Global Business Strategy of Coca-Cola

Fall

08

Global [GLOBAL BUSINESS STRATEGY] 1 G

Table of Contents ABSTRACT........................................................................1 Introduction and Coca-Cola Company’s overview.................2 PESTEL ANALYSIS..............................................................3 SWOT ANALYSIS................................................................8 The impact of international business environment on CocaCola Company:................................................................15 Globalization:..................................................................16 Brief history of Globalization............................................16 Benefits of Globalization..................................................16 Factors affecting Globalization.........................................17 Extent of Globalization on Coca-Cola Company..................18

Global Business Strategy

Challenges faced by Coca-Cola Company on Globalization..19

Structures of organisation operating on international scale ...................................................................................... 20 Moral and ethical issues faced by organisations operating

Fahad Umar ABSTRACT This paper focuses on global business strategy of Coca-Cola Company. The first part of the paper concentrate on the internal and external analysis of the company in the international business environment as well as the extent of globalisation on the company with a detailed report on different organisational structure being implemented on an international scale. The second part of the paper explicitly congregate issues on Corporate Social Responsibility on organisations operating internationally with regards to moral and ethical issues, conflicts between social responsibilities and ethical issues and regulations/guidance as regards to social responsibilities with emphasis on Coca-Cola company. internationally................................................................21 Stratford Collage of Business and Management UK

Conflicts between corporate strategy and ethical and social responsibility..................................................................24 The legislation, regulation and guidance as to corporate social responsibility.........................................................25

Code of ethics in regards to guidance on corporate social responsibility..................................................................26 Conclusion and recommendations....................................27 Reference.......................................................................27

Introduction and Coca-Cola Company’s overview According to a report by United State Securities and Exchange Commission (2006) the Coca-Cola Company was established in Atlanta, Georgia, in the year 1886. The company is considered to be the world number one non-alcoholic beverages company, leading in manufacturing,

marketing

and

distribution

of

its

product

(concentrate and syrups). Concentrates and syrups are being sold out to bottling companies for final dilutions and packaging to consumers, Coca-Cola Company produces a wide range of about 500 different beverage brands across the world. In the late 1920’s the company begins its journey for globalisation and presently operating in more than 200 countries following a simple global

2

formula “Provide a moment of refreshment for a small amount of money – a million times a day”. The Coca-Cola Company together with the bottling companies forms the best production and distribution system in the world, the system is designed in such a way that employees dedicated and put the company’s objectives as their number one priority. Products of this company have proven to be the number one soft drink in quenching consumer’s thirst of non-alcoholic soft drinks from Moscow to Montreal and from Beijing to Boston all over the world for more than 115 years of its existence. One of the key objective of the company is to increase its market share-value, which was achieved by operating with associates with the aim of satisfying customers and valuing customers interest as well as protecting company’s assets and minimizing business ricks.

PESTEL ANALYSIS A recent analysis polled online (http://anasurname.hubpage.com) written by Annasurmane on PESTL analysis. PESTL analysis is an mnemonic meaning Political, Economical, Social, Technological and Legal often use is a tool by companies to analyze the whole EXTERNAL environment from every angle the company is operating under. Although Coca-Cola Company is the world leading nonalcoholic beverages company in the world, its still needs to

3

undertake PESTL analysis environment,

precisely

to know

the

more about its

opportunities

out

external

there

and

it

competitors so as to maintain its customers loyalty and position. The Political factors establish the extent as to which the serving political policies and rules influence the economy or rather the business organisation. This policies and rules include, how much tax is impose, trade tariffs and fiscal policies to mention few. The

economic

factors

are

the

determinants

of

economic

performance that impact the company in one way or the other, factors such as interest rate, inflation rate, foreign exchange rate and economic growth. These factors will affect the company’s sales, product price and purchasing power of potentials customers. The social factors comprises of environmental trends, which includes cultural trends, population analytics, demographics trends, seasonal trends to mention few. For example, in the western countries there is high demand of things during holiday seasons. Technological

factors

includes

innovations

and

technological

development the affect the organisational performance in either in positive or negative way. This can be in form of automation of some organisational. Legal factors involves both internal and external segment of the organisation, internal in the sense that the organisation develop some inside laws and regulations to maintain its operations and

