#142 Coca Cola with a Buzz
In his latest book, Pankaj Ghemawat, celebrity professor at NYU and at IESE, describes – among many other things – how Coca Cola’s early international expansion followed a completely decentralized approach. As long as no major damage was done, everything was allowed and according to Professor Ghemawat, only two rules existed, “You can’t change the formula, and you can’t steal money”. Everything else was left to country managers or partners. Then came a period when the company became highly centralized as it chased a dream of megabrands that were built on full and complete globalization – “No left turns, no right turns” allowed. However, as many other companies also experienced, the expected benefits of complete global standardization never fully materialized. Quite to the contrary, over-standardization left market potential untapped, and so the pendulum swung back for the company in recent years. Today, Coca Cola shows more appreciation for country differences, and rather than to force its core soda products on consumers globally, it has started to acquire local brands. It has also developed entirely new products for foreign markets. Just recently, Coca Cola provided proof of how serious it is about tapping into opportunities in foreign markets. For the first time since its founding in 1886, Coca Cola decided to develop an alcoholic beverage (for a brief moment in time, it owned a winery from 1979-1982). For now, the experiment is limited to Japan where lower-alcohol beverages called “chu-hi”, in essence alcopops, are hugely popular. Under the name “Lemon Do”, Coca Cola has started to sell this fizzy, lemon-flavored drink in 3%, 5% and 7% alcohol content varieties. Besides different alcohol content, Lemon-Do is also available in both a salty-lemon and a honey-lemon variation. Japan’s highly developed beverage market seems to be Coca Cola’s favorite testing ground for new products. After many years of development, Coca Cola also brought a frozen Coke product in pouches as well as peach-flavored Coke to the market early this year. In marketing terms, Coca Cola is now pursuing a strategy of adaptation (sometimes also referred to as local responsiveness). Going beyond just the usual minor and common adaptations for FMCGs in pricing and promotion, the company is willing to incur the higher cost of product development. Coca Cola opted to let go of the much sought economies of scale in manufacturing and marketing in return for a larger piece of the pie. There is even more: Developing new products for foreign target markets can make companies more agile and innovative, which may help them in other regions, including their core or home markets. While Coca Cola has not announced a roll out of Lemon Do to other countries, it is not unlikely that the product will eventually be marketed elsewhere. I am already wondering what Coca Cola’s story will be when Professor Ghemawat writes his next book…
June 22, 2018 @ 9:23 am
This case truly shows the importance of the adaption of products to local requirements in foreign countries.
Due to globalization, markets are changing faster today than ever before. Global companies cannot just rely on their standardized products over a lifetime. There comes a point where you have to admit, that you cannot ignore the local responsiveness amongst different segments anymore. You have to get creative as well as innovative in order to be able to defend your position on the market.
I think that it is great that Coca Cola now really starts putting its efforts towards the development of new products. It shows, that even global companies start to overthink their strategies which were set years ago to exploit their fully potential and find new ways to continue to grow.
July 11, 2018 @ 6:46 am
I find the case of , “Coca Cola with a Buzz” very interesting because it is a good demonstration of how companies should properly adapt when expanding and entering new markets. I feel that Coca Cola is a great example because they are one of the few companies that has successfully adapted, introduced, and developed products to other cultures. An example of their strategy for global adaptation, is simply by looking at their website. On their main website, each country’s webpage is targeted to market to the country’s culture. They have been able to demonstrate the importance of their consumers tastes around the world.
There are many global companies that do not share the same mindset as Coca Cola’s global adaptation. Often, companies have a hard time adapting to a country’s culture because they don’t properly research the market or look at how their product will impact in that market. They have a hard time at succeeding in a new market because they focus on introducing a product without any modification. However, with changing demand of consumers it is important for a company to look at all aspects to be successful in a new or existing market.
July 13, 2018 @ 8:55 am
That story about Coca Cola shows that a pure globalization strategy without any adaption to local markets, especially in the field of beverages, is not the best way to go. And in my opinion, that fits to a wide other range of products too.
In this example of internationalization even the product itself is in need of adaptation. But also if your original product is accepted and well established in the foreign market, adaptations in other fields like advertising are most likely necessary as other examples like the failure of Coca Cola in Saudi Arabia during the soccer world cup in 1994 show.
With experimentations like the one with Lemon-Do in Japan Coca Cola starts to get closer to more local responsiveness. With their well-established global brand this seems to be the right step towards becoming a transnational company.
July 13, 2018 @ 8:42 pm
I am a big fan of the coca cola marketing because in my opinion they do a lot of things right. This case is a perfect example for international marketing. It is not enough to enter every market with the same strategy or even the same product. Every culture has an own mindset, other perception and also other necessities.
Coca Cola realized how important it is to listen to the customers/markets and to do a research for every new market. Consequently you have to adapt the strategy and also sometimes the products for foreign markets. For example it doesn’t make sense to sell milk as a “good night drink” when for your target group milk is more like an energy drink.
A lot of global companies are not able or willing to chance their plan A and be more open-minded.I think for companies with low Uncertainty Avoidance it is easier to change their habits, because they have less emotional resistance to change and they are also risk-taking.
July 15, 2018 @ 8:10 am
Coca-Cola seemingly has played well its cards and it has maintained its place in the markets despite it has plenty of considerable good market rivals. Even though United States is described rather non-pragmatic country, Coca-Cola has dared to do differently which has been a profitable act. Moreover, very thoughtful act from the company side has been the tailored marketing for different cultures. If targeted country is conservative one, it is guaranteed to not gain success there if bold marketing is used.
It is important to value and appreciate cultural differences and in today’s diversity world it’s even more urgent. Coca-Cola has realized this and, as mentioned in the post, investing in developing regionally different offerings simultaneously contributes market sharpness. Different countries have different norms, like individual-oriented society or masculinity predominance which means many aspects needs to be taken into consideration within overall appearing, just as it already has done.
July 16, 2018 @ 6:21 am
This case really demonstrates the importance of adapting when expanding into foreign markets. Coca-Cola is a brand with a product that is known all around the world, and yet they still continue to expand their product selection so that they can penetrate any market successfully and continue to grow.
With Lemon Do, Coca-Cola has branched out into a whole new field with a lot of potential for expansion. They are testing it out in a single market where similar products are known to be successful to get a feel for how consumers will react. If the product is successful, they will, without a doubt, expand this product into other markets.
Coca-Cola has found a perfect medium between standardization and adaptation, where they are able to achieve customer satisfaction and local acceptance, while maintaining the quality of their products and loyalty of their consumers. They have succeeding with dealing with external adaptation pressures, and continue to sell their products in over 200 countries.
It is a great example for companies who think their product is so great that they don’t need to adapt. Even a giant like Coca-Cola is willing to make changes to continue to be successful all over the world.