Coca Cola Company

Coca Cola Company

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Introduction

Multinational companies are organizations that engage in business in more than one country. This definition might be simple enough, but it covers a magnitude of different classes of businesses. These types of firms contribute to the globalization process as national governments express their interests through such firms. Economically, multinationals play a crucial role in developing countries by bringing foreign capital as well as production of different goods and services. Multinationals are also channels through which cultural imperialism is promoted by some powerful states. The company discussed in this paper provides evidence of such manipulation by their home government

Coca Cola is one such multinational company. It is the world’s largest manufacturer of carbonated soft drinks as well as other beverages. Its origin is in the United States of America but usage of powerful expansion strategies saw Coke expand its operation to over 200 countries in the world. The ethical standards and financial backgrounds of Coca Cola have also been given special attention in this paper. A study of the close relationship between the USA government and Coca Cola has the potential for enabling other scholars to realize the impact of state-led development (May 2006).

In the wake of the 21st century, Coca Cola has made strides in almost every aspect of life from education, sports to the economy. Having being in operation for over 126 years, Coca Cola has managed to have a huge impact on the regional and global business sector. It employs over 146, 200 individuals in direct jobs and a further 200, 000 individuals indirectly. These people are spread over 200 countries within the world. Their product variety is also impressive with the current brand list reaching up to 3,500 different beverages. Apart from soft drinks, Coca Cola produces fruit juices, waters, energy and sport drinks, teas and coffees (Isdell, Neville, & Beasley, 2012).

Background

The Coca Cola Company came into existence in around the 19th century when it was first patented by John Pemberton. The actual commercialization of Coke was however done by Asa Griggs who employed numerous successful marketing tactics that saw Coke become the dominant soft-drink producer throughout the United States and later, the rest of the world. The steady growth of the consumption of Coke within America took over fifty years but by 1935, the USA had recognized Coca Cola as a brand worthy of the national status. Coke has a close relationship with the United States, as this is where it was initially patented.

The company originally started out with bottled drinks but later on moved to produce canned soda. The next two decades saw a dynamic change in both the chemical, structural and financial aspects of Coca Cola and its products. Re-branding attempts in 1985 where the company attempted to launch the “New Coke” in a bid to capture more customers are some of these changes. By this time, the Coca Cola Company was making headway into other states in the Middle East and China although the 1968 conflicts in Iraq temporarily halted operations in the area (Pendergrast, 2000).

The company in 1970 decided to venture into new flavors like Sprite and Fresco as well as acquiring the Minute Maid Company that added juice to the Coca Cola product range. In this period, the company’s presence was slowly growing to include more countries like Paraguay, Macau, Cambodia and Turkey. During this time, Coke embarked on an aggressive advertising campaign that excited consumers and other rival businesses dealing with beverages. Currently, Coke have moved in to sponsor Olympic games and other talent building activities that involve the youth in a bid to connect with the younger generation.

Ethics

Ethics can be described as the rules of conducting oneself with respect to a particular institution or organization (Cheeseman, 2012).Organization within an office requires the maintenance of order. This can be achieved through regulations or constitutions. However, codes of ethics are the most preferred method of controlling the conduct of employees within an organization. The level of ethics for such a company as Coca Cola is very high. The company has thorough, detailed documents that lay down the procedure for conducting business. This similar ethical standard has been replicated to all branches and subsidiaries of Coca Cola throughout the world.

This section discusses the efforts by Coca Cola to maintain ethics in their work environment alongside their ethical violations. The Coca Cola Company has a stable Code of Business conduct that dictates how all the employees should behave while conducting the firm’s affairs. It has detailed guidelines on how the international branches as well as home company should operate. The handling of company assets and information are also stressed in this document. Coca Cola have made a comprehensive document that theoretically covers all forms of official violations. However, the misuses of certain grey areas within this regulatory document that have been the focus of many scholars.

Various aspects of Coca Cola have come under fire for their environmental, health and economic impacts on consumers. The health consequences revolve mostly around the impact that Coke has had on the consumers that are mostly young adults. The various chemicals that are used in the production of Coca Cola products include phosphoric acid, caramel coloring, sugar, carbonated water and caffeine. The combination of these chemicals has had adverse health ramifications given that they also have an aggressive marketing plan to children. Medical practitioners have cited the dental and digestive disadvantages of consuming excessive amounts of Coke.

