Case Analysis of Coca Cola
1. In the 1980s, under CEO Roberto Goizueta, Coca-Cola was a global brand with a growing presence in global-emerging markets like Europe, Russia, and South East Asia. It beat back its main rival Pepsi to be a leader in the carbonated beverage market with a 70% market share. During the 1990s however, under new CEO M. Douglas Ivester, the company’s market share started declining due to political (regulatory), economic, social (consumer), and technological (operations) challenges in the marketplace.
While Coca-Cola was trying to consolidate its position in it’s core cola market, there was an increasing shift in consumer tastes in favor of non-carbonated beverages such as juice, tea, and bottled water. Local brands in local markets moved in to fill the gap in Coca-Cola’s product lineup, and to cater to the growing local tastes and nationalistic preferences of consumers.
Coca-Cola’s global bottling & distribution system, consisting of ten anchor bottlers, was one of its greatest strengths. These independent bottlers like CCE, in which Coca-Cola held a significant minority stake, enjoyed a good run till the currency crises in Russia, Asia and Latin America in 1998 put a strain on the bottlers’ profit margins and on Coca-Cola’s profits in turn.
European regulatory authorities scuttled Coca-Cola’s growth and acquisition plans by invoking anti-monopolistic regulations against the company. The nationalistic and protectionist governments took a political stance against Coca-Cola, which was perceived to be a symbol of domineering, American businesses. Health and hygiene issues related to Coca-Cola’s products in Belgium & France further dented the company’s prospects in Europe. Domestic (US) and global rivals like RC Cola and 7Up bottlers, and Pepsi, became legally combative in protecting their territories and fair-market rights. Coca-Cola also faced a great deal of negative publicity from a race discrimination suit filed by African-American employees.
Coca-Cola’s response: In pursuing a goal of retaining global preeminence and a 15-20% earnings growth, Coca-Cola took on too much, simultaneously, in expanding its markets. Ivestor employed stopgap measures to correct Coca-Cola’s image. He personally apologized for the missteps in Europe & lobbied with the French & Belgian governments. He attempted to streamline the organizational structure by realigning his direct reports on a regional basis. However, these changes were not enough, and it was only under Daft that Coca-Cola effectively tackled environment and performance related issues in meeting its goals.
Internal effectiveness: Daft decentralized operational & marketing functions to give local managers more authority over product portfolio development.
Emotional health measure: Daft was an amiable personality, and in an effort to settle Coca-Cola’s racial discrimination suit he rehired Carl Ware to head the company’s Africa unit.