COCA-COLA’S STAFFING STRATEGIES
The main purpose of this research essay was to study and analyze the methods implemented for the purposes of efficiency in globalization efforts. This paper identifies and explains three different staffing strategies that are crucial in the globalization of a Multinational Enterprise (MNE). These methods of staffing are ethnocentric, polycentric, and geocentric. This analysis advances a close focus on the Coca-Cola Company. The company’s global presence as a renown brand presents it as an excellent candidate for this study. Analysis will reveal various strategies of what steps should be implemented in globalization efforts. This research will execute an in-depth review of how ineffectively or effectively the Coca-Cola Company has used each of the three staffing strategies. This paper focuses on Coca-Cola’s operations in its home country, the United States. However, foreign markets such as China and Nigeria will also be covered in the discourse. The paper uses various journals and books from the different countries to determine the Coca-Cola Company’s efficiencies and pitfalls in these markets. This paper demonstrates the Coca-Cola Company’s successes in implementing the different strategies across markets characterized by varying geographical and cultural needs. It also states the advantages and challenges that are faced in using the various staffing strategies.
Ethnocentric Staffing Strategy 5
Advantages of the Ethnocentric Approach 7
Disadvantages of the Ethnocentric Approach 7
Polycentric Staffing Strategy 7
Advantages of the Polycentric Approach 8
Disadvantages of the Polycentric Approach 9
Geocentric Staffing Strategy 9
Advantages of the Geocentric Approach 10
Disadvantages of the Geocentric Approach 10
International Collaborative Strategy 10
Conclusions and Recommendations 11
Since its founding in 1886, the Coca-Cola Company has grown to be one of the most recognized brands in history. Coca-Cola is the most well known beverage on earth and is consumed by over 800 million customers on a daily basis (Coca-Cola, 2013). It is the world’s leading marketer, manufacturer and distributor of non-alcoholic beverage syrups and concentrates, thanks to its operations in 200 countries worldwide. Coca-Cola has its central office in Atlanta, Georgia. The main company and its subsidiaries employ nearly 32,000 workers all over the world. The company emphasizes that its strength lies in its ability to have a global stretch and at the same time, a strong local focus. The Coca-Cola Company has more than 300 bottling partners worldwide (Coca-Cola Co (THE), 2005). The main company manufactures syrups, beverage bases, and concentrates and consequently sells them to bottling operations. The bottling partners then participate in packaging, manufacturing, merchandising and distribution of the already branded drinks to their vending partners and customers who consequently sell the Coca-Cola product to the consumers.
Top management teams, and CEO’s of large corporations, acknowledge that globalization is one of the most crucial challenges they face today (Liberman, 2013). They also recognize that it has become way difficult, over the past ten years, to key out internationalization strategies as well as with whom to do business. Getting into a foreign market is similar to discovering new domain for business owners. Foreign nations usually have contrasting economies, currencies, laws and business strategies. Multinational companies need to have information like which stores best suit their product, the suitable price for their products and the particular features the consumers value.
Another challenge that is common within companies that embrace globalization is having a workforce fluent in the ways of the world. Staffing strategies pose a tremendous challenge for globalizing companies (Kovtun and Ignatyuk, 2014). In fact, nearly 80 percent of large and mid-sized companies send their professionals abroad and approximately 45 percent plan to raise the number they have on assignment within the next two years. The need for expatriate employees is increasing since there is a lack of precise skill sets in the foreign countries. Over the past century, Coca-Cola has used three different staffing strategies during the exploits of globalizing itself. The three strategic staffing modules are ethnocentric, polycentric and geocentric.
Ethnocentric Staffing Strategy
The ethnocentric staffing strategy is whereby people from the home country are given the responsibility to manage the operations of a branch of the company in a foreign land. Under this staffing approach, multinational corporations formulate objectives, missions and important decisions for the branches and expect them to implement the decisions and report back to all functional managers at the headquarter level (Gaur, Delios and Singh, 2007).
This, therefore, means it involves sourcing human resource for subsidiaries from its countries or the country where the headquarters are situated. Usually, higher management levels of foreign companies are filled with expatriate employees from the parent country. The general rationale behind the ethnocentric staffing model is that the staff from the parent firm would represent the company’s interests effectively and link well with the parent company.