The operations of Coca Cola Company have also come under sharp criticism especially in other subsidiaries in Asia, Eastern Europe and Africa. Although within developed countries, Coca Cola has strict measures regarding their procurement, working standards and other business processes, this is hardly the case abroad. The different bottling plants and factories in Africa and Asia have been reported to exploit their labour forces along side employing slave labour in parts of Nazi Germany (Cross & Miller, 2009).

The current case in Guatemala where various labour violations were exposed within most of Coca Cola bottling plants is an example of the poor ethical standards. The terrorism of employees and the suppression of workers’ union activities forced many of the day laborers to work under poor conditions and low wages (Jamail & Prundt, 1989). Other instances where Coca Cola have been casual in maintaining high ethical standards include destroying the environment and adopting monopolistic tendencies in their sales. Nevertheless, Coca Cola have been similarly active in corporate responsibility and charity functions as well as investing in developing domestic talents in the areas where they have subsidiaries.

Coca Cola have also come under suspicion of having low standards when it came to supervising the production of their beverages. The company was accused of being lackluster in ensuring that each bottle, can or container that was distributed had undergone the same rigorous inspection in order to ensure high standards were maintained. In a particular case, over 15 million cans and bottles of Coke were recalled after children who had consumed them complained of indigestion and nausea. This was amid claims that Coca Cola was fully aware of the adverse effect that the particular shipment had had on its consumers beforehand and did nothing about it (Cheeseman, 2012).

These mishaps concerning Coke products had various impacts on the company as a whole. First, the damage that was done to the company’s reputation was irreparable. Coke’s ethical standards at the time were at an all time low because of the fatal mistakes in its products. Second, the mishaps also cost the company a lot of money in reimbursement of sick people and the recalling costs. The reasons for these continued ethical issues can be traced to the lack of quality leadership. Disputes and other emergencies should have a provision in the company’s plan and it seemed that Coca Cola had none. Their crisis management was naught. It is only after mishaps happened that the company stepped up to try to sort things out.

Globalization

Globalization is quite difficult to describe owing to its multifaceted and abstract nature. However, in economic parlance, globalization refers to the process of international cooperation between and among business entities. Globalization encompasses the different components of business and their internetworking with a common goal to reduce costs and maximize profits. This may be also interpreted by some as removal of the bottlenecks and barriers that interfere with the flow of factors of production between national states. Globalization therefore implies a partial or total dominance of territorial integrity and a subsequent embracing of liberal principles of international trade for example free trade areas (FTA), duty free imports and exports and subsidies among others.

Globalization, Westernization and Americanization are three terms that have been loosely interchanged within academic and economic circles. Coca colonization or coca-colonization refers to the globalization and cultural dominance that was brought about by the economic and cultural activities of Coca Cola. Within the larger global scene, it refers to the importance placed on Western goods and the subsequent invasion of Western culture in other parts of the world. The close relationship between Coke and the United States has given the soft drinks company an upper hand in enlarging their financial and operational bases. The existence of Coca Cola products in almost every country is proof enough that the company has benefited from globalization.

Coca colonization therefore came up as a cultural takeover of the rest of the globe by American states. This was around the Cold War period in most of Europe and cultural invasion was harshly opposed. The Coca colonization resulted in direct opposition from certain extremist companies while other liberal states imposed tighter sanctions concerning the operations of Coca Cola within their territories. The French, Germans and Canadians have at one time regulated the reach of Coke in their borders. Muslims countries have been more aggressive and imposed total bans of Coca Cola products.

The market significance that Coca colonization has had is both positive and negative. Positively, it has helped the growth and expansion of Coca Cola into new continents. Amid much competition from other companies, Coca Cola has emerged as the most popular soft drink. Negatively, the perceived cultural neo-colonialism is seen to be perpetuated by the US government under the blanket of multinationals namely Coca Cola has led to slower growth in some regions and a total failure to initiate business in others. The emergence of “non- American” soft drinks like Mecca Cola, Eram Cola and Zam Zam Cola are just some of the examples of attempts to counter the impact of Coca Cola in Middle East.

