Global Strategic Management - Essay Example

Global Strategic Management Global strategies are the plans developed by an organization such as a company to target growth on various levels of sales of their products or services. Globalization contains three vital levels such as global, multinational, and international strategies. These three areas refer to the strategies that a company ought to follow in order for the company to achieve its objectives in international expansion. While developing a global strategy, it is significant for a company to differentiate three levels of international expansion, which develops from a company’s resources, capabilities, current international trends in growth, and development. This article is a detailed overview of Coca-Cola Company’s global strategy. Doctor John Pemberton, a pharmacist, in Atlanta Georgia in 1886, invented Coca Cola Company. John Pemberton developed and concocted the coca cola formulae in his backyard of his home. He liaised with Frank Robinson, an excellent bookman, who helped to develop the word Coca Cola that is now used globally as a logo to the company. The soft drink was first sold to members of the public at Jacobs’s pharmacy in Atlanta Georgia on May 8, 1886. The brand continued to grow until 1905 when it was sold as a tonic, which contained extracts of cocaine as well as a caffeine rich cola nut. The company began its expansion plan beginning the 1960s when both small and big town dwellers enjoyed carbonated drinks at their local soda fountain counters (Coca Cola (a) Web). This served as a meeting place for all its drinkers. The company then developed a new trade secret and formulae used to manufacture the drink on April 23, 1985. This new secret was code-named new cookie. This strategy has helped the company to penetrate to new, markets where it was not in existence before. The rate of consumption of the drink has greatly increased to a minimum consumption rate of one billion drinks per day (Coca Cola (b) Web). How the Company Global Strategy Operates Vision and Mission Statement In order to achieve the company’s global strategy, the company had to renew their vision and mission statements, as well as their goals, aims, and objectives. The company’s vision statement has been changed to “To maintain our reputation as the leading Cola Company in the world.” Moreover, the company has developed new mission statements to match with their global strategies. Their enduring mission of achieving their global strategies inspires the company’s mission. Among the company’s mission statement is to refresh the world, in body, mind, and spirit. To inspire moments of optimism, and to create value and make a difference everywhere the company is engaged (Coca Cola Web). Responsibilities The company has developed responsibilities, which aims at achieving the global strategic goals of the company. These responsibilities include the following. One of their main responsibilities is to provide its customers with refreshing beverages, which includes soft drinks, water, energy drinks, juices, and tea. The company also aims at seeing that their products can be sold anywhere and are not age restricted which means that their responsibility is to sell their products in any occasion in the day-to-day life (Coca Cola (a) Web). The company has distinguished coke as their signature product and has the most sales of the one billion sales per day. The company is developing other strategies, which aims at boosting the sale of other soft drinks to reach the level of sale attained by coke. Another criteria used by the company is to use the most sophisticated equipment in developing their product in order to beat off competition from other companies such as Pepsi (Peng 7). The company also ensures that they process and make their products to ensure that they consumer is equally satisfied in consuming the last drink as compared to the first drink. The company also strives to ensure that the employees are equally treated and compensated and it practices fair trade in all markets that it is involved in to compete with its rivals. In addition, the company values its responsibilities to all communities, it serves and supports many educational, and leadership programs (Tallman 5). Nature and Drivers of the Company Global Strategies The major driver for the company’s global strategy is the large bottling network, which it owns. The company has many franchises agreements with their present bottlers who have privileges in a particular geographic area in perpetuity. These existing franchises prevent the franchise company from taking a new competing brand for similar products. The company has also entered into consolidation agreements with other bottlers through backward integration thus buying a significant percentage of the bottling companies. This means that it will be very difficult for new entrants in the market to find bottlers who are willing to distribute their products (Ghemawat 5). Coca Cola Company has in addition achieved global strategies through its supplier drivers. Most of the resources required to produce distillate are basic merchandises like color, caffeine flavor, or seasonings, sugar, and packaging. Essentially these are basic supplies. The manufacturers of these products have little power concerning the setting of prices and thus the suppliers in this industry are weak. The major driver of the company’s global strategy is its loyal buyers or customer drivers. The major channels of distribution for the soft drink company is food stores, fast food stores, retailing, convenience stores, and others