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SML 822 INTERNATIONAL BUSINESS

CASE STUDY
COKE GOES WORLDWIDE WITH A LOCAL STRATEGY

SUMMARY OF CASE

Coca-Colas sales in Europe were lower compared to those in the United States. In order
to improve sales, the Coca Cola Company took the following steps in 1990s:
i)
Replacement of complacent local franchisers with more active, market driven
sellers
ii)
Price reduction and increase in advertising expenditure
iii)
Building its own distribution network to package and sell Coke locally
iv)
Replacement of inefficient bottling networks
Cokes ruthless emphasis on cost control and market growth attracted the attention of
government agencies who investigated Coke for anti-competitiveness tactics.
However, in spite of the hurdles, Coke managed to establish a strong foothold in
Europe.
EUs abolishment of internal tariffs ensured that low cost and rapid delivery were the
key strategic factors for success. Coke believes that its strategy will give them an edge
over competitors in this situation.
The market for bottled water is growing in Europe and there has been a move away
from carbonated drinks in the recent past. Coca Colas Water Division, although a major
player in this space, is not the market leader and have not been very successful in their
innovations in this area.
Coca Cola know that their ability to grow will be dependent on their ability to
supplement its current product line with new (i.e. not carbonated water) offerings.
Coca Cola was traditionally a company with a centralized control structure but it realized
that to be successful in these markets, it has to be more responsive to local needs. It
therefore started the process of think local, act local and put more control into the
hands of local managers. It also started pushing its brands on a regional basis rather than
worldwide basis.
Coke also started reaching out to local communities and getting involved in charitable
activities in order to promote itself as a member of the local society.
Coke now attracts more investors and customers from Europe and is trying to hold on to
its market share by understanding and appealing to local differences.

Submitted By: Aditya Das | Ishani Das | Rajneesh Gupta | Sudhir Dalal | Group-3

QUESTIONS
Q1: Why did Coke engage in foreign direct investments in Europe?
Ans:

The idea of FDI is to help in reducing the costs. This in turn would help in reduction in

response time for an organization.


i)

By establishing its own distribution networks it was able to eliminate inefficiencies in


the earlier system.
Due to the EUs no internal tariff policy, low cost and rapid delivery were key
strategic factors for success, which Coke was able to achieve as it had invested in its
own distribution networks, bottling plants etc.
There was a significant market for non-carbonated water drinks in Europe which
Coke would be able to tap through its established networks in Europe.
Understanding local culture and local responsiveness was an increasingly important
factor for companies looking for global success. Coke would be able to do this by
establishing base in Europe.

ii)

iii)
iv)

Q2: How did Coke improve its factor conditions in Europe?


Ans:

Improvement factors consisted of both physical resourses and human resourses

i)

Coke was able to utilize local labor, transport networks and natural resources such
as water, power etc.
By establishing its own distribution networks and bottling plants, it was able to make
its processes more efficient and more responsive to local needs.

ii)

Q3: How is local rivalry helping improve Cokes competitive advantage?


Ans:

Cokes competitive advantage can be ascribed to:

i)
ii)
iii)

Cokes secret recipe, which gives the drink its trademark taste
Their ability to keep developing new products and reinventing old ones
Their comprehensive distribution system which ensures that Coke is available
absolutely everywhere.
Their efficient production techniques which help them lower manufacturing costs
and raise margins.
An incisive and world famous marketing campaign

iv)
v)

Local rivals help improve Cokes competitive advantage by:


i)
Constantly challenging them by competitive offerings which are closer to the local
taste, which drives Coke to come up with new products
a.) Identification of Local Vendors
b.) Joint Ventures with Local Vendors

Submitted By: Aditya Das | Ishani Das | Rajneesh Gupta| Sudhir Dalal | Group-3

ii)
iii)

Internal Tariff abolishment


Challenging Coke to a fight for market share in remote areas where the local drink
has achieved market ascendancy. This helps in development of Cokes distribution
system
Providing good quality products to customers at a competitive rate, challenging
Coke to improve manufacturing practices and reduce prices.
Achieving popularity through word of mouth and local marketing campaigns,
thereby throwing down the gauntlet to Cokes marketing team to come up with an
effective campaign to wrest away the initiative.
Motto of Think Global and Act Local

iv)
v)

vi)

Q4: Is the Coca Cola Company a multinational enterprise? Is it global? Why?


Ans: A multinational corporation or worldwide enterprise is an organization that owns or
controls production of goods or services in one or more countries other than their home
country (Source: Wikipedia). By this definition, Coca Cola Company is definitely a
Multinational Enterprise since it runs operations in more than 200 countries other than its
home country the United States, where its headquarters are located in the city of Atlanta,
Georgia.
It is also a global organization since Coca Cola has spread and expanded onto many countries
around the globe. Coca Cola has tie ups with the local market, a centralized operating location
at Atlanta and selling their products at all levels in different countries.

Submitted By: Aditya Das | Ishani Das | Rajneesh Gupta | Sudhir Dalal |Group-3