Case Study Coca-Cola Flashcards
Location?
Eastern Germany and Mehdiganj, Uttar Pradesh, India
Founded?
1886
Operates? Employs?
In over 200 countries around the world
Employs 139,600 people making over 3,500 different products
Reasons for investment in Germany: European market?
- The reunification of Germany opened up new markets in Eastern Europe to popular western brands
- They avoided import tariffs because product was NOT made outside EU and imported
Reasons for investment in Germany: Gov incentives?
- Coca-Cola given €3.5m to operate in Stralsund for 10 years
- This helped to minimise start-up costs
Reasons for investment in Germany: established infrastructure?
- Heavy western investment in East German transport, communication and industry straight after the fall of Communism in 1989
- Coca-Cola consolidated European operations by moving its HQ to Berlin
Effect of exit from Germany: jobs?
- 2,000 jobs lost
- Outmigration of unemployed led to knock on effects on local supporting businesses who lost contracts w Coca-Cola
- Shops and services lost customers who no longer had wages to spend
Effects of exit from Germany: Factory abandonment in Stralsund?
- Poor environmental quality would have put off in-migrants and left a legacy of waste and possible pollution from unused brownfield sites
Effects of exit from Germany: government funds?
- No further grants were being paid to Coca-Cola to stay any longer than 10 years, freeing up money to be spent on infrastructure and local development
- More sustainable investment in local industry was possible
Reasons for investment in Mehdiganj: labour?
- V cheap labour as typical wage was less than £1/day and wage levels in Germany had gone up
- This enabled lower manufacturing costs and higher profits
Reasons for investment in Mehdiganj: Water supply?
- Water is free in most of India so manufacturing costs are lower for MNCs who use it as a raw material
Reasons for investment in Mehdinganj: emerging middle class consumers?
Increasing no.s of India’s pop. can afford western luxuries such as coca-Cola as Undua develops rapidly as a NIC
Effects of investment in Mehdinganj: environmentally - water misuse?
- 1LITRE water used per 0.33L bottle made
- Drop in water table by 60m up to 3km from the bottling plant
- Only subclimax vegetation with long roots is able to reach the groundwater and grow
Effects of investment in Mehdiganj: environmentally - waste?
- Crops cannot be grown in any great quantity as the area is already water-poor and reaches 47 degrees C In the summer
- toxicity of waste water
Effects of investment in Mehdiganj: socially - farmers?
- Crushing blow to former wealthy land owners in a caste society
- Now wealthy farm owners lose income, land and status and live as much less ‘important’ members of communities
Effects of investment in Mehdiganj: socially - peaceful protesters?
- Beaten by police
- Women jailed for days, suffer broken bones after protesting against use of water
- Women are only ones who can get near plant as men are instantly turned away by guards
Effects of investment in Mehdiganj: economically - harvests?
- Harvests decline
- Rice and grain yields down by 40%
- Most available water is contaminated
Effects of investment in Mehdiganj: economically - wages?
- Wages v low and little job security
- Only a few 1000 permanent staff get £1/8hr shift
- Majority are day labourers on less than 70p for 12 hrs
- Injured workers are sacked and compensation is impossible to seek
Sustainability of investment: benefits to Germany?
Investment can now be focused on more sustainable German businesses to benefit local communities and workers.
Stralsund no longer associated w negative image of Coca Cola
Sustainability of investment: costs to Germany?
- Job losses in low skill industries are often hard to replace as ‘filtering down’ is v common
- The legacy of abandoned industrial sites can be costly and hard to clear up and can be left for year s before political will is sufficient to do anything about it
Sustainability of investment: benefits to India?
- Jobs in Mehdiganj plant provides income and chance of education drew
- MNCs can provide a boost to infrastructure improvements e.g. roads needed for transporting products
Sustainability of investment: costs to India?
- Use of Uttar Pradesh’s groundwater supply is unsustainable
- Quantity and quality is being adversely affected by the wasteful production
- Locals are negatively affected in their livelihoods (farming) and their daily lives (pollution of and pressure on water supplies)
- Environmental damage impossible to avoid given extreme climate in Uttar Pradesh with some unreliable rainfall
