Coke Strategy

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Coca Cola is the leading manufacturer, marketer and distributor of soft drinks in the world. With domestic market nearing saturation, the potential for growth lies in international markets. In recent years, economic, political and social changes have made the global environment more uncertain, forcing Coke to reevaluate its strategy, structure and culture to maintain a competitive advantage. The following is a dynamic analysis that tracks the evolution of Coke’s strategy from global standardization to a multi-domestic strategy that emphasizes national responsiveness.

During Goizueta’s management term, Coke is already a large, mature company in the formalization stage of its life cycle and in the international stage of global development. The organization’s official goal is to dominate the global beverage market and maintain its market leadership position over Pepsi and other competitors. Its primary operative goals are productivity, efficiency and profit. Coke is a highly formalized, centralized organization with a clear hierarchy of authority and a mechanistic management process. Employees believe in the supremacy of the product, and the company’s rigid, heavy-handed culture helps maintain control and drive aggressive marketing and expansion plans. Given the steady consumer demand and low uncertainty created by the simple/stable environmental dimensions, the vertical structure is appropriate because it provides management with high degree of efficiency and control. Coke’s effectiveness is a result of the synergistic fit between its structural and contextual dimensions.

Coke realizes economies of scale/scope and low-cost production from a globalization strategy that enables product design, manufacturing and marketing to be standardized throughout the world. According to Porter’s model, Coke’s competitive strategy would be defined as broad differentiation - it distinguishes its flagship cola product from its main competitor Pepsi, through standardized marketing and advertising on a global scale. Coke is also pursuing a prospector strategy, expanding its international footprint with heavy investments in emerging markets and a series of bottler acquisitions and strategic alliances. The company reaps additional efficiencies through its network of independent bottlers, which allows Coke to focus on concentrate production and marketing without getting bogged down with the high-cost bottling business. The organization is concerned with external issues and structural stability, leading to a rational goal emphasis. Adopting the right structure to match its strategy and environmental conditions is another reason for Coke’s effectiveness. It has a functional structure with an international division. The structure is designed for efficiency and control, and it delivers economies of scale/scope and low-cost production. Under Goizueta, Coke has a dominant market share and the “world’s greatest brand,” however, towards the end of his term, the company experiences a blinded stage due to a lack of effective scanning/control systems to alert management to symptoms of organizational atrophy.

When Ivester succeeds Goizueta in 1997, major shifts in the market, government and international sectors are increasing environmental complexity in a way that makes Coke’s current strategy and structure less effective. Management does not change course in the face of antitrust violations, health scares, increased competition, lagging consumer demand and economic uncertainty in emerging markets. Coke maintains its prospector strategy, aggressively expanding into risky foreign markets despite signs of economic instability. It also continues to pursue a broad differentiation strategy, maintaining global standardization and pushing the flagship cola product at a time when consumer demand is shifting to non-carbonated beverages and regional flavors. At this time, an analyzer strategy and focused differentiation strategy would have been more...
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