Globalization has been advancing at a higher rate compared to any other period in the past. Globalization gas facilitated internationalization (Giddens, 1999; Hill, Cronk and Wickramasekara, 2008). Most business enterprises are joining the international markets, a process known as internationalization.
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There are many reasons that motivate organizations to enter the global market, but the most common is the need to search for a wider market for their products and increase their level of income (Oviatt and McDougall, 1994). Firms join the international market in search for competitive advantages that will enable them improve their performance.
It is imperative to note that globalization is not the same as internationalization. The two have been confused by many people, or they have been wrongly used interchangeably. Globalization refers to the integration of economies in the world where various national economies come together to form one global economy.
On the other hand, internationalization is the increasing significance of the international trade and relations (Daly, 1999). Through internationalization, the rate at which globalization advances will increase since multinationals are significant in the integration of the global economy. This article focuses on internationalization of Coca- Cola. The paper gives a brief description of the company, followed by it internationalization process.
Overview of Coca- Cola
The Coca- Cola Company is a multinational that produces non-alcoholic soft drinks and syrups. The company is based in Atlanta, Georgia in the United State of America. It is one of the oldest and biggest multinationals in the world today. Coca-Cola was founded in the year 1886 by an American pharmacist known as John Pemberton. The company has over 500 brands, with drinks being sold in all nations across the world except in Cuba and North Korea.
The carbonated soft drinks are sold in restaurants, stores, as well as vending machines. The brand name Coco-Cola together with its formula were bought in the year 1889 by a man known as Asa Griggs Candler. Candler later incorporated the company in the year 1892. The company usually produces syrup concentrates and then sells them to Coca-Cola bottlers who are found in all over the world. It is reported that Coca-Cola serves over 1.7 billion drinks daily from across the world (The Coca-Cola Company, 2013).
Mission and Vision statements
The Coca- Cola Company’s roadmap begins with its mission. The mission statement is divided into three sections. It states as follows: “To refresh the world….To inspire moments of optimism and happiness…To create value and make a difference” (The Coca-Cola Company, 2013). The company’s mission guides the company’s actions.
It states the purpose of the company and is the basis upon which decisions are made. Coca-Cola’s mission states that the company is committed to global business. The decision by the company to go international starts from its mission in that it intends to refresh the world.
In addition, the company also has a mission to make its customers happy. Therefore, its products are aimed at maximizing consumer satisfaction. The company produces what customers need and, therefore, it has to carry out careful market research to learn what is required by customers. Finally, Coca-Cola is committed to creating value and making a difference. This calls for innovation and creativity.
Summarising the company’s vision, Coca-Cola aims at creating a favourable work environment to aid the development of employees, increase their productivity and maximize its profits. The company creates customer satisfaction through portfolio production and creating partnerships to win a large share of customers in the market (The Coca-Cola Company, 2013).
The company aims at exploring the international market in order to maximize its profits. Coca-Cola focuses on the needs of its consumers, as well as the needs of its franchise partners who are distributed around the world (The Coca-Cola Company, 2013). In addition, the company also aims at possessing a world view, as well as execute the market place daily.
In general, the company’s internationalisation business strategy is to increase the sales, as well as expand its national wide market share of the non-alcoholic drinks in order to maximize its earnings. Coca-Cola also has an objective of creating an economic value addition by enhancing its profits.
Internationalisation process of Coca- Cola
The Coca-Cola Company has adopted a number of processes in its internationalization. One of the strategies is formation of franchises in various nations across the world. Coca-Cola has franchises in almost every country, and these franchises help it in distributing its product.
The Uppsala model is very handy in helping understand the internationalisation process. Under this model, a company adopts investment in the foreign markets. Uppsala model of internalization was coined by the economists Johanson and Wiedershiem-Paul in the year 1975 at Uppsala University and then complemented by Johanson and Vahlne in the year 1977. Under this model, an organization expands its investments in the foreign market in a gradual manner (Johanson and Vahlne, 1977).
