Business Administration

Chapter 6

Globalization

• Process of integrating the world through commerce, technology, culture and politics

Coca-Cola Origins

• Invented in 1886 by a Civil War officer Dr. Pemberton (Pharmacist)
• Started selling it to soda fountains in Atlanta (local company)
• When inventor died in 1888 rights to formula were acquired for $2,300 and new owner soon formed Coca-Cola Company and began selling “Coke”

Global Coca Cola

• Today Coca-Cola Company (CCC) is the world’s largest manufacturer, distributor, and marketer of soft-drink concentrates and syrups.
• Sold in more than 200 countries
  – Main markets outside of U.S = Mexico, Brazil, Japan and Germany
• 62% of earnings come from outside of U.S.
• 1.5 BILLION servings/day
• Business strategy = “think global, act local”

•  Designed to put responsibility and accountability in hands of those closest to the market

Coca-Colonization

• “The Coca-Cola Company has been a target because it is a high profile American company

• Attacked in Afghanistan after first U.S. raids

• CCC illustrates the uniqueness of a Multinational and the necessity that this type of company has to develop strategies to deal with problems on a global scale

The acceleration of globalization

The factors that drive the acceleration of globalization:

• Improved communications
• Improved transportation systems
• The rise of major transnational corporations
• Social and political reforms
• The rise of international financial and trade institution (e.g. World Bank, IMF, WTO)

Major players on Globalization

• Multinational Corporations: MNCs
• Non-Governmental Organizations: NGOs
• International financial & Trade Institutions: • World Bank
• International Monetary Fund (IMF)
• World Trade Organization (WTO)

Multinational Corporations (MNCs)

a.k.a. Multinational Enterprises (MNEs)/ Transnational Corporations (TNCs)

What exactly makes a company an MNC?

According to the United Nations: firms that control assets abroad:

• –  Export products to foreign countries
• –  Establish sales organizations abroad
• –  License use of patents and technology to foreign firms that sell the MNC’s products
• –  Give foreign production facilities substantial autonomy but still reserves some important decisions for the home office (Headquarters)
• –  Decentralize authority throughout the company so that functions at home and abroad are done by executives from different countries

MNCs (II)
-79,000 MNCs operate in the modern global economy

-Most global commerce is carried out by a small number of powerful firms

NGOs (I)

• Most of these organizations were created in order to deal with issues caused by MNCs, particularly:

– Environmental risk – Worker rights
– Labor practices
– Human rights

– Community development

NGOs (II)

• Since early 1900s # of international NGOs has grown to approximately 20,000
• This growth has been attributed to several factors:

• New global economic & political relationships
• Openness in post-Cold War world that allows for more views to be expressed

• NGOs are now legitimate stakeholders in MNCs decisions due to their power and influence

International financial & trade institutions

The World Bank

• Provides economic development loans to its member nations.
• Funds used mainly for roads, dams, power plants, pipelines, and other infrastructure projects.