TNC Definition
Firms with operation spread across the world, operating in many nations as both makers and sellers of goods and services.
Coca Cola – What it is
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Currently offers 500 different brands in 200 countries and serves over 1.6 billion servings each day. Company operates a franchised distribution system dating from 1889
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Coca-Cola operates in more than 200 countries. Because of the local nature of their business, they are in the unique position to contribute to the economic vitality of even the most remote communities around the world.
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The total indirect economic impacts of the Coca-Cola system are significantly greater than the figures we present in their 2008/2009 Sustainability Review (PDF).
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The Coca-Cola system has more than 900 plants around the world.
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Their ingredients and raw materials are largely sourced locally.
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92,400 employees represent thousands of communities and many cultures.
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In addition, our bottling partners employ hundreds of thousands of people around the world and are committed to supporting community investment programs
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Their global business stimulates job creation throughout our value cycle.
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They contribute to the economic success of each community by employing local people; paying taxes to governments; paying suppliers for goods, services and capital equipment; and supporting community investment programs.
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Past independent studies on the economic impact of their business in Asia, Africa and Eastern Europe have consistently shown that for every job in the Coca-Cola system, an average of 10 more jobs are supported in local communities.
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Uses marketing techniques to gain market share – e.g. songs and also became the first commercial sponsor of
Olympic Games in Amsterdam in 1928 (and many more sporting events since)
Explain the role and significance of a named TNC (Coca Cola):
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The Brand - number one manufacturer of soft drinks in the world and probably the best known brand symbol, they sell nearly 400 products in 200 different counties with 70% of their sales generated outside of the USA, production is based on a franchise system.
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Advantages of being a TNC o Strong bargaining position and can negotiate favourable conditions for entry into countries o Government offer incentives to encourage TNCs to locate there o Labour costs are lower in LEDCs o Raw materials usually source in the LEDC (doesn’t apply to Coca Cola) o Can subcontract to existing companies to save money o Want access to high earning large populations and manufacturing near them saves on transport costs. o Cheaper raw materials in developing countries.
Some facts as to why Coca Cola is a TNC
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First year coke produced sales of $50. Today it is a multibillion dollar company.
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Revenue of £35.1billion – 84 th largest economy just before Costa Rica.
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During the 1960s and 1970s, Coca-Cola began diversifying its business.
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Coca-Cola acquired more than 15 different businesses ranging from food, wine and soft drinks to film and water treatment.
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1982, Coca-Cola purchased Columbia Pictures selling off other businesses along the way
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Mid 1980s, Coca-Cola came back to its roots to concentrate on the soft drink industry
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Coca-Cola produces franchise products. o Products do not have substitutes o Coca-Cola is a low cost leader o Coca-Cola has the largest plant capacity in the world and therefore enjoys significant economies of scale. o Low regulatory restrictions placed on the Company.

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Coca-Cola purchases under-performing bottling systems, improves them and sells them back to strong, existing bottlers. This strategy increases the operational efficiency of Coca-Cola’s distribution
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The factors below minimize the threat of new entrants into the soda industry o Coca-Cola enjoys significant economies of scale. o Coca-Cola has huge market share. o Coca-Cola has tremendous brand loyalty.
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Today company operates in 200 countries- more than 800 plants thousands of employees
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More than 3500 beverages offered by company today (or so many that if you drank one each day – would take you 9 years to sample them all).
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Average 1.5 billion products consumed each day (or 10,450 every second of every day).
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3.1% of beverages in world are products of Coca Cola.
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1,322,000 tweets each quarter
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94% of world’s population recognise the logo.
