FIRM GOVERNANCE AND INSTITUTION
Capitalism can be defined as a system of the economy that is rooted in private ownership regarding production means and profit maximization (Kemp, 2014). Ideologies involved in capitalism include accumulation of capital, price model; property owned privately, competition in the market and labor. The owners of the company make decisions on production methods, and distribution of products is determined by the level of competition in the market (Schumpeter, 2013)
Authors majored in two capitalist economies, that is, uncoordinated economic markets in countries like the United States and collaborative economic markets characterized by sharing between firms. Coordination is the differentiating aspect between these economies. Uncoordinated economic markets coordinate their aspirations using mechanisms in the market. In Collaborative economic markets, market factors do not apply in the interaction with others. Five fields were prioritized in which organizations related to other players. That is:
Relations in industry
Organizations have synchronized with their employees and trade unions over wages and production. In coordinated market economies, trade union membership is higher. Also, wage bargaining happens in the industry, sectors and national levels. On the other hand, in liberal market economies, employees and employers are less coordinated, and negotiation of wages takes place at the company level.
Developmental educational training
Employees in coordinated market economies possess specific skills matching the industry they are in. On the other hand, liberal market economies employees possess general skills that can be exercised in other firms.
Liberal market economies depend greatly on information from the public on finances such as stock markets. Coordinated market economies depend more on long-term capital. This shows they don’t depend on public financial information.
The relationship between firms
Coordinated market economies, firms are more corporative and share information while in liberal markets; firms tend to compete a lot.
In Coordinated market economies, management tends to work together with its employees in reaching decisions critical to the operation of the firm (Metzger, 2014). In uncoordinated economic markets, minute attention is paid to employees in decision making as it is left to the senior management.
The third type is the hybrid comprising of all the nations in the Mediterranean. The study of varieties played a great role since it enabled understanding of firm’s comparisons and contradictions in economies already developed (Bellis, 2014). Organizations depend on justice systems together with the unofficial laws passed from the nation’s historical background.
The Coca-Cola Company
In this context, the Coca-Cola Company is put into consideration. It’s a multination beverage company that has its headquarters based in Atlanta, Georgia. It’s listed on NYSE stock exchange market (Wagdi, 2017). The company also has a chairman, president, and chief executive officer. The company has been among the top most in the world and has gained international recognition due to its products which are high selling.
Property rights of the Coca-Cola Company and how they have been protected
This is the right to produce original products and does not allow other publications against its wish. For example in the logos on the bottles, Coca-Cola decides on what should be published and the methods of the distribution of its products. The adverts that can be aired and are also original and appear in a certain manner, and no one else is allowed to do what the company does not require (Mooij, 2013).
These are the secrets only known to the company and their employees. Coca-cola Company has trade secrets on making their drinks. This secret shouldn’t be known to their competitors as this would kill their profits. The company takes special precautions so that their secret does not get out and by so doing they fulfill the criteria of trade secrets (Robertson, 2015). An example is when coca cola changed its formula of making the drinks in 1893; it did not use the original formula again. This is because their competitors had already known the formula. Trade secrets ensure uniqueness of products of a particular company.
This is the sole right to invent, sell and distribute certain products. The coca cola company manufactures their barrier plastic bottles and has been granted sole right by the government (Alam, 2016). No other company has right to make such bottles, but Coca-Cola benefits from the manufacture of their bottles solely.
This is a special way that a company introduces its products so that other manufacturers cannot pose their goods as of the other. The Coca-Cola Company prints its name in a way that anyone using their product is aware that it’s from the company. If it’s printed as Coca-Cola, it’s correct but any other way it’s not acceptable. Counterfeits are thus eliminated and in return reduction of unfair competition in the market.
The Coca-Cola Company Advertising and Ease of Doing Business
The company has been one that is widely known because of its advertising. It’s able to capture a wide population through use of commonly acceptable themes for example love and music. Their logo and design of the bottle is also common (De Mooij, 2013). Mostly the messages they use to advertise are socially acceptable. Marketing directly has been used by the company for example selling during events such as football games.
The company also promotes itself by selling to retailers directly. This is mobile advertising which is also common in food joints for example KFC. This is a clever way of marketing since people will most likely need a drink after taking meals. The use of advertising has provided a baseline for vigorous marketing which has made it easy for the company in doing business thus earning more profits for the company.
Employee Engagement and Freedom of Speech in the Coca-Cola Company
Employees are encouraged to bring their ideas and air them freely so that they can help in achieving the vision of the company. People are not discouraged at all thus ensuring there is healthy work environment which results to superiority in results obtained. Open communication is encouraged. Dialogues are frequent with employees in the world such that opinions are put into consideration without any bias. Open communication demonstrates the freedom of speech available in the company’s branches around the world. This way, employees feel more accommodated and there is no pressure of making mistakes or inability to air their ideas to their senior managers.
