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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Internationalized companies are also known as multinational companies which are operating in two or more countries, making some profits in the business abroad and also with some other assets in one country other than its home country. Such companies have factories in different country, usually with a centralized headquarter where they coordinate global management  (Tutar, Altinoz and Cakiroglu, 2014). The rise of multinational company first arose in 1660: The East India Company, which was founded by the British. The headquarter was in London and it took part in international trading and exploration, with trading posts in India. Another example is the Swedish Africa Company which was founded in 1649, and the Hudson Bay Company which was constituted in Canada in 17th century  (Investopedia,2018). International economy has grown and connected way much more than any time before. Due to increase in the rate of deregulation in all the industries and along with flexibility between different countries has led to increase the connection and collaboration on all the international level. Thus, the movement of capital over different countries leads to satisfy the needs of the customers and also provides benefits to the company expanding the organization beyond the geographic border and increasing the growth and opportunities of the company on the international level. Most of the major multinational companies are either from America, Japanese or Western European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba Honda and BMW  (Tutar, Altinoz and Cakiroglu, 2014).

Coca-Cola is the world's leading company, operates as a non-alcoholic beverage company, which manufactures, markets and sells sparkling beverages and still beverages, it has the world's most valuable brand portfolio, leading value share positions across multiple categories. The owns or license and market more than 500 non-alcoholic beverages brands.  It holds the number one value position in non-alcoholic beverages, includes still beverages such as waters; enhanced waters like juices and juice drinks; ready-to-drink teas and coffees; and also, energy and sports drinks. Whereas, its brands include Coca-Cola, Diet Coke, Coca-Cola Zero, Fanta, Sprite, Minute Maid, Georgia, Powerade, Del Valle, Schweppes, Aquarius, Minute Maid, Pulpy, Dasani, Simply, Glaceau Vitaminwater, Bonaqua, Gold Peak, Fuze Tea, Glaceau Smartwater. The company is ruling the beverages market for 132 years. Coca- Cola first began on 8 May 1886, the very first Coca-Cola was sold in Atlanta, Georgia. The company is now spread in approximately 20 acres of land in downtown Atlanta near Centennial Olympic Park. It was founded by an Atlanta Pharmacist, Dr. John S. Pemberton, he first created a flavoured syrup which later he took to a pharmacy where he mixed the syrup with carbonated water. Dr. Pemberton's partner and the famous bookkeeper, Frank M. Robinson created a beverage name “Coca-Cola” with the designed trademark. The first newspaper ad, “the new and popular soda fountain drink”, appeared in the Atlanta Journal. After this ad, the average sales were nine drinks per day. Prior to the death of Dr. Pemberton, he sold the portion of his business to various partners and the remaining interest were sold to Asa G. Candler, an Atlantan known as great business acumen. After handing the major leadership to Asa G. Candler the distribution of Coca-Cola expanded to soda fountains beyond Atlanta. By 1895, Coca-Cola was sold in almost every state. In 1889 in Wilmington, Delaware a franchised distribution system was operated. In 1970s Coca-Cola started to reflect its commercial advertising in contact with fun, friends and good times. In 1979, many remember Hilltop singers performed, “I'd like to buy the world a coke” or “Have a coke and a smile”  (Company et al., 2018). From very beginning the business rapidly touched down to the people lives and spread over all the cities, towns and villages across more than 200 countries. Currently, they have 250 bottling partners around the world. The bottling partners work very close with customers through grocery stores, restaurants, street vendors, convenience stores, movie theatres, amusement parks and many others- to execute the localized strategies developed in partnership with the company. Through the effective collaboration, the company is selling their products to customers more than 1.9 billion servings a day globally. The company has reached 27 million customer outlets across more than 20 different channels through their global distribution network in more than 200 countries  (Coca-Cola History │ World of Coca-Cola, 2018). The recent survey, according to Forbes list, Coca-Cola is listed on the top 33rd rank for the world's best employers of 2018, 40th rank for Top regarded companies 2018, 6th rank for the world's most valuable brands 2018. Around, 61,800 employees are working worldwide. In the beginning, the company's market shares were fluctuating between 1948-1984. The company claimed about 60% of the market share but by 1984 the market share of the company dropped down to 21.8% due to new competitors, when Pepsi got released. However, the current revenue of the company is $33.7 Billion, Assets counts to $93.3 Billion while it earns the profit of $1.4 Billion  (Coca-Cola on the Forbes World's Best Employers List, 2018).

2- Focus on Entry mode choices to illustrate the chosen company's international strategy, based on theories learned from this module.

