2.2.2 The obvious improvement in hardware environment for foreign
investment.
China has affluent resources, roomy regions and comfortable environment. Affluent resources offer raw materials supply to international corporations, and suit for many kinds of industries investing in China. Not only the agriculture resources but also the several mineral resources are in the front of the whole world. These resources could offer supports to manufactory even services foreign investors. In the recent years, Chinese infrastructure has a great improvement, such as traffic, communication and water, electricity and gas supply have been built nearly perfectly. These infrastructure works for foreign business investment’s external producing and managing conditions. Without the good infrastructure in some countries or regions, firms need pay more efforts and costs on obtaining the raw material and information to markets their new products. With this position, it would increase the companies’ managing and operating cost, or lost some potential companies even more terrible.
Coca-Cola bottling system has a rigorous network from upstream to downstream, many needed supply from upstream’s suppliers transport into Coca-Cola production department. The affluent resources in China bring up the multifarious suppliers include agriculture, industry and mining industry, etc. Many multinationals obtain resources and materials directly and avoid import issues, which saving lots of costs. Many upstream relative industries such as coal, water, sugar, paper, gas, carbon dioxide and glass all offered perfect support to Coca-Cola system. On the another hand, the infrastructure in China has a great improve in recent years, the downstream industries also benefit to Coca-Cola system. It presented in the communication and transportation aspects. Retails and wholesalers have more conveniences in taking delivery of goods and selling goods to customers.
2.2.3 The obvious improvement in software environment for foreign
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investment.
At first, China has a stable political situation and people live and work in peace and contentment, which are particular community condition. Secondly, the markets economic system has been built preliminarily. Legislation was going perfect gradually in order to create good legislation environment for foreign investment. Then, with the advancement of education level and expansion of open up degree, people have a higher level quality. They have a great transformation in their conception, language, culture and customs, and they could accept some issues from different area. These points offered an appropriate social environment to foreign investment. The most important the labor force, which has enough amount and high level quality. The Chinese affluent sixpenny labor force offered huge opportunity to investment of labor intensive model. Actually, more than one half of foreign investments focus on the labor intensive model industries. On the other hand, China has a great deal of skilled work forces that has been well trained and educated. They could satisfy the demand of high and new technology industries foreign investment.
(http://www.zhaoshang-sh.com/2005/11-18/15-49-5313867.html)
The steady political situation, gradually completed legislation and laborious labors created a stable society environment for foreign investors. Many foreign investors come from different regions with different culture, custom and language, but Chinese people tried to reduce the distances with the enhancement of education level and the expansion degree of “open door” policy. Coca-Cola set so many bottling systems in China just because of the Chinese huge potential economic power, such as political and economic system, stable society and plenty of labor force with skilled and unskilled. Coca-Cola realized the cost advantages by employ so many employees, thus created more profits.
2.3 What kind of impacts the multinationals transferred to China
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Multinationals invest good round in international markets in order to create profits, through producing and selling the parent company’s products in overseas markets. Some firms establish their factories in overseas markets just in order to avoid the severe tariffs bulwark and these factories are independent to each other. Like Coca-Cola Company, which has bottling factories in not only United States but also many other countries. Without doing this, multinationals’ products may loss competition advantages in markets. And once they build factories in other countries, many effects may be brought to local markets. These impacts consist of employment, economy, environment taxation and technology aspects. I will investigate these details impacts in China through analyzing the Coca-Cola Company system in China. My analysis focused on the economic multiplier effect caused by Coca-Cola’s capital investment and ongoing operations.
2.3.1 The structure of Coca-Cola system in China
Each day, more than one billion servings of Coca-Cola products are consumed across the world. As the world’s most pervasive brand reaching about 200 countries, Coca-Cola products are sold in highly different markets. Its success in every market is not the result of a huge global strategy or single system. Although the concentrate of Coca-Cola is the most invariant regulation all over the world, the Coca-Cola system itself is highly adaptable. The complex of suppliers, bottling plants, and distribution outlets responsible for making and delivering the product to consumers suit for the local conditions and requirements in each market Coca-Cola services. Today, to produce locally and extend its global competencies, the Coca-Cola Company works with a select group of bottlers, mostly joint ventures with Chinese state-owned enterprises. Making the final products, the company permits the local bottlers to produce under the Coca-Cola brand, and they bottling companies form franchise
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arrangements with the Coca-Cola Company. A local Coca-Cola bottler must have sufficient capital to invest in the necessary land, building, structures, machinery, equipment, trucks, bottles and crates. All these constructions may drive many other economic issues, like employ more employees and advance the flow of fund.
Bottling Alliances: Coca-Cola set up joint-venture bottling plants in which it had local partners. These were generally drawn from 3 different Chinese government agencies: the China National Council of Light Industry (NCOLI), China National Cereals, Oils, and Foodstuffs Import and Export Corporation (COFCO) and China International Trust and Investment Corporation (CITIC).
2.3.2 Upstream and Downstream Networks of Coca-Cola system
Bottling alliance is business networks that expand upstream and downstream. Manufacturing and distributing soft drinks, the bottlers and the Coca-Cola country office perform a process of localization with suppliers and sellers. The clearly Figure 1 shows the Coca-Cola system and the ambient work issues that around the network. This network system can be seen as many different elements in the china from upstream to downstream.
In the upstream network just like the appendix 4 shows to us, the bottling system connects some local production joint ventures as the Chinese suppliers. They directly offer inputs and services to this system. Actually the production process of soft drinks is simple, with highly automated production lines, however, in order to produce the final soft drinks, the lines combine concentrate, syrups, water, sugar, CO2, bottling and packaging material, which needs a great many of local labor forces both skilled and unskilled.
The distribution side of the system, from the bottlers to final consumers, Coca-Cola has built an extensive downstream network. Delivering goods from all bottlers to
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consumers are the main responsibility for downstream. The bottling system could distribute goods to retailers directly, but most of time retailers get products from wholesales channels. Retailers appear in different forms, from large supermarket chains to small points-of-sale like kiosks and street vending. In most Chinese cities, people could find Coca-Cola products everywhere, because of the vast location of small retailers. Coca-Cola’s soft drinks almost are sold in every store.
2.3.3 Direct and indirect effects of Coca-Cola system
When the Coca-Cola bottlers purchase materials or hire employees in China. These used money have created new income to others people or firms, and these new incomes would be used to purchase other products, thus influences the local economy much more. The impacts that Coca-Cola bottling system made to the whole economy could not contingent on the incomes of Coca-Cola, but the income combination between Coca-Cola and the firms which effected by Coca-Cola. For example, the firms that relating to supplying and distributing process in Coca-Cola bottling system.
The total investment of initializing fund in 1998 in Chinese economy was 8.16 billion RMB, which was dispersed in 37 items belong to correlative investments, purchasing, capital expenditure and manage expenditure. The initializing fund involves wages expenditure (855 million RMB) and taxation expenditure (387 million RMB). These were the direct impacts in Chinese economy by Coca-Cola bottling system, and the indirect impacts also huge to Chinese economy. The 8.16 billion RMB total initial injections bring about total 21.7 billion RMB new increase production value.
There are nearly 400 thousand employment opportunities were created by the upstream and downstream network economic activities of Coca-Cola bottling system in China. The bottling system created about 14,000 work position itself, at the same time; the upstream suppliers provide 340,000 job positions due to Coca-Cola’s ordering. These suppliers include concentrate, plastic materials, cans, sugar,
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