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Foreign Direct Investment Entry Mode and Strategy Evolution in Transitional Enterprises:
A Case Study of the Coca-Cola Company in China
ASU
OMT 440 - International Business
Summer 2018
, Coca-Cola’s Foreign Direct Investment in China
Over the years, the multi-national corporation’s (MNC) Foreign Investments have been
regarded as a business endeavour characterized by deliberate strategic and objective goals based
on the investor’s resources and strengths. Due to globalisation, firms and industries are moving
into the international markets (Alon & McIntyre, 2018). These firms must possess strategies and
entry modes that will result in a successful investment. In most cases, companies use joint
ventures, mergers, acquisitions and wholly owned subsidiaries to create a global presence.
Political stability, regulatory climate, and cultural forces affect these modes of entry within a
host country. Besides, MNCs must juggle risk management and maximise profits to maintain
their investment in competitive markets. According to Dunning (1993), according to the eclectic
paradigm, the ownership, location, and internalisation benefits are determinants of foreign direct
investment success. Thus, it is possible to integrate the aspects of strategic decision making, the
contexts of the host markets, and the firm-specific benefits to guarantee long-term growth and
strength in MNCs.
In China, the inflow of FDI is noted to have continued to grow between 2015 and 2017,
with an estimated increase from $150 billion to $167 billion in 2017. Wang (2016) indicates that
one of the reasons why this has been on the rise is because of the favours from the liberalisation
plan by the Chinese government, the creation of the free trade zones in the country, as well as the
speedy development and establishment of the high-tech sector. The reason why the Chinese
government has adopted these strategies is to ensure that China is opened up to foreign
investment for the benefit of the Chinese people through the creation of a better and enabling
business environment, distribution of goods and services and structure by the transitional
enterprises (Wang, 2016).
, The Chinese Ministry of Commerce, in February 2018, reported that 35,652 firms funded
by foreign multi-national corporations were set up in 2017. It further stated that this accounted
for a 28% increase since 2016. It further indicated that some corporations, such as Coca-Cola,
one of the largest multi-national corporations in the country, contributed a whopping $16 billion
increase of 16.8% since 2016. It is also stated by Latorre et al. (2018) that the FDI stock in the
country went up by 10% between 2016 and 2017, reaching an enormous value of $1490 billion.
The chart below shows the FDI inflow in China between 2016 and 2017.
Figure 1: Illustrates the Trend of FDI inflow in China (Source- Wei, 2017)
Coca-Cola, in China, was chosen as the best case study for this research because, first, it
is considered by Kraus (2018) as one of the biggest Cola producers in the whole globe and the
largest MNC in China and the world. The researcher chose this MNC because the company has
been running its investments in the country for as long as 40 years. Therefore, it has a relatively
long history in the country, operating under various economic reforms (Kraus, 2018). This makes
, it a case study whose implications can be used to examine MNCs’ entry modes and strategies in
foreign direct markets.
Coca-Cola’s entry mode in the Foreign Direct Market in China
The high growth rate of China since 1979 as well as its large population is one of the
reasons that made Coca-Cola invest in the country. These aspects have made China a target for
most of the MNCs around the globe. Ma, (2015) says with the need for the achievements of the
unprecedented in regards to the market accessibility, Coca-Cola Company adopted various entry
modes since it began its operations in 1979. Over this period, to date, it has adopted three entry
modes depending on the three phases of its operations in the country. The figure below illustrates
Coca-Cola’s entry modes in China.
Figure 2: Illustrates Coca-Cola’s entry mode in China, Source -Ma, (2015)
i. Exporting
Foreign Direct Investment Entry Mode and Strategy Evolution in Transitional Enterprises:
A Case Study of the Coca-Cola Company in China
ASU
OMT 440 - International Business
Summer 2018
, Coca-Cola’s Foreign Direct Investment in China
Over the years, the multi-national corporation’s (MNC) Foreign Investments have been
regarded as a business endeavour characterized by deliberate strategic and objective goals based
on the investor’s resources and strengths. Due to globalisation, firms and industries are moving
into the international markets (Alon & McIntyre, 2018). These firms must possess strategies and
entry modes that will result in a successful investment. In most cases, companies use joint
ventures, mergers, acquisitions and wholly owned subsidiaries to create a global presence.
Political stability, regulatory climate, and cultural forces affect these modes of entry within a
host country. Besides, MNCs must juggle risk management and maximise profits to maintain
their investment in competitive markets. According to Dunning (1993), according to the eclectic
paradigm, the ownership, location, and internalisation benefits are determinants of foreign direct
investment success. Thus, it is possible to integrate the aspects of strategic decision making, the
contexts of the host markets, and the firm-specific benefits to guarantee long-term growth and
strength in MNCs.
In China, the inflow of FDI is noted to have continued to grow between 2015 and 2017,
with an estimated increase from $150 billion to $167 billion in 2017. Wang (2016) indicates that
one of the reasons why this has been on the rise is because of the favours from the liberalisation
plan by the Chinese government, the creation of the free trade zones in the country, as well as the
speedy development and establishment of the high-tech sector. The reason why the Chinese
government has adopted these strategies is to ensure that China is opened up to foreign
investment for the benefit of the Chinese people through the creation of a better and enabling
business environment, distribution of goods and services and structure by the transitional
enterprises (Wang, 2016).
, The Chinese Ministry of Commerce, in February 2018, reported that 35,652 firms funded
by foreign multi-national corporations were set up in 2017. It further stated that this accounted
for a 28% increase since 2016. It further indicated that some corporations, such as Coca-Cola,
one of the largest multi-national corporations in the country, contributed a whopping $16 billion
increase of 16.8% since 2016. It is also stated by Latorre et al. (2018) that the FDI stock in the
country went up by 10% between 2016 and 2017, reaching an enormous value of $1490 billion.
The chart below shows the FDI inflow in China between 2016 and 2017.
Figure 1: Illustrates the Trend of FDI inflow in China (Source- Wei, 2017)
Coca-Cola, in China, was chosen as the best case study for this research because, first, it
is considered by Kraus (2018) as one of the biggest Cola producers in the whole globe and the
largest MNC in China and the world. The researcher chose this MNC because the company has
been running its investments in the country for as long as 40 years. Therefore, it has a relatively
long history in the country, operating under various economic reforms (Kraus, 2018). This makes
, it a case study whose implications can be used to examine MNCs’ entry modes and strategies in
foreign direct markets.
Coca-Cola’s entry mode in the Foreign Direct Market in China
The high growth rate of China since 1979 as well as its large population is one of the
reasons that made Coca-Cola invest in the country. These aspects have made China a target for
most of the MNCs around the globe. Ma, (2015) says with the need for the achievements of the
unprecedented in regards to the market accessibility, Coca-Cola Company adopted various entry
modes since it began its operations in 1979. Over this period, to date, it has adopted three entry
modes depending on the three phases of its operations in the country. The figure below illustrates
Coca-Cola’s entry modes in China.
Figure 2: Illustrates Coca-Cola’s entry mode in China, Source -Ma, (2015)
i. Exporting