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Uppsala model can be applied in different forms. An organization can form partnerships with other established organizations in various countries. The two companies then sell their products together. For instance, if a company like Coca-Cola acquires or merges with another company in a different country, the products of Coca- Cola are sold in the outlets of that company.
This form of investment is usually successful since an organization trades with another organization whose brand name has already been established. Therefore, Coca-Cola is saved the costs of advertising its brand to create awareness of its products. The company may go ahead and acquire the other company it has partnered completely making it a subsidiary (Hennart and Reddy, 1997; Barkema and Vermeulen, 1998).
Coca-Cola has established subsidiaries that it has been acquiring for a long period. For example, in the year 1960 it acquired Minute Maid, a company that produces lemon and orange juice. Minute Maid is established in European countries such as Germany, as well as in America.
Since its acquisition, the company has been selling soft drinks produced by Coca-Cola. Coca-Cola has been able to extend its operations in Europe through the help of Minute Maid. In the year 1993, Coca- Cola acquired Thumps Up which is an Indian company. Other companies that have been acquired by Coca- Cola include; Odwalla, Fuze Beverage and Huiyuan Juice Group.
These acquisitions have played a very key role in internalization process of Coca- Cola (The Coca-Cola Company, 2013). The company is bound to remain competitive even in the future if it keeps this strategy of internationalization.
The other form of Uppsala internationalisation model is the establishment of manufacturing subsidiaries in the overseas countries (Blomstermo and Sharma, 2003; Erin and Gatignon, 1986). This has been the major internalization process of Coca-Cola. Coca-Cola has established manufacturing subsidiaries in form of franchises. Franchising entails making use of a franchiser’s trademark to sell one’s products.
This is an internationalization process that has been used by many other companies due to its perceived benefits (Madsen and Servais, 1997; Hennart and Park, 1993). Companies use franchising as a method of internalization since franchises make it easier for them to establish their businesses in the foreign countries. Multinationals can establish themselves within a relatively short period of time and at the same time spend little on direct investments (Oviatt and McDougall, 1995).
In addition, the company is able to create a global image by adopting a standard marketing approach. The franchiser gets the opportunity to learn and understand the foreign market. They are able to know the tastes and preferences of the local customers. This process has been very successful for Coca-Cola.
The company has gained competitive advantage over its closest rival, Pepsi. As stated in its focus on the market, Coca-Cola understands the market by listening, observing and learning it. This has been boosted by franchising partners and has facilitated its internalization process.
Coca-Cola has adopted the international strategy to integrate with the global market. The company transfers its valuable competencies to the nations whose competitors do not have such competency. It, however, centralizes its product development at the home company. The head company in the US is solely mandated with making Coca-Cola’s formulas. It then distributes them to all subsidiaries across the globe.
This syrup is the key to the company’s productions. The syrup is only produced in the home country and then sold to the bottlers in various countries. The host companies do not have competitors who produce the syrup, and this has helped the internationalization process of Coca-Cola.
As a result, the company does not face much pressure and its costs of operation are low since it does not spend much to promote its brand. This theory can be referred to as the Eclectic paradigm since it involves lowering the costs of transaction (Whitelock, 2002).
Impacts of internalisation actions to Coca- Cola
Internationalization is associated with many benefits to an organization. The benefits may differ depending on the internationalisation process a particular company adopts. It is important to note that mergers and acquisitions have also been beneficial in the internalization process of Coca-Cola.
One of the impacts of the internalization actions to Coca-Cola is the fact that it was able to create a global image faster and at a relatively low cost. Researchers have suggested that the cost of internalization has exceeded its benefits in most cases. However, Coca-Cola was able to overcome this fact through its franchising process.
The other impact of internalization actions of Coca–Cola is that the company is able to access a large market where it can sell its products. It is estimated that Coca- Cola serves approximately 1.7 billion drinks every day. The main objective of any organization is to maximize its profits through maximum sales.
Coca- Cola is able to achieve this through internationalization. Today, Coca-Cola is one of the largest multinationals in terms of revenues and size. Through internationalization, the company has acquired knowledge from the experiences it learns from various markets, thus enhancing its major competencies since different markets have different requirements.