Another factor of globalization that has greatly attributed toward the success of Coca Cola is the embrace of information technology. Coca Cola has progressed steadily in the development and research into new drink flavors, methods of production and manufacturing. Apart from the production process, Coca Cola has also applied the latest information systems in their communication with suppliers, consumers and shareholders. The use of advanced information technology by this company has enable Coke to tap into the younger market segment through the Internet. Here, Coke has engaged the different social sites like Facebook and Twitter in attracting more customers through online advertising.

Regional integration

The intention of integrating countries within particular regions was not always part of the Coca Cola strategy. However, in the process of integrating their foreign markets to reduce production costs while increasing consumers, Coca Cola created a phenomenon that unified these neighboring countries along economic grounds. The company’s organizational structure can be attributed to the increased integration among countries in different continents. The following examples are regional groups for Coca Cola. However, they also resemble the political alliances that have been formed around the world. The North America group comprises of US and Canada, the Latina America group includes South and Central America, the Africa and Middle East group and the Asia Pacific group. Lastly, the Greater Europe Group brings up the regional groups to five.

Within these groups, Coca Cola sought to align their company’s goals and objectives with the regions needs thereby forming a kind of partnership with other states. Regional integration is a process that involves states entering into an agreement with the intention of enhancing regional cooperation. The basis for having such agreements ranges from economic to political. Regional integration generally involves removal of barriers, reducing armed conflict and increasing the free movement of people, labor and goods across the different state borders. The degree of integration generally depends on the willingness of the states involved in sharing their sovereignty. Examples of successful integrations include the European Union (EU) and East African Community (EAC).

Coca Cola, as a company, has promoted regional integration mainly through the facilitation of economic integration among states. This phenomenon has mostly been successful in Africa and parts of Asia. The operations of Coca Cola within Africa for example encompass twenty-seven countries including East, South and West Africa. Within all these countries, the company has established local businesses that contain manufacturing plants, bottling plants and distribution centers as well as administrative quarters. Therefore, the company invests in any country they pinpoint as viable for business. Since 2001, Coca Cola has been running various programmes that aim at uniting the countries under one political platform in a bid to increase their overall economic situations.

Political and cultural differences in international trade

The decision to go international by any company means that they shall be subject to the host countries laws, rules, regulations and other norms and traditions that govern activities in their country. Companies who fail to abide with these regulations end up being fined by the government. Some of the political factors that influence Coca Cola’s operation in foreign countries are discussed in the following section.

The changes in the regulations and laws for example the change in financial laws touching on accounting standards and tax requirements stand out as political barriers. Tax changes particularly affect the operations of multinationals as most third world states obtain most of their revenue from taxes. Modifying tax laws and their rates as well as introducing new taxes are all ways in which Coca Cola experiences political difficulties. The subsequent changes among non-alcoholic businesses also serve to affect the operations of Coca Cola. Rival products poses some degree of competition which when combined with pricing policies, serve to undermine the efforts of foreign companies (Cheeseman, 2012).

The political conditions within most of these host states are mostly hostile and unstable. The potential for civil unrest is always present. Most countries experience civil wars and conflicts, coups and changes in the government. Apart from the conflict, the purchasing power of customers also goes down. Such political activities are usually accompanied by this volatile environment is not the best in which to conduct business. Coca Cola strives to contribute to peaceful by contributing towards developmental issues under the umbrella of corporate responsibility. The provision of employment for youth who are the bulk populations as well as engaging them in constructive occupations and hobbies are other ways in which Coke attempts to create a peaceful atmosphere.

Cultural differences

On the other hand, the cultural differences that exist between America where Coke originated from and the international markets are another obstacle towards Coke realizing exponential profits from these markets. It is for these reasons that America intended to go the imperialist way in order to shape the international markets in a manner similar to theirs. Having a similar capitalist platform would ensure a constant market for the goods they produce. However, certain cultural aspects have undermined the efforts by Coca-Cola.

Organizations that operate on an international scale have realized that spending huge amounts on communication and product strategy is not always the best decision. Instead, Coca Cola opted to shape their strategy to accommodate local cultures that varied from country to country. The rigid standardized marketing strategy that was in place beforehand had proved incapable of marketing to a universal platform. The brands and the position of Coca Cola therefore remained global but the implementations of its objectives were tailor-made to suit local culture. This explains the different languages and design of advertisements for similar Coke products across the globe.

