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International University Vietnam Bachelor of Commerce Program Assignment Cover Page Question: Companies internationalist for a variety of reasons and in a variety of ways. Discuss a major issue that a company will face while internationalization and how it may manage this challenge. Use examples from real companies to illustrate your points. Essay: In the world, many companies want to internationalist to expand or find a potential market but they must face many issues, such as red tape, language and cross culture.
This essay will analyze a major issue of lacking control in quality of products ND capacity of employees of Coca-cola when they internationalization and how the firms solved this problem. According to Bartlett and Shoal model, Coca-Cola chooses global strategies because they need to reduce the cost of production and it also becomes a reason why they internationalist. Additionally, Coca-cola entry into China because of three advantages of Dunning motive model. Firstly, Coca-Cola has their own pattern and strong brand image, so they can compete with local companies easily (Lily et al 2013).
In addition, Lily et al (2013) states that they also have location advantages of low labor cost, the significant domestic market and high economic growth of China. Finally, this internationalization advantages is that they have the agreement with big food company in China (Lily et al 2013). The problem of lacking control affect mostly to the Coca-cola when they can improve the quality and also manage the employees. Therefore, the plan to expand the market can be influenced and it also can decrease the reputation of the company.
The main issue is that it can reduce the sale volumes, so the profit can be decreased significantly because China s the potential market with large population. Coca-cola make a decisions to become a FED company to solve the issue and they apply Pascal model and entry mode to entry in to China to clearly show each step they done carefully which depend on the China’ situations. For the first step, they export their products to China and then, they sign a franchise contract with a Chinese bottling partner in 1979 when Chinese government apply tight regulations (Lily et al & Addax Consulting 2013).
Secondly, Lily et al (2013) points out that in 1985, they invest money in a Chinese firm to make this come a Joint venture firm and in 1993 they built their own subsidiary to become a FED firm when Chinese government had changed their policies to attract more FED. According to the Coca-Cola Company (n. D), the company established bottling operations in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia, Philippines and South Africa from 1920 to 1930. COMIC (n. D) claims that two bottling plants were establish in China and the bottles were imported from the plants in Philippines.
Coca-Cola depends on these two models to improve their power n term of control quality of product and capacity of employees. From an exporter to become a Joint venture, they can control a part and then, they can control all when they building their own factories. They show clearly their wants for develop in the China’s market.