Porter’s Diamond Model And Open Innovation: Analysis Of Coca-Cola (Hong-Kong)

Factors Impacting Coca-Cola Hong-Kong

Discuss About The Journal Of Studies In International Education.

Open Innovation refers to the type of innovation that is not limited to the internal process of business, instead open innovation refer to the innovation that work beyond the boundaries of the company. It helps the business to identify their innovation potential by using available environment. Whereas closed innovation is based on the principle that innovation is developed and organized in the internal process of companies only. The place of innovation is in the internal process of the organization only (Osagie, et. al., 2017). While initiating open innovation, an organization aims to attain the best innovation from any part of the world whereas in closed innovation, the organization believes that they can do it and they will do it. In open innovation, there is import and export of knowledge to improve and increase innovation while in closed innovation there is emergence of innovation within the company (Chen, and Hung-Baesecke 2014). Customers act as active co-innovators in the case of open innovation and in closed innovation, they act as passive recipients. Lastly, it should be noted that venture capital plays an important role in the process of open innovation and it has little or no significance in case of closed innovation (Coca-Cola 2018).

Source: (https://bock-pm.com/service/open-innovation/)

Coming up to the Annual Reports of the company Coca-Cola (Hong-Kong), it should be noted that the report evaluated the impact of various aspects on the activities of the company. The Porter Diamond National Competitiveness model is suitable to evaluate various impacts of various aspects on the external innovation approach used by the company.

Factor Conditions: this element of the Porter Diamond model talks about different types of resources that may or may not be available in the home country. Further, there  are two types of resources present in the environment that are basic and advanced factor, the basic factor are  those resources that are natural and mobility of these resources is low. Whereas advanced factor include those factors that are more sophisticated such as human resource, research capabilities. Relating this element to the activities of Coca-Cola Hong-Kong, it should be noted that the company aim to create global reach in the market using the local market resources. According to the management of Coca-Cola, the basic factors helps the organization in attaining competitive advantage in the target market, however the organization also feel that the advanced resources helps the organization in sustaining that competitive advantage. So, the company use local resources to initially gain identification the market through innovation and then aim to use advanced resources in order to sustain that innovation (ICT Regulation Toolkit 2018).  

Porter’s Diamond Model

Related and supporting Industries: These industries can produce input for the company that are critical for innovation as well as internationalization. This element of porter diamond model states that success of an organization depends upon the suppliers and related industries of that region. It can be explained with an explained with an example, like international competitiveness of German automotive industry can be explained by strong focus of German industry in this sector. Similarly, the financial report of Coca-Cola states that the business of Coca-Coola heavily relies on the power of partnership. Company’s bond with different local groups and suppliers helps them to manage their activities (Klarsfeld, et. al., 2012).

Demand Conditions: This aspect involves factors like early home demand, size of market, sophistication and market growth. These characteristics help the organization in creating sustainable advantage through innovation in the target market. Like, sophisticated home market buyers pressurize the firms to innovate their products and services faster so that they can create more advanced products than the competitor firms can. With respect to this element of model, the annual report of the company explains that it is more important for the organization to fulfil and satisfy the local need than to look for the fulfilment of global needs of the customers of the company (De Wit 2017). The company works with a forward-looking approach under which they initially make use of innovation in their business to satisfy the demand of the community from which they borrow the resources and then look for the global demand. The local presence of the company makes it easier for them to adopt any technology, implement it and insist the customers to make use of it (De Wit, and Meyer, 2010).

Strategy, Structure and Rivalry: The Company faces no problem in initiating this element in the business. As this element talks about the way, in which an organization has organized and managed their business functions for the growth and success in the international market. However, presence of rivalry makes the companies more competitive and innovative in the market. Like, in PepsiCo would be a competitor for Coca-Cola Hong-Kong then the company would not have used innovative sources and outshined their capabilities in the target market (Johnson, Scholes, and Whittington, 2005).

Government: The government plays a strong role in influencing the image of the company in the target market. The company aims to share value with the community and government and believes that they cannot have a strong growing business unless they are serving their sharing to the community and the government. The company has good terms with the government of Hong-Kong. The CSR activities of the company also help them to build a strong relation of with the government of the country (Felin, and Zenger 2014).

Open Innovation

Chance Events: It refers to the random events that are beyond the control of the company. In order to attain international competitiveness, it is very important for the company to grab the opportunities and chances available to them. Like, in Hong-Kong, the company found Swire beverages to exclusively use the tag of the company while manufacturing products that is chance of luck. It might have happened that the competitor firm have chosen the organization to work with. So, by grabbing this opportunity the company excelled their services in the target market by using innovation and eliminating competitions as well (West, and Bogers 2014).

Source: (https://www.researchgate.net/figure/Porter-s-diamond-of-national-competitive-advantage_fig3_247610619)

Convergence refers to the process of coming together in business so as to increase the extent of scope of business for companies. The process of coming together of distinct and separate factors in the business is called convergence. Moreover, when all the factors have come across from different parts of the world then it is called global convergence (Cavusgil, et. al., 2014). Global Convergence refer to the process of combining geographically distant cultures for the better working of the business and influencing each other’s activities. It is important for the organizations using open innovation to make use of global convergence to increase the competitiveness of the business (Greenwood 2016).

