1. Why is Coca-Cola so interested in Africa, which is typically regarded as part of the base of the global economic pyramid?
Coca-Cola is an organization that has been around since 1892. Coca-Cola is looking for new emerging growth markets and Africa has proven to be that. Combined, 12 of the African countries have a GDP greater than that of Chine. Coca-Cola has 29% of the market share in Africa.
2. What unique resources and capabilities does Coca-Cola have that will help it compete well in Africa?
Coca-Cola has the ability to conduct street by street campaigns, to reach the towns and villages. This will assist in improving it marketing and distributions to areas off the beaten path. The manual distribution centers will also assist to grow sales, by coaching and directing small bottlers and residents to own their sales and delivery.
3. What are the drawbacks of making such large scale commitments to Africa?
Yes there are drawbacks. There are still many areas in Africa where the government and physical infrastructure is not stable. With Coca-Cola
investing large amounts of money in Africa, the instability could prove disruptive to Coca-Cola operations.
4. Do stakeholders in the United States and Africa who criticize Coca-Cola have a reasonable case against it?
Yes, it is a valid criticism that Coca-Cola is depleting fresh water, and encouraging environmental harmful refrigeration. Coca-Cola needs to find a way to create sustainable manufacturing that will not pillage natural resources.
Why go to Africa
Coca-Cola was founded in 1892, but began business in Africa in 1929. Despite the belief that Africa is unstable government, lacks infrastructure, and great conflict and turmoil, Coca-Cola decided to enter Africa and is the largest private sector employer in Africa. $12 billion was allocated towards building distribution centers and plants in Africa. Sales in the United States are declining due to the public concern over sugar. Sales in Europe and Japan are flat, while markets in China and India offer up strong completion for Coca-Cola. Africa’s middle class population is growing at a steady rate, so the disposable income is increasing. This creates an opportunity for Coca-Cola to tap into growth opportunities (Natalia Cheverri 2012). How does it work?
Although there are areas in Africa lacking infrastructure, Coca-Cola operates in every country. Coca-Cola utilized a franchising manufacturing model that works perfectly for operating in Africa. Coca-Cola partnered with local licensed bottling groups to help create the product. Coca-Cola manufactures the syrup concentrate and sells to the bottlers. The bottlers add filtered water, carbonation, and sweetener to make the final product.
With this model, Coca-Cola is sharing the wealth with local investors/community members. This creates sustainable business and improves community buy-in with Coca-Cola’s existence in Africa (Maritz Jaco 2010). Because partnerships are formed with local bottlers and local members of the community, there is a vested interest by the locals to keep Coca-Cola’s business successful. Through these partnerships, Coca-Cola is able to help build the socio-economic system in different towns.
Coca-Cola was having difficulty distributing product to different area of Africa with no roads. In 1999, local bottlers came up with the idea to cover off the beaten path areas by any means necessary. This included distribution by bicycle, pushcart, hand-carry and even donkey-cart. This distribution method is called manual distribution and has been adopted by many organizations all over the world (Maritz Jaco 2010). Manual distribution method was even adopted by an innovative non-profit named Colalife. This organization distributes medicine all over the continent of Africa. Summary
Coca-Cola took a gamble in making the decision to enter Africa. This gamble has paid off, because Coca-Cola is now one of the largest organizations in Africa and sees growth profits.
Maritz, Jaco (2010), “Report: Doing Business in Africa, the Coca-Cola way” http://www.howwemadeitinafrica.com/doing-business-in-africa-the-coca-cola-way/2433/. Date accessed May 17, 2013. Steakley, Lia (2013), “Using the Coca-Cola supplier network to distribute medicines in Africa,” http://scopeblog.stanford.edu/2013/04/26/using-the-coca-cola-supplier-network-to-distribute-medicines-in-africa/. Date accessed May 17, 2013 Cheverri, Natalia (2012) “Coca-Cola in Africa,” http://www.thepolisblog.org/2012/03/coca-cola-in-africa.html