Marketing Mistakes and Successes 12th Edition

Marketing Mistakes and Successes,
12th Edition
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ROBERT F. HARTLEY • Cindy Claycomb
12th Edition
C O NT E N T S
Preface iii
About the Authors vi
Chapter 1 Introduction 1
PART I MARKETING WARS 9

Chapter 2 Cola Wars: Coke vs. Pepsi 11
Chapter 3 PC Wars: Hewlett-Packard vs. Dell 34
Chapter 4 Airliner Wars: Boeing vs. Airbus 50
PART II COMEBACKS 73
Chapter 5 McDonald’s: Rebirth Through a Low Growth Strategy 75
Chapter 6 Harley-Davidson: Building An Enduring Mystique 94
Chapter 7 Chrysler: Merger Problems and Recovery 109
PART III MARKETING MANAGEMENT MISTAKES 127

Chapter 8 Newell’s Acquisition of Rubbermaid: An Unbelievable
Disappointment 129
Chapter 9 Kmart and Sears: A Hedge Fund Manager’s Disaster 142
Chapter 10 Euro Disney: Bungling a Successful Concept 156
Chapter 11 Borders: Too Comfortable with Its Comfy Bookstores 174
Chapter 12 Maytag: A Sales Promotion Debacle in England and
the Allure of Outsourcing 186
Chapter 13 Borden: Letting Brands Wither 202
Chapter 14 United Way: Damage Control for a Nonprofit’s Image 215
PART IV ENTREPRENEURIAL ADVENTURES 229

Chapter 15 Google: Will an Entrepreneurial Giant Continue
to Rule? 231
Chapter 16 Starbucks: Can a Model of Growth Reinvent Itself? 250
Chapter 17 Boston Beer: Is Greater Growth Possible? 266
vii
viii • Contents
PART V ETHICAL MISTAKES 281

Chapter 18 Merck: The Vioxx Catastrophe 283
Chapter 19 MetLife: Deceptive Sales Practices 298
Chapter 20 Toyota: Accelerating Problems 311
PART VI NOTABLE MARKETING SUCCESSES 329

Chapter 21 Southwest Airlines: Is It Still the King of Cheap Flights? 331
Chapter 22 Nike: Is It an Unassailable Powerhouse Brand? 351
Chapter 23 Vanguard: Is Advertising Really Needed? 369
Chapter 24 Conclusions: What We Can Learn 381
Index 400
C HA PT E R ON E
Introduction
A t this writing, Marketing Mistakes & Successes has passed its thirty-fifth anni-
versary. Who would have thought? The first edition, back in 1976, was 147 pages
and included such long-forgotten cases as Korvette, W. T. Grant, Edsel, Corfam,
Gilbert, and the Midi.
In this twelfth edition, two new cases are added with extensive modification to
earlier cases. Other cases have been updated and in some instances reclassified.
Some of the cases are as recent as today’s headlines; several still have not come to
complete resolution. A few older cases have been continued because of their relevant
and enduring learning insights, even in today’s changing environment.
The entire book is reorganized. We moved Marketing Wars to Part I and newly
updated these cases with the latest competitive information. The Comebacks section
is now Part II and the case of Chrysler’s recovery after their disastrous merger with
(turned acquisition of) Daimler has been moved to this section, joining the cases
of McDonald’s rebirth and Harley Davidson’s enduring mystique. The Borders
Bookstores case has been added to Part III, Marketing Mistakes. We think students
will find this case particularly interesting and insightful. The Entrepreneurial Adven-
tures, Part IV, are updated with particular attention to Google’s competition for
consumers’ digital time and Starbucks’s setback and recovery. The exciting case of
Toyota’s accelerator problems is added to Part V, Ethical Mistakes. The cases close
with updates to three cases of Marketing Successes in Part VI.
We continue to seek what can be learned—insights that are transferable to
other firms, other times, other situations. What key factors brought monumental
mistakes to some firms and resounding successes for others? Through such evalu-
ations and studies of contrasts, we may learn to improve batting averages in the
intriguing, ever-challenging art of decision-making.
We will encounter organizational life cycles, with an organization growing and
prospering, then failing (just as humans do), but occasionally resurging. Success rarely
lasts forever, but even the most serious mistakes can be (but are not always) overcome.
As in previous editions, a variety of firms, industries, mistakes, and successes are
presented. You will be familiar with most of the organizations, although probably
not with the details of their situations.
1
2 • Chapter 1: Introduction
We are always on the lookout for cases that can bring out certain points or
caveats in the art of marketing decision-making, and that give a balanced view of
the spectrum of marketing problems. The goal is to present examples that provide
somewhat different learning experiences, where at least some aspect of the mistake
or success is unique. Still, we see similar mistakes occurring time and again. From
the prevalence of such mistakes, we have to wonder how much decision-making has
really progressed over the decades. The challenge to improve it is still there, and
with it marketing efficiency and career advancement.
Let us then consider what learning insights we can gain, with the benefit of hind-
sight, from examining these examples of successful and unsuccessful marketing practices.
LEARNING INSIGHTS
Analyzing Mistakes
In looking at sick companies, or even healthy ones that have experienced difficulties
with certain parts of their operations, it is tempting to be overly critical. It is easy
to criticize with the benefit of hindsight. Mistakes are inevitable, given the present
state of decision-making and the dynamic environment facing organizations.
Mistakes can be categorized as errors of omission and of commission. Mistakes
of omission are those in which no action was taken and the status quo was contentedly
embraced amid a changing environment. Such errors, often characteristic of conser-
vative or stodgy management, are not as obvious as the other category of mistakes.
They seldom involve tumultuous upheaval; rather, the company’s competitive position
slowly erodes, until management finally realizes that mistakes having monumental
impact have been allowed to happen. The firm’s fortunes often never regain their
former luster.
Mistakes of commission are more spectacular. They involve hasty decisions
often based on faulty research, poor planning, misdirected execution, and the
like. Although the costs of eroding competitive position attributable to errors
of omission are difficult to calculate precisely, the costs of errors of commission
are often fully evident. For example, in 1993 alone Euro Disney’s loss was $960
million from a poorly planned venture; it improved in 1994 with only a $366
million loss. With Maytag’s overseas Hoover Division, the costs of an incredibly
bungled sales promotion were more than $300 million, and still counting. Then
there was the monumental acquisition of Chrysler by Germany’s Daimler,
proud maker of Mercedes, for $36 billion in 1998. After nine tumultuous years,
Daimler gave up and sold Chrysler to a private equity firm in 2007 for only
$7.4 billion.
Although they may make mistakes, organizations with sharp management follow
certain patterns when confronting difficult situations:
1. Looming problems or present mistakes are quickly recognized.
2. The causes of the problem(s) are carefully determined.
3. Alternative corrective actions are evaluated in view of the company’s
resources and constraints.
Learning Insights • 3
4. Corrective action is prompt. Sometimes this requires a ruthless axing of

the product, the division, or whatever is at fault.
5. Mistakes provide learning experiences. The same mistakes are not repeated,
and future operations are consequently strengthened.
Slowness to recognize emerging problems leads us to think that management
is incompetent or that controls have not been established to provide prompt feed-
back at strategic control points. For example, a declining competitive position in
one or a few geographical areas should be a red flag that something is amiss. To
wait months before investigating or taking action may mean a permanent loss of
business. Admittedly, signals sometimes get mixed, and complete information may
be lacking, but procrastination is not easily defended.
Just as problems should be quickly recognized, the causes of these problems—
the “why” of the unexpected results—must be determined as quickly as possible.
It is premature, and rash, to take action before knowing where the problems really
lie. For example, the loss of competitive position in one or a few markets may reflect
circumstances beyond the firm’s immediate control, such as an aggressive new com-
petitor who is drastically cutting prices to “buy sales.” In this situation, all compet-
ing firms will likely lose market share, and little can be done except to stay as
competitive as possible with prices and services; however, closer investigation may
reveal that the erosion of business was caused by unreliable deliveries, poor quality
control, noncompetitive prices, or incompetent sales staff.
With the cause(s) of the problem defined, various alternatives for dealing with
it should be identified and evaluated. This may require further research, such as
obtaining feedback from customers and from field personnel. Finally, the decision
to correct the situation should be made as objectively as possible. If drastic action
is needed, there usually is little rationale for delaying. Serious problems do not go
away by themselves. They tend to fester and become worse.
Finally, some learning experience should result from the misadventure. A vice
president of one successful firm told us:
I try to give my subordinates as much decision-making experience as possible. Perhaps

I err on the side of delegating too much. In any case, I expect some mistakes to be
made, some decisions that were not for the best. I don’t come down too hard usually.
This is part of the learning experience. But God help them if they make the same
mistake again. There has been no learning experience, and I question their compe-
tence for higher executive positions.
Analyzing Successes
Successes deserve as much analysis as mistakes, although admittedly there is less
urgency than with an emerging problem that requires quick remedial action. Any
analysis of success should seek answers to at least the following questions:
Why Were Such Actions Successful?

• Was it because of the nature of the environment, and if so, how?
• Was it because of particular research, and if so, what and how?
• Was it because of particular engineering or production efforts, and if so, can

these be adapted to other operations?
• Was it because of any particular element of the strategy—such as service,
promotional activities, or distribution methods—and if so, how, and is it trans-
ferable to other operations?
• Was it because of the specific elements of the strategy meshing well together,
and if so, how was this achieved?
Was the Situation Unique and Unlikely to Be Encountered Again?

• If the situation was not unique, how can these successful techniques be used
in the future and defended against competition?
ORGANIZATION OF THIS BOOK

In this twelfth edition we have modified the classification of cases somewhat from
earlier editions. In Part I, Marketing Wars, we examine the actions and counter-
moves of archrivals in hotly competitive arenas. Part II, Comebacks, studies three
firms that faced adversity and came back better than ever. In Part III, Marketing
Management Mistakes, we delve into seven firms guilty of a variety of mistakes that
offer great learning insights. Part IV, Entrepreneurial Adventures, describes and
analyzes well-known recent endeavors. In Part V, Ethical Mistakes, we examine three
firms whose mistakes had major ethical and legal consequences. Finally, Part VI,
Notable Marketing Successes, offers paragons of successful marketing strategies and
operations. Let us briefly describe the cases that follow.
Marketing Wars
Pepsi and Coca-Cola for decades competed worldwide. Usually Coca-Cola won out,
but it could never let its guard down; however, it did so in Europe. Then a trend
toward noncarbonated beverages along with Pepsi’s non-drink diversifications swung
the momentum to Pepsi. Recently, Coca-Cola recovered and the war between the
companies continues.
Dell long dominated the PC market with lowest-prices, direct-to-consumer
marketing. Hewlett-Packard, the world’s second biggest computer maker, experi-
enced a series of four CEOs in twelve years that took H-P through a seesaw battle
with Dell. Today, both H-P and Dell are fighting for dominance in the tech indus-
try against each other and Far East competitors.
Boeing long dominated the worldwide commercial aircraft market, with the
European Airbus only a minor player. A series of Boeing blunders, however, coupled
with an aggressive Airbus, brought market shares close to parity. Both firms intro-
duced strikingly new planes but ran into problems that delayed their first commer-
cial flights. The fight continues for market share dominance.
Comebacks
McDonald’s had long dominated the fast-food restaurant market. Then it began to
falter, and hungry competitors made inroads into its competitive position. As it
Organization of this Book • 5
fought to regain its momentum, it explored diversifications and ever more store
openings, while profitability plummeted. With a new CEO, it found a formula for
profitable growth.
In the early 1960s, Harley-Davidson dominated a static motorcycle industry.
Suddenly, Honda burst on the scene and Harley’s market share dropped from
70 percent to 5 percent in only a few years. It took Harley nearly three decades
to revive, but now it has created a mystique for its heavy motorcycles and gained
new customers.
The merger of Chrysler with Daimler, the huge German firm that makes Mer-
cedes, was supposed to be a merger of equals. But Chrysler’s management quickly
found otherwise, and executives from Germany soon replaced the top Chrysler
executives. Assimilation and coordination problems plagued the merger for years.
Nine years later, Daimler sold Chrysler to a private equity firm for tens of billions
of dollars less than it paid. The situation did not immediately improve for Chrysler,
as it filed for bankruptcy protection in 2009, but emerged from bankruptcy with
newfound momentum.
Marketing Management Mistakes