An organization has to be aware of the various requirements in order to succeed. This facilitates innovation, which is a major factor in enhancing organizational competencies. Through internationalization, Coca-Cola is able to hire highly skilled employees who facilitated innovation and high quality production. The company has been able to transfer knowledge and skills from the subsidiaries to the main headquarters, thus enhancing its production.
Finally, internationalization has a major impact on the organizational culture (Ghoshal & Nohria, 1993). For multinational firms to succeed in international markets, they have to learn and practice the culture of the destination market. Coca-Cola’s culture was significantly impacted by internationalization. The company had to manage a diverse workforce and at the same time produce drinks that are acceptable to various cultures (Kogut and Singh, 1988). This led to Coca-Cola becoming a divergent multinational.
Impacts of Coca-Cola’s internationalization to the broader community
The mission of Coca-Cola Company states that it aims at making the world happy, as well as inspiring moments of optimism. Therefore, its internationalization extended happiness beyond the United States of America to many other nations across the world. The Coca-Cola soft drinks are used by people during recreation and social events.
Hence, the internationalization of Coca-Cola has had a positive impact on consumers around the globe. The company has created employment for many people. It is estimated that the company has over 55,000 employees in all its franchises across the world. It is through internationalization that the company is able to expand its operations and create employment opportunities. This has improved the living standard of people who work in the company. Their purchasing power has increased and this has had a positive impact on the economy since the flow of money is boosted (Brouthers and Brouthers, 2000).
Internationalization of Coca-Cola has also had an impact on its competitors. It affects the companies that produce juices and soft drinks in the countries where it establishes operations, as well as in the United States of America. It has been a wake- up call for Coca-Cola’s closest rivals such as Pepsi among others.
Coca-Cola’s internalization has helped it gain a large share of the market, thus the sales of its competitors as well as those for companies that produce juices and other beverages. In Europe, Coca-Cola has been competing with coffee retailers since coffee is usually highly demanded in those countries. Coca-Cola sells its products at a low price to influence consumers to buy them and forego coffee.
Internationalization is the process by which a company joins the international trade. This is a process that has taken root in this century as companies seek to enter new and promising markets across the globe. From the above analysis, a number of lessons can be learnt about internationalization.
First, a company that embraces internationalization is able to access a larger market and make more sales and income simultaneously. Secondly, internationalization opens the path for innovation within the organization. Therefore, a company is able to produce high quality goods. Thirdly, internationalization is an expensive exercise and a company should have the ability to select the best process when internationalizing its business.
Finally, managers of a company operating in the international market should have the ability to manage diversity since they encounter people with different cultural backgrounds as their customers and employees. I think the above lessons are important for the companies’ future decisions since they will be in a better position to consider the best internationalization process to adopt. Companies should weigh between the market they are likely to access and the cost of internationalization before making a decision.
Companies should also be aware of the high costs involved in the internationalization process and be prepared to take the investment risk. It is important to note that internationalization is associated with many uncertainties. Further, organizations should be aware of the diverse cultures they are likely to encounter in the international market and be prepared to deal with the diversity effectively.
One of the insights I got about international business is that it is worth investment since it helps a company increase its sales volume. An outstanding brand image markets a company internationally. The competition in the international market is high and, therefore, companies need to be ready to respond accordingly.
Since the beginning of the 20th century, many scholars and researchers have concentrated more on international business since globalization has been at its climax. The global economy is highly dependent on multinationals and, therefore, there are policies that support internationalization.
For a company, internationalization is all about finding a larger market for its products in order to make more profits. Coca-Cola adopted Uppsala internationalization model and adopted the franchising option, which have been highly successful. In addition, Coca-Cola has made a number of mergers and acquisitions in its internationalization process.
The company has been led by its mission statement in its internationalization. Internationalization has a number of benefits to organizations. Organizations are able to enhance innovation and at the same time increase their sales. However, the process is faced with a number of challenges, most notably the high costs involved and the uncertainties associated with it.
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