Coca-Cola Case Study
Question 1: Why is Coca-Cola making foreign direct investment in Europe? Answer:
As we can learn from the case study, the main reason for Coca-Cola making foreign direct investment in Europe is that Coca-Cola is willing to expand its market share in the region. The essential of expanding market share in beverage market, especially in soft drink segment, is to enhance the average consumption volume of the product. To achieve this, the lower selling price of the product is needed. Coca-Cola could be benefited in many aspects from making foreign direct investment through the way of setting up new production plants with efficient delivery and effective marketing efforts, by which, Coca-Cola is able to enjoy lower production cost. As the new bottling plant has been set up in Europe, the high shipping cost from North America to Europe became unnecessary, and Coca-Cola is able to source the raw material and employ the staff locally, that helps Coca-Cola to improve the productivity and reduce the production cost in some extent. Moreover, the import tariffs across the Atlantic Ocean could be avoided via setting up new bottling plants in Europe. Question 2: How is Coke improving its factor conditions in Europe? Answer:
As we all know, the factor of production refer to land, labor and capital. Capital and labor are active factors while land is passive. To improve the factor conditions in Europe, Coke adopted many efficient steps. Coca-Cola increased the capital input significantly on its distribution channel and advertisement, for example, in French some franchisee operations has been forced to sell back to Coke, thus Coke can run the operation by itself at a much more active way; and in England, Coke put more resource in marker efforts such as, running contest and sponsoring sports events over the country; and in Italy, discounts has been given by Coca-Cola to retailers who promised to stock only Coke. On the...