COLLEGE OF BUSINES/ATC UNIVERSITI UTARA MALAYSIA BFMA 6043 INTERNATIONAL BUSINESS SEMESTER 2011/2012

INDIVIDUAL ASSIGNMENT NO: 2

PREPARED FOR :

DR. SABRI

PREPARED BY :

MOHD GHAZALLY BIN ABDUL RAZAK (MATRIX NO: 808707)

SUBMISSION DATE : 4TH. DECEMBER 2011

Coca Cola Case Study Case Discussion Questions Question 1 Why do you think that Roberto Goizueta switched from a strategy that emphasized localization towards one that emphasized global standardization? What were the benefits of such strategy? Answer 1 Roberto Goizueta switched from localization strategy to global standardization strategy because during his initial control over Coca Cola Company in 1980s, the Coca Cola brand has already been marketed to more than 76 countries in the world and the subsidiaries were managed individually by the local management to suit with local taste and preference. This practice has given bad impact on the company profit as there were a lot duplication of functions, smaller scale of production runs and too much of customization which limits the ability of the firm to capture the cost reduction. The benefit of Global Standardization is the company will enjoy increase profitability and profit growth by reaping the cost reduction through economies of scale(produce in large quantity), learning effect(the production efficiency is improving from time to time as the worker become expert after repetitive sequence) and location economies(products value creation is done at the optimal location/environments). So by having the Global Standard, the product is produced at the most economic price and will create better perceived value for money spent by the customer. Question 2 What were the limitations of Goizuetas Strategy that persuaded his successor, Daft, to shift away from it ? What was Daft trying to achieve? Dafts strategy also did not produce the desired results. Why do you think this was the case? Answer 2 Goizuetas Strategy has a limitation on the product that was suit for local customization as his approach was more on producing the standard product for Global market. By having this strategy, his focused was on increasing profitability and profit growth by reaping the cost reduction that comes from economic of scale, learning effects and location economies. Douglas Daft has taken different approach by taking localization approach strategy. In this approach Daft has given back the autonomy power to the Country Manager to decide for any changes that was suit to customers expectation. The strategy taken by Daft was not really successful because even though he managed to meet the customers requirement by customizing the product but actually in total the company gained lesser profitability and profit growth due to higher cost per unit of products produced. Question 3 How would you characterize the strategy Coke is now pursuing? What is the enterprise trying to do? How is this different from the Goizueta and Daft? What are the benefits? What are the potential costs and risk? Answer 3 I believe that Coke is now trying to pursue transnational Strategy as it has been practiced by many multinational companies like Procter and Gamble, Xerox and etc. Goizuetas approach was on Global Strategy and Dafts approach was more on localization strategy. The transnational Strategy actually is a combination of both Global and Localization Strategy. The firm seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness. Interchange still occurs between the home base and foreign subsidiary and between foreign subsidiaries - a process known as global learning.

Benefit of Transnational Strategy a) Core competencies exchangeable b) Experience and location economies c) Locally responsive

Potential Cost a) Slightly higher price compared to localization strategy due to minimum adjustment to suit foreign country requirements.

Potential Risk a) Will be lacking of local responsiveness. b) Will be lacking of location economies. c) Cant exploit learning effect.

Question 4 What does the evolution of Cokes strategy tell you about convergence of consumer tastes and preference in todays global economy? Answer 4 Every location has different taste and preference according to the country, culture, environment, exposure and etc. Due to that, the producer of the product has to do minor adjustment on its product to suit with current situation in order to gain higher products sales and to penetrate bigger market. Based on Neville Isdell strategy, the company took moderate action between Goizuetas and Dafts strategy where the product was produced based on the local tastes and preference and later leveraging good ideas across nations. The approach was not the one-size-fits-all ethos like Goizuetas era but the consumer taste and preference is considered when setting the strategy and basically the response from the market is very encouraging.