Coca-Cola in Africa Case Study

 

Introduction

Since its inception in Africa way back in 1929, Coca-Cola has proficiently gained a reputation that has undoubtedly supported the growth and spread of this superlative international company. Of all the latest emerging economies, Africa takes positions of the most promising market where Coca-Cola can profitably operate. Despite the fact that Africa harbors the poorest countries on earth, the continent poises to be a potential market destination and an attractive spot for many investors not only the Coca-Cola Company but also other distinctive companies. In particular, Coca-Cola sees potential in the African market and in spite of it enjoying prominence in all countries of Africa the company still shows a little bit of heightened aggressiveness to increase its investments deep into the remote areas in each country. This is evident in the recent budget read by the CEO of the company - Muhtar Kent whereby, out of the $27 billion set out to boost the company’s investment in the new surfacing markets with prospective benefits in the future, $12 billion committ to escalating Coca-Cola’s investments in Africa. This decision is crucially important to the company’s investment decision because of the fact that the continent possesses many great opportunities that give the company an upper hand over other investors of beverages such as the Pepsi. Chiefly, the significant losses that the company has recently witnessed in America have contributed to the shift in focus of the market from more developed countries and continents to the recently picking up and developing countries in Africa. Not only the pulling effect from Africa, as far as potential markets are concerned, have necessitated the swap but also the pushing effect from the once dependable markets in Europe and America. Notwithstanding the various impending drawbacks, the company does not see deterred to commit such enormous funds in favor of investment in Africa.

This essay explicates the reasons why Coca-Cola has committed colossal amounts of money apropos its investment endeavors in Africa as an imperative fraction of the inclusive economic pyramid.

Coca-Cola’s Interest in Africa

In all the emerging economic hot spots, the African continent poses a vitally consistent market destination for the Coca-Cola products, which promises a heavy reaping that will see through the company’s projected sales turnovers over the years. The augmented per capita income, that further shows improvements in the near future, has significantly captured the interest of the company to invest in Africa. With the incredibly dynamic population characterized by aggressive young generation in big towns as well as in the rural pathways, this fact about Africa beckons significant returns that Coca-Cola cannot disregard. For ages, Africa has witnessed a protracted period of political turbulence that has certainly hindered many investors from committing huge funds in the name of investing in Africa. From the political unrest in Somali, Congo, and other counties in the continent to mention but a few, the instability has blocked many potential investors because of the fears of the unknown. Nevertheless, Peng (2010) affirms that the now improved political stability and peace almost throughout the continent has given the Coca-Cola Company the go ahead in its endeavors to invest and expand its economic base. This is considered as vitally important in the investment decision made by the company because of the fact that the assured political stability will allow the company to penetrate through to the villages without any glitches. Political stability will ensure guarantees of security and protection from any possible loss of the products for the distributors of the Coca-Cola products. Consequently, they will put in place more deports and an elevated number of stores. In addition, there are an increasing number of visible projects as far as infrastructural development is concerned. More roads are in construction even to the interior a measure that will definitely enable the company to veer easily through the many potential markets within the continent.

Unique Capabilities and Resources

Apparently, the company has whatever it takes to ensure its survival in Africa despite there being possible challenges posed by other local, as well as international firms. The fact that the company has committed huge chunks of money to invest in Africa vividly depicts that the company has the potential to outfit other firms and be able to thrive through for a considerable amount of time. Hays (2005) agrees that the finance shall help the company to sustain various initiatives as far as supporting the various distributors and local venders through the provision of free refrigerators, distribution crates, vehicles among other supportive measures and approaches where necessary. Besides, the fact that the company has been able to create a significantly considerable number of employment opportunities and jobs to the native residents of each respective country gives the company a more competitive advantage of gaining the trust of many Africans in the long run. The company’s unique products all over the world have extensively been a major interesting facet that has helped the company to enjoy dominance in various parts of the globe for quite some time since its entry in the market. Regardless of other emerging competitors, the unique taste of the Coca-Cola brand has continually helped the company survive in a range of counties where there are potential competitors hawking local beverages in the streets. Additionally, the ability of the company to command over 20% of the market share against its ‘rival’ in Africa for quite some time is a clear indication that the company has the potential features and ability to win the African market in selling its unique products. The street-to-street campaign to augment the awareness, as well as the consumption of the company’s products has proved to be beneficial in other different parts of the glob. This is unquestionably going to help the Coca-Cola Company retain a greater share of the market.

Drawbacks of Making Large Commitments in Africa

However, despite the large-scale commitments by the company, there are some concerns about the possible glitches that might hamper the company’s strategic plan to reach every nook and cranny of the continent. The primary concern revolves around the proper channels of distribution and political stability. The unpredictable trends in the African countries possess a major challenge as far as sustainable political stability is under concern. The possibility of war can significantly render the investment a waste of resources should anything malicious transpire at the wake of the investment. This can significantly impair the effectiveness of the company’s operations. In addition, Zurkuhlen & Meeker (1987) opine that the level of poverty a fact behind the poor infrastructural development in some parts of the continent renders some parts inaccessible and thus impeding the company’s efficacy. The company as well faces criticism from various corners of the continent, which certainly could taint its name and affect its sale that might translate to a loss of the investment. Besides, the fact that the company faced a lot of criticism of having contributed to the many cases of obesity in America, the information has undoubtedly spread all over the world and some individuals could withdraw their consumption of the Coca-Cola products leading to a decrease in sales.

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Coca-Cola’s Critics

The claim made by the United States stakeholders that the consumption of Coca-Cola products has led to the many cases of obesity amongst some individuals presents a reasonable case against the company. This is because, of the sugary drinks that it has offered for a considerable time span. The criticism, however, has acted as a wake-up call for the company to implement various strategies such as the introduction of soft drinks with low calories as well as the ban of advertisements of its products to young children. On the other hand, the criticism tabled by the African stakeholders of depleting flesh water, expensive and environmentally harmful refrigeration, and hurting local soft drink competitors is unquestionably not a valid case. Coca-Cola products are an alternative consumption and individuals are drinks them out of their own volitions. The Coca-Cola refrigerators are environmentally friendly and often are a cheaply and readily available offer for all retailers and distributors. Additionally, competition is a necessary practice in any marketing scenario and creates an offer to the consumer of healthier, more reliable, and trust-worth products.

Conclusion

In conclusion, this case study clearly unveils main interest of Coca-Cola in investing heavily in Africa because of the promising future benefits, taking into consideration the elevated earnings. The company has identified Africa as a potential market for its products and with all the necessary requirements that the company has the business in Africa is booming. Its unique resources and capabilities inherent in the company’s reputation ranging from the huge financial base and a differentiated wide array of brand choice will enable the company to continue enjoying the big market share in Africa. Irrespective of the various drawbacks ranging from unpredictable wars, increased levels of poverty, and relatively poor developed road networks, the company is optimistic in capturing and maintaining a greater share of the market. Nothing seems to deter the company from pursuing its initiatives and is ready to defend itself from various criticisms laid against it. Through its dedication that has seen it commit heavy amounts of money to invest in Africa, the company hopes to generate significant returns and improve its financial stand.

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