17320694 Strategic Management Issues of Multinational Companies MNCs a Case Study on CocaCola...

8/3/2019 17320694 Strategic Management Issues of Multinational Companies MNCs a Case Study on CocaCola Company

1/45

Strategic Management Issues of Coca-

INTRODUCTION

A global perspective is a matter of survival for businesses. Strategic

management is the process of specifying an organization's objectives,

developing policies and plans to achieve these objectives, and

allocating resources so as to implement the plans. The Coca-Cola

Company (Coca-Cola) is a leading manufacturer, distributor and

marketer of Non-alcoholic beverage concentrates and syrups, in the

world. The company owns or licenses more than 400 brands, including

diet and light beverages, waters, juice and juice drinks, teas, coffees,

and energy and sports drinks. The company operates in more than 200

countries. Coca-Cola Enterprises is the world's largest marketer,

producer and distributor of Coca-Cola products. It operates in 46 U.S.

states and Canada, and is the exclusive Coca-Cola bottler for all of

Belgium, continental France, Great Britain, Luxembourg, Monaco and

the Netherlands. Coca-Cola is the non alcoholic bottled beverages.

ORIGIN OF THE REPORTWeare lucky to say that our honorable course teacher Md. Muzahidul

Islam Lecturer, Department of Management Studies, Faculty of

Business Administration and Management, assigned us a report on

Strategic Management Issues of Multinational Companies

(MNCs): A Case Study on Coca-Cola Company. This report is

prepared on the basis of secondary data.

OBJECTIVES OF THE STUDY

Every successful study should have specified and well-defined

objectives. A careful statement of the objective helps in preparing a

well-decorated report facilitating others to take decision on it. The

specific objectives of the study are to have knowledge about-

Page1
http://www.economicexpert.com/a/Organization.htmhttp://www.economicexpert.com/a/Organization.htm


2/45


To know about the strategic management issues of multinational

companies

To know about the strategies of the multinational companies

To characterize the challenges of international strategic

management

To know about the international strategic management process

To identify and characterize the levels the international

management strategies

To know about the Coca-Cola Companys strategies management

process.

SCOPE OF THE STUDY This study has focused upon the Management Issues those are

followed by the Coca-Cola Company for capturing the global

market. Through our report we try to find out the global

challenges of International Strategic Management to assess the

basic strategies, describe the international strategic

management process of Coca-Cola Company. We hope this study

will help to whom, who want to know more clearly about

strategic management, its issues as well as the key factors which

affect the process of Internationalization for a company.

Data and Methodology

We examine secondary data of which related to the StrategicManagement Issues at the global based Market. Data are collected on

various issues from annual report of Coca-Cola Company (2005-2009).

In our report we analysis the monthly, quarterly, half-yearly news

Review of this company. Based upon this data we like to analysis the

Economic Review, Statistical Strategic condition of the Coca-Cola

Company. Both the official and regional website helps us to find out

more related to the issues with the global market. Form those huge

data we take the necessary and used them for the analysis. Our

Page2


3/45


analysis data are clearly represented in our main part of the report

through relevant chart, graph with proper description.

LIMITATIONS OF THE REPORT

As a student of faculty of Business Administration and Management,

7th semester, this is our first initiative for making a report on Strategic

Management Issues of Multinational Companies (MNCs): A Case Study

on Coca-Cola. We were really unable to collect enough information

from due to their official restrictions. Many things were so confidential

that we were not entitled to access there. Beside this we have facedthe following hindrances in preparing this report:

Lack of knowledge and experience

Short of time

Lack of computer facilities

Lack of sufficient privileges Lack of communication facilities

Definition of Strategic Management

Strategic management is the process of specifying an organization's

objectives, developing policies and plans to achieve these objectives,

and allocating resources so as to implement the plans. It is the highest

level of managerial activity, usually performed by the company's Chief

Executive Officer (CEO) and executive team. It provides overall

direction to the whole enterprise.

Page3
http://www.economicexpert.com/a/Organization.htmhttp://www.economicexpert.com/a/Chief:Executive:Officer.htmhttp://www.economicexpert.com/a/Chief:Executive:Officer.htmhttp://www.economicexpert.com/a/Team.htmhttp://www.economicexpert.com/a/Organization.htmhttp://www.economicexpert.com/a/Chief:Executive:Officer.htmhttp://www.economicexpert.com/a/Chief:Executive:Officer.htmhttp://www.economicexpert.com/a/Team.htm


4/45


International strategic management is a comprehensive and ongoing

management planning process aimed at formulating and

implementing strategies that enable a firm to complete effectively

internationally. The process of developing a particular international

strategy is often referred to as strategic planning. Strategic

Management is the study of function and responsibilities of senior

management.

Five Essential Parts of Strategic Management

Goal-setting

Page4


5/45


Goal-setting enables a firm to articulate its vision: identify what needs

to be accomplished, define short-and long-term objectives, and relate

them to what the organization needs to do.

Analysis

Analysis guides to collect and consider information so that a firm

understands the situation. Assess external environments and internal

situations to identify the strengths and weakness of the organization

and the opportunities and threats face to reach the goals.

Strategy Formulation

To determine a strategy, the firm reflects prioritize, develop options,

and make decisions. Review the results of the analysis, identify the

issues that a firm implementing partners need to address, and

prioritize them in terms of their urgency and magnitude. Use these

results to design alternative strategies and plans that address the keystrategic issues.

