Coca Cola Globalisation Methods And Plans Business Essay

Coca Cola Globalisation Methods And Plans Business studyThis business office of the research report would provide a detailed business relationship of Coca-Colas globalization methods and plans using the business techniques explained in part 2 which be the SWOT analytic thinking and Ohmaes five Cs. It would include a description of firmness of purposes of Coca-Colas globalisation plans and methods with any limitation. excessively that, securities industry numbers of Coca-Cola expansion with the use of t subjects and f diminishedcharts. there would be a critical analysis of the results of the globalisation erect of Coca-Cola. Lastly, conclusions would be cadaverous base on all(a) everywhereall research findings temporary hookup oerseeing how well intercommunicate accusings and research questions ar met and appropriate recommendations.3.1 Globalisation jibe to the Levin Institute,Globalisation is the c over of interaction and integration among volume, companies, a nd governments of various nations, driven by international disdain and investment and aided by information technology. This process has major effect on the environment, culture, policy-making systems, economic increase and prosperity, and on human sensual well- organismness and societies somewhat the world.(Levin Institute, n.d)Its effectuate influences people as businesses tend to do beyond their domestic and national food merchandises to different grocerys around the universe, where different foodstuffs argon interconnected. It is likewise seen as extending its reach to opposite parts of the world.3.2 Why did Coca-Cola globalise?Using Kenichi Ohmaes 5Cs framework with reference to the BPP textbook, we f put downpot understand the reasons why Coca-Cola move towards international merchandises for expansion.CustomerThe Coca-Cola club penuryed every unitary around the world to get it on its overlap. It was the owners vision for its return to be enjoyed worldw ide. The neighborly clubs success was also manipulated since it enjoyed homogenous customers where people around the world enjoyed the very(prenominal) taste. This partnered with major advertisement campaigns do Coca-Cola whizz of the c pull awayly famous set fix in the world. With the help of originative advertising, Coca-Cola was able to seizure the loyalty of consumers to abide use of its harvests. advertizing is seen as a medium for the follow to communicate and promote its products to its customers which is widely utilize by The Coca-Cola federation.According to dactyl 1, at that place is clear indication of tardy emendr of unit case sales over the 4 class achievement. display board 1 show that the increase of unit cases inter variety over the 4 years compargond to the previous year has dropped slightly in cc9 with sole(prenominal) 2.95% whereas the highest increase was in 2007 with a 6.07% increase from 2006.The Coca-Cola Company has also introduce d natural products to existing markets in station to suit to a crabby untaught taste bud. In 2009, research exam of a refreshful honey oil dispenser called the Coca-Cola Freestyle is able to dispense more than 100 different brands of beverages which is currently being placed in selected US markets and would continue to be placed worldwide. The part of the new dispenser is to capture data of what kind of taste people cause in preference, this allows the familiarity to gather data on statistics of peoples choice in beau monde to develop and introduce a new product into the market. (The Coca-Cola Company)CompanyThe Coca-Cola Company enjoys large economies of scale by moving into international markets. large scale bottling in the long run beats the company more agonistical by improving their achievement methods in order to achieve the lowest cost possible. They also look into potential international markets for growth and investment opportunities. After local anaesthet ic market needs be fulfilled, the company would want to degrade into new markets in order to increase its sales and avails. It would also increase the companys customer base since there is a new provide of demand to be met. Listed below in Figure 2 and panel 2 is the net operational tax, operating in come on and net income for the Coca-Cola Company over 4 years. unclutter operating revenue, operating income and net income ($ millions)$ (millions)Figure 2 Net operating revenue, operating income and net income of The Coca-Cola Company over a 4 year periodAccording to Figure 2, the companys net operating revenue is seen to be increasing gradually over the 4 year period magic spell dropping only slightly in 2009 although there was a major recession. Net income also has been increasing over the 4 year period to a record high of $ 6.8 billion in 2009. This could be due to better cost precaution.Further analysis on hedge 3 indicates that the companys cost is also kept at a conti nuous level of around 33% to 36% of meat net operating revenue in order to main(prenominal)tain a high consummate(a) profit margin of 63% to 66%. This is to crack that the company is everlastingly profitable to attract move investors.According to the recent slap-up expenditures do by The Coca-Cola Company, the company is restrained seen expanding its operations worldwide with throw magnitude capital expenditure made over the 4 years. This foot be run aground in Table 4 below which show the capital expenditures made by the company from 2006 to 2009. argumentThe Coca-Cola Company competes in the non-alcoholic beverages segment of the moneymaking(prenominal) beverages industry. The beverage industry is highly matched, as there argon umpteen different display cases of drinks in the market ranging from non-alcoholic to alcoholic products. There be umteen companies that are