A Case Study of Coca Cola Company
The carbonated soft drink company was established in Atlanta, the USA, in the year 1886 by John Smith Pemberton. (Boney, F.1987). The Company was later incorporated in Atlanta by Asa Griggs Candler in 1892 as a Georgia corporation. It is among the largest and best firmoperating in at least 200 countries in the world. Coca Cola is known to produce syrup concentrates that are later vended to numerous bottlers across the globe. The beverages are of different kinds such as Fanta, sprite, minute maid, diet coke, PowerAde, and many others. (Wright, A. 1995). Internationally, Coca-cola has made more significant progress throughout the last 50 years and strategically positioned itself as the best of all beverage companies (Sivny L, 2007). As of 2019, coca-cola revenue was at $37.27 billion, an 8.65% increase from 2018 (Wright, A. 1995).
For coca-cola Company to be successful and to have an impact on the market, it has followed and adhered to its local strategies and also adapted the standardization strategies to produce and sell its standardized products internationally. Plans that coca-cola has suited to explore the market globally include licensing, franchising, and total ownership hence solidifying its position as a global brand (Sivny L, 2007).
Coca Cola Company has adapted several entry strategies to venture into international markets to expand its market share to gain profit and stability. Coca-cola has achieved this by adopting various market entry strategies such as licensing, franchising, and total ownership (Miller, D. 1983).
Licensing is a form of market entry strategy whereby permission is granted by the licensor to the licensee to use intellectual property rights such as brand name, trademark, patents, or technology under defined conditions. Afirm permits another company in a foreign country to use its logo, its production processes, or manufacturing skills. The licensee is therefore entitled to pay a fee in exchange for the services and rights such as business name and methods provided by the other Company. The period for the license should also be considered before the permit happens (Miller, D. 1983).
Licensing is known to be the best market entry strategy that Coca Cola Company uses. The Company has licensed bottlers to use its brand tag and trade processes in advertising its branded stocks globally. For the Company to expedite the production of his products, the firmdelivers its license with the coca-cola syrup company. This has benefited the Company through evading the incurring substantial initial venture capital needed to establish manufacturing companies. Through licensing, Coca Cola Company has prevaricated prescriptive government regulations that prevent access to foreign markets (Wright, A. 1995).
Franchising is whereby semi-independent trade owners (franchisees) emolument fees toafirm (franchisor) to have the right to be recognized with its trademark, to trade its services and stocks, and to use its trade processes and format.
Franchising has aided the facilitation and distribution of Coca Cola Company stocks to numerous global markets over and done withthe use of indigenous suppliers. For example, the firm uses franchisees such as CCC, Swire, and Kerry to endeavor into the Chinese market (Liu, C. 2009). Adaptation of franchisees has aided the Company to eradicated risks that thrive in fresh foreign markets to reducefunctional costs further. Significantly, the Company has accelerated its success (Boney, F.1987).
Total ownership strategy can also be defined as wholly-owned subsidiaries.It is a company whose products is held by another company known as the parent company. It is well known to always operate independently of its parent company with its own structure, customers and stock rather than as an integrated division. It always operates in line with the strategic direction of the subsidiary (Miller, D. 1983).
Coca Cola exclusively possesses subsidiaries in various countries like Argentina, India, Zimbabwe, and Canada etc. Total ownership strategy helped the Company to endeavour into major cost-effective and less competitive foreign markets hence increasing its profits. Even though, this strategy impacted the firm positively, it is one of the most expensive strategy to implement (Wright, A. 1995).
Market expansion strategy is a business growth strategy and allows companies to adopt a market expansion strategy when their progress accelerate in current channels. When the existing markets are achieved, the Company becomes successful (Porter, M. E. 1980).
Coca Cola Company used the market segmentation approach to expand its markets. The Company divided markets based on the capacity and volume of customers and used appropriate approaches to increase sales of the products which earned profits. The Company used this approach to focus on growing the sales volume rather than profits so as to increase its customer domains to make a robust foundation for the business. This action became successful in that coca cola decided to sell its beverages to its customers at an affordable price or economical price to gain a huge number of customers (Porter, M. E. 1980).
The coca cola firm also used the brand establishment and customer relationship to expand its markets globally. Coca cola firm has also expanded its markets through the adoption of financial efficiency models, increasing process efficiency and focusing core competencies and business models so have maximum returns for the reserves with all-out productivity.
Resource based and institutional based factors are the major critical factors driving the adoption of the entry and expansion strategies of the Coca Cola firm.
This can be defined as an approach that is used to look at a firm’s internal capabilities and to also uncover the internal weaknesses. Resources can either be categorized as tangible or intangible resources (Barney, 1991).The Coca Cola firm contains intangible resources such as intellectual, goodwill and technical resources. The technical resources of the Company have highly boosted the production of the products through the assistance of the technical expertise who also produced various drink flavours his is a perfect indication that the firm hasgreat knowledge proficiency with high intellectual power. Coca Cola marketing departments possess intellectual capabilities hence they work efficiently to comprehend traders or venders need expectation and the firm competitors. This enables them to come up with effective strategies to aid the firm in increasing the volume of the products sale therefore expanding the market share of the firm(Elmore, B. 2013).