According to Gaur, Delios and Singh (2007), many multinational corporations opt for the ethnocentric staffing approach due to the lack of qualified human resource in the host country. The human resource in the foreign countries may lack the specific skill set that is needed hence making it hard for them to be employed. Another reason that companies opt for the ethnocentric staffing strategy is due to the high cost of host country nationals. Multinational firms also prefer the ethnocentric staffing method since when parent country nationals work in foreign countries they tend to be more committed compared to them working in their country of origin (Paik and Ando, 2011).
Finally, multinational corporations prefer the ethnocentric approach since when parent country nationals work in foreign countries they tend to show a high sense of belonging, and this positively affects the company’s productivity. Other than the Coca-Cola Company, which has used this approach in the past, other companies for examples, Toyota, and Samsung, follow this staffing method even to date (Paik and Ando, 2011).
Multinational corporations are better poised for benefits if they use the Ethnocentric approach during the early stages of the establishment of a subsidiary company (Paik and Ando, 2011). They should also opt for the ethnocentric approach when there is an inadequacy of managerial and technical skills in the host country. The ethnocentric approach should also be encouraged in situations where there is a greater need for maintaining close communication and coordination with the headquarters in the parent country. In situations where there is a great need to maintain a uniform corporate culture, an ethnocentric staffing strategy is recommended. Multinational companies prefer the ethnocentric staffing strategy in cases where home country nationals are less costly than the host country nationals.
Advantages of the Ethnocentric Approach
- The parent country nationals are assumed to be more familiar with the headquarters’ policies and systems therefore they are better positioned to achieve the company’s long-term
- It establishes a close communication network between the parent company and the subsidiary in a foreign nation.
- It enhances close coordination of the parent company and the subsidiary.
Disadvantages of the Ethnocentric Approach
- It prevents the company from getting talent internationally, hence avoiding a possible increase in productivity, which results from a talented workforce (Asmussen, 2011).
- It may lead to a decrease in morale of the expatriate workers.
- It also leads to the reduction of catching opportunities for the host country.
Polycentric Staffing Strategy
The polycentric staffing strategy is whereby the parent company treats each subsidiary as an independent company, decentralizes nearly all the operations and delegates decision-making authorities to its executives (Phillips and Gully, 2009). The appointed managers formulate strategies based on the vision and mission of the subsidiary and design the product entirely based on the foreign country’s environment. According to Phillips and Gully (2009), the multinational company sources perspective employees, including senior managers of the subsidiary firm from the host country’s nationals or local nationals. This form of limiting recruitment to the citizens of the host country is referred to as a polycentric approach. Coca-Cola currently uses this approach to staffing in most of the countries it operates in today.
Multinational corporations prefer the polycentric approach for a number of reasons. One of the major reasons is the high costs of expatriates. Expatriates are usually expensive for the company to maintain. 50 percent of the companies surveyed indicated that they spent 3 to 4 times an expatriate’s salary to send him or her and their family to a foreign land for a typical three-year assignment (Birkinshaw, 2003). In addition to that, 43 to 53 percent of the tasks were considered failures as a result of an early return, or the particular individual did not perform up to expectations. Multinational companies also prefer the polycentric method of staffing since it acts as a suitable cultural fit. It enables the company to fit comfortably into the new foreign market. The process also enhances a company’s globalization mission since it tends to increase the success rate of a corporation in a foreign land (Gaur, Delios and Singh, 2007).
The polycentric method of staffing should be encouraged in situations whereby the subsidiary company is in a growth stage. It should also be encouraged when the host government’s conditions are favorable (Coe, Johns and Ward, 2011). If the human control of the host country is developed and fully qualified, the polycentric staffing strategy should be used. In situations where the headquarters does not have any form of competency, the polycentric method should be encouraged so as to enhance the company’s globalization.
Advantages of the Polycentric Approach
- It is a cheaper cost for the human resource compared to the use of expatriates.
- It enables the company to blend smoothly into the new culture since the subsidiaries’ executives understand it better.
- It allows the company to be appreciated in the foreign nation since it offers numerous opportunities and services to them.
- It also enhances employee job satisfaction.
Disadvantages of the Polycentric Approach
- Coordination may become complex as a result of the decentralization of management.
- It leads to fewer promotional opportunities.
- It causes no hand on experience both in headquarters.
