Heckscher-Ohlin Theory of International Trade - Assignment Example

?INTERNATIONAL MARKETING Table of Contents Table of Contents 0 Introduction 2 Coca-cola competitors 4 Question One: How Coca-Cola Company Marketing Mix Is Standardised and/or Adapted Across International Markets 4 Introduction 4 1996 standardisation strategy 5 Standardising global finance 5 Adoption of effective standardisation strategy 6 Company’s performance 6 Promotion strategy 7 Coca cola sales 7 Coca cola quality 8 Heckscher-Ohlin Theory of International trade 9 Question 2 9 Introduction 9 Benefits of born global strategy 10 Domestic market 10 Uppsala model for internationalization 11 Internationalization in stages 11 Question 3 13 Introduction 13 Brand name and country of origin 13 Coca-cola in developing countries 14 Changes in the image of the home country of a company 14 Other countries 15 Conclusion 15 Introduction The Coca-Cola brand is a product of Coca Cola Company. The company was set up in 1886 and is currently the leading distributor, marketer, and manufacturer of non-alcoholic beverages (August 2008, p. 67). The Coca-Cola brand is currently sold in over 200 countries. The Coca-Cola Company head quarter is situated in Atlanta, Georgia (Susan, Douglas &Samuel 2005, p.91). The company has as well employed over 300, 000 employees around the world. Over 70% of the company’s products are sold in international market. Due to its accessibility and subsidised cost, the brand has turned out to be one of the most preferred soft drink in the world. The company’s success in global market is significantly brought about by its effective globalisation strategies and strong foothold in many countries. The company’s main competitors are: Cadbury-Schweppes and PepsiCo. Coca-cola however clams over 47% of the global market, with PepsiCo and Cadbury-Schweppes claiming 21% and 8% respectively. The essay below therefore seeks to unveil the Coca-Cola Company standardisation strategy and its impacts to global market. Coca-cola competitors Question One: How Coca-Cola Company Marketing Mix Is Standardised and/or Adapted Across International Markets Introduction The Coca-Cola Company has consistently relied on global standardisation strategy in its global business. The company global operations are as well controlled at the company’s headquarter. The main aim of this strategy is to integrate its global operation by encouraging strong organisational culture. Coca-Cola Company has in the last 25 years systematically changed its standardisation strategy to meet market demands and customers’ needs (Calof & Beamish 2005, p. 131). 1996 standardisation strategy In 1996, the company adopted a very rigid standardisation strategy which was aimed at producing similar flavour of coke brand to all countries across the world. The company as a result produced Coca-Cola brand with similar quality, quantity, and content in all its global production plants (Coca-Cola website, 2012, par. 4). The bottle design and branding were as well identical. This strategy was different from the previous strategy which focused on producing dissimilar brand in different markets. The new strategy was therefore, represented by tagline “think global, act global”. The strategy proved to be very success in many parts of the world (Zyman 2009, P. 23). As a result, the company registered one of its highest profits in its history. In 1997, the Coca-Cola Company earned 67% of its total revenue. Standardising its products also popularised the company’s Coca-Cola products in global market. Standardising global finance Following the 1999 financial crises in Asian countries, the Coca-Cola Company decided to improve its strategy by standardising its global prices. This was due to the huge loss that was incurred by the company in 1999 financial year. The company witnessed a one third decrease in its profit. To prevent future loss, the company opted to harmonise the prices of its products in the world in order to dominate the global market. To ensure acceptability and profitability of the Coca-Cola brand, the company used loss leaders pricing strategy. Through this strategy, the company placed low prices on its brand in order to attract more customers into the company’s brand. As a result, the strategy served as a promotion mechanism to the company’s product. Due to low prices of its brand in global market, the company’s customers increased drastically thus increasing its sales and profit. Moreover, the existing customers became loyal customers to the company’s products. Adoption of effective standardisation strategy In 2002, the Coca-Cola Company reinforced its standardisation strategy by adapting effective distribution mechanism. Coca-cola Company increased its outlets in its global market. The aim of this expansion was to ensure consistent production of quality products at the right time and in the right place. Opening of new outlets also ensured one-on-one entry into new markets. In this plan, the company started by undertaking systematic and comprehensive environmental analyses to understand the social, political, technological, and economic trend in international market. Coca-Coca Company also ensured that, its mission was effectively reflected in their global outlets. The company as well established its own sales forces in different parts of the world by establishing Coca-cola distributors who had a direct link with the company’s management team. This plan a result brought about effective and timely communication and feedback. The current popularity and productivity of the company is therefore brought about by its effective placing strategy. Company’s performance Effective placing has enabled the company’s production plants to effective improve its products and services. Moreover, the company’s huge profit is as well brought about by its minimised cost of operation. The direct link between the company and its distributors has to a great extent reduced the transportation cost thus minimising the operation cost. In facilitating quick and cheap distribution of its products, the company has opened manufacturing plants in several regions in the world. This has as a result increased customers’ awareness on the availability and the use of Coca-Cola Company’s products. Promotion strategy Through its standardisation strategy, the Cola-Cola Company has adopted several promotion strategies. For a starter, the company has embraced product extension strategy. In this plan, the company presents its products in global market without changing its design, size, and quality. This plan has resulted to increased sales of Coca-Cola brand especially to customers who are aware of its quality and price (Saif, 2005, p. 67). Secondly, the production and promotion adaption strategy has as well played an incredibly