Newell, a consumer-products firm, successfully geared its operations to meet the
demands of giant retailers, particularly Wal-Mart, whereas Rubbermaid had in
recent years been unable to meet those stringent requirements. In 1999, Newell
acquired Rubbermaid, confident of turning its operation around, only to find that
Rubbermaid’s problems were not easily corrected and that they negatively influ-
enced Newell’s fortunes as well.
Two faltering retail chains, Kmart and Sears, merged under the auspices of a
hedge fund manager, Edward Lampert. Whether two weaklings could become one
strong operation to compete with the likes of Wal-Mart and Target was uncertain,
though investors bid both stocks up to extravagant levels in anticipation. The rosy
expectations collapsed as we experienced a massive recession in 2007 and 2008 and
a slow economic recovery.
In April 1992, just outside Paris, Disney opened its first theme park in Europe.
It had high expectations and supreme self-confidence (critics later called it arro-
gance). The earlier Disney parks in California, Florida, and more recently Japan
were all spectacular successes. But rosy expectations quickly became a delusion as
marketing miscues finally showed Disney that Europeans, and particularly the
French, were not carbon copies of visitors elsewhere.
Founded in 1971, Borders exemplified the rise of book superstores. In its early
years, Borders thrived and grew to over 1,300 stores. But in the early 2000s, brick-
and-mortar bookstores began declining as they faced formidable online competitors.
Borders was one of the largest casualties—by the end of 2011, all Borders book-
stores closed.
The problems of Maytag’s Hoover subsidiary in the United Kingdom almost
defy reason. The subsidiary planned a promotional campaign so generous that the
company was overwhelmed with takers; it could neither supply the products nor
grant the prizes. In a miscue of multimillion-dollar consequences, Maytag had
to foot the bill while trying to appease irate customers. What can we learn from
Maytag’s travails?
Borden, with its enduring symbol of Elsie the Cow, was the country’s largest
producer of dairy products. On an acquisitions binge in the 1980s, it became a
diversified food processor and marketer—and a $7 billion company. But Borden
allowed consumer acceptance of its many brands to wither through unrealistic
pricing, ineffective advertising, and an unwieldy organization.
United Way of America is a nonprofit organization. The man who led it to become
the nation’s largest charity perceived himself as virtually beyond authority. Exorbitant
spending, favoritism, and conflicts of interest—these went without criticism until
investigative reporters from the Washington Post publicized the scandalous conduct.
With its public image plummeting, contributions nationwide drastically declined.
The real concern was whether United Way could ever regain its former luster.
Entrepreneurial Adventures
Google is arguably the most outstanding successful new enterprise ever. It was founded
by Sergey Brin and Larry Page, who dropped out of Stanford’s Ph.D. program to do
so. With its search engine, it raised advertising to a new level: targeted advertising. In
so doing, it spawned a host of millionaires from its rising stock prices and stock options
and made its two founders some of the richest Americans, just below Bill Gates and
Warren Buffett. How did they do it? And can they continue their dominance?
Starbucks rapidly grew as a new firm, a credit to founder Howard Schultz’s
vision of transforming a prosaic product, coffee, into a gourmet coffee house experi-
ence at luxury prices. Starbucks’s successful growth, however, covered up tremendous
waste within the company, and consequently, it suffered a setback. Schultz was
coaxed back to the CEO position to turn things around. What were his plans?
Boston Beer burst on the microbrewery scene with Samuel Adams beers,
higher priced even than most imports. Notwithstanding this—or maybe because of
it—Boston Beer became the largest microbrewer. It proved that a small entrepre-
neur can compete successfully against the giants in the industry, and do this on a
national scale.
Ethical Mistakes
Merck, the pharmaceutical giant, learned that its blockbuster arthritis drug, Vioxx,
doubled the risk of a heart attack or stroke. Over five years and $500 million in
advertising, it had 20 million users in the United States at the time it recalled the
drug on September 30, 2004. Critics and tort lawyers assailed the company for
waiting so long to recall this drug, as some research studies as early as five years
before had raised questions about the safety of Vioxx. What can we learn from
Merck’s handling of its great profit-making drug, now discredited?
The huge insurance firm MetLife, whether through loose controls or tacit
approval, permitted an agent to use deceptive selling tactics on a grand scale, in
the process enriching himself and the company. Investigations by several state attor-
neys general brought a crisis situation to the firm to which it was slow to react.
Eventually, fines and lawsuits totaled almost $2 billion.
General Wrap-Up • 7
Product safety lapses that result in injuries and even loss of life are among
the worst abuses any company can confront. These lapses are difficult for a
company to acknowledge when it has a solid reputation built on reliability and
safety. Toyota was slow to recall nine million vehicles and blamed drivers and
suppliers for accidents in Toyota vehicles. The US media fanned the flames. In
hindsight, it is easy to see that Toyota’s rapid expansion led to quality problems.
Inept crisis management brought a massive fine from the US government and a
host of lawsuits.
Notable Marketing Successes

Southwest Airlines found a strategic window of opportunity as the lowest-cost and
lowest-price carrier between certain cities. And how it milked this opportunity! Now
it threatened major airlines in many of their domestic routes. However, by 2008,
competitors were beginning to counter Southwest’s price advantage.
Nike and Reebok were major competitors in the athletic footwear and apparel
market. Reebok overtook Nike in the late 1980s, but then Nike surged far ahead,
never to be threatened again. What is the secret of Nike’s increasing dominance?
Vanguard has become the largest mutual fund company, charging past Fidelity.
Vanguard’s strategy is to downplay marketing, shunning the heavy advertising and
overhead of its competitors. It provides investors with better returns through far
lower expense ratios and relies mostly on word of mouth and unpaid publicity to
gain new customers, while old customers continue to pour in money. Is Vanguard
vulnerable to aggressive new competitors?
GENERAL WRAP-UP
Where possible, the text depicts major personalities involved in these cases. Imagine
yourself in their positions, confronting the problems and facing choices at their points
of crisis or just-recognized opportunities. What would you have done differently, and
why? We invite you to participate in the discussion questions, the hands-on exercises,
the debates appearing at the ends of chapters, and the occasional devil’s advocate
invitation (a devil’s advocate is one who argues an opposing viewpoint for the sake
of testing the decision). There are also discussion questions for the various boxes
within chapters.
While doing these activities, you may feel the excitement and challenge of
decision-making under conditions of uncertainty. Perhaps you may even become a
fast-track executive and make better decisions.
QUESTIONS
1. Do you agree that it is impossible for a firm to avoid mistakes? Why or

why not?
2. How can a firm speed up its awareness of emerging problems so that it
can take corrective action? Be as specific as you can.
3. Large firms tend to err on the side of conservatism and are slower to take
corrective action than smaller ones. Why do you suppose this is?
4. Which is likely to be more costly to a firm, errors of omission or errors of
commission? Why?
5. So often we see the successful firm eventually losing its pattern of success.
Why is success not more enduring?
PA RT
O N E
M A RK ET I NG WA R S
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EERR S T
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ON
Cola Wars: Coke vs. Pepsi
I ntense competition between Pepsi and Coca-Cola has characterized the soft-drink
industry for decades. In this chess game of giant firms, Coca-Cola ruled the soft-
drink market throughout the 1950s, 1960s, and early 1970s. It outsold Pepsi two to
one. But this was to change. The “war” switched to the international arena, and it
became a “world war.”
EARLY BATTLES, LEADING TO NEW COKE FIASCO

Pepsi Inroads, 1970s and 1980s
By the mid-1970s, the Coca-Cola Company was a lumbering giant. Performance
reflected this. Between 1976 and 1978, the growth rate of Coca-Cola soft drinks
dropped from 13 percent annually to a meager 2 percent. As the giant stumbled,
Pepsi Cola was finding heady triumphs. First came the “Pepsi Generation.” This
advertising campaign captured the imagination of the baby boomers with its ideal-
ism and youth. This association with youth and vitality greatly enhanced the image
of Pepsi and firmly associated it with the largest consumer market for soft drinks.
Then came another management coup, the “Pepsi Challenge,” in which com-
parative taste tests with consumers showed a clear preference for Pepsi. This
campaign led to a rapid increase in Pepsi’s market share, from 6 to 14 percent of
total US soft-drink sales.
Coca-Cola, in defense, conducted its own taste tests. Alas, these tests had the
same result—people liked the taste of Pepsi better, and market share changes
reflected this. As Table 2.1 shows, by 1979 Pepsi was closing the gap on Coca-Cola,
having 17.9 percent of the soft-drink market to Coke’s 23.9 percent. By the end of
1984, Coke had only a 2.9 percent lead, while in the grocery store market it was
now trailing by 1.7 percent. Further indication of the diminishing position of Coke
relative to Pepsi was a study done by Coca-Cola’s own marketing research depart-
ment. The study showed that in 1972, 18 percent of soft-drink users drank Coke
exclusively, while only 4 percent drank only Pepsi. In ten years the picture had
changed greatly: Only 12 percent now claimed loyalty to Coke, while the number
of exclusive Pepsi drinkers almost matched, with 11 percent.
11
12 • Chapter 2: Cola Wars: Coke vs. Pepsi
Table 2.1 Coke and Pepsi Shares of Total Soft-Drink Market,

1950s–1984
1975 1979 1984
% of % of % of
Mid-1950s Lead Market Lead Market Lead Market Lead
Coke Better than 2 to 1 24.2 6.8 23.9 6.0 21.7 2.9
Pepsi 17.4 17.9 18.8
Source: Thomas Oliver. The Real Coke. The Real Story (New York: Random House, 1986), pp. 21, 50;
“Two Cokes Really Are Better Than One—For Now,” Business Week, September 9, 1985, p. 38.
What made the deteriorating comparative performance of Coke all the more
worrisome and frustrating to Coca-Cola was that it was outspending Pepsi in adver-
tising by $100 million. It had twice as many vending machines, dominated fountains,
had more shelf space, and was competitively priced. Why was it losing market
share? The advertising undoubtedly was not as effective as that of Pepsi, despite
vastly more money spent. And this raises the question: How can we measure the
effectiveness of advertising? See the Information Box for a discussion.
INFORMATION BOX
HOW DO WE MEASURE THE EFFECTIVENESS
OF ADVERTISING?
A firm can spend millions of dollars on advertising, and it is only natural to want some
feedback on the results of such an expenditure: To what extent did the advertising
really pay off? Yet many problems confront the firm trying to measure this.
Most methods for measuring effectiveness focus not on sales changes but on how
well the communication is remembered, recognized, or recalled. Most evaluative
methods simply tell which ad is the best among those being appraised. But even
though one ad may be found to be more memorable or to create more attention than
another, that fact alone gives no assurance of relationship to sales success. A classic
example of the dire consequences that can befall advertisers as a result of the inability
to directly measure the impact of ads on sales occurred in December 1970.
In 1970, the Doyle Dane Bernbach advertising agency created memorable TV com-
mercials for Alka-Seltzer, such as the “spicy meatball man” and the “poached oyster
bride.” These won professional awards as the best commercials of the year and received
high marks for humor and audience recall. But in December, the $22 million account
was abruptly switched to another agency. The reason? Alka-Seltzer’s sales had dropped
somewhat. Of course, no one will ever know whether the drop might have been much
worse without these notable commercials.
So, how do we measure the value of millions of dollars spent for advertising? Not well.
Nor can we determine what is the right amount to spend, what is too much or too little.
Can a business succeed without advertising? Why or why not?
Early Battles, Leading to New Coke Fiasco • 13
Coca-Cola Tries to Battle Back

The Changing of the Guard at Coke
J. Paul Austin, chairman of Coca-Cola, was nearing retirement in 1980. Donald
Keough, president for the American group, was expected to succeed him. But a new
name, Roberto Goizueta, suddenly emerged. Goizueta’s background was far different
from that of the typical Coca-Cola executive. He was not from Georgia (the company
is headquartered in Atlanta), and was not even southern. Rather, he was the son of
a wealthy Havana sugar plantation owner. He came to the United States at age sixteen,
speaking virtually no English. By using the dictionary and watching movies, he quickly
learned the language and graduated from Yale in 1955 with a degree in chemical
engineering. Returning to Cuba, he went to work in Coke’s Cuban research lab.
Goizueta’s complacent life was to change in 1959 when Fidel Castro seized
power. With his wife and three children, he fled to the United States, arriving with
$20. At Coca-Cola he became known as a brilliant administrator and in 1968 was
brought to company headquarters; he became chairman of the board thirteen years
later, in 1981. Donald Keough had to settle for being president.
In the new era of change, the sacredness of the commitment to the original
Coke formula became tenuous and the ground was laid for the first flavor change
in ninety-nine years.
Introducing a New Flavor for Coke