similar to The Coca-Cola Company, some of which tends to compete for assign of market crossways the world. The company particularly globalised due to the fact that they wanted to strike adit into new and bigger markets since their domestic market needs are already fulfilled. An oppositewise reason would be due to strong competition from The Pepsi-Cola Company as they are the companys biggest rivals. According to the Coca-Cola Company, there are numerous competitive factors that could impact the business which include pricing, advertising, sales promotion programs, product innovation, increased efficiency in production techniques, the introduction of new packaging, new vending and dispensing equipment, brand and trademark festering and protection. (The Coca-Cola Company) Below Figure 3 and Table 5 indicates the top 10 beverage companies ranked harmonisely by market apportion.According to Figure 3, The Coca-Cola Company still hauls in market share of 41.9% ahead of PepsiCo of 29.9%. This is a good sign for the company as PepsiCo is the companys biggest antagonist. The company should remain focus on defending its market share and stay the market galloper. According to the data in Table 5, market share for The Coca-Cola Company and PepsiCo direct negative share change in 2009 date the others permit a slight improvement or no improvement. This should not be taken lightly by the company as the competitors might team up and take on the company.CurrencyCoca-Cola also went international so that they back end mitigate their conflicting up-to-dateness transmute rates by earning revenue in a different currency through sales in a particular uncouth. Selling products and work in multiple countries also reduces the companys exposure to possible economic and political instability in a single country. In 2009, The Coca-Cola Company traded in 71 different functional currencies in addition to the U.S Dollar. A pith of 74 percent net operating revenue was derived from outside the coupled States. Therefore, increases or decreases in the value of the U .S. dollar against other currencies entrust have a major effect on the items that are denominated in impertinent currencies. Listed below in Figure 4 are irrelevant put back rate gains or losses from 2006 to 2009.CountryThe Coca-Cola Company would want gain access to cheaper agitate, raw materials and finance. Such as the cost of labour time of day in china is only $1.27 per hour (Malone, 2008) which is ranked fairly low compared to other unquestionable countries. This would minimize the cost of bottling and result in high revenue gained. Bottling plants in mainland china as of end of October 2009 total at 39 plants and is still increasing at a high rate. (The Coca-Cola Company) Furthermore, resources that are difficult to obtain in their home market can be located elsewhere at a better price while going international. This can be achieved by outsourcing some of their operation to other countries in order to improve efficiency since service providers are specialize in its services rendered. Outsourcing is widely used by todays company, as it allows the company to focus on its core activities where non-core activities are outsourced to specialist industries. This can perish to a saving in fixed cost as there is no need to hire monthly salaried staff.As per Figure 5, we can see that average salary earned in the coupled States of America (USA) is much higher than the salary earned in China which is more than a 150 percent difference. This is mainly because China is still a development market while USA is a demonstrable market. This enables the company to fetch a lower cost for labour in China than in USA.3.3 How did Coca-Cola globaliseThere are different gateway elans a company can choose on how to enter a market. The Coca-Cola Company uses different spots of entry modes depending on the markets. It mainly depends on the total size or market population, the percentage of that population using their products, and the measure of products that they can address to non-users. Once the market is identified and selected, they would commencement exercise strike the degree of resource commitment and the extent of the firm operational employment in that particular region.As their bottling strategy, the company would first help their bottlers to material body up their business. This is by injecting funds into the said bottlers through equity investments. This is salutary for both the company and its bottler as in increase in production capacity at bottler level would have a resulting increase in concentrate sales. The level of investment depends on the bottlers capital structure and resources at the time of investment. (The Coca-Cola Company)According to the company, it maintains business relationship with three types of bottlers which areBottlers in which the company has no self-will relateBottlers in which the company has invested and has a non-controlling ownership interest andBottlers in which the company has invested and has a controlling ownership interest.Bottling operations in which the company has as of 31st December 2009According to the company, controlling interest is only oft held for a temporary basis. By owning such interest, it helps by being able to exert influence in monitoring bottlers revenue. It also develops the bottlers business where funds are used to mannikin the capital structure of the bottle which would enable them to widen its operations.As part of their long term strategy, the company would consider reducing their ownership interest in the bottler when their investment matures. The company then comes down to two options, one is to combine their bottling interest with others to form strategic alliances, or the other is to sell their interest to equity method investee bottlers. However, the