COMPARATIVE ANALYSIS
INTRODUCTION
The aim of this project is to conduct a country based comparative analysis and suggest a country for a real company for foreign direct investment. For the attainment of this objective, it is essential to decide on a specific industry, firm in that particular industry and then the country. Therefore, the industry that has been selected for the report is food and beverage industry; selected company is Coca-Cola Company, which is an American multinational company headquartered in the Georgia, the United States and the country that has been selected for the consideration of foreign direct investment (FDI) is Kuwait. The beverage industry includes fruit juices, coffee, dairy and yogurt based beverages, energy drinks, tea, and enhanced water (Wild, 2016).
MARKET SIZE AND GROWTH RATE OF THE INDUSTRY KUWAIT BY 2019
The Kuwait is recognized for its busy beverage and food industry, and it is expected that the sector will grow further as the income of the people is rising. Expansion in the tourism sector is pushing the volume of trade and attracting the new suppliers in hospitality and retail chains that will result in the enhanced consumption of food and beverages.
The growth of the food and beverage industry in the country has been steady from 2008 to 2012 with CAGR of approximately 0.6 percent (Mordor Intelligence, 2015). However, now it has been expected that the growth of the industry will improve significantly. Because the economic condition of the country is improving, and the country is set for additional growth in food and beverage industry (Oxford Business Group, 2014). In 2010, the sale of the beverages was plus 3.8 percent that increased up to plus 21.7 percent in 2014 (Business Wire, 2010). In 2010, up to 610 percent population was under 30 that increase by 3 percent on annual basis. The mall culture is on the rise due to which food, beverage outlets are increasing, and market size of beverages is expected to rise (Hospitality News, 2012).The chances of growth for the food and beverage industry are brighter because of the improved consumer confidence, employment, economic condition, and food consumption trends. The country is reasonably attractive, as the operating environment of the country is secure for investors. In term of counter-terrorism capabilities, the country scored 66.2 from 100 (BMI Research, 2015). The consumption of carbonated drinks in Kuwait was 663 USD million in 2006 that increased up to 781.5 USD million in the first quarter of 2015. Even the combined yearly per capita consumption of the soft drinks in Saudi Arabia, the UAE, Qatar, and Kuwait has exceeded 200 liters (Al-Humaid, 2015). In 2014, the sale growth of bottled water or enhanced water was plus 4.2 percent, and it is expected that from 2013 to 2018, the CAGR will be plus 4 percent (Research and market, 2015).
Companies expand their businesses with the aim of enhancing their profitability and globalization served the companies with such opportunities. The company is an American multinational, headquartered in the Georgia, United States. The United States is the major source of the organization’s earnings, which is also considered amongst the major weaknesses of the firm. The United Kingdom is a market with steady growth rate because of the saturating market. However, in China, the growth rate for beverage industry is high, but not for non-alcoholic drinks. These markets do not have immense growth opportunities for the company as compared to Kuwait. The country is posting significant growth opportunities for the food and beverage market. Therefore, it can be expected that the country will be the based choice to make foreign direct investment as the risk of failure due to saturating market, and lack of innovation will be lower in the market as compared to other countries. Moreover, according to the Reuter report (2012), The sale growth of enhanced water was 6.35 percent, and it is expected that the growth will be equal to 33 percent in 2016 (Reuter, 2012).
COMPETITOR ANALYSIS
In Kuwait, United Beverage Company KSCC and KDD are the competitors of the Coca-Cola in Kuwait. KDD is a competitor of the Coca-Cola Company with $ 6 million revenue. However, United Beverage Company, KSCC is the major producer of carbonated beverages in the country (United Beverage Company KSCC, 2016). There are few players in the market with small revenue (Data Fox, n.d). The overall food and beverage industry contribute 6 percent in the MVA, and the coke is amongst the brands that contribute immensely in the total MVA of the country. The brand of the company, Coke is amongst those brands that experienced the highest compounded growth rate of 9.6 % on a yearly basis from the year of 2008 to 2012. After 2008, the production of the brand experienced a sharp jump in production from 955.5 million MT (metric ton) to 14.22 billion metric ton.
