Reference no: EM133675203

Assignment:

Analyze the following case and answer the questions. "Coca Cola in Africa"

a) What are the dark sides associated with globalization of Coca-Cola in Africa from this case?

b) How can the MNC's leader manage its global operation to overcome this dark sides and get things done ethically?

Coca-Cola's Deep Dive in Africa Founded in 1892, Coca-Cola first entered Africa in 1929. While Africa had always been viewed as a "back-water," it has recently emerged as a major growth market commanding strategic attention of the US$27 billion that Coca-Cola would invest in emerging economies between 2010 and 2020. US$12 billion will be used to beef up the plants and distribution facilities in Africa. Why does Coca-Cola show such a strong interest in a "deep dive" in Africa? Both the push and pull effects are at work. The push comes from the necessity to find new sources of growth for this mature firm, which has promised investors of 7% to 9% earnings growth.

In 1998, its stock reached a high-water mark at US$88. But it dropped to US$37 in 2003. Since 2004, the share price has rallied again, rising from US$43 to a new peak of US$90 in November 2014 (adjusted for a 2:1 share split in 2012). Can Coca-Cola's stock reach higher? Its home markets are unlikely to help. Between 2006 and 2011, US sales declined for five consecutive years. Further, health advocates accused Coca-Cola of contributing to an epidemic of obesity in the United States and proposed to tax soft drinks to pay for health care. While Coca-Cola defeated the tax initiative, it is fair to say that the room for growth at home is limited.

In Europe and Japan, sales are similarly flat. Elsewhere, in China, strong local rivals have made it tough for Coca-Cola to break out. Its acquisition of a leading local fruit juice firm was blocked by the government, which did not seem to bless Coca-Cola's further growth. In India, Pepsi is so popular that "Pepsi" has become the Hindi shorthand for all bottled soft drinks (including Coke!), In Latin America, sales are encouraging, but growth may be limited. Mexicans, on average, are already guzzling 665 servings of Coca-Cola products every year, the highest in the world. There is only so much sugary water one can drink every day.

In contrast, Coca-Cola is pulled by Africa, where it has a commanding 29% market share versus Pepsi's 15%. With 65,000 employees and 160 plants, Coca-Cola is Africa's largest private sector employer. Yet, annual per capita consumption of Coca-Cola products is only 39 servings in Kenya, For the continent as a whole, disposable income is growing. In 2014, 100 million Africans earned at least US$5,000 per person. While Africa indeed has some of the poorest countries in the world, 12 African countries (with a combined population of 100 million) have a GDP per capita that is greater than China's. Coca-Cola is hoping to capitalize on Africa's improved political stability and physical infrastructure. Countries not fighting civil wars make Coke's operations less disruptive, and new roads penetrating the jungle can obviously elevate sales. Coca-Cola is already in all African countries.

The challenge now, according to chairman and CEO Muhtar Kent, will be to deep dive into "every town, every village, every township." This will not be easy. War, poverty, and poor infrastructure make it extremely difficult to distribute and market products in hard- to-access regions. Undaunted. Coca-Cola is in a street-by-street campaign to increase awareness and consumption of its products. The crowds and the poor roads dictate that some of the deliveries have to be done manually on pushcarts or trolleys. Throughout the continent, Coca-Cola has set up 3.000 Manual Distribution Centers. Taking a page from its playbook in Latin America, especially Mexico, Coca-Cola has aggressively courted small corner stores. Coca-Cola and its bottlers offer small corner store owners delivery, credit and direct coaching--ranging from the tip not to ice down the Cokes until the midday rush to save electricity, to helping on how to buy a house after vendors make enough money.

In Africa, US-style accusations of Coca-Cola's alleged contribution to the obesity problem are unlikely. After all, the primary concern in many communities is too few available calories of any kind. However, this does not mean Africa is Coca-Cola's marketing Shangri-La, free from any criticisms. It has to defend itself from critics who accuse it of depleting fresh water, encouraging expensive and environmentally harmful refrigeration, and hurting local competitors who hawk beverages. In response, Coca-Cola often points out the benefits it has brought. In addition to the 65,000 jobs it has directly created, one million local jobs are indirectly created by its vast system of distribution, which moves beverages from bottling plants deep into the slums and the bush a few crates at a time.