Geocentric Staffing Strategy
The Coca-Cola Company is currently using the geocentric staffing strategy. Under this approach, the entire world is considered as a single country. This strategy involves the sourcing of all kinds of human resources from all parts of the world. Each subsidiary of the main company functions autonomously (Bǎdulescu, 2013). According to Coe, Johns and Ward, (2011) it enables multinational corporations to source for the best prospective employees in terms of merit from the entire world. Therefore, the geocentric approach involves recruiting the most suitable persons for the position available, irrespective of their nationalities.
This strategy is the most appropriate for global companies since the recruitment of highly skilled workforce enhances the company’s productivity (Coe, Johns and Ward, 2011). The geocentric approach also intensifies competition as the most qualified people are given the opportunity to work for the firm. Recruitment is entirely based on merit and not nationality. Due to the technological revolution that is currently happening, most companies prefer to use the geocentric method of staffing as this enables them to develop with the particular skilled employees needed to cope with the rapid technological advancements. The employment of workers and managers based entirely on merit encourages innovative practices in functional areas.
Geocentric staffing should be implemented when a multinational company has reached a maturity stage. It should also be applied in situations where there is no requisite talent in the home and host country. Finally, this method of staffing should be used in host countries that have no restrictions on employment (Paik and Ando, 2011).
Advantages of the Geocentric Approach
- It leads to the formation of a competent labor pool.
- It enables a company to acquire the best talent at a cheaper cost.
- It enhances the company’s flexibility and adaptability in foreign markets.
- It leads to increased business productivity due to the presence of an extremely skilled workforce.
Disadvantages of the Geocentric Approach
- It is only suitable for large businesses since extensive global infrastructure is required. Therefore, small businesses may not use this model.
- Costs can skyrocket during the process of pulling employees from overseas, training them and relocating them.
- Challenges may be faced with the complexity of dealing with visas and other immigration-related requirements (Miroshnik, 2012).
- There is a risk of diluting the cultures in each of the offices.
International Collaborative Strategy
For companies to globalize, they must choose and international operating mode to fulfill their objectives and carry out their strategies. The Coca-Cola Company has achieved its globalization through some equity and non-equity arrangements (Senker and Foy, 2012).
A Foreign Direct Investment (FDI) gives an investor a controlling interest in a foreign company. When two or more firms share the ownership of an FDI, the operation is known as a joint venture (Coca-Cola, 2013). China’s enormous population and its relatively high growth rate have made the country be viewed as a significant market with an outstanding potential for many of the world’s multinational corporations. Coca-Cola has had a long history with China. In fact, most of Coca-Cola’s bottling facilities are joint ventures with one of the three government agencies (Coca-Cola Co (THE), 2005). For a company wishing to follow a geographic diversification strategy, collaborative arrangements are a faster means of entering multiple markets.
Swire and Kerry act as the foreign bulk partners in 19 of Coca-Cola’s 24 bottling facilities in China. The Coca-Cola Company holds a 12.5 percent stake in both companies and has agreements with them in the areas of plant management, sales, and distribution. Swire is involved in nine of Coca-Cola’s bottling facilities based in southern and eastern China. Kerry is a collaborator in 10 facilities located mainly in northern and western China. Coca-Cola is a direct majority partner in four bottling joint ventures: one in Hainan Province, one in Shanghai, and two in Tianjin. Coca-Cola also continues to have joint projects in other countries such as Peru, Nigeria and many more (Coca‐Cola Co (THE), 2008).
Conclusions and Recommendation
Although the Coca-Cola Company has successfully managed to globalize its brand, there is still room for improvement. It can use the Region Centric Approach. This approach is used when multinational companies have successfully operated in a foreign country and want to venture into the neighboring ones. At this level, the foreign subsidiary considers the regional environment (African or European) for formulating common strategies like pricing. Similarly, the multinational corporations source their prospective employees within the region in which the subsidiary is located. This approach may be beneficial, especially when neighboring countries possess similar cultural values or the neighboring countries provide qualified personnel at a cheaper cost (Coe, Johns and Ward, 2011).
Coca-Cola is without a doubt one the leading multinational corporations if not the leading one. Its exceptional performance is as a result of its strategic staffing approaches during the globalization of its firm. Coca-Cola is a company that recognizes its core abilities as a corporation. Conclusively, its mission, vision, culture, and values are the foundation of their core capabilities and what has encouraged their expansion and globalization throughout the years. This culture reflects on the employees and contributes positively to its globalization.
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