How State Economic Growth Depends on Providing a Safe Place for an Outlet - Case Study Example

Internationalisation Strategy: Coca Cola In almost every shop, retail of wholesale convenient store one goes to, the coca cola brand always stands out. The investment that has gone into making this company one of the largest global brands in the world has involved several strategic placements that show the growth of the company from a single outlet started in the US to a conglomerate with a presence in more than 200 countries. Its presence in the world has become a major case study across the world. In looking at the concept of location for the suitable position within the organization, it is clear that the impact this has on the company will be based on the ability to achieve the growth expected within the required timeframe. One of the many locations that Coca Cola has invested its resources in is in Japan, a country that accounts for close to 74% of the sales made in Asia. Having to locate a precise region and country that makes its products move of the shelves at a high rate will be essential for growth of the MNE. The ability to utilise strategies for the growth of the company indicates the benefits that influence the creation of new opportunities for the sake of the company. Answering this question will be quite essential in assisting upcoming MNEs to improve on their sales and revenues, while encouraging them to make good use of the resources available. To tackle this gap in the current literature, this essay will examine the literature present to date, and then look at an example of how Coca Cola manages to expand its services across the world, more so in Japan. An examination of the empirical evidence will also take place as well as an interpretation and discussion of the findings from the examination of Coca Cola and its internationalisation strategies. Literature Review Multinational companies are the main drivers of globalisation and economic growth. These enterprises use their skills, strategies and resources to make the best out of what they have. The goal is to recreate the growing need for a space in the host country to ensure they capture the markets and make good use of the strategies they have readily placed near them (Arregle, Beamish & Hébert 2009: 89). They understand that the global cities in place will only benefit if there are outsiders who come and take good advantage of the skills and resources present to improve on their presence geographically and within the industry. The market share they acquire will always depend on how much they invest to acquire exclusive rights to develop their goals within the society (Dellestrand & Kappen 2012: 221). An important thing to note is that multinational companies are responsible for the increased fostering of economic interdependence amongst national markets. Like the world systems theory stipulates, the economies of the world determine and define the way countries will interact and relate with each other, rather than the creation of national states (Dellestrand & Kappen 2012: 224). In most cases, the MNEs are responsible for shaping these economies to make them acquire the requisite level of production and growth that will improve their status in the world economic structures. These allow them to make good use of the available avenues to grow their portfolios, and are critical in defining the countries as core, peripheral or semi-peripheral (Cantwell, Dunning & Lundan 2009: 571). The core countries are those that make use of their position to exploit the resources in other countries. They use their dominance and power to gain the rights in these countries, and then enrich themselves using the resources of these non-dominant countries (Coe, Dicken, Hess & Yeung 2010: 142). These exploited countries are termed as the peripherals, which are in most cases the developing nations with weak governments and regulations. The semi-peripherals are those countries, which possess both the core and peripheral characteristics. They exploit, and are exploited as well (Arregle, Beamish & Hébert 2009: 94). A good example of the core countries is the US. The US is stable and can dominate the peripheral countries to gain raw materials and labour. India is an example of a semi-peripheral country with a stable economy but still dependent on foreign companies to come make good use of the skills present to improve on its growing technology. Cape Verde is a peripheral country that allows foreign investors to come and invest in the country, with major concessions and tax subsidies given to entice them to stay in the country Coe, Dicken, Hess & Yeung 2010: 145; Beugelsdijk, McCann & Mudambi 2010: 489). The MNEs take advantage of such subsidies and make investments in these countries. They understand that globalisation is changing the way countries interact, and that means that people have to make good use of the resources available for the sake of the growing economies (Cantwell, Dunning & Lundan 2009: 573). A good understanding has to be reached to ensure the country benefits from these countries, and more often than not, corruption takes centre stage as the companies look for favours in meeting the growing competition. Whether the investments made are good or not, MNEs looking for the best in their position and use that as a strategy to maintain and retain their competitiveness in the markets (Beugelsdijk, McCann & Mudambi 2010: 492). The growing need for a position in the budding markets shows that the strategies in place are ideal for the