Literature Review of Coca Cola Company PDF

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Table of Contents 1.

Assignment 3 21/6/20 Introduction................................................................................................. 4

2.

Literature Review............................................................................................................................. 5

2.1.

Three Stages of MNE Life Cycle.................................................................................................... 5

2.2.

Birth............................................................................................................................................ 5

2.3.

Growth........................................................................................................................................ 6

2.4.

Decline........................................................................................................................................ 6

3.

Background analysis........................................................................................................................ 7

3.1.

Coca-Cola Company’s stakeholder............................................................................................... 7

3.2.

Types of stakeholders.................................................................................................................. 7

3.3.

Stakeholders of Coca-Cola Company............................................................................................ 8

3.3.1.

Customers............................................................................................................................... 8

3.3.2.

Owners (Shareholders)............................................................................................................ 8

4.

Situation Analysis............................................................................................................................. 8

4.1.

STRENGTHS................................................................................................................................. 8

4.2.

WEAKNESSES............................................................................................................................... 9

4.3.

OPPORTUNITIES........................................................................................................................... 9

4.4.

THREATS.................................................................................................................................... 10

5.

Discussion...................................................................................................................................... 10

5.1.

Does MNE help or harm host countries?................................................................................... 10

5.2.

Positive impact of MNE on host countries:................................................................................ 10

5.2.1.

Providing employment.......................................................................................................... 11

5.2.2.

Building Competence and Skill:.............................................................................................. 11

5.2.3.

Negative impact of MNCs on host countries:......................................................................... 12

5.2.4.

Volatility in Exchange Rate:.................................................................................................... 12

5.2.5.

Repatriation of Funds............................................................................................................ 12

5.2.6.

Implications to International Business................................................................................... 13

Reference list......................................................................................................................................... 14

Abstract Multinational enterprises (MNE) are companies operating in over more than one country. They manage manufacturing establishments or provide services in at least two countries. MNE perform a significant part of their operations in other countries. The chosen MNE for this assessment is the world’s top soft drink beverage company, The Coca Cola Company. An overview of the type of stakeholders and Coca Cola Company’s stakeholders are shown in the background analysis. The three MNE life cycle of Coca Cola Company was also discussed followed by the birth, growth and decline of the company. Other than that, a brief definition of MNE was given to attain this purpose. Some of the positive impacts as well as negative impacts of the operation of MNE in the host country were then analysed particularly under discussion. Lastly, the SWOT Analysis is a framework to identify the strengths, weaknesses, opportunities and threats in Coca-Cola Company.

1. Introduction A multinational enterprise (MNE) is specified as an enterprise that operates and manages production establishments based in atleast two countries using the term "enterprise" to draw focus to the highest level of coordination in the hierarchy of business operations (Caves, 1996). Over the years, MNEs have evolved in its own way, adjusting and implementing measures to enhance progress in changing global environments in all aspects. One of the biggest MNEs today is the beverage brand Coca-Cola as it is commonly sold as well as being present in almost every category of beverage (Coca-Cola Company 2019).

The beverage had its main source of success in 1886 from pharmacist Dr John S. Pemberton invented the formula to the beverage (Hayes 1996) as he was in search of a cure to his morphine addiction in downtown Atlanta, Georgia (Bellis 2019). By 1889, Asa Candler took complete ownership of the company after Pemberton fell ill and decided to sell off his rights to the formula (Abrams 2012). Under Candler’s leadership, it positively impacted the company’s sales from approximately 9,000 gallons of syrup in 1890 to 370,877 gallons in 1900 (Pallardy 2011). Through their multinational network, more than 700,000 employees distribute those products every day to consumers and today, they have disseminated into the global market with over 500 brands globally (Coca-Cola Company 2019).

The American corporation has made its own successes in the market, albeit there were several complexities and challenges. The product is known for its Cola wars with its competitor Pepsi (Yoffie & Wang 2002) in which they faced a decline in its market share due to rivalry between upcoming competitors. This comes to the question, “What constitutes the successes and failures of multinational corporations?” as asserted by Jiang (2020). It is evident that multiple factors may determine the business performance of MNEs as different factors may change the global market and unforeseeable changes such as environmental conditions and political conflicts may unprecedentedly occur.

2. Literature Review An in-depth and critical review of existing literature on the topic is important for better understanding the subject of the 3 stages of MNE. First, the literature review will concentrate on defining key topics relevant to MNE in order to provide a well-rounded overview of this specific topic.

2.1. Three Stages of MNE Life Cycle Anything that evolves and develops over time, including any stage from birth to death, can be said to have a life cycle. An organization like a business is no exception, starting with the creation of the new entity and followed by the company's birth, growth and eventual decline when the business is being sold or closing its doors.

