Question One
The MNE’s strategic challenge is to take advantage of all three sources of worldwide competitive advantage, which are scope economies, national distinctions, and scale economies, to optimize worldwide efficiencies, global learning, and multinational flexibility (Bartlett & Bearnish, 2018). Coca-Cola is an organization considered to be among the top pioneer companies across the world. Going global has allowed this organization to maintain a competitive edge over its rivals in addition to increasing its revenue streams.
The Coca-Cola Company produces and sells beverage bases, syrups and concentrates to bottling operations (Pendergrast, 2013). So far, it has managed to establish a Bottling Investments Group that strategically devotes to choose bottling operations which it takes temporarily into the Company’s ownership (Schlegelmilch, 2016). Furthermore, Coca-Cola’s large product assortment is considered among its main strengths in maintaining a global competitive edge. The demand for health-friendly products has increased in the 21 st Century and Coca-Cola has developed its variety of health-friendly beverages.
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As a global organization, Coca-Cola experiences an operating setting characterized by volatility and diversity. Some of the risks and opportunities brought about by this particular setting are prevalent to all organizations, but others are special to organizations that operate across national territories (Bartlett & Bearnish, 2018). Within the Coca-Cola Company, different demographic factors appear to be relevant to their market industry. Age is a factor that is prioritized as the company has to adhere to certain regulations and laws, for instance, advertising to children (Pendergrast, 2013). Coca-Cola states that it will not advertise their products to children or exhibit them on children television shows as they contain high amounts of sugar, thus are unhealthy.
The political risks affecting the Coca-Cola Company generally constitute distinct regulations and rules that it needs to adhere to in order to not break the law. The organization is monitored by over 200 health agencies and governments which also incorporate Muslim nations where the brands need to have a Halal stamp (Schlegelmilch, 2016). Notably, the diversity within and without the Coca-Cola Company has exposed it to various stimuli, allowing it to develop diverse abilities, and provide it with wider learning opportunities than are present in a solely domestic company. Additionally, Coca-Cola’s initial stock of knowledge has provided it with the strength to establish organizational diversity.
Question Two
A description of the strategic tasks that organizations can use to respond to strategic challenges has been provided. Organizations considered being among the key global players in their business, need to concentrate on defending their supremacy while constructing novel sources of competitive advantage. For those that are smaller but aspire to global competitiveness, the strategic task is to establish the resources and abilities necessary for challenging the entrenched leaders (Bartlett & Bearnish, 2018). On the other hand, organizations that concentrate on their national markets and lack the resources or motivation for global expansion are tasked with safeguarding their local status from others that have the advantage of being multinational organizations. The strategic task that Coca-Cola Company uses most is that of defending their global dominance.
Over the years, the Company has managed to produce products that are easy to make and quite affordable. They have also set up a business model in which every party involved, such the servers, bottlers, and transporters, makes profits. It is their business strategy that has put them amongst the leading organizations worldwide. Recently, the shifting external forces such as political and social factors, have led to serious hardships even for multinational organizations that previously enjoyed firm historical statuses in their businesses globally (Pendergrast, 2013).
In the upcoming competitive setting, Coca-Cola can no longer depend on its historic capability to take advantage of worldwide efficiency, global learning, or multinational flexibility. That is why its present challenge or task is to safeguard and enhance the specific strength it had while at the same time developing its other capabilities.
Pepsi is perhaps the closest and biggest rival of Coca-Cola Company, a brand that has witnessed growth in organic revenue in 2017 (Schlegelmilch, 2016). The United States is Pepsi’s largest market where it is engaged in stiff competition with Coca-Cola. The latter’s complicated balancing act of safeguarding its already existing competitive advantages while creating novel ones requires it to adhere to two main principles. Firstly, it must focus on defending and reinforcing their current capabilities and assets as on creating new ones. Secondly, Coca-Cola Company is looking for ways to compensate for its insufficiency or approximate Pepsi’s source of competitive advantage, rather than trying to ape its asset framework or task design (Bartlett & Bearnish, 2018). The company’s strategic task is quite evident in its advertisements and promotions.
Question Three
Coca-Cola Company can use any or all of the strategic tasks more effectively by trying to approximate the rivals’ worldwide competitive advantages by connecting some form of coalition with a viable worldwide organization (Pendergrast, 2013). Looking at the company’s history, it is clear to see that it has already implemented or used some of the strategic tasks highlighted. For instance, having evolved from a small national player to a key global competitor, Coca-Cola challenged the dominance of conventional leaders in their businesses (Schlegelmilch, 2016). The real processes adopted to manage such huge changes tend to vary from one organization to the next. Some organizations grow through acquisitions and mergers, while others grow through interior development. Despite these distinctions, each follow a common step by step approach to establishing their competitive edges.
Apart from the task of defending its dominance in the global market, Coca-Cola need to consider safeguarding its domestic niches from global players who are in possession of higher resources and various sources of competitive advantage (Bartlett & Bearnish, 2018). It is quite tempting for a multinational organization to neglect its local functions, and this tends to create issues. A perceptive manager of a local Coca-Cola Company can make use of the brand’s reputation to influence industry structure or market situations to the national organization’s advantage. Some of these actions might incorporate influencing what customers prefer to demand a more locally tailored or service-intensive product (Pendergrast, 2013). Most of the organizations trying to enter the Japanese market, with the inclusion of Coca-Cola, have experienced this form of defensive strategy by local companies.