development of new products in these areas, making it easier to provide new avenues of growth of the sake of the company. Being profitable is one of the best ways of retaining growth within these new areas of growth. The world systems theory shows that the dependence and interdependence of a country’s economy depends on the ability to reiterate the growing need for a spot in the international market (Arregle, Beamish & Hébert 2009: 95). This implies having an internationalisation strategy that takes advantage of the growing global cities and the impact that strategic locations have in the sale of a company’s product. Notably, the challenges attained could be in three main forms. One of the ways the strategic position could be challenging is due to the complexity of operations in the host country. Some of the changes occurring from one region to the other could make it difficult to operate in a new country if one does not have a chance to re-examine the coordination of various attributes in the society (Cantwell, Dunning & Lundan 2009: 577). Another challenge is firm-specific which includes uncertainty occasioned by the unfamiliarity with the new environment and the need to deliver the best products against companies that are aware of what the market looks and feels like at different times of the year (Arregle, Beamish & Hébert 2009: 112). The other form in which challenges could emerge is in terms of the costs that could result from the discrimination accorded to MNEs within the environment of the host countries. This could be because of economic nationalism and lack of legitimacy amongst the international firms (Beugelsdijk, McCann & Mudambi 2010: 487). Coca Cola and its Growth Strategies Coca Cola has been in existence since 1886 and has continued to provide the world with one of the best beverages in the world. It has diversified into various industries and sectors in a bid to get the right methods of gaining the market share that rival companies are looking to acquire. This led to its creation of a structure that would make its people valuable and the company globalised, hence expanding to new places and making good use of the diversity in place (Tausch & Ghymers 2006: 112-114). The best way of attaining this is by examining the various opportunities present and looks for the different winning strategies that will make the culture within the company to propel it towards successful ventures. Coca Cola’s presence in Japan has been an interesting journey for a company that has been efficient in its utility of the available resources as it seeks to reinvent itself and suit the world’s needs. Asia has been a good place for developing its strategies and the use of Japan as the launching pad has been a great success. In fact, Coca Cola is the only brand to have a strong presence in the North and Latin Americas as well as Asia (Tausch & Ghymers 2006: 119). It has mastered the art of locating its services in areas that promise growth based on the technology and raw materials present. The idea is to present the world with so many options that provide new strategies for the significant growth required to boost its sales across the country (Beugelsdijk, McCann & Mudambi 2010: 488). Japan has managed to remain relevant due to the increasing financing from the local banks as well as the parent company’s investments in various sectors. Most of the benefits from Japan have been boosted by the merging and consolidation of the bottlers in the country, making it the largest bottler in Japan with the sales territory in 14 prefectures in the western part of Japan. The coming together of Kita Kyushu, Sanyo, Kinki, Mikasa and Minami Kyushu Coca Cola bottling companies to form one huge conglomerate known as the coca cola west company made it easier to provide Coca Cola with 28% of the total soft-drinks sales in the country (Blanding 2010: 258). This huge market share has continually improved to make it easier for the growth of the company as a whole. Coca Cola has gained a lot from this and created new platforms of growth by introducing other products that are tailored to meet the needs of the Japanese consumers (Foster 2008: 190). Empirical Evidence The growth rate of an MNE is any new country will depend on the foundations of the firm. According to the Scandinavian school of thought on the internationalisation model, the goal of every company is to make the right choices and maximise on the available positions before another one gets a chance to. This means building the firms incrementally starting with the lower levels of resource commitments that imply a greater understanding of the society based on the proximate cultural attributes in the host countries. The first bottling plant in Japan was built in 1949 and it was not until 1999 when Coca Cola decided to broker a deal between the major bottling companies to form a substantial revenue-making company that included all the other major bottlers (Blanding 2010: 260-2; Isdell 2011: 369). The goal was to assure the company that its investments will pay off by having a common management team to deal with and harness the country’s major bottlers all at once. As if trying to make use of its resources across the world, Coca Cola has sales totalling to 38.4% in North America, 24.9% in Asia (74% of these in Japan alone) and 22.4% in Europe. The company understands that it has to improve its outlook and increase its resources across the regions to improve its position (Elmore 2013: 720). The strategy here is to get into the market and introduce new products