com
Table of Contents
Abstract 2
Recommendations 3
Recommendation 1 3
Recommendation 2 4
Recommendation 3 5
Analysis 6
#1 – Organizations and Organizational Effectiveness 6
#2 – Stakeholders, Managers, and Ethics 9
#4 – Organizational Design 10
#5 – Designing Organizational Structure: Authority & Control 13
#6 – Designing Organizational Structure: Specialization & Coordination 15
#3 – Managing in a Changing Global Environment 16
#8 – Organizational Design & Strategy 19
#7 – Creating & Managing Organizational Culture21
#9 – Organizational Technology 21
#11 – Organizational Transformations: Birth et al. 23
#12 – Decision Making 25
#14 – Managing Conflict, Power, and Politics 26
Works Cited 28
Appendices 32
Abstract
The subsequent paper contains a comprehensive analysis of The Coca-Cola
Company and addresses several organizational theory issues. Three recommendations
are proposed based on the problems that were discovered during the analysis. The
goals of the recommendations are to address uncertainty with suppliers and
distributors, and also align company decision-making with the structure of the
organization.
Recommendations
Recommendation 1
The Coca-Cola Company has a high level of uncertainty when it comes to the
raw materials it uses. For a few of the ingredients, the company only has one or
two viable suppliers. This could be extremely problematic for a variety of
reasons. The Coca-Cola Company has less bargaining power if there is little
substitutability in suppliers. Another problem could arise if a supplier
experiences an event that economically devastates them. If a supplier goes
bankrupt, or is in some type of natural disaster, The Coca- Cola Company would
suffer greatly as well.
The Coca-Cola Company can improve and secure relationships with suppliers using a
few tactics such as minority ownership or strategic alliances. The most optimal
method would be to use backward vertical integration and purchase a supplier. The
results of such a strategy would allow the company to keep profits that used to be
earned by the supplier, save on costs, and have a reliable source of supplies.
Besides the actual purchase of the organization, another costly aspect of vertical
integration is high bureaucratic costs (Jones, 2007).
The Coca-Cola Company should look at buying the following companies: The
NutraSweet Company, Ajinomoto Co., Inc., Nutrinova Nutrition Specialties & Food
Ingredients GmbH, or Tate & Lyle. These companies are one of two possible
suppliers for important raw materials (Annual Report, 2006). Although the company
has not experienced significant problems, future events are always uncertain. The
most secure way to control suppliers for a company is through ownership. While
ownership of a sugar/sweetener company is clearly out of the company’s domain, the
move would make their core business more profitable. The Coca-Cola Company would
be able to purchase one of these companies through financing. The organization
has a high credit rating and, therefore, would be able to raise money for the
acquisition at a low cost.
Recommendation 2
The Coca-Cola Company’s decision making process does not fit into its structure or
mission, vision, and values. Their decision making process is more centralized,
and when compared to everything else going on at The Coca-Cola Company, it does
not match. The Coca-Cola Company has a more organic structure and their mission
and values preach creativity and employee involvement. They would improve their
decision making and enforce their organic structure by implementing a strategy for
organizational learning. They can begin by shaking things up more often by
changing managers for different departments on a periodical basis. This will force
managers to think outside the box when making decisions (Jones, 2007). This will
also enforce a learning organization and instill the organic culture into
everyone’s mind frame. Because of this, The Coca-Cola Company will have the
ability to solve large problems more quickly and become a stronger community as a
result.
Another way The Coca-Cola Company could match their decision making skills
to their structure is by making sure employees do get involved. They should
implement an open door policy in which any employee can go to their manager and
suggest ideas for solving different problems. This will allow the management to
become aware of small problems before they become large ones.
By changing their decision making process, they will also become more
accustomed to their recently adopted mission, vision, and values. They will
inspire optimism in all stakeholders by making decisions in a timelier manner.
This will show stakeholders that The Coca-Cola Company has a great outlook for the
future because problems will seem like less of an obstacle for them. By including
more, lower level employees in their decision making process, they are promoting
leadership and inspiring collaboration and innovation.
Recommendation 3
The Coca-Cola Company has become highly criticized for the actions of its bottling
partners in Colombia. The bottling company is alleged to have killed employees due
to their ties with a union, and even while The Coca-Cola Company does not own that
plant, The Coca-Cola Company has been the target of boycotts and lawsuits.
