Coca Cola’s environment has been changing over time and there was increased competition from other beverage companies and local brands around the world. With the ever-changing world, people were no longer satisfied with the norm and required new drinks that satisfied their needs. The environment that Coke was in changed right in front of their eyes and in an attempt to deal with the changing environment Coke’s strategy had to change. Coke shifted their strategy of focusing on just carbonated drinks to introducing different beverages that catered to the needs of people.
They hanged their philosophy to think local and act local. The company decentralized the operational and marketing functions and gave local managers more authority. The new structure gave local managers the responsibility for local market analysis, new product development, and management Of the local brand portfolio. With the new Structure, Coke was able to introduce new products faster and tailored their products to the needs of their customers. Coke’s strategy before Daft was focused on the carbonated drink sector and expanding its brand in emerging countries such as Russia, China, and India.
In edition Coke would try to acquire businesses in emerging countries and take advantage of the distribution networks to push the Coke brand. Coke centralized its concentrate production business and marketing and these aspects of the business would be run from Atlanta. Independent bottlers in various different regions around the world handled the bottling and distribution. The independent bottlers would execute the strategy and handle all the heavy lifting.
Some of the strengths in this strategy are that Coca Cola was able to “concentrate on concentrate” and this allowed them to focus on marketing managing and expanding in emerging countries. Also, bottlers would incur all the expensive costs associated with bottling and distribution while Coke maintained a clean balance sheet and focused on selling its high margin concentrate. Some of the weaknesses of this strategy and structure were that the bottlers did not have the flexibility to manufacture products that they can easily sell.
Instead of allowing bottlers to make decisions on their own Coca Cola forced bottlers to push Coke products because it was in their best interest. If bottlers were allowed to manufacture profitable products in local arrest this practice would have benefited the bottlers and Coca Cola. Also, this strategy was narrow-minded and did not take into account local preferences and tastes. Coca Cola ran into problems acquiring Ranging and completing the acquisition Of Academy Cheapest. Coca Cola was perceived as an abrasive and domineering American company.
The French denied the acquisition of Ranging because they felt that Coca Cola was using this tactic to force Pepsi out of the market. Some European countries were not too fond of an American company owning the most popular beverage in their country. Coca Cola came into these deals with a notion that they wanted to dominate and take over the market share in Europe. If Coca Cola’s abrasive and domineering culture was changed and the company was perceived differently, perhaps the deal would have been successful.
Another problem that Coca Cola encountered was the product contamination issues that caused a health scandal in Belgium and tarnished its brand and image. This problem stems from the fact that Coca Cola did not thoroughly oversee the product quality aspects of the bottlers. Coca Cola’s approach was hands off when it came to overseeing the product quality aspects of the tootles. These problems would not have occurred if Coca Cola was more involved and focused some of their efforts on product quality.
In addition, Coca Cola’s profits have been declining for several quarters and there was increased competition from other companies and local markets. This problem stems from Coca Cola’s narrow-minded approach to focus on carbonated beverages rather than expanding to different types of beverages. If Coca Cola developed additional products for local tastes perhaps they could gain back the market share and relinquish their earnings. Daft eliminated 6,000 jobs worldwide, reorganized the company, managers more authority.
Daft emphasized to think local and act local. The new structure gave local managers responsibility for local market analysis, new product development, and management of the local brand portfolio. Daft also emphasized that Coke should serve customer tastes and forge relationships with companies. The reduction in jobs will reduce operating costs and help the company get back on a track of profitability. However, a reduction in the workforce could also hinder Coca Cola’s ability to grow because of a lack of resources available to them.
The structural change of moving regional managers from headquarters to local markets will allow them to be more effective in local markets. Managers can easily stay in touch with their customers and this will improve customer relationships. The ability for operating divisions to develop new products and manage the local brand portfolio should help streamline the development process. The time frame for bringing a new product to the market will be decreased dramatically. However, allowing operating divisions to take on risks freely could be detrimental to the growth of the company.
If there are too many failed products the company could continue on its downward trend. To ensure its future effectiveness Coca Cola should look into improving its responsiveness to events and its ability to communicate to the public. In responding to the product contamination issues in Belgium it too long to us apply the public with information about the contamination. If they responded promptly, showed empathy towards people and were apologetic from the beginning, the public would have been more forgiving. Coca Cola should explore taking on more ownership in the bottlers business.
Coca Cola should view the relationship between bottlers as a symbiotic relationship. Integrating Coca Cola’s product quality best practices would reduce future product quality incidents and prevent their brand from getting tarnished. If this approach were taken rather than focusing on their own interests, both companies would benefit. Coca Cola should continue to focus on local tastes and develop new products tailored to the needs of their customers. When an opportunity is identified from a market analysis they should seize the opportunity and develop a reduce that satisfies the needs of the local people.
Local markets should be given more freedom and marketing should be run at a local level rather than from a centralized location. Stats, Coke should explore purchasing other products and businesses. Perhaps Coca Cola can purchase a pizza company and start marketing Coke and Pizza as a satisfying combination. Coca Cola at its roots is a beverage company but if they can integrate another product that can go hand in hand with a beverage they can benefit significantly and ensure Coca Cola’s future effectiveness.