With the market-share erosion of the late 1970s and early 1980s, despite strong adver-
tising and superior distribution, the company began to look at the soft-drink product
itself. Taste was suspected as the chief culprit in Coke’s decline, and marketing research
seemed to confirm this. In September 1984, the technical division developed a sweeter
flavor. In perhaps the biggest taste test ever, costing $4 million, 55 percent of 191,000
people approved it over both Pepsi and the original formula of Coke. Top executives
unanimously agreed to change the taste and take the old Coke off the market.
But the results flabbergasted company executives. While some protests were
expected, they quickly mushroomed; by mid-May calls were coming in at the rate of
5,000 a day, in addition to a barrage of angry letters. People were speaking of Coke
as an American symbol and as a long-time friend who had suddenly betrayed them.
Anger spread across the country, fueled by media publicity. Fiddling with the
formula for the 99-year-old beverage became an affront to patriotic pride. Even
Goizueta’s father spoke out against the switch and jokingly threatened to disown
his son. By now the company began to worry about a consumer boycott against
the product. On July 11th company officials capitulated to the outcry. They apolo-
gized to the public and brought back the original taste of Coke.
Roger Enrico, president of Pepsi-Cola, USA, gloated, “Clearly this is the Edsel
of the ‘80s. This was a terrible mistake. Coke’s got a lemon on its hand and now
they’re trying to make lemonade.” Other critics labeled this the “marketing blunder
of the decade.”1
1
John Greenwald, “Coca-Cola’s Big Fizzle,” Time, July 22, 1985, pp. 48–49.
Unfortunately for Pepsi, the euphoria of a major blunder by Coca-Cola was

short lived. The two-cola strategy of Coca-Cola—it kept the new flavor in addi-
tion to bringing back the old classic—seemed to be stimulating sales far more
than ever expected. While Coke Classic was outselling New Coke by better than
two to one nationwide, for the full year of 1985, sales from all operations rose
10 percent and profits 9 percent. Coca-Cola’s fortunes continued to improve
steadily. By 1988 it was producing five of the top-ten selling soft drinks in the
country, and now had a total 40 percent of the domestic market to 31 percent
for Pepsi.2
BATTLE SHIFTS TO INTERNATIONAL ARENA

Pepsi’s Troubles in Latin America
Early in 1994, PepsiCo began an ambitious assault on the soft-drink market in
Brazil. Making this invasion even more tempting was the opportunity to combat
arch-rival Coca-Cola, already entrenched in this third largest soft-drink market in
the world, behind only the United States and Mexico.
The robust market of Brazil had attracted Pepsi before. Its hot weather and
a growing teen population positioned Brazil to become one of the world’s
fastest-growing soft-drink markets, along with China, India, and Southeast Asia.
But the potential still had barely been tapped. Brazilian consumers averaged
only 264 eight-ounce servings of soft drinks a year, far below the US average of
about 800.3
Three times before over the previous twenty-five years, Pepsi had attempted
to enter the Brazilian market with splashy promotional campaigns and different
bottlers. Each of these efforts proved disappointing, and Pepsi had quickly dropped
them and retreated from the field. In 1994 it planned a much more aggressive and
enduring push.
Buenos Aires Embotelladora SA, or Baesa, was to be the key to Pepsi’s rejuve-
nated entry into Brazil. Baesa would be Pepsi’s “superbottler,” one that would buy
small bottlers across Latin America, expand their marketing and distribution, and
be the fulcrum in the drive against Coca-Cola. Charles Beach, the CEO of Baesa,
was the person around whom Pepsi planned its strategy.
Beach, 61, was a passionate, driven man, a veteran of the cola wars, but his was
a checkered past. A Coca-Cola bottler in Virginia, he was indicted by a federal grand
jury on charges of price fixing and received a $100,000 fine and a suspended prison
sentence. He bought Pepsi’s small Puerto Rican franchise in 1987. Then, in 1989,
Beach acquired the exclusive Pepsi franchise for Buenos Aires, Argentina—one of
the most important bottling franchises outside the United States. By discounting
2
“Some Things Don’t Go Better with Coke,” Forbes, March 21, 1988, pp. 34–35.
3
Robert Frank and Jonathan Friedland, “How Pepsi’s Charge into Brazil Fell Short of Its Ambitious
Goals,” Wall Street Journal, August 30, 1996, p. A1.
Battle Shifts to International Arena • 15
and launching new products and packages, he caught Coke by surprise. In only
three years he had increased Pepsi’s market share in the Buenos Aires metro area
from almost zero to 34 percent.4
With Pepsi’s blessing, Beach expanded vigorously, borrowing heavily to do so.
He bought major Pepsi franchises in Chile, Uruguay, and most importantly, Brazil,
where he built four giant bottling plants. Pepsi worked closely with Baesa’s expan-
sion, providing funds to facilitate it.
However, they underestimated the aggressiveness of Coca-Cola. Their rival
spent heavily on marketing and cold-drink equipment for its choice customers. As
a result Baesa was shut out of small retail outlets, those most profitable for bottlers.
Goizueta, CEO of Coca-Cola, used his Latin American background to influence the
Argentine president to reduce an onerous 24 percent tax on cola to 4 percent. This
move strengthened Coke’s position against Baesa, which in contrast to Coca-Cola
was earning most of its profits from non-cola drinks.
By early 1996, Baesa’s expansion plans—and Pepsi’s dream—were floundering.
The new Brazilian plants were running at only a third of capacity. Baesa lost
$300 million for the first half of 1996, and PepsiCo injected another $40 million
into Baesa. On May 9, Beach was relieved of his position. Allegations now surfaced
that Beach might have tampered with Baesa’s books.5
Brazil was only symptomatic of other overseas problems for Pepsi. Roger
Enrico, now CEO, had been on Coke’s black list since he had gloated a decade
before about the New Coke debacle in his memoir, The Other Guy Blinked: How
Pepsi Won the Cola Wars. Goizueta was soon to gloat, “It appears that the company
that claimed to have won the cola wars is now raising the white flag.”6
The person Enrico thought was his close friend, Oswaldo Cisneros, head of one
of Pepsi’s oldest and largest foreign bottling franchises, suddenly abandoned Pepsi
for Coca-Cola. Essentially, this took Pepsi out of the Venezuelan market. Coca-Cola
wooed the Cisneroses with red carpet treatment and frequent meetings with its
highest executives. Eventually, Coca-Cola agreed to pay an estimated $500 million
to buy 50 percent of the Venezuelan business.
Pepsi’s Problems Elsewhere in the International Arena

Pepsi’s problems in South America mirrored its problems worldwide. It had lost its
initial lead in Russia, Eastern Europe, and parts of Southeast Asia. While it had a
head start in India, this was being eroded by a hard-driving Coca-Cola. Even in
Mexico its main bottler reported a loss of $15 million in 1995.
The contrast with Coca-Cola was significant. Pepsi still generated more than
70 percent of its beverage profits from the United States; Coca-Cola got 80 percent
from overseas.7
4
Patricia Sellers, “How Coke Is Kicking Pepsi’s Can,” Fortune, October 28, 1996, p. 78.
5
Sellers, p. 79.
6
Sellers, p. 72.
7
Frank and Friedland, p. A1.
Table 2.2 Coke and Pepsi Shares of Total

Soft-Drink Sales, Top 10 Markets, 1996
Market Shares
Markets Coke Pepsi
United States 42% 31%
Mexico 61 21
Japan 34 5
Brazil 51 10
East-Central Europe 40 21
Germany 56 5
Canada 37 34
Middle East 23 38
China 20 10
Britain 32 12
Source: Company annual reports and Patricia Sellers, “How
Coke Is Kicking Pepsi’s Can,” Fortune, October 28, 1996, p. 82.
Commentary: These market share comparisons show the extent
of Pepsi’s ineptitude in its international markets. In only one
of these top ten overseas markets is it ahead of Coke, and in
some—such as Japan, Germany, and Brazil—it is practically a
nonplayer.
Table 2.2 shows the top ten markets for Coke and Pepsi in 1996 in the
total world market. Coke had a 49 percent world market share while Pepsi
had only 17 percent, despite its investment of more than $2 billion since 1990
to straighten out its overseas bottling operations and improve its image. 8 With
its careful investment in bottlers and increased financial resources to plow
into marketing, Coke continued to gain greater control of the global soft-
drink industry.
If there was any consolation for PepsiCo, it was that its overseas business
had always been far less important to it than to Coca-Cola, but this was slim
comfort in view of the huge potential this market represented. Most of Pepsi’s
revenues were in the US beverage, snack food, and restaurant businesses, with
such well-known brands as Frito-Lay chips and Taco Bell, Pizza Hut, and KFC
(Kentucky Fried Chicken) restaurants. But as a former Pepsi CEO was fond
of stating, “We’re proud of the US business. But 95 percent of the world
doesn’t live here.”9 And Pepsi seemed unable to hold its own against Coke in
this world market.
8
Robert Frank, “Pepsi Losing Overseas Fizz to Coca-Cola,” Wall Street Journal, August 22, 1996,
p. C2.
9
Frank, p. C2.
Coke Travails in Europe, 1999 • 17
COKE TRAVAILS IN EUROPE, 1999

The Trials of Douglas Ivester
In early 1998, Douglas Ivester took over as chairman and chief executive of Coca-
Cola. He had a tough act to follow, being the successor to the legendary Goizueta.
Things seemed to go downhill from then on, but it was not entirely his fault. The
first quarter of 1999 witnessed a sharp slowdown in Coca-Cola’s North American
business, at least partly owing to price increases designed to overcome weakness
resulting from overseas economic woes. While most analysts thought the sticker
shock of higher prices would be temporary, some thought the company needed to
be more innovative and do more than offer super-size drinks.10 Other problems
emanated from a racial discrimination lawsuit, as well as Mr. Ivester’s “brassy”
attempts to make acquisitions such as Orangina and Cadbury Schweppes, angering
overseas regulators and perhaps motivating them to make life difficult for Coke.
Such concerns paled before what was to come.
Contamination Scares
On June 8th, a few dozen Belgian schoolchildren began throwing up after drink-
ing Cokes. This was to result in one of the most serious crises in Coca-Cola’s
113-year history. An early warning had seemingly been ignored when in mid-May
the owner of a pub near Antwerp complained of four people becoming sick from
drinking bad-smelling Coke. The company claimed to have investigated but found
no problems.
The problems worsened. Coca-Cola officials were meeting with Belgium’s
health minister, seeking to placate him, telling him that their analyses “show that it
is about a deviation in taste and color” that might cause headaches and other symp-
toms, but “does not threaten the health of your child.” In the middle of this meet-
ing, news came that another fifteen students at another school had gotten sick.11
It was thought that the contamination came from bottling plants in Antwerp,
Ghent, and from the Dunkirk plant that produced cans for the Belgian market.
European newspapers were speculating that Coke cans were contaminated with
rat poison.
Soon hundreds of sick people in France were blaming their illnesses on Coke,
and France banned products from the Dunkirk plant. The setback left Coke out of
the market in parts of Europe because the company had badly underestimated how
much explanation governments would demand before letting it back in business.
Not until June 17 did Belgium and France lift restrictions, and then only on
some products; the bans continued on Coca-Cola’s Coke, Sprite, and Fanta. Then
the Netherlands, Luxembourg, and Switzerland also imposed selective bans until
10
Nikhil Deogun, “Coke’s Slower Sales Are Blamed on Price Increases,” Wall Street Journal, March
31, 1999, pp. A3, A4.
11
“Anatomy of a Recall: How Coke’s Controls Fizzled Out in Europe,” Wall Street Journal, June 29,
1999, p. A6.
health risks could be evaluated. Some 14 million cases of Coke products eventually
were recalled in the five countries, and estimates were that Coke was losing $3.4
million per day in revenues. Case volume for the European division was expected
to fall 6 to 7 percent from the year earlier.12 The peak soft drink summer season
had arrived, and the timing of the scare could not have been worse. Coca-Cola and
its local distributors launched an advertising campaign defending the quality of
their products.
Problems continued to spread. The European Union requested further study
as the health scare spread. The Ivory Coast seized 50,000 cans of Coke imported
from Europe as a precautionary measure, though there was no evidence that
anyone in the Ivory Coast had become ill by drinking imported Coke. All glass
bottles of Bonaqua, a bottled water brand of Coca-Cola, were recalled in Poland
because about 1,500 bottles were found to contain mold. This recall in Poland
soon spread to glass bottles of Coke. Barely a week later, the company recalled
180,000 plastic bottles of Bonaqua after discovering nonhazardous bacteria.
Coca-Cola also had to recall some soft drinks in Portugal after small bits of char-
coal from a filtration system were found in some cans. It seems quality control
was a problem.
Coca-Cola Finally Acts Aggressively

