#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.
February 26, 2019 @ 11:12 pm
This reminds me of McDonalds and the way that they have been able to adapt their simple burger, fries, and a drink combo into something way more advanced. If you visit international McDonalds, you can see that they have different variations of their product. In India you have the vegetarian burgers, China they use chicken thighs in all of their chicken products as well as they use a special chili garlic sauce that is a china exclusive, and in Germany they incorporate Nürnberger sausages in the burger recipes as well as serving a variety of beers. These are just a short list of the ways that McDonalds has been able to adapt their product in order to cater for a certain region. It’s very simple and I think that Coca-Cola should be applauded for their efforts in understanding that Japan is a great place to introduce a new line of Alcopops. They have the knowledge to understand that their name holds more weight than a smaller company that strictly makes alcopop related products. When looking on a shelf and wanting to purchase an alcopop I would definitely want to purchase a brand with that much influence. Coca-Cola should be appreciated for their due diligence as not many companies would have taken the time to do proper research. This is a reason why Coke is such a strong name and the Coca-Cola brand is here to stay. They have always been able to keep their values of having a great tasting drink, all the while they have ventured out of their standard soft drink market. Their success has not been surmounted and at this pace and with the knowledge that they have generated from around the globe they could sell any drink product and make a profit.
March 17, 2019 @ 9:08 am
An interesting case that clearly shows that global companies like Coca-Cola are standardizing their marketing mix as much as possible and adapting their marketing mix as needed. But why is Coca Cola adopting to the requirements of local markets? When you look at the various products with even more different tastes this global company offers, one could question the standardization being expected in the marketing mix. Starting with different soft drinks (Sodas) followed by fresh juices or half-frozen refreshment, products with coffee or tea, water, and even alcoholic beverages don´t really speak for the expected standardization. This also applies to the homepages, where the media presence is adapted to the local characteristics of each country. In my opinion, Coca Cola is seeking a balanced approach between adaptation and standardization of their products and they are doing the right thing. On the one hand, using the same marketing mix for all target markets (e.g. same products, tastes, sizes) clearly gives a company advantages through the reduction of costs (e.g. economies of scale) and improves the quality (e.g. product, process). But on the other hand, an adaption strategy leads to more customer satisfaction and enhances local competitiveness. To complete this strategy analysis in the words of Coca Cola: “Life tastes good.”
June 10, 2020 @ 4:09 pm
This interesting story shows basically how individual the world is despite the advanced globalization and worldwide standardization in many aspects. The different cultures want to be separated by their needs and wishes in a world of choice.
Coca-Cola as one of the most famous companies worldwide gives a perfect example how to deal with different markets and special cultural requests. With that differentiation it is possible to create success in the marginal groups of the potential customers.
For me it is very interesting how strong the different markets and cultures show their individualism and how this power influences even such global players like Coca-Cola.
December 9, 2021 @ 10:35 pm
I found the case “Coca Cola with a Buzz” very interesting. Coca Cola is an organization that has successfully entered and done business in new countries countless times. Coca Cola knows how to do enter new markets and do business internationally as proven through its diverse product offerings in each country. Each countries Coca Cola tastes different due to the sugar content among other things that make it appealing to the tase preferences in each country. Coca Cola effectively enters different markets and meets each cultural demand. Coca Cola saw the need for an alcoholic beverage in Japan and was able to create a product that was adaptable to the culture. In America, a lemon ginger alcoholic beverage would probably not do very well because of the local taste preferences. Coca Cola takes the time to do research into each country it does business in. Coca Cola is a leader in international business practice because of its diligence and attention to detail.
December 18, 2021 @ 8:18 am
Cola’s international expansion, it used the complete global standardization, but it did not get the expected goals. However, Coca Cola changes their strategy to focus on country differences. It acquires local brands and develops entirely new products for foreign markets. Like Lemon Do, it is a successful product with lower alcohol in Japanese market. Coca Cola has a huge budget for developing new product. It wants to get more market shares by innovation and creativity. After the new product is successful in a country, it could be sold to other foreign markets and home markets. Compared the expansion strategies of the global standardization and country differences, it is greatly significant for global companies to focus on the country differences to enter foreign market. In marketing terms, Coca Cola is now pursuing a strategy of adaptation (sometimes also referred to as local responsiveness) instead of the much sought economies of scale in manufacturing and marketing in return. The strategy may increase the higher cost of product development, but it must make Coca Cola get better development and expansion, because the product development means innovation and creativity. The new product could attract more potential customers and keep the loyal of the existed customers.
February 1, 2022 @ 2:15 am
After reading eight corporate internationalization disasters, Coca-Cola was the first company that got it right! The question at hand, what changed? The primary reason so many companies failed is due to the force of the home country’s culture, and product or service, on the foreign market. Therefore, the big change was Coca Cola’s decentralized approach and appreciation of country differences. Instead of forcing basic Coke products popular in America, the company hired local brands to design entirely new products for the foreign market. For example, In Japan, Coca-Cola noticed a trend of low-alcoholic beverages being popular. In response, they developed Lemon-Do, an alcoholic lemon beverage choice for the Japanese market. After three years, trends changed and Coke’s new brand followed; Lemon-Do is now making salty-lemon and honey-lemon to adapt to these changes. Overall, Coke does not care how much they spend on product development. The end goal for the company is local responsiveness: adapting quickly and accurately to the change of preferences and needs in the foreign market. In conclusion, this mindset is innovative and agile because it is transferable across multiple foreign markets as well as the home market. Therefore, if competition for economies of scale in manufacturing and marketing is strong, Coca Cola’s decentralized and local responsiveness approach is the recommended internationalization method.
February 12, 2022 @ 8:26 am
I believe Coca Cola is one of the best companies in the world to successfully internationalize all over the world. I really like their approach with over standardization it really helped globalize the brand. They are so well known that Coca Cola is the second most widely understood word in the world behind ok. This brand recognition is incredible to see and their way of acquiring local brands to expand their products. Over the last few years, I’ve really had a chance to see how dominant the Coca Cola brands. I was so surprised when I see brands like Costa Coffee, Gold Peak Tea, Fairlife, Minute Maid, Simply, Dasani, and Powerade. All these brands on their own are so established and are all over the place. I think it’s a really cool experiment to try an alcoholic beverage in Japan. I know I would be open to trying it if they decide to do something similar in the United States. The only issue I see with Alcohol is the brand. If too much Coca Cola alcohol brands get popular then it could affect Coca Cola in that it is changing their image. I am curious to see where this alcoholic side of Coca Cola will end up.
April 7, 2022 @ 4:28 pm
This case was an interesting one to read regarding Coca-Cola as they are one of the most recognizable brands out there that have become successful due to its global brand presence and adapting to the different cultures it serves. Coca-Cola decided to develop an alcoholic beverage in Japan’s highly developed beverage market since low-alcoholic beverages are extremely popular there. What I like about the idea is that instead of keeping the basic product the same for all countries, they decided to create a new product for its foreign market that is way out of their field. They did the right thing of testing it first in Japan where they sell similar drinks to see how the consumers will respond. It will be interesting to see what other countries Coca-Cola decides to expand its alcoholic drinks too, however, hopefully, this idea does not affect Coca-Cola’s family-friendly image. It seems like Coca-Cola takes its time in researching the different cultures and preferences in each country it expands to and is willing to pay whatever it takes in product development. Companies should learn the way Coca-Cola adapts and researches its markets to develop new products that fit the local culture.