International Business of Coca Cola and Unilever

We are moving away from a world in which national economics were relatively self confined entities, isolated from each other by barriers to cross border trade and investments; by distance, time distance, and business language, and by national difference in government regulation, culture and business systems. But now a day’s border are more free for trade the goods and services. Transportation has made the international business easier. Government regulation has decreased a fair dell. For those reason countries are now moving more toward international business.

COCA-COLA and UNILEAVER is the giant in global market.

Coca-Cola has business in more than 200 countries and Unilever has business in more than 100 countries. In this term paper we have discussed about how this two companies operate in different countries, what strategy they follow for doing business. We have also discussed how they follow government regulation, different culture, values and norms. How they help other nations economic growth. We also try to evaluate how they invest in foreign market.

What strategy they follow in investing in other countries, they ways of their global expansion or the ways to enter in other markets.

INTRODUCTION

More than a billion times every day, thirsty people around the world reach for beverages for refreshment. All around the world, drinking beverage is like an entertainment for people. The first company that conducted its operation in the soft drink industry was Coca-Cola. As the world’s largest manufacturer and distributor of non-alcoholic beverages, Coca-Cola is certainly no stranger to global marketing.

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Established in the US, Coca-Cola initiated its global expansion in 1919 and now markets to more than 200 countries worldwide. It is one of the most recognizable brands on the planet and also owns a large portfolio of other soft drink brands including Schweppes, Oasis, 5 alive, Kea Oar, Fanta, Lilt, Dr Pepper, Sprite and Powerade. Since its beginning in the spring of 1886, Coca-Cola has grown to become the most recognized trademark in history. It’s world headquarters in Atlanta, Georgia.  Coca cola was invented in city of Atlanta in 1886. scientist named John Pemberton was experiencing with his new recipe. He put some secret ingredients and found it very tasty, so he took that to Jacobs pharmacy mixed it with carbonated water and put it to sale for 5 cent a glass.

Thus he invented greatest refreshment of all time BRAND NAME: Pemberton shared this formula with his bookkeeper frank robinson who named it coca cola and made its brand name on his own writing. This word spread around and 9 drinks were sold per day FORMATION OF COMPANY: In 1888,a businessman, Asa candler bought the secret formula and made the coca cola corporation. He was a marketing genius . by his aggressive marketing coca cola became one of the popular fountain drink in America. For years it served in soda fountain.

BOTTLING AGREEMENT: In1899, first bottling agreement was made. Thomas and Joseph obtained the rights of bottling coca cola for a sum of one dollar. But Mr. candler didn’t share the formula of coke. Only concentrated syrup was provided to bottlers, then they mixed ot with water and sweetener and filled it in water. Bottle style of coca cola became very famous. Agreements with bottling partners were made in different countries.

UNIQUE BOTTLE DESIGN: 1n 1916, unique design of counter bottle was made so that no one can imitate it. It became trademark status of US patent office. Today it is one of the most recognized icon in the world. By the end of 1920s bottle sales of coke were more than fountain sales.

TOP MANAGEMENT PHILOSOPHY Top management philosophy plays a major role in giving a true picture of purpose of Company, and way of their thinking. Their thoughts and strategies determine in which direction company should go. How they will cope up with the foreign market. Coca-Cola always thinks globally.

So every country they go to doing business, they carry the mission and vision with them. Vision and missions of Coca Cola Company is always fortune in having so committed, visionary and dynamic leadership.

VISION STATEMENT: “To maintain our reputation as the leading cola company in the world” No doubt that management is on right track in achieving this vision and coca cola is a well known brand in more than 200 counties. This vision guides coca cola in every aspect of business.

MISSION STATEMENT This mission declares coca cola’s purpose as a company.

•  To Refresh the World… n 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.

Under this vision and mission umbrella, Coca Cola’s strategies revolve around following key points: People: Motivating employees to become the most valuable asset of company. Portfolio: It includes quality beverages that are according to customer taste and needs Partners: Creating value by maintaining strong networks with suppliers and nurturing long term relationships with customers.

