Globalization is defined as the spread of worldwide practices, relations, consciousness, and organization of social life. Globalization theory emerged as the result of real world concerns with the dramatic transformations of globalization as well as a reaction against the earlier perspective of modernization theory. Globalization can be analyzed culturally, economically, and politically. Some cultural theorists see globalization as producing homogeneity as a consequence of cultural imperialism while others see it as producing distinctive local forms.
It is the process completed in the twentieth century by which the capitalist world-system spreads across the actual globe. Since that world-system has maintained some of its main features over several centuries, globalization does not constitute a new phenomenon. At the turn of the twenty-first century, the capitalist world economy is in crisis; therefore, according to the theory’s leading proponent, the current “ideological celebration of so-called globalization is in reality the swan song of our historical system” (I. Wallerstein, 1998: 32).
Globalization has impacted strongly on the Coco Cola Company which is one of the largest Multinational Cooperation around the world today. The Coca-Cola logo is one of the world’s most recognised trademarks and an indicator of the extent of Coca-Cola’s penetration into communities across the world. It was created in Atlanta, Georgia by Dr. John S. Pemberton and is simply often referred to as Coke. It was first offered as a fountain beverage by mixing Coca Cola syrup and carbonated water. It is sold in stores, restaurants and vending machines in over 200 different countries. The Company is one that has been around for over 100 years.
Coke is a drink that spans all ages, colours, races, and countries. They have on occasion, introduced other cola drinks under the Coke brand name. The most common of these is Diet Coke which has become a major diet cola. Other worldwide brands are Dasani drinking water, Sprite, Minute Maid and Coke Zero. The actual production and distribution of Coca Cola follows a franchising model, which is then sold to various licensed bottlers throughout the world. MNE’s such as Mc Donald’s, Subway, Church’s Chicken and others also franchises Coca Cola along with the other products that they produce.
The marketing strategies used were to make coke the global brand it is today. The Political aspect of globalisation comes into play in theory and in reality. In theory Coca Cola as with all major corporations has to deal with the political rules that all nations employ. There are different regulations that apply in all 200 nations that Coke does business in and this is a theory that can be accepted through logic. In reality however, there is a political problem that Coca Cola is constantly faced with and that is in the area of public relations.
As the company has globalised it has fallen victim to many critics worldwide. In India for example, Coca Cola has been attacked for: depleting water resources, contaminating the water resources that remain, polluting the physical area in communities near its factories, and lacing drinks with high levels of pesticides. Coca Cola’s bottling plants in India are the target of many community-led campaigns, accusing the company of worsening water shortages in areas where it operates and polluting the scarce remaining water and soil.
These accusations expound on the idea of globalization because they are only found in India. Pepsi has also been accused with political and ethical issues in India. There were ethical issues surrounding Pepsi India which conducted an aggressive marketing campaign which defaced the environment in India. Pepsi sells upwards of 160 million cases annually through 750,000 retail outlets across India. The principal moral agents involved are Pepsi marketing personnel, presumably in India, and those they hired to paint rocks with colorful Pepsi advertising in the Himalayans.
Economically Coca Cola also has great impact. In 2009, the company generated revenues of $31 billion with $6. 8 billion net income. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks (abbreviated as CSD), which constitutes 78% of KO’s sales. KO’s profits are also vulnerable to the unpredictable costs for the raw materials used to make drinks – such as the corn syrup used as a sweetener, the aluminium used in cans, and the plastic used in bottles.
Furthermore, slowing consumer spending in Coke’s large North American market compounds the challenge of increasing costs and a weak economic environment. Finally, Coca-Cola earns approximately 75% of revenue from international sales, exposing it to currency fluctuations, which are particularly adverse with a stronger US Dollar. Despite these challenges, Coca-Cola has remained profitable. Though the non-CSD market is growing quickly, the traditional CSD market is still large in terms of both revenues and volume and highly lucrative. The size and variety of KO’s offerings in the CSD category, oupled with the unparalleled brand equity of the Coca-Cola trademark, has allowed KO to maintain its share of this important market. KO has also responded to consumers’ changing tastes with new, non-CSD product launches and acquisitions such as that of Glaceau in 2007. On February 25, Coca-Cola Company announced its plan to buy Coca-Cola Enterprises (CCE) for $12. 3 million. Since spinning of Coca-Cola Enterprises 24 years ago, the soft drink market has changed dramatically with consumers buying fewer soft drinks and more non-carbonated beverages, such as Powerade and Dasani water.