Strategy Implementation

To implement the strategy, assemble the necessary resources and

apply them. Put the chosen plans into practice, marshal the resources

and commitments necessary for moving ahead, tap existing capacity

and/or build new capacity, and seek to achieve results.

Strategy Monitoring

Monitoring allows checking the progress toward achieving the firms

goals and assessing whether any changes in the environmentnecessitate alternatives to the firms strategy. Modify plans and

Page5


6/45


actions to adjust to the impact of changing in the operating

environment.

SIGNIFICANCEOF STRATEGIC MANAGEMENT

Strategic management integrates the knowledge and experience

gained in various functional areas.

It helps to understand and make sense of complex interaction in

various areas of management.

It helps in understanding how policies are formulated and in creating

appreciation of complexities of environment that the senior

management faces in policy formulation.

Managers need to begin by gaining an understanding of the business

environment and to in control.

They should know to manage and understand information technology,

which is changing the face of business.

As public and common investors own and more companies managersneed to acquire skills to maximize shareholder value.

To have/take a strategic perspective, managers should foresee the

future and track changes in customer expectation. Intuitive, logic

reasoning is required for proper decision-making.

As corporate are becoming more integrated with the public life,

corporate governance is becoming important which manager may

have to practice.

Page6


7/45


Issues in Strategic Management Decision Making

While making a decision the company might have different

people at different periods of time.

Decision requires judgments; personal related factors are

important in decision-making. Hence decision ma y differs as

person change.

Decisions are not taken individually, but often there is a task in

decisions which could be Individual Vs Group decision making.There will be a difference between the individual and group

decision-making.

On what Criteria a company should make its decision, for

evaluation of the efficiency & effectiveness of the decision

making process, a company has to set its objectives which

serves as main bench mark.

Page7

To the shape the Future

of business

Effective strategic idea

Mangers and employer

are innovative and

creative

Its decentralized the

Management

Its helps to increase the

productivity

To Makes discipline

To make control

To makes forward s

thinking

Signific

anceof

Strat

egic

Management


8/45


3 Major Criteria in decision Making are---

a. The concept of Maximization.

b. The concept of satisfying.

c. The concept of instrumentalism.

Based on the concept chosen the strategic decisions will differ.

Generally decision-making process is logical and there will be

rationality in decision-making.

When it comes to Strategic decision making point of view there

would be proper evaluation & then exercising a choice from

various available alternative resources, which leads to attain the

objectives in a best possible way.

Creativity in decision-making is required when there is a

complete situation & the Decision taken must be original &

different.

There could be variability in decision-making based on the

situation & Circumstances.

International strategic management results in the development of

various international strategies, which are comprehensive frameworks

for achieving a firms fundamentals goals. Conceptually, there are

many similarities between developing a strategy for competing in a

single country and developing one for competing in multiple counties.

In both cases, the firms strategic planners must answer the same

fundamental questions

What products and/or services does the firm intend to sell?

Where and how will to make those products or services?

Where and how will it sell them?

Where and how will it acquire the necessary resources?

Page8


9/45


How does it expect to outperform its competitors?

But developing an international strategy is far more complex than

developing a domestic one. Because managers developing a strategy

for a domestic firm must deal with one national government, one

currency, one accounting system, one political and legal system and

usually a single language and a comparatively homogeneous culture.

But managers responsible for developing a strategy for an

international firm must understand and deal with multiple

governments, multiple currencies, multiple political and legal system,

and variety of language and cultures.

Various Roles of Strategic Management

Senior management plays n important role in Strategic Management.

Role of Board of Directors: Board of Directors is the supreme

Authority in a company. They are the owners/ shareholders/ lenders.

They are the ones who direct and responsible for the governance of

the company. The Company act and other laws blind them and their

Page9


10/45


actions & they sometimes do get involved in operational issues.

Professionals on the B.O.D help to get new ideas, perspectives and

provide guidance. They are the link between the company and the

environment.

Role of C.E.O: Chief Executive Officer is the most important

Strategist and responsible for all aspects from

formulations/Implementation to review of Strategic Management. He is

the leader, motivator & Builder who forms a link between company

and the board of directors and responsible for managing the external

environment and its relationship.

Role of Entrepreneur: They are independent in thought and action

and they set / start up a new business. A Company can promote the

entrepreneurial spirit and this can be internal attitude of an

organization. They provide a sense of direction and are active in

implementation.

Role of Senior Management:They are answerable to B.O. Directorsand The C.E.O as they would look after Strategic Management a

responsible of certain areas / parts of terms.

Role of SBU Level Executives: They Co-ordinate with other SBUs

& with Senior Management. They are more focused on their product /

burners line.

They are more on the implementation role.

Role of Corporate Planning Staff: It provides administrative

support tools and techniques and is a Co-ordinate function.

Role of Consultant: Often Consultants may be hired for a specified

new business or Expertise even to get an unbiased opinion on the

business & the Strategy.

Page10


11/45


Role of Middle Level Managers: They form an important link in

strategizing & Implementation. They are not actively involved in

formulation of Strategies and they are developed to be the future

management.

COMPANY OVERVIEW

The Coca-Cola Company (Coca-Cola) is a leading manufacturer,

distributor and marketer of Non-alcoholic beverage concentrates and

syrups, in the world. The company owns or licenses more than 400

brands, including diet and light beverages, waters, juice and juice

drinks, teas, coffees, and energy and sports drinks. The companyoperates in more than 200 countries. Approximately 74% of its

products are sold outside of the US. The company is headquartered in

Atlanta, Georgia and employs 71,000 people as of September

2006.The company recorded revenues of $24,088 million during the

fiscal year ended December 2006, an increase of 4.3% over 2005. The

increase in revenue was primarily due to increase in sales of Unit

cases of companys products from approximately 20.6 billion unit

cases of the companys Products in 2005 to approximately 21.4 billion

unit cases in 2006, the increase in the Price and Product/geographic

mix also boosted the revenue growth. The company-wide gallon sales

and unit case volume both grew 4% in 2006 when compared to 2005.