in the according to the market share. The profitability index in each of this case shows clearly the power of the buyer. Moreover, buyer index shows that different buyers pay different prices for the same product in different countries. For instance, a person in the USA will pay a higher for the same product as compared to a buyer in Kenya. This is mostly based on the power to negotiate and the different strengths of the currency used. Globalization is required for each of these customers in all their different markets. Moreover, the different buyers of the coca cola product requires globally standardized products ( Faulkner and Segal-Horn 8). Economies of scale drivers are another major driver of the global strategies of the coca cola company. The company has achieved high economies of scale from the different countries in which it operates. Moreover, the company has many employees who offer quality services at a cheap cost thus lowering on the total cost of production for the company. Moreover, this has enabled the company to sell their products at a cheaper cost and therefore fight off new entrants in the market (Lamont 5). Coca Cola Company has also benefited with the government drivers to achieve its global strategies. One of the most common government drivers is the trade policies and regulations. Different governments in various countries have set different trade policies and regulations that a company has to adhere to when conducting business in those countries. Such trade acts are usually under the departments of trade. Coca Cola Company has strived to adhere to these policies in the 200 countries in which it operates. Moreover, the company has achieved all the technical standards required by these countries for a company to begin its operations. For instance, in Kenya, Coca Cola Company has achieved all the technical standards set by the Kenya bureau of standards (Kluyver 5). From the above missions, visions, goals, aims, and objectives of the company, we can learn that the company achieves its global strategy through acknowledging the customers equally in every country, developing its products and services in equal standards to match those of the international standards. Moreover, we can learn that the company treats its various markets equally without any discrimination and strives to achieve customer satisfaction in each case. Coca Cola Company also uses the most sophisticated level of technology in its market to achieve its set standards as well other standards set by the international markets (Kozlowski 8). This level of technology has enabled the company’s product to achieve a high level of acceptance in the global market and thus setting a record of one billion sales per day. Another driver for the company’s global strategy is the concern n for survival, profitability, and growth (Coca Cola (b) Web). To achieve this, the company has developed a framework that only recruits the best talents in the world to head and run their operations at various different countries as well as departments. This has enabled the company to achieve high standards of innovation, invention, and product development. The high caliber of talents has enabled the company to develop new products such as bottled water, energy drinks, and tea. This strategy has also enabled the company to diversify from relying on the sale of soft drinks such as soda. The inclusion of development of other products from soda has also increased the company’s profitability index to a new record level. Moreover, the use of modern and sophisticated technology has enabled the company to reduce some costs that were incurred before which lowered the company’s profits (Inkpen 6). Moreover, these strategies have ensured the company growth level improves each day and to a level of international acceptance. The company now has operations in over 200 countries worldwide. Another driver of the company’s growth strategy is its self-concept. Self-concept refers to the way the company perceives and sees itself in the market. Coca Cola Company sees itself as a global leader in the market of soft drinks. This has played a major role in boosting the self-esteem of its employees as well as the existential self. The company has learnt that it exists as a separate entity and its products and services are unique and separate for themselves. The notion of self-concept has enabled the company always want to improve the quality of its product in the international markets to achieve its international growth (Cooper 1). Coca Cola Company has also achieved global strategies through the concern for the public image. Public image is also referred to as brand in various sources. The company has a long history of advertising alongside its rival company, Pepsi. This has enabled the company to achieve huge amounts of brand equity and many loyal consumers all over the world (Edgar 13). This has made it virtually impossible for new entrants in the market to penetrate and achieve the scale set by the company. The company has also invested heavily in advertising for its products. The company spent over $2.6 billion in advertising in the year 2000. This is 40% more than its rival companies of Pepsi are and their bottlers are. On average, the company advertisement expenditure per point of market share in 2000 was 8.3 million. This has made it extremely difficult for new market entrants to penetrate and compete in the same market as the incumbents and gain any visibility (Coca Cola (a) Web). The company also develops and grows its global strategies from the retailor self-space known as retail distribution. The