Planet: To ensure safe operations that is environment friendly. Profit: Maximizing long-term return to shareowners while being mindful of our overall responsibilities.

Maslow’s Hierarchy of Needs

In 1943, Abraham Maslow first published his famous “Hierarchy of Needs” to explain what energizes and directs human behavior. It is no accident that very successful brands, such as Coke, appeal too many of Maslow’s deficiency and growth needs and that these needs are linked to powerful emotions:

• Physiological Needs (Coca-Cola quenches thirst and hunger. It is” delicious”& “refreshing. ”)
• Safety/Security Needs (Coca-Cola is safe to drink worldwide. It is unchanging: “Classic Coca-Cola. ”)
• Belongingness Needs (You are part of a large group of people who love Coca-Cola. )
• Esteem Needs (Coca-Cola is recognized as a premium soft drink worldwide. It also call to mind memories of “special times and places. ”)
• Aesthetic Needs (All Coke ads and designs have a sense of order and beauty. )
• Self-actualization Needs (On the Coca-Cola web site, there are many stories on how. Coca-Cola has deeply affected people’s lives)

OPERETING STRUCTURE

Orientation: Whether and how much a company and its manager adapt to foreign cultures, depends not only on the conditions within the foreign cultures, but also on the attitudes of the companies and their managers. There are four types of orientation that a company can have Polycentrism, Ethnocentrism, Regiocentrism and Geocentrism. In Polycentric organization, the company believes that business units in different countries should act very much like local companies.

In Ethnocentrism is the belief that one’s own culture is superior to others. Coca Cola thinks globally, that is why they become the number one brand in the world. To operate in different country in different region, Coca-Cola Company has selected the combination or the hybrid of the host country practice, the companies familiarized practices, and some entirely new practices, that is Geocentric. The Company’s operating management structure consists of five geographic groups plus the Minute Maid Company.

1. The North American Group comprises the US and Canada.
2. The Latin America Group includes the Company’s operations across Central and South America, from Mexico to the tip of Argentina.
3. The Greater Europe Group stretches from Greenland to Russia’s Far East, including some of the most established markets in Western Europe and the rapidly growing nations of East and Central Europe.
4. The Africa and Middle East Group, the Company’s most populated operating group, encompasses the Middle East and the entire continent of Africa.
5. The Asia Pacific Group has operations from India through the Pacific region including China, Japan and Australia.

The Minute Maid Company – the Company’s juice business – is located in Houston, Texas. It is the world’s leading marketer of juices and juice drinks. 4. 0 GLOBAL EXPANTION 1886-1892: Coca cola made its beginning Atlanta in United States. Over the course of three years, 1888-1891, Atlanta businessman Asa Griggs Candler secured rights to the business for a total of about $2,300. Candler would become the Company’s first president, and the first to bring real vision to the business and the brand. 1893-1904: By 1895, Candler had built syrup plants in Chicago, Dallas and Los Angeles.

Inevitably, the soda’s popularity led to a demand for it to be enjoyed in new ways. In 1894, a Mississippi businessman named Joseph Biedenharn became the first to put Coca-Cola in bottles. 1905-1918: The Coca-Cola Company grew rapidly, moving into Canada, Panama, Cuba, Puerto Rico, France, and other countries and U. S. territories. In 1900, there were two bottlers of Coca-Cola; by 1920, there would be about 1,000. 1919-1940: The expansion of Coca-Cola overseas and in 1928 coca cola was introduced to the Olympic Games for the first time when Coca-Cola traveled with the U. S. team to the 1928 Amsterdam Olympics. 1941-1959: In 1941, America entered World War II. Thousands of men and women were sent overseas.

The country, and Coca-Cola, rallied behind them. President of company ordered that “Every man in uniform gets a bottle of Coca-Cola for 5 cents, wherever he is, and whatever it costs the Company”. 1960-1981: After 70 years of success with one brand, Coca-Cola, the Company decided to expand with new flavors: Fanta, originally developed in the 1940s and introduced in the 1950s; Sprite® followed in 1961, with TAB in 1963 and Fresca in 1966.

