As a person with knowledge of international market entry and development modes, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of this topic and at times fails to understand the reasons or logic behind certain strategic implementations imposed on it.
By delving into this project paper, the author intends to have better insights into how various international market entry and development modes are thought up, formulated and then imparted down by multinational companies. The author hopes to have an in-depth understanding as to how the various international market entry and development modes enable multinational companies to compete effectively and profitably in this era of internationalization where competition is extremely intense.
In order to reinforce the learning objectives, two key focal issues were focused upon i.e. innovation and diversity. Innovation was discussed with regard to the various international market entry and development modes of multinational companies where they were renowned for their developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the issues being discussed.
This essay utilized Coca Cola as the model multinational company to review its present international market entry and development modes and how they dealt with critical situations. From the analysis, key trends in the international market entry and development modes of Coca Cola were then identified, how they worked and their effectiveness in dealing with critical situations was ascertained. The paper then moved on to assess these international market entry and development modes with regard to their suitability to critical situations, during which the internal capabilities of these international market entry and development modes in relation to the strategy being followed by Coca Cola was determined also. An overall analysis of the performance and effectiveness of Coca Cola’s international market entry and development modes was also conducted to assess and compare the capabilities of these international market entry and development modes with those of others. Gaps in the international market entry and development modes and environment were then identified.
Finally, several choices of strategies to improve the international market entry and development modes of Coca Cola as effective means in critical situations were recommended and evaluated in terms of appropriateness to the issues reviewed, feasibility in carrying out the options and acceptability within the key stakeholders and decision makers. Several key implementation issues related to managing strategic change were also addressed as well.
International market entry and development modes pertain to the various strategies that most multinational companies use in order to ensure the efficient and effective entry of their products and services in a particular territory. International market entry and development modes also focus on the careful management of the processes involved in the production and distribution of products and services (Bhattacharya, 2000).
More often than not, small and relatively unstable companies don’t really have the capabilities to implement international market entry and development modes. Instead, these companies engage in activities that various schools of business management typically associate with market entry and development modes. These activities include the marketing of products, product development, production and distribution.
However, international market entry and development modes deal with all operations done within multinational companies and organizations. Activities such as the management of purchases, the control of inventories, logistics and evaluations are often related with international market entry and development modes. A great deal of emphasis lies on the efficiency and effectiveness of processes. Therefore, international market entry and development modes include the analysis and management of internal processes (Rosenberg, 1984).
OVERVIEW OF COCA COLA COMPANY
Coca Cola Company aims for sustainable growth as a broad market leader in the beverage industry as well as for segment leadership. In both cases, the Coca Cola brands will play a crucial part. Coca Cola Company is able to establish its broad leadership usually by acquiring other strong beverage companies and their products, which are then combined into a new, larger company (Schmidt, 2002). Offering training to its employees, improving the company operations, and the introduction of new technologies then reinforces the positions of the various Coca Cola products. This practically results in economies of scale that is able to create a distribution network for both the local and international Coca Cola products. If a market is already in the control of other beverage companies, Coca Cola Company devotes its attention towards the development of a premium segment with its various products (Booms, 1981).
The mission of Coca Cola Company is to secure the growth of the business in a sustainable manner, while at the same time constantly improving the company’s profitability. The strategy to achieve this involves four elements:
Licensing and Franchising
Licensing and franchising are key factors especially in markets where a broad leadership position has yet to be fully developed (Miller, 2004). In these markets Coca Cola Company strives for strong positions especially in the premium/import and specialty segments.
Good examples here include Coca Cola Company’s leading position in the import segment in the United States as well as the recently established market in China. In both examples, Coca Cola Company shows its desire to establish autonomous growth through the selling of more and more brands and expansion through the distribution networks as well as growth through acquisitions.
Coca Cola USA
Coca Cola USA has been showing steady signs of growth and progress for a couple of years now. This consistent progress can be attributed to the change in strategic directions that was implemented several years ago and is still being further structured up to now. Basically, the critical element of the strategy was that Coca Cola USA started looking at things from the perspectives of the consumers and the customers.
Why Coca Cola USA?
Because primarily, the United States has nearly half a million outlets where beverages are allowed to be sold. If one would consider the size of the country, it would seem like that the “getting closer to the market” strategy would not work. Add the fact that it is very difficult to get detailed information about the performances in terms of sales of every independent convenience store in the US (Kotler et al. 1999).
But Coca Cola USA still took up the challenge. Under the leadership of CEO E. Neville Is dell, large-scale operations were initiated. Business units were started to be established to initiate the change process needed to bring Coca Cola USA closer to the market. In the part of marketing, the decisions taken in recent years already established positive impacts such as portfolio management and ethnic marketing.
Coca Cola China
China possesses a strong market that enables it to be easily targeted by the world’s leading beverage companies. China’s market value has even increased over the recent years especially with the steady increase of their presence.
Coca Cola Company is the first to strike a deal with China in its bid to strengthen its foothold as the top beverage company in the world. With its entry into the beverage market of China, the world’s largest beverage market holder just got even bigger and stronger (1994).
Why Coca Cola China?
China has one the largest beverage markets in the world. For instance, its beverage market earned an estimated sales volume of 250 million hectoliters of beverage in 2003. Add the fact that with a population of nearly 85 million people, China has certainly one of the largest and wealthiest beverage markets in the world (Loins, 2003).
This is a crucial initial step made by Coca Cola Company, and they remain positive about the prospects of striking more deals with international beverage companies in Asia to fortify its number one position in the beverage industry.
Exporting / Collaborative Ventures
In order to sustain its growth on the international level, Coca Cola Company builds its business on four (4) main positioning strategies.
- The first is building a strong local operating platform, and then testing it over time to determine if profitable growth would be possible through the selection of the right brands and creation of the structures for distribution to supply a local national market.
- The second is broadening the portfolio in order to make way for international brands to give access to those not supported by the local brands. Global perspectives are also gathered to help optimize both the local and global brands. By broadening the portfolio, Coca Cola Company is able to meet the consumer’s needs and minimize the costs of local infrastructures (Jobber, 1998).
- The third strategy involves a balanced portfolio of countries among established and developing markets. In this instance, the established markets such as those in North America and Europe will provide the funds to invest in developing markets like those in Asia that have lower GDPs but possess a tremendous potential for growth and development (Parvatiyar, 2001).
- The last strategy involves market consolidation which would help in the securing of positions and the creation of shareholder values. Coca Cola Company strives to be in the top position on each market.
Coca Cola Company is in a great position to solidify its dominance of the premium segments in markets under its control. There is a strong possibility that in the long run, the sizes of the premium segments in each market will grow continuously in proportion to the total beer market (1991). Coca Cola Company should continue its consistent investment level to such programs to maximize the opportunities for the Coca Cola brand in the future years ahead.
The results of the analysis carried out on the international market entry and development modes of Coca Cola Company indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the international market entry and development modes of Coca Cola Company could still be expected to improve faster than the average.
The review of the company’s capabilities and resources revealed very little inconsistencies regarding its international market entry and development modes. This is coherent with its traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for the Coca Cola Company.
The analysis among the environment as well as the international market entry and development modes of the Coca Cola Company revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure the competitiveness of the company.
Also, Coca Cola Company has to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.