Strategy of Coca Cola for Internationalization and Impact of Globalization

This report discusses the strategy used by Coca Cola for internationalization and the impact of globalization on the company. It analyzes the challenges and opportunities faced by Coca Cola in expanding its market internationally, including the need for deep knowledge about technology, consumer needs, cultural aspects, and trade policies.

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INTERNATIONAL BUSINESS
PROJECT 1

Executive Summary
In the report the strategy which is being used by Coca Cola for internationalization will
be discussed. Coca Cola has been deemed as the world’s number one soft drink. It has
been analyzed that company is going to expand their market in Malaysia. In this firm is
making use of integrative/responsive approach in order to establish their market share.
In the report, the impact of globalization on Coca Cola will also be discussed. It has
been analyzed that in order to expand market internationally the company will also face
various challenges. In order to expand firm needs to have deep knowledge about the
technology, trends and needs, demands of consumers. They also need to analyze the
cultural aspects of the country in which Coca Cola is going to expand. Firm also have to
gain knowledge about the trade policies which is existing in region which they are
planning to expand.
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TABLE OF CONTENTS
NO DESCRIPTION PAGE NUMBER
1 LIST OF TABLES 3
2 Executive summary 2
3 1.0 Introduction 4
1.1 Literature review
1.2 Entry Modes
1.3 Foreign direct investment (FDI)
1.3.1 Foreign Exchange rate (FX)
1.4 Joint Venture
1.5 Political Influences
1.6 Economic Influences
1.7 Socio-Cultural Influences
1.8 Technological Influences
1.9 Market analysis
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4 3.1 Global Strategy of COCA-COLA
3.2 Competitor Analysis
3.3 Risks and opportunities involved
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5 4.1 Discussion and analysis 13
6 5.1 Recommendation 14
7 6.1 Conclusion 15
8 REFRENCES 16
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1.0 Introduction
International marketing can be defined as that process which can be used by business
to promote their products internationally. This supports business in establishing their
market in global areas. Present report will lay emphasis on Coca Cola. It is a soft drink
company that has been started on 8 May, 1896. Firm has been headquartered in United
States. Present report will lay emphasis on the potential risk which is being involved in
expanding to foreign market. It will also analyze the factors that can affect the growth of
business. Report will also highlight the opportunities that can be explored by Coca Cola
while expanding in international market. (Business Credit 2016).
1.1 Literature review:
As per the view of Bartlett, C., S. Ghoshal, and P. Beamish (2018) the integrative
responsive framework can be used by various organizations so that they can expand
market in global areas. This approach can also support Coca Cola to help and analyse
the needs of local market. Company can become responsive of demands of local
market needs. This can help firm in creating loyalty and also it supports firm in growing
and achieving their needs and objectives. To expand globally Coca Cola also needs to
enhance their technology and must get involved in standardization of products. There
are various approaches which is also being included in IR framework and that can be
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used by Coca Cola . Like for example international, global, transnational and multi
domestic approaches. Each framework has their own advantage and dis-advantage.
According to Bartlett and Ghoshal (2018), in order to successfully expand market,
deep research also needs to be done by various organizations who are expanding in
global areas. This will support Coca Cola in gaining competitive advantage. It will also
support their growth and also to have control the profitability aspects. If Coca Cola is
expanding globally they also need to have proper knowledge about the trade laws which
is being implemented in international market. Transitional approach is one of the most
important strategy that can be used by Coca Cola in order to trade internationally. Also
company needs to make appropriate pricing strategy so that they can create consumer
loyalty in new market.
1.2 Entry Modes:
It is very important for the organization to expand internationally so that they can
increase profit and also can mark their presence in international market. There are
various modes of entry like joint-venture, franchising, merger and acquisition. All the
modes of entry have their own advantages and dis-advantages. Coca Cola can also
make use of direct exporting that can increase sales of their products, goods and
services. Firm also needs to think about the investment which will be made while they
are making use of various modes of entry. They need to forecast about the future
challenges that they are going to face in international market. (Business Credit 2016).
