The Royal Navy, with Japanese assistance, had spent the early months of the war searching for the German East Asiatic commerce-raiding squadron known to be operating under Admiral Spee in the Pacific (Spee having moved from Tsingtao in China once Japan entered the war on Britain's side), without success.
The British learned from an intercepted radio communication in early October of a plan devised by Spee to prey upon shipping in the crucial trading routes along the west coast of South America. Patrolling South America at that time was Admiral Cradock's West Indies Squadron, which consisted of two armoured cruisers, HMS Good Hope (Cradock's flagship) and HMS Monmouth, the light cruiser HMS Glasgow, and a converted ex-liner, Otranto.
Cradock's fleet was by no means modern or particularly strong, and certainly ill-matched when set against Spee's formidable force of five vessels, led by the armoured cruisers SMS Scharnhorst and SMS Gneisenau plus a further three light cruisers, all modern, efficient ships. Nevertheless he was ordered to deal with Spee.
Cradock, who was aware that his shipping was outgunned by Spee's, had meanwhile been waiting in the hope of naval reinforcements. In the event the Admiralty dispatched only the Defence - an armoured cruiser, and HMS Canopus - an elderly battleship, the latter sent from London. Neither reached Cradock before battle unexpectedly commenced on 1 November 1914.
Deciding that he could wait no longer for the delayed reinforcements, Cradock determined to sail from the Falkland Islands to a predetermined rendezvous point with the Glasgow at Coronel, the latter having been sent there to gather intelligence.
At this point the First Lord of the Admiralty, Winston Churchill, in London issued orders to Cradock on 28 October instructing him to halt, pending possible reinforcement from the Japanese navy. It is a moot point as to whether Cradock actually received Churchill's instructions; in any event he shortly afterwards ordered his squadron to adopt an attacking formation.
Cradock had received word, again via intercepted radio signal on 31 October that SMS Leipzig, the slowest light cruiser in Spee's fleet, was in the area. He promptly ordered his squadron north to cut it off - and instead found himself confronting Spee's entire force the following day at around 4.30pm.
At this stage it is probable that the British force could have escaped by sailing towards Canopus, then some 300 miles to the south; with the failing light Spee would most likely have lost contact with the British squadron. Instead Cradock chose to stay and fight; however he ordered Otranto to break formation and flee.
With the seas difficult (to the disadvantage of the British) Spee reacted by moving his faster vessels out of Cradock's firing range; at sunset - 7pm - with the setting sun clearly silhouetting Cradock's fleet, he began to shell the latter's force, with Scharnhorst's third salvo crippling the flagship Good Hope. Both Good Hope and Monmouth were destroyed shortly afterwards.
There were no survivors of either ship, Cradock himself going down with the Good Hope. Glasgow and Otranto both escaped (although the former suffered five hits). Spee's own fleet had suffered little damage, and sailed thereafter to Valparaiso to a rapturous welcome from the local German population.
Once news of the scale of the British defeat, and its consequent humiliation, reached the British Admiralty in London a decision was quickly taken to assemble a huge naval force under Admiral Sir Frederick Sturdee. This was promptly dispatched to destroy Spee's force: which it subsequently did, at the Battle of the Falkland Islands.