Thursday, November 1, 2012

How Mr. Muhtar A. Kent made Coca-Cola bullet proof?


Mr. Muhtar A. Kent is the current CEO and chairman of Coca-Cola. His father, Mr. Necdet Kent, was the Turkish consul-general in America. Mr. Kent was born in 1952 in New York.

Whats so special about Mr. Kent?
What I find most striking about Mr. Kent’s leadership is his expertise in business forecasting, his strategic focus on globalization and his revival of Coca-Cola’s focus on consumer needs and wants. Basically, globalization is a part of business forecasting and Mr. Kent’s focus on business forecasting suggests that he is a visionary, concerned about future opportunities. Additionally, his actions to revive Coca-Cola’s focus on consumer needs and wants, advocates his ability to focus on current problems at the same time. Mr. Kent has this unique ability to plan ahead but at the same time he does not lose sight of current challenges. It is remarkable that how Mr. Kent balances these two opposite approaches and makes the best out of them to achieve his goals.

Business forecasting
Mr. Kent has a unique ability to see business opportunities where others may see nothing. He can predict the direction and dynamics of the market, i.e., consumer demand. For example, when Berlin wall fell in 1989, he realized at once that there would be a rapid increase in demand and an opportunity for the business to grow. There were 400 million people behind the iron curtain who were all potential customers for Coca-Cola. He seized the moment and took full advantage of the opportunity; Coca-Cola built more than 20 plants in less than 30 months to meet the rapid increase in demand. This initiative resulted in tremendous growth and set the pace of successful expansion in new territories which continues through today. [9]Mr. Kent recognized early in his career that continuous growth for Coca-Cola is only possible through global diversification. Company growth and profits for the past few years is due to this global diversification. As shown in figure 1, total annual revenues have grown from $31,944 million, in 2008 to $46,542 million, in 2011, even when the whole world economy was in recession.[10]
Figure 1 - Source: The Coca-Cola Company Revenue Growth, YCharts [12]
Furthermore, Mr. Kent has introduced the new innovative method of water recovery system. This system will allow Coca-Cola to reduce operational water needs and improve water use efficiency by up to 35 percent in manufacturing plants. [25] This improvement in water use efficiency will result in cost reduction and more profits for Coca-Cola; moreover, it also addresses the future threat of water shortage. These initiatives show Mr. Kent is able to assess future opportunities and threats. More importantly, Mr. Kent takes appropriate practical steps to address these issues effectively.

Globalization Strategy
To diversify globally, Mr. Kent launched numerous initiatives to expand Coca-Cola as a global brand. First he improved the company’s working relationship with its 300 bottling partners, operating worldwide. These bottling partners provided useful information about their local markets to Coca-Cola. This healthy relationship with the bottling partners resulted in a better understanding of consumers in the international market. Once Mr. Kent was aware of the market situation, he invested heavily in countries where he could predict growth opportunity. For instance, Coca-Cola has committed investment of 5 billion dollars in India, 3 billion dollars in Russia and 4 billion dollars in China.[18][19][20] These are investments in the future towards globalization; moreover, Coca-Cola has awarded more than 70 million dollars to 263 Community Organizations Worldwide in 2011 through its primary international philanthropic arm “Coca-Cola foundation”.[10]These initiatives have resulted in improving Coca-Cola’s image worldwide, evident from its rise to rank 4 in 2012“World’s Most Admired Companies 2012”. Mr. Kent is exploring new markets for growth opportunities. For Coca-Cola the United State’s consumer market is at a mature state and the competition is fierce, whereas in the global market there is plenty of room for growth. Mr. Kent’s interest in emerging markets is practical and justified, as the new middle-class consumer market is rapidly growing in countries like China and India. Coca-Cola is already benefitting from globalization and will continue to do so in the future.

Reviving customer focus
When asked about his own business philosophy, Mr. Ray Kroc, founder of McDonalds, has been quoted as saying: “Look after the customer and the business will take care of itself” [26]. Mr. Kent knew that customer focus is crucial for success and survival of Coca-Cola in today’s highly competitive consumer market. In 2008, when Mr. Kent became CEO, he inherited a company that suffered from an inward-looking, “arrogant” corporate culture and one that was losing customer focus. In order to succeed, he knew that they would need to focus on the consumers’ rapidly changing needs and wants. He resolved this problem by bringing in new people from all over the world and changing the corporate culture of Coca-Cola. Mr. Kent strategy worked and he was able to fulfill the consumers physical as well as emotional needs, evident from Coca-Colas’ rise to rank 4 in 2012“World’s Most Admired Companies 2012”. Additionally, in order to address the sensitive issue of “obesity” that is so prevalent in many developed nations across the world; he has taken countless actions at every level. Coca-Cola partnered with Washington Nationals against child obesity to increase awareness. [15] When asked a question regarding “health and obesity” in an interview by Mr. Charlie Rose, Mr. Kent explained that Coca-Cola is offering wide array of products with low or zero calories to address this problem; moreover, Coca-Cola is also offering numerous healthy life style products such as vitamin water and juices. He explained further that the key to “healthy life style” is to offer consumer the wide array of choices in products. Coca-Cola has offered around 2000 additional products since 2008, totally more than 3500 products in more than 200 countries, 20 percent of these are no or low calorie products.[16]Similarly, Coca-Cola in its pursuit of promoting “healthy lifestyle” has committed 8.4 million dollars to setup 100 fitness centers in USA and to support fitness and nutrition programs around the world.[17] Mr. Kent has gone the extra mile to improve Coca-Cola’s image; as a result, he was able to successfully create a positive emotional link between Coca-Cola and the consumers. This emotional link is the key to long term sustainability and competitive advantage over competitors.