In 1960, The Coca-Cola Company acquired The Minute Maid Company, adding an entirely new line of business juices  to the Company. 1982-1989: Many innovations occur. Diet coke was introduced in 1985. 1990-1999: Many new markets and brands were introduced. Association with different sports was created. Olympic Games, FIFA World Cup, football (soccer), Rugby World Cup and the National Basketball Association. 2000-now: Coca Cola is touching local communities with the customers preferences and cultural priorities at the top of mind.

ENTRIY STRATEGY

The coca cola company is a pure global  enterprise. it has made its expansion possible throughout the world.

Export: coca cola has divided its world market in 6 big regions i. e. north America, Latin America, Asia, Africa Europe . different countries within each region export products to each other  Coca Cola used Hartsfield Jackson International Airport to transport goods to other countries in the world. Coca Cola used the Interstate Highway System to transport products across America. They used Coca Cola trucks and made deliveries to places everywhere. Coca Cola used Deepwater Ports to ship cargo filled with Coca Cola products to other countries.

Franchising: Coca-Cola Company is a franchise system. It’s bottlers are primarily local. In Bangladesh, for example, it has a Bangladeshi bottler. So the effectiveness of the company depends on the effectiveness of relationships with the bottlers and the Company. To manage franchise relationships, Coca-Cola has to have a geographic orientation. Therefore the organization is primarily geographic. Coca cola has franchising agreements with its 3oo bottlers throughout the world. In such agreements bottling plants are wholly owned by the host country. Franchisee just import concentrate from Coca Cola Company. Coca cola company has no managements right in franchisees.

Joint venture: To get the management right of bottling plant, Coca cola begin to expand by joint ventures with local bottling companies. For example it entered Chinese market with franchising mode of entry but then penetrated market through joint ventures.

HOW COCA-COLA MANAGES 90 EMERGING MARKET

The world’s largest beverage company has delegated major decision making to individual markets, but it maintains its global brand strategy through collaborative practices. Ahmet C. Bozer, president of the Coca-Cola Company’s Eurasia and Africa Group, has spent his career demonstrating how a large international company can build a strategy and structure itself to compete in emerging markets.

Coca-Cola is one of the most globally active international companies, deriving 80 percent of its sales from outside the U. S. , and it is therefore one of the most experienced in tackling emerging markets, including Egypt and Pakistan, where political tension renders the business environment uncertain and Coca-Cola’s strategy has proven resilient. Bozer, who was born and raised in Turkey, has worked for Coca-Cola since 1990 in various capacities, including operations and finance, as well as leading the Coca-Cola bottling company in Turkey.

He is currently based in Istanbul, where he oversees 90 markets, ranging geographically from India and South Asia through the Middle East and all of Africa, across Turkey and the Caucasus into the countries of the former Soviet Union. This territory accounted for 16 percent of Coke’s sales last year, for a retail value of US$10 billion, and Bozer expects that number to grow rapidly during the next decade. Like four other regional presidents, Bozer reports directly to Coca-Cola Chairman and CEO Muhtar Kent in Atlanta, Ga.

Bozer sat down with a Business Newspaper at the Coca-Cola offices in New York. S+B: Your late CEO Roberto Goizueta charged the company to “think global, act local” in its strategy. How do you accomplish this?  BOZER: I wish it was as easy as repeating the slogan. The key for international companies is finding the right mix of global and local in their operations. The Coca-Cola brand is global, but it must be locally relevant. We may be giving the same happiness message, the same brand architecture may be communicated, but it has to be done differently in each country.

S+B: Your structure has strong regional managers such as yourself, but headquarters in Atlanta maintains global responsibility for sales, finance, and marketing — and for specific product lines like water or juices. How do you manage this? BOZER: We are a franchise system. Our bottlers are primarily local. In Turkey, for example, we have a Turkish bottler. So the effectiveness of our company depends on the effectiveness of our relationships with the bottlers and our brands. To manage franchise relationships, you have to have a geographic orientation.