What Sort of Fiscal and Legal Capacity Has Evolved in America
Fiscal capacity can be described as the ability of the government of a particular country’s ability to provide public amenities through extraction of revenues. This is through the use of taxes.
The strength of tax administration relies on trained personnel, infrastructure, and functional information models. They help determine the goods to be taxed and also monitor taxpayers in the states. This will help reduce tax evasion by individuals in the states. The internal revenue authority has been able to accomplish this since it has a huge number of trained employees. This has enabled it to be able to monitor each in the United States of America easily. Good tax administration, therefore, reduces tax evasion and encourages more tax compliance. A fiscal capacity and tax structure hugely depend on good tax administration.
Tax Evasion Models
The country has developed economic models that increase fiscal capacity. This model demonstrates that individuals will choose to comply with taxation if the costs of evasion are too high for them. The model will ensure that people know the costs associated with evasion of taxes and will, therefore, choose to pay taxes instead of incurring extra costs. Therefore, the government can derive revenue easily from individuals in the state thus increasing its fiscal capacity. The models have proved to be beneficial to the country. America will, in essence, collect a larger share of income in taxes.
Placing Of Less Efficient but More Monitored Taxes
These include the use of tariffs. For instance, it will be easier to collect taxes from the border of the country. Others include customs duty that is paid for the goods at harbors. This is because such goods cannot be obtained without the payment of such taxes. Import and export duties are also used as a source of revenue for a country. With the use of such taxes, it’s easier to monitor, and evasion is lessened. America has developed the use of these taxes. However much they seem less inefficient, they are favorable in that there is ease in monitoring and ease of collection. Therefore the fiscal capacity of the country is also heightened.
Legal System That Has Evolved In America
One of the laws that have developed in the United States of America is Federal Law. This law is used to enact statutes that regulate trade among the states. In earlier days, it regulated tariffs, money relating to the military, patents, and copyrights among others. Nowadays, it has broadened to addressing issues on business and spending clauses of the constitution. It has expanded to areas such as trademarks, telecommunication, aviation, and pharmaceuticals. In trademark and employment law, areas such as insurance are a powerful law in both federal and state levels. The expansion of federal law has hence enabled the coverage of certain areas that had not been earlier regarded in the law hence more legality in the said areas. The federal law contains limited power outlined in the constitution. States give the extensive public rights. Hence, the United States law, for instance, the agreement law, law on possession and ownership, public law, and family law. At federal and state levels, the United States law is majorly extracted from the common law of England which was in force during the American Revolution. The American law, however, has evolved from the English law in matters of substance and procedure. It has instilled some initiative civil laws.
How do these characteristics affect Coca cola’s strategies regarding labor conditions and working practices and regarding corporate governance practices?
Chosen firm: Coca-Cola Company
Federal law has affected Coca-Cola Company’s terms of labor conditions and working practices and also corporate governance practices. These effects include:
When the company wants to fund the federal state and local candidates, it does not obtain the money from its treasury but rather its PAC (political Act committee) since the law does not accept the former. It does not make political expenditures since it’s a profit-generating firm and has contracts with the federal government and by law; it’s prohibited from making such expenditures. Coca-cola has been able to follow all the regulations that have been set by the federal law.
The Company does not discriminate employees according to their race. This is by the federal law on employment. Racial discrimination can cost the company a lot of money since it’s discouraged by the law. In essence, employees of different races can be employed by the company (O’Brien, 2014). In cases of discrimination, the affected parties can sue the company. Federal charges may, in turn, lower the profits of the company. Therefore, to be parallel to the requirements of the federal law, the company discourages racial discrimination of employees.
Board and Management Oversight
By the law, Coca-Cola Company reviews advocacy efforts annually including the political contributions by the Political Act Committee and also it’s treasury funds where it’s applicable by the law. This ensures that the company is always in alignment with the set values. The management cannot, however, review the acts that are not allowed by the federal law. This ensures that the company is always by the law to avoid federal charges which could lead to further loss of returns.
How These Institutional Characteristics Affect Coca-Cola Internationalization Strategies and Other Strategies
The characteristics of the institution by the federal law have had impacts on strategies for internalization for Coca-Cola Company. These are positive effects which include:
High Recognition of the Brand
The products of the company have become highly recognized. Federal law has kept the company in check, and therefore it has kept its dignity in the production of high-quality beverages. Without law instituted, the company could have earlier collapsed, but since rules are guiding it, it tends to rise higher. This has hence helped the company to venture into more countries, and more ventures can be expected. A globally recognized firm about its high-quality brands builds consumer confidence, and the company hence makes more sales.