Under the new deal, Coca-Cola Company will take control of the bottler’s North America operations, giving the company control over 90% of the total North America volume. In return, Coca-Cola Enterprises will take over Coke’s bottling operations in Norway and Sweden, becoming a European-focused producer and distributor. In March 2010, Coca-Cola Company entered into discussions to buy the Russian juice company, OAO Nidan Juices. The company is 75% owned by a private equity firm in London and 25% by its Russian founders and controls 14. 5% of the Russian juice market. If successful, the purchase would add to Coca-Cola’s 20. % market share, passing Pepsi’s 30% market share. The Russian juice market is estimated to be $3. 2 billion dollars, and estimates of Nidan’s purchase price are $560 – $620 million. A great example of one country in which Coca Cola is doing a lot of business would be China. They were one of the first companies to do business within China. The first bottling plant was built a decade after the first World War, furthermore Coca Cola was the first company from the United States to distribute its products in China after the country opened its gates to foreign investors in 1979.
Coca Cola went on to be very successful in China as it currently accounts for “35 percent of China’s carbonated beverage market” and was able to generate annual sales of up to $1. 2 billion . There were also many economic benefits reaped by the Chinese due to Coca Cola’s business. A study conducted by Beijing University in partnership with Qinghua University and the University of South Carolina found that Coca Cola directly employs 14,000 employees in China. Effectively this same study also found that Coca Cola’s total investment in China in the last 20 years is well over $1. billion. Coca Cola’s is based in U. S. and all profits go to the U. S, and will benefit the economy as a whole via taxes and profits because it is a global brand, this is beneficial for the country due to Foreign Direct Investment (FDI). MNCs bring wealth/foreign currency to local economies when they buy local resources, products and services – providing resources for education, health and infrastructure. Coca Cola is known for having one of the world’s most famous and profitable brands worldwide through brand equity.
Globalization is also responsible for creating the global village where everyone in the world has adapted an in-sync culture and lifestyle. Mass media plays a big role in the spread of this culture. Many people take what they are exposed to accept it and integrate it into their own cultures. In Coca Cola’s case advertisements throughout the mass media it has been used globally to attract more customers. The company affects global cultures so much that the term “coca-colonization” has been coined to define the company’s success.
In India, Coca Cola is more alive than in the U. S. They are picking up elements of U. S. pop culture which in the United States is not that highly valued, and is accepting it. This proves just how effective the MNC is at spreading American culture through globalization. The increase of knowledge to live healthy lifestyles has also reflected on Coca Cola’s products, with the introduction of Dasni bottled water, The Minute Maid Company (producers of juices) and Diet Coke.
Coca Cola also diversified with its customers by producing Cannings which is a flavored soft drink and has a different taste. We look George Ritzer’s theory on McDonaldization and how it has been dominating more and more sectors other than the American society. For example, in India due to their culture where the cow is venerated and the majority of people do not eat beef the Mc Donald Corporation introduced the ‘Maharaja Mac’. Also in China, Japan and other surrounding Asian countries, Mc Donald’s added rice to their menu to facilitate for the culture in that region.
Roland Robertson’s theory on “glocalization” of interpenetrating global and local aspects and having results in different geographic areas can be used as an example in the automobile industry. Hybird cars are being manufactured because of the global concern for a cleaner environment by Honda. Coca Cola has also sponsored international events such as the Summer Olympics, FIFA World Cup and many other globally famous telecasts and celebrities. For Olympics 2008 they advertised the product in Chinese and you did not have to know Chinese to read it, this proves that it is recognized in any language.
Not only has the corporation impacted on the adaptation of social culture but in language also. English is the most common language known today and people around the globe communicate through internet: emailing, instant messages in this language in which Coca Cola originates. Globalisation has also impacted on travel and tourism and people are now travelling more often due to lifestyle changes and interests. The culture of fast food has taken over the world and health issues exist where Coca Cola is a part of. Obesity is at high percentages in the U. S and many have seen the product as unhealthy.
In an article on Natural News states that Coca Cola paid a doctor “ saying soft drinks have been unfairly targeted in the efforts to turn back the obesity tide, I think the answer to really looking at a healthy lifestyle is balance and variety and moderation, and any time you pick out a single culprit you’re going to really be in trouble, because, you know, obesity and health risks are all associated with multiple factors,” adding that research focusing on soft drinks – which shows as much as 50 percent of the 300 excess calories consumed daily by Americans come from soft drinks – does not look at the big picture.
Technology is the driving force of globalisation – space and time could not be shortened without information and communication technologies. Due to the change in culture and lifestyle Coke is accessible in vending machines at a touch of a button, anywhere possible without human contact. Coca Cola partakes in globalization through the rapid trend of technology, the spread of its merchandise and production techniques used. It is almost common knowledge that Coca Cola’s success lies in its formula for its syrup as well as its bottling technology.
Globalisation affects Coca Cola through its heavy use of ingredients extracted from the Coca leaf and Kola nut in its inception and this is to show just how global the very creation of the soft drink that the Coca leaf and Kola nut from many South American countries. Furthermore, the continuing development of the extraction process by Coca Cola led to breakthroughs that are used worldwide such as the process of decaffeination as we know it today. Later in its history they also pioneered the use of the chemical known as Saccharine, an alternative to sugar, in response to higher sugar prices.
