Coca-Cola Company
Coca-Cola Company is the world's leading beverage maker with operations in more than 200 countries worldwide. The parent company is situated in Atlanta, Georgia where it serves as the headquarters of the whole operation. The company is well known for the production and sale of its premier seller, Coca-Cola. The beverage is the world's most popular carbonated soft drink and is unrivaled regarding sales figures and worldwide distribution. The enterprise operates on a franchise basis in which it produces the syrup concentrate and hands this to the hundreds of bottlers around the world(Green, 2016).
The company's flagship drink, Coca-Cola, was invented in 1886 and the formula rights sold to Asa Candler, who established the Coca-Cola Company. The drink was created by John Pemberton, who was an accomplished chemist. The company was founded in 1892 and has operated on a franchise basis ever since. The company does not produce only one product and has made several acquisitions over the years that are worth noting.
The business has made many acquisitions over the course of its operations to claim the title of the world's biggest soft drinks company. The company has acquired many major soft drink institutions such as Minute Maid, Thums Up, and Fuze. The company sells beverage products in over 200 countries with sales figures of 1.6 billion beverages sold daily. The company was the first multi-national to make over 1 Billion Pounds in the 2010 annual UK grocery sales. The company has also ventured into the film industry through the acquisition of Columbia Pictures, which was later sold to Sony for $3 Billion. The company has managed to grow into one of the biggest companies in terms of revenue, employee base and influence in the global scene.
Coca-Cola Company can produce its products in various geographical locations through the use of its subsidiaries and licensed bottlers. The parent company and its subsidiaries only provide the syrup constitute that is used to make the fizzy drinks. These branches supply the concentrate to local licensed bottlers in the host countries where they are mixed with water and sweeteners to make the final product. The bottlers in these countries hold the franchising rights of the company and are free to advertise and sell the Coca-Cola produced in the host country. The company receives royalty payments from all these branches worldwide. The bottlers sell carbonated soft drinks to retailers, restaurants, vending machines, schools, and food distributing companies.
Technology Transfer
Technology transfer is accorded a lot of importance in the practice of business. Technology needs to be moved from a region with an advanced grasp on technological knowledge to less developed nations(Anderson & Anderson, 2010). Multi-national companies that operate in less developed countries such as Coca-Cola Company that operate in developing countries have the responsibility of filling the technological gap in its operations. The transfer of technology can occur in vertical and horizontal ways. Vertical transfer is the transfer of knowledge and methods within a single organization whereas horizontal transfer refers to movement from one industry or country to another.
Transfer of technology has the benefit of filling the social capacity of the society that once lacked the technology. The technology adopted is often critical to the economic growth of the country because modern technology can significantly advance the society and helps in the eradication of poverty. Companies can choose to transfer its technology through various channels depending on the context of its operation.
Technology Transfer in Coca-Cola
The method through which a company chooses to transfer its technology is in line with the advantages the company will be able to receive. Coca-Cola Company licenses its technology to its subsidiaries and bottlers and receives royalty payments in return. The company possesses the rights to one particular asset and thus needs to decrease the risk it may run in the host nation's market by licensing out the formula and receiving royalty payments on the products made and sold on behalf of the parent company. This method is suitable for Coca-Cola because it minimizes the risk of direct investment in over 200 countries with varying political stability and FDI policies. The method also helps in maintaining the knowledge of the technology of the carbonated soft drink (Cortés, 2013).
A large company such as Coca-Cola benefits from the licensing approach because of the minimization of risks on its primary operation. The host market has many factors that determine the success of a technology transfer policy. A small host country has a large risk portfolio for direct investment. A country that is politically unstable also has a large risk factor that discourages direct investment to curb potential losses to the parent company. Coca-Cola operates in over 200 countries, some of which are small and politically unstable; this exposes them to a lot of risks if a market performs poorly. To offset these risks, the company employs the licensing policy in the transfer of its technology. The company has 80 percent of its sales outside of America. Sales from the Middle East, Africa and Eastern Europe had a retail value of $10 Billion in 2010 and this number continued to rise over the years (Holstein).
Another factor that makes licensing a good option for Coca-Cola Company is the fact that there is no prior experience in foreign direct investment. The company is better suited to adopt a licensing channel to transfer its technology to overseas markets. The company will be able to counter any losses that they experience in the foreign market better than through a foreign direct investment.
Licensing is not without its disadvantages. One of the major downsides of licensing as a mode of technology transfer is the risk of enabling a company to become competition. The licensed company may grow to become a serious competitor to the parent company when the terms of the license come to an end. Intellectual property becomes a fair game after a contract ends, and this often happens in businesses all over the world(Tak & Sabidussi, 2015).
Impact of Technology Transfer on Coca-Cola Company
Perhaps one of the most impressive feats of modern times, the secret formula for Coca-Cola has remained a secret since 1886. This secrecy is partly attributed to the licensing of its technology. The method through which the company's trademark product is manufactured ensures that the formula is kept a close secret by the company.. This practice reduces the chance of knockoff versions of the popular soft drink to be made in any form anywhere.
Transfer of technology has enabled the multi-national corporation to produce drinks that undergo the same standards of manufacturing in every single country worldwide. Through its franchise policy, there are a long and detailed set of criteria that a company must attain to get a license to bottle and distribute Coca-Cola beverages. The transfer of management policies and manufacturing knowledge to its various branches has enabled the company to gain a worldwide customer-base. The taste of a bottle of Fanta or Coca-Cola in one country is the same as in another country.
Coca-Cola Company can operate in a vast number of countries with minimal risk due to its channel of technology transfer. The company applies a vertical transfer model to transfer technology in all 200 countries. Multi-national companies face the risk of incurring high losses in certain markets especially those in politically unstable countries and small countries. To offset this risk, the business follows a licensing- franchise model. This model allows the company to avoid direct investment into the country. Direct investments have many disadvantages that make it unsuitable for very large corporations. These disadvantages include direct loss to the company and the possibility of loss of intellectual property in cases of government interference. Coca-Cola is now among the most profitable companies in the world with an annual turnover of over $25 Billion. The company reported a net revenue growth of 1% and organic growth of 8% in 2015 (The Coca-Cola Company, 2015)
The risk is reduced in a licensing situation. The company that acquires the license will do so to use the brand's name and products in the foreign market. The parent company will receive royalty payments from the licensee. They will cover any loss that the licensee suffers in the foreign market.
References
Anderson, M., & Anderson, M. (2010). Technology transfer. Haywards Heath, West Sussex: Bloomsbury Professional.
Cortés, R. (2013). A secret history of coffee, coca & cola. New York: Akashic Books.
Green, S. (2016). Coca-Cola.
Multinationals, Governments and International Technology Transfer (RLE International Business). (2012). doi:10.4324/9780203076552
Tak, H. S., & Sabidussi, A. (2015). Business models for technology transfer offices: a case study. International Journal of Technology Transfer and Commercialisation, 13(3/4), 192. doi:10.1504/ijttc.2015.075834
The Coca-Cola Company. (2015, April 22). The Coca-Cola Company Reports First Quarter 2015 Results: The Coca-Cola Company. Retrieved from http://www.coca-colacompany.com/press-center/press-releases/the-coca-cola-company-reports-first-quarter-2015-results/
Holstein, W. (2011, November 7). How coca-cola manages 90 emerging markets. Strategy-Business.