2.2. Birth At this point of development in the industry's life cycle, the industry's product or service is either launched for sale in its infancy or is still being produced. The need for birth-stage funding is probably at its highest cost, as businesses struggle to build up their businesses and spend a lot of money on research and development (Smith 2020). According to World of Coca Cola (n.d.) The history of Coca-Cola started in 1886 when the interest of Dr John S. Pemberton, an Atlanta pharmacist, prompted him to develop a distinctly flavoured soft drink that could be served at soda fountains. He produced a flavoured syrup, took it to the pharmacy in his neighbourhood, where it was mixed with carbonated water and considered "excellent" by those who sampled. The soft drink was first sold to the public on May 8, 1886 at the Jacob's Pharmacy's soda fountain in Atlanta. Every day, about nine portions of the soft drink were available. The first year 's revenues added up to about $50 in total. But the first year of operation wasn't much of a success, because it cost Pemberton more than $70 in expenditures to make the beverage, causing a loss (Bellis 2019).

2.3. Growth If the company increases the attention from a larger section of the market gradually, the business moves into a stage of development where productivity remains to increase. Complementary products are now beginning to become market-accessible, so that buyers have more choices when consuming the product and replacing it (Anon 2020). The falling prices would then also help to stimulate demand for the industry's products or services, which will then accelerate the industry 's development. However, the falling rates cause a need for effective operations such as changing strategic forces; taking the company to the next step in the industry's life cycle (Smith 2012). This applies to Coca-Cola Company. According to Bellis (2012), another Atlanta pharmacist and businessman, Asa Candler, purchased the Coca-Cola company from Pemberton in 1887 for $2,300. By 1889, Candler secured the formula rights, as well as the name and brand "Coca-Cola." In 1892, he established The Coca-Cola Company and extended the first syrup manufacturing plant beyond Atlanta which was in Dallas, Texas. Other branches opened the next year in Chicago, Illinois and Los Angeles, California (Coca Cola Company n.d.). As demand for Coca-Cola rose, the company expanded its facilities rapidly. The first headquarters building was built in 1898 solely dedicated to syrup production and business administration (Coca Cola Company n.d.). Coca Cola 's marketing and promotions led to a large rise in sales, and in 1894 a Mississippi businessman named Joseph Biedenharn began bottling the drink, making it portable. The Coca-Cola Company was sold to a group of investors in 1919, and later expanded the company, bringing Coca-Cola to the rest of the world, creating an internationalization (Yafai 2016).

2.4. Decline Profits are declining at a high rate at this stage when the life cycle is ending, and the company needs to start its escape route. If the company has nothing left at saturation level, it will remain to sustain on within the smaller shrinking market. In addition, mergers and consolidations are often set up and appear to be feasible approaches for takeover or diversification (Luenendonk 2017). According to Huddleston (2019), The Coca Cola Company changed the classic recipe to produce a much sweeter taste in an effort to improve sales and cope with its biggest competitor, Pepsi. However, it backlashed against them when consumers hated it and caused the company to lose $34 million (Collins 1995). It only took the organization 79 days to continue producing Coca-Cola Classic. New Coke however did

not die there. The name of the soda has been changed to Coke II, and it distributed until 2002 (Wynne 2020).

3. Background analysis The MNE life cycle reflects the different phases within a business in which businesses work, grow, prospect and slump. Over time, the rise of the revenue of a company is used to map the life cycle. The distinct stages of a life cycle in the industry are initiation, growth, maturity, and decline. Sales usually start gradually at the initial level, then quickly take off throughout the development process. Sales then begin a steady decline upon maturity levelling out.

3.1. Coca-Cola Company’s stakeholder Stakeholders are groups, people, or organisations that have an indirect or direct stake in an organisation in the form of support. Stakeholders impact and are similarly influenced by an organization's actions, aims, and policies (Kaler, 2002 p.93). As such, a company’s main stakeholders include consumers, creditors, workers, directors, unions, vendors, the government and its agencies, and the society where the company receives its assets. Furthermore, the stakeholders are not the same, so different stakeholders are entitled to specific requirements from an organisation (Corporate Finance Institude n.d.). For instance, customers of a firm are entitled to impartial trading practices however they are not authorized to the similar consideration as the employees of the firm. Hence, stakeholders are a set of individuals with an interest in a commercial organization (Lumen n.d.).

3.2. Types of stakeholders According to Minning (2019), stakeholders fall into two different categories known as the internal and external stakeholders. However, the two categories of stakeholders as the secondary stakeholders and primary stakeholders. For instance, a firm’s employee can be grouped as an internal stakeholder but when he becomes a customer of the same company, he becomes an external stakeholder.

