Internationalization/regionalization strategies of the
largest food and beverage multinationals
Master Thesis
MSc. Business Studies – International Management University of Amsterdam
Supervisor: Dr Johan Lindeque Second reader : Dr Sebastian Kortmann
Student: Randa Azarkan
Student ID: 5866561
Abstract
MNEs are considered to be major players in the globalization process. However, a growing number of studies show that the activities of most MNEs are regionally oriented and that only a handful are truly global. As a part of the regionalization/internationalization debate, this paper seeks to explain the pattern and the reasons behind the international/regional orientations of the largest multinational enterprises (MNEs) operating in the food and beverage (F&B) sector. The research is conducted by means of a multiple case study using a sample of six firms selected from the largest food and beverage MNEs listed in the Fortune Global 500 of 2012. The home regions of all these firms belong either to the USA or Europe so they are all originating from the triad region and the research project covers the period between the 2005 and 2012. The results largely support the regionalization theory but also show the importance of emerging markets in the geographic expansion of these firms. Moreover, while the liability of foreigners associated with differences in formal and informal institutions is a determinant factor in the internationalization of F&B MNEs, organizational capabilities and firm specific advantages (FSAs) in particular innovation and marketing are found to be more influential in this study. Finally, a direct home country effect was found in the case of US MNEs which are affected by the US political and foreign policies.
Acknowledgments
I would like to express my deepest and sincere respect and gratitude to my thesis supervisor Dr. Johan Lindeque for the valuable guidance. Your patience, advice, comments and suggestions on the research have been priceless.
I also wish to thank my parents for their prayers and encouragement. In addition, I would like to thank my sister Nora for her continuous support.
My heartfelt appreciation goes to my sister and best friend Leila; words can hardly describe my love and gratitude for you.
Finally, special thanks to my friends who have encouraged and supported me through the writing process.
Table of Contents ABSTRACT ... 1 ACKNOWLEDGMENTS... 2 1-INTRODUCTION ... 4 2- LITERATURE REVIEW ... 6 2-1 Regionalization/internationalization debate ... 6
2-2 Regionalization/internationalization in the sector of Food and Beverage: ... 11
2-2-1 Liability of foreignness ...13
2-2-1-1 Institution-based view ... 14
2-2-1-2 Resource-based view ... 15
2-2-4 Home country effects ...17
2-3 Integration ... 18
3-METHODOLOGY: ... 19
3-1 Ontological and epistemological assumptions: ... 19
3-2 Multiple-case design... 20
3-3 Case selection ... 22
3-4 Data sources and collection: ... 24
3-5 Analytical strategy ... 25
4- RESULTS: ... 27
4-1 Within case analysis: ... 27
4-1-1 Coca-Cola ...27 4-1-2 PepsiCo ...31 4-1-3 Kraft ...34 4-1-4 Nestlé ...36 4-1-5 Groupe Danone ...40 4-1-6 Unilever...43 4-2 Cross-cases analysis ... 46 5-DISCUSSION ... 48 6- CONCLUSION ... 51 6-1 Limitations: ... 51
6-2 Academic and managerial relevance ... 51
6-3 Suggestions for future research ... 52
7- REFERENCES ... 53
1-Introduction
Globalization is an important phenomenon and issue in international business that has generated lively discussions and debates. Multinational enterprises (MNEs), being an important component of the globalization process, have also received their share of attention in the debate and studies. The debate on whether MNEs are pursing global or regional strategies has been mainly introduced by Rugman (2001) who announced “the end of Globalization” and argues that businesses should think and act locally while ignoring the global strategy myth. Afterwards, Rugman and Verbeke (2004) found strong empirical evidence supporting this perspective when they concluded that only a handful of the Fortune Global 500 list MNEs can be labelled as truly global.
To further test this regionalization theory, it would also be interesting to compare the evolution of firms operating in the same industry and also compare different industries. This will help depict potential regionalization/internationalization patterns specific to each industry if any and also capture the pace and scope of their regionalization. In the spirit of gaining more understanding of this phenomenon, this paper seeks to contribute to the regionalization/internationalization debate by focusing on MNEs producing food and beverage products (hereafter, F&B MNEs), the degree of their internationalization, the determinants of their performance and whether these determinants are internal or external to the firms. The two views on MNEs performance, the resource based view (RBV) and the institution based view (IBV) are examined and adapted to the case of the F&B sector.
On the one hand, the global/regional discussion has political and cultural environmental dimensions because of the notion of a region itself, which is based on common or similar political, cultural and historical institutions (Peng & Pleggenkuhle-Miles, 2009). Firms that go beyond their home regions are exposed to many risks principally resulting from their unfamiliarity with new contexts or what is referred to as the liability of foreignness (Rugman, 2005). Hence, the IBV is indispensable to understanding the regionalization strategies of MNEs and thus important to be considered in the case of this research. On the other hand, the liability of foreignness can also be explained by the difficulties faced by MNEs in coordinating their international operations, which might translate the importance of firms’ internal organizational and managerial capabilities in surmounting the liability of foreignness (Zaheer, 1995). Accordingly, taking the RBV of the firm into consideration in this research is essential to shed light on the impact of the firm-specific advantages (FSAs) on
mitigating the liability of foreignness and hence decreasing costs of doing business abroad and allowing a larger internationalization scope. In addition, the home country effect being an important theme in the regionalization theory is taken into account to ensure home region effects are not actually capturing the importance of the home country market of a MNE.
By investigating the F&B sector and taking into consideration both RBV and IBV in the research and examining the regionalization motives of the largest F&B MNEs, a small contribution to the current debate is added. In addition, the importance of the broad triad region (NAFTA, the European Union and Asia) and the extent to which it still matters for F&B MNEs is examined. Regions outside the triad such as South America and Africa are also considered in this research to reassess the generality and the validity of limiting a global presence in the (broad) triad region which is considered an additional and distinguishing element of this paper . With these insights in mind, the research question of this paper is: How can the internationalization / regionalization strategies of the largest food and beverage from the USA and Europe be explained?
The research is conducted using the multiple case study method with a sample of six MNEs selected from the Fortune Global 500 list of 2012 and using data obtained from the annual reports of the focal companies and The Financial Times newspaper articles. The research covers the period between 2005 and 2012. The results largely support the regionalization theory with only two MNEs found to be global according to the definition by Rugman and Verbeke (2004). However, emerging markets have gained a considerable share in F&B MNE’s revenues, which might question the validity of defining a global F&B MNE based on the exclusive presence in the triad region. The liability of foreignness associated with formal and informal institutional differences is relevant in this study but not as influential as MNEs FSAs in the internationalization process. Finally, a home country effect represented by the influence of the US foreign policies on consumers’ perceptions and attitudes towards US brands has been observed.