Therefore our organization is primarily geographic. Globally, we have five operating groups: North America, Latin America, Europe, Eurasia and Africa, and Pacific. At the same time, the juice business requires a different organizational structure than the sparkling beverages business. The raw material costs are high and fluctuate a lot, and there are opportunities to innovate more quickly; we may introduce four or five new variants of a juice in a given year. Thus, there is a matrix. A functional group in Atlanta is in charge of juices worldwide, but they work through the geographic organizations.

We are still evolving in finding the best local and global combination that works for us. When it comes to franchise relations with the bottlers, that is local. We have to make decisions in the local context with the right speed. Quality standards are both local (we adhere to all local government safety regulations) and global (we have our own global, rigorous, quality control standards). But we take advantage of our global properties and collaborate as a global team, bringing the best resources to bear on a specific issue. S+B: How do you manage disagreements between the field and headquarters?

BOZER: We have been working on it for many years. We all understand that nothing is as black-and-white as we’d like. Let’s say I’m hiring a function leader. I am the ultimate decision maker, but I know that any function leader must operate as part of the global team. He or she must be able to collaborate globally, and the global organization has to be comfortable with that candidate. This is where maturity is important. We emphasize a collaborative process because it makes the decision better. But our culture is purely focused on making the right choice, rather than defining my turf versus your turf. That allows us to make these decisions quickly.

BEING LOCALLY RESPONSIVE

One of The Coca-Cola Company’s greatest strength lies in the ability to conduct business on a global scale while maintaining a local approach. By contract with The Coca-Cola Company or its local subsidiaries, local businesses are authorized to bottle and sell Company soft drinks within certain territorial boundaries and under conditions that ensure the highest standards of quality and uniformity. The Company takes pride in being a world-wide business that is always local.

Bottling plants are, with some exceptions, locally owned and operated by independent business people who are native to the nations in which they are located. Bottlers provide the required capital for investments in land, buildings, machinery, equipment, trucks, bottles and cases. Most supplies are purchased from local sources, often creating new supply industries and areas of employment within local economies. The Company supplies the concentrates and beverage bases used to make its products and provide management assistance to help its bottlers ensure the profitable growth of their businesses.

Product manufacturing, quality control, plant and equipment design, marketing and personnel training are just a few of the areas in which the Company shares its expertise.

ENVIRONMENTAL ANALYSIS

Environment of a business can be divided into two categories micro environment and macro environment. Coca cola company interacts with environment for both getting resources and  offering products MICRO ENVIRONMENT: These are the forces that company can control it includes the following: Company: the employees  of company. coa cola takes its employees as valuable assets.

They hire those individuals that are passionate and self motivated. Proper training is given to employees to work in the organization Suppliers: it includes suppliers of raw material and bottlers of coca cola. there are some companies which provide it ingredients, Packaging and machinery. it has franchise system with its bottlers and they are considered to be its partners. Coca cola company only produces syrup which then send to bottlers throughout the world to make finish product. coca cola has some rules and regulations which all suppliers have to follow. ).

These include: compliance with laws and standards, laws and regulations, freedom of association and collective bargaining, forced and child labor, abuse of labor, discrimination, wages and benefits, work hours and overtime, health and safety, environment, and demonstration of compliance (Coca Cola 2006). Intermediaries: It includes distributers, whole sellers and retailers. It works directly with intermediaries to maximize sales. It gives significant margins to retailers for shelf space. Customers: coca cola is always striving to create value for its customers.

It provides high quality products which are readily available to everyone, everywhere. Competitors: coca cola’s major competitor in market is Pepsi-cola. Coke objective is to produce better products than its competitors and to attract more customers. Coke is successful in doing so by its strong brand image and creative advertising. Publics: Coca cola always provide relevant information to public. Its press releases, speeches and company statement are relatively available. On its website it gives a lot of information .

