|← Various Management Theories||A Leadership Style →|
There are a number of issues that are likely to arise when a large giant like Coca cola invests in a developing country. First, most developing countries have anti-foreign sentiments with their governments being keen on protecting local firms from foreign competition. Therefore, a large multi-national corporation is likely to face resistance and may find it hard to obtain permission to operate in developing countries. Secondly, corruption is rampant in most developing countries therefore close a relationship with key government officials is necessary for success. Lastly, in developing countries a giant corporation may lack adequately skilled personnel to run their branch in that country. Most developing countries have few high quality educational institutions which creates a void of skilled workforce in the labor market.
There are several advantages for a multinational company of setting up a branch in a developing country. First, it is easier to coordinate production and supply of products to the final consumer in another country from a branch in that country than from the headquarters. This would result in cost savings, operational efficiency and improved consumer satisfaction. Secondly, In the long run, the company can make considerable financial savings producing in that country instead of producing in the home country and exporting. This is because production costs are lower in developing countries due to availability of cheaper labor and weak currencies of most developing countries compared to the dollar. This will in turn increase coca cola profit margins.
Some of the strategies that can be employed by large diversified companies include; market definition and market navigation. Market definition is diversifying into new lines or product and diversifying markets. Large diversified companies can scout for new markets, segregate them on the basis of products that in demand in those markets and supply their products to those markets. This will increase sales volume and market share. Large diversified companies can also do market research and develop new products that satisfy consumer expectations. Market navigation can be defined as the measures put in place to increase competitive advantages in their existing geographical and product markets. This is a market strategy aimed at protecting their market share. Large diversified companies can employ the same strategies however the implementation will be different. This is because their geographical and product markets are different.