Case Study of a TNC: Coca Cola
- Coca-Cola is a carbonated soft drink sold in the stores, restaurants, and vending machines of more than 200 countries.
- It is the number one manufacturer of soft drinks in the world.
- Their headquarters is situated in Atlanta Georgia, USA. It is probably the best known brand symbol in the world.
- They sell nearly 400 different products.
- 70% of its sales are generated outside of North America.
- Until 1905, the soft drink, marketed as a tonic, contained extracts of cocaine as well as the caffeine-rich kola nut.
- The Coca-Cola recipe was formulated at the Eagle Drug and Chemical Company, a drugstore in Columbus, Georgia by John Pemberton, originally as a coca wine called Pemberton’s French Wine Coca.
- In 1886, when the county passed legislation which prohibited the alcoholic version, Pemberton responded by developing Coca-Cola, a non-alcoholic version.
- The soft drink was first sold to the public in Jacob’s Pharmacy in Atlanta on May 8, 1886.
- It proved popular in the United States at the time due to the belief that carbonated water was good for the health. Pemberton claimed Coca-Cola cured many diseases, including morphine addiction, dyspepsia, neurasthenia, headache, and impotence.
- After disputes over ownership, with many people creating the recipe, Asa Griggs Candler The Coca-Cola Company in 1892.
- Coca-Cola was sold in bottles for the first time on March 12, 1894.
- Cans of Coke first appeared in 1955
- The first bottling of Coca-Cola occurred in Vicksburg, Mississippi, in 1891
- By 1895, Candler had built syrup plants in Chicago, Dallas and Los Angeles.
- Advertising focused on the authenticity of Coca-Cola, urging consumers to “Demand the genuine” and “Accept no substitute.” As copycats sprang up.
- As the country roared into the new century, 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.
- The expansion of Coca-Cola overseas took place in 1923 and in 1928 Coca-Cola was introduction to the Olympic Games for the first time when Coca-Cola traveled with the U.S. team to the 1928 Amsterdam Olympics
- To support troops in the Second World War (but also to keep their business steady as far as business is concerned) they offered coca cola to any troops for 5 cents.
- During the war, many people enjoyed their first taste of the beverage, and when peace finally came, the foundations were laid for Coca-Cola to do business overseas. From the mid-1940s until 1960, the number of countries with bottling operations nearly doubled.
- After 70 years of success with one brand, Coca-Cola, the Company decided to expand with new flavors: Fanta was originally developed in the 1940s and introduced in the 1950s; Sprite followed in 1961. In 1960, The Coca-Cola Company acquired The Minute Maid Company, adding the line of juices to the Company.
- The Company’s presence worldwide was growing rapidly, and year after year, Coca-Cola found a home in more and more places: Cambodia, Montserrat, Paraguay, Macau, Turkey and more.
- The 1990s were a time of continued growth for The Coca-Cola Company. The Company’s long association with sports was strengthened during this decade, with ongoing support of the Olympic Games, FIFA World Cup football (soccer), Rugby World Cup and the National Basketball Association. Coca-Cola classic became the Official Soft Drink of NASCAR racing, connecting the brand with one of the world’s fastest growing and most popular spectator sports.
- It has 139,600 associates around the world, with 50 percent of them outside the U.S.
- The Coca-Cola Europe Group employs approximately 1,600 Company associates who work with European bottler employees numbering more than 60,000 strong. Approximately one third of the Company team of 1,600 provides shared services for all of the Europe Group and beyond and manages group-wide resources, while 12 business units, consisting of one to four countries each, execute plans at the local market level.
- The Coca-Cola Headquarters is a campus in Midtown Atlanta, Georgia that is home to The Coca-Cola Company.
- 1920s & 30s – The Company began a major push to establish bottling operations outside the U.S. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and South Africa. By the time World War II began, Coca-Cola was being bottled in 44 countries.
- After the fall of the Berlin Wall, the Company invested heavily to build plants in Eastern Europe. And as the century closed, more than $1.5 billion was committed to new bottling facilities in Africa.
- Coca Cola don’t always own their factories; they subcontract out to pre-existing bottling companies to save more money.
- Coca Cola want to have access to high earning large populations such as India, by manufacturing their goods close to their intended market they can save on transportation costs.
- Coca Cola manufactures their drink concentrate in America. The marketing of its products is also completed in America.
- Bottlers buy the concentrate from the Coca Cola Company. They then mix it with water and sweeteners then they bottle the finished product. Each bottling company has exclusive rights to a region of the world. Coca Cola owns shares in some of the companies but not all of them, some are independent. Bottlers are in charge of distributing the products to the retailers.
- Retailers sell the bottled products to the public to buy.
Research & Development
- “Research and Innovation uses sensory science, product development and consumer insights to create totally new beverages and to improve existing ones. We work with our other R&I centres around the world as well as suppliers, agencies and outside research institutes to create the best beverages in the world.”
- R&D still takes place in the US, there has however been recent expansion:
“According to a Coca-Cola official, the company, which has been attempting to increase their efforts in Turkey, is now finalizing the details in order to bring the R&D centre project into fruition. Michael O’Neill, CEO of Coca-Cola Soft Drinks, stated, “The issue of tax incentives is definitely a significant factor in the decision to make Turkey a R&D centre.”
- Coca-Cola opened a new 90 million USD new research and development centre in Shanghai in March 2009
Social Influences for Countries Affected
- Coca Cola offer training and education.
- Coca Cola runs some community schemes in Africa and South East Asia.
- One of Coke’s microfinance startup schemes provide 4000 Vietnamese women with the merchandise, training and basic equipment to begin selling Coca Cola.
- Environmental regulations are often less strict in LEDC’s: some TNC’s take advantage of this.
- Working conditions in some factories are harsh. Employees get very few benefits and there are unlikely to be any unions.
- Depletion of the local ground water table due to the utilisation of natural water resources by the company poses a serious threat to many communities. In March 2004, local officials in Kerala, India shut down a $16 million Coke bottling plant blamed for a drastic decline in both quantity and quality of water available to local farmers and villagers.
- On February 25, 2010, a new lawsuit was launched on behalf of 8 plaintiffs against The Coca-Cola Co. and Coke processing and bottling plants in Guatemala, with charges of murder, rape, and torture of union leaders and their families.
- In Colombia there are allegations that the company “hired, contracted with or otherwise directed paramilitary security forces”. In January 2004, a New York City-based group, that included some city officials, confirmed the workers’ allegations. They found:
“To date, there have been a total of 179 major human rights violations of Coca-Cola’s workers, including 9 murders. Family members o f union activists have been abducted and tortured. Union members have been fired for attending union meetings. The company has pressured workers to resign their union membership and contractual rights, and fired workers who refused to do so.
Most troubling to the delegation were the persistent allegations that paramilitary violence against workers was done with the knowledge of and likely under the direction of company managers. The physical access that paramilitaries have had to Coca-Cola bottling plants is impossible without company knowledge and/or tacit approval….”
Economic Influences for Countries Affected
- Creates jobs both directly and indirectly in the host country.
- Many of the bottling firms are local companies so all the profit stays in the host country.
- Coca Cola has invested $1.5 billion in the Russian Economy; this includes training, the construction of manufacturing plants and improvements to infrastructure.
- In some LEDCS they work long hours for very little pay.
- Profits are returned to the shareholders, very little of the money remains in the host countries.
- TNCs are very powerful; if they are not happy with the economic conditions within the host country they will pull out leaving people unemployed.