Excelsior College
Coca-Cola
M5A2

Aleksander Laskowski
BUS 435 International Business
Prof. Irwin Nathanson
09 June, 2013
Introduction
Coca-Cola was founded in 1886 and has just celebrated its 127th anniversary. The Atlanta based multinational corporation is an American icon, employing 71,000 employees in 200 different nations. The company is a perfect example of success in capitalizing on foreign growth, with over 70 percent of case volume being in foreign markets. To reach the iconic status, Coca-Cola has gone through multiple organizational changes in strategy and in structure.
Roberto Goizueta changing strategy from localization to globalization, and its benefits In 1981 when Roberto Goizueta became the CEO of Coca-Cola, he decided to change the strategy of the company from one focused on localization to a more standardized, global one. The strategy was changed in order to save on costs, which are considerably higher when using a localization plan, compared to a globalization approach. When a product becomes standardized, its production becomes much cheaper, rather than a customized item under a localization strategy. By cutting the cost Coca-Cola could aggressively price their products in international markets to gain market share, and increase consumption which was at low levels of 10-15 percent compared to that of the U.S. (Hill, 2013). Yet another benefit of a globalization approach is the centralization of decision making, which allows the firm to see the entire picture of their products performance worldwide, and take appropriate action to improve it when necessary.
Douglas Daft shifting strategy back to localization The limitations of Goizueta’s strategy, which persuaded Douglas Daft to shift away from it, included lack of attention to local markets, inflexibility and centralized decision making.
A complete lack of a local strategy, which ignored cultural differences across nations, was the biggest drawback of the globalization strategy. Roberto Goizueta failed to realize the localization pressure for his company was high, and his strategy did not fit the market realities.
As the experience of the firm in Japan showed, customers’ preferences differ from country to country, and a global marketing strategy and one-size-fits-all approach was the incorrect one.
By being a centrally managed business Coca-Cola lacked flexibility to respond to changes in the market place. Bureaucracy which is a trademark of centrally run enterprises, made any decisions take longer than in decentralized companies.
When Douglas Daft shifted away from the globalization strategy he tried to make his corporation be more cognizant of local preferences, empower local managers to use strategies they think will work for their market, and to improve international sales, which he knew had growth potential, and to reduce performance ambiguity so he could see the troubled spots.
Daft decentralized marketing decisions and product development to local managers, to capitalize on the differences in culture which affect preferences. He saw potential in allowing his country supervisors to develop and market products they thought would fit the desires of the local population. A localization strategy allows the parent corporation to use simpler performance evaluations, because performance ambiguity is low. This would allow the headquarters to see troubled managers and address their poor performance.
Douglas Daft’s strategy did not produce the desired results, and in 2002 Coca-Cola reverted back to a more global approach. The reason for the localization strategy failing was too much focus on local markets, which failed to show the whole picture to the managers in Atlanta. Lack of, or poor guidance raised costs, and led to some bad decisions.

Coca-Cola under Neville Isdell In 2004 Neville Isdell became the CEO, and adopted a strategy which can be categorized as transnational, which is a middle ground between the strategies of the prior three CEOs. A transnational strategy is characterized by a mixture of a global and local approach. A company responds to local pressures, but to the extent possible uses global operations to minimize costs.
Coca-Cola was trying to find the equilibrium between a centralized and a decentralized strategy, and to retain local flexibility while administering across borders to attain global integration.
The difference in this strategy between that of Goizueta and Daft, is that it took the advantages of both strategies, and minimized the drawbacks. While the previous CEO’s chose to stick with one strategy, Isdell chose to mix them to attain best results. This strategy achieves coordination between headquarters and subsidiaries, and is responsive to change.
The benefit of the transnational strategy is it has the ability to attain economies of scale, and exploit experiences from local experiences. It has the ability to attain standardization while retaining top notch local responsiveness.
The risks of this strategy include high cost, difficulty transferring knowledge, finding the balance between reducing costs and local responsiveness. High cost of the transnational strategy arises from very high need of coordination, integration, cultural controls. Benefits of doing business internationally can be erased by high cost of the items mentioned above. It is also very difficult to maintain a flow of knowledge from the subsidiaries back to headquarters and the opposite.
For this strategy to work the company must find the right balance of local responsiveness and standardization, and that balance will constantly need to change to maintain a competitive advantage. This is the most difficult part, and it takes a very flexible organization to achieve it.
Evolution of Coca-Cola and convergence of consumer tastes The evolution of Coca-Colas strategy tells us that international businesses need to constantly adapt to the changing environment, or they will face financial losses. The convergence of consumer tastes is not as close as big businesses would like to think. While some products are standardized across the world, most nations differ significantly in their tastes which are affected by different cultures. Some regional assumptions can be made about tastes, as the case of the low carbonated orange drink developed in China, and became a hit in China, Thailand and India, and the success of Fanta brand of drinks in Europe.
Conclusion
Coca-Cola is the hallmark of an American success story, and is considered one of the most recognized brands in the world. They owe this success to the constant adaptation to the surrounding business environment. The company has capitalized on developing local brands, while standardizing its global operation, and successfully implemented a transnational strategy. This strategy has been developed after many tries to find the best solution to sustain growth in the international market.

References:
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