The paper proceeds by giving insights from the regionalization/internationalization debate followed by the presentation of the internationalization themes important to the sector of F&B and the working propositions. Subsequently, an explanation of the methodology conducted, the sample and data is provided. Afterwards, individual analysis of the cases and a cross analysis are presented before moving to the discussion part. Finally, the paper is concluded by a summary of the key findings, limitations, managerial and academic implications and suggestions for future research.
2- Literature review
The first part of this literature review will be devoted to giving general insights from the regionalization theory and the internationalization debate taking into account both the macro and the micro levels of analysis. The second part will be devoted to the specific case of the F&B sector as well as the presentation of the research working propositions. First of all, the concept of liability of foreignness is introduced and followed by the presentation of the two core perspectives on international firm performance: the institution-based view (IBV) and the resource-based view (RBV). These two theoretical frameworks are taken into account to assess possible factors related to the liability of foreignness that influence the degree of internationalization/regionalization of the focal companies. Finally, the second theme considered for this study which concerns the home country effects is discussed.
2-1 Regionalization/internationalization debate
Globalization is a phenomenon that has generated an ongoing debate about its causes and extent (Garret, 2000). In international Business, the consideration of MNEs and the extent of their international presence has been a major research area (Rugman 2000, cited in Millar, Choi & Chen, 2005) and has been the subject of an enormous amount of research papers and journals’ special issues (Management International Review, 2005; European Management Journal, 2009; International Marketing Review, 2009; British Journal of Management, 2014). The concept of ‘globalization’ has received more attention after the publication of Levitt’s important article on global strategy in 1983 (Yin & Choi 2005).
Levitt (1983) advocates a global corporation that pursues a global strategy and hence sells a standardized product in the same way at a global scale. He claims that even with firmly held cultural differences, consumers are becoming similar and the world is getting homogenized. The author attributes this global convergence to the power of technology that facilitates communication, transportation and also production processes so that global markets for standardized consumer products are emerging more and more.
However, reality shows that the world is not fully unified and that disparities among consumers and countries are influential factors that can cause serious damages and losses if overlooked (Ghemawat, 2001). Hence less extreme perspectives on international business will be more insightful and will reflect reality more accurately.
A different and less generalized perspective is expressed in the ‘Triad Power” seminal book by Ohmae in 1985 (cited in Yin & Choi 2005; Rugman & Verbeke 2004). Ohmae (1985) noted the concentration of the world economy in the triad region represented by the United States, the EU and Japan where most industrial innovations occur. These three large markets have a lot of characteristics in common such as low macroeconomic growth and analogous technological infrastructure. The challenge for MNEs originating from this region or what Ohmae (1985) describes as the “global impasse” is the inability of these companies to replicate their home region presence and performance in the other two legs of the triad region. Hence only few MNEs have been able to operate in the three blocks of the triad successfully and simultaneously, that is to say, globally.
Bringing this regional/global orientations debate into a lower level of analysis by focusing on the region, Ghemawat (2003) proposes an insightful description of the international business’ interactions which he labels as “semi-globalization”. According to the author, this state implies that we are living in an era where neither extreme geographical isolation nor complete cross-border integration are observed. The political reality of the world is in line with the regionalization theory where most regions are not integrated (Ghemawat 2007, cited in Peng & Pleggenkuhle-Miles, 2009). Ghemawat (2005) presented a set of statics on international trade and foreign direct investment (FDI) flows and found a positive correlation between the increasing economic integration and the increase in the levels of regionalization. He stated that in the second half of the twentieth century, trade growth was driven more by intra-regional than inter-regional activities. Hence, Ghemawat (2005) stresses the importance of the increased regional integration and the development of regional blocks as an alternative to global cross border economic integration. The author further argues that this persistent trend of regionalization reveals the enduring importance of four interrelated factors which concern the geographical, economic, cultural and administrative proximities within regions. These proximities have been reinforced by free trade agreements, regional trade preferences and tax treaties, and even in a stronger way by currency unification (Ghemawat, 2005). Examples of regional economic integration are the European Union (EU), North American Free Trade Agreement (NAFTA) and the Association of Southeast Asian Nations (ASEAN).
In 2001, Ghemawat proposed a conceptual framework "CAGE” providing an analysis of the different/ similar dimensions of distance that may influence the internationalization process of MNEs according to industries and products. This framework makes a distinction in terms of cultural, administrative, geographic and economic distances between
countries/regions and calls for taking them into account when deciding on doing business abroad. Ghemawat (2001, 2005) states that the level of integration between states is greatly overestimated and that, conversely, the impacts of differences that still separate nations and the costs of doing business internationally are underestimated.
If we move to the firm level of analysis, we find studies that have largely supported the country or region level research findings. MNEs have been considered to be the engines of the globalization process but this view of a global strategy or a company’s global presence has been challenged in various papers (Rugman and Brain 2003; Rugman and Verbeke 2004; Rugman and Verbeke 2005; Rugman and Verbeke 2008).
From the study by Rugman and Verbeke (2004), it has been demonstrated that a great percentage of the total sales of 380 firms out of the fortune 500 MNEs list were concentrated in their home region in the broad triad area (Table 1) . The empirical findings of 2001 imply mainly that a great share of MNEs’s activities considered “global” is performed at an intra-regional scale and that MNEs are intra-regionally organized (Peng & Pleggenkuhle-Miles, 2009).
Table 1 gives a general overview of the change that the internationalization orientation of the fortune global 500 companies has undergone in particular at the level of home (regional) and global orientation in 2012 compared to 2001. The results of the year 2001 correspond to the research findings in Rugman and Verbeke (2004) whereas 2012 results are obtained from a research project on the regionalization of the Fortune Global 500 MNEs conducted at the of the University of Amsterdam Business School in 2013.
Rugman and Verbeke (2004) identify four types of MNEs according to the distribution of their sales in the different regions of the broad triad (NAFTA, the European Union and Asia). In general and regardless of the change in the components of the list and the number of companies that lack data in 2012 compared to 2001 , table 1 gives an important indication on how dynamic the regionalization of companies can be and how the percentage of global firms evolve within the set of the Fortune Global 500. Accordingly, the number of home region oriented MNEs has decreased since 2001 while the number of Global, Bi-regional Oriented, Host-region Oriented and Global MNEs has increased. This observation may imply that the general trend among most of the Fortune Global 500 MNEs has been moving away from regionalization.