Even if The Coca-Cola Company was unaware and uninvolved in what happened, their
name is attached to the product. In order to make the situation better, The Coca-
Cola Company should buy the bottling partners in Colombia. The company can use its
resources to create stable bottling plants. Managers would need to work with union
leaders to create an agreement that was fair for both sides. While taking over and
running the plants would cost the organization money, the company would have full
control over the activities of managers. This increased accountability and
dedication to correcting any wrong doings would garner some positive publicity for
the company’s operations, and provide the benefit of having a stable distribution
channel in the region.
Although the organization does not own most of their bottling plants,
acquiring the Colombian bottlers would provide The Coca-Cola Company with the
ability to foster better relationships with the citizens of the country. This
acquisition would cost the company money in the short-term, but it could provide
fruitful benefits in years to come.
Analysis
#1 – Organizations and Organizational Effectiveness
What allows an organization to continue to operate for over 125 years, and
along the way, become one of the most globally recognizable brand names? The
ability to adapt and find new markets has helped Coca-Cola© become an icon of the
American culture. Coca-Cola© was invented in 1885 and since The Coca-Cola
Company’s incorporation in 1892 (Coca-Cola, 2007), a strong focus on growth and
marketing has existed. Besides traditional advertisements in the local newspaper,
the company’s founder, Asa Candler, distributed thousands of coupons for free
glasses of Coca-Cola© so that many more people would be inclined to taste the
product (Thecoca-colacompany.com). He also distributed countless souvenirs that
depicted the Coca-Cola© trademark logo. By 1900, the organization, already, had
operations in the United States and Canada. This focus on aggressive marketing is,
still, the cornerstone for The Coca-Cola Company’s strategy and culture.
The Coca-Cola Company was eager to take advantage of new markets, and
expansion efforts quickly led to Cuba, Puerto Rico, Guam, and the Philippines
(Thecoca-colacompany.com). Before long, Coca-Cola© was being sold in Europe. When
The United States entered World War II, Coca-Cola© was being sold to both sides.
The Coca-Cola Company turned what many would view as a threat, into an enormous
opportunity. In 1941, the company’s president, Robert Woodruff made an order to
provide American troops with Coca-Cola©, regardless of where they were, and what
it cost to the company. During the war, 64 bottling plants were set up in Europe
and the Pacific. This not only allowed American troops to acquire a taste for the
drink, but it left Coca-Cola© with a solid foundation to greatly expand its
operations overseas.
Over time, The Coca-Cola Company has remained adamant about staying in the
non-alcoholic beverage industry. Besides soft drinks, The Coca-Cola Company sells
energy drinks, juice drinks, sports drinks, tea, and water. The current focus of
The Coca-Cola Company is still that of growth. The current objective of the
organization “is to use our formidable assets-brands, financial strength,
unrivaled distribution system, global reach, and a strong commitment by our
management and employees worldwide-to achieve long-term sustainable growth (Annual
Report, 2006, p.33).”
The key inputs for production are the raw materials used in the beverages.
The company uses different types of sweeteners depending on where the concentrate
is being produced (Annual Report, 2006). Water is one of the main ingredients used
in every beverage. Since the organization greatly focuses on marketing, human
capital is an important asset to the company as well. Without its employees’
knowledge and abilities, The Coca-Cola Company would not be nearly as successful.
The secret formula for Coca-Cola© is another key input for the company.
The Coca-Cola Company does not actually produce soda. They produce the
concentrate or syrup, which is then sent to distributors (Annual Report, 2006).
Distributors add carbonated water and any other ingredient necessary to create the
final product. The production process of Coca-Cola© is a secret; however, it
mainly consists of adding the correct amount of ingredients, and mixing them. The
process to create each beverage is extremely mechanized in order to achieve quick
and efficient production (Thecoca-colacompany.com). The outputs of The Coca-Cola
Company are the syrups and concentrates of its beverages.
The Coca-Cola Company faces a number of challenges, many of which stem from
the fact that the organization operates on such a large level. Each market has its
own trends and demands. Consumers in some markets have become more heath conscious
(Annual Report, 2006). In order to react to this trend, many diet and low-calorie
drinks have been created. The Coca-Cola Company is always trying to find ways to
be innovate. Due to the anti-carbohydrate trends created by the Atkins© diet,
Coca-Cola C2© was introduced. It is supposed to have the same taste as Coca-Cola©,
but contain half the carbohydrates (Coca-Cola C2, 2007).
Another problem The Coca-Cola Company faces is derived from the social and
political differences of each market. For example, different countries have
different laws. Most developing countries have more relaxed pollution
requirements. In some countries, bribes of government officials are considered
normal and expected. While it is company policy that The Coca-Cola Company will
follow the laws of every country that it operates in, it still has strong
criticism from other parts of the world for its actions (Thecoca-colacompany.com).
