Coca-Cola is the largest selling soft drink in the world,

but sales vary by nation. For example, Americans consume

almost 30 gallons of Coke annually, in contrast to

Europeans who drink less than half this amount and in

some countries, such as France, Italy, and Portugal, the

average is in the range of 10 gallons. In the 1990s,

Coke took a number of steps to increase its European

sales.

One of these was to replace local franchisers who had become too complacent with more active,
market-driven sellers. In France, for example, Pernod, a Coca-Cola franchisee,

was forced to sell some of its operations back to Coke

which, in turn, appointed a new marketing manager for the

country. In addition, Coke’s price was lowered and advertising was sharply increased. As a result, per
capita consumption in France went up.

In England, Beecham and Grand Metropolitan used to

be Coke’s national bottlers but that was turned over to

Cadbury Schweppes, most famous for its Schweppes

mixers. The latter immediately began a series of marketing

programs that resulted in sales tripling within three years.

In Germany the pace has been even faster. Beginning in

the early 1990s Coke identified Germany as one of its

primary targets and began building a distribution network

there to both package and sell Coke locally. Meanwhile

throughout the entire country the company has taken

even bolder steps including the replacement of an inefficient bottling network and the institution of a
new, well financed marketing campaign. As a result, Germany

became Coca-Cola’s largest and most profitable market

in Europe.

But all of this came at a price. For example, some government agencies and companies expressed
concern about
Coke’s overriding emphasis on cost control and market

growth and its willingness to push aside those who are

unable to meet these goals. As a result, the European

Union’s Competition Department was asked to investigate

possible anti-competitiveness tactics. Meanwhile, in the UK,

the British Monopolies and Mergers Commission investigated Coke regarding its joint venture with
Schweppes; and

San Pellegrino, the mineral water company, filed a complaint with the Commission of the European
Communities,

contending that Coca-Cola abused its dominant position by

giving discounts to Italian retailers who promised to stock

only Coke.

Yet none of these actions stopped Coca-Cola’s efforts

to establish a strong foothold in Europe. As the European

Union eliminated all internal tariffs, it became possible for a

chain store with operations in France, Germany, Italy, and

the Netherlands to buy soft drinks from the lowest-cost supplier on the continent and not have to worry
about paying

import duties for shipping them to the retail stores. Low

cost and rapid delivery were going to be key strategic

factors for success. Coke believes that its current European

strategy puts it in an ideal competitive position against

competitors.

Recent developments shed some doubt on whether the

company will be as successful as it is forecasting. Worldwide

market growth has been flat and there has been a move

away from carbonated drinks. In Eastern Europe, it is the

market for bottled water that is booming. Between 1998

and 2004, per capita consumption of bottled water in

Eastern Europe doubled. Although Coca-Cola water division

smaller, local competitors account for a large portion of the

market. Other efforts to develop innovative, non-carbonated

products have not proven very successful. The company

knows that its future growth is going to depend heavily on

its ability to supplement its current product line with new

offerings such as vitamin-enriched drinks, and perhaps

coffee and tea offerings. Worst of all perhaps, a few years

ago the company began centralizing control and encouraging

consolidation among its bottling partners. Coke believed

that by making all key operating decisions in Atlanta, it

could drive up profitability. Unfortunately, at the same time

that it was pushing for this centralized type of operation,

regional markets began demanding that the company be

more responsive to local needs. In short, Coke was going

global while the market wanted it to go local.

Coke is now trying to turn things around. In particular,

the firm is now implementing three principles that are designed to make it more locally responsive. First,
the company is instituting a strategy of “think local, act local” by

putting increased decision making in the hands of local

managers. Second, the firm is focusing itself as a pure marketing company and pushing its brands on a
regional basis

and local basis rather than on a worldwide basis. Third,

Coke is now working to become a model citizen by

reaching out to local communities and getting involved in

civic and charitable activities.

Europe remains an important market for Coke, which derives about a quarter of its revenues from the
region, about the same as the Asia-Pacific region. North America, though

the dominant market, accounts for just under a third of

Coke’s revenues.
In the past, Coke succeeded as a multinational because of

its understanding and appeal to global commonalities.

