Coca-Cola Back In Burma

The most-valuable question that must be answered when analyzing this station is how Coca-Cola volition be able to mitigate the risks Involved with the unstableness of the lattice and economical system in Burma. Despite the going of Nuns San Sue Sky, the political situation form unstable with vast internal disagreement over governance. The international political landscape of the country has make a sharp turn with the severance of ties to North Korea and the rebuilding of relationships with the West. These political relationships have paved the focusing to cooperative economic diements.The economic development of Burma has been on the rise for the last two decades, with economic egress taking an optimistic Jump of 6 percent in March 2013. The end to the economic sanctions de marchesined by countries such as the United States is contributing to the inflow of remote capital investment. Addition entirelyy the release of the sanctions opened the floor for the development of t rade agreements, namely free trade agreements and bilateral investment agreements, surrounded by Burma and other countries to facilitate further economic growth. In 2012 a Foreign Direct Investment honor was introduced, providing a significant sanctioned issue for contrasted investors.FED is customary trialed chthonian the principles of customary law. However, Burma has non sign-language(a) onto the New York Convention on the Recognition and Enforcement of Foreign Arbitrarily Awards. This creates an unfriendly legal environment for foreign Investors, as Investment Issues are to be trialed In local courts tightly controlled by government with forces Influence. Hypothesis The long-term solution that Coca-Cola should pursue Is an International pronounce venture between their Crystal Springs bottling mark and a credible bottling partner In Burma.Any companies under U. S sanctions entrust non be con officered so to ensure the credibility of the partner club. Coca-Cola go aw ay have 70% possessorship of the ewe company, giving the Burmese side 30% control. This exit ensure Coke defends governance over operations and end making, while protect their investment. This Is Important considering the Joint venture allow for be structured so that the domestic asset owner bears the risk of expropriation, which willing Increase expertise, sharing of resources and knowledge, and less risk.When the Joint venture first occurs there will be an inflow of knowledge and experienced laborers to ease transition into the Burmese business environment. Considering the political and economic instability and that the country has a socialisation very different than that of the U. S, it will be beneficial to develop a close relationship with the Burmese culture and business environment. The short-term solution that Coke should put on is a standardized resource too BIT. This alternative will be a public subject that summarys all the rules, regulations, and codes that C oca-Cola expects all employees and suppliers to adhere by.It will outline financial regulations, outside investments, political instability and valet de chambre rights issues. Most importantly, any violation of the ode will be investigated under an Ethics Committee, chartered by Coke. standardised to a BIT, this code will allow for international arbitration, which is beneficial as domestic courts can be avoided for disputes. This alternative will make public all the standards that Coke expects regarding humane rights and the security and safety of investments. foil is a powerful tool in alleviating risk.The more public the information is, the safer Cokes investments are to corruption and the higher(prenominal) the value is for shareholders. Implementation The implementation of the international Joint venture is a detailed wreak. Coca-Cola will maintain 70% ownership, which will allow for Coke to be the dominant decision maker. Domestic prudence will be hired and will have a sa y in the decision making process of the Joint venture firmly. For example, domestic employees will be integral in the marketing department where culture is important. The partner chosen for the venture needs to be credible and trusted therefore no companies under U.S sanctions will be considered. There will overly be ample look for d matchless to see a partner that has similar business goals and values to ease the transition. Second, up to date research will be conducted to acquire as much information on Burmese business practices and the political and economic environment. The international human resource team will have to develop a compensation structure, programs to read expatriates in local business culture, ensuring expatriates smooth transition into the country, maintain a strict code for all employees to abide by, and develop employee performance reports.Furthermore, there will be performance assessments made to ensure the Joint venture is profitable after implementation . If he venture is not profitable there will be agreement to what conditions need to be met to terminate the Joint venture. A crucial part of the implementation of Coca- Colas alternative to the BIT is to hire a due diligence team. This consists of external auditors and independent experts, to create rules and regulations regarding financial, outside investments, political instability, and human rights issues that all Coca-Cola employees must follow.Performing a due diligence process contributes information available to decision makers, while engaging with a broad range of takeovers. American and Burmese consultants will be hired to help conduct the due diligence process that will result in a mutually beneficial set of rules and regulations. Furthermore, the alternative to the BIT must be public, allowing for transparency, which is essential to increasing shareholder value. jeopardize Factors for Joint Venture In regards to the Joint venture, there are various risk ciphers that m ight barricade the performance of the firm going forward.While there is synergy to be gained from the firms taking advantage of their specialization, differences in management styles and cultural differences can result in disputes, which will affect the short-term success of the firm. The main factor that leads to risks in international joint ventures is poor planning and implementation, which will be mitigated through Coca-Colas research and experience in entering new markets. Finding an optimal partner and having 70% control will also reduce the risk that the two companies will have disputes over goals, management, and decisions made.If the venture meets the conditions to be change the process outlined for termination will be followed. Political and legal risk also drama a part, as the new legal entity is 30% Burmese owned, which makes the venture subject to laws and regulations that might not affect Coca- Cola as a multi-national corporation and vice versa. Salary scale differ ences might also cause issues with human rights groups, which might accuse Coca-Cola of taking advantage of the local workforce by give a low wage as compared to international standards.Despite having a 70% controlling share, Coca-Cola will not have full input when setting long term strategic goals as there will be a shared American-Burmese board of directors, causing less flexibility for Coca-Cola. However, after a complete due diligence process, Coca-Cola will be experts in making decisions with Burmese law considered. The BIT alternative will also serve as a way to mitigate political risk as it sets a standard for all Coca-Cola employees to follow and allows for international arbitration.Moreover, Joint ventures mitigate expropriation risk, which help protect foreign investments in Burma. Analyzing Alternatives Solutions Alternative 1 An alternative to the Joint venture is for Coke to establish a ancillary many to take over manufacturing operations in Burma. As the uncertain p olitical and legal situation in Burma is risky and prone to shocks, a subsidiary company will allow Coke to miscellanea its risk exposure.The risk of human rights violations and political problems arising from operations and negatively effecting Coca- Colas crack will be reduced, which is one of the firms most valuable assets. Considerations to be taken into account for this strategy are that it does not completely loose Coke from responsibilities regarding possible for any financial problems. Furthermore, it is still possible for bad publicity to affect the Coca-Cola brand name, as there is a direct link from the subsidiary to its parent company.Alternative 2 A indorse option is an alternate business model for Coca- Colas business operations in Burma. Manufacturing and bottling can take tooshie nearby in a more stable political environment (e. G. Thailand). This will allow the firm to bypass many of the risks of operating in Burma as operating manufacturing is a complex proces s, which includes hiring of workers, it is capital intensive, human resource issues may arise and there will be a cultural gap. However, import tariffs into Burma and exportation tariffs in Thailand will be extra costs.Moreover, the tax rate in Thailand may also be unfavorable as compared to in Burma, and the transportation and delivery cost of getting Coca-Cola products across countries may pass the profitability margins of its Burma operations. Conclusion The action plan that is recommended to take involves a two-part solution. In the short term the company will create a standardized alternative to a BIT. This public report will outline company rules and regulations. Violations are to be investigated via Coca-Colas Ethics Committee.Most importantly, this alternative allows for international arbitration, which mitigates expropriation risk and thus, protects investments. In the long term it is recommended that the Crystal Springs bottling plant be a Joint venture of Coca-Cola and a local, credible, bottler. The set structure in which the local bottler is the bearer of risk expropriation will reduce the negative impact of potential government actions, which will help protect investments. These recommendations were crafted carefully to allow Coca-Cola to safely allow foreign direct investments amidst the unstable legal system of Burma.