Coca-Cola has grown in all aspects from product portfolio to new markets; Coca-Cola is offering many new products and also expanding to new markets. Mr. Kent has achieved this growth by improving the corporate culture of Coca-Cola. Changing culture of such an enormous organization is not easy and it is a task next to the impossible. Mr. Kent has also revived the Coca-Cola’s lost customer focus and has brought back the culture of winning. However, Mr. Kent is limiting growth potential of Coca-Cola by limiting its business scope only to “Hydration” business. Coca-Cola can easily increase the scope of its business by including additional products to its current product portfolio, for example candies, sweets and ready-to-eat products. In an interview with HBR (Harvard Business Review), Mr. Kent predicts massive urbanization in the coming years that will result in the rapid increase of the middle class globally. If this is the case, is it logical for Coca-Cola to limit itself only to hydration business? Trends like urbanization, increase in value conscious consumers, and massive increase in middle class indicate tremendous opportunity for ready-to-eat products. As we get busier every day the demand for ready-to-eat products will dramatically increase. I believe Coca-Cola already has an edge over other brands and it would be a great strategic move for Coca-Cola to expand its business scope beyond “Hydration”.

1.      "Muhtar Kent: Chairman of the Board and Chief Executive Officer". The Coca-Cola Company. Retrieved 2012-07-04
 2.      "Alumni services". Cass Business School. Retrieved 2012-04-18.
 3.      “2012 The Coca-Cola Proxy”. The Coca-Cola Company. Retrieved 2012-07-04
 4.      “The Coca-Cola Company Share Price”. NYSE (New York Stock Exchange). Retrieved 2012-07-04
 5.      “World’s Most Admired Companies”. CNN Money. Retrieved 2012-07-07
 6.      “Global 500”. CNN Money. Retrieved 2012-07-04
 7.      “Shaking Things Up at Coca-Cola”. Interview with Mr. Muhtar Kent by Adi Ignatius.
Harvard Business Review. Retrieved 2012-07-04
 8.      “Brief historical overview”. Berlin Wall Online. Retrieved 2012-07-06
 9.      “A conversation with Muhtar Kent”. An Interview with Mr. Muhtar Kent by Mr. Charlie Rose. Retrieved 2012-07-06
 10.  “2011 Annual Review”. The Coca-Cola Company. Retrieved 2012-07-06
 11.  “2012 Q1 Earning Release”. The Coca-Cola Company. Retrieved 2012-07-06
 12.  “The Coca-Cola Company Revenue Growth”. Retrieved 2012-07-06
 13.  “America’s Most Admired Companies, Top 20”. CNN Money. Retrieved 2012-07-07
 14.  “How To Be Marketing Focused”. Dr. Dennis Rosen. Retrieved 2012-07-07
 15.  “Partner Against Child Obesity”. The Coca-Cola Company. Retrieved 2012-07-07
 16.  “Product Descriptions”. The Coca-Cola Company. Retrieved 2012-07-07
 17.  “Coca-Cola Support Active Healthy Lifestyles”. The Coca-Cola Company. Retrieved 2012-07-07
 18.  “3 Billion Sustainable Growth India”. The Coca-Cola Company. Retrieved  2012-07-08
 19.  “3 Billion For Sustainable Growth in Russia”. The Coca-Cola Company. Retrieved  2012-07-08
 20.  “Company Invests US4 Billion in China”. The Coca-Cola Company. Retrieved  2012-07-08
 21.  “Supporting Reconstruction in Japan”. The Coca-Cola Company. Retrieved  2012-07-08
 22.  “Muhtar Kent's new Coke”. CNN Money. Retrieved 2012-07-09
 23.  “CandyLand Products”. CandyLand website. Retrieved 2012-07-09
 24.  “The coming urban explosion”. McKinsey. Retrieved 2012-7-09
 25.  “Innovative Water Recovery System”.  The Coca-Cola Company. Retrieved 2012-7-25
 26.  “Quotes”. Quotes. Retrieved 2012-7-27

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