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up cash for reinvestment at low cost. It reinvested those and other
funds to expand its global bottling networ kto erect an extensive and
efficient business system. All this Goizueta explained with great clar-
ity to his fellow shareholders.
Infrastructure Fortification
Part of that investment helped finance improvements in its bottlers’
processing and distribution systems. Not only did those investments
bolster current and future product sales (and strengthen the Coke-
bottler partnership), Coke could subsequently sell its interest in the
investment at an additional profit for its shareholders.
Goizueta called Coke’s investment in and development of an ex-
tensive and efficient bottling and distribution system “infrastructure
fortification.” It entailed continued and deeper investments in the
system that bottles and distributes Coca-Cola products. A variety of
means were used to fortify the system, from encouraging bottlers to
reinvest to investing equity directly and supplying managerial exper-
tise.
Through these practices, Coke expanded around the globe to
nearly two-hundred countries to create billions of new potential cus-
tomers. Between 1980 and 1994 the number of potential Coke cus-
tomers more than doubled. With sales volume growth as the key to
sustaining value growth, this shows why Coke’s average return on
capital was over triple the approximate cost of that capital.
Adding strength to Coke’s focus on the core brands in its global
business system was geographic diversification. Coke enjoys a
strong—maybe dominant—position in blue chip markets such as the
United States, Germany, and Japan. It is committed to dominating
new worlds of opportunity such as eastern Europe and Indonesia.
Add to that the “start-up” markets of China and India and you have
overall diversity through which to “use existing strengths to create
future strengths.” (That fortification is one of the reasons Coke pre-
vailed against the adversity of the Asian financial crisis of 1998.)
Resource Allocation
In Coke’s global business environment, Goizueta said, his primary
challenge was to optimally allocate resources generated in developed
markets to invest in less developed ones. The greatest growth poten-
tial for Coke in the world, Goizueta told a group of students in 1995,