1. 0 Introduction Roberto Goizueta, a Cuba immigrant who became the CEO of Coke in 1981, he switched from a strategy that emphasized localization to one that emphasized global standardisation.
Localisation strategy focuses on increasing profitability by customising the firm’s goods or services to the intended country’s preference (Hill, 2011). On the other hand global standardisation strategy focuses on increasing profitability and profit growth by reaping the cost reduction that come from economies of scale, learning effects, and location economies (Hill, 2011). 1. 1 OpportunityThe reason why he believes that the only difference between U. S. market and international market is that, the latter has the lower average level of market penetration. According to Pankaj Ghemawat(2007), which he has written in the book call “ Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matters”, it says that, as what Goizueta puts in his speech, now in United Stated there were more people buying soft drinks than any other liquid, including tap-water.
So he thinks that as long as the company take this opportunity, not in so many years, they could see the result.By switching to global standardisation strategy, the company could have more strategic control over the headquarters and easier to extend the business; the company would have more opportunities to earn big profits and to be a market leader. In this case of Coca-Cola, the strategy was built about standardisation and realisation of economies of scale, by using the same advertising messages to all over the world, moreover, in order to push Coca-Cola became a global company, and centralised a great deal of management and marketing activities at the corporate headquarters in Atlanta, he focused on core brands and took equity shares. Hill, 2011) 1. 2 Reducing Costs From 1902 when it first branched out from the United States until the 1980’s Coca-Cola’s strategy for marketing was mostly localisation. Coca-Cola Company localised each country’s teats by their own preferences. Because country has their own preferences in teats, the sales volume of each product would be different, depends on the region where they were selling. For example, in Japan a non carbonated drink was most sold, but back to U.
S. it turned out a totally different story.But when the global standardisation came up, the company can use the same product line, the marketing plan would be the same, also the functions would be the same as well.
In certain degree, the cost had been cut down a lot. Because of the global standardisation strategy, it reduced cost of duplication of the functions that needed in different countries Another reason why Mr. Goizueta switched strategy and pushed so hard to make Coca-Cola became a global company is because of that at the time, 1980, the market share of Coca-Cola has already reached 38%.In another word, the company has already saturated local market. In order to make profit growth, Coca-Cola needs to become a global company. What were the imitations of Goizueta’s strategy that persuaded his successor, Daft, to shift away from it? 2. 0 Imitations of Goizueta’s Strategy The limitations of Goizueta’s strategy was in the very 1990s is when Coke first time failing to hit the financial targets, because the one-size-fits-all strategy was not working so well anymore, as smaller, more local competitors started to take over the market share from Coca-Cola.
Although Goizueta’s strategy does not need to take all the responsibility for the failing. After Guozueta died in 1997, Douglas Ivester took over the position of CEO, and almost the same day, the economies of Brazil and Japan started to nosedive, apparently it was too much to take, since Brazil and Japan are the two of largest overseas market of Coca-Cola. Moreover it followed by Asian currency crisis and Russian operations were limping alone at 50% capacity. (Pankaj Ghemawat,2007).Anyway, it was the taste of failure of Coca-Cola for the first time, the board fired Douglas Ivester, and took over by Douglas Daft. Daft realised that they have to make a change, and he has switched strategy to localisation. As what Daft(2000) said, “ No one drinks globally, local people get thirsty and they go to their retailer and buy a locally made coke.
” Also he posted an article on the newspaper on March 2000, “Think Local, Act Local. ” . Therefore, Daft have to shift away the strategy to be more localisation.Apparently, the imitations of Goizueta’s strategy was not concerned enough about different people might have different preferences in taste, since they were from different countries. Probably is because of the culture, history, different tastes in food, or other reasons. Somehow, in order to globalise company, there is the need to make the local people buy the products. Clearly the strategy of Goizueta’s was not going to make it.
The coca-cola company needed some strategies are more specific with what local consumers need, more personalised.As result, Daft has done it well; he brought back the Japan market back to the track, by localising the product. Discuss Coke’s current strategy in comparison with those strategies pursued by Goizuieta and Daft in terms of benefits, cost and risks. 3. 0 Current Strategy The Coca-Cola Company has been operating for over a century and is highly successful. It is currently in there new all level of the post-maturity stage in the business life cycle. Coca-Cola has a marketing office or a representative office in almost all the countries where Coca-Cola Company operates in.In case there is no direct office presences in the home country, then it would rely on the the largest bottling plant that Coca-Cola Company works with.