With the current health concerns, most citizens are exhibiting healthier food behaviors. The general trend that society preferred fast foods and other processed materials is slowly changing into a desire for healthy, organic lifestyles characterized by the avoidance of alcohol, soft drinks and manufactured foods. Coca Cola end up the losers as this will translate into lesser buyers of Coke, their main product. Coca Cola can however counter this effect by focusing more on healthier products. People have been switching to bottle water and other diet cokes and Coke should take the cue and focus more on this. For example, they could focus on their Minute Maid, Dasani and other healthy beverages that will ensure their product range will be fully in demand in these markets (Jamail & Prundt, 1989).

The advertising and branding sector of Coca Cola has been very influential in cutting across language barriers to access foreign markets in developing and developed worlds. The strategy adopted by Coca Cola had placed marketing responsibilities in the hands of the regional managers. In this way, business decisions were made on a domestic environment to fit in with the unique cultural setting in which the particular Coke branch found itself in. this move to localize decision making has seen the success of Coca Cola products in almost all continents, countries, religions and cultures.

Coca Cola brands have adapted to fit the different settings in which they operated. It is very common to see a Coke billboard displaying the message in English, Swahili, Arabic or Chinese. Adverts within conservative countries for example within the Middle East are different from those in liberal countries like Kenya or South Africa. This adapted marketing mix that factors in the cultural, geographic and economic situation has proved quite successful. This ability to tailor their marketing needs to suit a particular context have made Coke reach out to far more consumers than its rivals.

Economic relationship with US

The relationship between Coca Cola and the United States of America is symbiotic in nature. On one hand, USA provides Coca Cola with a ready market for all their products. Their relationship dates back to the Cold War period when states were enforcing their different ideologies through their colonial acquisitions and their business activities. It is during this time that Coca Cola became a preferred company for the United States to use in furthering their interests abroad. The go-ahead and support by the US government that allowed Coca Cola to operate in France was one of these failed attempts at “Americanizing” the rest of Europe (Kuisel, 1991).

This subtle form of self-assertion by Coca Cola and the US government was aggravated in their assistance of the economically troubled states in Europe. After the Second World War, the Marshall Plan that was extended to Europe by America also initiated the Americanization through companies like Levis and of course, Coca Cola. Coca Cola was one of the first corporations to flock the European market and was thoroughly involved in the domestic affairs that it was very difficult to distinguish between the United States and Coca Cola Company. Soon, America had entrenched itself on to the Europeans and their lifestyles were slowly changing to mimic those of the American (Kroes, 1996).

In effect, the Europeans were not only promoting an American company, they were also slowly embracing American ideas. It was only much later that these countries actually started realizing their folly and rejected the operations of Coke and its affiliates. However, the damage was already done. The American ideals were already cultivated in some Europeans who had fully embraced the consumption of American soft drinks, American fashion as well as American lifestyles. In this way, the relationship between the USA and Coke systematically attempted to gain economic advantage and establish future markets fro their products in the future.

On the other hand, Coca Cola provided imperialistic incentives to USA in the following way. The dominance of Coca Cola in Europe and other countries created a dependency on Coke products as well as cultural erosion. While operating their economic activities, the same companies engage in cultural transformation that would see Europe mirror American ideals. The next step after cultural erosion would be economic dominance and lastly, political. This systematic method of entrenching neo-colonialism via multi national companies such as Coca Cola has enabled the United States of America achieve economic supremacy in the world (Kroes, 1996).

Competition and competitive advantage

The company’s main rival in the marketing and production of soft drinks in the USA is Pepsi, the product of PepsiCo. Pepsi is closely followed by Dr. Pepper Snapple Group with their drink, RC Cola. Within other markets, Coca Cola also faces stiff competition from other established companies for example Corsica Cola and Qibla Cola are serious competitors of Coke in France and the Middle East respectively. Muslim countries for instance have always vehemently opposed the sale, consumption and manufacture of coke products in their states. Instead, they have opted for their competitor brands that are considered less “American” like Cola Turka and Parsi Cola.

