A Strategic Alliance between McDonalds and Coca-Cola - Essay Example

Strategic Alliances Name Institution Course Date Strategic Alliances Strategic alliances are very important in organisations as they provide a valuable and effective means of carrying out business co-operatively without autonomy. For a strategic alliance to occur, two or more organisations set out an agreement to operate together on a particular project or share productive resources and information (Taylor, 2012). Strategic alliance may be between a supplier and a purchaser or it can also be between two non-identical companies that operate in different industries and have different vertical supply chain. Strategic alliances offer some benefits to companies including acquiring additional expertise in marketing and production, gaining larger market base, strengthening company’s brand through co-branding and acquire marketing and advertising vigour. Successful strategic alliance is expected to form a stronger brand image, exploit economies of scale and achieve higher revenues. This essay will analyse a strategic alliance between McDonald’s and Coca-Cola Alliances take many forms that depend on the agreement between collaborators. Strategic alliance can be classified as trading, functional or dynamic (Das, 2011). A trading strategic alliance involves a seller and a purchaser who forms a partnership aimed at improving sales and distribution based on contractual terms. Dynamic strategic alliance involves sharing of development and marketing capabilities, market-based acceptance, and proprietary technology. On the other hand, functional alliance largely involves pooling assets to attain the set goals. This alliance leads to continuous long-term management relationship and pursues research projects, create brand awareness, and enhance market share. An example of a functional strategic alliance is a partnership between McDonald’s and Coca-Cola (Wheelen and Hunger, 2012). McDonald’s created a strategic alliance with Coca-Cola Company in the year 1955 (Ferraro, 2010). This took place when McDonald’s established the first outlets in Des Plaines and required a constant beverage supplier to the restaurants. It was easy for the two companies to collaborate as they shared similar American expansion ambition. There was no paper contract, but the alliance took place as the executives were in agreement with the collaboration. Therefore, the strategic alliance was more of a board level agreement. From 1955, the strategic alliance between the two companies has proved to be a success has it has made McDonald’s and Coca-Cola what they are today. It is very clear that MacDonald’s is the largest food service retailer worldwide owing to its 35000 restaurants accommodating as many as 70 million customers found in more than 100 different countries. On the other hand, Coca-Cola Company is the largest leading beverage company in the globe found in more than 200 different countries. Many customers enjoy having a meal with a drink especially coke. This is a fundamental way McDonald has increased their revenue since its establishment. Soft drinks made up to 5% revenue to McDonald. In the same way, distribution of Coca-Cola beverages to McDonald’s has earned the company revenue over the years. Dick Starmann of McDonald once said that the Coca-Cola Company not only sources its revenue from Japan, Germany, it also gets a lot of revenue from McDonald’s. The alliance between Coca-Cola and McDonald’s allowed sharing of exact expansion destination (Ferraro, 2010). Hand-in-hand, the two companies expanded principally across United States, then distributed around the globe. As a consequence, the two companies managed to develop and offer wonderful transformational value for both of them, focussing on expanding the supply chain and facilitating large-scale extensive expansion into new regions across the world. For example, the two companies opened the Russian market recently. In addition, the top executives of the two companies agreed to be careful about partnering with other organisations since their handshake agreement meant a lot more than it looked. The good relationship between MacDonald’s and Coca-Cola Company can also be seen in the appealing relationship between executives. For instance, after every one and a half years, 100 executives from both companies meet at some local Beach to talk about their successful affair. Although it is clear that Coca-Cola and McDonald’s alliance is a natural fit, the extraordinary strategic collaboration between the two has been attributed to the captivating ‘value Propositions’ and ‘the offers’ they both created. The strategic alliance that exists between Coca-Cola and McDonald’s has led to creation of exceptional offers. The joint expansion vision that they share has motivated partners to share vision and avoid relying too much on chemistry. This assisted their global expansion. According to Mr Starmann, Coca-Cola and McDonald’s over the years have assisted each other to expand globally and grow immensely. Alliances are considered a means of achieving quick and inexpensive growth. With that being said, Coca-Cola over the years has saved a lot of capital meant for vertical integration as a result of their collaboration with McDonald’s, compared to another beverage company, Pepsi, that grew its distribution by acquiring Taco Bell and Fried Chicken at high capital value. In the interim, the collaboration has benefited the two companies with respect to resources, minimizing risk and marketing interactions since they share the same demographic end customer. In terms of market expansion, both the companies are leaders in their area of expertise and control various resources and operational experience. They contribute largely to the vision of market expansion. For instance, Coca-Cola Company many times offers existing offices around the world for the operation of McDonald’s, and this has contributed to the global growth of McDonald’s (Schlosser, 2012). In addition, the know-how and operational experience of Coca-Cola has largely benefited the product development of their collaborator, McDonald’s. In the beginning of 1993, Coca-Cola freely offered its expertise and business advice to McDonald’s that helped in their product development and created the ‘Extra Value Meal’. Around 2002, the two companies implemented joint strategies for all Latin American. They cohesively designed and tested the new packaging of drinks. Moreover, not long ago, Coca-Cola assisted in the development of new product line for McDonald’s. The strategic alliance between Coca-Cola and McDonald’s has created an exclusive supply chain that has led to the creation of added values. According to a research done, the unsurpassed taste of coke is exclusively available in McDonald’s due to the implementation of exceptional delivery and production system of Coca-Cola. Normally, coke syrup gets to the buyers in plastic bags. However, in McDonald’s outlets, coke syrup is brought by stainless steel tanker since they are delivered in large quantities. Also, McDonald use reverse osmosis filters to deliver clean water. These are the reason why Coca-Cola in McDonald’s restaurant tastes better, hence they have a competitive advantage over other outlets. McDonald’s and Coca-Cola also share corporate advertising responsibility (Haig, 2003). The two have worked together on a number of campaigns over the years such as sponsorship of world cup 2014. Not so long ago, the two companies developed a social media campaign to create awareness of ‘the fast food chain’s BFF Bundle’. Moreover, the two partners revolutionizes communally in a better sustainable supply chain. Three years ago, they chased after a new sponsorship opportunity involving the Latin America where they created new cups with lids to prevent spillage of drinks by children and assisted over 100 schools to see the assembly from Art Museum. In conclusion, it is clear that the strategic alliance between Coca-Cola and McDonald’s yielded a long term business relationship that has assisted in creating better brand recognition, has provided higher revenue, has expanded the market share and has exploited economies of scale through sharing of resources. Without each other, the two companies would not be where they are today. Coca-Cola has assisted McDonald’s in product development which has led to their brand recognition. McDonald has assisted Coca-Cola in revenue generation since it saved a lot of capital otherwise used for vertical integration. Their physical growth and market expansion has been attributed to their exceptional partnership. The two companies have shared resources and activities to reach where they are today. Their partnership is an example of successful strategic alliance. References Das, T 2011, Strategic alliances in a globalizing world, Charlotte, N.C: Information Age Pub. Ferraro, G 2010, The cultural dimension of international business, Upper Saddle River, NJ: Pearson. Haig, M 2003, Brand failures : the truth about the 100 biggest branding mistakes of all time, London Sterling, VA: Kogan Page. Schlosser, E 2012, Fast food nation : the dark side of the all-American meal, Boston, Mariner Books/Houghton Mifflin Harcourt. Taylor, F 2012, Principles of Scientific Management, New York, Dover Publications. Wheelen, T & Hunger, J 2012, Strategic management and business policy: toward global sustainability, Upper Saddle River, N.J: Pearson Prentice Hall. Read More