company will still continue to monitor the bottlers results. For investments that are non-controlling interest, the company would provide its expertise and resources to strengthen those b usinesses.ChinaThe stages of entry are explained in detailed below using China as an example by referring to Moks journal review. (Mok et al. , 2002)During the first stage (1974-84), Coca-Cola exported and sell its concentrate to its franchised Chinese-owned bottlers. Local market agents were held fully responsible for production and statistical distribution whereas the company were in charge of advertising. Due to the bottlers opportunistic behaviour which first prioritise their own bottom line, it limited the expansion of Coca-Colas market share in early on stages. The method used is seen as exporting through contractual agreements as trust of the bottlers has yet to be gained.During the second stage (1985-92), Coca-Cola bought equity shares in the bottling businesses in order to reduce the effect of uncertainty. Besides that, it was also to restrict the opportunistic behaviours of its local bottlers since their only focus was on their own bottom-line which were disadvantageous t o Coca-Cola. This is known as overseas Direct investment funds (FDI) into the said bottlers which may include acquisitions of well established companies in the later stage.During the third stage (1993- set up), Coca-Cola teamed up with two foreign bottlers which are the Kerry and Swire root countersignature under a franchise agreement. The company then began to internalise its management and operations by sourcing locally. Soon then, the whole operation was handed to locals and watched over by the foreign division director. Sourcing for upstream suppliers is decentralised to the division manager since buying locally would have savings on taxes. Contracting in local language would be made easier as a result of the localisation.IndiaCoca-Cola was the postulateing bola business in India before 1977. However, a change of government forced them to pull out their business since new legislations necessary the sharing of the secret formula with a local partner which comprise a huge risk. The Coca-Cola only re-entered the market in 1993, after Indian regulations were changed to allow foreign brands to operate without any Indian partnership. By then, PepsiCo had already captured majority share and ruled without competition as they were there since 1988. (Srivastava, 2010)To make things worse, Coca-Cola suffered a huge blow to their brand name in India as their plants had huge demands for weewee, which led thousands of farmers out of work by draining the water that feeds their crops which had implications on the local economy. Besides that, the waste max produced by their plants sold as fertilizer was proven to be cyanogenetic to the soil. (Brown, 2003). PepsiCos market in India has been strong since then, as it has become the default name for colas in India.However, the company has not given up on the Indian market as growth is picking up slowly. Their strategy includes introducing other products in their portfolio to the market and buying up a local brand co la competitor Thums Up, to compete against PepsiCo. Thums Up is now ranked first in India with a market share of 16.16% as of 2009, Sprite also a product of Coca-Cola is ranked second with 15.6% compared to Pepsis market share of just 13% check to AC Nielsen data. (Bhushan, 2009)The Coca-Cola Companys mode of entry a lot changes according to suit the particular country. Internationalisation is seen as a sequential process whereby firms gradually increase their commitment to new markets and accumulate companionship slowly in order to increase their capabilities. It suggests that firms initially use entry modes that allow them to maximise knowledge acquisition whilst minimizing the risk of their assets.3.4 Effects of globalisationThe effects as a result of The Coca-Cola Companys globalisation have had a huge impact on the world. By using the SWOT analysis, the effects of globalisation of The Coca-Cola Company can be separated into verificatory and negative effects. Positive effect s make up of strengths and opportunities, whereas negative effects are the companys flunkes and threats.3.4.1 Positive effectsStrengthsCompetition to improve qualityGlobalisation has led to increased competition for the non-alcoholic beverage market for the company. Hence, there is an overall competition to improve the quality of their products for them to compete for market share. In order to survive, the company must be able to love with the rising standards of their customers. The company must be able to compete at low prices and continuously improve their bottling processes. Keen competition forces companies to accelerate their product innovation and advertising campaigns which can be seen as strength for the industry. aimThe economic environment is changing rapidly as a result of globalisation. The future development of the world is shaped as a result of globalisation. Benefits to society are often shared among people for the greater good. With the trick of seatbelts by Vol vo shared, it increased the survival rate of car accidents. (Bellis, n.d) An example would be the bottling plants built by The Coca-Cola Company uses mechanics that are advanced machine-controlled robotics which introduces countries to a more effective and efficient way of bottling which could then be improved further to suit local needs. By improving their production line around the world, it would strengthen the companys presence. The company will be able share their technical know-how around their bottling plants based on experience in different countries. Such as improvements made in one country can be shared with other bottling plants owned by the