What Conceptual Blocks Were Experienced by Coke Executives?

Managerial Skills and Professional Experience

Spring 2017

Homework Questions 4

Due: February 21, 2017

3.1. What conceptual blocks were experienced by Coke executives?

  Coke began to very worry about their future development because the market share of coke declined from 18 percent to 12 percent, but in the meanwhile, Pepsi’s market share increased from 4 percent to 11 percent. Not only that, accounting to Coke’s blind taste test, Coke drinkers more preferred the taste of Pepsi instead of Coke. Thus, Coke’s management came up with two alternatives in order to solve this problem. Firstly, Coke wanted to ensure their market share, which make customers more aware of the Coke. Coke wanted that their product placement was more widespread and better positioned than Pepsi’s so that customers can easier to get Coke product than Pepsi’s. The second alternative was to engage in a research and development effort and to produce a new cola with better taste to compete with Pepsi. And Coke’s management choose the second alternative to face the situation. However, the New Coke was a sales disaster and the market share even decreased more. Coke executives had to reintroduce the Coke Classic several months later to save the company.

  In this case, Coke executives were experienced several conceptual blocks. The first one is the stereotyping based on past experiences in commitment conceptual block. In this conceptual block, individuals tend to use their past experiences to determine and solve the present problems. Because of the decreasing in the market share of Coke, Coke executives decided to develop a new taste of cola to meet customers’ preference due to the result of the blind taste test. However, Coke executives did not consider the problem thoroughly and critically. They only focus on the one blind taste test, then according to their experience to decide make a new taste that close to the taste of Pepsi. Although Coke executives also came up another alternative, both alternatives and their final decision was not base on the comprehensive or overall market research but according to their pasted experience.

  The second conceptual block is occurred as a result of compression of ideas. According to the textbook, looking too narrowly at a problem, screening out too much relevant data, and making assumptions that inhibit problem solution are common examples. In this case, Coke executives did not find the real reason of decreasing in the market share and figure out why Pepsi’s market share and sales increased tremendously. They even did not consider what will happen after they introduce the New Coke to the market. And Coke executives wanted to catch the gap of 7 percent customer preference in taste. Business people should know that market share is related to many factors, such as marketing strategies, sales strategies, company’s development strategies, and so forth. Thus, I think Coke executives should consider all those factors and do the researches and surveys for all the factors. Only in this way, they can find the the root of the problem.

  The third conceptual block is complacency because of fear, ignorance, insecurity, or just plain mental laziness. According to the case we can know that even Coke’s market share decreased while Pepsi’s market share increased, the market share of Coke was still greater than the Pepsi’s market share. I believe that Coke executives were very confident about their cola product. In this process, I think maybe because they were very confident about cola product and they were on the loose, thus, they were scared of the tremendous decrease in their market share and the huge gap of the cola drinkers’ taste preference after they found the change. This result was not their expected. After the situation happened, they lost their presence of mind and they ignored other reasons caused the situation they were in but only considered the problem of taste.

3.3. How do explain the success of Coke versus Pepsi over the last 20 years?

  In my opinion, Coke and Pepsi is kind of same product. I do not think they have different until my friends told me that Pepsi is sweeter than Coke few years ago. I am not American so that I am not sure and do not know what happened with Coke and Pepsi in the last 20 years in the United States. I can talk something about Coke and Pepsi in Chinese market.

  Coke-cola was founded in 1886, and its first into China was 1927. But after the end of World War II and new China was founded (PRC), the U.S. embassy withdraws from China and the relationship between China and the United States broken in 1949, Coke also pulled out of China at same time. Until 1979, after three hours of China and the US established diplomatic relations, Coke announced its entry into China. Pepsi was founded in 1893 and its first entry into China was in 1981. Thus, no matter in the United States or in China, Coke appeared earlier than Pepsi. Because they are almost the same thing, people are more accept the product which is first come out and people are not like changes. Thus, Pepsi is very difficult to get more market shares and customers to compete with classic Coke.