Coca-Cola International Strategy Entering China: Case Study

Coca-Cola International Strategy Entering China: Case Study

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Embry Riddle Aeronautical University

Coca-Cola: Case Study

When a company decides to enter an international market just like entering any other market, the company must ask “Why? Where? And How?” (Carpenter & Sanders, 2009). A company can do this by using the 5 element strategy diamond and the 1-2-3 model. These models put a company in a “good position to determine the scale and scope of [their] international strategy” (Carpenter & Sanders, 2009).

In the case of the 1-2-3 model with Coca-Cola, the “Why?” asked why expand into another geographic arena--“is the economic logic compelling and do our differentiators apply?” (Carpenter & Sanders, 2009). For Cola-Cola, they had already expanded into China in the early 1920s and had built 3 bottling plants in larger cities in China. However, when the People’s Republic of China was formed in 1949, all foreign direct investment and direct production activities by a foreign company were not allowed. Coke was asked to leave and the bottling plants were nationalized. Finally 30 years later, China announced the ‘open door policy’ that allowed foreign trade and investment back into China but under strict control. (Carpenter & Sanders, 2009). The question why Coke entered the Chinese market again after all of initial investment and loses was extremely risky but I believe they understood they had strong differentiators. Their strong brand name provided them the ability to have a strong competitive advantage right away.

The “Where?” Asked which new geographic area. Coca-Cola determined it would be most beneficial to “focus solely on those highly competitive urban areas”. In my opinion this capitalized brand recognition also since most of the workers of the plants lived and worked in the cities and would likely purchase the products and because urban customers were more likely to be familiar with the Coca-Cola brand name than the...