Table 1: Internationalization/Regionalization orientation of the Fortune Global 500 firms in 2001 and 2012 Orientation Definition* 2001 (R&V)* 2001 % (R&V) 2012 (UvA) 2012 % (UvA) Home Region Oriented
Firms with at least 50% of sales in
their home region of the triad 320 64,00 215 43,00
Bi-regional Oriented
Firms with at least 20% of sales in each of two regions, but less than 50% in any one region.
25 5,00 39 7,80
Host-region Oriented
Firms that drive more than 50% of their sales in a triad market other than their home region.
11 2,20 13 2,60
Global
Firms driving sales of 20% or more in each of the three parts of the triad, but less than 50% in any one region of the triad
9 1,80 26 5,20
Insufficient or no data 135 27,00 207 41,40
Total 500 100 500 100
Source: UvA and (*) Rugman and Verbeke (2004, p7)
As interesting and insightful as they are, the findings of Rugman and Verbeke (2004) have not been immune to criticism. While largely valuing these findings, Dunning, Fujita and Yakova (2007) argue that the regional concentration of MNEs operations can be merely explained by macro-level data (Gross Domestic Product and trade) of the given countries. The authors find that the use of micro or firm-level data or MNEs individual strategies is not sufficient and that they need to be complemented by country-level data. Another point of criticism concerns the static character of the study and the classification scheme of the MNEs based on sales (Osegowitsch and Sammartino, 2008). The authors questioned the robustness of the findings because of the taxonomy of the firms employed in the research. They reached different conclusions when other schemas were used. Moreover, Osegowitsch and
Sammartino (2008) call for more longitudinal studies in the regionalization theory to depict dynamics of extending sales abroad.
Despite the drawbacks of the study by Rugman and Verbeke, the latter was the starting point of many research papers on the subject of MNEs international orientations. In contribution to this debate, various papers have attempted to assess the internationalization/regionalization strategies and performance of certain MNEs acting within specific sectors. In particular, sectorial studies are required because of the differences that exist between industries in terms of the location patterns of international production (Ietto-Gillies 2005; UNCTAD, 2001, cited in Filippaios & Rama, 2008).
In the automotive sector, Rugman and Collinson (2004) found that 23 out of the 29 largest auto and auto parts firms are home-region based in one of the three parts of the triad and none is truly global.
In the retail sector specific studies, Rugman and Girod (2003) found that only one of the 49 largest retail MNEs is considered to be global and concluded that MNEs in this sector are mainly locally oriented. Mohr et al. (2014) arrived to a similar conclusion supporting the regionalization theory in the retail sector and recognized the importance of other factors such as foreign entry timing and internationalization speed.
Studies related to, among others, cosmetics and toiletries industry (Oh and Rugman, 2006), electric utilities (Kolk et al.2014), Accounting services (Kolk and Margineantu, 2009) and financial sector firms (Grosse, 2005) have been conducted. Overall, different approaches, units and levels of analysis and measures have been used to address this issue, which led to different conclusions still not in favour of the existence of a real globalization strategy.
As an additional contribution to this debate, this paper seeks by examining the case of F&B MNEs, their global expansion incentives and eventual barriers to their internationalization, to further developing understanding of the phenomenon of regionalization. Filippaios and Rama (2008), analyzed the geographic pattern of the world’s largest F&B MNEs over 1996-2000 and found that most of the 81 sampled companies follow regional strategies. Notwithstanding, this paper differs from Filippaios and Rama’s (2008) research in several aspects. First of all, this paper considers a longer and more recent time span to get a better picture of the phenomenon studied. Second, this research makes use of different measures to portray the internationalization of F&B MNEs, while Filippaios and Rama (2008) employ MNEs’ number of affiliates and their international distribution to test the regionalization theory. Third, the number of companies dealt with in this paper is small (6 firms) compared with the sample of 81 firms studied in Filippaios and Rama (2008) but this
difference is also attributed to the methodology and research goal difference, which leads us to the final point of difference. Filippaios and Rama (2008) opted for a quantitative and a statistical analysis (ANOVA, Pearson Chi square and a Fisher tests) to test the internationalization pattern of F&B MNEs, whereas the methodology followed in this paper is qualitative and the aim of the research is to go beyond portraying the internationalization orientations of F&B MNEs. This paper aims at increasing our understanding of the reasons behind the internationalization/regionalization patterns of these firms. To achieve this goal, the core views of MNEs performance, namely the IBV and the RBV are taken into account. In the following section, the potential incentives, destinations and explanations of the regionalization / internationalization orientations discussed in the literature are presented and applied to the specific case of F&B MNEs. In the following section, themes that correspond to the internationalization/regionalization debate and that are important in the case of the F&B sector are introduced together with the working propositions.
2-2 Regionalization/internationalization in the sector of Food and Beverage:
Generally, MNEs operating in the F&B sector have internationalized more than most MNEs operating in other sectors (Filippaios and Rama, 2008). To get a better understanding of the regionalization/internationalization strategies of MNEs, we first start by examining an important issue, which is the incentives to go abroad. Rugman (2005) argues that firm’s global orientation delivers no additional gains in terms of scale, scope or differentiation advantages and that the only reason for a company to enter new markets is the absence of growth opportunities in its home region. If we consider this claim in the case of F&B MNEs and given the set of challenges western F&B MNEs face in their home regions (Filippaios and Rama, 2008), we might infer that these MNEs will tend to go abroad looking for growth opportunities in other regions. According to Filippaios and Rama (2008), the challenges that western F&B MNEs are experiencing in their home regions concern the population itself which is demographically stable and mostly aging, customers’ preferences shift to organic and fresh products and finally some challenges that are specific to the F&B markets with the emergence of large tobacco and pharmaceutical firms as new players and the competition from retailers’ cheap own brands. Hence, the first working proposition can be formulated as follows:
WP1: Given the stable growth opportunities in their home regions, US and EU F&B MNEs are expected to have an international orientation in pursuit of growth opportunities
The second important issue when it comes to internationalization is the choice of host-locations. While most studies focus only on the triad region and are content with the presence in its three legs to define a global MNE, emerging markets are getting more and more consideration in the F&B MNEs internationalization agenda. These companies are operating in a consumer industry hence they are more likely to be driven by market-seeking strategies and they might look for new prospects in emerging markets (Filippaios and Rama, 2008). In a study to compare food and beverage consumption patterns between developed and developing countries, Selvanathan and Selvanathan (2006) found that the proportion of income spent on food is much higher in developing countries. Investors in the F&B industry have been increasingly interested in emerging markets due to the gradual increase in the average purchasing power per capita in these regions (Ayadi, Rastoin & Tozanli, 2006).In the triad region, the Asia leg is dominated by emerging and large markets like China and India. However, there are also other important emerging markets to be considered in this study such as the Middle East countries and some countries in Africa and South America. These regions might also be important players in the case of F&B MNEs despite the fact that they are not part of the triad region and consequently not relevant to define a global F&B MNE. Including these countries as well in this study will help evaluate the robustness of the triad region notion in the F&B sector. Hence, the second working proposition is the following:
WP2: Emerging markets in and outside the triad region are expected to have an important weight in the F&B MNEs international presence given their population and growth characteristics
The third important element of internationalization/regionalization choices of F&B MNEs is the reasons that drive these MNEs to focus on their home regions or avoid expanding abroad. At first glance, internationalization of the MNEs operating in the F&B sector seems easy to achieve given the great economic opportunities available in new regions and the potential large markets they can enter (Filippaios and Rama, 2008). However, the economic dimension is not the only factor to be taken into consideration when deciding on entering new markets. According to Ayadi, Rastoin and Tozanli (2006), higher purchasing power is a necessary factor in consumption patterns, yet not really a sufficient one. To support this view, the authors stated that some countries classified by the world bank as “high income” and “upper middle income” countries in 2002 such as Bahrain, Lebanon, Estonia have not been among the target markets of F&B MNEs. On the contrary, “lower middle income” countries such as Brazil, South Africa and Egypt have been attracting poles for F&B
MNEs. Therefore, there are other factors that should be taken into account when deciding to cross home country or region boundaries and decide to do business abroad.
