Case study - Coca Cola a transnational corporation
Case study - Coca Cola a transnational corporation
Transnational corporations (TNCS) are large companies that
operate in more than one country. The head quarters are usually in
an MEDC. They have a large number of factories operating around the
world.TNCs use cheap labour especially in LEDCs such as Asia as an
alternative to paying the expensive costs of labour in their own
country.
Coca ColaCoca Cola 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 in more than 200 different
countries. 70% of its sales are generated outside of North America.
Production is based on the franchise system
Advantages of being a TNC. Have a strong bargaining position and
can negotiate favorable conditions for entry into countries..
Governments offer incentives to encourage TNCs to locate there..
Labour costs are lower in LEDCs.. Often the raw material is sourced
in the LEDCs BUT this does not apply to Coca Cola. . Coca Cola dont
always own their factories, they subcontract out to pre-existing
bottling companies to save more money.. TNCs 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.
Positive effects that TNCs have on the host country. 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.. TNCs offer training and education.. Many TNCs to
improve their image get involved with schemes to help the poor.
Coca Cola runs some community schemes in Africa and South East
Asia.. One of Cokes microfinance startup schemes provide 4000
Vietnamese women with the merchandise, training and basic equipment
to begin selling Coca Cola.. TNCs attract other TNCs to 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.
Negative effects that TNCs have on the host country. Low paid,
semi skilled or unskilled production takes place in LEDCs.
Management, design and marketing take place in MEDCs.. If the TNC
experiences problems, the newest overseas branch plants are the
first to be closed.. Some people think that companies like Coca
Cola are adding to the water stress of the area because the water
should be used for agriculture. . TNCs are very powerful; if they
are not happy with the economic conditions within the host country
they will pull out leaving people unemployed.. Environmental
regulations are often less strict in LEDCs: some TNCs take
advantage of this.. Profits are returned to the shareholders, very
little of the money remains in the host countries.. Working
conditions in some factories are harsh: long hours for very little
pay. Employees get very few benefits and there are unlikely to be
any unions.
Coca Cola hierarchyCoca 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.
QUESTIONS FOR DISCUSSION
Q1.) From all viewpoints, Coca Cola is a TNC which benefits the
countries they operate in. Debate this observation.