1.3 Foreign direct investment (FDI)
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Foreign direct investment is that business in which one organization is involved in
controlling the ownership of one business by being in another country. This type of
investment can include merger and acquisition and also providing the people of different
region the new and updated technology to be used. But when Coca Cola is investing in
foreign then there might arise conflict, as business is expanding then chaos might get
increased. Foreign direct investment can also increase operational cost of company as
they are investing in different regions. They might also face various barriers while
expanding their business in foreign market. This can also increase economic growth of
country in which Coca Cola is going to expand. It can also increase gross domestic
income of that regions. (Business Credit 2016).
1.3.1 Foreign Exchange rate (FX):
Foreign exchange rate can be defined as that rate in which one currency can be
transferred at the rate of another currency. If foreign exchange rate changes then Coca
Cola might face high amount of risk and it can also hamper the working of organization.
Risk is being divided in following aspects:
Transaction exposure can arrive when the rate if exchange has a great impact on the
final value that is being related with transaction. It must be analyzed by Coca Cola that
relevant measures are being taken by them in order to expand(Choi, A. 2018).
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Economic exposure can also be faced by Coca Cola, in this there might occur chances
that these type of risk can affect the present value which is being merged with cash
flow. It can reduce liquidity of company. It can also cause instability to firm and can
cause them several problems.
1.4 Joint Venture:
Coca Cola in order to internationally expand their market can make use of various mode
of entry. One of the entry mode is Joint venture. In this Coca Cola might get
collaborated with other local or international firm which is already been established in
market where firm is expanding. In this type of venture, Coca Cola can share their risk
with other partner. So this can be really beneficial for business as risk is being shared.
Also it has bene analyzed that this strategy also have various dis-advantages like it
gives the other partner control of leading and managing business. (Business Credit
2016).
1.5 Political Influences:
It has been analyzed that there are various political factors like rules, laws and
regulations passed by government that can affect working of Coca Cola. They must
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engaged in following all federal laws related to food which is being implemented by
government of different country or regions. If it is not being followed by company then
this can hamper goodwill of the firm. (Halepete, J., Iyer, S., and Park, C., S., 2018).
1.6 Economic Influences:
There are various factors like labor rate, fiscal policy, exchange rate that can affect
working of various organizations that is going to expand their market internationally.
Like for example if labor rate in any regions increases then this can enhance the
operational cost of business. This can also reduce productivity aspects of business, so
company needs to think upon it.
1.7 Socio-Cultural Influences:
There are various social factors that can impact working of Coca Cola internationally.
(Svensson, G., 2017). Company needs to have an idea about the values, thoughts
behaviour of people that are living in Malaysia. Also firm needs to engage in analysing,
the trends which is being followed by the individuals so that they can establish their
market share. Also company needs to analyse the trends followed by them.
1.8 Technological Influences:
Coca Cola needs to make use of updated technology in order to grow. In this they can
make use of automation and artificial intelligence so that they can also achieve their
objectives and goals. It can also support them in increasing their profit.
1.9 Market details
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A significant change has been observed in the income statement for fourth
quarter of the company for the year 2017. It is making organisation as one of the
promising and profitable organisation giving huge benefits to its shareholders. There
has been an improvement in operating margin by 12% by the end of year 2020.
Source:[(Mirola, T. 2017)]
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[Source :(Albertsson, S. and Klingenstierna, K. 2012)]
3.1 Global Strategy of COCA-COLA:
Malaysia is one of the fastest growing economy of the world and with impressive
GDP and product expansion rate. The long term market exposure, experience and
strong brand value is the key strength of Coca-Cola which has helped organisation to
establish its dominance in various markets. Most of the business of organization relies
on its multi local business which is effectively collaborated with the local bottling
partners. For global success the organization has specific global strategy as per the
particular geographic region. For instance the promotional campaigns and brand value
creation program of the organisation are based upon culture or social aspects of the
region. It helps company to deliver highly specific marketing and business outcomes.
Instead of applying a standard global strategy for all activities of marketing mix
Coca-Cola uses mix approach. For example it uses product standardization so that its
quality and services remains same throughout the world. However for promotional and
people aspect it has differentiation strategy so that market penetration can be achieved
with more efficiency. The key global strategy used by Coca-Cola for gaining
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competitive advantage is to include and respect diversity in its practices without
compromising the service and product standards (Rugman, A. M., Collinson, S and
Hodgetts, R. M. 2016). Further the organisation is very innovative and creative in terms
of packaging, product specification, marketing and other business aspects. Coca-Cola
also adopts a uniform global strategy to ensure that its services and products are highly
specific and of good quality so that it can build customer loyalty and enjoy uninterrupted
long term success.