4

dealings while external in the case where certain law, policies and regulations are imposed to the company by legislation, government or regulatory agency. PESTL ANALYSIS FOR THE COCA-COLA COMPANY POLITICAL: Political changes in accordance with the ruling government, changes that has to do with government regulations, majors and policies as to how a companies should operate and as to how the products should also be. By setting up those rules and regulations the government intervene with the company’s decisions because the board have to make sure in every decision that is being made those roles and regulations must in no circumstance be violated, some of which includes monitory policy, trade restriction, recruiting policy, environmental policy. The Coca-Cola Company being a non-alcoholic beverages company falls in the category of what is known as the Food and Drug Administration (FDA), FDA is a globally recognized agency originated from the United State of America to monitor and verify ingredients that are being used in manufacturing non-alcoholic products. The coca-cola company cautiously examine their ingredients to meet up requirements of the FDA before presenting it for approval. However, aside from the FDA’s requirements other political majors that are being set in accordance with the jurisdictions of countries

5

includes income tax, import and export regulations and the uncertainty of political crisis. Political crisis can be in form of protest, which might affect the demand of products, as well as political violence that makes it hard for the products to penetrating in political crisis zones. ECONOMIC: These are economical factors, which companies uses in forecasting future decisions on investment. These includes interest rate, inflation, standard of living, wages, exchange rate, unemployment rate and the overall economic growth of the country. These economical factors differs in each of the operating countries, which is

why

before

a

company

venture

any

country

it

has

to

comprehensively analysed the economy of the country considering the upper mentioned factors. Economic growth of a country gives a company a glimpse of high purchasing-power, this is what most marketers use in penetrating the market. Coca-Cola Company uses this tool to market their product across the world, which brought about the 63 different types of currency being used by the company. However, due to constant fluctuation on exchange rate strong or weak currency are some of the determinants of exporting product world wide which is very important as the company generate 72% of its operating profit outside the United State.

6

Furthermore, another major economical tool is the interest rate imposed on borrowed money. Changes in interest rate affect the financial status of a company and further investments as it increase total cost, the Coca-Cola company manage to cope with interest rate fluctuation by implementing a derivative instrument. In the case of inflation, the Coca-Cola Company sort their employees with higher wages and salaries in countries with high inflation rate so as to enable them cope with the situation. This increase in wages increase product cost and couldn’t be reflected on the product price due to the competitive and risk of the market, a threat being faced by external environment in most companies. SOCIAL: The social factors have to do with people’s cultures, traditions, health perception, safety majors, population growth and new trends among the population. A company is not expected to change the social factors but rather, to adapt and adjust to suit these social factors. This is a very important section as regards to a company like CocaCola that has a direct link to the customers, companies of this nature are considered to be B2C. Countries are diversify in terms of culture and tradition, this element have to be absolutely analyse before introducing marketing and introducing products. Coca-Cola Company has about 3300+ different products, in penetrating new market after intensive market analysis the Company start by

7

introducing few of their products based on the social factors of the general population subsequently increasing products based on social factors. Consumers and government are very cautious on the issue of health and safety, in beverages industries obesity is the most common concern of the general public. This concern is mostly raised by younger generations so as to maintain good physique. According to a study consumers of Coca-Cola are very concern with nutritional content nowadays. This is one threat that the management was able to turn into opportunity by introducing dietary products such as Coca-Cola Zero, Light Coke and Diet Coke. In a non-alcoholic beverages company, most of the market share comes from youth and children, which is why population growth is being given high emphasis in market analysis and being one of the major factor of social analysis. TECHNOLOGY: Technology plays several functions in beverages industry as with the manufacturing new products, packaging product and distribution of products. Coca-Coca Company rely on its bottling partner for packaging, 83% of case volume produce across the world is being manufactured by bottling partners which the company don’t have total control power over. This is why it’s essential for the company to keep a healthy

8

relationship not just with its bottling company but within and outside the entire departments companies involve. The availability of different Coca-Cola packaging has everything to do with the advance in technology, various vending machines are available all over the world. This let to the production of some stylish non-refillable bottles and cans, which are trending among youth and attractive to children which also serves as a marketing tool for promoting products. LEGAL: Legal laws includes, employment law, antitrust law, customer law, health and safety law and discrimination law to mention few. Various acts and regulations exist in the United State of America some of which includes Federal Food Act, Federal Trade Commission Act, Drug and Cosmetic Act, health and safely Act apart from the upper mentioned Acts several environmental regulations are being implemented within the State some of which include, regulations on advertising, sales and production. Slight alteration in either of the laws, regulations or act could yield to positive or negative impact on the company. Furthermore, violation of any of the upper mentioned laws, acts, or regulations will escalate serious penalty which will definitely affect the company.

