Introduction to Financial markets
The financial market is a term that is used to describe any marketplace where both buyers and sellers participate in asset trading like bonds, equities, derivatives, and currencies. Therefore, it is typically defined by possessing transparency pricing, regulations on trading, and market forces that determine the value of securities that are in the trade. Financial markets are almost found in every country. However, some may be small with few participants while others like the New York Stock Exchange are big and do trade trillions of dollars on a daily basis. Moreover, the investors have the access to a large number of financial markets and the exchange rates that represents an array of financial products. Similarly, some of these markets are always open to private developers while others remain exclusive to major international financial institutions and professionals.
Classic financial markets pre-globalization
The integration of the financial market has followed a U-shaped pattern that has been declining in the middle of the 20th C from high achievement levels before 1914. That is it took a restoration of macro stability by the developed nations in the 1970s and 1980s (Bordo, 2000). This led to the specification of the trilemma resolution with the advent of floating exchange rates to permit the recovery of capital mobility. Consequently, the record made a strong case for the floating exchange rate for the developed nations. However, this did not rule out the regional exchange rate arrangements such as the ERM.
The developed historical record made it easy for the intermediate arrangements hard to defend. The integration of financial markets was narrow during the pre- globalization thus reflecting that there was limited innovation to overcome the challenges to asymmetric information. Similarly, there was little improvement in communication at work, and the regulations by the government discouraged transparency in financial markets.
Globalization of Financial Markets
Transportation is linked with the globalizing world. The efficient distribution of freight and the movement of individuals is always an important factor for maintaining the economic cohesion systems from the empires to the modern states, and economic blocs. Due to the influence of technological and economic developments, the achievement of globalization goals have considerably progressed with a series of historical revolutions and evolutions. Therefore, it was possible for people to move faster in greater volumes over long distances conveniently.
Globalization process is very complex and related to the spatial evolution of the economic system. However, the Silk Road trade route that connected China and the Mediterranean Sea facilitated the exchange of ideas and knowledge. The trade route also facilitated trading goods and foods such as spices, and porcelain from the East.During the establishment of oversea colonies by the Europeans, globalization also grew, and many explorers from Europe were eager to introduce Christian religion to the visited regions. Therefore, Christianity globalization spread from Europe to Latin America via Christian missionaries. Consequently, globalization spread widely during the 19th C due to the industrial revolution. Several companies made good use of raw materials and sold their products to other countries.
Modern day globalization
Communication
Modern communication has played a big role in cultural globalization in the sense that there have been instant zips of information around the globe through internet. Several people can read information regarding foreign nations easily just like they can read their local news. Additionally, people became aware through globalization at a faster rate. That is they can respond to natural disasters that are occurring miles away in seconds. Moreover, about 80% of people around the world currently use mobile phones. Similarly, the success of global news such as CNN have also contributed to globalization in that more around the world can watch the same news 24 hours.
Corporate Governance/Financial deregulation
Economic policies, liberalization, and deregulation have characterized the financial globalization. Hence, the rise of financial markets in the economy. Therefore, the corporate governance in companies has adopted new social environment under the influence of the interested investors. While monitoring the over-emphasis on the maximization of the short term value of the shareholders without revitalizing the risk, the value of such shareholders should be considered as a contributory factor to the current economic crisis.
Multi-National Corporations
The MNCs always leverage their financial position to access the global market to raise capital in a cost-effective and efficient way. This will be advantageous to the MNCs from the domestic companies that do not have a similar amount of cash. However, there is a risk that is associated with the international finance in that the capital structure that is applied to the global corporations influence the profitability, growth, and sustainability.
Brief history/background of Coca-Cola Company
The coca cola beverage was founded by John Stith, the pharmacist in 1886 (World of Coca Cola, 2016). It was later incorporated as a company in 1892. In 1916, Coca-Cola Company started to manufacture its famous bottle that has remained to the signature of the company today. Under the leadership of Robert Woodruff in 1928, the company expanded overseas when he introduced the company to the Olympic Games. Coca-Cola expanded its new flavors such as Fanta, and Sprite, in addition to its newly acquired Minute Maid Company. This added a new line of business juices to the company. In the 1980s, there was much change and innovation in Coca-Cola Company. They introduced Coke that later become the top low-calorie drink around the world. The presence of the company in the world market grew rapidly and today the company has grown to become the most ubiquitous brand all over the world with more than 1 billion beverages sold every day.