Coca Cola’s use of alternative sugars lead to success in other global markets, namely Europe after World War II where the sugar prices were on average much higher than those of the U. S. Globalisation’s technology aspect as it is simply put a spread of technology through the company’s growth. Coca Cola’s development of new bottling techniques also fulfilled the technological aspect of globalisation. Originally, Coca Cola started off with glass bottles and can still be found packaged that way today in very few locations. IN the 1960’s however, Coca Cola had its first venture into metal cans.
This is important as globalisation is observed because today this technology pioneered by coke has spread to every corner of the globe, in many different types of markets, with many different types of products. For example, S. M Jaleel Company, a soft drink company based in Trinidad, has been one of the first to launch plastic bottles made from polyethylene terephthalate P. E. T. in the Caribbean. The modern filling lines are highly automated with equipment that does not require significant manpower. Bottles are blown from granular plastic and then filled, labeled and packaged in hygienic conditions at very high speeds, without human contact.
Not only is producing Coca Cola technology is used, but in the value chain it also exists, due to the rising cost of fuel in 2008, Coca-Cola and its two largest U. S. bottlers are shifting their fleets to hybrid electric vehicles. The company currently has 142 hybrid-electric delivery trucks throughout the U. S. and Canada this also contributes to the environmental concerns of the MNE. In the automobile industry, Honda is known for its innovative technology which has been a Honda hallmark from the very beginning and is the reason they are one of the most technological advanced companies in the automobile industry.
Today, Honda’s pioneering technology results in a truly unique brand of high-quality, high-performance power sports products and technological advanced expertise incorporated in the automated production of the products. The introduction of assembly lines, from manual to automotive is beneficial to MNCs but this will result to a cut in the manual labour needed hence a decrease in employment and a need for more innovative, technological expertise.
According to Wall and Rees (2007) “new technologies have substantially raised output per unit of labour input (labour productivity) and per unit of factor labour input both labour and capital (total factor productivity)”. Labour is also sourced in the country the MNE is located, for example, in China, locals are employed in sweatshops and they are paid lower wages hence this results to lower labour cost > lower production cost > higher profits, giving the company the competitive advantage. Technology has an impact is other ways such as communication.
With the introduction of cellular phone, internet and e-commerce, this has made globalisation a positive to the business world. Information at your ‘finger tips’, purchasing online in the comfort of your home, is what consumers has adapted to and companies has used this as an advantage. E- Commerce demonstrates the actual impact of globalisation. The convergence of information and communication technologies has resulted in a lower cost for information, furthering globalisation and global standardization. English is becoming the world language, notwithstanding this, there remain important language barriers.
The legal environment to enter any border has barriers in which any MNE’s will have to face. Abiding by the law of the country the company set up has to be one of the main priorities. Their legal systems are put into place to regulate standards and prevent issues when operating in its region, for example; polluting the environment, running risks with safety or imposing poor working conditions and low wages on local workers. As mentioned earlier, Coke has fallen victim to a number of lawsuit held against them by individuals and groups.
Other MNE’s has been faced with legal issues. For example, according to Wall and Rees (2004) “McDonald’s, the world’s biggest fast food chain, is fighting a lawsuit from a group of obese teenagers. But a central claim in the case – that some of the food us unhealthier than the public realized – was dropped in June 2003. ” Another example is Kraft Food was threatened with a lawsuit claiming that it contains high levels of artery clogging trans fats in Oreo cookies, but later this lawsuit was dropped because Kraft promised to address the issues.
Coca Cola was banned from India by the Indian Government in 1977 but was allowed to return in October 1993 after agreeing to certain regulations. As India becomes increasingly “Westernised”, the popularity of Coca Cola has soared, particularly amongst the younger generations and urban elite. Barriers to entry are not as strong in emerging markets and it will be more challenging to Coke, where they would have to deal with regulatory challenges, cultural and any existing competition that have their distribution networks already setup.
Potential impacts of globalization that Coca Cola face is not any different from actual impacts the MNE experience presently. Changes in demand for the product worldwide do not look like a threat but the entry and innovation of present and new competitors in the market is something the company should keep track of. The increase of technological expertise and equipment, the situation of the economies of the world, politics, legislation and environmental concerns are potential impacts that may change or continue to stay the same in the soft drink industry.
Coca Cola has been has been present since the beginning of globalisation and has experienced both negative and positive impacts of being in the global arena. It is in the company’s best interest to continue investing in foreign markets and contributing to its home economy. Keeping abreast with the technological changes, dealing with political issues and legal consequences and barriers that may still exist, and diversifying with the culture of nations and people in which makes the MNE the brand it is today.
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