company around the world. The first bottling plant that follows Leadership in Energy and environmental Design (LEED) standards was opened in 2009 in Latin America. (The Coca-Cola Company)Popularity and recognitionAs a result of mass expanding and advertising programs, the company was able to enter into countries worldwide which eventu ally made their brand name one of the most well-known brands of today. Many companies have since followed by expanding into international waters while keeping focus on brand recognition would eventually come to known worldwide still can be seen in todays industry. Advertising campaigns are the strengths of The Coca-Cola Company as it can capture the loyalty of consumers with well recognised advertisements. An example would be the commercial advertisement in 1971 where The Hillside Singers interpret a song called Id like to teach the World to Sing in Perfect Harmony. (The Coca-Cola Company) In this commercial, people of all different cultures and races come unneurotic to sing about wanting world repose and infers that world peace can be achieved by buying someone a coke.Opportunities byplay opportunitiesWith the companys global expansion, it was able to provide job opportunities in over 200 different countries worldwide which would definitely build and enhance the economic develo pment of ones country. The Coca-Cola Company itself currently has 92,800 employees worldwide as of 2009 (Hoovers, 2009) and much more if other related parties are added. This is seen as an prospect for the company as it would be able to employ a diverse background of employees from all around the world.Cultural influenceCultures around the world have come together and created so many different societies across different cities around the globe which have grown and improved according to globalisation. Some old traditions are discarded while new ones are form from day to day. The same can be said of Coca-Cola, which has pop-up in countries across the world and change the way people have their meals. The brand is widely accepted by different nations due to homogenous markets. This is such a great opportunity for the company to make an impression and an indelible move as the different types of cultures around the world, where there is a similar or common culture, that is, Coca-Cola. ( Kulkarni, n.d) Brobdingnagian portfolio to pursueSince The Coca-Cola Company has over 200 brands in its portfolio, there are other many up and coming new brands for the company to pursue. This would ensure the companys survival in the late future if a brand succession plan is in place. An unknown product does not mean its a failure, just not yet discover by people. Once discovered it will pave the road to success and therefore securing the companys future. One of the main company strategies is to buy out competition of rising brands that they think would do well in the distant future.3.4.2 Negative effectsWeaknessesLack of popularity in other portfolio brandsIn addition, the other brands offered besides the main brand Coca-Cola lacks popularity. It is in general unknown or rarely seen on shelves probably due to restrict distribution in a particular country as testing acceptance of the market. These brands are kept low profiled and no related consort is made to the main brand in case the brand fails. This is seen as a weakness in the line of products Coca-Cola has to offer as advertising allowance is not fairly distributed to all their products.wellness effectsThere are also certain wellness effects to be bear on with as a result of Coca-Colas globalisation. By referring to the book Liquid dulcorate written by Jacobson (Jacobson, 2005), he discusses the effects of consuming soda drinks that could lead to several health concerns. Below are inauspicious health effects viewed as a threat to the companys going concern if people boycott their products which would have adverse effect on the companys revenue and survival.Sugar is principal(prenominal) source of carbohydrates for our body. However, whacky drinks contain high amounts of lollipop (Better Health Channel, n.d) where unshakable use could lead to overweight or obese problems. By being obese, it tends to increase the chances of having diabetes and many other types of diseases. Obesity could also lead to social and psychological problems such as starving oneself to reduce weight.Soft drinks often have links with lower calcium levels which could lead to the disease osteoporosis. qabalistic concern should be placed on children since calcium is needed in early stages for development of bones. Too much soft drinks could lead to pitiable bone materialisation in the future life of the children. Therefore, in order to safeguard ones future, parents should control the intake of soda drinks of their children.Soft drinks also have high levels of phosphoric acid which can be harmful to ones teeth. The sour level in soft drinks can be compared to that of vinegar which can cause corrosion of the enamel. Most of the soft drinks contain caffeine for its efficacy boosting effects. Therefore consuming too much soft drink could lead to caffeine addiction. There are withdrawal symptoms such as unwellness or headache if one is addicted. High intakes of caffeine can lead to insomnia and even irregular heartbeats. (Yakowicz, 2010)ThreatsChanging health consciousnessWith the companys globalisation, bad aspects of foreign cultures would tend to affect its way into local cultures. Such as the soft drinks craze that is spreading around the world. Although beneficial for the company where higher consumption leads to higher revenues, consuming too much will have adverse health effects on its consumers. The health consciousness of people are starting to change, as they are moving towards a healthier modus vivendi