Each country would have a small marketing department to capitalise on localising Coca-Cola. The job of this marketing department is to work in close coordination with Coca-Cola HQ to analyse a perfect, commercially successful and locally acceptable localisation plan, after all the company would put it into use. 3. 1Goizueta’s Strategy The strategy that Goizueta was running was basically global standardisation trategy.
Global standardisation strategy focuses on increasing profitability and profit growth by reaping the cost reduction that come from economies of scale, learning effects, and location economies (Hill, 2011). Back to then, the Coca-Cola Company use the same advertisement for worldwide, and the tastes of each country would be the same. Everything would be unified, as what Mr. Goizueta said, “ think global, act global. ” But somehow, this strategy was not working well after Mr. Goizueta’s death, therefore global standardisation has got abounded.3. Daft’s Strategy The Daft’s strategy was localisation, just like what Coca-Cola’s current strategy.
Localisation strategy focuses on increasing profitability by customising the firm’s goods or services to the intended country’s preference (Hill, 2011). As aforementioned, since the beginning of Coca-Cola Company, it started of using localisation, till Goizueta took over the position of CEO, and pushed Coco-Cola Company into a global company, but after the Coco-Cola Company failing to reach the financial targets, Daft switched back to localisation until now. .
3 Comparison I. Benefits Compare these three different periods of Coca-Cola Company, Daft’s strategy was nearly the same as the current strategy, they are both localisation. And Goizueta’s strategy would be global standardisation. Global standardisation could be easier to make a company into a bigger market; therefore Mr. Goizueta used it, when Coca-Cola Company first started to get in to international market and trying to gain big profit. But global standardisation doesn’t bother the differences between regions, which was not acceptable.Each race and nationality has different preferences in tastes; therefore if the company unified it, it sure will now satisfied everyone.
That’s way localisation came up when Daft took over the place, until now. Localisation effectively satisfied the costumers from different part of the world. The typical incident with Coca-Cola Company was the example in Japan, the cherry coke won a huge market share in Japan, and brought Coca-Cola company back to the table in Japan. II. Costs Compare these two types of strategy, clearly localisation needs more expenses than global standardisation.But for current situation of Coca-Cola Company, there are no worries for it to take localisation; due to it has enough assets for them to spend on analysing different flavours or advertisements for different region of consumers.
In global standardisation strategy, it lowers the communication costs, transportation costs. It is the advantage of one-size-fits-all strategy. But during the time Mr. Goizueta was on top, global standardisation did save a fortune for the company.
III. Risks For global standardisation, like what Chunk Csizmar(2010) said, “you know the one size rarely fits in all. Critically evaluate the evolution of coke’s strategies against the background of convergence of consumer tastes and preference in today’s global economy. As aforementioned, since 1902 to 1980, the strategy of Coca-Cola has always been localisation, it provide products according to different region of costumers, they have been trying to understand different cultures in order to better promote the products, also they have been analysing different tastes of coke ever since they realised that different people have different preferences in tastes.When they first started the business, the started really fast, they were willing to sell cokes to other countries, and they thought everyone liked coke, coke in the same taste, soon enough, they realised that it was not the case, then they decided to change, which is good, is always good that a company could figure out what goes wrong and try to fix it. And then they started to localise their product, even puts in today, this strategy is still most used strategy in most of the companies, to understand what costumer’s needs.
Then the Coca-Cola Company started to try to satisfied customers worldwide. 1980, Roberto Goizueta became the CEO of Coca-Cola Company, and he wanted company to became a global company. For the goal, he was focusing on core brands, centralising a great deal of management, and using one-size-fits-all strategy. Compare to today’s need of consumer’s, global standardisation is hard to work, since the culture differences are quite significant between some regions, sometimes it is tough to have something is actually one-size-fits all, especially products ike drinks. Therefore global standardisation might not be suitable in nowadays. Anyhow, since the profit growth was bad, the new CEO Daft had switched the strategy back to localisation, and it has been react well.
Even in today’s global economy, we can see companies like Pepsi, Toyota, Nokia, etc. their advertisements are so different from region to region. It shows that, a company needs to try to understand the desire of most of consumers, and try to satisfied most of the consumers.