The operating profit of the company was $6,308 million during fiscal

year 2006, an increase of 3.7% over 2005. The net profit was $5,080

million in fiscal year 2006, an increase of 4.3% over 2005.

HISTORY OF COCA-COLA

Page11


12/45


Coca-Cola was first introduced by John Smyth Pemberton, a

pharmacist, in the year 1886 in Atlanta, Georgia when he invented

caramel-colored syrup in a three-legged brass kettle in his backyard.

He first distributed the product by carrying it in a jug down the street

to Jacobs Pharmacy and customers bought the drink for five cents at

the soda fountain. Carbonated water was teamed with the new syrup,

whether by accident or otherwise, producing a drink that was

proclaimed delicious and refreshing, a theme that continues to echo

today wherever Coca-Cola is enjoyed.

Dr. Pembertons partner and book-keeper, Frank M. Robinson,

suggested the name and penned Coca-Cola in the unique flowing

script that is famous worldwide even today. He suggested that the

two Cs would look well in advertising. The first newspaper ad for

Coca-Cola soon appeared in The Atlanta Journal, inviting thirsty

citizens to try the new and popular soda fountain drink. Hand-

painted oil cloth signs reading Coca-Cola appeared on store awnings,

with the suggestions Drink added to inform passersby that the new

beverage was for soda fountain refreshment.

By the year 1886, sales of Coca-Cola averaged nine drinks per day.

The first year, Dr. Pemberton sold 25 gallons of syrup, shipped in

bright red wooden kegs. Red has been a distinctive color associated

with the soft drink ever since. For his efforts, Dr. Pemberton grossed

$50 and spent $73.96 on advertising.

Dr. Pemberton never realized the potential of the beverage he

created. He gradually sold portions of his business to various partnersand, just prior to his death in 1888, sold his remaining interest in Coca-

Cola to Asa G. Candler, an entrepreneur from Atlanta.

By the year 1891, Mr. Candler proceeded to buy additional rights and

acquire complete ownership and control of the Coca-Cola business.

Within four years, his merchandising flair had helped expand

consumption of Coca-Cola to every state and territory after which heliquidated his pharmaceutical business and focused his full attention

Page12


13/45


on the soft drink. With his brother, John S. Candler, John Pembertons

former partner Frank Robinson and two other associates, Mr. Candler

formed a Georgia corporation named the Coca-Cola Company. The

trademark Coca-Cola, used in the marketplace since 1886, was

registered in the United States Patent Office on January 31, 1893.

The business continued to grow, and in 1894, the first syrup

manufacturing plant outside Atlanta was opened in Dallas, Texas.

Others were opened in Chicago, Illinois, and Los Angeles, California,

the following year. In 1895, three years after The Coca-Cola

Companys incorporation, Mr. Candler announced in his annual report

to share owners that Coca-Cola is now drunk in every state and

territory in the United States.

As demand for Coca-Cola increased, the Company quickly outgrew its

facilities. A new building erected in 1898 was the first headquarters

building devoted exclusively to the production of syrup and the

management of the business. In the year 1919, the Coca-Cola

Company was sold to a group of investors for $25 million. Robert W.

Woodruff became the President of the Company in the year 1923 and

his more than sixty years of leadership took the business to

unsurpassed heights of commercial success, making Coca-Cola one of

the most recognized and valued brands around the world.

HISTORY OF BOTTLING

Coca-Cola originated as a soda fountain beverage in 1886 selling for

five cents a glass. Early growth was impressive, but it was only when a

strong bottling system developed that Coca-Cola became the world-

famous brand it is today.

Year 1894: A modest start for a bold idea

Page13


14/45


In 1894 the Coca-Cola Company is in a candy store in Vicksburg,

Mississippi, brisk sales of the new fountain beverage called Coca-Cola

impressed the store's owner, Joseph A. Biedenharn. He began bottling

Coca-Cola to sell, using a common glass bottle called a Hutchinson.

Biedenharn sent a case to Asa Griggs Candler, who owned the

Company. Candler thanked him but took no action. One of his

nephews already had urged that Coca-Cola be bottled, but Candler

focused on fountain sales.

In 21st century the Coca-Cola bottling system grew up with roots

deeply planted in local communities. This heritage serves the

Company well today as consumers seek brands that honor local

identity and the distinctiveness of local markets. As was true a century

ago, strong locally based relationships between Coca-Cola bottlers,

customers and communities are the foundation on which the entire

business grows.

Page14

1916

Birth of the

1920s and 30s

International

expansion

1950s Packaging

innovations


15/45


Our mission declares our purpose as a company. It serves as thestandard against which we weigh our actions and decisions. It is thefoundation of our Manifesto.

To refresh the world in body, mind and spirit

To inspire moments of optimism through our brands and

our actions To create value and make a difference everywhere we

engage.

