The Global Distribution System and Marketing Strategy of Coca-Cola - Research Paper Example

Executive Summary Globalization is the process by which regional and cultural barriers are removed and results in the unification of the world. Globalization not only ensures increased profits for the company but also helps in the economic development of the nation. The ethics behind the globalization of a company lies in the fact that how much that company contributes to the society, the community and the economy of the country in which it enters. Coca Cola, during its global expansion has always tried to contribute to the local community. They have always tried to maintain their philanthropic image. They have tried to be ethical as an employer. They have maintained ethical relationship with their suppliers and bottlers. The purpose behind the globalization of Coca Cola has not been just profits but they have always tried to be socially responsible. They have had to face various obstacles related to culture and language during their global expansion. These obstacles made them come up with various global strategies to ensure smooth global expansion. The global strategies of Coca Cola have been discussed. Coca Cola has abided by global business ethics in their operation. Therefore global business ethics and Coca Cola have been discussed in this paper. They have indulged in various social responsibility programmes. The ethics behind their global expansion lies in these initiatives and has been discussed accordingly in the paper. The Asian market was a major challenge for Coca Cola. They believed that the entire potential of the Asian market had not been utilized. The ‘Anchor bottler system’ was established keeping the Asian market in mind. Coca Cola has always tried to understand the local culture and have localized their products accordingly. Coca Cola is a company that has very efficiently managed its global operation. In the process of globalization it has not forgotten its responsibility to the society and has always tried to function ethically. Table of Contents Executive Summary 1 Introduction 4 Global Expansion of Coca Cola 6 Global Culture and Coca Cola 7 Global Business Ethics and Coca Cola 9 Social Responsibility Programmes of Coca Cola 11 Ethics behind Coca Cola’s Global Expansion 12 Global Strategy of Coca Cola 13 Coca Cola’s Strategy in Asia 15 Reasons for Coca Cola’s Global Success 16 Conclusion 17 Recommendations 18 References 19 Bibliography 22 Introduction Globalization is a process by which entities around the world become integrated. Globalization impacts the society, the culture, the prosperity and well being of the entire nation. Most of the companies today are going for global expansion. It is pertinent for them to ensure that they abide by certain ethics during their expansion. They should ensure that they do not harm the local community and environment and should do their bit to contribute to the society. The manner in which Coca Cola has ethically managed their global expansion is worth appreciating. The world’s most refreshing drink was made by a pharmacist, John Pemberton in Atlanta, Georgia on 8th May, 1886. Frank Robinson who was a partner of John Pemberton had come up with the name ‘Coca Cola’. In 1888 Pemberton sold his stakes to Asa G Candler. Asa Candler along with his brother John S. Candler and Frank Robinson formed the Coca Cola. The ‘Coca Cola’ trademark was registered in the patent office of US in 1893. Candler’s marketing efforts increased the sales of the beverage and it was soon being sold in every part of US. Joseph Biedenharn, a soda fountain operator was the first person to bottle the drink. Later Benjamin Thomas, Joseph Whitehead and John Lupton were sold exclusive bottling rights. Individual bottlers were given bottling rights by them. The Root Glass Company of Indiana had designed the contour bottle to address the problem of imitation. In 1919 Ernest Woodruff and W.C Bradley bought the company. Ernest Woodruff’s son Robert Woodruff led the company for more than six decades. He emphasized on high quality standards at every stage of the bottling operation. Mr. Woodruff was the person who had envisioned that the product should become an international beverage. In the early 1900s bottling operations were started in Panama, Cuba, Canada, Puerto Rico, Philippines and Guam. The Coca Cola export corporation was established to carry out global expansion. The company’s forte had always been its advertising, its catchy jingles and slogans. The company had gradually developed an emotional bonding with its customers. In 1988 surveys conducted by Landor and Associates proved beyond doubt that it was the most loved trademark in the world (The Coca Cola Company, 2010). Global Expansion of Coca Cola Coca Cola had started its global network in 1920. At present the company operates in more than 200 countries. The production and distribution system of the company along with its bottlers throughout the world is commendable. Coca Cola is continuing to refresh millions of people around the world every day (The Coca Cola Company, 2010). The company had first opened its international bottling plants in Cuba, Panama and Canada in 1906. The end of 1920s witnessed Coca Cola’s bottling operations in twenty- seven countries. The company faced several challenges in its global expansion. There were obstacles related to culture, language and government regulations. Robert Woodruff had insisted that the company would use local machineries, caps, bottles, trucks and employees. The company operated on this ideology for more than eighty years. The Second World War provided the incentive to the company to capture market share around the world (Tuck School of Business at Dartmouth, 2004). Roberto Goizueta, the CEO of Coke had said “The labels ‘international’ and domestic…. no longer apply”. The tagline of his globalization programme was “think global, act global”. This strategy failed at the time of Asian currency crisis and there was reduced earning and losses. Douglas Daft decided to change