9

SWOT ANALYSIS According

to

Berry

(2014)

SWOT

is

mnemonic

representing

Strengths, Weaknesses, Opportunities and Threats which are considers to be internal and external factors some of which the company has control over and some of which it has no control over. This analysis is been used as a tool of auditing of generally strategic position of an organization. The factors can be overviewed as follows Strengths: These are qualities of an organization that facilitate that support the organization to achieve its mission. These qualities could be what the organization is versed on or expertise on, these includes individual and team quality of employee, the diverse qualities that distinguished the organization from its competitors. Strengths of an organization can be on its brand, financial resource, human competency, products/services to mention few. Weaknesses can be regards to the attributes the prevent an organization from achieving its mission or operating effectively, these

weaknesses

organization.

hinder

Weaknesses

the

growth

include

poor

and

success

machinery,

of

the

ineffective

decision-making, deficient research and development capability etc. Opportunities are usually presented by the external environment within which the organization operates to take advantage of, when opportunities arise its expected for an organization to strategized on

10

how to take advantage of it be its in profitability, brand, customer loyalty, product/service recognition, penetrating new market etc. Threats are also attributes presented by external environment, attributes that have the tendency of jeopardizing the organization. This are sometimes being mistaken for weakness, but threats are external while weakness are internal within the organization example of which includes technological changes, increase in competition to mention few.

SWOT ANALYSIS FOR COCA-COLA COMPANY Jurevicius (2013) in a site conducted a detailed SWOT analysis of the Coca-Cola Company using so many factual statistics and evidences in validating the analysis. As mentioned earlier SWOT analysis comprises of Strengths, weakness, opportunity and threats, where the strengths and weakness are considered to be internal factors while the opportunities and threats are the external factors influencing the company. This will be discussed in details below. STRENGTHS: 1. World’s foremost brand: Coca-Cola as a brand is consider to be the global leading brand, in the year 2006 an international

11

branding consulting firm ranked Coca-Cola number one brand on the hierarch of top 100 global brand in the same year week-inter-brand valued the brand at $67,000,000. The brand is racked far above it competitors in the beverages industry, the brand following it in the beverages industry is Pepsi which was ranked number 22 with brand value of $12,690,000. Moreover, aside from being the number one brand, it owns the top four beverages brand in the world that include Fanta, Sprite, Coca-Cola, and Diet Coke. This is why the Coca-cola brand posses the largest portfolio of product brand in the beverages industry. This advantage is what the company look at in introducing new brand example of which are Vanilla Coke, Cherry Coke, and Limon Coke. Coca-Cola Company heavily invest in promoting the brand over the years, this is one major advantage the Company uses in penetrating new market meanwhile strengthening existing markets. 2. Large scale of operations: In the whole world Coca-Cola Company is the largest beverages company operating with more than $24 000,000,000 (twenty four billion USD), it manufacture, market and distributes its product in more than 200 countries with approximately 52,000,000,000 (fifty two billon) consumed everyday. The company account for more than 1.4 billion USD in beverages bearing trademarks. These operations are being supported by strong infrastructures with 32 high standard manufacturing plants distributed across the

12

world along with 95 bottling and canning plants outside the United State. In addition the company also produce bottle water and concentrates juice. This advantage enable the company to be able to meet up to its high demands of products as well as increase the company’s revenue. 3. Vigorous revenue growth: Coca-Cola Company’s revenues double it growth in Latin America, Pacific Rim and East, South Asia. In the year 2006 its recorded revenue grew by 20.4% in Latin America, and grew by 10.6% in East/South Asia and Pacific Rim. Furthermore, the bottling company accounted for 34.8% of revenue generated during the fiscal year 2006. This vigorous raise in revenue in those segments contributed effectively in the overall growth of the Company during the year. WEAKNESS: 1. Negative Publicity: The Company has been allege to various unethical related issues which prompt lawsuits against the Company on issues of human right violations, there have been rapid allegations raised concerning the Middle East and U.S foreign policy over the years. In the year 2006, the company received negative publicity concerning ingredients used for producing its products by CSE (centre for Science and Environment).