MACRO ENVIRONMENT: The distant forces that company cannot control. It includes the following: Demographics: It includes study of population on basis of age, gender etc. The change in individual leads to different preferences of brand or taste. Fanta is mostly preferred by children and ladies while youngsters prefer energy drinks. Diet coke is for diet conscious people. Coca cola has assigned employees to constantly observe change in population. Economic factors: coca cola studies consumer spending habits and then accordingly price product. Natural forces: coca cola tries to be good cooperate citizen. It also emphasis on care of natural environment.

Coca cola has developed a foundation for the preservation of polar bears, it has largest bottle recycling plant, they have energy saving cola drink equipment. Technological forces: The new technology of internet and television has made the marketing more effective. Introduction of cans and new bottles have made to carry it more easily and it has increased companies sales. As the technology is advancing there has been introduction of new machineries and new packaging styles Political forces: All businesses have to abide by the rules and regulation of govt. Coca cola follows these rules.

It includes taxation requirements, environmental laws, political relations wit different countries and restriction on ability to transfer capital across border. Cultural forces: As coca cola operates in different countries it must be aware of the cultural needs of its employees and customers coca cola has continued changing, improving and developing new drinks that appeal to local tastes. For example coke do not appeal so much to Japanese consumers so coke offered 30 new drinks for Japanese market that include Asian  tea, English tea, coffee and fermented-milk drink. .

Industry for coca cola is globally standardized i. e in every country coca cola is made  up of same ingredients and all bottlers follow standardized rules of bottling but markets of coca cola are localized i. e packaging, branding and advertisement is different in different countries because of their cultural and linguistic reasons.

OPERATING STRATEGY IN DIFFERENT COUNTRY

In this section we will discuss about Coca-Cola and its global business strategies. According to the article Coca-Cola is consumed all over the world, and its strength has been its ability to supersaturate first world markets and to break into foreign markets, providing rough competition to established foreign brands. They use great strategies such as their unique ad campaigns and their ways of helping the community. A questions that I have is does Coca-Cola have set strategies in case they start declining in sales. If this would happen I think they could suggest new advertisements or try to expand the number of places Coca-Cola is being sold.

Coca-Cola has a business strategy that has been taking place for the last 115 years. There strategy is quite simple- “to get the familiar red and white logo firmly imprinted in people’s minds all across the globe”. There strategy has been very successful; Coke is sold in over 200 countries.

OPERATIONS IN INDIA: The Coca-Cola Company re-entered India through its wholly owned subsidiary, Coca-Cola India Private Limited and re-launched Coca-Cola in 1993 after the opening up of the Indian economy to foreign investments in 1991. Since then its operations have grown rapidly through a model that supports bottling operations, both company owned as well as locally owned and includes over 7,000 Indian distributors and more than 1. 3 million retailers. The Coca-Cola Company’s brands in India include Coca-Cola, Fanta Orange, Fanta Apple, Limca, Sprite, Thums Up, Burn, Kinley, Maaza, Maaza Milky Delite, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh and Nestea Iced tea, the Georgia Gold range of teas and coffees and Vitingo (a beverage fortified with micro-nutrients).

In India, the Coca-Cola system comprises of a wholly owned subsidiary of The Coca-Cola Company namely Coca-Cola India Pvt Ltd which manufactures and sells concentrate and beverage bases and powdered beverage mixes, a Company-owned bottling entity, namely, Hindustan Coca-Cola Beverages Pvt Ltd; thirteen authorized bottling partners of The Coca-Cola Company, who are authorized to prepare, package, sell and distribute beverages under certain specified trademarks of The Coca-Cola Company; and an extensive distribution system comprising of the customers, distributors and retailers.