the global strategy. He said “The world in which we operate has changed dramatically, and we must change to succeed….. No one drinks globally. Local people get thirsty and…buy a locally made Coke”. This strategy of thinking local and acting local failed too. Coke now stresses on greater localization and lesser standardization (Ghemawat, 2003). Global Culture and Coca Cola Coca Cola in its effort at globalization invested large amount of money on research and development. Robert Goizueta had realized the importance of the globalization of the brand because 80% sales of the company were coming from outside US. He changed the management structure at Coca Cola. The two units ‘North America’ and ‘International’ were replaced with five units around the world. In China and Indonesia the company had to undertake a mammoth task of building infrastructure whereas in Japan and in West Germany they had an established business. The company has always abided by its American philosophy. In France, Coca Cola was even accused of cultural imperialism. In Belgium, the accusations of selling contaminated Coke was not dealt with promptness and Coca Cola suffered great damage to their image. Coca Cola has never tried to increase its global reach by bringing in localized products unlike other global brands (Rothacher, 2004). The fact is that although Coca Cola sells standardized products yet it had to go for localization during its globalization process. In Japan, the common marketing practice is that vending machines sell almost everything. Coca Cola vending machines in Japan sold not only Coke but also canned coffee ‘Georgia’. Georgia became extremely popular canned coffee in Japan. Later Coca Cola also produced other drinks in Japan like Hachimittsu, Fanta Asari Berry and Nagomi. This experience in Asia was applied by Coca Cola in other parts of Asia as well. In China also Coca Cola came up with localized products (Tian, 2007). In China, Coca Cola has developed local brands like Tianjin Jin Mei Beverage Co. Ltd. They produce a drink called Tianyudi. Local managers are encouraged by Coca Cola to develop new drinks. In the Asia Pacific region Coca Cola has nineteen brand names (St. Clair, 2008). Global Business Ethics and Coca Cola Coca Cola has always tried to maintain its philanthropic image. They have claimed that their globalization efforts were aimed at bringing about global prosperity. The company has always presented itself as a responsible brand committed to its customers, suppliers and the local community. The Coca Cola Foundation was set up to donate money for social causes. The company makes efforts to develop programmes related to community support and community involvement. The company provides support to local businesses through kiosk programmes. Coca Cola discusses with its suppliers issues related to corporate social responsibility, child labour, employee rights, work environment etc. The company tries to empower employees at the workplace. The company also ensures fairness, dignity, safety at the workplace, training and development, human rights and employee engagement. The company strives to adopt environment friendly practices. Some efforts in this direction were the launching of global water initiative to stress the importance of water. The company also takes part in a forum that deals with global water issues. It also makes charitable donations around the world. The company’s support to the community adds to its brand image (Rendtorff, 2009). In 2000 Coca Cola had failed to make a place amongst the top ten of Fortune’s annual “America’s Most Admired Companies”. The company also lost its position in the annual list of Business Ethics of “100 Best Corporate Citizens”. The company was facing several ethical crises. The company developed various social responsibility initiatives to improve its image. These initiatives were directed towards the community, the environment, the workplace and the market. Coca Cola wishes to be known as a responsible global company that not only increases shareholder’s wealth but also fulfills its responsibility towards the society (Ferell & Et. Al., 2009). Social Responsibility Programmes of Coca Cola Coca Cola is associated with a programme in Singapore called “Education on Wheels”. This programme is meant for children. This is an interactive educational programme for the children to improve their knowledge, creativity and communication skills. Coca Cola provided grants to various colleges and universities in not only US but also other countries around the world. They also provide scholarships to 170 colleges and 30 tribal colleges of American Indian College Fund. Every year 250 Coca Cola scholars are interviewed and 50 amongst them are called national scholars and 200 are called regional scholars. Coca Cola is active on issues related to HIV/AIDS in Africa. Coca Cola in partnership with UNAIDS and other NGOs, is trying to fight the AIDS epidemic (Ferell & Et. Al., 2009). Coca Cola entered into a partnership with the World Wildlife fund. This partnership aimed at conserving water and reducing carbon emission in Coca Cola’s operations. By 2012 Coca Cola plans to improve its water efficiency by 20% (Johnson & Turner, 2009). Ethics behind Coca Cola’s Global Expansion Global expansion of Coca Cola has not just increased value for the company in terms of increased market share but has also developed the economy of the country in which they have entered. Coca Cola has indulged in various social responsibility initiatives in the various countries in which they are present. They have addressed various social issues. They have generated employment and have provided an impetus to local entrepreneurs and businesses to perform well. They have been able to justify their global expansion through their sincere efforts. A company which does not simply think of its profits but also tries to contribute to the community deserves accolades. Global Strategy of Coca Cola Multinational companies often have to change their products, advertisements and strategies to suit the local