Coca cola strategy

© SYMPHONYA Emerging Issue in Management, n. 1, 2000-2001
www.unimib.it/symphonya

Think Local-Act Local:
Is It Time to Slow Down the Accelerated Move
to Global Marketing?

Isabelle Schuiling∗

Abstract
In view of the accelerated move of great corporations towards global marketing,
the strategic changes of such companies raise interesting questions. Is marketing
globalization reaching its limits after years of implementation? Is it time for
companies to rethink their strategies and move back, like Coca-Cola, to a multi-
domestic marketing approach?

Keywords: Global Marketing; Multi-Domestic Marketing Approach; Brand
Equity; Drawbacks of Marketing Globalization; Coca-Cola

Just over a year ago (March 2000) Douglas Daft, CEO of Coca-Cola, announced
that the next big evolutionary step for the company would be ‘going local’. Coca-
Cola, he had concluded, was operating as a big, slow and sometimes insensitive
‘global’ company at a time when the market was demanding ‘greater flexibility,
responsiveness and local sensitivity’. In view of the accelerated move of most
international firms towards global marketing, the strategic change of a company
with such an undisputed ‘global’ brand raises interesting questions. Is marketing
globalisation reaching its limits after years of implementation? Is it time for
companies to rethink their strategies and move back, like Coca-Cola, to a multi-
domestic marketing approach?

1. The Marketing Globalisation Debate

The marketing globalisation debate has been exercising the minds of academics
and practitioners for more than 30 years. In the 1980s, proponents like Ted Levitt
have argued that movement towards standardisation was inescapable due to the fast
diffusion of technologies, standardisation of consumer needs and economies of
scale. Opponents like Wharton Professor Jerry Wind suggested that differences

∗
Lecturer in Marketing, IAG, Université Catholique de Louvain (isabelle.schuiling@uclouvain.be)

Edited by: ISTEI - University of Milan-Bicocca ISSN: 1593-0319
Schuiling Isabelle, Think Local-Act Local: Is It Time to Slow Down the Accelerated Move to
Global Marketing?, Symphonya. Emerging Issues in Management (www.unimib.it/symphonya), n.
1, 2000-2001, pp. 83-87
http://dx.doi.org/10.4468/2001.1.08schuiling
83


would remain and that it was still necessary to adapt product strategies to local
markets.
In the 1990s, however, experts no longer questioned the validity of going global.
They focused instead on identifying the degree of globalisation firms should
achieve and for which type of product categories. The slogans ‘think global, act
global’ or ‘think global, act local’ were seen everywhere in the international press
and in academic journals.
Few industries have ignored the trend. Industrial companies like Caterpillar were
first to leverage the advantages of global marketing. Consumer goods firms such as
Mars or Procter & Gamble followed suit while in the service industry, British
Airways and Saatchi and Saatchi have been strong advocates.

2. Reasons for the Global Marketing Acceleration

The multi-domestic marketing approach used ten years ago by international firms
such as Unilever, Nestle and Benckiser-offering products and marketing campaigns
adapted to local markets-is now considered by most to be an outdated model.
The acceleration towards global marketing-standardising the maximum number
of marketing elements in order to offer 'ideally' one global product, under a single
global brand name and with one global positioning-can be explained in a number
of ways. The approach is viewed by many firms, for example, as a powerful way to
achieve new competitive advantages, notably the cost advantage generated by
leveraging scale. Substantial economies can be generated in manufacturing,
logistics, buying and marketing.
Then there is industry pressure. When one firm starts to globalise its marketing
strategy, competitors are bound to follow suit in order not to be at a cost
disadvantage.

□ Procter & Gamble, for example, started to push globalisation as a
key competitive weapon in the 1990s restructuring its marketing
operations several times, streamlining its portfolio to focus on big
international brands, and ultimately influencing Unilever to abandon
its traditional multi-domestic approach. At the end of 1999, Unilever
announced it would eliminate more than 1200 brands concentrating on
just 400 leading ones and favouring those with a worldwide reach.

□ Even Nestle, another past proponent of the multi-domestic
approach, has announced that it will focus on six strategic brands that
have global presence (Nestle, Nescafe, Buitoni, Nestea, Friskies and
Maggi).

Finally, the impact of the financial community cannot be discounted.
Shareholders and financial analysts favour restructuring that reduces a firm's costs
and boosts the bottom line, as illustrated by the stock market's response to
Unilever's announcement.
So in view of all this how come that a firm like Coca-Cola is turning back on the
globalisation model and favouring the ‘old’ multi-domestic marketing approach?