As we know that, mode of entry is an essential step to adapt for every organization to enter in a new international market. Where in multinational companies, competition is increasing against one another in multiple markets where the strategic actions taken by a multinational in one market can have consequences on another (e.g., Watson [1982]); Kim and Mauborgne [1988], which is as argued that entry mode choices have a major impact on global strategic posture. The choice of market entry mode plays an important role on international operations and can be considered as a leading edge in international marketing  (Kim and Hwang,1992). The organization must carefully consider which entry mode to use while seeking to enter any foreign market and must make the strategies accordingly. Licensing, joint venture, exporting and sole venture are the most common modes of foreign market entry. Entry mode selection is critical strategic decision because sometimes, firm's initial choice of any entry mode is difficult to amend or change without the loss or time or money, there all these modes require backup supplies  (Anderson and Gatignon,1986). As the situation gets difficult when the business transaction involves contract contingencies, multinational companies prefers to establish either wholly owned subsidiaries (WOSs) to deal with the market imperfections in the form of green-field investment or acquisition or the other commonly used modes such as joint ventures (JVs). It is very important to identify the economic rationale behind the theory that establishing Joint venture may generate more gains than establishing Wholly Owned Subsidiary (WOSs) in the host country.  (Mok, Dai and Yeung, 2002).

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Entry modes: Franchising

In franchising, semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchisor) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system (Scarborough, 2012). Coca-Cola first chose to invest in 1979 in China due to long history, as economic reform was implemented under the leadership of Deng Xiaoping. Also, the competition was very close with its competitor, Pepsi-Cola, and due to unfamiliar and highly versatile local market environment. The main reason to enter in China was the higher growth opportunities are available due to immense population. To achieve the market accessibility, Coca-Cola used this method in three different stages of operation after (1979-1984). First, Coca-Cola sold concentrate to its franchised Chinese-owned bottlers, for which the local market agents were responsible for production and distribution. The market agents found the good opportunity in running the bottling business to focus in their bottom lines, which limited the expansion of Coca-Cola's market share. Where in second stage (1985-92), to reduce the effect of uncertainty Coca-Cola bought equity shares in bottling business. During third stage (1993-present), Coca-Cola gave franchise to two foreign bottlers, Kerry group and Swire group. After investing more than US$1 billion by Coca-Cola, in the last two decades the products of Coca-Cola are now available to about 80 per cent of the Chinese population via a comprehensive network of production and distribution systems all over the country. In 2000, comparing the share of Coca-Cola brands and Pepsi-Cola, Coca-Cola market was 40 per cent while Pepsi-Cola was only 15 per cent  (Mok, Dai and Yeung, 2002). In 2010 the market share of Coca-Cola and Pepsi-Cola was 25.3% and 21.8%, In 2012, market share of Coca-Cola and Pepsi-Cola 25% and 20.6% and in 2011, market share of Coca-Cola was 24.6% and 20.1% was Pepsi-Cola share  (Murray, Ju and Gao, 2012). Another example to consider for the second large continent where the consumption and growth and development of Coca-Cola is very high. In Africa as well, the same mode of entry, franchising is adopted. In 1948 in Kenya, East Africa Coca-Cola company invested in a wholly owned subsidiary by registering a new company called Nairobi Bottlers. Imports of Coca-Cola in Africa started in1928 and bottling in 1940.By 1994, Coca-Cola and its bottling partners commanded 81per cent of the South African soft drink market while the market share of Pepsi-Cola was 4.7 per cent  (Coca-Cola: 125 Years of Making Friends, Africa, 2018). Currently, the company has expanded more than 55 bottling partners in all sub-Saharan African countries. All over across the continent Coke has about 3000 small distribution centres. The market share of Coca-Cola company in Africa 2010 is 49.8 per cent, while the market share of Pepsi-Cola is 5.5 per cent based on the sales value. SABMiller one of the coke bottler in Africa Coca-Cola volume growth is 13% and with a 21% increase in South Africa  (Moses and West 2010).

Wholly Owned Subsidiary

Coca-Cola came into India in 1993, beginning its production facility outside of Agra. Coca-Cola entered in the market by forming wholly owned subsidiary named as Coca-Cola India Private Limited. The meaning of wholly owned subsidiary is the company have a complete ownership and control over the company, (Moyi, 2013)  (Company et al., 2018). After forming the subsidiary, Coca-Cola took the ownership of Parle's soft drinks business including the popular Thums Up spicy cola, which made it become the largest soft drinks producer in India with a share market of of 60%, which led him gaining the leadership in the competition with Pepsi-Cola in Indian market. The Coca-Cola system in India has invested $2 billion till 2011 since their re-entry into India. The company is also planning to invest another $5 billion till the year 2020.The market share of India 2013 is 56.7 per cent while the market share of Pepsi-Cola in India is 34.1%. Currently, the company owns 21 factories. Hindustan Coca-Cola Beverages Pvt Ltd being a part of the Bottling Investment Group of the Coca-Cola company has 21 bottling plants and covers approximately 65 per cent of bottling operations for the Coca-Cola System in India  (The Coca-Cola Company - Coca-Cola Beverage Bottlers India & Bottling Partners, 2018).

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