significant role in increasing the number of the Coca-Cola Company customers. This mechanism was intended at producing products that can meet customers’ demands and needs. The company has as well used different promotion languages in different cultural backgrounds. Thirdly, the company has as well adopted the invention promotion strategy. In this strategy, the company has invented in new products to meet its customers’ needs. Considerate price of Coca-Cola brand has also adversely increased its sale. Coca cola sales The global standardisation strategy is therefore incredibly effective in increasing the sale and demand of Coca-Cola brand. Due to its effective promotion mechanism, Coca-Cola is a competitive brand in global market. According to recent market analyses, Coca-Cola has an exceptional powers compared to other similar brands in global markets (Chen & Tain-Jy 2009, p. 131). The subsidised and harmonised price of the brand has as well played a remarkably essential role in increasing its global demand. The quality of the Coca-Cola brand has as well significantly improved the profitability of Coca-Cola Company (Chen & Tain-Jy 2009, p. 131). Despite its attractive flavour, the brand is also presumed to have a unique feeling of comfort to its consumers. Coca cola quality Through its effective standardisation strategy, the company has as well succeeded in keeping the freshness of the brand by maintaining a powerful sense of nostalgia that brings together the coke lovers. The quality of the brand is also essential in creating deep connection between the brand and its customers. The company’s systematic distribution channel can as well be associated with the brand increased sale. The establishment of numerous outlets and production plants has adversely deepened the relationship between the company’s product and the consumers. The Use of different promotion strategy can as well be associated with the company’s increased profitability. Employing different promotion mechanisms in different cultural settings has very encouraging outcomes to the company’s profitability. Heckscher-Ohlin Theory of International trade According to the Heckscher-Ohlin Theory of International trade, every country has different factors that determine its market trend. Therefore, to prosper in global market, the marketer should understand and capitalise on the identified unique market factors. By understanding this principle, Coca-Cola Company undertook an intensive market survey in global market to understand the exceptional traits in global market (George 2005, p. 79). The success of Coca-Cola brand is based on the understanding of The Heckscher-Ohlin Theory of International trade principle which states that, the preferences, tests, and technologies are similar in different cultural settings and countries. Familiarity on this principle played an incredibly decisive role in facilitating effective global standardisation of Coca-Cola brand. Moreover, the increased sale in Coca-Cola brand, in the London Olympic Games was attributed by global viewership of the brand. Moreover, a research which was conducted in Europe continent in July 2012 indicated that, Coca-Cola brand was the fastest selling and preferred soft drink in United Kingdom, France, Germany, Australia, and Canada. Question 2 Introduction Born global is a theory in the internationalization process of companies which means the process of launching businesses into the international or global market for their business as soon as they start operating. This approach has been employed significantly by small and medium sized companies (Chandra, Styles & Wilkinson, 2012, p. 86). Most of the born global companies have achieved success in internationalizing their business because of the favourable global conditions for business activities and opportunities in new foreign markets. According to Kaarna (2010, p. 556), a born global company or firm is a business organization which from its inception seeks competitive advantage through the utilization of resources in addition to the sale of products and services within multiple countries. The born global model does not match the internationalization strategy of Coca-Cola Company. This is because Coca-Cola operated its business in Atlanta in its inception and later spread to other parts of the world (Pollock, 2010, p. 209). Benefits of born global strategy When a company employs born global as an internationalization strategy, it benefits from the numerous business opportunities which characterize global markets (Ardalan, 2012, p. 97). These opportunities include vast resources such as labour and raw materials for production. Kaarna (2010, p. 560) adds that the born global model allows a company to have a wider market for products and services which leads to higher sales. Furthermore the born global approach allows a company to implement modern technology to facilitate its business activities in addition to promotion of goods and services. , Claudia & Mihaela (2012, p. 140) points out that the born global model leads to challenges in management which are associated with the complexity of monitoring international operations. In addition, high cost is associated with this model as demonstrated by the large amount of capital which is required to operate globally (Sicoli, 2012, p. 117). Domestic market According to Ardalan (2012, p. 95), the Uppsala model for internationalization of business activities of a company refers to the gradual intensification of business operations into the global market with the application of the experience that is gained from the home or domestic market. The Uppsala model best fits the internationalization strategy that was used by Coca-Cola Company. This company grew gradually from its domestic market in the US and spread its operations and market to other parts of the world. The management experience that was achieved in the domestic market and strategies of marketing and promotion were employed by Coca-Cola within its international business which is the cause of its current success as a top global enterprise in soft drinks (Vrontis & Sharp, 2008, p. 295). Uppsala model for internationalization Sicoli (2012, p. 123) points out that Uppsala model for internationalization is advantageous because it prevents companies from incurring the risk of investing into new markets before they have acquired adequate knowledge on the culture and needs of the new international markets. In addition, the Uppsala model is allows companies to utilize the business gains from the domestic market for marketing research and expansion into new markets within the global scale. However the Uppsala model of business internationalization cause companies to take a long time to acclimatize to new foreign markets (Claudia & Mihaela, 2012, p. 138). This