Company Background and Strategy
In the modern global food and beverage industry, Coca-Cola, Inc. has cemented its image as a leading manufacturer of its brand carbonated drink and other products (The Coca-Cola Company, 2018). However, the company has been experiencing minor hindrances in its recent performance, with a slight drop in revenues (The Coca-Cola Company (KO), 2018).
To advance in the global market and create a sustainable competitive advantage, Coca-Cola has adopted the Global Standardisation Strategy (GSS), which has affected its decisions regarding Supply Chain Management, especially the use of suppliers’ services and the levels of local responsiveness pressure. While the current approach has affected the company’s opportunities in the global market and its performance levels, in general, rather positively, it has also created several challenges for Coca-Cola to address.
Coca-Cola’s Global Integration Pressure
Company Analysis
Commodity Standardisation
The current global integration pressure levels are quite high for Coca-Cola, which justifies the application of the GSS framework. The GSS tool helps to reduce the impact of global integration by reducing the expenses taken to produce the drink (Kayaba, Boyraz, & Derdiyok, 2017). By introducing uniform requirements for the production of the rink, the company has managed to cut costs significantly. As a result, Coca-Cola has managed to address the pressure of the global integration process by establishing uniform high-quality standards and upholding them. At the same time, production costs have been lowered since no unexpected changes in the use of resources were possible after the integration of the global standardization principles
Factories Distribution
Similarly, the adoption of the GSS has helped Coca-Cola to rearrange its manufacturing sites more effectively. For example, the organization has managed to allocate its factories across the world, preferring the areas where the expenses for the labour force are the lowest, such as China and Malaysia (Dhesi, 2018). The specified step is rather effective in reducing the pressure of the global integration process and its effects. However, a more promising framework for distributing factories can be applied to improve the current performance of the organization. Coca-Cola could expand its bottling operations to Europe and other states in order to enhance the SCM processes (The Coca-Cola Company, 2016).
Outsourcing to Foreign Suppliers
Since Coca-Cola follows the principles of the GSS directly, it tends to use the services of trusted suppliers. Therefore, the organization does not use outsourcing when it comes to supply services (Kotabe & Murray, 2018). Although the identified approach makes it possible for the company to maintain its production standards, it affects the firm’s opportunities for cost reduction.
Aspects of Low Local Responsiveness Pressure
Reasons for the Lack of Significance of Consumers’ Characteristics
In its marketing approach, Coca-Cola does not take customer-specific characteristics into account due to the lack of local responsiveness pressure. The propensity to disregard the unique qualities of consumers aligns with the company’s use of GSS, yet it may require adjustments in case the corporation decides to diversify its products. For instance, to increase the number of its customers, the organization may need to rebrand its product, at the same time maintaining GSS.
Reasons for Ignoring Local Practices and Infrastructure
In an attempt to follow the principles of GSS, Coca-Cola disregards state-specific principles of manufacturing and the use of the local infrastructure. The specified decision helps to provide a homogenous product that is instantly recognisable and relatable (Lee, Yang, Miserski, & Lambert, 2015). Although the company does not diversify its marketing approach due to the application of the GSS principles and does not use the local infrastructure, it manages to remain appealing to target audiences due to its brand recognition and the strong brand image.
Absence of Specific Government Demands
Following the principles of the GSS, Coca-Cola does not adhere to any specific government demands unless it implies violation of the existing regulations. As a result, the organisation retains its flexibility in decision-making and trade, which is critical for negotiating in the target market. The selected approach implies not only benefits but also certain problems, such as the need to comply with the global policy of taxing soda (Taylor, 2016).
Analysis of the Current Strategy
Advantages
The GSS approach that Coca-Cola has been deploying has affected the organisation positively. For example, it has provided the company with a chance to establish a meaningful presence in the global market and create a very strong brand image. Furthermore, the GSS framework helped Coca-Cola to overcome the challenge of adapting toward a vast number of foreign cultures and traditions (Tian, 2016). After the firm had set a range of characteristics that it defined as its unique brand specifics, it did not have to alter them to fit a local market.
Disadvantages
Among the problems that the GSS framework implies, one should list the inability to establish an emotional connection with each customer due to the lack of appeal to buyers’ cultures (Haron, 2016). Thus, Coca-Cola could use a more culture-specific segmentation framework in its marketing to cement its image of a global organisation. Thus, the corporation will receive a chance to build stronger ties with the global community.
References
Dhesi, D. (2018). Coca-Cola to invest more in Malaysia. The Star. Web.
Haron, A. J. (2016). Standardized versus localized strategy: The role of cultural patterns in society on consumption and market research. Journal of Accounting and Marketing, 5(151), 2-13. Web.
Kayaba, T. D., Boyraz, G., & Derdiyok, R. (2017). Examining Coca-Cola and Pepsi brands under the basis of globalisation and multinational companies. International Journal of Academic Research in Business and Social Sciences, 7(12), 351-358.
Kotabe, M., & Murray, J. Y. (2018). Global sourcing strategy: An evolution in global production and sourcing rationalization. In Advances in global marketing (pp. 365-384). New York, NY: Springer.
Lee, A., Yang, J., Mizerski, R., & Lambert, C. (2015). The strategy of global branding and brand equity. New York, NY: Routledge.
Taylor, K. (2016). Governments around the world are taxing soda – And it’s forcing Coke and Pepsi to make major changes. Business Insider. Web.
The Coca-Cola Company. (2016). New bottlers to join U.S. Coca-Cola system; three existing bottlers sign letters of intent to expand. Web.
The Coca-Cola Company. (2018). The Coca-Cola Company reports solid operating results and a positive start to 2018. Web.
The Coca-Cola Company (KO). (2018). Web.
Tian, X. (2016). Managing international business in China. Cambridge, UK: Cambridge University Press.