The

products

where

asserted

to

contain

pesticide residue.

13

The President/CEO of Coca-Cola Company Mr. Muhtar Kent received a note on the 10th of December 2008 from FDA warning him about some of its product that are violating the Act.

Products

include

Diet

Coke,

Plus,

20FL

and

OZ.

Furthermore, Coca-Cola Company has been suit by United State Consumer Group I early January 2009 against the company’s flavours for Vitamins Water. 2. Slow performance in some regions: In North America CocaCola Company generate about 30% of it total revenue during the fiscal year 2006, this significantly shows how important this region is to total revenue growth of the Company. Prior to this study estimate a weak market performance in this region due to weak trends of sparkling beverages in the region, where the company recorded a decrease supply in company’s warehouse. Slow performance in this region will defiantly impact the company negatively in terms of revenue growth and hinder the company in entering the top growth list of companies. 3. Decline liquidity from operating activities: As recorded in the company’s annual report, there is a clear declination in cash flow from operating activities in the year 2006. Comparing it to the preceding year in 2006 the operating activities cashflow decrease by 7%. Total cash flow generated in the year 2005 is recorded to be $6,423,000 which decrease to $5,957,000 in the year 2006. The decrease of $216,000,000 is as a result of tax-qualified trust, which is set up to promote

14

and fund retiree medical sector. However, the decrease is also as a result of positive marketing strategy in the year 2005, which was lacked in 2006. Decline liquidity reduced the financial investment rate that will positively impact on the total company’s growth. OPPORTUNITIES: 1. Acquisitions: in the year 2006 Coca-Cola Company acquired Kerry Beverages (KBL) this made it possible for the company to take control over manufacturing and distributing its product across Chinese provinces operating in form of join ventures. Likewise in Germany Apollinaris was acquired, a company that is engage in sparkling and mineral water. More also the company owns 100% interest in South African company named TJC Holdings, more acquisitions where made in Australia and New Zealand in the year 2006. This acquisition did not only expand the company’s revenue but rather strengthened the company’s international operation, which is an added advantage. Furthermore, as we mentioned earlier robust international operations increase the company’s overall growth and make it much more easier for the company to penetrate into a new and existing markets.

Coca-Cola

Enterprises is one of the biggest bottling company in North America was also acquired by Coca-Cola Company on 25 th of February 2010.

15

2. Emergence of Bottle Water: In beverage market today bottle water is the fastest growing commodity study has showed that in the year 2006 bottle water generated revenue of $15.6 billion. This is due to increase in health concerns, in the years 2006 consumption of bottle water was estimated around 30 billion volume of litres and statistics expect it to increase in 2010 by 38.6 billion unit. The value of bottle water is estimated to reach $19.3 billion in 2010 while the revenue generated by the flavour (slightly sweetened refreshing flavour) is annually increasing by $10 billion. In the United State Coca-Cola bottle water Dasani brand is rated to be the third best selling water. 3. Rapid population growth: Rapid increase

in

Hispanic

population across the United State is an added prospect for the company to snatch so as to generate higher revenue on products consumption. In the year 2006 its confirmed that 11.6 million households in United State are Hispanic, where at the same year census estimated that Hispanic population will increase to more than 60 million by 2020 (18% of United State Population). Translating this to buying power, the Nielsen media proclaimed Hispanic buying power will increase to $1 trillion by the year 2003. THREATS: High Competition: Coca-Cola Company being among the nonalcoholic beverages find it’s self in highly competitive position in

16

various market within the United State and outside. PepsiCo is the major competing company to Coca-Cola Company; other companies include Danone, Krafft Foods, Cadbury Schweppes, and Nestle to mention few. The presence of these competitors elevated the factors which include issues of pricing, innovations, brand, advertising, sales and protection. High competition rate could impact the company’s general performance. Dependence on bottling companies: The Company generate lion share of it revenue through sales of concentrates and syrups to many bottling companies of which the Coca-Cola Company have no total control of. It was approximated in 2006 that 83% of the total volume unit is been produce and distributed by various bottling companied across the world. Health cautious is now becoming major concern among people. In the United State of America people are searching for different variety of non-alcoholic beverages and at the same time highly cautious with carbonated and sweetened drinks are are align to prompt a decline rate in consumption of those carbonated drinks. The general revenue generated in 2005 by carbonated drinks decrease by about $63.9 billion USD. Beverages Company faces criticism for promoting obesity and poor diet to their consumers.