These authorized bottlers independently develop local markets and distribute beverages to grocers, small retailers, supermarkets, restaurants and numerous other businesses. In turn, these customers make these beverages available to consumers across India. Helping Indian People & Economy :

• Foreign Investment: The Coca-Cola Company has invested nearly USD 1. 1 billion in its operations in India since its re-entry back into India in 1992.
• Giving Employment: The Coca-Cola system in India directly employs over 25,000 people including those on contract. The system has created indirect employment for more than 1,50,000 people in related industries through its vast procurement, supply and distribution system. We strive to ensure that our work environment is safe and inclusive and that there are plentiful opportunities for our people in India and across the world.
• Economic Growth: The beverage industry is a major driver of economic growth. A National Council of Applied Economic Research (NCAER) study on the carbonated soft-drink industry indicates that this industry has an output multiplier effect of 2. 1. This means that if one unit of output of beverage is increased, the direct and indirect effect on the economy will be twice of that. In terms of employment, the NCAER study notes that “an extra production of 1000 cases generates an extra employment of 410 man days. ”
• Buyer of Agricultural product: Coca-Cola in India is amongst the largest domestic buyers of certain agricultural products. As an industry which has strong backward and forward linkages, operations catalysis growth in demand for products like glass, plastic, refrigeration, transportation, and Industrial and agricultural products. Company’s operations also lead to incremental growth for enterprises engaged in post production activities like merchandising, marketing and sales. In addition, it share best practices and technological advancements with our suppliers, vendors and allied industries which often lead to improvement in the overall standards of quality across industries.
• Value on good citizenship :The Coca-Cola Company has always placed high value on good citizenship. Company’s basic proposition entails that our Company’s business should refresh the market; enrich the workplace; protect and preserve the environment; and strengthen the community.
• Education and Health: The Company leverage their unique strengths to actively support and respond to local needs – be it the need for education, health, water or nutrition.
• Disaster Relief : They have used their distribution network for disaster relief, use their marketing prowess to raise awareness on issues such as PET recycling, and our presence in communities to improve access to education and potable water.  The Coca-Cola India Foundation is now taking forward in the community at large, projects and programs of social relevance to carry forward the message of inclusive growth and development.

OPERATION IN AFRICA: Coke is focusing a lot of its attention on promoting itself in less-developed markets and Africa. Africa has served as a model of branding success in the third world for Coca-Cola. It has helped compare the sales to the Asia-Pacific Group. Asia’s target group is about 3. 2 billion potential customers whereas Africa’s is 1. 2 billion. The average African drinks two servings of the company’s products per month, twice as much as the average Asian. Despite the poverty in Africa, raging civil wars and major health problems, Coke is sold throughout the continent with the exception of Libya, Morocco and the Sudan.

The major place Coke is sold is Rwanda, Burundi, Angola and Zimbabwe. Coke has been very successful in Africa. It has been successful because.  It is a much admired brand name. People walk miles down dirt roads to reach a place to buy Coke.  The reason it is admired and successful is because of its advertising as well as its involvement in community life. Coke has helped the community by initiating sports scholarships, sports development, entrepreneurial development, scholarships and education projects. Coca-Cola has found many ways to get its products trucked into even the most remote corners of Africa and has cultivated reputation for corporate honesty and openness that has won the respect of African business people from Cape Town to Madagascar. “If Coke can succeed here, Asia ought to be a snap. ” Coke has been very successful with its local advertising campaigns which is a great business strategy since it is linking its products to people’s aspirations and passions. For example, Coke did an advertisement that was linked to Soccer (a great African obsession).

These great advertising strategies have helped Coke become an “enduring” Symbol of Africa and its number one brand. They also prevented Coke’s rival, Pepsi, from gaining any market share in South Africa at all.

OPERATION IN CHINA: The Coca-Cola Company has been refreshing China for eight decades. We opened our first bottling plants in Tianjin and Shanghai in 1927, and by 1948, Shanghai was the first market outside of the United States to post annual sales of more than one million cases of Coca-Cola®. When The Coca-Cola Company re-entered China in 1979, it was the first international consumer company to grasp the opportunities offered by the open-door policy. Since opening our Beijing bottling plant in 1981, the Coca-Cola system has spread across the country by way of our 35 bottling plants. Today, The Coca-Cola Company is proud to be China’s leading beverage manufacturer. In 2004, Coca-Cola China celebrated an incredible manufacturing milestone – the production of its 100 billionth bottle of Coca-Cola Company product.