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The Import of Culture? The Coca Cola Company in America and Australia

Term Paper 2014 11 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Table of Content

Introduction

Theories

Hofstede’s Culture Theory

Corporate Governance

Internal Organisation

Entry Strategies

Coca Cola Company USA

Hofstede on USA

Corporate Governance (CSR, Sustainability) of The Coca-Cola Company

Internal Organisation of The Coca-Cola Company

Cultural impact on Entry Strategies

Coca Cola Amatil Ltd.

Entry mode used in Australia

Corporate governance

Internal Organisation

US Culture in Australia – was it successful?

Impact of local culture and institutions on company

Conclusion

References

Introduction

This paper will look into how cultures and institutions still affect a company’s corporate governance and internal organization in their home country, but also determine whether this home country culture is then transferred onto their companies in host countries. It will also look into how both home and host country culture have an effect on a company’s choice of entry strategy. The subject of this paper is Coca Cola invented in 1886 in USA (History of Bottling, 2014). The home country of The Coca-Cola Company (TCC) is therefore USA and the host country that we will be looking at in this paper is its bottling partner Coca-Cola Amatil Ltd. (CCA) in Australia.

Theories

Hofstede’s Culture Theory

Geert Hofstede born in 1928 defines culture as “the collective programming of the mind that distinguishes one group or category of people from another” (Hofstede, 2011). His intercultural research led him to determine a country’s culture through the following categories: Power distance, Individualism, Masculinity and Uncertainty avoidance. Power distance is “the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally” (Hofstede, 2001). Individualism establishes “the degree of interdependence a society maintains among its members” (Hofstede, 2001). Masculinity determines “the distribution of emotional roles between the genders” (Hofstede, 2001) in a society, e.g. assertiveness being a more masculine trait and caring being a more feminine trait. Uncertainty avoidance describes “the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these” (Hofstede, 2001).

Corporate Governance

Corporate governance encompasses three main factors: a company’s ethics, CSR and sustainability (Xia Unit 5, 2014). These go beyond complying with regulations and laws given by institutions, a company’s CSR and sustainability policies are a testament to the ethics of the company. Therefore a good CSR and sustainability policy can be beneficial to a company because it can have a positive effect on consumer behaviour. Ethics can play an important role when choosing to internationalise a company. For example it is important when sourcing or manufacturing in other countries to satisfy customers that this sourcing and manufacturing is in compliance not only with guidelines, but also with moral principles present in the company’s home country and human rights. Company’s sourcing fair trade goods to produce products or provide better pay and working conditions for their workers display a good CSR and sustainability policy.

Internal Organisation

There are several different organisational structures a company can use to form its internal organization: International Division, Geographic Area Structure, Product Structure, Functional Structure and Global Matrix Structure (Xia Unit 7, 2014). The structure chosen is influenced by the level of government intervention in the economy, the higher the level of government intervention the more likely a company’s organizational structure is centralised, e.g. product and functional structures. The lower the level of government intervention the more likely a company’s internal organisation will be a multi-divisional form e.g. geographic area structure or global matrix structure. Government intervention is enforced to insure a country is attracting the operations they want by making entry/export easier or more difficult for a company.

Entry Strategies

There are different ways to enter a foreign market, for example exporting, joint ventures or wholly owned subsidiaries. The strategies are chosen as a result of the national culture of the company, but also on the basis of the culture of the country or area a company wants to enter. For example, if a company’s home and host culture are very different the company may prefer to form joint ventures or have wholly owned subsidiaries over acquisitions (Kogut and Singh, 1988). In this case Hofstede’s uncertainty avoidance also plays a role. If a country scores very high on uncertainty avoidance it will choose to enter as mentioned above. However, should a company’s score on uncertainty avoidance be very low determining how that company is most likely to enter a foreign market becomes more difficult. Furthermore the governance quality of a country can influence a company’s choice of entry mode as well. If a country has satisfactory governance quality companies are more willing to form joint ventures rather than wholly owned subsidiaries (Chang, 2012).

Coca Cola Company USA

Hofstede on USA

Hofstede’s take on USA shows that they scored fairly low on power distance with a score of 40. However, USA scored very high in the category individualism with a score of 91 (Hofstede, 2001). Hofstede states that the combination of these two scores is a reflection of Americans being encouraged to make their own way in life and be themselves, but at the same time despite being very individual equal rights and “justice for all” still applies (Hofstede, 2001). The low power distance score is also the result of hierarchy only being enforced in organisations for convenience leaving superiors very accessibly and a flow of communication across various levels of employees. Masculinity is also classed as relatively high with a score of 62 mainly resulting from the fact that American society is greatly defined by the presentation of success. The “live to work” mentality is also driven by the want to improve status. With a score of 51, USA scores below average on uncertainty avoidance. As a society Americans are very open to new things and very tolerant in terms of freedom of expression (Hofstede, 2001). They also do not require a lot of rules showing that they are not afraid of facing uncertainty or unfamiliar situations.

Corporate Governance (CSR, Sustainability) of The Coca-Cola Company

When consulting TCC website there seems to be a good CSR and sustainability policy in place with the company claiming that:

At The Coca-Cola Company, we aim to lead by example and to learn from experience. We set high standards for our people at all levels and strive to consistently meet them. (TCC: Governance Ethics, 2014)

These high standards include introducing Plant Bottle Packaging (TCC: Plant Bottle, 2014) to reduce their carbon footprint and improve sustainability, the RAIN project in which TCC aims to help provide clean drinking water for 2 million people in Africa by 2015 (TCC: RAIN, 2014) and the Coca-Cola Foundation promoting water stewardship, healthy and active lifestyles, community recycling and education (TCC: The Coca-Cola Foundation, 2014). These are only a few of TCC’s ventures promoting their external CSR and sustainability policies. However TCC also emphasises the importance of CSR within their organistation. This includes their Human Rights Statement, Workplace Rights Policy and Global Mutual Respect Policy and their empowering women initiative which offers more opportunities for women within TCC (TCC: 5by20, 2014).

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Details

Pages
11
Year
2014
ISBN (eBook)
9783656832621
ISBN (Book)
9783656830832
File size
463 KB
Language
English
Catalog Number
v283541
Institution / College
Loughborough University
Grade
75
Tags
Coca Cola Australia America USA Import Culture

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Title: The Import of Culture? The Coca Cola Company in America and Australia