In the initial contamination episodes, Coca-Cola was accused of dragging its feet.
Part of the problem in ameliorating the situation was the absence of an explanation
by any top Coca-Cola officials. Ivester was criticized for this delay when he finally
made an appearance in Brussels on June 18, ten days after the initial scare. He
visited Brussels again four days later, meeting with the prime minister. Strenuous
efforts to improve the company’s image and public relations then began.
Ivester, in a major advertising campaign, apologized to Belgian consumers and
explained “how the company allowed two breakdowns to occur.” The ads showed
his photograph along with these opening remarks, “My apologies to the consumers
of Belgium; I should have spoken with you earlier.” Ivester further promised to buy
every Belgian household a Coke. A special consumer hotline was established, and
fifty officials, including several top executives, were temporarily shifted from the
Atlanta headquarters to Brussels.
Five thousand delivery people then fanned out across the country offering a
free 1.5-liter bottle of Coke’s main brands to 4.37 million households. Around
Belgium, Coke trucks and displays proclaimed, “Your Coca-Cola is coming back.”
In newspaper ads, the company explained its problems, noted it was destroying
old products and using fresh ingredients for new drinks. A similar marketing strat-
egy was implemented in Poland, where two million free beverages were distributed
to consumers.
12
Will Edwards, “Coke Chairman Tries to Assure Europeans,” Cleveland Plain Dealer, June 19, 1999,
pp. 1-C and 3-C; Nikhil Deogun, “Coke Estimates European Volume Plunged 6% to 7% in 2nd
Quarter,” Wall Street Journal, July 1, 1999, p. A4.
Coke Travails in Europe, 1999 • 19
Pepsi’s Competitive Maneuvers Near the Millennium

Pepsi’s Role in Coke’s European Problems
Some thought that Coca-Cola’s problems should have been Pepsi’s gain. Yet, Pepsi
did nothing to capitalize on the situation, did not gloat, did not increase advertis-
ing for its brand. Worldwide, Pepsi experienced some temporary gains in sales,
most surprisingly in countries far removed from the scare—such as China. A Pepsi
bottler in Eastern Europe probably expressed the prevailing company attitude
when he observed that people were buying bottled water and juices instead of
soda pop: “That’s why we don’t wish this stuff on anyone,” he said, referring to
the health scare.13 But Pepsi was not idle in Europe.
Pepsi’s Antitrust Initiatives against Coca-Cola

In late July 1999, acting upon a complaint by Pepsi, European Union officials
raided offices of Coca-Cola and its bottlers in four countries in Europe—
Germany, Austria, Denmark, and Britain—on suspicions that the company used
its dominant market position to shut out competitors. Coming at a time when
Coca-Cola was still trying to recover from the contamination problems, this was
a cruel blow. All the more because such alleged noncompetitive activities
affected its plans to acquire some additional businesses in Europe. The major
suspicion was that Coke was illegally using rebates to try to force competitors
out of the market.
Coca-Cola’s huge market share in most countries of Europe fed the concern.
See Table 2.3 for Coke’s market shares of the total soft-drink market in selected
countries in Europe.
Table 2.3 Coca-Cola’s Market

Share of Soft-Drink Market in
Selected European Countries, 1998
France 59%
Spain 58
Germany 55
Central Europe 47
Italy 45
Nordic and Northern Eurasia 41
Great Britain 35
Source: Company published reports.
Commentary: The dominance of Coke in almost
all countries of Europe, not surprisingly, makes it
vulnerable to antitrust scrutiny.
13
Nikhil Deogun and James R. Hagerty, “Coke Scandal Could Boost Rivals, but Also Could Hurt Soft
Drinks,” Wall Street Journal, June 23, 1999, p. A4.
Pepsi also filed a complaint with Italian regulators, and they were quicker
to act. A preliminary report found that Coca-Cola and its bottlers violated anti-
trust laws by abusing a dominant market position through practices such as dis-
counts, bonuses, and exclusive deals with wholesalers and retailers. The Italian
regulators also said there was evidence that Coke had a “strategic plan” to remove
Pepsi from the Italian market, one of the biggest in Europe, by paying wholesal-
ers to remove Pepsi fountain equipment and replace it with Coke. At about this
time, Australian and Chilean officials also began conducting informal inquiries
in their markets.
Coca-Cola officials responded to the Italian report as follows: “We believe this
is a baseless allegation by Pepsi and we believe that Pepsi’s poor performance in
Italy is due to their lack of commitment and investment there. As a result, they are
attempting to compete with us in the courtroom instead of the marketplace.”14
COKE FINDS TOUGH GOING IN

NEW CENTURY WHILE PEPSI SURGES
For decades, Coca-Cola was a premier growth company with some of the best-
known brands in the world, and management seemed well positioned to take
advantage of the global economy. But we have just seen lapses in the late 1990s,
particularly in handling contamination problems in Europe and in dealing with
antitrust charges. Going into the new millennium, problems seemed more subtle
but with longer lasting concerns. Not that the old battered company was withering
away, but rather that it faced a slowing growth trend. Share prices had fallen hard,
in 2004 trading at less than half their 1998 peak. At the same time, PepsiCo, while
never quite catching Coke in the cola wars, outdid its rival in overall revenues. The
following comparative statistics show the slipping performance of Coca-Cola com-
pared to PepsiCo—especially in income growth and stock performance—over the
six years through 2004.
Coke Pepsi
1998 2004 % change 1998 2004 % change
Revenues ($ in billions) $16.3 $22.0 35.0% $22.3 $29.3 31.4%
Income ($ in billions) $3.5 $4.8 37.1% $2.0 $4.0 100%
Stock price (ending 12/31) $67.00 $41.64 –37.9% $40.88 $52.20 27.7%
Sources: Company and public reports.
Part of the problem facing Coke was an industry problem, but with its heavy
emphasis on carbonated soft drinks it became worse for Coke than for Pepsi. Con-
sumers, more concerned with health and obesity, were seeking new kinds of beverages
14
Betsy McKay, “Coke, Bottlers Violated Antitrust Laws in Italy, a Preliminary Report States,”
Wall Street Journal, August 13, 1999, p. A4.
Coke Finds Tough Going in New Century While Pepsi Surges • 21
such as gourmet coffees, New Age teas, sports drinks, and waters. Carbonated
beverages were no longer a growth sector of the market. One consultant said, “The
carbonated soft-drink model is 30 years old and out of date.”15 Pepsi had pushed into
the noncarb market with Tropicana juice, Gatorade sports drink, and Aquafina water,
and these were billion-dollar beverage brands. Coca-Cola remained fixated on its
flagship Coke brand, with sodas accounting for 82 percent of its worldwide beverage
sales, far more than Pepsi. On the other hand, Pepsi not only had more strongly
diversified into other noncarb beverages, but also had its Frito-Lay Division with
snack foods such as Lays, Doritos, and Baked Crunchy Cheetos; and then there was
Quaker Oats that it acquired August 2001. (In 1997, PepsiCo had spun off its restau-
rant operations.) The following shows the breakdown of sales and profits for Pepsi’s
four major businesses as of 2004:
Percent of Company Sales and Operating Profits

Frito-Lay 34% 41%
PepsiCo Beverages 29 30
Quaker Foods 5 9
PepsiCo Int’l (snacks and beverages) 32 20
Source: Public information as of 2004.
Coke’s Reluctance to Diversify

Critics blamed Coke’s stubborn commitment to its four hallowed soda-pop brands—
Coca-Cola, Diet Coke, Sprite, and Fanta—as going back to the 16-year reign of
Roberto Goizueta, who guided Coke stock to a 3500 percent gain in those years.
Goizueta was the first CEO ever to break the $1 billion compensation barrier. After
he died of lung cancer in 1997, he was almost deified, and his cola-centric philoso-
phy became the gospel of the executives who followed and also of the aging board
of directors.
Neville Isdell came out of retirement to head the company in May 2004, after
earlier building distribution networks in India, Russia, and Eastern Europe. He
showed the same conservative mindset as his predecessors and had passed on the
chance to acquire Red Bull, a promising energy drink. Isdell still believed in the
growth potential of carbonated soft drinks and their 30 percent profit margins.
Because of this conservatism, Coke now lacked a popular entry in the highly prof-
itable energy-drink category to compete with what had become the market leader,
Red Bull. Some analysts saw this reluctance to diversify as reflecting a corporate
mindset that still saw Coca-Cola as only a soda company, while Pepsi viewed itself
as a beverage-and-snack company.16
15
Tom Pirko, president of Bev Mark LLC, as quoted in Dean Foust, “Gone Flat,” Business Week,
December 20, 2004, p. 76.
16
Foust, p. 80; Leslie Chang, Chad Terhune, and Betsy McKay, “Coke’s Big Gamble in Asia,”
Wall Street Journal, August 11, 2004, pp. A1, A6; “Behind Coke’s CEO Travails: A Long Struggle
Over Strategy,” Wall Street Journal, May 4, 2004, pp. A1, A10.
Other Problems
Ivester, successor to Goizueta in the late ‘90s, in a desperate effort to try to sustain
the profitability of the Goizueta era, had imposed a 7.6 percent price hike on the
concentrate it sold its bottlers. For decades Coke had sold its beverage concentrate
to US bottlers at a constant price, no matter what price the soft drinks would later
command at retail. Not surprisingly, these bottlers became incensed and complained
bitterly to the board and succeeded in pushing the already embattled Ivester to
resign in late 1999. His successor, Douglas Daft, tried to work with them, but rela-
tions steadily deteriorated. Bottlers began fighting back with sharp increases in their
retail prices of Coke. These hikes dampened sales of Coke but increased bottlers’
profits. Some also refused to carry the company’s new noncarbonated niche offer-
ings, Mad River teas and Planet Java coffee; these flopped and the company phased
them out in 2003. Going into 2005, Isdell faced contentious bottler relations that
needed to be addressed.
The C2 Disappointment
In the summer of 2003, Coca-Cola launched C2, a reduced-calorie, reduced-carb
cola, with a $50 million promotional campaign. This was Coke’s biggest product
introduction since Diet Coke more than twenty years before. The company had
expected this new beverage would help win back a critical consumer group—20- to
40-year-olds who were concerned about weight—and priced it at a 15 percent pre-
mium in the quest to achieve higher profits on its drinks. But sales of C2 fell nearly
60 percent a few weeks after the product introduction.
Isdell halted the premium pricing strategy to try to salvage the product, but
still sales languished. The pricing strategy had been botched, as C2 at times retailed
for 50 percent or more than regular Coke, especially on weekends when sodas were
often discounted. Adding to the dissatisfaction with the higher prices, many con-
sumers were critical of the taste, either too flat or with an aftertaste. Coca-Cola
took C2 off the market in 2006.
Advertising Miscues
Spending for advertising had become conservative during the reign of Ivester. He
believed that the Coke brand could largely sell itself without a major commitment
to advertising. The result of a reduced ad budget was lackluster ads that failed to
attract the important youth market. Instead, Ivester shifted resources into more
vending machines, refrigerated coolers, and delivery trucks, “growth through distri-
bution.” But some of these expanded distribution sites, such as auto parts stores,
did not pay off.
Global Problems
Even Coke’s global strength was becoming tarnished. Ivester’s slowness in respond-
ing to the contamination scare in Belgium and France in 1999 was but the first
misstep. Coke’s plans to make Dasani bottled water into a global brand were slowed
by an aborted launch in Europe after elevated levels of bromate, a cancer-causing
Analysis • 23
substance, were detected in bottles in Britain. Declining sales in Germany and

Mexico, two very important markets, put more pressure on developing such markets
as China and India. Yet these looked years away from contributing significantly to
Coke’s profitability. The distribution and capacity that Isdell built in Eastern Europe
in the 1980s and 1990s proved to be extravagant, and write-downs eventually
exceeded $1 billion.17
In the meantime, Pepsi was nibbling away at Coke’s international markets. Its
antitrust case against Coke in the European Union was eventually settled five years
later in October 2004, with Coke having to drop its controversial incentive discounts
to retailers and agreeing to share display space with rivals such as PepsiCo. Thus,
the playing field was more leveled to Pepsi’s benefit.
Coke’s Board of Directors

Few firms could boast as prestigious a board of directors as Coke. Warren Buffett,
one of the world’s richest and most influential investors, was a major presence on the
board. Ten of the fourteen directors dated back to the Goizueta era and still espoused
his policies of concentrating on the basic core of carbonated soft drinks with less
emphasis on diversifying. Critics of the board accused it of micromanaging and being
too conservative, and blamed it for the difficulty in recruiting highly regarded candi-
dates for top management jobs, as well as not retaining the ones it had.18
The board played a major part in vetoing the acquisition of Quaker Oats, the
maker of Gatorade. CEO Douglas Daft had reached an agreement to buy Quaker
for $15.75 billion in stock. But the board overruled him, calling the price too expen-
sive. PepsiCo snapped up the company instead. Daft was left to contemplate his
lack of support by the board and his loss of faith among his peers. His tenure was
short lived, and Isdell replaced him.
ANALYSIS
Coke’s Outlook at the New Millennium
The situation by 2005 did not come about suddenly. It gradually crept up until a
deteriorating stock price confronted investors, managers, and analysts. Though the
company was still healthy and profitable, somehow the Coke name had lost its
cachet and critics abounded. Then there was PepsiCo becoming more formidable
all the time.
Proposals for dealing with the situation went to two extremes: (1) stick with the
basics, and simply do things better, or (2) vigorously diversify, even to nondrink
areas as Pepsi had seemingly done successfully. The two approaches could be cat-
egorized as a mission of being a soda company versus an expanded mission of being
a beverage-and-snack company. Coke’s board, harking back to the glory days of
Goizueta, was negative toward mergers and strongly favored doing a better job with
17
Chang, Terhune and McKay, “Coke’s Big Gamble in Asia,” p. A6.
18
For example, see Dean Foust, p. 76ff; and “Behind Coke’s CEO Travails,” pp. A1, A6.
the basic core, such as with distribution and tapping international markets more
aggressively. Critics, however, saw Coke as too wedded to the status quo and miss-
ing growth opportunities. Of course, there was a third option between the two
extremes. This would look for suitable diversifications within the non-cola drink
market, and even fortuitous and compatible nondrink additions, but without any
mandate to go on a merger binge.
Several factors should affect these decisions. One was the recent trend toward
healthy lifestyles, and the foods and drinks that influence this either negatively or
positively. Worrisome omens were appearing. Some schools were removing colas
from their vending machines and school lunches. Advertisements and other public-
ity were trumpeting the health risks of fast foods and soft drinks. Was this the wave
of the future, or merely a short-term phenomenon?
Then Coke needed to confront whether its days as a growth firm were over
and if it was in the mature stage of its life cycle. The long-term consequences of
this decision would hardly be inconsequential. Disavowing aggressive growth—
recognizing a mature life cycle—can benefit investors, at least in the short run, since
more profits would be available for dividends. But the search for breakthrough
diversifications should not be abandoned. The right one(s) might put a mature firm
on the growth path again.
What Went Wrong with the New Coke Decision?

