drinks in that nation. Seeing the potential of the drink, Coca-Cola rolled it out
in other Asian countries. It has been a huge hit in Thailand, where it was launched in 2005,
and also gained traction in India, where it was launched in 2007.

Coca-Cola at a Glance (2020 figures)

Innovating the Way We Do Business

Coca-Cola is evolving its business strategy to become a total beverage company by giving
people more of the drinks they want –including low and no-sugar options across a wide array
of categories –in more packages sold in more locations.
Building a portfolio of “consumer-centric brands” requires shifting focus from what the
company wants to sell to what consumers want to buy, explains President and Chief
Operating Officer James Quincey, who shared this strategy as part of the company’s vision
for future growth today at the Consumer Analyst Group of New York (CAGNY) conference
in Boca Raton, Fla. "We need to start by asking, ‘Where are they going?” he said, stressing
the need to stay a step ahead of trends and evolving tastes. “Consumers are looking for
products that are more natural. At times with less sugar. Sometimes with more benefits.”

Responding to Consumer Demands

Quincey, who has been tapped to become Coke’s CEO in May 2017, said the company’s
multifaceted approach to meet changing tastes and needs includes reducing sugar and calories
across many brands; offering new drinks that provide health benefits like hydration and
nutrition; expanding the availability of smaller, more convenient packages to help people
control sugar more easily; and providing clear, easy-to-find calorie information to help people
make informed decisions without the guesswork.
Putting the consumer first, Quincey said, starts with rethinking some of the company’s
beverage recipes to reduce sugar, and investing to make the next generation of zero-calorie
sweeteners. The goal is to give people the low and no-sugar drinks they want without having
to give up the great tastes they know and love.

Supporting Lower Sugar

At the same time, The Coca-Cola Company supports the current recommendations of several
leading health authorities, including the World Health Organization (W.H.O.), that people
should limit their intake of added sugar to no more than 10 percent of their total daily
calorie/energy intake. “We’ve begun our journey toward that goal,” Quincey said, citing
efforts to make low-and no-sugar drinks more visible and easier to find, and bringing more
offerings like organic tea, coconut water, dairy, grab-and-go coffee, juices and purified waters
to more people in more places. In 2017, the company will reduce sugar in more than 500 of its
drinks around the globe –adding to the 30 percent of more than 3,900 beverages that already
fall into the low or no-sugar category.

Building Portfolio Awareness

The company is also investing more of its marketing dollars to build awareness of its low-and
no-sugar drinks. For example, the “One Brand” global marketing strategy launched in early-
2016 unites all four Trademark Coca-Cola brands – Coca-Cola, Coke Zero, Diet Coke/Coca-
Cola Light, and Coca-Cola Life – in the “Taste the Feeling” creative campaign, underscoring
the company’s commitment to offering a Coca-Cola for all tastes and lifestyles. 'We’re
listening carefully and working to ensure that consumers are firmly at the center of our
business so we can continue to grow responsibly. If we embrace where the consumer is going,
our brands will thrive, and our system will continue to grow.' "We’re listening carefully and
working to ensure that consumers are firmly at the center of our business so we can continue
to grow responsibly. If we embrace where the consumer is going, our brands will thrive, and
our system will continue to grow." - James Quincey
Another element of the strategy involves smaller, more convenient packaging. Today, about
40 percent of the company’s sparkling brands are available in these packages of 250 mL (8.5
oz.) or less. And mini cans and other smaller packs now account for 15 percent of the
company’s sparkling transactions in North America.

Continuing to Be Consumer-Focused
For years, the company has been implementing policies and actions in line with this strategy.
In September 2009, Coca-Cola became the first beverage company to commit to front-of-
package calorie labeling globally on nearly all packaging and continues to do so.
Additionally, the company is diligently following its longstanding policy not to target
advertising to children under age 12 anywhere in the world.
All these proof points, products, programs, and policies –and the company’s futureplans–are
grounded in consumer insights.
“We’re listening carefully and working to ensure that consumers are firmly at the center of
our business so we can continue to grow responsibly,” Quincey said. “If we embrace where
the consumer is going, our brands will thrive, and our system will continue to grow. This is
Our Way Forward.”

Reference: This case is based: Coca-Cola, the iconic American soda maker, has long | Chegg.com
New Focus on Choice, Convenience and Consumers - News & Articles (coca-colacompany.com)