The process of globalization has impacted on the world's business operation which is mostly driven by the development of MNCs. According Macmillan Dictionary, term of 'globalization' defines as 'concept a single economy and culture are developed as a result of advance in technology which easier the communications between two corporation and globalization mostly influence by multinational companies toward economic, financial, trade and communication.' Besides, the United Development Program (1999) announces globalization is the most important integration of economy, political and cultural phenomenon across nation frontiers. (cited in Kiggundu 2002). [Moses N.Kiggundu, 2002, Managing globalization in developing countries and transition economies: Building Capacities for a Changing World, Praeger,Westport CT][page. 4][ http://www.questia.com/read/101335345]
'Globalization is the inexorable integration of markets, nation-states and technologies to a degree never witnessed before- in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper that ever before, and in a way that is enabling the world to reach into individuals, corporations and nation-states farther, faster, deeper, cheaper than ever before.'
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Said by , American journalist, columnist and author,Thomas Friedman
The idea of globalization that applies by Coca-Cola can be simplified by key characteristic below:
1.1.1. Multinational Corporations
The process of globalization has impacted on the world's business operation which is mostly driven by the development of MNCs. A corporation can be categorized as MNC if there are 20% to 50% or more of its net profit from directs investment in one or more in foreign countries. (Iamsam, n.d)[ http://hubpages.com/hub/Multinational-Corporations-MNCs].This citation no need? Stated in many book also. Coca-Cola is a business which truly international in scope by signifying 67% of total its total net income from non- USD source. The growth of multinational corporations is measured by Foreign Direct Investment (FDI), with condition foreign investor owns at least ten percent of the ordinary shares
1.1.2. Improved technology in transportation and telecommunications which allow a smooth and easier access to Coca-Cola products.
1.1.3. Movement of People and Capital
People move from home country to another countries looking for new job due to the lower standards of living and lower income. Migration usually takes place in develop countries because this giving them a greater chance to earn more money. Coca-Cola invested a lot in U.S and part of the non-U.S country. Plenty of job is being provided to people. http://geography.about.com/od/globalproblemsandissues/a/globalization.htm
1.1.4. Diffusion of Knowledge
The new knowledge is being spread out globally. With the new knowledge, new invention is happened. Coca-Cola using the new knowledge to carry out on innovation and improvement on either product or management.
1.2. Coca-Cola Company' Facts
Coca-Cola not only the largest producer and distributor but also the largest marketer of non-alcoholic beverage that establish by a pharmacist, Dr. John Stith Pemberton in Midtown Atlanta, Georgia in 1886 with Coca-Cola syrup.
In 1891, Druggist Asa Candler bought The Coca-Cola Company. Within four years it was available in all 50 states, Canada and Mexico. The Coca-Cola Company began building its global network in the 1920s. When Asa Candler purchased the recipe and established the Coca-Cola Company, he begins one of the largest franchises in the world. The government expanded the company and built 64 plants overseas in 1929.
Today, The Coca-Cola Company operates in more than 200 countries, with 2400 beverage products are provided worldwide with approximately 1.5 billion serving rate each day. (Datamonitor, May2010) (http://www.just-drinks.com/market-research/the-coca-cola-company-swot-analysis_id92127.aspx)
With the assistance of Coca-Cola Enterprises that operating in 46 US states and Canada, they becomes the world's largest marketer, manufacturer and distributor of Coca-Cola products. Coca-Cola Enterprises run a network about 84,000 suppliers of goods and services regardless demand from consumer.
Through E. Neville Isdell 's firm commitment, Coca-Cola Company have been revolute into new century, recognized as the world's most valuable brand nowadays. [http://www.123helpme.com/preview.asp?id=164239]
1.3. Management Structure
Coca-Cola Company as a multinational company handles enormous capacity of business with well-organized structure. Coca-Cola has 5 operating geographically segmentation. There are United States, Latin America, European Community, Northeast Europe/Africa, and also Canada and Pacific. http://www.asensio.com/Reports/CokeClassicCC.aspx The international unit control entire activities of theirs subsidiary company. However, Coca-Cola Company allows their division to customizing marketing based on Geographic segmentation. For instance, they allow altering the sweetness of drink according to local taste.
Always on Time
Marked to Standard
Figure 1 shows the outlook of international division structure.