The company has recently been the subject of strong criticism the company’s
bottling plants in Colombia are alleged to have killed workers who were attempting
to unionize (“Online extra,” 2006). Even though the bottling plants are
independently owned and operated, and nothing has happened legally to the bottling
plants in Colombia, The Coca-Cola Company has been facing strong criticism for it
in the United States.
The Coca-Cola Company’s structure has characteristics of both organic and
mechanistic models. The organization has a more centralized structure, however in
recent years there has been a movement towards decentralization. A more in-depth
analysis of the organization’s structure will be discussed later.
The Coca-Cola Company measures success in many ways. The Coca-Cola Company
believes that if they analyze sales based on volume growth (gallons and units
sold), it is an indicator of trends at the consumer level (Annual Report,
2006).The company obviously looks at profit as a way to measure success. Recently,
The Coca-Cola Company has been focused on being a more responsible global citizen.
The company has over 70 clean-water projects in countries all across the globe
(McKay, 2007). Attached in the appendices is a performance chart that the company
uses to measure success in terms of people, portfolio, partners/planet, and
partners/profit (Corporate Responsibility Review, 2006).
#2 – Stakeholders, Managers, and Ethics
The stakeholders for The Coca-Cola Company as stated in the company’s
Corporate Responsibility Review (2006) are “shareowners, our people, bottling
partners, governmental agencies, suppliers, retail customers, consumers, and local
communities (p.16).”
Because each group of stakeholders has a different goal, conflicts arise. The
shareowners are concerned with earning a profit, while local communities care
deeply about environmental issues and labor standards. Suppliers want to charge as
much as possible to create more revenues, and The Coca-Cola Company wants to get
the lowest prices to decrease costs. Management wants to keep labor costs down,
while employees want raises and increased benefits.
A hierarchy of the organization’s corporate structure is located in the
appendices (Reuters.com) The organization’s divisional managers run company
operations in a general region of the globe. The functions of each vice president
are divided into functions such as human resources, innovation/research and
development, marketing, and public affairs and communication (Reuters.com). The
two functions most critical in taking advantage of the company’s competitive
advantages are marketing and innovation/research and development. As stated time
and time again, the organization tries to capitalize on its brand name as much as
possible, which is why the marketing function is so important to the company. The
innovation/research and development department must come up with the products that
the marketing function demands.
The majority of the top level managers at The Coca-Cola Company have worked
in many different regions and areas of the company. Many have worked for or ran
the bottling companies that partner with the organization (Thecoca-
colacompany.com). The fact that members of the top management team have well
rounded backgrounds allow for problems to be looked at from multiple angles.
#4 – Organizational Design
The Coca-Cola Company realizes that it needs to be able to meet the ever
changing demands of its customers. This is why the company pushed towards
decentralization in the nineties, and even more so recently. The organization has
two operating groups called Bottling Investments and Corporate. There are also
operating groups divided by different regions such as: Africa, Eurasia, European
Union, Latin America, North America, and Pacific. Each of these divisions is again
divided into geographic regions. By allowing decisions to be made on a more local
level, the organization can quickly respond to changing market demands, and
higher-level management can focus more on long-term planning. “Country Managers
(2),” an article that appeared in Business Europe (2002) had the following
information: “According to Jon Chandler, director of communications for Europe,
the responsibility for getting it right – and for profit – is firmly at the local
level (p.3).”
Certain divisions of the company, such as finance, human resources,
innovation, marketing, and strategy and planning are centrally located within the
Corporate division of the company. Some of these functions take place at lower
levels in each of the regions of the company; however, most decisions are made at
the top of the hierarchy. For example, in 2002 the decision to sponsor the World
Cup was done at the corporate level. Corporate headquarters, however, allowed the
local divisions to make the advertising decisions (“Country managers (2),” 2002).
This allowed each division to specifically design commercials and ads that would
appeal to the local market.
When Neville Isdell took over as CEO and chairmen of The Coca-Cola Company
in 2004, he began to using more complex integrating mechanisms. In order to deal
with organization’s extremely low growth rate, Isdell used teams of top managers
to create solutions to the organization’s most pressing problems. Face-to-face
meetings were held regularly at the local levels so employees could remain
informed. Besides the use of teams and meetings, the intranet was overhauled to
provide a source of real-time sharing of information (Fox, 2007). The use of
complex integrating mechanisms is important in such a tall and wide organization.
It is important that each function of the company is able to share up-to-date
information quickly with each other.