To create consumer products, services and communications, customerservice and bottling system strategies, processes and tools in order tocreate competitive advantage and deliver superior value to;

Page15

MISSION OF COCA-COLA COMPANY

VISION OF COCA-COLA COMPANY


16/45


Consumers as a superior beverage experience

Consumers as an opportunity to grow profits through the use of

finished drinks

Bottlers as an opportunity to grow profits in volumes

Bottlers as a trademark enhancement and positive economic

value added

Suppliers as an opportunity to make reasonable profits when

creating real value-added in an environment of system-wide team

work, flexible business system and continuous improvement

Indian society in the form of a contribution to economic andsocial development.

Refresh the World... In body, mind, and spirit

Inspire Moments of Optimism... Through our brands and our

actions

Create Value and Make a Difference... Everywhere we engage.

Our vision guides every aspect of our business by describing what weneed to accomplish in order to continue achieving sustainable growth.

People: Being a great place to work where people are inspired to bethe best they can be.

Portfolio: Bringing to the world a portfolio of quality beverage brandsthat anticipate and satisfy people's desires and needs.

Page16

VISION FOR SUSTAINABLE GROWTH


17/45


Partners: Nurturing a winning network of customers and suppliers,together we create mutual, enduring value.

Planet: Being a responsible citizen that makes a difference by helpingbuild and support sustainable communities.

Profit: Maximizing long-term return to shareowners while being

mindful of our overall responsibilities.

Coca-Cola Company follows different quality standard for different

countries across the globe. Coca-Cola Company has a long-standing

commitment to protecting the consumers whose trust and confidence

in its products is the bedrock of its success. In order to ensure that

consumers stay informed about the global quality of all Coca-Cola

products sold in World, Coca-Cola products carry a quality assurance

seal on them. The One Quality Worldwide assurance seal appears on

the entire range of Coca-Cola Companys beverages.

CURRENT ORGANIZATIONAL ORGANOGRAM

Page17

QUALITY POLICY

CEO

EVP/

President

Bottling

Invest/

Supply

Chain

CFO and

EVP

EVP/

Presiden

t MKT

Strategy

Presiden

t

SVP &

General

Counsel

SVP &

Director

Human

Resource

s

SVP &

Director

Public Affairs/

Communicati

on

President

of African

Group

President

European

Union

Market

President of

Eurasia

Group

President

Latin

America

Group

President of

Pacific Group


18/45


Page18


19/45


BRANDS OF COCA-COLA

Coca-Cola Zero has been one of the most successful

product launch hes in Coca-Colas history. In 2007, Coca

Colas sold nearly 450 million cases globally. Put intoperspective, that's roughly the same size as Coca Colas

total business in the Philippines, one of our top 15

markets. As of September 2008, Coca-Cola Zero is available in

more than 100 countries.

Energy Drinks

For those with a high-intensity

approach to life, Coca Colas brands

of Energy Drinks contain ingredients

such as ginseng extract, guarana

extract, and caffeine and B vitamins.

Juices/Juice Drinks

We bring innovation to the goodness

of juice in Coca Colas more than 20

juice and juice drink brands, offering

both adults and children nutritious,

refreshing and flavorful beverages

Soft Drinks

Coca Colas dozens of soft drink

brands provide flavor and

refreshment in a variety of choices.

From the original Coca-Cola to most

Page19


20/45


recent introductions, soft drinks from The Coca-Cola Company are

both icons and innovators in the beverage industry.

Sports Drinks

Carbohydrates, fluids, and electrolytes

team together in Coca Colas Sports

Drinks, providing rapid hydration and

terrific taste for fitness-seekers at any

level

Tea and Coffee

Bottled and canned teas and coffees

provide consumers' favorite

drinks in convenient take-

anywhere packaging, satisfyingboth traditional tea drinkers and today's growing coffee culture.

Water

Smooth and essential, our Waters and

Water Beverages offer hydration in

its purest form.

Page20


21/45


Other Drinks

So much more than soft drinks, Coca

Colas brands also include milk

products, soup, and more so you

can choose a Coca Cola Companyproduct anytime, anywhere for

nutrition, refreshment or other needs.

CONSUMER CHOICE AT A GLANCE

Factors affecting the strategic management issues

Page21

Limca Common

drink.

Fanta Basically Preferred by

Ladies and Kids.

Maaza also Ladies and

Kids

Sprite not clearly

defines.

Kinley Soda Mostly those who

consume liquor


22/45


Factors affecting the strategic management issues of domestic and

international operations of Coca-Cola Company.

Table 1: Factors affecting the strategic management issues

Language English used as asecond language

Use the local language required inmany situations

Culture Relativelyhomogenous

Quite diverse, both betweencountries and within countries

Politics Unstable Often volatile and of decisive

importanceEconomy Underdeveloped Wide variations among countries and

among regions within countries

Governmentalinterference

Reasonablypredictable

Often extensive and subject to rapidchange

Labor Skilled labors arenot available

Skilled labors often scarce, requiringtraining or redesign of productionmethods

Financing Moderatelydeveloped financialmarkets

Often poorly developed financialmarkets; capital flows subject togovernment control

Marketresearch

Data collect is notvery easy

Sometimes data difficult andexpensive to collect

Advertising Media are availablewith somerestrictions

Media limited; many restrictions; lowliteracy rates rule out print media insome countries

Money Must change from one currency toanother

Transportations

It is not developed Often adequate

Control Always a problem A worse problem

Labor

relations

Collectivebargaining, layoff ofworkers

Layoff of workers often not possible;

may have mandatory worker

participation in management;

workers may seek change through

political process rather than collectivebargaining

Page22


23/45


Figure: Factors affecting the strategic management issues

There are some factors which affect strategic of Coca-Cola Company in

case of international operation. Language is one of the main

considerations when it does business domestically, they generally

domestic language. But when it does business outside the country it

follows Polycentric policy that is it used different language in different

countries. Side by side culture is relatively homogeneous in domestic

operation and quite diverse, both between countries and within

countries. Political stability and policy also be considered by the Coca-

Cola Company. Control function is done by centrally in case of

domestically but when it goes beyond outside, it must work a tightrope

between over centralizing and losing control to much decentralizing.