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6 Geographic segments o South East Asia and Pacific o North America – 91 brands o Africa o North Asia, Eurasia and Middle East- 92 countries, largest of the segments. Serves 3 billion people. o European Union – has 1600 associates and 60k bottler employees and 38 countries o Latin America
Positive effects on host country:
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Creates jobs both directly and indirectly in the host country
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Many of the bottling firms are local so all the profit stays in the host country
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TNCs offer training and education
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Improve image of TNC with schemes to help the poor
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TNCs attract other TNCs to the host country
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Improvements to infrastructure
Negative effects:
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Low paid, semi-skilled or unskilled production takes place in LEDCs. Management, design and marketing takes place in MEDCs
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If the TNC experiences problems, the newest overseas branch plants are the first to be closed
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Packaging used in Coca-Cola's products has a significant environmental impact but the company strongly opposes attempts to introduce mechanisms such as container deposit legislation
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Some people think the companies are adding the water stress of the area because the water should be used for agriculture
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Environmental degradation in the form of 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.
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TNCs are very powerful, if they aren’t happy with the economic conditions within a country they will pull out leaving people unemployed
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Environmental regulations are often less strict in LEDCs, some TNCs take advantage of this
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Profits are returned to the shareholders, very little money remains in the host countries
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Working conditions in some factories are harsh, long hours, little pay and few benefits or unions.
Specific Cases
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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.
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In April 2005, Kerala's highest court rejected water use claims, noting that wells there continued to dry up last summer, months after the local Coke plant stopped operating. Further, a scientific study requested by the court found that while the plant had "aggravated the water scarcity situation," the "most significant factor" was a lack of rainfall. Critics respond that Coke shouldn't be locating bottling plants in drought-stricken areas.
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In Plachimada, Coca-Cola is allegedly responsible for creating problems for communities by creating severe water shortages and polluting the groundwater and soil, destroying farms by draining them out completely.
The plant here used about 900,000 litres of water last year, about a third of it for the soft drinks, the rest to clean bottles and machinery. It is drawn from wells at the plant but also from aquifers Coca-Cola shares with

neighbouring farmers. The water is virtually free to all users. These farmers who have been protesting say their problems began after the Coca-Cola factory arrived in 1999.
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Near the holy city of Varanasi in north-eastern India, a local water official blamed a Coke plant for polluting groundwater by releasing wastewater into surrounding land. A Coke official confirmed that there had been a drainage problem with treated wastewater several years ago but said that the company built a long pipeline to correct it.
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Indian environmental activist Vandana Shiva has stated that it takes nine litres of clean water to manufacture a litre of Coke though Coca-Cola says it is only an average of 3.12 litres.
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Outside of India, Coca-Cola has been blamed for causing water resource disruptions in Mexico and El
Salvador. The Company was blamed for taking control of water resources in the war-torn part of Chiapas,
Mexico. Local activists are claiming that Coca-Cola put pressure on government to allow access to water
 resources, effectively privatising it
Coca-Cola has continuously reported losses in the last decade of operations in Vietnam despite it being one of the biggest players in the domestic beverage market – so use their expertise to avoid tax.
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There have been allegations that monopolistic practices o In June 2005, Coca-Cola in Europe formally agreed to end deals with shops and bars to stock its drinks exclusively after a European Union investigation found its business methods stifled competition. o In November 2005, Coca-Cola's Mexican unit - Coca-Cola Export Corporation - and a number of its distributors and bottlers were fined $68 million for unfair commercial practices. Coca-Cola is appealing the case
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In South Africa it supported Coke employed 4,500 workers, operating under the racially-segregated housing, workplace, and wages, and was one of the largest employers in the country. Therefore students boycotted
Coca cola at American universities.
Possible Health Effects
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Soda and sweetened drinks are the main source of calories in the American diet
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The drink has also accounted criticism for its use of caffeine, which can cause physical dependence.
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Acidity is dangerous and the product causes tooth decay
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To save costs high fructose corn syrup is used – this is from genetically altered plants – also can cause obesity and diabetes.
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Risk from over consumption
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In India there is widespread concern over how Coca-Cola is produced. Particularly the fear that water used to produce Coke may contain unhealthy levels of pesticides and other harmful chemicals. Pesticides that can contribute to cancer and a breakdown of the immune system. Indian produced Coca-Cola soft drink products had 30 times the level of pesticide residues permitted under European Union regulations.