market. Coca Cola’s advertisement showing a polar bear cartoon character did not appeal to all viewers throughout the world. People of warmer countries could not relate to the advertisement. This made the company go for advertisements specific to a particular country. For example the company introduced an advertisement with the tagline ‘thanda matlab Coca Cola’ in India. The word ‘thanda’ referred to the cold drink since thanda means cold in India (Peng, 2008). In the early 1970s Japan had become the largest coke market and was contributing 18% of the company’s profits. Paul Austin, the then president of Coca Cola had negotiated the entry of Coca Cola in Egypt, Portugal, Yemen, Sudan, Soviet Union and China. The company continued to succeed in various countries throughout the world except in India. In India the company had to exit in 1977 because it did not want to reveal its secret formula. Bob Broadwater in 1978 had signed a contract to supply coke in the East Block sports festival. In 1980 coke obtained exclusive rights to the Moscow Olympics. Despite criticisms Coke became popular in China too. Coca Cola’s global networking strategy was executed throughout the world through its Bottlers (Rothacher, 2004). Coca Cola’s global expansion into Asia has been a major challenge for the company because the culture in Asia was entirely different from the US culture. Therefore, on the next section of the paper, strategy developed particularly for Asia will be discussed. Coca Cola’s Strategy in Asia Implementation of ‘anchor bottler system’ and development of the markets that had not been developed were the main elements of coke’s global strategy. The company bought out the local bottlers and then improved their marketing, production and distribution capabilities. The local bottlers were then sold to the ‘anchor bottlers’. The anchor bottlers have the responsibility to manage bottling operation throughout the world. Coca Cola’s bottler system gives it an edge over its competitors. The company has been able to better manage its global operations because of this system. Coca Cola believes that the opportunities in the Asian market have not been fully utilized yet. There is a great scope for the company in South Korea and China where the population does not consume much of its products (Rothacher, 2004). Reasons for Coca Cola’s Global Success Coca Cola had always adopted a global marketing strategy. The company believes in selling standardized products globally. The company’s move towards globalization was not an easy task. It faced several problems on the way to globalization. The company realized that in order to succeed globally they needed to work on their trademark. They consistently strived to improve on their trademark. An international survey revealed that it is the most respected and well known brand in the world. Coca Cola has continuously improved on their strategies to increase their market share and expand globally. The global distribution system of Coca Cola is very well coordinated with their global marketing efforts. Coca Cola’s global success can be attributed to a large extent to their bottling partners (Marquardt, 1999). Conclusion Coca Cola has a remarkable presence globally. Coca Cola has always tried to develop the local economy of a place. They have also tried to provide employment to the local people by recruiting as many local people as possible. They have helped in the prosperity of the local businesses and entrepreneurs who in turn have been able to contribute towards the economy’s prosperity. The company has taken its responsibility towards the community seriously and has implemented various social responsibility initiatives. They have been sensitive towards the local culture as well. Thus it can be concluded that the company has managed its global operations very efficiently and has always been ethical in their global operations. Recommendations Coca Cola has consistently strengthened its brand image through its social responsibility initiatives in every country it has entered. They have helped in developing the local economy through their bottlers. The company should continue with its social initiatives because it improves their brand image. They should continue to project themselves as an environmentally conscious company. Coca Cola can bring some innovation in its products. They should also become more heath conscious so that customers become assured that consuming Coca Cola will not affect their health adversely. These efforts on the part of the company will strengthen their position as the most loved brand in the world. References Ferell, O. C. & Et. Al., 2009. Business Ethics: Ethical Decision Making and Cases. Cengage Learning. Ghemawat, P., 2003. The Strategy of Differences. The Forgotten Strategy. [Online] Available at: https://www.student.gsu.edu/~llucas3/documents/IB%208990/readings/The%20Forgotten%20Strategy.pdf [Accessed December 13, 2010]. Johnson, D & Turner, C., 2009. International Business: Themes and Issues in the Modern Global Economy. Taylor & Francis. Marquardt, M. J., 1999. The Global Advantage: How World-Class Organizations Improve Performance Through Globalization. Gulf Professional Publishing. Peng, M. W., 2008. Global Strategy. Cengage Learning. Rendtorff, J. D., 2009. Responsibility, Ethics and Legitimacy of Corporations. Copenhagen Business School Press DK. Rothacher, A., 2004. Corporate Cultures and Global Brands. World Scientific. St. Clair, R. N., 2008. The Supremacy of Coca-Cola as a Cultural Icon. The Legitimation of Cultural Icons Across Cultures. [Online] Available at: www.uri.edu/iaics/content/2008v17n3/02%20Robert%20StClair.pdf. [Accessed December 13, 2010]. Tian, X., 2007. Managing International Business in China. Cambridge University Press. The Coca Cola Company, 2010. A Global Business. The Chronicle of Coca-Cola. [Online] Available at: http://www.thecoca-colacompany.com/heritage/chronicle_man_named_woodruff.html [Accessed December 13, 2010]. Tuck School of Business at Dartmouth, 2004. 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