8.2. Strategy in Action. The Evolving Strategy of Coca-Cola 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. By 1929, Coke was marketed in 76 countries. In World War II, Coke struck a deal to supply the U.S. military with Coca-Cola wherever soldiers might be stationed. 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 awaited overseas. By 2012, Coca-Cola was operating in more than 200 countries, and over 80% of Coke's case volume was in international markets. Up until the early 1980s, Coke's strategy could best be characterized as one of considerable localization. Local operations were granted a high degree of independence to oversee operations as managers saw fit. This changed in the 1980s and 1990s, under the leadership of Roberto Goizueta, a talented Cuban immigrant who became the CEO of Coke in 1981. Goizueta placed renewed emphasis on Coke's flagship brands, which were extended with the introduction of Diet Coke, Cherry Coke, and similar flavors. His prime belief was that the main difference between the United States and international markets was the lower level of penetration overseas, where consumption per capita of colas was only 10 to 15% of the U.S. figure. Goizueta pushed Coke to become a global company, centralizing many 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 one- size-fits-all 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 a one-size-fits-all strategy was running out of steam, as smaller, more nimble local competitors that were marketing local beverages began to halt the Coke growth engine. When Coke began 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. His belief was that Coke 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. Moreover, in a striking move for a marketing company, he announced that the company would stop using global advertisements and 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 Coke in Japan, the company's second most profitable market, where the bestselling Coca-Cola product is not a carbonated beverage but a canned, cold coffee drink, Georgia Coffee, which is sold from vending machines. The Japanese experience seemed to signal that products should be customized to local tastes and preferences, and that Coke 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 trend was moving back toward more central coordination, with Atlanta exercising oversight over marketing and product development in different nations outside the United States. But this time, it was not the one-size-fits-all ethos of the Goizueta era. Under the leadership of Neville Isdell, who became CEO in March 2004, senior managers at corporate headquarters now reviewed and helped to guide local marketing and product development. However, Isdell adopted the belief that strategy (including pricing, product offerings, and marketing message) should vary from market to market to match local conditions. Isdell's position, in other words, represented a midpoint between the strategy of Goizueta and the strategy of Daft. Moreover, Isdell has stressed the importance of leveraging good ideas across nations--such as Georgia Coffee, for example. Having seen the success of this beverage in Japan, in 2007, Coke entered into a strategic alliance with Illycaff, one of Italy's premier coffee makers, to build a global franchise for canned or bottled cold coffee beverages. Similarly, in 2003, the Coke subsidiary in China developed a low-cost, noncarbonated, orange-based drink that has rapidly become one of the bestselling drinks in that nation. Sensing the potential of the drink, Coke rolled it out in other Asian countries such as Thailand, where it has been a huge hit.

Question:

1. Which global strategy shown in Figure 8.3 did each of the four CEOs use?
2. What facts in the case lead you to the conclusion? Arrange the facts into two categories: Activities controlled by Atlanta HQ and Activities controlled by the country subsidiaries.

Figure 8.3 Four Basic Strategies High Global Transnational standardization strategy strategy Pressures for cost reductions International Localization strategy strategy Low Low High Pressures for local responsiveness