In the theories of MNE, the central assumption behind the tendency towards adopting regional strategies rather than global ones is the liability of foreignness (Buckley & Casson, 1976; Caves, 1982; Dunning, 1977; Hennart, 1982, cited in Zaheer, 1995) which will be presented in the following section.
2-2-1 Liability of foreignness
When doing business abroad, foreign firms face extra costs that national firms are exempted from (Hymer, 1976). These costs are mainly the result of what Zaheer (1995) refers to as the “liability of foreignness” (LOF). The latter is the product of the non-native status of foreign MNEs and their unfamiliarity with the new contexts in the host regions in terms of several national features such as language, culture, laws and regulations (Hymer, 1976).
In Rugman and Verbeke’s view (2004), one of the main reasons of the increased MNEs activities within a region is the lower LOF within a given region (intra-regional LOF), mostly the home region, compared to the case of LOF between regions (inter-regional LOF). A lower LOF implies lower risks of economic, cultural, administrative or geographical differences (Rugman & Verbeke,2004). Supporting this viewpoint, a study on the relationship between regional diversification and firm performance conducted by Qian et al. (2008) (cited in Peng and Pleggenkuhle-Miles, 2009) arrived to the conclusion that performance maximization is more likely to occur when MNEs are regionally focused.
One of the most important foci’s of this paper is the consideration of the internationalization of F&B MNEs outside the triad and the role played by the differences between regions in the internationalization process of these companies. Accordingly, the inter-regional liability of foreignness is expected to be more relevant especially in the case of the MNEs investigated in this paper which are either from Europe or the US. Thus the intra-regional LOF experienced by these firms in their home regions Europe and North America is disregarded for the purpose of this research and also because of the limits on its scope.
To further understand the LOF, the two core perspectives on firm performance are presented below. On the one hand, MNEs deal with a different set of institutions and different cultures when doing business in a foreign country. The IBV of the firm, presented in the
following subsection, stress the importance of these institutions and their importance for firm’s performance in different locations. On the other hand, the RBV of the firm puts emphasis on the internal strengths at the firm level as determinants of their global performance. This perspective will be discussed in the second subsection.
2-2-1-1 Institution-based view
Unlike the views that focus on firm’s internal resources as performance determinants regardless of the corresponding institutional framework, the IBV calls for paying more attention to institutions and stresses their importance in the international business research (Peng & Khoury,2008). There are two approaches to IBV, economic and sociological. For the purpose of this research, the focus will be on the economic approach by North (1991). North (1991, p 97) defines institutions as “the humanly devised constraints that structure political, economic and social interaction”. The author argues that the purpose behind the establishment of such institutions is to organize exchange transactions and reduce uncertainty. According to North (1990, 1991), institutions can be divided into two types:
1-Formal institutions: such as laws, property rights, rules and regulations. 2-Informal institutions: customs, traditions, norms and cultures.
This view claims that institutions are among the explaining factor of the difference that exists between firms’ performances (Peng et al.2009). Strategies of MNEs do not only depend on their capabilities or the industry they are operating in but also on the institutional framework they are facing (Peng, Wang & Jiang 2008). Hence, the IBV perceives strategic choices as the result of the dynamic interaction between organizations and institutions (Peng 2003;2006, cited in Peng, Wang & Jiang 2008).To succeed abroad, companies need to obtain sufficient understanding of the formal and informal rules of the game in the new context they want to enter (Peng et al. 2009).
In the case of F&B MNEs, these firms are exposed to a large set of institutions which are both formal and informal. The first type of institutions concerns the differences between countries in terms of governments and laws that regulate acquisitions and FDI flow for instance. Thus, an MNE might be willing and able to operate in a foreign market but it might face administrative and regulatory challenges only because of its non-native status. Therefore, the third working propositions can be formulated as follows:
WP3: Differences in formal institutions are likely to increase the inter-regional liability of foreignness and hence undermine the internationalization strategies of the largest F&B MNEs
The second type concerns the informal institutions, in particular cultural difference between countries, this topic is of great importance for F&B MNEs because of the position that diet and cooking occupy in each cultural setting (Cavusgil, Knight & Riesenberg 2008, cited in Filippaios and Rama, 2011). F&B MNEs operate in an industry where products are largely connected to local cultures, but this specific relationship is still largely unexplored in the literature (Filippaios and Rama, 2011). In an attempt to partially fill this gap in the previous research, Filippaios and Rama (2011) test the potential relationship between the dispersion of F&B MNE’s physical assets and the dispersion over different cultural areas. The authors conclude that the largest F&B MNEs tend to expand within their cultural area or to culturally close areas. These findings support the view that F&B MNEs operate in an industry that is culturally bound. Hence, the fourth working proposition is:
WP4: Greater differences in culture between regions are likely to increase the inter-regional liability of foreignness and hence undermine the internationalization strategies of the largest F&B MNEs.
The IBV of the firm represent only one side of the story and focusing merely on this approach will not provide us with a complete picture of the internationalization process of an MNE. The firm itself and how it deals with the different institutions in different contexts is also crucial in its internationalization process. That is what will be presented in the following subsection.