Labor is another consideration because their skills and collective

bargaining that is labor relation differ from country to country.

Advertising in domestic country is very easy because domestic

cultures are known to them. But in case of international operation it

faces many problems for advertising such as shortage of media, hugeadvertising cost and so forth. However economy is relatively uniform

Page23

Langua

geCulture Politics

Econom

y

Governme

ntLabor

Financin

gMarket Money Control Advertising

Contrac

ts

Transportation and

CommunicationLabor Relations

Factors Affecting International

Strategic Management


24/45


in domestics country but outsides, it faces wide variation among

countries and among region within country. In case of Coco-Cola

Company the market research data is easy to collect but when it goes

to foreign sometimes face difficult and expensive to collect data. At

last we see that government interference in case of domestically, it is

minimal and reasonably predictable but in international operation it is

often expensive and subject to rapid change.

Strategic Alternatives of Multinational Companies

Multinationals corporations typically adopt one of four strategic

alternatives in their attempt to balance the three goals of global

efficiencies, multinational flexibility, and worldwide learning. There

four strategies are as follows

Home Replication Strategy

In this strategy, a firm utilizes the core competency or firm-specific

advantage it developed at home as its main competitive weapon in the

foreign markets that it enters. That is, it takes what it does

exceptionally well in its home market and attempts to duplicate it in

foreign markets.

Multi-domestic Strategy

It is the second alternative available to international firm. A multi-

domestic corporation views itself as a collection of relatively

independent operating subsidiaries, each of which focuses on a

specific domestic market.

Global Strategy

It is the third alternative available for international firms. A global

corporations views the world as a single marketplace and has as its

primary goal the creation of standardized goods and services that will

address the needs of customers worldwide.

Page24


25/45


Transnational Strategy

The transnational corporation attempts to combine the benefits of

global scale efficiencies with the benefits of local responsiveness.

Strategies for Coca Cola Company

These four strategy are shown in the following figure

From these four strategies Coca-Cola Company follow the Multi-

domestic strategies. They produce their products independently in

different countries. All countries product are not same. They produce

their products by following different strategy for different countries,

based on the internal and external environment of the country. Coca-

Cola Company developed their strategy by considering the nature ofthe people of different countys people, culture, status and so many

other related factors. Behind the reasons of following of this strategy

may be that, different countries economies of scale for production,

distribution, and marketing are low, side by side cost of coordination

between the parent corporation and its various foreign subsidiaries is

high. Because each subsidiary in a multi-domestic corporation must be

responsive to the local market, the parent company usually delegates

considerable power and authority to managers of its subsidiaries in

various host countries.

Page25

Home

Replication

Strategy

Multi-domestic

Strategy

Transnational

StrategyGlobal Strategy


26/45


Levels of Strategies followed by Coca-Cola Company

There are three levels of strategies followed by Coca-Cola Company.

This may be stated as the following

Figure: Levels of Strategies

Page26


27/45


Corporate Level Strategy

Corporate level strategy attempts to define the domain of business the

firm intends to operate. Corporate level strategy fundamentally is

concerned with the selection of businesses in which the company

should compete and with the development and coordination of that

portfolio of businesses. A firm might adopt any of three forms of

corporate strategy:

A single business strategy

Related diversification strategy and

Unrelated diversification strategy.

Coca-Cola Company follows related diversification strategy that is calls

for the firm to operate in several different but fundamentally related

businesses. Each of its operations linked to the others Coca-Cola

characters, the Coca-Cola logo, and a theme of wholesomeness and a

reputation for providing high quality family products. Coca-ColaCompany follows this strategy because it has several advantages. At

first,the firm depends less on a single products so it is less vulnerable

to competitive or economic threats. Secondly, related diversification

may produce economies of scale for a firm. Thirdly, related

diversification may allow a firm to use technology or expertise

developed in one market to enter a second market more cheaply and

easily. Corporate level strategies of Coca-Cola Company is following

Page27


28/45


Figure: Corporate Strategy of Coca-Cola Company

Business Unit Level Strategy

A strategic business unit may be a division, product line, or other profit

center that can be planned independently from the other business

units of the firm. Corporate strategy deals with the overall where as

business strategy focuses on specific business, subsidiaries or

operating units within the firm. Business seeks to answer the question

how should we compete in each market we have chosen to enter?

The firms develop unique business strategy for each of its strategic

business units, or it may pursue the same business strategy for all of

them. The three basic business strategy are differentiation, overall

cost leadership and focus. Coca-Cola Company uses the differentiation

strategy effectively.

Page28

Corporate Level Strategy

of Coca-Cola Company

Marketin

g

Strategies

R&D Strategies

System

Strategie

s

Reward

System

Strategies

Financial

Strategies


29/45


Functional Level Strategy

The functional strategies attempts to answer to question How wemanage the function? The functional level of the organization is the

level of the operating divisions and departments. The strategic issues

at the functional level are related to business processes and the value

chain. Functional level strategies in marketing, finance, operations,

human resources, and R&D involve the development and coordination

of resources through which business unit level strategies can be

executed efficiently and effectively.