A second strategy would be to for the domestic sub-companies to try and offset the rival’s worldwide advantage. As already indicated, Pepsi is a direct competitor of Coca-Cola and some predict that in the coming years, it might actually surpass it and instead be recognized as the leading soda beverages organizations of the world (Schlegelmilch, 2016). They can do this by gaining government sponsorship to create equal worldwide capabilities through financing of R&D, capital investments, and subsidizing exports (Bartlett & Bearnish, 2018). Lastly, by exchanging or pooling technology, production capability, and market access, the smaller Coca-Cola subsidiaries can gain some measure of defense against worldwide competitors such as Pepsi, Red Bull, and Dr Pepper Snapple.
Question Four
Coca-Cola Company integrates globally as per the Adaptation-Aggregation-Arbitrage (AAA) triangle presented in Ghemawat (2007). Adaptation refers to the creation of worldwide value by transforming one or more components of an organization’s offer to meet local requirements or likings (Pendergrast, 2013). This is perhaps the most broadly utilized worldwide strategy as some level of adaptation is vital for almost all products in all parts of the globe. A good illustration is with Coca-Cola’s brand taste. The taste of the soft drink in Europe is quite different from that in America, reflecting distinctions in the quality of water, and the type and quantity of sugar added (Schlegelmilch, 2016). Coca-Cola has also had to make some modifications to business positioning, anticipations for victory, and alterations to policies.
Coca-Cola Company has also adapted its branding, marketing, and packaging strategies to be triumphant in different nations. It has utilized acquisition or key local brands as a main strategy to establish links with the consumers and push its base brand along with the famous local brands (Bartlett & Bearnish, 2018). With regard to Aggregation, the company has implemented this particular approach in an effort to expand beyond the United States and attain global economies of scale.
As evidence, Coca-Cola offers over 350 brands apart from its Coca-Cola beverage to meet customer preferences (Schlegelmilch, 2016). Notably, the company boasts of a long history of acquisitions, and recently announced its presence in Burma. This is a novel geographical place targeted by Coca-Cola as soon as Burma’s suspension on Western sanctions has been lifted.
Regarding Arbitrage, Coca-Cola is a good illustration of Economic and Geographic arbitrage (Pendergrast, 2013). This is because it outsources and manufactures majorly in China, having about 39 facilities across the globe. It also has manufacturing plants with local bottling rights in most the nations as a way of minimizing the cost of production. Additionally, Coca-Cola Amatil which is based in Australia seeks to take advantage of the cultural aspects of the country via introduction of cost effective items and products which will not only be appealing for potential consumers, but also viable health-wise (Schlegelmilch, 2016). Overall, the Coca-Cola Company in Australia plans to pursue its operations through manipulation of the market target which is lacking in regional players.
Question Five
Based on the research carried out this week, internationalization is a process where organizations evolve their foreign involvement in small steps, by acquiring knowledge locally, the steadily gaining knowledge and expanding to nearby nations (Bartlett & Bearnish, 2018). Notably, this process varies with regards to the size of an organization. For instance, SMEs tend to be more flexible, easier to adapt to transformations, and more risk-seeking compared to their MNEs counterparts. It is presumed that the more global an organization’s mindset is, the better they get in embracing a worldwide approach to international markets and to pursue a worldwide strategy (Pendergrast, 2013). The internationalization mentality appears to mean to overcome the cultural limitations and ease the commitment process of organizations’ business network internationalization process by recognizing opportunities and establishing trust.
It is also argued that a company’s worldwide mindset is only effective if it surpasses the individual mentality to the organizational one. This is to say that the whole organization has to take on a worldwide mentality so as to be effective internationally (Schlegelmilch, 2016). Under the internationalization mentality, target nations are chosen based on their cultural proximity to their local market. Moreover, key leaders hail from the parent nation and are also chosen based on their foreign experience and language efficiency. With this in mind, I no longer believe this kind of mentality, and feel that the Multinational Mentality is the correct one.
Under Multinational Mentality, the distinctions between national markets are addressed. Organizational strategy constitutes the nationally, multiple oriented strategies of subs (Bartlett & Bearnish, 2018). This particular mentality is founded more on marketing rather than on production efficiency. Manufacturing plants at the local level are constructed more as a way of overcoming trade restrictions, establishing a presence near strategic resources, taking advantage of political associations, and improving marketing (Pendergrast, 2013). Notably, operations of autonomous subs are quite expensive due to the duplication of activities in various nations. Therefore, the Multinational Mentality is more suitable in industries where pressures for cost minimizations are not important.
Conclusion
Internationalization is a strategy that organizations today can utilize in increasing their profits. Coca-Cola Company is a good illustration of a company that has its operations worldwide, boasting of branches across five continents in over 200 nations. The paper has also looked at an alternative approach, the multinational mentality, which Coca-Cola can consider utilizing in order to maintain its competitive advantage. This will enable it expand its market and create a firmer worldwide dominance.
References
Bartlett, C.A., & Beamish, P.W. (2018). Transnational management. Cambridge: Cambridge University Press.
Pendergrast, M. (2013). For God, country, and Coca-Cola: The definitive history of the great American soft drink and the company that makes it . New York: Basic Books.
Schlegelmilch, B.B. (2016). Entering global markets . New York: Springer International Publishing.
