Role of a Management Consultant in PepsiCo and Coca-Cola - Essay Example

? Topic There are few giant multinational corporations in the world who have stood the test of time for more than a century. Since 1886, Coca Cola has defined itself as a premium world-class beverage company, capable of making millions of customers around the world across continents and generations, regardless of cultures and races. It is a brand which is known throughout the world, partly because, Coca Cola is one of those brands that have remained committed to their originality in terms of products and their offerings. And this established the brand into becoming known as an American icon; it symbolized ‘continuity, stability, and tradition’ (Hutt, P. B., 2001). The same brand is part of a long, classic, one-on-one competition with its archrival, PepsiCo. Inc. Coca Cola experienced a rapid growth in sales and consumer –preference, thanks to Roberto Goizueta who raised Coca Cola to the heights of performance while he was CEO from 1981 to 1997. Using his sharp analytical skills and market foresight and risk-taking tendency, Goizueta took Coca Cola into the direction of high sales, increasing market-share, revenue gains and high profit margins. He revolutionized how the soda industry is run and showed the world that just by focusing on Coca Cola’s principle black beverage; the company became a top-notch giant. This very philosophy inspired Coke’s followers, and even the Board of Directors, which included tycoons such as Warren Buffet, Herbert A. Allen and Donald Keough. They remained admirers of this approach and frowned upon any notions of diversification, unlike what was happening inside PepsiCo. Throughout the nineties, through this very approach, Coca Cola saw its rise in the world of beverage as an undisputed winner over PepsiCo. Inc. Goizueta took some very successful decision during his time, one of which was to form a new company under the name Coca Cola Enterprises, in 1986, which handled the US bottling operations for Coca Cola. This, immediately, helped Coca Cola in terms of the debt burden and also, raised their stock volumes, while reassuring quality bottling and distribution. (Cravens & Piercy, 2009). According to Cravens and Piercy (2009), this move turned out to be quite a profitable one as Coca Cola could erase off $2.4 billion from the balance sheet. Moreover, having formed Coca Cola Enterprises, US bottling operations were handled well and timely distribution channels were assured. He was known to be risky, as he himself used to admit. His believes were of the nature that risk-taking is a necessity for growth and development. In a growing consumer-market, playing safe all the time could mean losing out on opportunities and business. Goizueta is renowned for another important move: his non-contemporary approach of globalization of brands. ‘Think global, act local’ was the underlying philosophy of Goizeuta to expand and capture foreign markets. Unlike the general wave of globalization, he insisted that, to develop a successful multinational brand, it was important to think globally while acting in the local context. He explained that standardization and uniformity represent a strong and consistent image of a brand and it triggers a sense of surety in the minds of consumers worldwide. This uniformity can help create a very powerful image of the brand; while also considering vital selling points and marketing campaign specifics of differing cultures and geographies. At the very end of all this positive period, it did become quite apparent that the direction in which Coca Cola was heading into, had a dead-end. Arguably, his headstrong, upfront style of leadership, even though raised Coca Cola to reach new heights in the short-run; however, his moves, somehow, created a recipe for future disaster. His decisions focused more on the bottling operations than the actual customers. It is important to note that Mr. Roberto Goizueta maintained that Coca Cola did not need diversification to increase revenue. Instead, according to Suhaib Riaz (2008), he borrowed millions and billions of dollars to acquire bottling companies and distributors to spread Coca cola’s accessibility and ubiquity. This artificial bubble did inflate for a certain period of time, Coca Cola saw its rise since focus was shifted towards limiting down the product line to the 4 soda drinks - Coca Cola, Sprite, Fanta and Diet Coke– and a Fruit juice non- carbonated soft drink product, Minute Maid. These 5 product variants were marketed throughout the world regions while taking on the strategy of ‘think global, act local’. Goizueta took creative initiatives in terms of launching a new version of Coke – Coke II, which had a less strong constituency and a sweeter taste than the old coke (Riaz, 2008). Contrary to what Goizueta and his Coke staff anticipated, this failed to be a hit move since it brought much scepticism from various regions of Coca Cola consumers. Analysts argued that since Coca Cola had developed an image of standardized taste and quality for so long, any alteration, or even a modern version of Coke was not approved by the majority of millions of customers. Ultimately, customers demanded the re-launch of the old flavour of coke which was re-launched as ‘Coke Classic’. This attacking crisis management was well-responded-to, and it helped Coke gain more loyal customers as the ‘Coke Classic’ fulfilled the long-time consistent image of Coca Cola. Indeed, when the ideology revolves around steadiness and regularity of taste and brand image, drastic variants such as Coke II can prove to be failed attempts. However, of course, flavour variants for Fanta and Coke were part of the little diversification that Goizueta and his Board f Directors approved of. Coke II was among one of the bad decisions that were taken during Goizueta’s reign. Another decision, which comes under a lot of criticism, is the numerous acquisitions of bottling niches that took place during Goizueta’s era. Goizueta seemed to have lost sight of who the real customers were, something he himself admitted to during an interview taken by Betsy Morris for Fortune in 1995. He said that they lost sight of who the true customers were, and it was only later than they realized that it was neither the bottling partners nor the distributors, instead, it was the consumers who drink Coca Cola’s beverages. Having mentioned the above points, it would be unfair to not mention the various positive steps that were taken during Goizueta’s that notched up Coca Cola’s customers’ loyalty, its financial situation, its