3.2 Competitor Analysis:
Pepsi is one of the biggest threat and competition for Company, especially in Malaysia.
Pepsi got success in the Malaysian market as joint venture and with its Pepsi food
limited. Later with the growth Pepsi bought its partners and became successful and fully
owned organisation ending its joint venture relationships. It helped Pepsi to grow
enormously and to act as huge competitor for the Coca-Cola's.
3.3 Risks and opportunities involved
Pepsi has been one of the biggest risk for the organisation however Coca-Cola also
have huge opportunities for the growth by acquiring more markets through service
improvements and new product or brand development. With increasing health
consciousness among people there is greater demand of such healthy soft drinks. Thus
Coca-Cola can capture a complete new target market by developing such new
products. Though it can be a tough nut for the organisation to improve its product range
and to enter into healthy products choices but the choice has vast scope for the growth.
Coca-Cola has also made successful acquisition of Pepsi bottlers which has helped to
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enhance its market dominance. Thus in future as well organisation can make such
ventures and can generate the maximum revenue.
4.1 Discussion and analysis
This is important for the organization to keep tracking the availability of the
resources in order to manage their production line efficiently. The suppliers of the
organization in limited numbers and so the bargaining power of the supplier is high for
company. This is important for the organization to increase the number of supplier to
reduce the power of the suppliers. It is not possible for the organization to replace their
supplier in order because these suppliers in small numbers. The impact of limited
supplier is directly related to the profit and production line of organization. There are
different processes can be used by the organization to improve their current situation in
order to reduce the current they are facing with their suppliers. One of the process they
can use is making alliance with the suppliers. This process will improve their capabilities
in the market place. By complete take over of the supplier they will not face any issue in
the manufacturing process of their products. By this process company will be able to
take advantages that are previously gained by the suppliers. This can reduce the
production cost of company and help them to generate high marginal profit. This
process can cost company in two different ways. One is at process of purchasing and
other process is about cost of bureaucratic in order of purchasing. This could be related
to the syncing the new implementation in the structure of company.
5.1 Recommendation
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this is important for the company to sole its current and future possible issues in
order to make effective changes in the promotion of its products in the current
market and community. For the improving the company processes and
performance in target market organization can include their employees in
decision making process to gain more ideas and suggestion to improve the
capability of organization. As per the present structure of company this
process can help them to generate more revenue by implementing innovation
in the organization procedure. By making its employees aware, organization
can effectively reduce the operational and performance issues in the market
place. By following this process they will be able to take decision very fast
and immediate basis.
This most important thing for the organization to maintain the satisfaction level of
employees high in order to achieve higher productivity in the market place.
This can not be consider as the issue of organization but it is really effective
to provide better solution for the dropping or declining performance of
company in target market. By this process all the leaders of organization will
feel that are part of organization and it will help them to stay motivated and
encouraged to give their best for company. The criticism faced by the
organization has shown some negative impact on its performance of the
organization it also has damaged performance and penalties along with
strikes. One of partner of company was involved in the issues and it has
negatively promoted the performance and reputation of company in the
market place.
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There are different possibilities' organization have to reduce its issues in the target
market. Buy over is one of the best solution for this issues related to
reputation of company in the market place. This will also help them to take
lead in the competitive market to get competitive advantage. Buy over
process will also establish them on the international level. By using effective
promotional events' organization can get better recognition in the international
market.
6.1 Conclusion
It can be concluded that global strategy of Coca Cola is highly effective in terms of
customer engagement and promoting customer loyalty. The organisational strategy to
integrate culture and high quality standards for its brand, service and products have
been successful in creating a long lasting impression on the customers. It has been
also analysed that in future the organisation may experience good competition from
Pepsi and other new emerging health drinks. Thus for dealing with such challenges
organisation must adopt more innovative and comprehensive strategies. It can also be
concluded that company must also improve its marketing strategy to retain its good
position in the market.
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