Acknowledgement of the company
The Company has become globally acknowledged and renowned for its performance in the global economy. With federal law governing its operations and employment law enforcement on labor, the company has gained more control. This has hence expanded its market and can further venture in many more countries. Venturing into many countries enables the company to learn more about the preferences of the people of a particular country thus it focuses more on their tastes. As a result of this, more profits have been able to be realized.
Several factors affected the internalization of the company. These include:
Technical production systems
Coca-Cola has efficient production systems which in turn ensured that there was mass production. As a result, the company experienced a high consumer base which led to more profits margins being recognized. The high level of technology enables the production processes to flow efficiently without hitches. This has become a huge impact on the company as high production means higher sales, and thus more profits have been realized. Technology in production adds value to a company.
Recognition of the brand
Coca-cola as a brand has become recognized in many countries all over the world. It’s, therefore, able to explore and venture in many countries as possible (Mooij, 2013). This has also maximized profits greatly for the firm. In conclusion, federal law has had a positive impact on the Coca-Cola Company. The law has made the company stay in focus and respect every individual. This has in essence, promoted the company enabling it to venture into different countries. Federal law should be adopted in companies and rules followed accordingly to ensure that a company can gain from it.
Wage Setting/collective bargaining
The minimum wage of employees is set to avoid disparities in issues such as gender gaps and wage inequality. This ensures that every employee feels comfortable and do not feel intimidated by others in the same profession (Anner, 2015). In our focus company, that is, Coca-Cola, there is freedom of collective bargaining. The employees are usually represented by a union that will dialogue on their behalf. They are compensated regarding the working hours, overtime and provided with an opportunity to develop their skills and competence. Therefore, if employees in a certain type of labor for example packaging, all those packaging’s are rewarded the same except in cases of overtime. This sets a good trend for other firms.
Unionization and Strike Activity
Strikes are common among employees, and thus unions represent them in their case against the company. An example of a strike that happened in our focus company Coca-Cola is one where workers were rejecting unfair labor practices in 2015(Anner, 2015). However, the union that was representing the employees finally accepted federal mediation to a new labor contract. The union called for unfairness and negotiation in bad faith. Mediation is one way to solve the issue of strikes of employees. With negotiation, companies can maintain healthy relationships with their employees.
Stock Market, Mergers, and Acquisitions
Coca-Cola has acquired several firms. These include; Minute Maid, Thums Up, Fuze Beverage among others. Acquisitions help the company expand their brands and hence venture into more markets. This is associated with the need to satisfy different tastes and preferences. Coca-cola, therefore, has been able to capture a wide market range since people of different cultures tend to have differing preferences. This is a profit maximization strategy that the company adopted. There is also competitive advantage acquired from merging of firms since customers of the previous firm tend to migrate to the acquiring firm.
The Coca-Cola Company is listed on the stock exchange market. This also promotes the company as it is publicly traded (Wagdi, 2017). People from the public are hence invited to be shareholders of the firm. The company also pays dividends every year. Listing of a company in the stock market gives it a competitive advantage as more people are willing to invest in it (Heath, 2017). The company has been able to raise more funds from the stock exchange. Dividend payments to the shareholders also encourage new shareholding.
Analyze the links between the firm(s) and the Variety of Capitalism in that country and its institutional characteristics
Coca-cola is a beverage company located in the United States. The United States practiced the liberal market economies. Let us look at various characteristic that is, high tech service, high competition, deregulation, complete and formal contracting and general skill possession. Coca-cola is a good example of an organization with high competitive advantage (Tanwar, 2013), innovativeness, widespread business models and knowledgeable logistical systems. The company was incorporated in 1892 for production of the fizzy beverage.
Presently, the company is one of the highest performing companies in the United States. The company is highly sustainable and very highly competitive possessing highly rated stocks on the New York Stock Exchange. This can all be attributed to the ingredients for coke (Bellis, 2014). Coke flavor is better than other soft drinks hence its higher demand. Also, their continued innovation and inventions. Brands continue to increase as time goes. Coca colas technical production increases the products profit margin since only a portion of the selling amount is used in the production of the beverage. Coca-cola embraces the highest standards and systems that help in ensuring consistency in quality of production, bottling, and logistics. The Coca-Cola Company is focusing its efforts on ensuring its working population obtains the abilities they require to be performing their roles.
The beverage company collaborated with the Institute of technology in Georgia in creating developmental programs. The programs aim to impart execution and insight skills to their supply chain directors, managers, and other employees. Coca-cola also receives tax incentives for its operations from the government. An agreement is set that stipulates that Coca-Cola gets two years tax-free operation about property tax, relieving its educational system of taxes which have been fully funded. However, it will continue paying operational taxes to the government. The incentives increase employment creation in the company.
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