The organization seems to be doing an excellent job of balancing standardization
and mutual adjustment. The Code of Conduct for the organization is a guidebook for
how every employee should act (Thecoca-colacompany.com). Should an employee act
improperly, they are subject to disciplinary actions. Due to the changes
implemented by Isdell, mutual adjustment has started to play a larger role in the
organization. Employees feel more engaged and turnover has been reduced. Isdell’s
changes have led to increased growth rates for the organization, and return on
equity for stockholders went from a negative return to a 20 percent return (Fox,
2007). This balance is essential, because it allows employees some flexibility,
but also gives the organization some predictability (Jones, 2007).
The Coca-Cola Company’s structure is a hybrid of both mechanistic and organic
models. The focal point of The Coca-Cola Company is on responsiveness. The complex
integrating mechanisms previously discussed are characteristic of an organic
structure. The surveys and interviews used by the company allowed information to
flow from the bottom-up, and the intranet allows for information to be exchanged
laterally. The surveys have also caused The Coca-Cola Company to pursue
simplification and standardization (Thecoca-colacompany.com). Centralization and
high standardization are associated with a mechanistic structure.
Mechanistic Organic
Focus Efficiency, stability Flexibility, responsiveness
Specialization High Low
Integrating Mechanisms Simple Complex
Centralization High Low
Standardization High Low
Communication Top-down Network (top-down, bottom-up, lateral)
The blending of both types of structures seems to be ideal for the organization.
Flexibility is essential when trying to appeal to such a vast number of
independent markets, however, high standardization is important to remain
efficient in production. The use of complex integrating mechanisms allows for
easier coordination for the global company. Centralization keeps organizational
choices aligned with organizational goals. Now that information in the company is
flowing in every direction, upper-management will have access to information more
quickly, adding to the organization’s flexibility and responsiveness. The recent
shift towards a more decentralized and organic structure corresponds with the
uncertainty of the organization’s environment, which will be discussed later.
#5 – Designing Organizational Structure: Authority & Control
The Coca-Cola Company currently employs approximately 71,000 employees.
According to a general organizational chart obtained from the company’s website,
there are at least 5 hierarchical levels at the corporate level. For example: the
head of the Canadian division reports to the president and COO of the North
American Group. That president reports to the CFO, who reports to the Office of
the General Counsel. The General Counsel then reports to the CEO. It is fair to
assume that there are at least a few more steps in the hierarchy at the local
level.
Due to its tall structure, the organization has experienced communication
problems. One of the problems discovered through the survey mentioned before was
that the people and the company lacked clear goals (Fox, 2007). Tall hierarchies
also cause motivation problems, which is why the organization is attempting to get
employees more engaged (Arendt, Ch.5). The increased usefulness of the company’s
intranet will greatly increase the communication between every level of employees,
and allow upper management to effectively communicate to the front line employees.
Based on information from Re This span of control seems somewhat slim for
the CEO of such a large organization. The CEO is also a member of the Senior
Leadership Team. This team consists of each head of the eight operating groups
aforementioned, and also has other top executives in areas like innovation and
technology and marketing. Although there are only six people that answer directly
to the CEO, the CEO is able to receive input from a wide variety of divisions
because of this leadership team. Since the team is comprised of members from
various divisions, the CEO is able to obtain a wide variety of information.
The move to decentralization has caused structural changes for The Coca-Cola
Company. New offices have been opened to facilitate decisions being made closer to
the local markets (Annual Review, 2006). The organization has also undergone
centralization of some of the company’s departments. In 2006, the Bottling
Investments division was created to “establish internal organization for our
consolidated bottling operations and our unconsolidated bottling investments
(Annual Report, 2006, p.2).” It appears that the organization is striving for a
hybrid structure, which allows them to have advantages of both mechanistic and
organic structures, while trying to minimize the negative consequences of each.
The strategic structural changes that the organization has gone through in
recent years have created a much needed positive impact on the company. Sales
growth increased and employees are much more satisfied (Fox, 2007). The
organization is trying to create a more innovative culture by pushing towards
decentralization. It looks as if the company is not content with following trends
in the beverage industry, but looking to be on the forefront of new and exciting
products.
#6 – Designing Organizational Structure: Specialization & Coordination
The Coca-Cola Company realizes that a divisional structure gives the
organization the best opportunity to react to the changes in its uncertain
environment, but also allow it to maintain a level of stability.
The multidivisional structure is beneficial for the organization for a variety of
reasons. The division based on geographic region allows certain aspects of the
company’s operations to be tailored to the individual market. One advertising
campaign or slogan may not be appropriate for another market, so decisions about
specific ads are made closer to the individual markets. Multidivisional structures
allow divisional managers to handle daily operations while corporate managers are
free to focus on long-term planning (Jones, 2007).