2-2-1-2 Resource-based view
The RBV of the firm is a significant theory in international business research which puts emphasis on the firm and its FSAs (Rugman & Verbeke, 1992). Resources can be defined as “…all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness” (Daft 1983, cited in Barney,1991). To gain the possibility of holding a sustained competitive advantage, firm resources must be valuable, rare, perfectly inimitable and not substitutable (Barney, 1991). Table 2 gives an overview of
the different elements that constitute the resources base that firms need to perform successfully (Verbeke, 2009).
Table 2: Components of firm’s resource base
Resources Examples
Physical resources Buildings and plant equipment Financial resources Access to equity and loan capital
Human resources Individuals and teams with efficiency-related skills Upstream knowledge Product and process-related technological knowledge Downstream knowledge Marketing and distribution
Administrative (governance-related)
knowledge Organizational structure and organization culture
Reputational resources Brand names
Source: Adapted from Verbeke (2009, pp.4-5)
Taking the RBV of the firm into consideration in this research is essential to shed light on the impact of the firm-specific advantages (FSAs) on mitigating the LOF and hence decreasing costs of doing business abroad and allowing a larger internationalization scope. In particular, the focus will be on internationally transferable or non-location-bound FSAs (NLB FSAs) (Rugman & Verbeke, 1992). NLB-FSAs are defined “as FSAs that can be exploited globally, and lead to benefits of scale, scope or exploitation of national differences.”( Rugman & Verbeke, 1992,p.763). According to Verbeke (2009), NLB do not cease creating value for the firm across borders and they determine the scope of the international expansion of the firm. For instance, these FSAs might be included in the final products and thus might be transferable by exports. These internal capabilities and resources allow firms to surmount the LOF they might experience to varying degrees in host countries.
The LOF might be attributed to difficulties in coordinating firm’s operation at an international scale and therefore internal resources and capabilities in particular the organizational and managerial ones might play a crucial role in overcoming the LOF (Zaheer, 1995). Consequently, the fifth working proposition can be formulated as follows:
WP5: NLB FSAs are likely to decrease the inter-regional liability of foreignness and hence bolster the internationalization strategies of the largest F&B MNEs
The following final section of this literature review will be devoted to discussing the potential effects of the home country of firms’ international performance. Home country effects on MNEs strategies represent an important theme in the international business literature (Kolk, Lindeque & Van den Buuse, 2014), and it is expected to be interesting in the case of F&B MNEs.
2-2-4 Home country effects
Home country effects or the country of origin effects on MNEs is a topic that remains ill-defined and consequently examples of these effects and the mechanisms that produce them vary among authors (Noorderhaven & Harzing, 2003). At the macro level, Hawawini et al. (2004) indicate that home country effect might have an impact on firm performance because of a home bias in demand and capital costs. Moreover, Murtha and Lenway (1994) (cited in Goldszmidt et al. 2011) point the importance of the governmental impact on firms’ activities. The authors explain that this relationship is established through the different national political economical and institutional measures that affect the country’s capabilities and ultimately affect firm’ s competitive advantages. At the firm level, previous studies in international human resource management have demonstrated the effect of home-country culture on employment practices (Bae et al. 1998).
Noorderhaven & Harzing (2003) present an analysis of the country-of-origin effect on the internationalization strategy and the international control strategy at the corporate level of an MNE. For the purpose of their study, they define the country-of-origin effect as “that part of the differences in internationalization strategies and international control strategies of MNCs that can be ascribed to the different national origins of these MNCs, rather than to variations in their task environment” (Noorderhaven & Harzing, 2003 p.8). The authors further argue that the sources of this effect belong to the culture and institutions of the MNE’s home country through two means. The first one is the continued hiring of home-country nationals and the second relates to the entrenched national administrative preferences in the organizational structure and operational practices of an MNE. Finally, Noorderhaven & Harzing (2003) list a number of factors (Table 3) that may affect the strength of the country-of- origin effect to varying degrees. These factors or moderators are related to both the home country and the MNE and are expected to have different impacts on the strength of the home country effect.
Table 3: Moderators of the Country-of-Origin Effect Culture
Culture Institutions Contingencies Home Country factors -Homogeneity of home-country Culture -Characteristics of home-country culture Characteristics of home-country institutional regime
Size of home country Economy Openness of home country economy MNC-specific factors Cultural diversity of environments in which the MNC operates Diversity of institutional regimes in which MNC operates International growth path of MNC
Source: Adapted from Noorderhaven & Harzing (2003, p 27)
A more obvious and clear home country effect, which remains unexplored in the literature, might be manifested in the potential link that different economic agents might establish between an MNE and its home country political and foreign relations. For instance, some MNEs might be affected negatively by consumers’ reactions (boycotts) and might experience more challenges in foreign countries merely because of their home country foreign policies. This home country effect is expected to be relevant in the case of F&B MNEs and therefore it will be also taken into account in the analysis. With these different effects in mind, the sixth and final working proposition is the following:
WP6: Home country effects are likely to undermine the internationalization of the largest F&B MNEs.
2-3 Integration
After giving some insights of internationalization/regionalization literature and developing the working propositions that apply the discussed regionalization themes to the specific case of F&B MNE, we move to explain the methodology followed in this paper to test the working propositions in real contexts. The following section will be devoted to describe all the aspects of the research method, cases and data selection and analytical strategy.
3-Methodology:
This chapter explains the methodology followed in this paper. First the research philosophy, the post-positivist approach, is described. The philosophical assumptions, related to the nature and the development of knowledge, are significant as they depict and strengthen the method and the strategy of the research (Saunders et al. 2009). Subsequently, the multiple-case design and selection in addition to all information related to the data used in the study are presented. The research is conducted using the multiple-case study design that includes the six largest F&B MNEs headquartered in the USA and Europe. Data include quantitative and qualitative data from the firms’ annual reports and newspaper reporting (The Financial Times). The latter are analyzed using the qualitative data analysis software Nvivo, where they are coded according to the themes relevant to the study and discussed in the literature review section, to explain the MNE’s strategies.
Figure 1: Structure of the research design
Source: Author adapted from Myers (2009, p37).
3-1 Ontological and epistemological assumptions:
As shown in figure 1, the qualitative research design includes several layers. The first one concerns the philosophical assumptions or research paradigm upon which the research is built. According to Guba and Lincoln (1994, p.107), a paradigm “represents a worldview that defines, for its holder, the nature of the "world," the individual's place in it, and the range of possible relationships to that world and its parts…” The authors argue that questions on research methods are of secondary importance compared with questions on paradigms and the latter can be discussed on the basis of three major foci: ontological, epistemological and methodological dimensions (Guba & Lincoln, 1994).