Source and use of funds
The source of funding in Coca-Cola Company is composed of the bonds, commercial paper, and the revolving credit facility. The company spent about $ 120 billion on health research, partnerships with professional companies, and fitness programs.
Bonds
Concerning bond issuance, the company issued 100-year bonds in the past containing an option that allows the debt issuer to partially or fully repay the debt before the scheduled maturity. The company issued such bonds because the aim of the business is to make the profit from the market demand. Therefore, there are groups of investors that had a strong demand for the 100-years bond. For instance, institutions use the 100-year bond to lengthen the duration of their portfolios of bonds to meet certain duration based objectives.
Markets of Coca Cola
The coca cola company belongs to the global, and domestic market because it has received global recognition. Similarly, its main brand, Coca-Cola is leading in this recognition. However, when it is needed, they operate locally to fulfill the demand of the local tastes with over 23o brands in almost 300 countries. Although the company is operating a global business, it also stays local, and the independent business people who are native to the countries in which the company is located do own local bottling and distribution activities.
Utilization of modern technology in Coca Cola
The Coca-Cola Company is constantly rebranding, advertise, and presents its products to keep consistent high sales. Therefore, the company has continuously embraced new technology in many ways to promote the brands (Ireland, 2016). For instance, in 2009, the greener bottles and packaging was introduced by Coca Cola to produce about 3 billion products while economizing petroleum. The practice was successful in that other companies such as Heinz also adopted the technology of creating the greener packaging as well. Additionally, Coca-Cola has remained visible on Facebook, and other social network sites like Twitter. In 2011, the company had about 34 million customers, and this enables it to harness the social network power to spread the message of the new products.
Examples of Coca-Cola entering new markets
Recently, the Coca-Cola Company started to invest heavily in the African market. But previously, Africa was not the priority for coca cola until 1997 when the rapid population growth and disproportionate low sales made the company strategize to double its sales in Africa in five years' time.
Challenges of integration
Strategy
Besides creativity, strategy acts as a divergence point especially between sophisticated corporations and their mainstream. Therefore, capability without direction leads to inefficiency at worst counter productivity.
International Issues
If there are low international problems, there will be more internal variation in data of integration. Therefore, international issues can be problematic to the integrated markets particularly to the organizations that do not have local agencies to assist with unique media consumption, local competition, and cultural norms.
Inflation
When there is low inflation, and it is expected to be low subject to the partial variations over the medium term, the value of financial assets will incorporate less inflation risk. This will be in contrary to a situation of high and uncertain inflation, and where there is no credibility in central banks. Consequently, this will influence integration of financial markets.
Banking systems
Causes for the globalization of financial markets
Several financial institutions such as banks and institutional investors have geographically expanded their activities (Antonio & San-Jose, 2013). During such processes, the banks are acting as an intermediary to channel capitals to the borrowers from the lenders across national borders. Secondly, the most mature securities that have been gained by the market across the border. Therefore, newly issued securities will be designed and offered to the public in a way that can maximize their appeal to the international investors.
Conclusion
The process of globalization has not yet been finalized. Therefore, it will lead to the world in which nations and areas of economics become more interdependent to the other. Regarding the financial markets, the process of globalization open access to borrowing, global investing, and lending. Additionally, it plays a key role in disciplining policies. Consequently, when both monetary and economic policies pursue stability-oriented purposes, the economy will be capable of reaping the full benefits of globalization of financial markets as the associated risks are contained.
References
Antonio, J. & San-Jose, L. (2013). The impacts of Financial Globalization on the Economy in the current crisis through Corporate Governance. Contemporary Economics, 7(3), 79-94.
Bordo, M. (2000). The Globalization of International Financial Markets. The College Of Globalization.
Coca-Cola History │ World of Coca-Cola. (2016). World of Coca-Cola. Retrieved 11 May 2016, from https://www.worldofcoca-cola.com/about-us/coca-cola-history/
Ireland, K. (2016). Does Coca Cola use Technology to gain an advantage?
