Business Globalisation in Central and Eastern Europe - Assignment Example

?Anderson (2000: 34) defines globalisation as “the growing economic interdependence between different countries in the world through increasing the volume and the variety of goods and services traded across the international borders, foreign capital flows in addition to rapid and extensive transfer of technology across different countries”. Economic and political changes have resulted into reduction of barriers to trade at international level and more intense competition. Consequently, there are increased financial flows such as foreign direct investments, technology transfers and portfolio management across international borders. Modern communication such internet and information technology has greatly enhanced exchange of information across the world at unprecedented speed. In addition, the discovery of fast and safe methods of transport has enhanced greater mobility of people across the globe (Narula, 2003: 174). These changes have occurred in different stages and businesses have undergone various transformations in order to remain relevant in the market. This paper explores different stages of globalization with special focus on how Coca-Cola Company has responded to every phase of liberalization. Pearce (2006: 28) argues that every institution and business must commit to enhancing its global competitiveness as a crucial strategic goal. In the current business environment characterised by intense competition, no business organisation can succeed if it fails to match with the high standards set by its competitors in the particular market niche. There are two phases of globalization recorded in the history of international trade namely old and new globalization (Manea and Robert, 2004: 203). International trade undertaken from 1893 to 1913 is classified in the old phase while the new phase entails trade from 1915 to the present. Although these phases are defined by an increasing gross domestic product ratio and growing international investments, there are distinct differences. In the old phase, there were high barriers to trade caused by high tariffs. However, the new phase has witnessed drastic reduction of tariff barriers, resulting to the opening international borders to high volume of trade (Manea and Robert, 2004: 215). The new globalisation has witnessed the expansion of new markets, services and emergence of global brands. Many countries are members of international trading organisations formed to set the norms and standards of trade. In addition, emerging issues such as democracy, human rights and market economy are increasingly defining the norms and rules of new globalization. At business level, the new globalisation creates the necessity of expanding from local to regional levels. This implies that businesses should no longer distinguish between foreign and domestic market, but concentrate on enhancing the quality of their products, because of intense competition at both levels (Anderson, 2000: 62). Businesses undergo five stages before becoming global firms. Generally, exporting goods or services is the initial stage of engaging in international business by local firms. In later stages, most businesses establish ventures in foreign countries (Anderson, 2000: 86). Narula (2003: 35) identified five stages that businesses undergo before developing into global corporation. The first stage, entails exporting using overseas dealers and distributors. In this stage, the business is predominantly domestic and it engages the services of foreign dealers as it expands into new overseas markets. In the second stage, the company has already established a foothold in foreign markets and therefore exporting its products using its own distributors and dealers (Narula (2003:43). During the third stage, the company is more established in the foreign markets. The firm begins undertaking manufacturing its products, sales, marketing and other activities on its own (Pearce, 2006: 57). In the fourth stage, the business applies complete business systems including engineering, research and development. A company’s movement to a more insider position in the foreign market characterizes the fourth stage. In this stage, Pearce (2006:65) argues that managers find it necessary to duplicate business operations techniques, systems and processes that have worked well in the domestic level into the new global market. In order to succeed in this stage, the management of the now global business is compelled to seek assistance from the domestic head offices in search for the necessary operational requirements such as finance, skilled personnel among other necessities. In this regard, the firm in foreign market continues relying on assistance from its domestic headquarters although it has already established firm business operations in the foreign markets (Pearce, 2006:74). The fifth and the final stage, is localisation where the firm assumes an authentic global operation stance. According to Narula (2003:69), the company is dedicated to satisfying the customers’ needs in a global perspective during this stage. This requires the now global business to strike an organizational balance that addresses the needs of the market from domestic to international level. The new business orientation now requires the