Figure 1 : International Division Structure
2. Actual Impacts of Globalization
2.1. Establishment of international alliances
http://books.google.com.my/books?id=3pTFN8IdRpkC&dq=international+alliances+example+on+coca-cola&source=gbs_navlinks_s (page 435)
The establishment alliances or coalitions which link firms of the same industry based in different countries. MNCs commonly engage in international alliances such as joint ventures and licensing agreements with foreign firms. http://kurtgrashaw.blogspot.com/2009/07/what-are-tradeoffs-pros-and-cons.html
Coca-Cola formed global joint venture with many industries to strengthen its company buy launching new products. Coca-Cola able to fully utilize its beverage expertise with the help of joint partner by connection with technology areas key to our business, such as packaging, vending equipment, foundation equipment and water treatment. Historically, these joint developments have led to the development and commercialization of breakthrough technologies for the beverage industry. http://www.yet2.com/app/insight/insight/20010401_landgraff
Coca-Cola also engaged in licensing with companies that are affiliated with food or beverage company but not with companies that compete with Coca-Cola in the non-alcoholic beverage market segment. We do some licensing with suppliers to the beverage industry. Examples of these types of companies are various packaging and equipment suppliers to the beverage industry. We have also licensed with universities around the world where there is a particular expertise with an individual or group of professors or researchers. Coca-Cola has over 300 licensees who sell over $ 1 billion of licensed products each year. It is estimated that Coca-Cola generates over $ 70 million in royalty revenue and billions of incremental impressions from licensed products. Licensing agencies outside of North America which work with us are The Licensing Company in Europe and Redibra in Brazil. The manufacturing system also called 'The Coca-Cola System' by Coca-Cola Company. Licenses are usually given to distributors who can incorporate the markets by attain lowest cost in resources and fully utilize technologies from different country to maximize revenue.
These are the two joint ventures for Coco-Cola which doing well and earned huge profit on it.
Joint venture between Coca-Cola and Nestle to tap rapidly growing beverage segments
Coca-Cola and Nestle Refreshments (CCNR) is their highly successful joint venture formed on 1991 which launched in 24 countries. On 30Jan2001, CCNR rename as Beverage Partners Worldwide (BPW) function as an entrepreneurial unit to focus on the growth of beverage segments, actively expand into new beverage like ready-to-drink coffee, teas and health beverage. BPW also focus on expanding its geographical with existing products include Nestea and Nescafe and new products inclusive of Tian Yu Di tea and Yang Guag tea businesses undertaking by Coca-Cola.
Joint venture of Coca-Cola Company and Illycaffe Spa
They introducing three premium ready-to-drink (RTD) espresso-based coffee products. The products are:
Caffe full-bodied character, real Italian 'chilled caffe.' First ready-to-drink coffee to offer black (no milk) espresso-based coffee.
Cappuccino intense uplifting aromas of illy espresso, blended with milk and dark cacao.
Latte Macchiato smooth fresh illy espresso experience, swirled with milk.
The product will be available in stylish premium can to attract the consumer. The RTD first launch in 10 European countries including Austria, Croatia, Greece and the Ukraine as the firm aim of their joint venture.
After 1 month, the additional countries in Asia, North America, Eurasia and the Pacific as the expansion of the sales and will be delivered through the 'Cola-Cola system' also known as manufacturer system. RTD coffee brings a high profit to the company.
2.2. Development and Improvement of Technology
The improvement of the whole organization in order to address challenges or problems, for in line with the participation in globalization is the increase in the number of problems to be encountered. With this, it can be understood that along globalization is the need to develop, improve, innovate, and adopt new strategies and methods in relation to systems modification to enable adjustment to the changes and challenges being encountered by the organization. Modification and restructuring in the organization is needed because along with the company's intention to expand and widen its target market is the need for additional workforce and management processes and styles that would enable the company accommodate the increase in changes. Restructuring and remodeling of the company, thus, serves to be a good way of adjustment.
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Technology revolution can have important effects on the decisions taken by international business. The improved of technology can transform a firm to become a successful international business. With the current technology, innovation can be done by a firm to develop a new product which can attract the current consumers as well as the new buyers.
In the case of health trend and changing taste of the consumers, Coca-Cola responded to this through innovation and change. The primary objectives of product innovation are to create value, to obtain a competitive advantage, and to achieve long-term success through the development and commercialization of new products and services (Sundbo and Fuglsang, 2002).
Innovation for Coca-Cola Company accomplished through development of new products. A range of products such as the Coca-Cola Zero, Enviga, Diet Coke, Gold Peak,Cherry Coke, Diet Cherry Coke, Vanilla Coke, Coca-Cola with Lime, Coca-Cola with Lemon and other variants of Coke.