Functional units of an organization are involved in higher level

strategies by providing input into the business unit level and corporate

level strategy, such as providing information on resources and

capabilities on which the higher level strategies can be based. Once

the higher-level strategy is developed, the functional units translate it

into discrete action-plans that each department or division must

accomplish for the strategy to succeed.

Page29


30/45


E-COMMERCE OF COCA-COLA COMPANY

Good points of Coca-Cola Company

Brand Promotion

Attractive products selection

Look and feel 8

Provision of multimedia product, catalogue pages

Personal attention

Community relationships

Weak points of Coca-Cola Company

Performance and service: that is not easy navigation, shopping

and purchasing, and prompt shipping and delivery.

Discount pricing is not being offered.

Page30


31/45


Developing International Strategies

Developing international strategies is not a one-dimensional process..

Simply put, put strategy formulations deciding what to do and strategy

implementation is actually doing it. Firms generally carry outinternational strategic management in two broad strategies-

Strategy Formulation

In strategies formulation, a firm establishes its goals and strategic plan

that will lead to the achievement of their mission goals. In

international strategy formulation, managers develop, refine, and

agree on which markets of enter (or exit) and how best to compete in

each.

Strategy Implementation

A firm develops the tactics for achieving the formulated international

strategies is known as strategy implementation. Strategy

implementation is usually achieved via the organizations design, the

work of its employees, and its control systems and processes.

Every Multinational Companies are developing their international

strategies so that they can survive in the complex business situation.

Now the modern market is fully globalized and as a result its really

difficult for every multinational organization in the right track. In such

aspect the importance of strategy formulation and strategy

implementation played an important role. Side by side there is some

important process which helps in international strategy formulation.

Developing International Strategies in Aspects of Coca-Cola

Company

Page31


32/45


TCCQS is the Coca-Cola systems branded quality management

system. It helps coordinate and guide our activities to ensure quality in

everything they do. For entering in to a new market and be survive in

the market it always ready to cope with change. Different government

policy, economic condition, political situation, barrier and ban are

associated with different market.

Coca-Cola Companys basic strategies are to develop a mission

statement for entering a new market depending on a fully fledged

market survey. Identifying external and internal environment strength,

weakness, opportunity, and threats is the next management

strategies. Depending on the scope and opportunity the company will

go forward as well as try to resolve the weakness and threats. After

entering into a new market Coca-Cola Company try to achieve

strategic goals and guide its daily activities with proper observation.

Lastly this company establishes a control framework for controlling the

managerial and organizational systems and process as well. This

company believes that, for taking a position in a new country is fully

depends on the good formulation strategies and keeping it. To do

business outside the local market is depending on the quality control

of the product and quality ensures the customer perception and the

choice for consuming this products.

Figure: Quality Management System of Coca-Cola Company

Page32


33/45


Through this model, we see that the company is first take the

response of customers and consumers through market survey. Then

the management accumulates the best quality resources for making

their products. This process includes-

Skilled employee involvement for production and quality control

High quality materials for production

Up to date technology for quality control

Effective methods and newly developed strategies

They will follow some sequential steps in developing the international

strategy formulation. Those steps help the Coca-Cola Company to

enter and establish their business in multinational base. They are

following multi-domestic strategies for their produced product as well

as their marketing system. The analysis of different levels of strategic

formulating of Coca-Cola Company is given below.

Developing the Mission Statement

Coca-Cola Company begins the international strategic planning

process by creating a mission statement, which clarifies theorganizations purpose, value, and directions. The mission statement is

often used as a way of communicating with internal and external

constituents and stakeholders about the firms strategic direction.

Mission statement of Coca-Cola Company

This company focused on driving growth in of their business inselected profitable and emerging categories. To develop, implement

and continuously improve the integrated management systems in a

culture of continuous improvement which:

Directs the continual up-gradation for efficient and environment

friendly manufacturing technology.

Monitor and improve the efficiency and effectiveness of all

business processes.

Page33


34/45


Promotes professional and flexible work environment, teamwork

and innovation through employee participation and process

ownership.

Drives customer orientation at all levels within the organization.

Monitor and economize the Cost of Quality.

Comments on mission Statements

(In terms of how they support the strategies)

The vision statement of this company supports the existing strategiesthat are (generic strategy) that Coca Cola needs to pursue is that of

differentiation. In their current vision and mission statements, the

company says it aims to be a low cost leader, yet through their

analysis of the strategic direction, the company needs to adopt a

generic strategy of differentiation. This will allow Coca cola to do two

things;

1. Increase unit sales

2. Gain buyer loyalty

However, at the expense of sounding simplistic, it is necessary that

the company communicate its differentiation to its customers,

otherwise these two advantages will not avail themselves. Initially

Coca cola will need to adopt a focused differentiation approach, which

means that they should selectively choose which markets will profitthem the most and then target only those markets until such

provisions are in place from where the company is able to expand its

target base. After which they should opt for a broad differentiation

generic strategy.

COCA-COLA COMPANY, THE SWOTANALYSIS

SWOT ANALYSIS

Page34


35/45


The Coca-Cola Company (Coca-Cola) is a leading manufacturer,

distributor and marketer of Non-alcoholic beverage concentrates and

syrups, in the world. Coca-Cola has a strong brand name and brand

portfolio. Business-Week and Inter brand, a branding consultancy,

recognize Coca-Cola as one of the leading brands in their top 100

global brands ranking in 2008. The Business Week-Interbred valued

Coca-Cola at $67,000 million in 2008. Coca-Cola ranks well ahead of

its close competitor Pepsi which has a ranking of 22 having a brand

value of $12,690 million The Companys strong brand value facilitates

customer recall and allows Coca-Cola to penetrate markets. However,

the company is threatened by intense competition which could have

an adverse impact on the companys market share.

