Analysis of a Multinational Enterprise: the Coca-Cola Company - Case Study Example

Analysis of a Multinational Enterprise (MNE): The Coca-Cola Company Introduction Multinational enterprises (MNEs) are companies that operate in many countries. Such companies have to deal with the challenges and opportunities that abound in the different environments in which they carry out their activities. MNEs also have to use their knowledge regarding international business to capitalise on the opportunities that arise so that they can reach many markets. To achieve this, they have to develop strategies that enable them to satisfy the needs of customers in different regions. They also have to deal with the challenges that are associated with doing business on a global scale. More importantly, they have to deal with any issues that might arise in relation to their operations. For instance, they have to deal with ethics issues regarding their operations, employment and labour relations, and environmental impacts. Against this background, this essay will discuss the Coca-Cola Company (Coca-Cola) as one of the leading MNEs. The essay will touch on the company’s history and its international business strategy and the achievements that it has made. As well, a review of the challenges that Coca-Cola faces will be made, followed by a discussion of recommendations on how the company can deal with these challenges. History of the Coca-Cola Company The Coca-Cola Company is one of the MNEs that have long histories, having been started in 1886 (Gong 2013, p. 47). Headquartered in Atlanta, the company is the world’s biggest beverage firm conducting business in over 200 nations with a collection of not less than 3,500 products (National Round Table on the Environment and the Economy (NRTEE) 2012, p. 55; Ferrell, Fraedrich & Ferrell 2013, p. 454). The portfolio of Coca-Cola’s products includes carbonated drinks, juices, bottled waters, coffees, teas, energy drinks and soft drinks (Ferrell, Fraedrich & Ferrell 2013, p. 454). The first Coca-Cola drink was founded by John Pemberton, who then sold it to the Atlanta-based Jacob’s Pharmacy as a patent medicine. During the period between 1886 and 1892, Asa G Candler obtained the right to the Coca-Cola business and became its first president (Gong 2013, p. 47). During the initial years, the focus of the Coca-Cola Company was on expanding the share of the market in the United States. However, after the Second World War, the company started to appreciate the opportunity in selling its products to other countries across the world (Ferrell, Fraedrich & Ferrell 2013, p. 454). Details of the expansion across other countries and some key events in the company’s history are outlined in the table below. Period Presence Key events 1886 to 1892 Atlanta John Pemberton formulated Coca-Cola. The product is then sold to Jacob’s Pharmacy as a patent medicine. Later, Asa G. Candler buys the business and becomes its first president. 1893 to 1904 The United States Joseph Biedenham becomes the first to package Coca-Cola in bottles. Later, three businesspeople in Tennessee obtain exclusive rights to package Coca-Cola and establish the Coca-Cola bottling system. 1905-1918 8 nations The unique contour bottle of Coca-Cola is approved. The company then enters Canada, Cuba, Panama, France, Puerto Rico and other countries. 1919 to 1940 53 nations Asa Candler sells the company to the Woodruff family. Robert Woodruff becomes president of the company and leads expansion. The company supports the Amsterdam Olympics in 1928. 1941 to 1959 120 nations During the Second World war, the company grows rapidly and is introduced to many countries for the first time. 1960 to 1981 163 nations Coco-Cola company expands with product varieties such as Sprite. The company enters China in 1978. 1982 to 1989 165 nations The firm launches New Coke and Diet Coke into the international market. 1990 to 1999 Approximately 200 nations The firm expands through acquisition of brands such as Cadbury Schweppes and India’s Limca. 2000 to present Over 200 countries Coca-Cola is one of the brands that have the widest presence globally and epitomises the globalisation of MNEs. Source: Adapted from Gong (2013, p. 47) Coca-Cola Company’s international business strategy and achievements As noted above, Coca-Cola has a global presence; in addition, it operates one of the most successful production and distribution strategies globally. According to Shenkar, Luo and Chi (2015, p. 2), by having a wide array of products and sales in more than 200 nations, Coca-Cola is matched by only a few companies in terms of the visibility of its products. In addition, its flagship product Coca-Cola (Coke) and the unique contour bottle in which it is packaged have become an embodiment of a global brand. According to the NRTEE (2012, p. 55), the international business strategy of Coca-Cola involves having a global business that operates on a localised level through various channels. For example, the company produces concentrates, syrups and beverage bases that are utilised in the manufacture of carbonated drinks, and offers them for sale to over 300 independent bottling franchises located in various countries. The bottling companies prepare, package, merchandise and facilitate the distribution of the final branded beverages to customers and entities involved in vending of the different products. The localisation of operations in different regions ensures that the company is able to treat different regions differently and have unified activities within various regions (Morschett, Schramm-Klein & Zentes 2015, p. 265). The Coca-Cola Company retains the ownership of the various brands produced by the company and is responsible for the marketing initiatives that are undertaken (The Coca-Cola Company 2015a). As noted on the Coca-Cola Company website, the bottling franchises that work with the company work closely with other players in the supply chain who sell the final products to customers. These include restaurants, grocery stores, convenience stores, street vendors, amusement parks and movie theatres among