management to consider both the domestic and international markets simultaneously. To achieve the business strategic goals in this stage requires the business to venture into new grounds to meets the localised customer needs in an international context. To attain global localisation Manea and Robert (2004: 127) argued that it is crucial for the business to denationalize their operations in favour of a more globalized system that constitutes a system of shared corporate values in across the international markets. In this regard, the shared values should substitute the nation based focus initially entrenched in the previous stages of globalisation. According to Pearce (2006), global corporations today are not based on nationality since customers are becoming less loyal to the products and services from their countries of origin. In this respect, authentic global corporation should always strive to meet the needs of their customers but not serve the interest of government in both foreign and domestic markets. According to Pearce (2006: 19), global corporations do not repatriate all their profits back to the country of origin. They help in building of infrastructure, creating job opportunities for the locals and engage in corporate social responsibility in countries where their operations are based. Coca Cola Company, a globally renowned multinational has undergone all the five stage of globalization since it was founded in 1886 in Atlanta. The beverage company with its flagship brand Coca Cola, a soft drink has been in existence for 125 years since its inception (Coca- Cola Company 2011). The first stage of the company’s path to globalisation started when the founder Dr Pemberton sold part of the business to Mr Chandler, Atlanta based businessman. This enabled expansion of the brand beyond Atlanta and by 1894, the company had expanded to Mississippi. By 1899, Coca Cola beverage was being sold and drunk in almost all states in the United States. In 1900, the company established the first large scale bottling facility in Chattanooga and later in Atlanta. In 1906, the company entered international market establishing bottling plants in Canada, Cuba, and Panama. This marked the beginning of rapid and aggressive international expansion and currently the company has a global presence in over 200 countries (Coca- Cola Company, 2011). The initial stage of globalisation was characterised by dispute about the ingredients of its beverages. The company eventually removed cocaine ingredient from its popular Coca Cola brand (Coca- Cola Company, 2011). However, it retains formula used to make the beverages up to date. During the second stage of globalisation, the company exported its products using its own dealers and distributors. The major challenge that the company faced in the second stage was installing the relevant plants and logistics for distributing the products in various overseas markets. To overcome the challenge the company subcontracted local distributors and dealers. In addition, the parent company in Atlanta provided the financial and technical expertise relevant for installation of the bottling plants in foreign countries (Coca- Cola Company, 2011). Another challenge was imitation of the company’s bottle by other competitors in the beverage industry. By patenting the beverage bottles, the company was able to overcome the challenge. In the third stage, the company began manufacturing bottles in its licensed Coca Cola bottling plants in overseas markets. The strategy minimized the cost of exporting bottles from the headquarters in the United States to the foreign markets. The company began decentralising operations such as marketing and sales from United States. However, the company’s headquarters in Atlanta still manufactures concentrates, which are then supplied to authorized Coca Cola bottlers worldwide (Coca- Cola Company, 2011). In the fourth stage, the company diversified its brand portfolio from the popular Coca Cola brand to meet the diversified customers’ needs in the global market. The company duplicated most of the strategies that the company had used to acquire large market share in the United States. This included investing heavily in marketing and advertising, patenting bottles for other company’s brands and in skilled human capital. In the fifth stage, the company has acquired a global outlook. This has been achieved by sponsoring major sports events such as FIFA world cup, Olympics. The company has numerous brands and beverages including carbonated drinks, fruit juices and bottled water. These drinks are strategically manufactured to meet the needs of every person in the globe (Coca- Cola Company, 2011). References Anderson, S. (2000). Field guide to the global economy. New York: New Press. Coca- Cola Company. (2011). 125 years of sharing happiness. Retrieved on August 15, 2011 from http://www.thecoca-colacompany.com/heritage/pdf/Coca-Cola_125_years_booklet.pdf Manea, J and Robert, P. (2004). Multinationals and transition: Business strategies, technology and transformation in central and eastern Europe. London: Palgrave Macmillan. Narula, R. (2003). Globalisation and technology. Oxford: Polity Publishers. Pearce, R. (2006). Globalization and development: An international business strategy approach. Transnational Corporations. 15(1): pp 15-54. Read More