Coca-Cola's Re-Entry and Growth Strategies in China|Business Strategy|Case Study|Case Studies

Coca-Cola's Re-Entry and Growth Strategies in China

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Case Details:

Case Code : BSTR140
Case Length : 12 Pages
Period : 1978-2004
Organization : Coca - Cola
Pub Date : 2004
Teaching Note : Available
Countries : China
Industry : Beverages

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Localisation Strategies

Long before Coke was given permission to sell its products to the Chinese people, it began developing production capabilities through various joint ventures with the Chinese government.

In sharp contrast to its strategies in the past (in China and other countries as well), initially Coke did not own any bottling plants in China. It imported the concentrate and sold it to bottling plants. The bottling plants (that it sold the concentrate to) had been built by Coke and handed over to the Chinese government. The first of these plants was built in Beijing and was operational in 1981. According to an agreement between Coke and the state-owned China National Cereals, Oils, and Foodstuffs Import and Export Corporation (COFCO) in 1980, Coke agreed to build a plant and hand it over to the government in exchange for approval to expand distribution and sales in China. The second bottling plant was built in Guangzhou and was also handed over to the Chinese government in 1982...

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China, Coca-Cola's Second Largest Market in Asia

Coke has enjoyed great success in China and in the Asian markets on the whole. According to the 2003 Annual report, Coke's Asian operating segments boosted its revenues when growth in its US market was slowing down.

In terms of volume, China was Coke's second largest market in Asia in 2003 (Refer to Exhibit II) and Coke estimates that China will beat Japan to the top position in 2004. Encouraged by its success in big cities and towns, Coke wants to reach more customers in rural areas. "We'd grown well by reaching the top 100 cities, but how many people were we reaching? Rather than continuing to focus solely on those highly competitive urban areas, Coke must push aggressively into the rest of China and India", said Patrick Siewert, Coke's East and South Asia group president. In early 2004, Coke announced plans to build two new bottling plants in China's western provinces to tap the market potential of China's rural areas...


Exhibit I: Coca-Cola China Ltd.'s List of Bottling Enterprises (As Of March 2000)
Exhibit II: Percentage-Wise Breakup of Total Unit Case Volume in Asia Operating Segment

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