Page35


36/45


Analyzing the primary competitor and identifying their Strengths,

Weaknesses, Opportunities, and Threats (SWOT Analysis) help

determine target markets, marketing plan, and customer service,

sales forecasting and sales planning. Examining the following willassist in the competitive analysis:

Identify the level of rivalry among competing sellers in the

industry

Review strategies of companies to encourage customers to

switch from a competitor

Analyze ease of entry for new competitors

Determine bargaining power for suppliers of key materials and

components

Determine bargaining power for buyers of the product

SWOT Analysis represents the analysis of the following four things

STRENGTHS

Distribution network: The Company has a strong and reliable

distribution network. The network is formed on the basis of the time of

consumption and the amount of sales yielded by a particular customer

in one transaction. It has a distribution network consisting of a number

of efficient salesmen, 700,000 retail outlets and 8000 distributors. The

distribution fleet includes different modes of distribution, from 10-tonne trucks to open-bay three wheelers that can navigate through

narrow alleyways of Indian cities and trademarked tricycles and

pushcarts.

Strong Brands: The products produced and marketed by the

Company have a strong brand image. People all around the world

recognize the brands marketed by the Company. Strong brand names

like Coca-Cola, Fanta, Limca, and Maaza add up to the brand name ofthe Coca-Cola Company as a whole. The red and white Coca-Cola is

one of the very few things that are recognized by people all over the

Page36


37/45


world. Coca-Cola has been named the world's top brand for a fourth

consecutive year in a survey by consultancy Inter brand. It was

estimated that the Coca-Cola brand was worth $70.45billion.

Low Cost of Operations: The production, marketing and distribution

systems are very efficient due to forward planning and maintenance of

consistency of operations which minimizes wastage of both time and

resources leads to lowering of costs.

WEAKNESSES

Low Export Levels: The brands produced by the company are brands

produced worldwide thereby making the export levels very low. In

India, there exists a major controversy concerning pesticides and other

harmful chemicals in bottled products including Coca-Cola.

Small Scale Sector Reservations Limit Ability To Invest And

Achieve Economies Of Scale: The Companys operations are carried

out on a small scale and due to Government restrictions and red-

tapism, the Company finds it very difficult to invest in technological

advancements and achieve economies of scale.

OPPORTUNITIES

Large Domestic Markets: The domestic market for the products of

the Company is very high as compared to any other soft drink

manufacturer. Coca-Cola India claims a 58 per cent share of the soft

drinks market; this includes a 42 per cent share of the cola market.Other products account for 16 per cent market share, chiefly led by

Page37


38/45


Limca. The company appointed 50,000 new outlets in the first two

months of this year, as part of its plans to cover one lakh outlets for

the coming summer season and this also covered 3,500 new villages.

In Bangalore, Coca-Cola amounts for 74% of the beverage market.

Export Potential: The Company can come up with new products

which are not manufactured abroad, like Maaza etc and export them

to foreign nations. It can come up with strategies to eliminate

apprehension from the minds of the people towards the Coke products

produced in India so that there will be a considerable amount of

exports and it is yet another opportunity to broaden future prospects

and cater to the global markets rather than just domestic market.

Higher Income among People: Development of India as a whole

has lead to an increase in the per capita income thereby causing an

increase in disposable income. Unlike olden times, people now have

the power of buying goods of their choice without having to worry

much about the flow of their income. The beverage industry can take

advantage of such a situation and enhance their sales.

THREATS

Imports: For example: As India is developing at a fast pace, the per

capita income has increased over the years and a majority of the

people is educated, the export levels have gone high. People

understand trade to a large extent and the demand for foreign goods

has increased over the years. If consumers shift onto imported

beverages rather than have beverages manufactured within the

country, it could pose a threat to the Indian beverage industry as a

whole in turn affecting the sales of the Company.

Tax and Regulatory Sector: The tax system in India is accompanied

by a variety of regulations at each stage on the consequence from

production to consumption. When a license is issued, the production

capacity is mentioned on the license and every time the production

Page38


39/45


capacity needs to be increased, the license poses a problem.

Renewing or updating a license every now and then is difficult.

Therefore, this can limit the growth of the Company and pose

problems.

Slowdown In Rural Demand:The rural market may be alluring but it

is not without its problems: Low per capita disposable incomes that is

half the urban disposable income; large number of daily wage earners,

acute dependence on the vagaries of the monsoon; seasonal

consumption linked to harvests and festivals and special occasions;

poor roads; power problems; and inaccessibility to conventional

advertising media. All these problems might lead to a slowdown in the

demand for the companys products.

COCA-COLA COMPANY, THE PEST ANALYSIS

A scan of the external macro-environment in which the firm operates can beexpressed in terms of the following factors:

Political

Economic

Social

Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a

framework for the analysis of these macro environmental factors. A PEST analysisfits into an overall environmental scan, which consists of significant political,

economic, social and technological analysis for a firm to reach their desirable

position or to attain the goals and objectives. For operating a business worldwide it

is too much important, because its analysis represent the overall environmental

scanning as shown in the following diagram:

Page39


40/45


Environmental Scan

/ \

External Analysis Internal Analysis

/ \

Macro environment Microenvironment

|

P.E.S.T.