Ontology concerns the nature of reality itself and what can be known about it while epistemology deals with the relationship between the researcher and the research subject (Guba & Lincoln, 1994). In other words, ontology considers the nature of reality or being and epistemology involves the researcher’s understanding of the components of an acceptable knowledge that can be claimed (Saunders et al. 2009). Subsequently, the methodological
Philosophical assumpstions :
Post-positivist Multiple case studies Reaserch method :
Data collection technique : Documents Data analysis approach : Narrative analysis Written record : Research paper 19
focus, which is constrained by the ontological and epistemological assumptions, addresses the technique a researcher employs to find out answers to what he believes can be known (Guba & Lincoln, 1994).
In this research the philosophy adopted is post-positivist with explanation as an analysis purpose (Lincoln and Guba, 2000). This perspective takes the position of realism based on the assumption that the world is objective and external to the mind (Gephart, 2004). The post-positivism philosophy deals with understanding the subjectivity of a socially constructed reality (Noor, 2008). The ontological assumptions of post-positivism are labeled as critical realism claiming that reality can merely be imperfectly captured and that it must be critically investigated whenever possible (Guba & Lincoln, 1994). Therefore, the basic assignment of post-positivist research is falsification not verification because reality can only be probabilistically known (Gephart, 2004). Knowledge according to this perspective is constituted by non-falsified hypotheses or working propositions that can be probable facts or laws (Lincoln & Guba, 2000). Epistemological assumptions corresponding to this perspective are generally characterized as being objective with a special emphasis on external “guardians” of objectivity like the critical traditions (the fit with previous knowledge) and the critical community such as referees and professional peers (Guba & Lincoln, 1994).
The aim of this research strongly corresponds to the post-positivist philosophy. This research is conducted in the same vein as the study conducted by Rugman and Collinson (2004) and seeks to primary test the robustness of the regionalization theory and the extent to which it can be generalized to all MNEs regardless of their sector or their geographic origin and over a long time. This paper aims at investigating the internationalization of MNEs in more depth in the specific case of F&B MNEs within their real context and through an extended period of time.
3-2 Multiple-case design
A qualitative approach method of analysis enables comparing facts to prior knowledge in order to contradict it or uncover new evidences (Gephart, 2004). This research will be conducted through a qualitative analysis in particular by means of a multiple case study involving both within and cross cases analysis of the six MNEs presented in table 4. Each firm constitutes a separate case and unit of analysis within this research to allow an analysis within each setting and across settings (Baxter and Jack, 2008). In this way, the separate
analysis of several cases enables the prediction of similar or conflicting results, through theoretical / purposeful sampling (Yin, 2003).
According to Yin (2003), case studies are most suitable to address how and why questions and capture contextual conditions. This specific choice is mainly corresponding to the nature of this research goal which is to assess the degree of the internalization of F&B MNEs (or how are their activities distributed around the globe?) and the potential internal and external factors behind their strategies (or why are they (not) fully internationalized?).Besides, a qualitative case study allows an examination of the phenomenon studied through different angles and therefore several features of the case will be revealed (Baxter and Jack, 2008). This method allows a more in depth exploration of the regionalization of the firms and a better analysis of the potential reasons behind the different outcomes.
Multiple cases enable broader exploration of the research questions and comparisons to assess the degree of consistency of the findings among the units of analysis (Eisenhardt and Graebner, 2007). The examination of multiple cases allows the depiction of the differences and similarities (Baxter and Jack, 2008) between the companies in terms of internationalization incentives, patterns and challenges. In this case, if the comparison between the firms in the sample will result in consistent findings, we may infer that institutional and external factors have greater impact on the internationalization process than their internal factors.
The quality criteria related to multiple case studies are generally based on four dimensions: construct validity, internal validity, external validity and reliability (Yin, 2003). The construct validity of this research study is attained by the choice of the appropriate measures to answer the research question. For all firms, at least two measures will be used to assess the regional orientation and more than two whenever it is possible to find data. Internal validity concerns building causal relationships. At this regard, only data describing explicit effects of a factor on the internationalization process of the MNEs in the sample will be taken into account to ensure that inferences from the study do not constitute a threat to its internal validity. External validity defines the degree to which results can be generalized. For the case of this paper, more similar studies (investigating the same or other firms) are needed to support its findings and enable the generalization of results to all F&B MNEs. However, multiple case studies (with six units of analysis in the case of this research) provide evidence that is considered to be more robust and compelling compared with single cases (Herriott & Firestone 1983, cited in Yin 2003). Finally, reliability which aims at minimizing bias in the
study is taken into account in all the phases of this research to make sure that all steps are fully described and understood and consequently permit and facilitate its replication.
3-3 Case selection
As stated in the Food and Beverage industry Global report by IMAP (2010), the global F&B sector which includes farming, food production, distribution, retail and catering was valued at $5.7 trillion USD in 2008 and is expected to increase to more than $7 trillion USD by 2014. The global food products industry consisting of agricultural products and packaged foods generated revenues of $3.2 trillion USD in 2008. The global beverage industry which consists of soft drinks, beers, ciders, spirits and wines was valued at $1.4 trillion USD in 2008. These figures demonstrate the importance of the industry as an important engine of economic growth and a significant research field.
The choice of the cases has been based on the structure and the trends of the global F&B industry. The structure of this industry has been very fragmented with few top players (IMAP, 2010). As for the geographic composition in terms of revenues, Europe was the major player in the industry followed by the USA in 2007 (IMAP, 2010)
Besides, the 25 largest food firms that are most active as investors are mostly from Western Europe and the United States of America (Ayadi et al.2006). Hence, the six firms presented in table 4 were selected for this research. Nestlé, Unilever, Coca-Cola, PepsiCo, Groupe Danone and Kraft ( ) have been major actors in the global F&B sector and they all originate from the triad region either from the USA or Europe.
Table 4: Sample Company Rank in the Fortune Global 500 (2012) Home country Home Region
Business lines Some key brands Regional
Orientation Rugman (2004)
Regional Orientation 2012
Nestlé 71 Switzerland Europe -Powdered and Liquid B, Milk products and Ice
cream, Prepared dishes and cooking aids, Confectionery and Pet Care
Nescafé, KitKat, Maggi, Nido, Nesquick and Häagen-Dazs
Insufficient Information
Global
PepsiCo 133 USA North
America
-F&B Pepsi , Diet Pepsi, Tropicana, Lay’s , Doritos,
and Quaker
Home Region Home Region
Unilever 139 The
Netherlands/UK
Europe -Foods , Refreshment, Home care and Personal care Lipton, Ben & Jerry’s, Knorr and Flora Bi-regional Global
Kraft 170 USA North
America
-F&B. Philadelphia, Oreo, Milka Not included Home
Region/Global
Coca-Cola 212 USA North
America
-Sparkling B and Still B Coca-Cola,Coca-Cola Zero, Diet coke, Fanta
and Minute Maid
Global Home Region
Groupe Danone
411 France Europe -Fresh dairy products, Waters, Baby nutrition and
Medical nutrition
Activia, Actimel, Evian and Dumex .
