Reference no: EM133429115

Question: When it comes to culture, even the biggest multinationals can get it wrong. In 1998, Coca-Cola, the US soft beverage giant, launched the 'Heaven and Earth' bottled tea drink in to the Chinese market. The product, popular in the USA, was fruit-flavoured and sugary. The instant tea market in China was a virtual duopoly being dominated by two Taiwanese companies: Uni-President and Master Kong. Coke admitted defeat by withdrawing the product after three years. Coca-Cola then tried again. In 2001, it launched the Lanfeng honey green tea drink and, in 2002, Sunshine iced fruit tea. In 2004, it got together with Nestlé to launch Nestea, and in 2005 it offered the Tea Research Workshop series, with two versions of tea: one aimed at men and the other at women. They all flopped even though the Chinese instant tea market was tripling in size each year. Coke tried other drinks products in the Chinese market including water, sports beverage and lemonade, and the Simply Orange brand of Minute Maid. With the exception of Minute Maid orange juice, they all failed to make an impact in terms of brand recognition or market share faced with Huiyuan, China's largest juice producer, which is highly regarded by Chinese consumers. In 2015, Coke acquired Xiamen Culiangwang, a Chinese company primarily selling health-conscious, whole grain and plant-based protein drinks. The market for plant-based beverages was growing at more than 20 per cent per year. However, Xiamen Culiangwang trailed behind Deyufang, Yili and, Mengniu in this market. Some analysts put Coke's disappointing performance down to its failure to take cultural factors into account. Faced with its inability to crack the market, the company got social scientists to carry out research on Chinese culture to find out why. They found that cultural attitudes to tea in China contrasted sharply with that in the USA. Americans associate tea with indulgence and pleasure so adding fruit flavours went down well with US consumers. Tea consumption in China has a very different cultural meaning bound by a set of rules, some explicit and others implicit. Strong tea might be served to friends or to those with whom one wants to build a closer relationship. It would never be offered to people one has just met. Tea products therefore need to be offered in different strengths. Consuming tea products should remove irritations and distractions like noise. Following the research, Coke eliminated sugar and fruit flavours from 'Heaven and Earth', and gained some success. Other commentators suggest that Coke's problems in China stem from an over-centralized and bloated, bureaucratic structure which means that decisions have to go through several levels in the organization before being signed off. Coke's brands are centrally managed in the USA, meaning that local managers do not have the authority to adapt brands to local conditions. It is also claimed that Coke's marketing and legal departments act independently leaving it unclear which one the right to make decisions and making coordination difficult.

Answer the following with respect to the paragraph given above.

1. Why is Coca-Cola so keen to get into the Chinese market?

2. Discuss the reasons for Coke's failures in the Chinese beverages market.

3. Give reasons for Coke's acquisition of Xiamen Culiangwang