Coca-Cola Companys perform/ operate their business unit in different countrybased on the developing of the PEST analysis. The PEST analysis of Coca-Cola

Company is as following

Political Factors

It is one of the significant parts of a company where, in which country they

operate their business unit. Political factors include government regulations and

legal issues and define both formal and informal rules under which the firm must

operate. Some examples include:

tax policy

employment laws

environmental regulations

trade restrictions and tariffs

political stability

Economic Factors

Another most imperative element for PEST analysis is economic factors.

Economic factor affects the purchasing power of potential customers and the firm's

cost of capital. The following are examples of factors in the macro-economy:

economic growth

interest rates exchange rates

Page40


41/45


inflation rate

Social Factors

Social factors include the demographic and cultural aspects of the external macro

environment. These factors affect customer needs and the size of potential

markets. Some social factors include:

health consciousness

population growth rate

age distribution

career attitudes

emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient

production levels, and influence outsourcing decisions. Some technological factors

include:

R&D activity

automation

technology incentives

rate of technological change

Develop Strategic and tactical goals and plans of Coca-

Cola Company

After completion of SWOT and PEST analysis as context, international

strategic planning is largely framed by the setting of strategic goals.

Based on different market situation as well as customers response this

company will set up their tactical goals for being a strong position in

the global market place. Strategic goals are the major objectives that

the Company wants to accomplish through pursuing a particularcourse of action.

Page41


42/45


The basic objective of set up this strategic and tactical plan and goals

is to exploit the firms strengths and environmental opportunities,

neutralize external threats and overcome the firms weakness.

Depending on those vital factors this Coca-Cola Company is develop aControl Framework for their overall controlling of management.

Through this framework managerial and organizational systems are

observed, monitor, and processed.

Findings

By preparing this report about the strategic management issues of

multinational companies (MNCS), the case study on the Coca-Cola

Company, we get some important things. These findings are as follows

Coca-Cola Enterprises is the world's largest marketer, producer

and distributor of Coca-Cola products. Coca-Cola was first introduced by John Smyth Pemberton, a

pharmacist, in the year 1886 in Atlanta, Georgia when he

invented caramel-colored syrup in a three-legged brass kettle in

his backyard.

It operates in 46 U.S. states and Canada, and is the exclusive

Coca-Cola bottler for all of Belgium, continental France, Great

Britain, Luxembourg, Monaco and the Netherlands. Coca-Cola is

the non alcoholic bottled beverages.

Page42


43/45


The company owns or licenses more than 400 brands, including

diet and light beverages, waters, juice and juice drinks, teas,

coffees, and energy and sports drinks.

The company operates in more than 200 countries

Strategic management integrates the knowledge and experience

gained in various functional areas.

3 Major Criteria in decision Making are---the concept of

Maximization, the concept of satisfying, the concept of

instrumentalism.

The vision of Coca-Cola Company is to refresh the world in body,

mind and spirit

Bringing to the world a portfolio of quality beverage brands thatanticipate and satisfy people's desires and needs.

Coca-Cola Zero has been one of the most successful product

launch hes in Coca-Colas history

It has soft drinks, energy drinks, juice drinks, sports drinks, tea

and coffee, water and other drinks.

Coca-Cola Company follows the multi-domestic strategy for

operating their business.

After entering into a new market Coca-Cola Company try toachieve strategic goals and guide its daily activities with proper

observation.

Good points of Coca-Cola Company are brand promotion,

alternative products selections, Provision of multimedia product,

catalogue pages and so on.

CONCLUSION

Being in such a tense competition (just like the brand Coca-Cola),

Coca-Cola should not take the direct and tough attack upon it. There is

no good to either side. The best way is to keep a peaceful relationship

with it and always compare with others; we should find their

disadvantages and show our advantages on this aspect. Then by and

by, the people would think ours is betted Of course the most important

rule is to improve ourselves to meet the consumers. An organizationsstrategic thinking is governed by the situation prevalent in its external

Page43


44/45


environment. The external environment comprises of the strategic

moves adopted by the organizations competitors. The organization

has to carefully study these moves and accordingly devise strategies

to gain competitive advantage. For the same, the organization needs

to conduct an industry and competitive analysis. The paper discusses

the steps and processes involved in the same. In formulating business

strategy, managers must consider the strategies of the firm's

competitors. While in highly fragmented commodity industries the

moves of any single competitor may be less important, in

concentrated industries competitor analysis becomes a vital part of

strategic planning.

REFERENCES

Cooper, R. D., Schindler, S. P. (2001), International Business Research

Method Seventh Edition, New York: McGraw-Hill Irwin

Page44


45/45


Gerard Prendergast and Leyland Pitt (2007) International Journal of

Strategic Management: a World Issue, Vol. 26 No.6, 1996, pp. 60-72.

MCB University Press.

James Prendergast and Eammon Murphy and Malcom Stephenson

(1996) International Journal of Quality & Reliability Management,

Vol. 13 No. 5, 1996, pp. 77-90, MCB University Press.

Rose Sebastianelli and Nabil Tamimi How Management Strategies

Defining Quality, Vol. 19 No. 4, 2002, pp. 442-453. MCB UP Limited.

Annual Report of Coca-Cola Company (2005-2009)

www.coke/homeContent.asp.htm

17320694 Strategic Management Issues of Multinational Companies MNCs a Case Study on CocaCola...

Documents

Transcript of 17320694 Strategic Management Issues of Multinational Companies MNCs a Case Study on CocaCola...