The most convenient scapegoat was the marketing research that preceded the
decision. Yet Coca-Cola spent about $4 million and devoted two years to the mar-
keting research. About 200,000 consumers were contacted during this time. The
error in judgment was surely not from want of trying. But when we dig deeper
into the research, some flaws become apparent.
Flawed Marketing Research

The major design of the marketing research involved taste tests by representative
consumers. After all, the decision was whether to go with a different flavored Coke,
so what could be more logical than to conduct taste tests to determine acceptabil-
ity of the new flavor, not only versus the old Coke but also versus Pepsi? The results
were strongly positive for the new formula, even among Pepsi drinkers. This was a
clear “go” signal.
With the benefit of hindsight, however, some deficiencies in the research design
merited concern. Research participants were not told that by picking one cola, they
would lose the other. This proved to be a significant distortion: Any addition to the
product line would naturally be far more acceptable than completely eliminating
the traditional product would be.
While three to four new tastes were tested with almost 200,000 people, only
30,000 to 40,000 of these testers tried the specific formula for the New Coke.
Research was geared more to the idea of a new, sweeter cola than that used in the
final formula. In general, a sweeter flavor tends to be preferred in blind taste tests.
This is particularly true with youths, the largest drinkers of sugared colas and the
Analysis • 25
very group drinking more Pepsi in recent years. Interestingly, preference for
sweeter-tasting products tends to diminish with use.19
Consumers were asked whether they favored change as a concept, and whether
they would likely drink more, less, or the same amount of Coke if there were a change.
But such questions could hardly prove the depth of feelings and emotional ties to the
product. The symbolic value of Coke was the sleeper. Perhaps this should have been
foreseen. Admittedly, when we get into symbolic value and emotional involvement,
any researcher is dealing with vague attitudes. But various attitudinal measures have
been developed that can measure the strength or degree of emotional involvement.
Herd Instinct
Here we see a natural human phenomenon, the herd instinct, the tendency of
people to follow an idea, a slogan, a concept, to “jump on the bandwagon.” At first,
acceptance of New Coke appeared to be reasonably satisfactory. But as more and
more outcries were raised—fanned by the media—about the betrayal of the old
tradition (somehow this became identified with motherhood, apple pie, and the
flag), public attitudes shifted strongly against the perceived unworthy substitute.
The bandwagon syndrome was fully activated. It is doubtful that by July 1985 Coca-
Cola could have done anything to reverse the unfavorable tide. To wait for it to die
down was fraught with danger—for who would be brave enough to predict the
durability and possible heights of such a protest movement?
Could, or should, such a tide have been predicted? Perhaps not, at least regard-
ing the full strength of the movement. Coca-Cola expected some protests. But
perhaps it should have been more cautious, by considering a worst-case scenario in
addition to what seemed the more probable, and by being better prepared to react
to such a contingency.
Pepsi, and Later Coca-Cola’s, International Problems

Pepsi’s Defeats in South America
With hindsight we can identify many of the mistakes Pepsi made. It tried to expand
too quickly in South America, imprudently putting all its chips on a distributor with
a checkered past, instead of building up relationships more slowly and carefully. It
did not monitor foreign operations closely enough or soon enough to prevent rash
expansion of facilities and burdensome debt accumulations by affiliates. It did
not listen closely enough to old distributors and their changing wants, and so lost
Venezuela to Coca-Cola. Pepsi apparently did not learn from its past mistakes: For
example, three times before it had tried to enter Brazil and had failed. Why the
failures? Why was it not more careful to prevent failure the next time?
Finally, we can speculate that maybe Pepsi was not so bad, but rather that its
major competitor was so good. Coca-Cola had slowly built up close relationships
with foreign bottlers over decades. It was aggressive in defending its turf. Perhaps
not the least of its strengths, at least in the lucrative Latin American markets, was
19
“New Cola Wins Round 1, but Can It Go the Distance?” Business Week, June 24, 1985, p. 48.
INFORMATION BOX
THE DYADIC RELATIONSHIP
Sellers are now recognizing the importance of the buyer-seller interaction, a dyadic
relationship. A transaction, negotiation, or relationship can often be helped by certain
characteristics of the buyer and seller in the particular encounter. Research suggests
that salespeople tend to be more successful if they have characteristics similar to their
customers in age, size, and other demographic, social, and ethnic variables.
Of course, in the selling situation this suggests that selecting and hiring sales appli-
cants most likely to be successful might require careful study of the characteristics of
the firm’s customers. Turning to the Pepsi/Coke confrontation in Brazil and Venezuela,
the same concepts should apply and give a decided advantage to Coca-Cola and
Roberto Goizueta in influencing government officials and local distributors. After all,
in interacting with customers and affiliates, even a CEO needs to be persuasive in
presenting ideas as well as handling problems and objections.
Can you think of any situations where the dyadic theory may not work?
a CEO who was also a Latino, who could speak Spanish and share the concerns and
build on the egos of the company’s local bottlers. In selling, this is known as a dyadic
relationship, and it is discussed further in the Information Box. After all, why can’t
a CEO do a selling job on a distributor and capitalize on a dyadic relationship?
Coca-Cola’s Problems in Europe

Could Coca-Cola have handled the Belgian crisis better? With hindsight we see a
flawed initial reaction. Still, the first incident of twenty-four schoolchildren getting
ill and throwing up after drinking Coke seemed hardly a major crisis at the time.
But crises often start slowly with only minor indications, and then mushroom to
catastrophic proportions. Eventually hundreds of people reported real or imagined
illnesses from drinking the various Coca-Cola products.
The mistakes of Coca-Cola in handling the situation were: (1) not taking the
initial episodes seriously enough; (2) not realizing the intense involvement and skep-
ticism of governmental officials, who demanded complete explanations of the
cause(s) and were reluctant to lift bans; and (3) not involving Coke Chairman
Douglas Ivester and other high-level executives soon enough. Allowing ten days to
go by before his personal intervention was a long time for Ivester to let problems
fester. Added to that, the quality-control lapses should not have been allowed to
occur in the first place. Eventually, Ivester and Coke acted aggressively in restoring
Coca-Cola, but lost revenues could not be fully recovered.
Of interest in this environment of cola wars was Pepsi’s restraint in not trying
to take advantage of Coke’s problems. This was not altruism but fear that the whole
soft-drink industry would face decreased demand, so Pepsi did not want to aggravate
the situation. Anyway, Pepsi saved its competitive thrusts for antitrust challenges.
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DANCE ON STILTS AT THE GIRLS’ UNYAGO, NIUCHI
Newala, too, suffers from the distance of its water-supply—at least

the Newala of to-day does; there was once another Newala in a lovely
valley at the foot of the plateau. I visited it and found scarcely a trace
of houses, only a Christian cemetery, with the graves of several
missionaries and their converts, remaining as a monument of its
former glories. But the surroundings are wonderfully beautiful. A
thick grove of splendid mango-trees closes in the weather-worn
crosses and headstones; behind them, combining the useful and the
agreeable, is a whole plantation of lemon-trees covered with ripe
fruit; not the small African kind, but a much larger and also juicier
imported variety, which drops into the hands of the passing traveller,
without calling for any exertion on his part. Old Newala is now under
the jurisdiction of the native pastor, Daudi, at Chingulungulu, who,
as I am on very friendly terms with him, allows me, as a matter of
course, the use of this lemon-grove during my stay at Newala.
FEET MUTILATED BY THE RAVAGES OF THE “JIGGER”
(Sarcopsylla penetrans)
The water-supply of New Newala is in the bottom of the valley,