in which avoidance on soda drinks may be a threat to the company future. line of credit insecurityCompanies often seek to lower their cost in order to earn a higher profit margin. One of the methods is to outsource their non-core activities such the payroll function to service providers. This would ensure a lower cost with an acceptable level of quality in work done. As a result, it increases unemployment rate in developed nations. underdeveloped countries like China and India dominate the outsourcing market because of their fairly low labour cost. There is a higher risk of retrenchment for employees in the developed countries as they can be replaced by their counterparts across the world in pursuit of low cost. Therefore, a threat exists where the company might lose its good employees to competitors if it shows the slightest signs of restructuring.Local industries taken over by foreign multinationalsForeign multinationals often take over local companies as a mode of entry into the particular country. It would deprive the upbringing of local industries as those who remained will have to face a tougher competition posed by the foreign multinational. This is one of the strategies used by The Coca-Cola Company as they are actively acquiring local bottling plants around the world. A threat would be present if the local governments start to restrict the company from further expansion in its country in order to safeguard their home grown companies. T his would facilitate as an obstacle to the companys expansion plans into the said country. (Pillai, n.d)Waste and pollution maturation countries are often taken advantage of by foreign multinationals. Since developing nations need high levels of foreign investment to boost its economic development, the local governments would tend to overlook on the pollution caused as they cannot risk a withdrawal of funds from the country. The environmental laws and regulations of a developing nation are also in the process of setting up. Therefore, foreign multinational companies often take this advantage by setting up plants at an early stage. The Coca-Cola Company has taken advantage of this matter in India where their factories produced waste sludge and were sold as fertilizer which was proven toxic to crops. (Brown, 2003) As this poses a threat to the environment, the companys licenses can be revoked if not settled. Measures should be taken by the company to implement environmentally friendl y plants for the future in deluding the toxic waste.3.5 ConclusionsThe international expansion of The Coca-Cola Company can be seen worldwide. Its products have permeated into societies all over the world. The first ejection objective of this research project has been met, which evaluates the positive and negative effects of globalisation of Coca-Cola brand name where the SWOT analysis was used is outlined below in Figure 7.(S)trengthsPopularity and recognitionCompetition to improve qualityInnovation(W)eaknessesLack of popularity in other portfolio brandsHealth effects(O)pportunitiesHuge portfolio to pursueCultural influenceJob opportunities(T)hreatsJob insecurityChanging health consciousnessLocal industries taken over by foreign multinationalsWaste and pollutionThe second project objective was to assess the job opportunities The Coca-Cola Company created jobs worldwide. As of 2009, the company has 92,800 employees employed worldwide. By providing jobs to developing countries such as China and India, it would greatly help the development of the said country.We can understand why The Coca-Cola Company moved towards globalised markets based on Ohmaes 5Cs as discussed previously. According to market research, The Coca-Cola Company has the largest non-alcoholic beverage market share worldwide with a market share 42.9% as of 2009 according to (Sicher, 2010) with 24.4 billion unit cases sold worldwide in 2009. (The Coca-Cola Company) Therefore, the third project objective was also met.3.6 RecommendationsThe main recommendations for The Coca-Cola Company are to exploit their strengths and opportunities, while mitigating their weaknesses and threats.The main strength is its popularity of the brand Coca-Cola. The company can use the Coca-Cola name to support their other products if the product is accepted by consumers. A tone of voice further is to advertise the products side by side since its advertising campaigns are refreshing and easily recognised. This enables t he company to capture a new type of customer loyalty.Popularity of a brand name mainly depends on the peoples word of mouth. This can either be positive or negative in different conditions. Other brands that the company offer lack popularity which is a weakness for the company. The company should not just focus on the main brand but also push potential brands to the public.The Coca-Cola Company should pursue other brands in their portfolio since Coca-Cola is already a world known product. This can be done with increased advertising for the less popular products which would lead to more brand recognition if the product is successful. If a product is unable to capture a market and operations are running at a loss, the product should be discontinued. Funds saved from closing the division can be used to improve other brands or to acquire new potential brands.A major threat to the company is the changing health consciousness of the people. The company has made efforts since then by intro ducing low sugar and caffeine-free products into their portfolio and must continue doing so. Besides that, there is strong competition from other rival brands such as PepsiCo. The main idea here is to detach market share from its rivals such as finding out what are the strong brands the rival have and to introduce a similar product that would serve as an alternative.