coca cola company enjoys high margins of retail distribution amounting to 15-20% of the shelf space they offer. These are very high margins and are significant for their bottom line. The high margins make it tough for the new entrants to convince retailers to carry or substitute their new products for Coca cola ("Pacific Vegas Global Strategies Inc.” 1). Moreover, the company has played the major role in instilling the fear of retaliation for new entrants. This means that to enter the market with entrenched rival behemoths like Coca cola is not easy as it could lead to price wars, which affect the new entrants (Gillies 5). Challenges Facing the Global Strategy in Achieving Higher Performance Levels Different drivers that hinder companies from achieving their objectives affect global strategy. One of the main challenges for the global strategy is fragmented distribution network. In fragmented distribution network, different companies have to operate differently in the different countries. This means that these companies have to operate as different entities in the different countries of their operation. For instance, a company operating in Canada has to be managed and operated different from its partner in USA (Gupta, Wakayama and Rangan 15). In addition, different consumer needs and preferences act as a major hindrance for the achievement of global strategies. For instance, refrigerators tend to have different doors and compartments in different countries. In Europe, refrigerators tend to be small and standard in size so that they can fit in the kitchen compartments, as compared to those in the USA. In japan, the same refrigerators tend to be big with several compartments and doors so that the user can keep varying temperatures in each compartment (“Research and Markets a” 1). Another challenge facing global strategy is the cost differentiation in different countries. Companies face different costs of their operation from the different countries in which the company operates. For instance, computer-manufacturing company in the USA will operate at a high cost than a similar company in china. This is because of a set of different factors known as absolute advantage ( Faulkner and Segal-Horn 6). Global strategy also faces the challenge of coordinating across offices and sharing knowledge and information. This challenge is facilitated by the high costs involved information and knowledge such as research and development. Moreover, global strategy is faced by the challenge of foreign market penetration. Market penetration is an important part of any company that is thinking of global strategy. Different companies have to develop different strategies as to how they will penetrate foreign markets. There are four different methods of foreign markets entry, which a company can follow. These are, through exporting, licensing which also includes franchising, joint venture, and through foreign direct investments (Ghemawat 8). How the Company Could Overcome These Challenges Coca Cola Company can overcome the challenge of fragmented distribution network through setting up of distribution networks in the different countries in which it wishes operate. This will enable the company to abide by the asset policies of that country as well as minimize the cost of operation. Moreover, the company will be able to create more employment opportunities for the residents of that country as well as minimize the cost of operation through distribution (“Research and Markets Reports” 1). In addition, Coca Cola Company should set high standards in order to meet the different consumer needs and preferences in the various countries where it operates. For instance, in the USA, the country recommends low levels of sugar in the soft drinks such as coke and Pepsi coke from its rival company. Moreover, different consumers will prefer low levels of sugar in their soft drinks due to different ailments such as diabetes. In order to suit the different consumers, coca cola has developed a sugarless coke drink known as “Coke Light” for its disease-ridden consumers. This is in harmony with the global strategies of the company (Gillies 5). Coca Cola Company has put more efforts to ensure that its products are affordable to all the people. This measure is meant to oversee that cost differentiation has been achieved and harmonized in the various countries of operation. However, the same soft drink will always cost differently in different countries due to varying factors such as the standards of living, income level of consumers and taxes enforced by the country. Coca Cola Company has a distinguished lineage of information, which it uses to share the knowledge, and information. This lineage has enabled the company to develop to develop a high standard of research and development for its products. Moreover, the company uses sophisticated technology to attain these high standards set differently in different countries (Gupta, Wakayama and Rangan 13). Works Cited "Pacific Vegas Global Strategies Inc. Clarifies Details regarding Resignation of Two Directors." Business Wire: 1. Aug 09 2004. ABI/INFORM Complete. Web. 1 Nov. 2012. "Research and Markets Adds Report: Competing for Share of Global Rail Industry Spend in 2010-2011: Supplier Marketing & Sales Strategies & Industry Outlook." Travel & Leisure Close - Up (2010) ABI/INFORM Complete. Web. 1 Nov. 2012. "Research and Markets; Global Downstream and Midstream Oil and Gas Industry Outlook to 2010: Buyer Spend and Procurement Strategies and the Impact of Recession and Recovery." 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