The entry of many new competitors into the soft drink and beverages industry has presented Coke with many new organizational problems. Most of Coke’s rivals offer very similar products having just as cheap prices. This kind of threat cannot be eliminated by simply producing better quality goods at lower prices. In terms of difference in product, the two soft drinks, Pepsi and Coke have quite similar tastes stressing the similarity of these two commodities. However, in terms of preference, Coke comes out on top of all other similar products due to their advantageous competitive strategy (Dube?, 2005).

The type of competition facing Coca Cola is mainly from direct equivalents of Coke. The root of Coca Cola’s strength lies in the bottling companies that do most of the marketing and distribution for Coca Cola. The dominant player in the bottling field is FEMSA. First, the strong market leadership that has been created by Coca Cola FEMSA makes it a formidable force. This is because FEMSA operates in nine countries and commands the largest sales volume among all bottlers. The business partnerships between FEMSA and Coke have also enabled them to work together and produce innovations in beverage making.

The strong brand portfolio wielded by Coke is another powerful tool that gives them an advantage over other rival companies. The wide portfolio of drinks and beverages offered by Coke is designed to serve all types of customers and consumers. This strategy of product differentiation has also helped Coke beat the competition presented by its rivals as it has beverages in almost all categories-sport drinks, juices, root beers and other drinks. Rival firms therefore struggle to keep up and overtake Coke because of its varied product range. The branding strategy is perhaps the strongest factor in Coke.

The combination of forces between Coca Cola and its bottling partners has created a network of distribution that is highly formidable. This gives them the advantage of economies of scale creating a barrier to competition. The advertising strategy for Coca Cola similarly enjoys large economies of scale as well as the company’s strong brand. In terms of bargaining power, Coca Cola can easily bargain with its suppliers. This is because the raw materials for production are readily available save for the artificial sweeteners. Suppliers cannot therefore hold the company ransom in their bid to gain profits (Cross & Miller, 2009).

Position within global marketplace

Coca Cola operates on a global level having manufacturing, distribution and marketing facilities all over the world. Their main product is soft drinks but Coke also produces other beverages like water, tea and coffee. Although it is global, Coca Cola also engages in retail business with other small organizations and facilities like restaurants. Coca Cola has about 75% of its revenue being international and within the no-alcoholic market; Coca Cola takes up 10%. In terms of global ranking, Coca Cola is first in the sale of sparkling beverages and juice, second in sport drinks and third in bottled water sales.

The opportunities for Coca Cola to grow are immense especially in the developing countries. The consumption of Coke’s products in Africa and Asia has been on the steady increase as displayed by a study that disclosed that from 1985 up to 2005, the per capita consumption of Coca Cola’s products had risen from 32 drinks up to 77 drinks. Much of this growth has naturally been contributed by developing countries. There are however, considerable opportunities for Coca Cola to grow even further. The majority of the population lives in the developing world where the capital consumption is low and this presents an opportunity for global growth within Coca Cola.

Apart from depending on the wide product range that will have a ready market among developing countries, Coke has room for growth by purchasing other local companies that may have the potential for tapping wider markets. This strategy of buying out the competition greatly helped the survival of the Coca Cola Company in the 1980s. The same strategy is still applicable in today’s situations. Having these new brands in their camp, Coke can have a positive return on investments that is contributed by these acquisitions. The acquisition of Glaceau, a drinking water company originating in France but was sold off to Coca Cola for $4.1 billion in 2007 (Matanga, 2010).

The alarm over unhealthy lifestyles spells doom for Coca Cola’s most successful products-soft drinks. With an increased awareness of the ingredients used in making these beverages, more and more consumers are opting for tea, coffee and water products. Coca Cola has attempted to respond to this changing phenomenon by coming up with nutritional soft drinks that have had above average success in these markets. The strengthening of Coca Cola Zero and Diet Coke Plus are just some examples of how Coca Cola has managed to deal wit the mounting pressure over the amount of non-nutritional content in their beverages.

Conclusion

The dynamic nature of Coca Cola has helped it meet the present and future consumer demands. Likewise, the management of Coke has been able to constantly record profits margins high enough to satisfy the shareholders’ interests. The company has been able to embrace the different changes in technology, culture, economy and education. All these achievements can be attributed to a combination of marketing skills, adopting information technology, adapting to local business environments and the power of globalization among other factors. Single handedly; Coca Cola has come up with a successful method of transforming a small business into a multi million empire having branches in many other countries.

References

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