International diversity perspective refers to the process of diversifying the business in such a way that people of all types of culture, age, sex, gender, creed come and joins the organization. Under this process, an organization approaches the employees of different culture and welcome to work with the organization so as to grow globally and gain sustainable advantage as well (Agarwal, and Brem 2015). There are various benefits and drawback of the international diversity perspective that are discussed below:

After analysing both the aspects, it should be noted that the organization should make use of international diversity perspective so as to help the organization to grow effectively in the target market. The company Coca-Cola should make use of the international diversity perspective with the effective use of product differentiation strategy in the target market. Using the convergence perspective in the business can be risky for the growth of the organization, so the management of Coca-Cola should initially train the diversified employees with the aspects of convergence and then use this strategy as well. Further, ideas of diverse employees will help the organization to aim for product differentiation and achieve the same using their creativity (Ioannou, and Serafeim 2017).

Global Convergence

Corporate governance is a system of rules, practices and processes with the help of which an organization is governed and controlled. This aspect helps an organization in balancing the interest of stakeholders of the organization with the activities of the company. Corporate profit refers to the money left over with the organization after payment of all the expenses. Lastly, corporate sustainable responsibility is more about corporate citizenship; it refers to the internal organizational policy that fully satisfies the requirements of community (Lozano 2015).

James Quincey is the current CEO of the company Coca-Cola. He, along with his senior management team successfully aims to satisfy all the social responsibilities of the society along with increasing profitability of the company as well. The annual report of the company clearly explains the objective of the organization along with social responsibility of the company. Moreover, the employees successfully play the lead role in implementing the objectives of the organization (Ferraris, Bresciani, and Del Giudice 2016). On the part of corporate governance of the company, it is the objective of the organization to promote the long term interest of the shareholders of the company. Another objective of the organization is to strengthen the Board and management accountability so as to build public trust of people in the company. The corporate governance guidelines of the company provide an effective framework to the employees with the help of which they can manage profitability along with sustainability of the company (Miller, Lavie, and Delios 2016).

The fact should be noted that the leaders and the seniors are the people who make the most output from the activities of the company. If they will not follow the corporate social responsibility, then nobody else will and subsequently it will result in incompletion of social objectives of the company. The below mentioned are some of social objectives of the company that they need to follow apart from fulfilling the financial objective of the company (Vassilopoulou, et. al., 2016).

• Increase the aspect of women empowerment through their activities
• Water Stewardship
• Climate Protection and agriculture
• Govern the business using fair trade actions

The above mentioned are some of objectives of the company that the leaders of the company aim to follow. The initial competence that the leaders of the company Coca-Cola Hong-Kong have is the leadership skills. Leadership skills of the leaders of the company motivate the employees to move forward and provide their contribution in the fulfilment of corporate sustainability objective apart fulfilling the core profitability objective of the company. In addition, it should be noted that it is very important for the management to effectively make use of the leadership in business in order to complete an objective of the organization (Grivastava, and Kleiner 2015).

Merits

Further, another ability that the leaders of Coca-Cola have is good communication skills, communication skills helps the leaders of the company to proactively involve the lower level employee in the activities of the organization and influence them to fulfil the objectives of the company as well (Coca-Cola 2018). Good communication skills present in leader helps the employees to clearly explain their issues with them and seek for redressal as well (Barak, Findler, and Wind 2016). Corporate governance being an important objective of the organization makes it easier to fulfil for the management by using communication in the business. Not only employees, such skills of leaders enhance the satisfaction of other stakeholders of the company as well. The leaders of Coca-Cola adequate understand that thee damage they cause to the nature due to their regular day to day activities is not good for the business so they perform various corporate sustainability activities that help them to compensate with the activities of the company and increase the satisfaction of community as well (Stahl, et. al., 2016).

Talking about my personal learnings with the completion of this paper is that now I have learned the operational activities of the Multinational Corporations like Coca-Cola. There are various aspect that an organization think of while implementing any activity in their business. Innovation is the most important aspect that helps a business to sustain their growth in the target market. It depends upon the discretion of the organization and resource available with them to make use of open or closed innovation in their business. However, considering all the facts I gained to know through this analysis, I found out that open innovation is the best way with which a business can expand their scope of business.

Contradicting to the statement I also believe that convergence can somehow stagnate the growth of business by increasing barriers on the way of operation and international diversity can help in smooth functioning of the same. Furthermore, talking about the benefits and limitations of external innovation, I believe that external innovation provide various opportunities to the companies to make use of differential external resources and apply them in their business to create identification in the domestic market. However, limitation of this approach is that the management would require special experts to make use of this type of innovation. Further, I did not prefer choosing global convergence perspective for the growth of the company Coca-Cola as the model because the concept is diverse and chaotic as well. The approach needs to match according to the activities of the company. It is important for the management to converge adequate resource and then use them. Whereas on the other hand international diversity helps, the business in firstly adopting qualified human resource and then adopting external innovation in their business. Senior management of the company plays a lead role in enhancing the activities of the company. I think the CEO and other leaders of the company are successfully running on the completing their profitability along with sustainability objective of the company.

Demerits

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