17

The impact of international business environment on CocaCola Company: As studied in 2007 (ElAmin) Coca-Cola Company being on a multinational manufacturing business environment with high valuable brand, high market development and vast scope for product development on an international level the company own its

national

and

international

operations

in

an

extensive

economic segment. This makes the level of company’s turnover as well as the profitability margins proportionate to the company’s expansion and development in the outskirts market. Wide brand expansion is one of the company’s main objectives which is maintain through producing over 260 million bottles of different sizes. Aside from the upper mentioned Coca-Cola product, the company owns Schweppes in the Great Britain name and produces it in different flavors so also other products, which include Capri Sun, Friutiser, monster Appletiser and some sparkling fruit juices. The strategic management policy of the Coca-Cola Company focused toward imprisoning the national and international market for the purpose of quality improvement, developing strength in the international market at the same time holding accountability of environmental strategy on the ground of business operations, performance

management

and

developing

environmental

standard in an international scale. There is a rapid change in the economic environmental structure over the years; in the year 18

2005

there

was

high

marketing

strategy

that

was

why

distribution of products was being done through advertising campaign. This got success and yield to 35% increase in international sales force in the year 2006 while in the preceding year sale strategy was included through promotion techniques in the international market which also yield to an increase in sales with 39.5% more than the previous year.

Globalization: As defined by McGrew (2014) in the general scale globalization is a way of eliminating the difference between different countries, continent and economy so as to make it easier to trade and conduct transactions within and between every nations there by putting the whole world under the same umbrella called GLOBALIZATION. This process has been going on over a century particularly in the 1945, but the process has been moving on a slow rate until in the last 20 year when it became much more faster due to development and order forces which will be discuses letter on.

Brief history of Globalization According to James and Peck (1998) Globalization started in the 17th century with the inventions of new ships which gave Europeans avenue to trade with other centuries on a large scale,

19

comparing to agriculture trade was still a tiny part of the economy

as

of

then.

With

the

recent

development

and

innovations in transport sector such as rails, steam ships and Airplanes. These developments contributed hugely in the sense it shrinks the world and make it more convenient and faster for people to travel across the world and carry out trade, with the presence of the Internet it makes it even much more easier to communicate internationally. Decline in barriers to trade between different countries increase international trade that makes the world’s GDP increasing in a steady rate.

Benefits of Globalization Increase in economic integration can be seen to be on of the major benefit gain from the umbrella term Globalization as asserted by Jeffrey (2003). Economy used to be self-contained in the sense that import and export are mostly independent but rather now with integration between countries economies are closely dependent in the sense that importing raw materials for a production. This is why recession in an economy of one’s country affect the others. However, consumer markets are considered to be more important in the economy, as there is convergence globally in customer tastes and purchasing habit. Hence, businesses operate and productions are mostly on global preference example is Coca-Cola. Company’s operating in that scale are known as multinational companies, these companies

20

have been existing in small number until recently with the advance in technology and they have brought a great positive change to world GDP as mentioned earlier.

Factors affecting Globalization A later study (Jeffrey, 2003) shows that fluctuations of monetary capital exchange between countries: This has to do with the policies and regulation concerning transfer of funds between different countries, with this barriers in some countries it makes transactions unattractive in the region but with free movement of funds like in the 90’s huge amount of funds enter United Kingdom form the United State of America. This is what is known as deregulation, which is also a factor that affects globalization. Its started in the UK in the 80’s when many policies and rules regarding foreign business ownership where removed and privatization took place, this prompt foreign investors to carry out their businesses across the world. A clear example is the one that took place in the UK, many of their utilities which used to be own by the government are now owned by local and foreign investors. Rapid development in technological and communication sector is another major driving force of globalization, this development made

information

open

and

accessible

to

everyone

and

anywhere. This gives investors all over the world a chance to

21

search and take chance of new business opportunities. This is visible due to the presence of faster and cheaper transportation medium. Transportation medium is now much faster and cheaper, aside from airplanes, containerisation that was developed in the 50’s was a major drive in transporting heavy and huge goods. However, there was a continuous enhancement to shipping technology ever since.