that will meet the needs of the people. Making these tailor made changes will be a boost to the company and the customers too (Foster 2008: 196). A good example if the recent entry into the unsweetened tea sector where coca cola aims to produce a different type of Tea to beat the common green, blended and oolong teas most common in Japan. Their Taiyo no Matecha product has been received well so far and they look at improving their sales in the near future. The Chinese markets are also a good way of meeting their expansion demands (Elmore 2013: 722). Although Coca Cola thinks that the consumption tax in the country is increasing by the day, it foresees huge gains in the coming years. The company seeks to increase its prices for canned drinks from 120 yen to 130 yen to take care of the increased rates in the country. Japan has increased its consumption tax by 3% and this has made companies rethink their strategies. However, the company knows that the potential therein is quite huge and only time will tell if it will reduce the prices after garnering the support and market share it desires in the country (Elmore 2013: 722). The regulatory attributes in the country also make it difficult to keep up with demand because of the increasing costs of the essential aspects of the company’s growing attributes. Though this is not part of the company’s strategy, it has to make do with what is available, meaning that new strategies should be sought for the growth of the company’s portfolio (Foster 2008: 199). The strategies in place for any company must be inclusive of the changes taking place in major global cities. One mistake in one section of the manufacturing industry could lead to an international boycott of products and that could harm the revenues. If it wants to succeed in Japan, Coca Cola must ensure it uses all platforms to advertise and maximise on the available internet options to reach out to more people (Foster 2008: 203). Conclusion The growth of the economy in nation will depend on the ability to provide MNEs with a safe place to conduct their business. The only way to assure this is by setting the right avenues for the growth of the MNEs and their revenues through considerable tax regimes as well as increased utility of the available regulations. This paper has examined the basic steps of setting shop in different places in the world. Of great importance was the establishment of the Coca Cola Company in Japan based on the world systems theory. It has also established that the location of setting up a business is as important as any other strategy with many companies ignoring the feasibility of their new positions in the country. Every company has its strategies and goals. The problem is that these may not achieve the requisite growth the company projects if the strategy does not meet the global needs. Any company setting up its shop in any part of the country will have to make good use of the specific attributes that redefine the growth of the society based on the presented products. In most areas, the governments will require that companies have joint ventures with locals, and not understanding how to form strong ventures could limit growth. Coca Cola understood this and made it possible for more than four companies to come together and form one big company that would improve production across the continent. This achieved what it wanted because it allows coca cola to concentrate on other businesses while the ventures capitalise on their traditional markets as well as expand to other parts of the continent. The report has been successful in examining the importance of having strong international strategies for the sake of growing more revenue for the MNE as well as improves its production across the region. Targeting these new avenues of expansion and development has made Coca Cola one of the largest global brands. References Arregle, J.L, Beamish, P. & Hébert, L. (2009) “The regional dimension of MNEs’ foreign subsidiary localisation”, Journal of International Business Studies, vol. 40, no. 1, pp. 86–107. Beugelsdijk, S., McCann, P. & Mudambi, R. (2010) “Place, space and organisation: Economic geography and the multinational enterprise”, Journal of Economic Geography, vol. 10, no. 4, pp. 485-493. Blanding, M. (2010) The Coke Machine: The Dirty Truth Behind the World’s Favorite Soft Drink, New York: Avery. Cantwell, J., Dunning, J. & Lundan, S. (2009) “An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment”, Journal of International Business Studies, vol. 41, no. 4, pp. 567–586. Coe, N, Dicken, P., Hess, M. & Yeung, H. (2010) Making connections: Global production networks and world city networks, Global Networks, vol.10 no.1, pp.138–149. Dellestrand, H. & Kappen, P. (2012) “The effects of spatial and contextual factors on headquarters resource allocation to MNE subsidiaries”, Journal of International Business Studies, vol. 43, no.3, pp. 219–243. Elmore, B.J. (2013) "Citizen Coke: An Environmental and Political History of the Coca-Cola Company," Enterprise & Society vol. 14, no. 4, pp. 717–731. Foster, R. (2008) Coca-Globalisation: Following Soft Drinks from New York to New Guinea, New York: Palgrave Macmillan. Isdell, N. (2011) Inside Coca-Cola: A CEO’s Life Story of Building the World’s Most Popular Brand. With the assistance of David Beasley, New York: St. Martin’s Press Tausch, A. & Ghymers, C. (2006) From the "Washington" towards a "Vienna Consensus"? A quantitative analysis on globalisation, development and global governance, Hauppauge, New York: Nova Science. Read More