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In India, sample of the sludge Coca-Cola sells as fertiliser were taken, they showed high levels of lead and cadmium in the sludge. Lead is particularly bad for children, affecting their nervous system, and cadmium is taken up by plants, is toxic to the kidneys and liver and can cause cancer.
How products are varied to suit the market
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Use of fructose corn syrup - Kosher for Passover Coke is also made with cane sugar, rather than corn syrup, due to the special dietary restrictions for observant Jews. Some Orthodox Jews do not consume corn during the holiday. Bottled with yellow caps, this variant can be found in some areas of the US around April.
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However - In the Catalan-speaking region, the company has stirred up a great deal of controversy for its refusal to print its labels in Catalan, despite doing so in all the other European languages of similar magnitudes. Coca-Cola label in 135 languages around the world (but will not label in Catalan).
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Marketing strategies developed for each country – for example in India – strategy to align product with Indian
Culture and tradition. Ad campaigns shows brand as a relaxing drink fighting off hot weather and humidity in
India. Adopted jingles in Hindi and Celebrity endorsements
(such Actress Kareena and Amir Khan and Sachin
Tendulkar endorses it). In India – seen the importance of festivals and uses this in marketing strategy. Also uses cricket as most Indians have a love of this game.
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It partners with movie theatres and restaurants – so gets brand known – e.g. MacDonald’s
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Sponsors sporting events – so that people see company and product as a good force for sport

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Uses social websites to connect e.g. Facebook twitter etc.
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In some cases a product is developed solely for local consumption and an example of this is the product Lilt, which is only available in Great Britain and Ireland.
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The Coca-Cola Company has proved itself ready to do business in novel and inventive ways. The day the Berlin
Wall came down in 1989, Coca-Cola representatives were handing out cans of Coke to the East Germans as they walked into West Berlin. Within three months the company was distributing Coca-Cola to the Eastern States
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Has tailored product to fit lots of different markets, powerade and flavoured Coke for younger consumers, diet Coke and vitamin water for the health conscious
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Packaging differentiation – varied packaging according to need e.g. different sizes, different material for bottles (glass, plastic, cans) for ease of stacking and vending machine dispensing, also all packaging is recyclable
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Coca-Cola set up a “hug machine” in Singapore – a vending machine with a message saying “hug me”, after which the consumer received a free Coke. It generated 112 million impressions within a day
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In Istanbul they installed a vending machine which gave away free Coke if people could prove they were a couple.
Expansion of Coca – Cola
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Early 1900s - started to globalize. Bottling plants were built in Cuba and Panama as US military had bases here. These proved successful; reducing shipping and delivery costs. Soon after plants were opened in
Hawaii, Puerto Rico and the Philippines.
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Has expanded to most countries in the world. In 2009 it released its marketing strategy to 2020, which announced investments of more than $30 billion in markets around the world to 2020.
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Growth in China and India is slowing down. In developing nations, areas outside major cities lack infrastructure, such as roads or reliable electricity. And some countries may not have the bottling or distribution channels to meet the company’s massive needs.
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Coca-Cola has 53.1% of the international carbonated beverage market share, while Pepsi has 21.7%
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By 2010, Coca-Cola had put in place systems that allowed the company to replace all the water it uses through harvesting rainwater and irrigation techniques.
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In December 2011, it purchased half of one of the biggest beverage companies in the United Arab Emirates,
Aujan Industries. Three months later, it opened its 42nd bottling plant in China.
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In June, Coca-Cola announced its intentions to begin distributing in Myanmar, one of three countries in which Coca-Cola does not sell its products. The other two are Cuba and North Korea. However, it is reported to be available in both countries as a grey import.
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In September 2011, Coca-Cola announced it and its bottling partner, Coca-Cola Hellenic, would commit $3 billion over the next five years in Russia, including the opening of a plant in the country’s Rostov region.