others. These entities also help in executing localised strategies that are developed in partnership with the Coca-Cola Company. This multipronged strategy appears to be very successful since it targets a wide variety of market segments. The success of the strategy is evidenced by the fact that Coca-Cola ends up making 1.9 billion servings to consumers per day (The Coca-Cola Company 2015a). Challenges that the company faces Despite the wide visibility and the significant sales that Coca-Cola attains, the company also faces various challenges. Notably, since the 1990s, the company has faced criticism over alleged unethical behaviours in various areas, which include anti-competitiveness, concerns over product safety, channel stuffing, racial discrimination, pollution, threats against unionised employees, health concerns, conflicts with distributors, and depletion of natural resources (Ferrell, Fraedrich & Ferrell 2013, p. 454). To start with, Coca-Cola’s search for cost efficiency as well as a bigger market share has been regarded as anti-competitive in some markets. A case in point is where the Chinese competition authority cited antitrust concerns in their decision to prevent Coca-Cola from acquiring Huiyuan, China’s biggest local fruit juice firm, in 2008 (Pride, Hughes & Kapoor 2011, p. 121; Fryzel 2015, p. 189; Shenkar, Luo & Chi 2015, p. 3). By then, Coca-Cola already commanded over 70 percent of the soft drinks market in China; hence, the authority was of the opinion that the acquisition would not be in public interest (Fryzel 2015, p. 189). As well, Coca-Cola has been accused of contaminating underground water, failing to treat the water that it uses in the manufacture of its products, and depletion of water sources (Ferrell, Fraedrich & Ferrell 2013, p. 459; Albert, Werhane & Rolph 2014, p. 240). For instance, in 2003, the company faced accusations of depletion of groundwater as well as contamination of the same in India. The Centre for Science and Environment conducted tests on soft drinks manufactured in India by the company and found high levels of pesticides emanating from the use of contaminated groundwater. This led to a 15 percent decline in the company’s sales. Coca-Cola was also accused of contaminating groundwater in Varanasi, India with wastewater (Ferrell, Fraedrich & Ferrell 2013, p. 459). The company has also been blamed for causing water depletion in drought plagued regions in India. This allegation is serious given that on average, for every litre of product that the company produces, 2.26 litres of water is required (Albert, Werhane & Rolph 2014, p. 240). The company has also been widely criticised over its use of packaging materials that are non-biodegradable (such as plastics) (Dubrin 2012, pp. 101-102). The allegations against the company – whether substantiated or not – have had myriad impacts, including declining sales and severing of contracts with some of the company’s partners. Coca-Cola has also been accused of racial discrimination in its employment practices. In 1999, 1500 African American workers of the company sued it for racial discrimination in regard to pay, performance assessments and promotions (Ferrell, Fraedrich & Ferrell 2010, p. 312). Even though the company strongly denied the allegations, the proceedings stirred strong reactions. The company paid $193 million in settlement of the lawsuit and also established a diversity council to deal with the issue of discrimination (Ferrell, Fraedrich & Ferrell 2010, p. 312). Recommendations on how to deal with the challenges While Coca-Cola has been able to resolve most of its challenges, (for instance the formation of a diversity council to deal with employment issues), the company still faces challenges with regard to environmental concerns. However, the company has put in place measures to ensure environmental sustainability and sustainable development. For instance, to deal with the problem of plastic bottles, Coca-Cola has initiated plastic recycling programmes in various countries to not only reuse plastics but also create employment for the individuals involved. It has also introduced bottles made of 35 percent less plastic (Bilgin & Wührer 2014, p. 217). These are practices that should be encouraged in all countries where Coca-Cola operates, especially in the developing countries where legislation on protection of the environment is weak. To deal with the problem of water depletion, the company has come up with an initiative to become ‘water neutral’ in its worldwide operations by 2020 (The Coca-Cola Company 2015b). This is to be achieved by treating all its wastewater and returning it for use by the community and nature. In addition to this, the company also needs to come up with other initiatives that help stabilise the water cycle, such as planting of trees – especially in drought-prone areas where it operates. Conclusion In conclusion, since its inception in 1886, Coca-Cola has grown into an MNE than operates an international business on a localised level. Through this strategy, the company is able to market its more 3500 products by treating different markets differently and having unified operations within various markets. Although the company has achieved tremendous visibility and sales, it faces a number of challenges with regard to ethical issues. The company has been able to resolve most of the challenges; however, it is still has more to do in regard to addressing environmental concerns. Currently, the company is involved in a number of practices such as recycling the wastewater that it produces and recycling plastic bottles. These are practices that need to be encouraged, especially in the developing countries where legislations concerning the environment are weak. References Albert, P, Werhane, P & Rolph, T (eds) 2014, Global poverty alleviation: a case Book, Springer Science+Business Media, Dordrecht. Bilgin, FZ & Wührer G 2014, International marketing compact, Linde Verlag, Wien, Scheydgasse. DuBrin, AJ 2012, Essentials of management, 9th edn, South-Western Cengage Learning, Mason, OH. 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