Competitive advantage rationale
For analyzing the authenticity of the decision, it is essential, that the decision is assessed based on some rationale. It has been realized during the analysis that the competition in other countries is tough as compared to Kuwait. The company due to its distribution and lean manufacturing experience will be able to gain the cost leadership advantage. The company through its wider range of products will be able to differentiate itself from competitors. Moreover, the economic condition of the country is improving rapidly, and unemployment is decreasing that will encourage the beverages consumption as more mall are boosting the trend of food and beverage outlets. The alcoholic drinks are prohibited in Kuwait that will reduce the indirect competition of the company (Bograce Company, n.d). The company will have a competitive advantage over other organizations in the food and beverage industry because of its expertise in operating global environment.
CONCLUSION
The recommended country in which the company should invest is Kuwait as the country is growing economically that in result improving the consumer confidence and spending power. The increased number of malls and trend of consuming beverages is an evident opportunity for the company to grasp the market share. Kuwait does not have many players in the food and beverage industry that can give competition to the firm and other markets, the Kuwait’s beverage industry is not saturating; therefore, the company will not need to come up with innovative products. The company can differentiate itself based on its wider category of products, unique taste of the brand, and immense experience of distribution. However, the company is an expert in lean operations that will benefit the firm in gaining the cost leadership advantage over other organization in the industry.
References
Al-Humaid, N. (2015). Saudi Soft Drinks Market Continues to Fizz. Farrelly and Mitchell, Retrieved on February 5, 2016, from < http://farrellymitchell.com/wp-content/uploads/2015/01/Insights-January-2015-.pdf>
BMI Research. (2015). Kuwait. Retrieved on February 5, 2016, from <http://www.bmiresearch.com/kuwait#>
Bograce Company. (n.d). Kuwait Import & Export Information Center. Retrieved on February 5, 2016, from <http://www.bograce.com/Kuwaitimportexport.html>
Business Wire. (2010). Research and Markets: Kuwait Food and Drink Report Q4 2010 - the Outlook for Kuwait's Food and Drink Sector Appears to Be Improving. Eastern Daylight Time, Retrieved on February 5, 2016, from http://www.businesswire.com/news/home/20100827005299/en/Research-Markets-Kuwait-Food-Drink-Report-Q4
Data Fox. (n.d). KDD company profile and information. Retrieved on February 5, 2016, from https://datafox.com/kdd
Hospitality News. (2012). A promising food & beverage market still under the radar. Retrieved on February 5, 2016, from <http://www.hodema.net/pdf/MGLPDF136074304742.pdf>
Mordor Intelligence. (2015). Manufacturing industry in Kuwait: Analysis of consumption and production trends of several key industries (2004 2014). Retrieved on February 5, 2016, from < http://www.mordorintelligence.com/industry-reports/manufacturing-industry-in-kuwait-industry>
Oxford Business Group. (2014). Kuwait: Appetite for growth in food and beverage sector. Retrieved on February 5, 2016, from <http://www.oxfordbusinessgroup.com/news/kuwait-appetite-growth-food-and-beverage-sector>
Research and market. (2015). Kuwait Food and Drink Report Q1 2015. Retrieved on February 5, 2016, from < http://www.researchandmarkets.com/reports/3057844/kuwait-food-and-drink-report-q1-2015#rela0>
Reuter. (2012). Research and Markets: Kuwait Food and Drink Report Q2 2012 - In January 2012, Americana Group Announced a Development Agreement with US High-End Burger Chain to Open 33 New Locations. Retrieved on February 5, 2016, from <http://www.reuters.com/article/idUS33939+17-Mar-2012+BW20120317>
United Beverage Company KSCC. (2016). Company Profile. Retrieved on February 5, 2016, from <http://www.unibevkw.com/company/41/Company-Profile>
Wild Company. (2016). Company. Retrieved on February 5, 2016, from <https://www.wildflavors.com/NA-EN/company/markets-we-serve/beverage/non-alcoholic-beverages/>