Extent of Globalization on Coca-Cola Company According to Coca-Cola Company’s report (2006) The name CocaCola is one of the must popular brands in the world and the company is ranked the largest company in beverages industry today. This is so because the Coca-Cola Company continuer to gain growth due to the prompt expanding across the world, the Company operate presently in more than 200 countries with 84,000 suppliers this makes 70% of the company’s turn over to be from other foreign country. This is possible due to globalization; John Pemberton founds the company in the 1880’s in United State of America with a good reputation of consistency and high quality, in the early stage storekeepers requested for an attractive package with brand recognition. The Coca-Cola Company focus and meets those requests with a brand name Coca-Cola and a red and white

22

attractive package with a uniform taste of product across the country, this became some of the foundation strategy of the company. Globalization in Coca-Cola Company started in the 1900’s when bottling plants where built in Panama and Cuba as military spread through those regions, this spread prompt the rise in demand of the product. These plants reduced the shipping cost of the product in these regions, the success of these plants swift the Company to build many more across which includes Hawaii, Puerto Rico and Philippines. By the year 1926 the Company established a strong foreign relationship with other countries around the world this gave the company a chance to continue on its quest of rapid expansion and mass production of its product across the world by the use of local branches and local partnerships. This expansion continue to take place for several centuries until the end of World war II and Cold war that is when the company was marked as a accurate global corporation.

Challenges faced by Coca-Cola Company on Globalization. The road to success has never been smooth and easy. For CocaCola

Company the

phrase seems

perfectly

matched,

the

Company faced a lot of challenges in some countries as it was trying to globalize. Some countries prohibited the used of CocaCola products with the assertion that the products are health threatening and cheering obesity, which are two major concern 23

for people nowadays. Aside from these assertions so many suits had been filed against the Coca-Cola Company with the allegation of “child labour sweatshops” other countries suits the Company for being selective in providing healthcare to their workers. Another major challenged faced by the Company was the infiltration of the beverages market by other strong Companies such as Pepsi and co as analysed by the company’s sustainability

report

(http://www.coca-

colacompany.com/sustainability/global-challenges.html). However, upon the above mentioned challenges, the Coca-Cola Company remain strong and overcome the obstacles by focusing on its mission to provide good quality, satisfying and refreshing products to their customers. The Coca-Cola Company uses a strategy of uniform tastes, which is been achieved by ensuring strict control of recipes and facilities. This strategy really helps the Company in overcoming some of the challenges and the Company’s number one goal to be the number one beverages company in the world.

Structures of organisation operating on international scale Organisational structure According to an article written by Nordmann (2004) The term organisational structure is primarily used in defining how organisations structure their operational tasks. Six key elements

24

are expected for an organisation to consider in structuring organisational tasks, this includes work specialization, span of control, decentralization, centralization, departmentalization and chain of command. The Simple Structure The Simple organisational structure is mostly been use in a small businesses where the owner is likely to be the manager of the business,

this

structure

is

characterized

with

low

degree

subdivision of tacks. This made it easy for the authority to be sided or centralized to a single manager who is assumed to be the owner of the business. From the name simple structure, its consider to be simple with little formalization, this makes it flexible, easy to control, more accountability, fast to coordinate and more economical to operate. However, as organisation is growing bigger this structure is prompt to so many challenges due to low level of formalization and high level of decision centralization this will eventually instigate information overload which drive ineffective decision making by slowing it down. The Bureaucracy Structure Bureaucracy business structure is a pyramidal structure that is often use by government agencies and public administrations which involved a lot of paper work with the intent of achieving predefined complex goal efficiently and at low cost. The structure

25

is characterized with extremely organized structure with high level of formality and the structure has a strict orderly, highly efficient and fair line of command at all times with centralized authority as well. This structure has many layers of line management,

flowing

from

executives

to

senior

regional

managers on to departmental managers flowing all the way down to supervision officers. The Coca-Cola company has a similar organisational structure with a distinct international division which is in the head office commanding the five continental divisions around the world, this includes Eurasia and Africa Group, Pacific Group, Europe Group, North America Group and South America Group. Each of those continental groups has a vice president that assumes the control of each sub-division. The company’s structure is uniformly irrespective of region or country of operations with rigid command of operations control from the head office.