some 1,600 feet lower down. The way is not only long and fatiguing,
but the water, when we get it, is thoroughly bad. We are suffering not
only from this, but from the fact that the arrangements at Newala are
nothing short of luxurious. We have a separate kitchen—a hut built
against the boma palisade on the right of the baraza, the interior of
which is not visible from our usual position. Our two cooks were not
long in finding this out, and they consequently do—or rather neglect
to do—what they please. In any case they do not seem to be very
particular about the boiling of our drinking-water—at least I can
attribute to no other cause certain attacks of a dysenteric nature,
from which both Knudsen and I have suffered for some time. If a
man like Omari has to be left unwatched for a moment, he is capable
of anything. Besides this complaint, we are inconvenienced by the
state of our nails, which have become as hard as glass, and crack on
the slightest provocation, and I have the additional infliction of
pimples all over me. As if all this were not enough, we have also, for
the last week been waging war against the jigger, who has found his
Eldorado in the hot sand of the Makonde plateau. Our men are seen
all day long—whenever their chronic colds and the dysentery likewise
raging among them permit—occupied in removing this scourge of
Africa from their feet and trying to prevent the disastrous
consequences of its presence. It is quite common to see natives of
this place with one or two toes missing; many have lost all their toes,
or even the whole front part of the foot, so that a well-formed leg
ends in a shapeless stump. These ravages are caused by the female of
Sarcopsylla penetrans, which bores its way under the skin and there
develops an egg-sac the size of a pea. In all books on the subject, it is
stated that one’s attention is called to the presence of this parasite by
an intolerable itching. This agrees very well with my experience, so
far as the softer parts of the sole, the spaces between and under the
toes, and the side of the foot are concerned, but if the creature
penetrates through the harder parts of the heel or ball of the foot, it
may escape even the most careful search till it has reached maturity.
Then there is no time to be lost, if the horrible ulceration, of which
we see cases by the dozen every day, is to be prevented. It is much
easier, by the way, to discover the insect on the white skin of a
European than on that of a native, on which the dark speck scarcely
shows. The four or five jiggers which, in spite of the fact that I
constantly wore high laced boots, chose my feet to settle in, were
taken out for me by the all-accomplished Knudsen, after which I
thought it advisable to wash out the cavities with corrosive
sublimate. The natives have a different sort of disinfectant—they fill
the hole with scraped roots. In a tiny Makua village on the slope of
the plateau south of Newala, we saw an old woman who had filled all
the spaces under her toe-nails with powdered roots by way of
prophylactic treatment. What will be the result, if any, who can say?
The rest of the many trifling ills which trouble our existence are
really more comic than serious. In the absence of anything else to
smoke, Knudsen and I at last opened a box of cigars procured from
the Indian store-keeper at Lindi, and tried them, with the most
distressing results. Whether they contain opium or some other
narcotic, neither of us can say, but after the tenth puff we were both
“off,” three-quarters stupefied and unspeakably wretched. Slowly we
recovered—and what happened next? Half-an-hour later we were
once more smoking these poisonous concoctions—so insatiable is the
craving for tobacco in the tropics.
Even my present attacks of fever scarcely deserve to be taken
seriously. I have had no less than three here at Newala, all of which
have run their course in an incredibly short time. In the early
afternoon, I am busy with my old natives, asking questions and
making notes. The strong midday coffee has stimulated my spirits to
an extraordinary degree, the brain is active and vigorous, and work
progresses rapidly, while a pleasant warmth pervades the whole
body. Suddenly this gives place to a violent chill, forcing me to put on
my overcoat, though it is only half-past three and the afternoon sun
is at its hottest. Now the brain no longer works with such acuteness
and logical precision; more especially does it fail me in trying to
establish the syntax of the difficult Makua language on which I have
ventured, as if I had not enough to do without it. Under the
circumstances it seems advisable to take my temperature, and I do
so, to save trouble, without leaving my seat, and while going on with
my work. On examination, I find it to be 101·48°. My tutors are
abruptly dismissed and my bed set up in the baraza; a few minutes
later I am in it and treating myself internally with hot water and
lemon-juice.
Three hours later, the thermometer marks nearly 104°, and I make
them carry me back into the tent, bed and all, as I am now perspiring
heavily, and exposure to the cold wind just beginning to blow might
mean a fatal chill. I lie still for a little while, and then find, to my
great relief, that the temperature is not rising, but rather falling. This
is about 7.30 p.m. At 8 p.m. I find, to my unbounded astonishment,
that it has fallen below 98·6°, and I feel perfectly well. I read for an
hour or two, and could very well enjoy a smoke, if I had the
wherewithal—Indian cigars being out of the question.
Having no medical training, I am at a loss to account for this state
of things. It is impossible that these transitory attacks of high fever
should be malarial; it seems more probable that they are due to a
kind of sunstroke. On consulting my note-book, I become more and
more inclined to think this is the case, for these attacks regularly
follow extreme fatigue and long exposure to strong sunshine. They at
least have the advantage of being only short interruptions to my
work, as on the following morning I am always quite fresh and fit.
My treasure of a cook is suffering from an enormous hydrocele which
makes it difficult for him to get up, and Moritz is obliged to keep in
the dark on account of his inflamed eyes. Knudsen’s cook, a raw boy
from somewhere in the bush, knows still less of cooking than Omari;
consequently Nils Knudsen himself has been promoted to the vacant
post. Finding that we had come to the end of our supplies, he began
by sending to Chingulungulu for the four sucking-pigs which we had
bought from Matola and temporarily left in his charge; and when
they came up, neatly packed in a large crate, he callously slaughtered
the biggest of them. The first joint we were thoughtless enough to
entrust for roasting to Knudsen’s mshenzi cook, and it was
consequently uneatable; but we made the rest of the animal into a
jelly which we ate with great relish after weeks of underfeeding,
consuming incredible helpings of it at both midday and evening
meals. The only drawback is a certain want of variety in the tinned
vegetables. Dr. Jäger, to whom the Geographical Commission
entrusted the provisioning of the expeditions—mine as well as his
own—because he had more time on his hands than the rest of us,
seems to have laid in a huge stock of Teltow turnips,[46] an article of
food which is all very well for occasional use, but which quickly palls
when set before one every day; and we seem to have no other tins
left. There is no help for it—we must put up with the turnips; but I
am certain that, once I am home again, I shall not touch them for ten
years to come.
Amid all these minor evils, which, after all, go to make up the
genuine flavour of Africa, there is at least one cheering touch:
Knudsen has, with the dexterity of a skilled mechanic, repaired my 9
× 12 cm. camera, at least so far that I can use it with a little care.
How, in the absence of finger-nails, he was able to accomplish such a
ticklish piece of work, having no tool but a clumsy screw-driver for
taking to pieces and putting together again the complicated
mechanism of the instantaneous shutter, is still a mystery to me; but
he did it successfully. The loss of his finger-nails shows him in a light
contrasting curiously enough with the intelligence evinced by the
above operation; though, after all, it is scarcely surprising after his
ten years’ residence in the bush. One day, at Lindi, he had occasion
to wash a dog, which must have been in need of very thorough
cleansing, for the bottle handed to our friend for the purpose had an
extremely strong smell. Having performed his task in the most
conscientious manner, he perceived with some surprise that the dog
did not appear much the better for it, and was further surprised by
finding his own nails ulcerating away in the course of the next few
days. “How was I to know that carbolic acid has to be diluted?” he
mutters indignantly, from time to time, with a troubled gaze at his
mutilated finger-tips.
Since we came to Newala we have been making excursions in all
directions through the surrounding country, in accordance with old
habit, and also because the akida Sefu did not get together the tribal
elders from whom I wanted information so speedily as he had
promised. There is, however, no harm done, as, even if seen only
from the outside, the country and people are interesting enough.
The Makonde plateau is like a large rectangular table rounded off
at the corners. Measured from the Indian Ocean to Newala, it is
about seventy-five miles long, and between the Rovuma and the
Lukuledi it averages fifty miles in breadth, so that its superficial area
is about two-thirds of that of the kingdom of Saxony. The surface,
however, is not level, but uniformly inclined from its south-western
edge to the ocean. From the upper edge, on which Newala lies, the
eye ranges for many miles east and north-east, without encountering
any obstacle, over the Makonde bush. It is a green sea, from which
here and there thick clouds of smoke rise, to show that it, too, is
inhabited by men who carry on their tillage like so many other
primitive peoples, by cutting down and burning the bush, and
manuring with the ashes. Even in the radiant light of a tropical day
such a fire is a grand sight.
Much less effective is the impression produced just now by the
great western plain as seen from the edge of the plateau. As often as
time permits, I stroll along this edge, sometimes in one direction,
sometimes in another, in the hope of finding the air clear enough to
let me enjoy the view; but I have always been disappointed.
Wherever one looks, clouds of smoke rise from the burning bush,
and the air is full of smoke and vapour. It is a pity, for under more
favourable circumstances the panorama of the whole country up to
the distant Majeje hills must be truly magnificent. It is of little use
taking photographs now, and an outline sketch gives a very poor idea
of the scenery. In one of these excursions I went out of my way to
make a personal attempt on the Makonde bush. The present edge of
the plateau is the result of a far-reaching process of destruction
through erosion and denudation. The Makonde strata are
everywhere cut into by ravines, which, though short, are hundreds of
yards in depth. In consequence of the loose stratification of these
beds, not only are the walls of these ravines nearly vertical, but their
upper end is closed by an equally steep escarpment, so that the
western edge of the Makonde plateau is hemmed in by a series of
deep, basin-like valleys. In order to get from one side of such a ravine
to the other, I cut my way through the bush with a dozen of my men.
It was a very open part, with more grass than scrub, but even so the
short stretch of less than two hundred yards was very hard work; at
the end of it the men’s calicoes were in rags and they themselves
bleeding from hundreds of scratches, while even our strong khaki
suits had not escaped scatheless.
NATIVE PATH THROUGH THE MAKONDE BUSH, NEAR

MAHUTA
I see increasing reason to believe that the view formed some time
back as to the origin of the Makonde bush is the correct one. I have
no doubt that it is not a natural product, but the result of human
occupation. Those parts of the high country where man—as a very
slight amount of practice enables the eye to perceive at once—has not
yet penetrated with axe and hoe, are still occupied by a splendid
timber forest quite able to sustain a comparison with our mixed
forests in Germany. But wherever man has once built his hut or tilled
his field, this horrible bush springs up. Every phase of this process
may be seen in the course of a couple of hours’ walk along the main
road. From the bush to right or left, one hears the sound of the axe—
not from one spot only, but from several directions at once. A few
steps further on, we can see what is taking place. The brush has been
cut down and piled up in heaps to the height of a yard or more,
between which the trunks of the large trees stand up like the last
pillars of a magnificent ruined building. These, too, present a
melancholy spectacle: the destructive Makonde have ringed them—
cut a broad strip of bark all round to ensure their dying off—and also
piled up pyramids of brush round them. Father and son, mother and
son-in-law, are chopping away perseveringly in the background—too
busy, almost, to look round at the white stranger, who usually excites
so much interest. If you pass by the same place a week later, the piles
of brushwood have disappeared and a thick layer of ashes has taken
the place of the green forest. The large trees stretch their
smouldering trunks and branches in dumb accusation to heaven—if
they have not already fallen and been more or less reduced to ashes,
perhaps only showing as a white stripe on the dark ground.
This work of destruction is carried out by the Makonde alike on the
virgin forest and on the bush which has sprung up on sites already
cultivated and deserted. In the second case they are saved the trouble
of burning the large trees, these being entirely absent in the
secondary bush.
After burning this piece of forest ground and loosening it with the
hoe, the native sows his corn and plants his vegetables. All over the
country, he goes in for bed-culture, which requires, and, in fact,
receives, the most careful attention. Weeds are nowhere tolerated in
the south of German East Africa. The crops may fail on the plains,
where droughts are frequent, but never on the plateau with its
abundant rains and heavy dews. Its fortunate inhabitants even have
the satisfaction of seeing the proud Wayao and Wamakua working
for them as labourers, driven by hunger to serve where they were
accustomed to rule.
But the light, sandy soil is soon exhausted, and would yield no
harvest the second year if cultivated twice running. This fact has
been familiar to the native for ages; consequently he provides in
time, and, while his crop is growing, prepares the next plot with axe
and firebrand. Next year he plants this with his various crops and
lets the first piece lie fallow. For a short time it remains waste and
desolate; then nature steps in to repair the destruction wrought by
man; a thousand new growths spring out of the exhausted soil, and
even the old stumps put forth fresh shoots. Next year the new growth
is up to one’s knees, and in a few years more it is that terrible,
impenetrable bush, which maintains its position till the black
occupier of the land has made the round of all the available sites and
come back to his starting point.
The Makonde are, body and soul, so to speak, one with this bush.
According to my Yao informants, indeed, their name means nothing
else but “bush people.” Their own tradition says that they have been
settled up here for a very long time, but to my surprise they laid great
stress on an original immigration. Their old homes were in the
south-east, near Mikindani and the mouth of the Rovuma, whence
their peaceful forefathers were driven by the continual raids of the
Sakalavas from Madagascar and the warlike Shirazis[47] of the coast,
to take refuge on the almost inaccessible plateau. I have studied
African ethnology for twenty years, but the fact that changes of
population in this apparently quiet and peaceable corner of the earth
could have been occasioned by outside enterprises taking place on
the high seas, was completely new to me. It is, no doubt, however,
correct.
The charming tribal legend of the Makonde—besides informing us
of other interesting matters—explains why they have to live in the
thickest of the bush and a long way from the edge of the plateau,
instead of making their permanent homes beside the purling brooks
and springs of the low country.
“The place where the tribe originated is Mahuta, on the southern
side of the plateau towards the Rovuma, where of old time there was
nothing but thick bush. Out of this bush came a man who never
washed himself or shaved his head, and who ate and drank but little.
He went out and made a human figure from the wood of a tree
growing in the open country, which he took home to his abode in the
bush and there set it upright. In the night this image came to life and
was a woman. The man and woman went down together to the
Rovuma to wash themselves. Here the woman gave birth to a still-
born child. They left that place and passed over the high land into the
valley of the Mbemkuru, where the woman had another child, which
was also born dead. Then they returned to the high bush country of
Mahuta, where the third child was born, which lived and grew up. In
course of time, the couple had many more children, and called
themselves Wamatanda. These were the ancestral stock of the
Makonde, also called Wamakonde,[48] i.e., aborigines. Their
forefather, the man from the bush, gave his children the command to
bury their dead upright, in memory of the mother of their race who
was cut out of wood and awoke to life when standing upright. He also
warned them against settling in the valleys and near large streams,
for sickness and death dwelt there. They were to make it a rule to
have their huts at least an hour’s walk from the nearest watering-
place; then their children would thrive and escape illness.”
The explanation of the name Makonde given by my informants is
somewhat different from that contained in the above legend, which I
extract from a little book (small, but packed with information), by
Pater Adams, entitled Lindi und sein Hinterland. Otherwise, my
results agree exactly with the statements of the legend. Washing?
Hapana—there is no such thing. Why should they do so? As it is, the
supply of water scarcely suffices for cooking and drinking; other
people do not wash, so why should the Makonde distinguish himself
by such needless eccentricity? As for shaving the head, the short,
woolly crop scarcely needs it,[49] so the second ancestral precept is
likewise easy enough to follow. Beyond this, however, there is
nothing ridiculous in the ancestor’s advice. I have obtained from
various local artists a fairly large number of figures carved in wood,
ranging from fifteen to twenty-three inches in height, and
representing women belonging to the great group of the Mavia,
Makonde, and Matambwe tribes. The carving is remarkably well
done and renders the female type with great accuracy, especially the
keloid ornamentation, to be described later on. As to the object and
meaning of their works the sculptors either could or (more probably)
would tell me nothing, and I was forced to content myself with the
scanty information vouchsafed by one man, who said that the figures
were merely intended to represent the nembo—the artificial
deformations of pelele, ear-discs, and keloids. The legend recorded
by Pater Adams places these figures in a new light. They must surely
be more than mere dolls; and we may even venture to assume that
they are—though the majority of present-day Makonde are probably
unaware of the fact—representations of the tribal ancestress.
The references in the legend to the descent from Mahuta to the
Rovuma, and to a journey across the highlands into the Mbekuru
valley, undoubtedly indicate the previous history of the tribe, the
travels of the ancestral pair typifying the migrations of their
descendants. The descent to the neighbouring Rovuma valley, with
its extraordinary fertility and great abundance of game, is intelligible
at a glance—but the crossing of the Lukuledi depression, the ascent
to the Rondo Plateau and the descent to the Mbemkuru, also lie
within the bounds of probability, for all these districts have exactly
the same character as the extreme south. Now, however, comes a
point of especial interest for our bacteriological age. The primitive
Makonde did not enjoy their lives in the marshy river-valleys.
Disease raged among them, and many died. It was only after they
had returned to their original home near Mahuta, that the health
conditions of these people improved. We are very apt to think of the
African as a stupid person whose ignorance of nature is only equalled
by his fear of it, and who looks on all mishaps as caused by evil
spirits and malignant natural powers. It is much more correct to
assume in this case that the people very early learnt to distinguish
districts infested with malaria from those where it is absent.
This knowledge is crystallized in the
ancestral warning against settling in the
valleys and near the great waters, the
dwelling-places of disease and death. At the
same time, for security against the hostile
Mavia south of the Rovuma, it was enacted
that every settlement must be not less than a
certain distance from the southern edge of the
plateau. Such in fact is their mode of life at the
present day. It is not such a bad one, and
certainly they are both safer and more
comfortable than the Makua, the recent
intruders from the south, who have made USUAL METHOD OF
good their footing on the western edge of the CLOSING HUT-DOOR
plateau, extending over a fairly wide belt of
country. Neither Makua nor Makonde show in their dwellings
anything of the size and comeliness of the Yao houses in the plain,
especially at Masasi, Chingulungulu and Zuza’s. Jumbe Chauro, a
Makonde hamlet not far from Newala, on the road to Mahuta, is the
most important settlement of the tribe I have yet seen, and has fairly
spacious huts. But how slovenly is their construction compared with
the palatial residences of the elephant-hunters living in the plain.
The roofs are still more untidy than in the general run of huts during
the dry season, the walls show here and there the scanty beginnings
or the lamentable remains of the mud plastering, and the interior is a
veritable dog-kennel; dirt, dust and disorder everywhere. A few huts
only show any attempt at division into rooms, and this consists
merely of very roughly-made bamboo partitions. In one point alone
have I noticed any indication of progress—in the method of fastening
the door. Houses all over the south are secured in a simple but
ingenious manner. The door consists of a set of stout pieces of wood
or bamboo, tied with bark-string to two cross-pieces, and moving in
two grooves round one of the door-posts, so as to open inwards. If
the owner wishes to leave home, he takes two logs as thick as a man’s
upper arm and about a yard long. One of these is placed obliquely
against the middle of the door from the inside, so as to form an angle
of from 60° to 75° with the ground. He then places the second piece
horizontally across the first, pressing it downward with all his might.
It is kept in place by two strong posts planted in the ground a few
inches inside the door. This fastening is absolutely safe, but of course
cannot be applied to both doors at once, otherwise how could the
owner leave or enter his house? I have not yet succeeded in finding
out how the back door is fastened.
MAKONDE LOCK AND KEY AT JUMBE CHAURO

