Case Study Coca-Cola

Question 1

Location?

Answer 1

Eastern Germany and Mehdiganj, Uttar Pradesh, India

Question 2

Founded?

Answer 2

1886

Question 3

Operates? Employs?

Answer 3

In over 200 countries around the world

Employs 139,600 people making over 3,500 different products

Question 4

Reasons for investment in Germany: European market?

Answer 4

• 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

Question 5

Reasons for investment in Germany: Gov incentives?

Answer 5

• Coca-Cola given €3.5m to operate in Stralsund for 10 years

- This helped to minimise start-up costs

Question 6

Reasons for investment in Germany: established infrastructure?

Answer 6

• 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

Question 7

Effect of exit from Germany: jobs?

Answer 7

• 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

Question 8

Effects of exit from Germany: Factory abandonment in Stralsund?

Answer 8

• Poor environmental quality would have put off in-migrants and left a legacy of waste and possible pollution from unused brownfield sites

Question 9

Effects of exit from Germany: government funds?

Answer 9

• 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

Question 10

Reasons for investment in Mehdiganj: labour?

Answer 10

• 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

Question 11

Reasons for investment in Mehdiganj: Water supply?

Answer 11

• Water is free in most of India so manufacturing costs are lower for MNCs who use it as a raw material

Question 12

Reasons for investment in Mehdinganj: emerging middle class consumers?

Answer 12

Increasing no.s of India’s pop. can afford western luxuries such as coca-Cola as Undua develops rapidly as a NIC

Question 13

Effects of investment in Mehdinganj: environmentally - water misuse?

Answer 13

• 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

Question 14

Effects of investment in Mehdiganj: environmentally - waste?

Answer 14

• 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

Question 15

Effects of investment in Mehdiganj: socially - farmers?

Answer 15

• 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

Question 16

Effects of investment in Mehdiganj: socially - peaceful protesters?

Answer 16

• 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

Question 17

Effects of investment in Mehdiganj: economically - harvests?

Answer 17

• Harvests decline
• Rice and grain yields down by 40%
• Most available water is contaminated

Question 18

Effects of investment in Mehdiganj: economically - wages?

Answer 18

• 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

Question 19

Sustainability of investment: benefits to Germany?

Answer 19

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

Question 20

Sustainability of investment: costs to Germany?

Answer 20

• 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

Question 21

Sustainability of investment: benefits to India?

Answer 21

• 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

Question 22

Sustainability of investment: costs to India?

Answer 22

• 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