Moral and ethical issues faced by organisations operating internationally According

to

Donaldson

on

a

recent

(https://www.karlknapp.com/resource/ethics)

polled

site

Generally,

organisation operates in either production of goods or services by utilizing limited resources to meets customers needs and wants.

26

The organisational activities is expected to be carry out in such an efficient way to maximize profitability so as to get back to the society in a positive way, by so doing the organisation is fulfilling its social responsibility. In light of globalization, there has been an increase number of ethical and moral issues facing international organisations, issues of cross-cultural situations where many international

organisations

are

being

accused

of

ethical

misconduct in carrying out some of there functions. Most if not all organisation operating internationally in a cross-cultural setting are being exposed to divers ethical norm and values which have to be taking care of for the organisation to succeed. Addressing such ethical issues has never been easy but it could be influence using

some

ethical

approaches,

some

of

which

include

“descriptive-prescriptive and normative approach”. Descriptive approach laid more emphasis on taking a deep understanding of moral reasoning and value of groups and individuals when making decision on ethical matters, in this approach ethical decision making process is being influence by different individual, contextual and situational context such as cultural environment, organisational environment, opportunities and personal experience. Ethical standards are often not clear or not defined explicitly in many countries, which is why moral question of what is right or wrong is still a dilemma in both local and international market

27

place. This problem is more complicated in the international scale due to diverse cultural groups, that is accepted in one country might be rejected in another country. This gave raise to the issue of universal ethical norms that had been based upon some basic moral principles that could be used to appraise international organisational ethics, where violation of such basic moral values could be regarded as a bridge. Most of this basic morals values are cultivated using a scenarios in various organisational subdisciplines

which

management,

includes

purchasing

retail

management,

management,

human

advertising resource

management and so on. General

ethical

and

moral

issues

faced

by

organisations

operating internationally include the following: Bribery: This could be categorised in either traditional small scale or large scale, which involves the payment of relatively small of large amount of money to any official to overlook of violate some of his/her duties/responsibilities or rather to facilitate policies in favour of the giver. Pricing: The issue as regards to pricing involve differential pricing and incontrovertible invoice. These include a scenario where buyer will request for a different price written on the invoice other than the actual transactional price and secondly for the prices to be unjustly different form the host country.

28

Illegal/immoral activities: Some organisational practices can be seen as illegal in the hosting country due to the negative effect it has

on

the

country,

workers

or

customers

of

the

products/services. This includes polluting environment with organisational by-products or operating in an unsafe environment that prompt the workers at ricks. Cultural differences: Their exist a high tendency of cultural misunderstanding in transactional and exchange processes due to cultural diversification, a clear business transactional practice could be considered a bribery by other culture example include political contribution, gift, favours, monetary payment and so on.

Conflicts between corporate strategy and ethical and social responsibility As asserted by European competitiveness report (2008) A corporation being having a predefine decision making ability on rules and policies is the key element that makes it mandatory to abide by society’s ethical and social responsibility. Some corporation policies and rules can contradict society ethical and social principles, which will defiantly bring conflict between the society and the corporation. A most common conflict that usually arises between corporations and society is the issues of advertisement.

29

Advertising is way of broadcasting message through the media with the intension of reaching out to customers or potential customers in order to promote certain goods or services. This process is conducted with the aim of achieving three consecutive goals, which include convincing potential customers over certain product of services, communicating information to the general public and constructing some certain values to the society. This process can bring conflict between the society and the corporation if either the message is unwholesome to the audience or if the advert is conveying negative value to the audience. Furthermore, if the message is unwholesome it can mislead the audience. A clear example is the advert slogan that uses to exist many year ago “Do whatever you want” this slogan is believed to have violate sensibility of the audience which was argued on and letter modify to “Do what you should”. The second phase is the conveying values, which can either be positive or negative. A common positive advert slogan is “You only live once” this is inspiring and it teaches the audience the value of life, on the contrary some does convey negative values. Examples of such are the hedonism as well as the patriarchy; the hedonism adverts always encourage the value of material wealth to be the greatest good such adverts distort the moral and ethical value of human and encourage trend of audience chasing after brands and materials while some advertisements contains some violent sexual implication which are some of the reasons 30

why many countries regulate the type of advert to shown due to these negative influence on audience.