3.3. Stakeholders of Coca-Cola Company 3.3.1. Customers Consumers come under the control of external stakeholders (Boundless 2015). According to Coca Cola Company's official website (n.d.), consumers in Coca-Cola Company are of great interest because they have a strong influence on the market plan. Equally, customers are always keen to purchase goods from the companies they know. Therefore, consumers are very important because each company is dependent on the consumers they have. In fact, if there are no buyers, then there would be no business ever. According to Newman (2016), Coca-Cola promotes its drinks with touching family and friend messages. The bottles themselves suggests you share coke with someone special. Consumers identify with those feelings, so buying a coke becomes mean so much more.

3.3.2. Owners (Shareholders) Coca-Cola Company has its owners who are part of the internal stakeholder group; therefore, they are considered the primary stakeholders. Likewise, Coca-Cola Company owners have a clear interest in the company as all of the operations revolve around their capital that the company finances. For example, as Coca-Cola makes profits and their investments increase interest, more revenue will ultimately be gained by the investors. Nonetheless, if the Company has difficulties and it causes mistakes, the shareholders will eventually lose income. As such, Coca-Cola Company shareholders or owners influence the company's decision making and business processes. According to Coca-Cola Hellenic Bottling Company (n.d.), since 2001, Coca-Cola Company has given their shareholders €3.8 billion in cash back.

4. Situation Analysis 4.1. STRENGTHS Coca-Cola is the world 's largest non-alcoholic beverage manufacturer, distributor, and bottling company. Some of the strengths of the company is that it owns 42% of the market share based on the volume rating of carbonated soft drinks (Maverick 2020).

While strengths and weaknesses are perceived as internal factors that influence the operational activities, opportunities and threats of a business are external factors (Thompson n.d.) These are qualities of the company that propel it towards the strategic objectives. Coca-Cola Company has several strengths that facilitate the achievement of the latter, with the objective of achieving a globalisation milestone. These include brand quality, large scale of operations and strong growth in revenue. According to Forbes (2016), the market share of carbonated soft drink (CSD) industry is dominated by two powerhouses: Coca-Cola Company and Pepsi Co. These two companies are the two major carbonated beverage companies. Coca-Cola Company controlled just under 50 per cent of the worldwide soft drink industry in 2015, while PepsiCo dominated the market by slightly over 20 per cent (Statisca 2015). That gives it a more advantage over its competitors.

4.2. WEAKNESSES These are internal factors which function as barriers to an organization's achievement of its goals. Coca-Cola faces some factors in certain places as misleading advertising, decreasing profitability and slow performance. These are internal factors which function as barriers to an organization's achievement of its goals. According to Kell (2017), Coca Cola Company was sued for alleged propaganda and misleading advertisement thus affecting their brand image. The company has been criticized and filed for its technological vulnerability in the use of health-concerning ingredients. The brands were depicted to harbour excess sugar and phosphoric acid (Dangers Alimentairies 2011). According to Watson (2013), Coca-Cola intentionally refused to reveal that phosphoric acid is used either as an artificial flavoring or as a natural preservative on its label.

4.3. OPPORTUNITIES These are considered external environment issues on which an organization can capitalize to enhance its profitability while stabilizing loyal customers and market base. Such opportunities include rapid population growth, bottle water emergence and corporate acquisitions. The company purchased the biggest bottling business in North America in 2010, thus improving quality packaging to draw more consumers (Merced 2010). In fact, with the modern world becoming more health-sensitive, Cola-Cola Company started manufacturing bottled water. Dasani, a bottled water brand, was started in 1999 by The Coca-Cola Company. Dasani is the U.S. top-selling still bottled water brand, the highest-selling bottled water in the United States. The Dasani generated sales of $1.05 billion in 2019 (Reiff 2020).

4.4. THREATS Though firms such as Starbucks (SBUX) and Dunkin' Brands Group (DNKN) do not compete specifically with Coca-Cola, these firms do put a dent in the market share of the company. The chains offer healthier options, exclusive choices, and consumer satisfaction benefits that Coca-Cola doesn't readily equal (DeFranco 2015). In addition, smaller franchises and retail chains provide private-label substitutes for traditional Coke products to patrons, allowing these companies to deliver beverages at a lower price. Industry reports show that future consumers will continue to be drawn away from simple drink choices in favour of personalized alternatives which can offer greater nutritional benefits (DeFranco 2015).

5. Discussion A business located in another country but operated in the home country is called Multinational Enterprise (MNE), an entity that has sections or facilities in other countries than in the home land. For a number of reasons such as increased market share and the resulting economies of scale, these companies opt to expand into the global arena. It can save money, increase productivity and strengthen management. Although multinational enterprises (MNE) are believed to have a heavy influence on economic growth of nations and the host countries, there are also a few distinct disadvantages for multinational businesses.

5.1. Does MNE help or harm host countries? MNCs' presence and activity in developing countries has been the subject of controversy during development discussions. According to Borensztein, Gregorio, and Lee (1998)."Governments are liberalizing MNC regimes as they have come to associate MNCs with positiv...