This is the general way of closing a house. The Makonde at Jumbe
Chauro, however, have a much more complicated, solid and original
one. Here, too, the door is as already described, except that there is
only one post on the inside, standing by itself about six inches from
one side of the doorway. Opposite this post is a hole in the wall just
large enough to admit a man’s arm. The door is closed inside by a
large wooden bolt passing through a hole in this post and pressing
with its free end against the door. The other end has three holes into
which fit three pegs running in vertical grooves inside the post. The
door is opened with a wooden key about a foot long, somewhat
curved and sloped off at the butt; the other end has three pegs
corresponding to the holes, in the bolt, so that, when it is thrust
through the hole in the wall and inserted into the rectangular
opening in the post, the pegs can be lifted and the bolt drawn out.[50]
MODE OF INSERTING THE KEY
With no small pride first one householder and then a second

showed me on the spot the action of this greatest invention of the
Makonde Highlands. To both with an admiring exclamation of
“Vizuri sana!” (“Very fine!”). I expressed the wish to take back these
marvels with me to Ulaya, to show the Wazungu what clever fellows
the Makonde are. Scarcely five minutes after my return to camp at
Newala, the two men came up sweating under the weight of two
heavy logs which they laid down at my feet, handing over at the same
time the keys of the fallen fortress. Arguing, logically enough, that if
the key was wanted, the lock would be wanted with it, they had taken
their axes and chopped down the posts—as it never occurred to them
to dig them out of the ground and so bring them intact. Thus I have
two badly damaged specimens, and the owners, instead of praise,
come in for a blowing-up.
The Makua huts in the environs of Newala are especially
miserable; their more than slovenly construction reminds one of the
temporary erections of the Makua at Hatia’s, though the people here
have not been concerned in a war. It must therefore be due to
congenital idleness, or else to the absence of a powerful chief. Even
the baraza at Mlipa’s, a short hour’s walk south-east of Newala,
shares in this general neglect. While public buildings in this country
are usually looked after more or less carefully, this is in evident
danger of being blown over by the first strong easterly gale. The only
attractive object in this whole district is the grave of the late chief
Mlipa. I visited it in the morning, while the sun was still trying with
partial success to break through the rolling mists, and the circular
grove of tall euphorbias, which, with a broken pot, is all that marks
the old king’s resting-place, impressed one with a touch of pathos.
Even my very materially-minded carriers seemed to feel something
of the sort, for instead of their usual ribald songs, they chanted
solemnly, as we marched on through the dense green of the Makonde
bush:—
“We shall arrive with the great master; we stand in a row and have
no fear about getting our food and our money from the Serkali (the
Government). We are not afraid; we are going along with the great
master, the lion; we are going down to the coast and back.”
With regard to the characteristic features of the various tribes here
on the western edge of the plateau, I can arrive at no other
conclusion than the one already come to in the plain, viz., that it is
impossible for anyone but a trained anthropologist to assign any
given individual at once to his proper tribe. In fact, I think that even
an anthropological specialist, after the most careful examination,
might find it a difficult task to decide. The whole congeries of peoples
collected in the region bounded on the west by the great Central
African rift, Tanganyika and Nyasa, and on the east by the Indian
Ocean, are closely related to each other—some of their languages are
only distinguished from one another as dialects of the same speech,
and no doubt all the tribes present the same shape of skull and
structure of skeleton. Thus, surely, there can be no very striking
differences in outward appearance.
Even did such exist, I should have no time
to concern myself with them, for day after day,
I have to see or hear, as the case may be—in
any case to grasp and record—an
extraordinary number of ethnographic
phenomena. I am almost disposed to think it
fortunate that some departments of inquiry, at
least, are barred by external circumstances.
Chief among these is the subject of iron-
working. We are apt to think of Africa as a
country where iron ore is everywhere, so to
speak, to be picked up by the roadside, and
where it would be quite surprising if the
inhabitants had not learnt to smelt the
material ready to their hand. In fact, the
knowledge of this art ranges all over the
continent, from the Kabyles in the north to the
Kafirs in the south. Here between the Rovuma
and the Lukuledi the conditions are not so
favourable. According to the statements of the
Makonde, neither ironstone nor any other
form of iron ore is known to them. They have
not therefore advanced to the art of smelting
the metal, but have hitherto bought all their
THE ANCESTRESS OF
THE MAKONDE
iron implements from neighbouring tribes.
Even in the plain the inhabitants are not much
better off. Only one man now living is said to
understand the art of smelting iron. This old fundi lives close to
Huwe, that isolated, steep-sided block of granite which rises out of
the green solitude between Masasi and Chingulungulu, and whose
jagged and splintered top meets the traveller’s eye everywhere. While
still at Masasi I wished to see this man at work, but was told that,
frightened by the rising, he had retired across the Rovuma, though
he would soon return. All subsequent inquiries as to whether the
fundi had come back met with the genuine African answer, “Bado”
(“Not yet”).
BRAZIER
Some consolation was afforded me by a brassfounder, whom I

came across in the bush near Akundonde’s. This man is the favourite
of women, and therefore no doubt of the gods; he welds the glittering
brass rods purchased at the coast into those massive, heavy rings
which, on the wrists and ankles of the local fair ones, continually give
me fresh food for admiration. Like every decent master-craftsman he
had all his tools with him, consisting of a pair of bellows, three
crucibles and a hammer—nothing more, apparently. He was quite
willing to show his skill, and in a twinkling had fixed his bellows on
the ground. They are simply two goat-skins, taken off whole, the four
legs being closed by knots, while the upper opening, intended to
admit the air, is kept stretched by two pieces of wood. At the lower
end of the skin a smaller opening is left into which a wooden tube is
stuck. The fundi has quickly borrowed a heap of wood-embers from
the nearest hut; he then fixes the free ends of the two tubes into an
earthen pipe, and clamps them to the ground by means of a bent
piece of wood. Now he fills one of his small clay crucibles, the dross
on which shows that they have been long in use, with the yellow
material, places it in the midst of the embers, which, at present are
only faintly glimmering, and begins his work. In quick alternation
the smith’s two hands move up and down with the open ends of the
bellows; as he raises his hand he holds the slit wide open, so as to let
the air enter the skin bag unhindered. In pressing it down he closes
the bag, and the air puffs through the bamboo tube and clay pipe into
the fire, which quickly burns up. The smith, however, does not keep
on with this work, but beckons to another man, who relieves him at
the bellows, while he takes some more tools out of a large skin pouch
carried on his back. I look on in wonder as, with a smooth round
stick about the thickness of a finger, he bores a few vertical holes into
the clean sand of the soil. This should not be difficult, yet the man
seems to be taking great pains over it. Then he fastens down to the
ground, with a couple of wooden clamps, a neat little trough made by
splitting a joint of bamboo in half, so that the ends are closed by the
two knots. At last the yellow metal has attained the right consistency,
and the fundi lifts the crucible from the fire by means of two sticks
split at the end to serve as tongs. A short swift turn to the left—a
tilting of the crucible—and the molten brass, hissing and giving forth
clouds of smoke, flows first into the bamboo mould and then into the
holes in the ground.
The technique of this backwoods craftsman may not be very far
advanced, but it cannot be denied that he knows how to obtain an
adequate result by the simplest means. The ladies of highest rank in
this country—that is to say, those who can afford it, wear two kinds
of these massive brass rings, one cylindrical, the other semicircular
in section. The latter are cast in the most ingenious way in the
bamboo mould, the former in the circular hole in the sand. It is quite
a simple matter for the fundi to fit these bars to the limbs of his fair
customers; with a few light strokes of his hammer he bends the
pliable brass round arm or ankle without further inconvenience to
the wearer.
SHAPING THE POT
SMOOTHING WITH MAIZE-COB
CUTTING THE EDGE