The physical, human and the financial tangible resources has enabled the Company to produce high quality products and sell them at a lower price compared to other firms. The availability of the tangible resources in the firm ensures that Coca Cola does not lease its equipment therefore manages the cost of production to be low.In 2010 there was a major revenue increase in the Coca Cola firm as compared to the preceding year (Wright, A. 1995). The Company made a profit of $6.48 billion. The high increase in revenue resulted because of the introduction of the fresh products in the market which became a major competitive verge to other firms. Another reason is that Coca Cola Company produces high quality products as compared to other firms hence meets the customer needs.The architectural plans of the Company ensures that the Coca Cola firm adheres to strategic objectives of the Company to ensure that the business process operates smoothly (Wright, A. 1995).
The institution based view includes the institutional dimension when presenting appropriate responses to the essential queries of strategy. Developing stronger measures of institutions is one of the major challenges that this factor faces (Peng et al., 2009).This factor constitutes two components that is the formal and informal components which are the social norms and individual values (North, 1991). This factor came about because globalization affected most of the industries in the previous years. Globalization is evident in the coca cola firm whereby the interaction and integration with other traders from different countries made the firm to prepare and manufacture numerous products and services to be supplied globally to different foreign markets. Adaptation of the foreign cultures also made coca cola to be more successful in its productivity(Saltman, K. 2004).
During World War I and cold war, coca cola did not lose its preeminence. It remained more efficient with great capabilities. Initially, coca cola firm was built in Panama and Cuba which an increase in demand of the products since most of the US military resided in the two countries(Saltman, K. 2004).
Most of other countries such as China and India had weak governance frameworks hence led to poor rule of laws and weak company ownership. Informal institutions reimbursed fault in shareholder safety and rule of law. The interactions between the local and private businesses established the foundation for the formal institutional changes (Meyer et al. 2009). Firms with better structural support, devoted great levels of resources to a country and dedicated more assets to the market entry (Estrin etal. 2009). Similarly to market entry theory, coca cola firm contradicts the institutional theory. Regardless of the poor and weak institutional frameworks in India and China, Coca Cola Company decided to obligate major valued resources and later came into a joint venture. This distinctive entry of Coca Cola into India and China suggested that the present theories on the firm organization and entry approach should be revised before it is applied to any large developing economies.
The entry and expansion strategies have positively impacted coca cola though the implantation of the strategic process of the approaches. This has made coca cola to expand widely in different countries through formal and informal corporations whereby many developing countries have are also coming up because of the enhanced and constructive marketing approaches.
The informal institutional relationships between coca cola and foreign countries attained legitimacy and was able to alleviate poor and weak institutional frameworks in China and India. Resource based view offered perceptive knowledge on the coca cola firm managerial structure, skills and process with esteemedstrategy formulation using the internal environmental approach. These resources and intuitional factors continued the provision of well improved foundations of long term strategies which maintained a secure reputation for the firms. Through these initiatives coca cola became successful and was branded as one of the best companies in the world.
Advancement in technology has enhanced the ease of doing business. Living during an era in which access to a smartphone has become a way of life, Coca cola should consider utilizing the online market place by coming up with an app where one can exclusively place an order for coca cola products. This will not only increase the market base but also help the Company interact with its clientele at a personally level knowing which brand a certain customer prefers.
The Company has made attempts in moving along with its consumers, especially in having brands associated with people on diet. This is the way to go for any company, it has to move along with its customers, Coca cola should consider developing more brands that are specific consumer oriented. This may include but not limited to developing brands of fruit juices with no preservatives for the health conscious market.
Boney, F. (1987). First Atlanta and Then the World: A Century of Coca-Cola. The Georgia Historical Quarterly,71(1), 91-105. Retrieved March 4, 2020, from www.jstor.org/stable/40581620
Sivny, L. (2007). Improving firm performance by matching strategic decision-making processes to competitive dynamics. Academy of Management executive. 2004, Vol.18, No.4 Soft Drinks in Morocco.
Wright, A. (1995). Southern Cultures,1(2), 258-260. Retrieved March 5, 2020, from www.jstor.org/stable/44378654
Peng, M., Sun, S., Pinkham, B., Chen, H., 2009. The institution-based view as a third leg for a strategy tripod. The Academy of Management Perspectives 23 (3), 63—81
Meyer, K.E., Estrin, S., Bhaumik, S.K., Peng, M.W., (2009). Institutions, resources, and entry strategies in emerging economies. Strategic Management Journal 30 (1), 61—80.
Barney, J., (1991). Firm resources and sustained competitive advantage. Journal of Management 17 (1), 99—120.
North, D.C., (1991). Institutions. The Journal of Economic Perspectives 5 (1), 97—112.
Porter, M.E., (1980). Competitive Strategy. The Free Press, New York.
Miller, D. (1983).The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770-791.
Liu, C. (2009). Multinationals, Globalisation and Indigenous Firms in China. London: Routledge, https://doi.org/10.4324/9780203885123
Saltman, K. (2004). Coca-Cola’s Global Lessons: From Education for Corporate Globalization to Education for Global Justice. Teacher Education Quarterly,31(1), 155-172. Retrieved March 6, 2020, from www.jstor.org/stable/23478426
ELMORE, B. (2013). Citizen Coke: An Environmental and Political History of the Coca-Cola Company. Enterprise & Society,14(4), 717-731. Retrieved March 6, 2020, from www.jstor.org/stable/23701761
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