approach is also criticized as being a slow approach to internationalization especially for companies that require gaining from new markets and opportunities for expansion into foreign markets. Internationalization in stages Internationalization in stages is another model of expansion of a company into international business and markets. Chandra, Styles & Wilkinson (2012) illustrates that internationalization stages approach refers to the process in which a company grows from a domestic company into an international company and eventually growth into a multinational business. This model perfectly fits the internationalization approach that is employed by Coca-Cola as one of its strategies for expanding its business into global markets. The company went through stages of internationalization which has made it to become a multinational company in soft drink business (Pollock, 2010, p. 210). This model is described as advantageous because it allows a company to venture into new markets when it has reached growth limits within the domestic market (Ardalan, 2012, p. 94). In addition, internationalization in stages benefits a company from the use of domestic experience in business operations and management within new foreign markets and as a result makes it competitive in global business (Claudia & Mihaela, 2012, p. 141). It is however argued that this strategy is not fit for companies which begin as export and import enterprises (Ardalan, 2012, p. 98). Question 3 Introduction According to Pudelko and Harzing (2009, p. 535), country of origin effect refers to the psychological influence that consumers have in relation to quality, authenticity, reliability and image of products and services, based on the home country of the company. Ming-Huei (2009, p. 267) adds that the evaluation of products and services by consumers is normally based on the country of origin of the company. The image that Coca-Cola has in the market is based on its origin within the US. Many consumers have therefore valued the soft drink brands that Coca-Cola produces based on the fact that the company is based in a developed and leading economy of the world (Pollock, N 2010, p. 209). This is argued to be one of the main reasons why Coca-Cola is very competitive in the markets as attributed to the positive image that is attached by consumers of its soft drinks. Pudelko & Harzing (2009, p. 545) argue that consumers are largely influenced by the image of a company in the purchase of products. Company image develops as a result of the views that consumers have for the company’s country of origin. Brand name and country of origin Ming-Huei (2009, p. 269) demonstrates that the brand name of products is significantly related to the country of origin of the producing company. This means that the consumption of Coca-Cola’s soft drink brands and products and the notable high sales are related to the fact that consumers view the company as authentic and reliable based on its US origin. , Gurhan-Canli and Maheswaran (2009, p. 309) argues that most consumers have no idea of the country of origin of a company. This is often associated with multinational companies which have subsidiaries within local markets. However a positive country image of a specific company is described by market research as a driver of the increased sales and competitiveness of a company within international markets. According to (Vrontis & Sharp, 2008, p. 209), the acceptance and recognition that Coca-Cola’s brands have gained in its new markets are related to the fact that the company has a superior country of origin image which makes it more competitive as compared to its business rivals. Coca-cola in developing countries Pudelko & Harzing (2009, p. 540) illustrate that products that are manufactured in developing countries are less competitive as compared to those that are produced within developed economies. This demonstrates that the country of origin has an influence on the perception and attitudes of consumer about the company and its products or services. Ming-Huei (2009, p. 267) adds that global competitors within foreign markets are competitive in their products as compared to local producers who are forced to reduce prices in order to achieve sales. Coca-Cola has registered high competitiveness in various international markets as compared to local producers of soft drinks. This is related to the country of origin effect which influences the consumers of the company’s soft drinks to purchase and become loyal to its brands. Changes in the image of the home country of a company Pudelko and Harzing (2009, p. 545) reveal that companies should not depend on the country of origin image in their marketing strategy because of the instability of this concept which is attributed to the possible changes in the image of the home country of a company. This reveals that in case the marketing strategies of local producers of soft drinks improve, Coca-Cola is likely to face significant competition in its international markets. In line of this argument, Coca-Cola has committed itself to continuous marketing of its products regardless of their good performance within the international market (Vrontis & Sharp, 2008, p. 210). Generally through, the values, beliefs and desire of consumers for a company’s products is generally influenced and shaped by the home country of that company (Pudelko & Harzing, 2009, p. 543). Other countries Despite being popular due to the prosperity of the country of origin, the coca-cola product has also succeeded in other countries such United Kingdom. Compared to United States of America, the market in United Kingdom is as excellent as it the case in the mother country. However, despite dominating the United Kingdom soft drink market, coca-cola has faced high level competition in United Kingdom. This therefore means that, apart from be image of the country of origin, the company ought to advance its products in order to dominate global market. In china, the market has also been complicated and challenging. Coca-cola has been forced to undertake intensive promotion exercise in order to dominate the market. Conclusion In the light of the above analyses, illustrations and discussion, it is evident that several factors and forces are attributed to the success of Coca-Cola in the soft drink business as one of the leading multinational companies. More importantly, it is notable that the appropriate approaches to globalization such as the implementation of the stages and Uppsala models of internationalization has allowed the company to be very competitive in the market. It is also evident that the country of origin effect has enabled Coca-Coca to have an enhanced company and brand image for its soft drink brands. 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