A latest technical achievement made by Coca-Cola Company and Ardagh Glass was the new environmentally friendly version of the iconic Coca-Cola Contour which has won number of awards for its light weight.
The following shown some of the products with description:
Year New Products Description
2005 No-Calorie Drink
(Coke Zero) - The introduction of Coke Zero was motivated by the increasing consumer demands for healthier products.
- Coke Zero offers the same taste as Coca-Cola with no calories
- First launched in North America
2006 Calorie Burning Tea
(Enviga) - This product is intended to complement healthy lifestyles.
- By drinking three cans of Enviga each day, consumers can burn an extra 60-100 calories daily.
- This innovative product is added with a powerful antioxidant EGCG that speeds up metabolism and increase energy use, especially when combined with caffeine.
2006 Gold Peak - A premium ready-to-drink iced tea.
- It's with homemade taste
- Revives the timeless flavour of classic, authentic iced tea.
By introducing new products, Coca-Cola aims to strengthen its brand image as the home quality beverages. Besides, Coca-Cola fills the gaps between markets and its products. Coca-Cola Company innovate a range of new products including health concerned products to meet consumer's demand that are health conscious.
2.3. Renewing Systems and Structures
Trance1. Got Essays? Retrieved December 13, 2010, from http://www.gotessays.com/essays/5130/index.php
The organisational form of Coca Cola is the Entrepreneurial start-up which is the simplest structure. According to Mintzberg (1992) the structure is described as having a little or no techno structure at all, it only has few support staffers, restrained division of labour, minimal differentiation in the work place, and a limited hierarchy in management. The overall setting is informal because there are no strict rules and regulations except the punctuality and absenteeism. Moreover the behaviour within the organisation, particularly in the convenience store is not that formalised wherein it utilises minimal planning, training and liaison devices.
After the impact of globalization, the new organization was formed in Coca-Cola business. As we can see in Hong Kong, it would be Machine Bureaucracy. According to Mintzberg (1979), the machine bureaucracy is an organisational structure wherein there is a clear configuration of the design parameters wherein it consistently held up researches it includes specialised routinely operating procedures, formalised procedures in the centre of operations, propagation of rules and regulations, proliferation of formalised communication throughout the company, dependence on the functional basis for tasks wherein it needs group work, comparatively centralised power for decision-making, and a complexly detailed administrative structure with sharp differences between the line and staff. In this form of organisational structure Coca Cola will be able to monitor the efficiency of the performance of the workers because there would be standard procedures and more elaborate structure of management.
2.4. Increase In Competition Among Other Firms In The Same Industry
Last major impact of globalization is the increase in competition among other firms in the same industry. A global firm may be in a better position to compete with its global rival, as it can enhance its resources globally (2003). Being able to participate in its foreign target market makes the global firm more advanced and more developed compared to its rivals in the same industry, for it is able to meet the standards and demands of its foreign customers. From this perception, major suppliers and stakeholders would prefer the global firm to other firms.
Due to the impact of globalization, there are some local brands compete with Coca-Cola. For example, Big Cola Ã¯Â¿Â½C a brand in South and Central America and it act as a Fast-growing competitor to Coca-Cola. Secondly, the Corsica Cola in French island of Corsica which is made by brewers of the local Pietra beer growing fast as Coca-Cola also. Furthermore, Breizh Cola is available in the French region of Brittany. Because of the increasing in the competitors, The Coca-Cola Company forced to purchase its brand, a registration of Coca-Cola as their own brand mark in 1999. http://www.gotessays.com/essays/5130/index.php
Globalization brings benefits to The Coca-Cola Company and it also led the company to compete with other big company which is in the same industry in whole world. Pepsi Company (PEP) is the major competitor that most people familiar with. Usually, people will take Pepsi as their second choice, but in some certain markets, Pepsi outsells more than Coca-Cola. Another big competitor to Coca-Cola is Dr Pepper Snapple Group (DPS). DPS starting its soft drinks business since 1885 and they compete in terms of the packaging, price, availability and so on.
2.5. Global Products
Coca-Cola Company need to concern on the languages that they used while doing the advertising, promotion and so on. Respect to the consumer culture is an important things in order to attract them for purchasing the product. For example, The Coca-Cola company has to change the logo and the description on their packaging from common English to Mandarin on Taiwan and China markets. this can help the company launch the product successfully by follow consumer mother's language in their countries.