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3. Drawbacks of Marketing Globalisation

Despite the huge financial advantages that it generates global marketing is a
process driven mainly by supply considerations rather than market ones. It is true
that other advantages such as lower prices, speed to market, standardised brand
image and better control of marketing strategies can be achieved thanks to
standardisation-but most of the time financial advantage is the main driver.
The problem is that the market (i.e. the consumer) is not necessarily asking for
global products. Consumer needs may be converging more and more for certain
segments of the population-e.g. the youth segment in Europe and indeed the world-
but that is not why firms have been going global in marketing.
The Coca-Cola example demonstrates that these drawbacks should not be
underestimated when a company decides to push further towards a globalisation
strategy. They can be identified as follows:
Heavy centralisation Marketing globalisation requires centralising most of the
marketing operations in regional or global headquarters. Many new global or
European management positions have been created centrally to develop brand
strategies. The key benefit of this is to accelerate the time to market for worldwide
product initiatives but it slows down the development of other marketing activities
such as advertising campaigns or reactions to local competitors. Coca-Cola
identified this as a key issue and it explains why the company has eliminated many
jobs not only at its Atlanta headquarters but also in regional operations.
Insensitivity to local markets Global or European marketing managers at
corporate headquarters, who are responsible for developing brand strategies,
become less and less familiar with the reactions and needs of local consumers.
Physically distant from local markets, they spend too much time on planes and in
meetings and not enough in stores or with consumers.
With fewer local managers those left on the job also have to execute strategies
developed by the headquarters. They have less time and fewer resources to
understand consumers and formulate consumer knowledge.
For this reason Coca-Cola has given back responsibility to local teams and wants
local managers to be close to consumers. Local management will be allowed to
develop local advertising and even to launch local brands if they identify the need
for it.
Poor local execution Despite the fact that strategies are designed centrally, the
success of initiatives can vary considerably from market to market under a
globalisation approach. This can be explained by the quality of local execution.
The latter can be influenced by the motivation of the local teams to execute well
the programmes developed centrally. It is not rare to meet demotivated local
managers and where this is the case the risk is that business opportunities are lost.
No adequate products Marketing globalisation requires the development of
products that satisfy the largest number of people. This often leads to products
based on the lowest common denominator to please the largest possible segment of
the population. Compromise on product quality can be the result.
Damaged brand equity Standardising brands leads many companies to
standardise their brand positioning as well as their products. Many firms try to
standardise the positioning of brands belonging to the same category but sold under
different positioning in different countries. This can be done to the detriment of
brand heritage and therefore brand equity.


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□ The example of the dishwashing liquid business of P & G in Europe
is salutary. In Belgium and the UK, both brands were profitable market
leaders. Each had a different name, Fairy in UK and Dreft in Belgium.
They were positioned to offer different benefits, going from mildness to
hand to heavy grease cutting. The UK advertising was highly
traditional, portraying a mother and child relationship, while a modern
and humourous approach was used in Belgium. The decision was taken,
however, to standardise these brands despite the different brand
benefits, brand characters and brand images with the result that the UK
advertising messages were used in Belgium. Such changes run the risk
of damaging long-term brand equity.

Weakened brand image-the country of origin effect in relation to brands has been
researched by academics for many years and has confirmed the impact on brand
image.

□ The case of McDonalds, another successful global brand example-
is instructive. In May 2000 the company declared that it should not be
seen as an American brand and that it wants now to follow a multi-
local marketing approach. It claims that its values-cleanliness, service
and price-have to be shared by all franchisees throughout the world but
that the local dimension should be as strong as possible. As indicated
by the Belgian Marketing Director: ‘We buy locally, some of our
products are typically local and restaurants are adapted to the local
habits’. In Belgium, as elsewhere, a local advertising campaign has
been developed.

4. Companies Which Are Changing

Other firms are successfully demonstrating that they can gain a competitive edge
by being closer to local consumers. This does not mean that they are not trying to
streamline their operations but they are not doing so at the expense of the
consumer. Significantly, some have chosen to manage the business differently
despite the existence in their industry of strong competitors following a more
global marketing approach.

□ Electrolux, the Swedish company, is number one in home
appliances worldwide. It controls 25 per cent of the global market and
20 per cent in the United States as well as having good margins and
strong profitability. By contrast with its key competitor Whirlpool
which has developed a strong global marketing approach, Electrolux
has achieved leadership with a wide range of local brands-there are 50
worldwide including Frigidaire, Zanussi, Arthur Martin and AEG-and
marketing targeted to the needs and habits of local markets. Economies
of scale have been achieved by centralising the buying function and
streamlining the manufacturing operations. One single plant, for
example, is delivering to most European countries but some local plants
are kept to fulfil specific local needs.


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□ In the beer market, the Belgian brewer-Interbrew-is now number
two in the world, just behind the leader Anheuser Bush but in front of
Heineken. Five years ago, Interbrew was not in the top 10 but is now
the most profitable brewer worldwide. The company has achieved
success through the acquisition of strong local brands and now has 180
of them including Canada's Labatt, the UK's Whitbread and Belgium's
Stella Artois.

These examples are not intended to prove that the multi-domestic is better than
the global marketing approach. They only show that there are different ways for an
international firm to succeed today in the business, even alongside 'global'
competitors.

5. Is it Time to Rethink Marketing Strategies?

As explained in this article there are unquestioned benefits in global marketing
such as economies of scale, cost reduction and speed to market. But in some cases
the advantages of the traditional multi-domestic approach are being sacrificed.
Global marketing can lead after several years to heavy centralisation, insensitivity
to local markets, poor local execution, no adequate products or damaged brand
equity or image.
Companies like Coca-Cola, Electrolux or Interbrew, however, are sensibly
adopting new ways of managing their businesses. They believe that the needs of
local consumers are important and they are developing a localised approach to
satisfy these needs.
Companies need to evaluate more carefully the essentially financial benefits of
global marketing and ask if they are good for the long-term development of their
business. Perhaps they should return to the basis of good marketing: the ability to
develop products that best fulfil consumer needs.


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