Why did Roberto Goizueta switch from a strategy that emphasized localisation towards one that emphasized global standardisation?
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).
The 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...
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