Home Region Home Region
3-4 Data sources and collection:
The data used in the research is both quantitative and qualitative and extracted from different documents. On the one hand, the internationalization patterns are depicted using quantitative data consisting of the international distribution of employees, sales and assets of the six MNEs and whenever available industry specific measures. These elements are all recognized proxies of regional presence in the literature (Kolk et al.2014). This data will be solely obtained from the firm’s annual account reports covering the period 2005-2012 to guarantee a high level of credibility. The non-availability of PepsiCo’s annual reports prior to 2005 was the main reason behind the choice of the research time span.
On the other hand, the qualitative data will serve as a possible explanation of the different patterns founded after the exploration of the companies’ international orientations. This type of data is retrieved from The Financial Times (FT) articles related to the six MNEs to understand the stories behind the numbers collected and the changes that the orientation of the focal firms has undergone. Using the power search option of the academic search tool Lexis Nexis Academic, the company’s name was first used as a key search term. Again, the same name was selected in the “company” category under all results of the initial search. This procedure was adopted for Nestlé, Kraft, PepsiCo, Coca-Cola and Groupe Danone. In the case of Unilever, food and beverage is selected under the “industry” category instead of selecting the company name again. The reason behind this is that Unilever operates in different business lines such as personal and home care. This articles’ selection procedure was followed to obtain the most relevant articles which are closely related to the focal firms and discard articles which might not be useful for the current research. The period chosen was between 2004 and 2012 to ensure access to the largest possible number of articles. Table 5 gives an overview of the number of articles found in each selection step.
Table 5: Selection of articles found through Lexis Nexis
Company number found Initial After selecting the company name under all results Articles used
Coca-Cola 2474 283 134 PepsiCo 711 94 74 Unilever 2520 313* 143 Kraft 1658 52 46 Groupe Danone 822 216 147 Nestlé 1828 251 153
(*) Number of articles after selecting “food and beverage” under the “industry” category
Given the large number of the articles used in this study (697), individual articles will only be cited in the text when directly quoted or used as additional information and illustrations in the analytical tables. However, if needed, all articles can be retrieved following the procedure described above.
3-5 Analytical strategy
Empirical data about the regionalization / internationalization of the six firms was recorded manually to depict their regional orientation over the years considered for this study. Information about sales, assets, number of employees and industry specific measures (unit case volume in the case of Coca-Cola) were extracted, when available, from the annual reports that were retrieved from the companies’ global websites. Subsequently the information was classified according to geographical regions. The method used to determine the regional orientation of the firms along all possible dimensions was merely based on the schema developed by Rugman and Verbeke (2004).
The FT articles obtained after the second selection are examined systematically to further select the ones which are appropriate for this research. The next step was to organize the large amount of the qualitative data that has been gathered and categorize it depending on the various research themes. To achieve this goal, the computer-assisted qualitative data analysis software Nvivo has been used. Moreover, Nvivo will also help make s cross-case analysis and compare the themes among the different six firms and their home regions by means of the matrix coding query.
To answer the research question both the institution based view and the resource-based view of the firm to overcome the liability of foreignness will be examined. Hence, the codes created will be derived taking into account these two perspectives. The approach used to code the articles is both deductive and inductive so that the codes were altered as the research progressed. This approach is useful in the sense that it enables guiding the analysis process, capturing all the meaningful data and discarding irrelevant information.
First, a list of the central codes based on the main two perspectives underlying this research is created. Examples of these codes are: “Institution based view”; “Resource based view”, “Inter-regional liability of foreignness” and “Home country effect”. Moreover, more specific codes (or sub-codes) are created to capture the regionalization/internationalization dynamics to the best extent. Examples are “Informal institutions”, “Formal institutions” and “FSAs”. The code book is represented in the following table (6).
Table 6:Code book
Name Description Hierarchical Name Number Of Coding References
Coca-Cola Information about Coca-Cola found in the articles of other firms Nodes\\Coca-Cola 260 Groupe Danone Information about Groupe Danone found in the articles of other
firms
Nodes\\Groupe Danone 289 General Important info about the F&B sector or the firms that cannot be
classified under the other themes
Nodes\\General 121
HC effect Home country/Region effect Nodes\\HC effect 31
Formal insittutions Law, regulations, competition, economic factors (prices, crises...)
Nodes\\IBV\Formal insittutions
307
Informal institutions Culture, consumer preferences Nodes\\IBV\Informal
institutions
140 Internationalization Internationalization of the six firms abroad Nodes\\Internationalization 214
Kraft Information about Kraft found in the articles of other firms Nodes\\Kraft 88
INTER LOF between different regions Nodes\\LOF\INTER 45
INTRA LOF within the same region Nodes\\LOF\INTRA 13
Nestlé Information about Nestlé found in the articles of other firms Nodes\\ Nestlé 335 PepsiCo Information about PepsiCo found in the articles of other firms Nodes\\PepsiCo 145 FSAs Such as: brand name, innovation, R&D, marketing, products
and quality
Nodes\\RBV\FSAs 216
Weaknesses Problems, weaknesses, under-performing units Nodes\\RBV\Weaknesses 25
Unilever Information about Unilever found in the articles of other firms Nodes\\Unilever 495
4- Results:
In the following section, the results of the qualitative analysis of the FT articles specific to the six companies are presented. The results show that the challenges that these firms face can be classified into two categories. First, challenges that concern the firm itself, its organization and its home country. These firm specific challenges will be discussed in the following section. Second, challenges which are common to all firms, or industry related challenges. This group of challenges and the extent of their impact on the six MNEs will be discussed in the cross-analysis sections to avoid stating them redundantly. These challenges mainly involve: consumers’ preference shift into healthier nutrition, fierce competition in particular from private-label goods and finally the increase in energy and raw material prices.
4-1 Within case analysis: 4-1-1 Coca-Cola
The following table gives an overview of the international distribution of Coca-Cola’s sales, employees and the beverage industry specific measure expressed by the Unit Case Volume (UCV). Coca-Cola defines (in its annual reports and corporate website) this measure as a unit of equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings) and ‘‘unit case volume’’ means the number of unit cases (or unit case equivalents) of Company beverage products directly or indirectly sold by the Coca-Cola bottling system to customers.