FINISHING THE BOTTOM
LAST SMOOTHING BEFORE

BURNING
FIRING THE BRUSH-PILE

LIGHTING THE FARTHER SIDE OF
THE PILE
TURNING THE RED-HOT VESSEL
NYASA WOMAN MAKING POTS AT MASASI

Pottery is an art which must always and everywhere excite the
interest of the student, just because it is so intimately connected with
the development of human culture, and because its relics are one of
the principal factors in the reconstruction of our own condition in
prehistoric times. I shall always remember with pleasure the two or
three afternoons at Masasi when Salim Matola’s mother, a slightly-
built, graceful, pleasant-looking woman, explained to me with
touching patience, by means of concrete illustrations, the ceramic art
of her people. The only implements for this primitive process were a
lump of clay in her left hand, and in the right a calabash containing
the following valuables: the fragment of a maize-cob stripped of all
its grains, a smooth, oval pebble, about the size of a pigeon’s egg, a
few chips of gourd-shell, a bamboo splinter about the length of one’s
hand, a small shell, and a bunch of some herb resembling spinach.
Nothing more. The woman scraped with the
shell a round, shallow hole in the soft, fine
sand of the soil, and, when an active young
girl had filled the calabash with water for her,
she began to knead the clay. As if by magic it
gradually assumed the shape of a rough but
already well-shaped vessel, which only wanted
a little touching up with the instruments
before mentioned. I looked out with the
MAKUA WOMAN closest attention for any indication of the use
MAKING A POT. of the potter’s wheel, in however rudimentary
SHOWS THE a form, but no—hapana (there is none). The
BEGINNINGS OF THE embryo pot stood firmly in its little
POTTER’S WHEEL
depression, and the woman walked round it in
a stooping posture, whether she was removing
small stones or similar foreign bodies with the maize-cob, smoothing
the inner or outer surface with the splinter of bamboo, or later, after
letting it dry for a day, pricking in the ornamentation with a pointed
bit of gourd-shell, or working out the bottom, or cutting the edge
with a sharp bamboo knife, or giving the last touches to the finished
vessel. This occupation of the women is infinitely toilsome, but it is
without doubt an accurate reproduction of the process in use among
our ancestors of the Neolithic and Bronze ages.
There is no doubt that the invention of pottery, an item in human
progress whose importance cannot be over-estimated, is due to
women. Rough, coarse and unfeeling, the men of the horde range
over the countryside. When the united cunning of the hunters has
succeeded in killing the game; not one of them thinks of carrying
home the spoil. A bright fire, kindled by a vigorous wielding of the
drill, is crackling beside them; the animal has been cleaned and cut
up secundum artem, and, after a slight singeing, will soon disappear
under their sharp teeth; no one all this time giving a single thought
to wife or child.
To what shifts, on the other hand, the primitive wife, and still more
the primitive mother, was put! Not even prehistoric stomachs could
endure an unvarying diet of raw food. Something or other suggested
the beneficial effect of hot water on the majority of approved but
indigestible dishes. Perhaps a neighbour had tried holding the hard
roots or tubers over the fire in a calabash filled with water—or maybe
an ostrich-egg-shell, or a hastily improvised vessel of bark. They
became much softer and more palatable than they had previously
been; but, unfortunately, the vessel could not stand the fire and got
charred on the outside. That can be remedied, thought our
ancestress, and plastered a layer of wet clay round a similar vessel.
This is an improvement; the cooking utensil remains uninjured, but
the heat of the fire has shrunk it, so that it is loose in its shell. The
next step is to detach it, so, with a firm grip and a jerk, shell and
kernel are separated, and pottery is invented. Perhaps, however, the
discovery which led to an intelligent use of the burnt-clay shell, was
made in a slightly different way. Ostrich-eggs and calabashes are not
to be found in every part of the world, but everywhere mankind has
arrived at the art of making baskets out of pliant materials, such as
bark, bast, strips of palm-leaf, supple twigs, etc. Our inventor has no
water-tight vessel provided by nature. “Never mind, let us line the
basket with clay.” This answers the purpose, but alas! the basket gets
burnt over the blazing fire, the woman watches the process of
cooking with increasing uneasiness, fearing a leak, but no leak
appears. The food, done to a turn, is eaten with peculiar relish; and
the cooking-vessel is examined, half in curiosity, half in satisfaction
at the result. The plastic clay is now hard as stone, and at the same
time looks exceedingly well, for the neat plaiting of the burnt basket
is traced all over it in a pretty pattern. Thus, simultaneously with
pottery, its ornamentation was invented.
Primitive woman has another claim to respect. It was the man,
roving abroad, who invented the art of producing fire at will, but the
woman, unable to imitate him in this, has been a Vestal from the
earliest times. Nothing gives so much trouble as the keeping alight of
the smouldering brand, and, above all, when all the men are absent
from the camp. Heavy rain-clouds gather, already the first large
drops are falling, the first gusts of the storm rage over the plain. The
little flame, a greater anxiety to the woman than her own children,
flickers unsteadily in the blast. What is to be done? A sudden thought
occurs to her, and in an instant she has constructed a primitive hut
out of strips of bark, to protect the flame against rain and wind.
This, or something very like it, was the way in which the principle
of the house was discovered; and even the most hardened misogynist
cannot fairly refuse a woman the credit of it. The protection of the
hearth-fire from the weather is the germ from which the human
dwelling was evolved. Men had little, if any share, in this forward
step, and that only at a late stage. Even at the present day, the
plastering of the housewall with clay and the manufacture of pottery
are exclusively the women’s business. These are two very significant
survivals. Our European kitchen-garden, too, is originally a woman’s
invention, and the hoe, the primitive instrument of agriculture, is,
characteristically enough, still used in this department. But the
noblest achievement which we owe to the other sex is unquestionably
the art of cookery. Roasting alone—the oldest process—is one for
which men took the hint (a very obvious one) from nature. It must
have been suggested by the scorched carcase of some animal
overtaken by the destructive forest-fires. But boiling—the process of
improving organic substances by the help of water heated to boiling-
point—is a much later discovery. It is so recent that it has not even
yet penetrated to all parts of the world. The Polynesians understand
how to steam food, that is, to cook it, neatly wrapped in leaves, in a
hole in the earth between hot stones, the air being excluded, and
(sometimes) a few drops of water sprinkled on the stones; but they
do not understand boiling.
To come back from this digression, we find that the slender Nyasa
woman has, after once more carefully examining the finished pot,
put it aside in the shade to dry. On the following day she sends me
word by her son, Salim Matola, who is always on hand, that she is
going to do the burning, and, on coming out of my house, I find her
already hard at work. She has spread on the ground a layer of very
dry sticks, about as thick as one’s thumb, has laid the pot (now of a
yellowish-grey colour) on them, and is piling brushwood round it.
My faithful Pesa mbili, the mnyampara, who has been standing by,
most obligingly, with a lighted stick, now hands it to her. Both of
them, blowing steadily, light the pile on the lee side, and, when the
flame begins to catch, on the weather side also. Soon the whole is in a
blaze, but the dry fuel is quickly consumed and the fire dies down, so
that we see the red-hot vessel rising from the ashes. The woman
turns it continually with a long stick, sometimes one way and
sometimes another, so that it may be evenly heated all over. In
twenty minutes she rolls it out of the ash-heap, takes up the bundle
of spinach, which has been lying for two days in a jar of water, and
sprinkles the red-hot clay with it. The places where the drops fall are
marked by black spots on the uniform reddish-brown surface. With a
sigh of relief, and with visible satisfaction, the woman rises to an
erect position; she is standing just in a line between me and the fire,
from which a cloud of smoke is just rising: I press the ball of my
camera, the shutter clicks—the apotheosis is achieved! Like a
priestess, representative of her inventive sex, the graceful woman
stands: at her feet the hearth-fire she has given us beside her the
invention she has devised for us, in the background the home she has
built for us.
At Newala, also, I have had the manufacture of pottery carried on
in my presence. Technically the process is better than that already
described, for here we find the beginnings of the potter’s wheel,
which does not seem to exist in the plains; at least I have seen
nothing of the sort. The artist, a frightfully stupid Makua woman, did
not make a depression in the ground to receive the pot she was about
to shape, but used instead a large potsherd. Otherwise, she went to
work in much the same way as Salim’s mother, except that she saved
herself the trouble of walking round and round her work by squatting
at her ease and letting the pot and potsherd rotate round her; this is
surely the first step towards a machine. But it does not follow that
the pot was improved by the process. It is true that it was beautifully
rounded and presented a very creditable appearance when finished,
but the numerous large and small vessels which I have seen, and, in
part, collected, in the “less advanced” districts, are no less so. We
moderns imagine that instruments of precision are necessary to
produce excellent results. Go to the prehistoric collections of our
museums and look at the pots, urns and bowls of our ancestors in the
dim ages of the past, and you will at once perceive your error.
MAKING LONGITUDINAL CUT IN
BARK
DRAWING THE BARK OFF THE LOG
REMOVING THE OUTER BARK

BEATING THE BARK
WORKING THE BARK-CLOTH AFTER BEATING, TO MAKE IT

SOFT
MANUFACTURE OF BARK-CLOTH AT NEWALA

To-day, nearly the whole population of German East Africa is
clothed in imported calico. This was not always the case; even now in
some parts of the north dressed skins are still the prevailing wear,
and in the north-western districts—east and north of Lake
Tanganyika—lies a zone where bark-cloth has not yet been
superseded. Probably not many generations have passed since such
bark fabrics and kilts of skins were the only clothing even in the
south. Even to-day, large quantities of this bright-red or drab
material are still to be found; but if we wish to see it, we must look in
the granaries and on the drying stages inside the native huts, where
it serves less ambitious uses as wrappings for those seeds and fruits
which require to be packed with special care. The salt produced at
Masasi, too, is packed for transport to a distance in large sheets of
bark-cloth. Wherever I found it in any degree possible, I studied the
process of making this cloth. The native requisitioned for the
purpose arrived, carrying a log between two and three yards long and
as thick as his thigh, and nothing else except a curiously-shaped
mallet and the usual long, sharp and pointed knife which all men and
boys wear in a belt at their backs without a sheath—horribile dictu!
[51]
Silently he squats down before me, and with two rapid cuts has
drawn a couple of circles round the log some two yards apart, and
slits the bark lengthwise between them with the point of his knife.
With evident care, he then scrapes off the outer rind all round the
log, so that in a quarter of an hour the inner red layer of the bark
shows up brightly-coloured between the two untouched ends. With
some trouble and much caution, he now loosens the bark at one end,
and opens the cylinder. He then stands up, takes hold of the free
edge with both hands, and turning it inside out, slowly but steadily
pulls it off in one piece. Now comes the troublesome work of
scraping all superfluous particles of outer bark from the outside of
the long, narrow piece of material, while the inner side is carefully
scrutinised for defective spots. At last it is ready for beating. Having
signalled to a friend, who immediately places a bowl of water beside
him, the artificer damps his sheet of bark all over, seizes his mallet,
lays one end of the stuff on the smoothest spot of the log, and
hammers away slowly but continuously. “Very simple!” I think to
myself. “Why, I could do that, too!”—but I am forced to change my
opinions a little later on; for the beating is quite an art, if the fabric is
not to be beaten to pieces. To prevent the breaking of the fibres, the
stuff is several times folded across, so as to interpose several
thicknesses between the mallet and the block. At last the required
state is reached, and the fundi seizes the sheet, still folded, by both
ends, and wrings it out, or calls an assistant to take one end while he
holds the other. The cloth produced in this way is not nearly so fine
and uniform in texture as the famous Uganda bark-cloth, but it is
quite soft, and, above all, cheap.
Now, too, I examine the mallet. My craftsman has been using the
simpler but better form of this implement, a conical block of some
hard wood, its base—the striking surface—being scored across and
across with more or less deeply-cut grooves, and the handle stuck
into a hole in the middle. The other and earlier form of mallet is
shaped in the same way, but the head is fastened by an ingenious
network of bark strips into the split bamboo serving as a handle. The
observation so often made, that ancient customs persist longest in
connection with religious ceremonies and in the life of children, here
finds confirmation. As we shall soon see, bark-cloth is still worn
during the unyago,[52] having been prepared with special solemn
ceremonies; and many a mother, if she has no other garment handy,
will still put her little one into a kilt of bark-cloth, which, after all,
looks better, besides being more in keeping with its African
surroundings, than the ridiculous bit of print from Ulaya.
MAKUA WOMEN

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Marketing Mistakes and Successes,

PART I MARKETING WARS 9

PART III MARKETING MANAGEMENT MISTAKES 127

PART IV ENTREPRENEURIAL ADVENTURES 229

PART V ETHICAL MISTAKES 281

PART VI NOTABLE MARKETING SUCCESSES 329

Chapter 24 Conclusions: What We Can Learn 381

4. Corrective action is prompt. Sometimes this requires a ruthless axing of

I try to give my subordinates as much decision-making experience as possible. Perhaps

Why Were Such Actions Successful?

• Was it because of particular engineering or production efforts, and if so, can

Was the Situation Unique and Unlikely to Be Encountered Again?

ORGANIZATION OF THIS BOOK

Marketing Management Mistakes

Notable Marketing Successes

1. Do you agree that it is impossible for a firm to avoid mistakes? Why or

Cola Wars: Coke vs. Pepsi

EARLY BATTLES, LEADING TO NEW COKE FIASCO

Table 2.1 Coke and Pepsi Shares of Total Soft-Drink Market,

Coca-Cola Tries to Battle Back

Introducing a New Flavor for Coke

Unfortunately for Pepsi, the euphoria of a major blunder by Coca-Cola was

BATTLE SHIFTS TO INTERNATIONAL ARENA

Pepsi’s Problems Elsewhere in the International Arena

Table 2.2 Coke and Pepsi Shares of Total

COKE TRAVAILS IN EUROPE, 1999

Coca-Cola Finally Acts Aggressively

Pepsi’s Competitive Maneuvers Near the Millennium

Pepsi’s Antitrust Initiatives against Coca-Cola

Table 2.3 Coca-Cola’s Market

COKE FINDS TOUGH GOING IN

Percent of Company Sales and Operating Profits

Coke’s Reluctance to Diversify

substance, were detected in bottles in Britain. Declining sales in Germany and

Coke’s Board of Directors

What Went Wrong with the New Coke Decision?

Flawed Marketing Research

Pepsi, and Later Coca-Cola’s, International Problems

Coca-Cola’s Problems in Europe

Newala, too, suffers from the distance of its water-supply—at least

The water-supply of New Newala is in the bottom of the valley,

NATIVE PATH THROUGH THE MAKONDE BUSH, NEAR

MAKONDE LOCK AND KEY AT JUMBE CHAURO

MODE OF INSERTING THE KEY

With no small pride first one householder and then a second

Some consolation was afforded me by a brassfounder, whom I

SMOOTHING WITH MAIZE-COB

CUTTING THE EDGE

LAST SMOOTHING BEFORE

FIRING THE BRUSH-PILE

TURNING THE RED-HOT VESSEL

NYASA WOMAN MAKING POTS AT MASASI

DRAWING THE BARK OFF THE LOG

REMOVING THE OUTER BARK

WORKING THE BARK-CLOTH AFTER BEATING, TO MAKE IT

MANUFACTURE OF BARK-CLOTH AT NEWALA

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