revenue growths and market value. Goizueta’s approach of uniformity, arguably, aligned well with the 80’s and 90’s market situations to bring great results for Coca Cola; however, it is worth discussion if those decisions had enough ability to sustain the test of time, or rather those decisions only created an artificial bubble of increased sales, revenue and it was only a matter of time before the bubble would pop, keeping in mind the huge money spent on distribution, rather than the final customer. Let’s shed some light on the contrasting innovative strategies employed by the two archrivals PepsiCo and Coca Cola. One of the most renowned firm competitions involved these two multinational giants. Indeed, Coca Cola and Pepsi have always been arch rivals for each other and they have often been part of advertisements wars against each other. At various instances since the last 100 years of their rivalry, they have competed rigorously to capture each other’s market share and customers, regardless of geography. However, looking into both companies’ marketing and innovative strategy, there are factors worth consideration. Coca Cola, as explained above, under Goizueta’s reign, focused primarily on the philosophy of consistency and uniformity by using most resources and energy to market the Coca Cola beverage while injecting spending on distribution and bottling operations. On the other hand, Pepsi kept track of the changing consumers markets, and used a flexible approach towards decision-making. That meant diversification and expansion of product line; acquisition of Frito-Lays, launch of products variants such as mineral water and fruit juices. According to Cravens and Piercy (2009), this differing vision, subsequently, caused Pepsi to catch up on Coca Cola’s market share and revenue while Coca Cola experienced decline in sales revenues and annual profits. Thus, what becomes evident from this is that by keeping firms sensitive to market fluctuations and consumer preferences, it certainly allows firms to grab opportunities that are created in rapidly-changing markets. This is, probably, why Pepsi was able to lift its game and come up to challenge Coca Cola’s high market share and sales volume under the good times of Goizueta. While discussing what brought Coca Cola down, it should be followed by a discussion of how Coca Cola regained some business strength. Mary Minnick is one corporate tycoon who helped Coca Cola recover some of its lost market share and brand image. Mary Minnick can be regarded as the upfront spearhead who, potentially, ‘saved’ Coca Cola from further decline at the turn of the century. Her unshakeable belief in her goals and ideas helped her grow fast in the corporate arena and become an integral part of the Coca Cola entity. Contrary to the bureaucratic belief of coke only persistent during and after Goizueta’s era, Minnick strived to develop flexibility and diversification in the Coca Cola universe. According to Cravens and Piercy (2009) in Case 6-6, Minnick believed that Coca Cola needed to recover from decline and revive its high market share by diversifying its product categories into emerging market trends of beverages – tea/coffee, energy drinks, sports drinks and mineral water. She was headstrong on the fact that new mentality of consumers around the world is inclined towards non-soda drinks, such as sports drinks and energy drinks. To start the recovery process, she had to struggle through numerous barriers from within the company, primarily coming from the conventional school of thought of soda-centric ideology. Through all the resistance, she proved that diversification and an expanded product line is the new recipe for success. As a matter of fact, she seemed to show an understanding of the developing consumer market. It was her insight to comprehend the fact that their archrivals, PepsiCo, implemented a different sort of innovation strategy which involved expansion of product category and diversification; something that was considered unacceptable under Goizueta’s philosophy. PepsiCo was able to threaten Coca Cola’s market share and revenue status only because of its adaptability with the market trends; avenues were created for revenue earnings and in the wake of changing times, the product line was not kept narrow or limited. She understood that the new-age consumer of beverages is slightly inclined towards new types of drinks. Energy drinks and sports drinks rivals such as Red Bull and Gatorade and showed their success and it was no rocket science to see these trends. With the boom in communication technology and the internet lifestyle, the new-age customers tends to be much more aware of the good and bad for their health, hence the need for sports drink, mineral water, tea/coffee is overshadowed by the primitive and monopolistic cloud of carbonated soda drinks. While emphasis on the legacy of carbonated coke should not be minimized, Minnick understood that much focus should be laid on new types of beverages that are gaining consumer preferences throughout the world. Indeed, the world saw a change in how consumers determine their lifestyle, and health-awareness has seen a rise in the past couple of decades. Coca Cola’s product strategy, targeted this exact consumer trend, whereby the beverage market has seen an inclination towards non-carbonated drinks. While having discussed the non-carbonated drinks strategy, an important point to consider is if the trend will ever shift back to carbonated soda. Certainly, this is something only time will tell, but for now, the trend of the 21st century is a shift towards non-carbonated drinks and any successful marketing and innovative strategy must be formulated keeping this fundamental market trend under utmost consideration. References Cravens, D. W., & Piercy, N. F. (2009). Strategic marketing (9th ed.). Boston: McGraw-Hill. ISBN: 9780073381008 Hutt, P. B.(April 16th , 2001) The Image and Politics of Coca-Cola: From the Early Years to the Present. LEDA at Harvard Law School. Retrieved on 28th August, 2012 from http://leda.law.harvard.edu/leda/data/398/AlOthman.html Riaz, S. (2008) Strategic Leadership at Coca-Cola: The Real Thing. Richard Ivey School of Business; the University of Western Ontario. Retrieved on 30th August, 2012 from http://m.asiapacific.ca/sites/default/files/9b08M040w.pdf Verdin, P. & Heck, N. V. (2007) Beyond Globalization and its Myths: Learning to Love Diversity. Notes on Globalization and Strategy: IESE Business School; University of Navarra. Retrieved on 30th August 2012 from http://www.iese.edu/en/files/AR-Apuntes9.pdf Read More