Examples includes,

Sweden and Norway prohibit advert of any kind to children under 12, Greece prohibits adverts on war games, Germany and Finland prohibits advert of products that children can access and buy directly,

England

prohibits

adverts

starring

in

children

programmes to mention few. Hence, its expected for the corporation’s advert to stay within the society’s social norms and encourage significant social values to its audience.

The legislation, regulation and guidance as to corporate social responsibility Feris

(1997)

These

are

parameters

most

managers

and

government agencies used to ensure and promote ethical conduct of an organisation, which can be shaped within the organisation by the managers and outside the organisation the organisation by government and regulatory agencies. Legal responsibility in this phase has to do with the rules and regulation

enforce

by

state

legislators,

federal

regulatory

agencies and local town councils on corporations operations, those embrace what the regulating bodies as mentioned earlier 31

deems as significant in respect to proper corporate behaviour. Its expected for every organisation to operate within the legal framework

set

by

those

regulatory

bodies

wherever

the

organisations is located or positioned. Any organisation that is found to compromise any of those rules and regulations is likely to be suit by any of these regulatory bodies. Example is Tenet healthcare; this health organisation had a federal lawsuit on one of its hospitals for performing excessive cardiac procedure to some client that has to be settled with $54,000,000 USD. There are several numerous cases of such federal lawsuit against organisation across the world this is making managers to be more cautious in abiding by each one of their legal responsibilities. Some of this laws and regulations include,

tariffs,

child

labour

law,

import/export

quotas,

discrimination law, site regulations, and administrative policies, International financial reporting standard, OECO, ISGN, ISAR to mention few.

Code of ethics in regards to guidance on corporate social responsibility Porter (2006) Code of ethics is a formal statement developed by the organisation revelling the company’s stands of social and ethical issues, this statement is formed primarily to communicate

32

directly to the employees on certain level of social, moral behaviours and values that are being expected from them at the same time those that wont be tolerated. This statement often comes in two categories, the policy based statement and the principal based statement. The principal base statement is popularly known as corporate credos which is developed to address corporate culture, the statement define the fundamental ethical and social values on company’s products quality, employee welfare and company’s responsibilities. The policy-based statement is designed to address situational techniques to be used in address specific ethical and social circumstances, which include conflict of interest,

proprietary

information,

equal

opportunities

and

marketing practice.

Conclusion and recommendations The report commenced with a brief introduction of Coca-Cola Company with a detailed analysis of the international market of its products. PESTL and SWOT analysis was being conducted to identify potential segments the management needs to focus on in order to achieve its objectives so also the trends and factors affecting the company on an international scale. The report also examines the global position and structure of the company. Although there were some limitations and challenges being faced by the company, it still

33

maintained its position due to its Brand, Taste< Availability and Innovativeness. It is clear that customers are being regards as the number one factors to be considers in operating under international or local level, unlike before nowadays customers have different varieties of choices between products. Therefore, if a company can not satisfy his/her desired product they will eventually switch to the other sources. Hence, for any company or organization to endure its market competition they need to put in their best in given customers what the desired because customers are no longer loyal.

Reference Ahmad ElAmin (2007). “Coca-Cola reports progress in red environmental impact” William Reed Business Media. United State. Anthony McGrew. “Researching Globalization ” Retrieved June 19, 2014 http://www.polity.co.uk/global/research.asp Brian Nordmann (2004) “Organizational Structure” http://www.studymode.com/essay

34

Coca-Cola Company “Sustainability report” Retrieved May 28, 2014 http://www.coca-colacompany.com/sustainability/globalchallenges.html G.A Cole (2006). “personnel management theory and practices ” Hemisphere D.P publication Ltd. G Jeffrey (2003) ”Winners and losers over two centuries of globalization ” Retrieve May 29, 2014 http://www.nber.org/papers/w9161 M. Porter (2006). “Strategy and society: the link between competitive advantage and corporate social responsibiliyu”. Harvard Business Review Thomas Donaldson (2014). Ethical Issues in Business. Retrieved June 15, 2014 from https://www.karlknapp.com/resources/ethics

35