MGMT 672 Planning and Execution of Strategy
With approximately one fifth of the global population, China was a natural choice for Coca Cola to expand its operations and grow its business. In 1979 Coca Cola was able to reenter the Chinese market and since, it has developed itself into China’s most recognized and trusted brand. It has achieved this status through the implementation of an effective international strategy.
Coca Cola first entered China in 1920 and maintained operations up until 1949 when the political climate in the region forced the closure of its plants. It wasn’t until 1978 when the country began to allow outside trade and investment that Coke decided that it would once again set up roots in the region (Carpenter & Sanders, 2009). In 1979 it reestablished operations in ...view middle of the document...
When it first reentered the market, Coke was forced to act as a wholesaler, selling its patented formula to bottling plants in the region who in turn would distribute the product. For years, Coke struggled since they did not have any management oversight of the plants that were bottling its product. In 1985, Coke decided to take an alliance approach as a vehicle for increasing its operations in the region. The reason they did this was to increase their management oversight of their product as forming the alliance would allow them to acquire stakes in the other companies. Additionally, these partnerships and alliances allowed Coke to build its relationship with the Chinese government which afforded them less government interference when they began to increase the number of bottling plants in the region.
As part of the localization strategy that Coke adopted, it began to produce local brands aimed at satisfying Chinese taste buds for a variety of beverages. The local strategy also included the growth plan for the region which entailed not only the opening of new bottling plants but it also encompassed the distribution network to saturate the market with its products. This long term strategy of expansion and localized production is what allowed them to build a better distribution network and establish a truly nationwide operation within China. A cornerstone of this localized international strategy was marketing. In this strategy, the local managers were able to control the content of the advertisements. Due to persistent marketing and a well maintained balance between productivity and localization, Coke has become the most recognized beverage throughout China.
Carpenter, M. A. & Sanders, W. G. (2009). Strategic management: Concepts and cases (2nd ed.). Pearson/Prentice Hall.