Coca-Cola company have to research on the most suitable flavor on carbonated drinks that did suit the eastern countries like China and Taiwan. This had to be replaced by products such as Asian Tea and fermented milk drinks. This needed a lot of research and development to make sure that the relevant product can suit the market.
Following are evidence of Coca-Cola becomes successfully sell globally:
Year of First Introduced Countries Detail on Coco-Cola Company
1942 Argentina - Seven 24-bottle cases and eighteen single 185 milliliter bottles were sold on the first day launched.
-On 1943, sales increases to 300,000 cases.
-Today, sales of products increase around one thousand times annually compare to first year introduced.
1927 Belgium - One of the world's top 20 countries on consumption of Coca-Cola products.
1933 France -Introduced in the 'Caf' de l'Europe' in Paris.
- Customer's most preference in France since 1966.
-Total sales increase to double after 8 years of launching.
-Provide more than 1000 jobs in the country.
-Today, consumers drink an average 88 servings of Coca-Cola products each year.
1927 Italy - Jobs provided approximately 3,000 people.
- Consumers drink an average of 100 servings of Coca-Cola products each year.
-There are 12 bottling plants in the country.
-More than 500,000 retail outlets selling Coca-Cola.
-Producing a wide range of Coca-Cola products, including Fanta, Sprite, Nestea, Kinley Tonic Water, Beverly, Bonaqua and Minute Maid products.
3. Potential Impact
3.1. Invention of Coca-Cola Freestyle Machine.
A new interactive fountain dispense named as Coca-Cola Freestyle is launch with an unprecedented 106 flavors dispense according to its consumers' taste. Unlike other fountain-drink dispensers already on the market, the flavors for each beverage are mixed with precision via a dispensary system, broadening brand exposure.
Each machine includes data collection transmittal and alert systems that send comprehensive, detailed information about customer behavior back to Coca-Cola. With this latest data collected from its customers, Coca-Cola can develop and test market products targeted at specific geographic areas and restaurants.
Further, Coca-Cola doesn't plan to license or sell the new machines to competitors, showing company has several patents associated with the new system. Yet, this priviledge is not available for other competitor.
This high-tech touch screen interface dispenses machines will inspire more customers to buy fountain drinks, and some are expected to visit particular establishments just because they have a Freestyle machine. Directly, it will increase the sales of Coca-Cola products.
This approach enable Coca-Cola have a smoother and better progress of globalization. This demonstrations good potential for Coca-Cola drinks to become a familiar beverage worldwide by serving a drink that they want.
3.2. Coca-Cola becomes Partners for New Beginning
Partners for a New Beginning (PNB) is a group of American leaders who are committed to the common goal of building public-private partnerships in Muslim communities around the world, support President Obama's Cairo speech of 'a new beginning between the United States and Muslims around the world, one
Understandably, the partnership will work to strengthen the bonds between the United States and citizens in Muslim-majority nations and will do so based on a philosophy of mutual understanding, mutual interests, and mutual respect. This will increase the understanding of culture and religion of each other, enhance the relationship between countries.
Although it is look like more benefit to Muslim community, this aid program reflects a development in the long run for Coca-Cola Company, with a steady position in Muslim country for further activities. Therefore, it should result a win to both country.
With the benefits of international portfolio diversification in developed as well as emerging markets in Muslim county, which may be a vehicle to improve portfolio return and risk diversification in other highly developed countries. Consequently, improve economic environment which bring higher rate of return.
3.3. Changed in Economic Position
Coca-Cola might faces losses in net profit due to the fluctuation of interest and exchanges rates. Coca-Cola must aware of every trading restriction that set by the government before investment on the specific country. The restriction will forced to stop Coca-Cola company continue investing immediately and lead to a huge losses on account.
Since Coca-Cola is an MNC, the exchange rates are different on every country they trade with. If the exchange rates in different countries have changed, Coca-Cola would need to work out what prices are their products being sold at and whether it would be worth it.
4. Strategy to go Forward
-Brand name reputation
-Great variety of products
-Consistent powerful logo display
-Increasing brand recognisability and global strategy
-Increase product line in less developed countries
-Increasing product dversification
-Lack of understanding of culture differences and consumer behavior
-Lack of financial resources by regional bottlers
-New and viable competitors, PepsiCo
--Changing attitudes of consumer towards health consciousness
-Consumer buying power
-Political and economic instability
SWOT Analysis for Coco-Cola Company