Today, it is trying to hold its market share by better understanding and appealing to local differences.
Case Analysis Framework
1. Introduction
 Briefly summarize the case and its importance in the context of international business.
2. Market Analysis
 Consumer Behavior: Compare consumption patterns in different regions (e.g., U.S. vs.
Europe).
 Market Challenges: Discuss the challenges Coca-Cola faced in European markets,
including competition and regulatory scrutiny.
3. Strategic Responses
 Franchise Adjustments: Analyze the decision to replace complacent local franchisers
and the impact of new marketing managers.
 Pricing and Promotion: Evaluate the effects of lowering prices and increasing
advertising in driving sales.
4. Competitive Positioning
 Market Share: Discuss Coca-Cola's efforts in Germany and the shift in market
leadership.
 Responses to Competition: Explore how Coca-Cola responded to competition from
local brands and smaller players, especially in the bottled water segment.
5. Organizational Strategy
 Centralization vs. Localization: Examine the initial move towards centralized control
and its implications for local responsiveness.
 New Principles: Discuss the three new principles Coca-Cola is implementing to enhance
local responsiveness.
6. Future Outlook
 Product Diversification: Consider the challenges Coca-Cola faces in diversifying its
product offerings, especially in non-carbonated drinks.
 Regional Adaptation: Analyze the importance of adapting strategies to local markets for
future growth.
7. Conclusion
 Summarize key findings and reflect on the lessons learned about balancing global
strategies with local needs.
Why did Coca-Cola engage in foreign direct investments in Europe?
Coca-Cola engaged in foreign direct investments in Europe for several reasons:
1. Market Potential: Europe offered significant growth opportunities due to increasing
consumption.
2. Increased Control: Direct investment allowed better control over marketing and
distribution.
3. Competitive Advantage: It enhanced competitiveness through efficient practices and
quick market responses.
4. Local Adaptation: Investing locally helped tailor products and strategies to regional
tastes.
5. Regulatory Benefits: The elimination of internal tariffs in the EU made market entry
easier.
 6. Strategic Partnerships: Acquiring local bottlers leveraged established networks and
market knowledge.
Overall, FDI was key to strengthening Coca-Cola's market position in Europe.
How did Coke improve its factor conditions in Europe?
Coca-Cola improved its factor conditions in Europe through several strategies:
1. Local Production: By establishing local bottling plants, Coca-Cola reduced
transportation costs and improved delivery efficiency.
2. Investment in Infrastructure: The company upgraded distribution networks to ensure
rapid and reliable supply to retailers.
3. Marketing Innovations: Enhanced marketing campaigns tailored to local markets
increased brand visibility and consumer engagement.
4. Skilled Workforce: Coca-Cola hired local talent, improving operational effectiveness
and market understanding.
5. Technology Integration: Implementing advanced technologies in production and
logistics streamlined operations and improved product quality.
6. Responsive Management: Empowering local managers to make decisions allowed for
quicker responses to market demands and preferences.
These improvements helped Coca-Cola create a more favorable environment for its operations in
Europe.
How is local rivalry helping to improve Coke’s competitive advantage?
Local rivalry is enhancing Coca-Cola's competitive advantage in several ways:
1. Innovation Pressure: Competing with local brands drives Coca-Cola to innovate its
products and marketing strategies to stay relevant.
2. Market Responsiveness: Intense competition encourages quicker adaptation to
consumer preferences and trends, allowing Coca-Cola to better meet local needs.
3. Operational Efficiency: Rivalry pushes Coca-Cola to optimize its supply chain and
production processes, reducing costs and improving service.
4. Brand Loyalty: Engaging with local communities fosters brand loyalty, as consumers
feel a stronger connection to a company that understands their needs.
5. Collaborative Opportunities: Local competition can lead to partnerships or
collaborations that enhance market reach and brand perception.
Overall, local rivalry compels Coca-Cola to continuously improve and differentiate itself,
strengthening its competitive position in the market.
Is the Coca-Cola Company a multinational enterprise? Is it global? Why?
Yes, the Coca-Cola Company is both a multinational enterprise (MNE) and a global company.
Here’s why:
1. Multinational Presence: Coca-Cola operates in over 200 countries, with local bottling
partners and production facilities, adapting its strategies to meet regional market needs.
2. Global Brand Recognition: The brand is recognized worldwide, making it a staple in
many cultures, which supports its global positioning.
3. Diverse Product Portfolio: Coca-Cola offers a wide range of products tailored to
different markets, including soft drinks, juices, and water, demonstrating a global
strategy.
 4. Centralized Coordination with Local Adaptation: While Coca-Cola has a centralized
management structure for overall strategy, it emphasizes local decision-making to
respond to market demands.
5. Cross-Border Operations: The company’s operations involve significant international
trade, investments, and collaborations, reinforcing its status as a global player.
In summary, Coca-Cola exemplifies a multinational enterprise through its extensive international
operations and a global strategy that accommodates local markets.