In 2001, Coca-Cola was among the handful truly ‘global’ firms identified by Rugman and Verbeke (2004). However, table 7 shows that the company has undergone a radical change from being a global (G) player in the F&B sector to being an almost home region oriented firm in terms of generated revenues in the last couple of years. It was not possible to strictly apply the schema adopted by Rugman and Verbeke (2004) after 2005 to classify Coca-Cola’s international orientation. However, given the importance of North American sales compared to the other regions (approximately twice the second most important region), we can argue that Coca-Cola is converging toward being a home region oriented company conforming to its geographic sales data. Another important conclusion from the table is the important sales’ share of emerging markets (in this case Africa and South America combined), which has become more important than Asia’s or Europe’s shares during the last seven years. Employees and UCV dispersion across the different regions also indicate that
Coca-Cola is far from being a global MNE (mostly bi-regional) and again stress the important weight of the shares of Africa and South America in Coca-Cola’s global presence.
Table 7: Coca-Cola’s data and regional orientation Coca-Cola 2005 2006 2007 2008 2009 2010 2011 2012 % % % % % % % % Sales total (MLN US $) 23.104 24.088 28.857 31.944 30.990 35.119 46.542 48.017 North America 28,90 29,10 26,90 25,70 26,40 31,70 44,20 45,15 Europe 29,40 16,10 15,40 15,00 13,90 12,60 10,30 10,67 Asia 24,90 16,50 13,90 13,70 14,60 14,10 11,70 12,57 Africa 5,50 7,00 6,80 6,70 6,40 6,90 5,80 6,19 South America 10,90 10,30 10,60 11,30 12,00 11,00 9,40 10,06
Employees total NA* 71.000 90.500 92.400 92.800 139.600 146.200 150.900
US 14,59 14,07 12,61 50,43 45,26 North America 17,89 15,25 14,72 12,93 50,64 50,27 49,37 Europe 19,58 18,45 17,32 17,24 9,81 9,51 9,34 Asia 34,37 38,01 32,79 31,68 23,64 23,19 23,13 Africa 16,20 13,15 22,84 24,57 7,02 8,41 8,68 South America 11,97 15,14 12,34 13,58 8,88 8,62 9,48
Unit Case Volume (Total in bn) 20,6 NA* 22,7 23,7 24,4 25,5 26,7 27,7
North America 28 25 24 23 22 22 21
Africa 6 7 15 15 16 16 18
East south Asia and Pacific 9 26 17 18 18 18 18
EU 16 15 17 16 16 15 14
Latin America 25 27 27 28 28 29 29
North Asia, Eurasia and ME 16
Regional Orientation (sales) G HMR HMR HMR HMR HMR HMR HMR Regional Orientation Employees NA* BR BR BR BR HMR HMR HMR Regional Orientation (UCV) BR BR BR BR BR BR BR BR Overall Regional Orientation Home region oriented
Source: author adapted from Coca-Cola’s annual reports 2005-2012 Notes: Global (G); Home region (HMR); Bi-regional (BR) orientations (*) Not available
To explain this transition in Coca-Cola’s international orientation, an analysis of FT articles has been performed. Table 8 gives an overview of the results obtained and impact of each of the themes discussed in the literature review supported by corresponding quotations. It is worth noting that the impact of each factor is judged in comparison to the other factors’ impacts on the internationalization strategy of MNEs so this does not concern an absolute evaluation of each theme and this reasoning applies for the whole analysis. Thus if the impact of the FSAs of a given MNE in this paper are judged to be strong, this implies that they are strong compared to the LOF experienced and the impact of institutional frameworks. Hence, this judgment does not concern FSAs as a separate set and their role in the MNE’s performance.
Within its home market, Coca-Cola was also facing challenges with the increased consolidation and bargaining power of the retailer Wal-Mart and pressures from its bottlers. To solve this issue and in order to gain more control over its manufacturing, sales and distribution system, Coca-Cola acquired the bottling operations of the North American business of Coca-Cola Enterprises Inc. (‘‘CCE’’) its major US bottler in October 2010. This move was taken to increase the company’s flexibility and to keep up with the changes in the firm’s new business model and the expansion of the output that includes now all categories of non-alcoholic beverages. The importance of the bottling business and also its home regions is also expressed in the company’s 2012 reorganization decisions. The company has decided to concentrate its business along three divisions one of them will be the bottling business outside North America. The two other divisions will consist of two large and similar-sized geographic regions. The first one is the new Americas business that includes the US, Canada and South America and a second for the rest of the world. The reason behind this consolidation of global operations is, according to Mr Kent, Coca-Cola’s Chief Executive Officer, “…streamline reporting lines, intensify our focus on key markets and create a structure that leverages synergies and gives us flexibility to strategically adjust our business within those geographies in the future” (Jopson 2012, p.16).
Table 8 : Coca-Cola FT articles analysis
Factor Impact Quotations (FT)
Importance of emerging markets in the
internationalization process
Strong “Since Neville Isdell's appointment as chief executive last year, Coke's performance has been improving, driven by strong growth in emerging markets, but the company continues to struggle in its biggest western markets, including the US, Germany and the UK.” (Ward 2005, p.22)
“…These demographics also present opportunities for consumer-focused companies, especially in populous markets such as Egypt and Saudi Arabia”(Kerr 2011, p.18)
LOF associated with formal institutions
Moderate “Coke has blamed its problems in Germany mainly on complicated recycling laws, which have caused some of the country's biggest discount retailers to remove the company's drinks from their stores.” (Ward 2005, p.19)
“Mr Kent says he regards the potential obstacles to Coca-Cola's China ambitions coming from broader political pressures as China's growth could still fall short of expectations” (Birchall 2009, p.16)
“Coca-Cola has become embroiled in a dispute with the French government over a new tax on fizzy drinks, leading the company on Thursday to threaten cutting its investment in the country, before making an abrupt U-turn after drawing criticism.”( Boxell & Rappeport 2011, p.22)
LOF associated with informal institutions
Not observed
No additional information
Home country effect Strong “Another risk to Coca-Cola is that rising anti-American sentiment, fuelled by resentment against US foreign policies, could dent the image of US companies overseas.” (Ward 2004, p.5)
"That slice (of America) no longer looks so attractive," says Mr Reinhard. "Foreigners are transferring anger at the US government to anger at the US and anger at US business." (Roberts 2004, p.5)
“"Coca-Cola's long history is richly intertwined with the history of American foreign policy," Mr Kent said... Coke has been notorious for quickly entering markets after the US lifts sanctions.” (Rappeport 2012, p.18)
FSAs : Financial resources, upstream knowledge, downstream knowledge and reputational resources
Strong “Coca-Cola has formed a venture with the leading US family doctors group to promote healthier diets, as it fights back against pressure for a federal tax on sugared drinks.”(Birchall 2009, p.16)