There are also problems associated with this type of structure. If the company
creates divisional competition, coordination may decrease because each division
wants to have an advantage over everyone else. Communication problems may also
exist because information can become distorted when it has to travel up and down
tall hierarchies (Jones, 2007).
A multidivisional matrix structure may be better suited for The Coca-Cola Company.
This would increase coordination between corporate and divisional levels, and
managers at each level would work together to create solutions to problems. While
such a structure may be too complex for a global organization, the company may
want to look into it.
#3 – Managing in a Changing Global Environment
Due to its tremendous global presence, The Coca-Cola Company operates in an
extremely uncertain environment. Increased competition from global and local
companies has led to competition over the most important resource: customers. The
Coca-Cola Company must not only compete for customers, but also raw materials
needed for each product. In some parts of the world, clean water is becoming
increasingly hard to come by. The Coca-Cola Company has only one or two suppliers
for some of its raw materials. For example, they view The NutraSweet Company as
one of only two viable sources for the ingredient aspartame (Annual Report, 2006).
The Coca-Cola Company is at a strong disadvantage if they cannot decrease their
reliance on a small number of suppliers. If relations with suppliers deteriorate,
or if the suppliers go bankrupt, it would have dire consequences for The Coca-Cola
Company.
The Coca-Cola Company must also compete to get the best employees possible. The
production of the beverages does not require skilled labor, but the organization
has had problems finding the proper personnel to run the organization. In 2004,
The Coca-Cola Company’s top choices for the open CEO position decided not to join
the company because they did not like the actions of the Board of Directors (McKay
and Terhune, 2004).
Due to the organization’s high credit rating, the company has the ability to raise
funds at a lower cost (Annual Report, 2006). This allows the organization the
opportunity to finance operations such as expansion through the issuance of debt.
This may be necessary if The Coca-Cola Company looks to expand into new markets,
or purchase new brands.
The environment in which The Coca-Cola Company operates in is extremely
dynamic. The environment is difficult to predict and control due to the global
nature of the operations. The Coca-Cola Company faces the threat of reduced
production or disruption in distribution if there is a problem in a market. The
Annual Report (2006) lists risks, such as worker strikes, work stoppages, and the
chance a distributor falls on harsh economic times. Another reason the company’s
environment is tremendously dynamic is due to the nature of their raw materials.
Some of their key raw materials are dependent on specific climates (Annual
Report). Climate changes may impact the price of the materials they need to obtain
and, in turn, affect the cost of production.
The strength and interconnectedness of the general forces that The Coca-Cola
Company must deal with make the environment extremely complex. Recently in the
United States, two forces have started to become inter-woven: cultural/social
values and political/environmental forces. Many American companies are now being
lambasted if they do not try to be more environmentally friendly, and The Coca-
Cola Company is no different. The company has received plenty of criticism for its
operations in India, with claims that they cause a great deal of pollution and
have damaged local water supplies (“Online extra,” 2006).
Dynamism Low (stable) High (dynamic)
Munificence Abundant Scarce Abundant Scarce
Complexity Few Many Few Many Few Many Few Many
Environmental Uncertainty
Low High
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Appendices
1. What is the name of the organization? Give a short history of the company.
Describe how it has grown and developed. Be sure to identify when your
organization was founded, and who founded it.
Candler was an aggressive marketer, and increased syrup sales over 4000 percent
from 1890-1900 (Bellis). At the turn of the century, Coca-Cola was being sold
across the United States and Canada. In the early 1900s, the cocaine was removed
from the recipe (Coca-Cola, 2007). The Coca-Cola Company even started production
internationally in countries such as Guam, Cuba, Puerto Rico, and the Philippines.
In 1920 it established its first bottler in France, Coca-Cola’s first European
plant (Thecoca-colacompany.com). During World War II, The Coca-Cola Company set up
64 bottling plants in Europe and the Pacific which led to easy post World War II
expansion. When supplies to produce Coca-Cola ran out in Germany, Fanta was
created. The 1960s saw the creation of Sprite, Tab, and Fresca. In 1960, Minute
Maid marked Coca-Cola’s venture into the juice market. In the 1980s, taste tests
suggested that consumers preferred a sweeter version of Coca-Cola. This led to the
launch of New Coke. Consumers were angry because they had a strong emotional
attachment to the original Coca-Cola. The company listened to consumers, and Coca-
Cola became Coca-Cola Classic, and New Coke ultimately failed.
The 1990s saw The Coca-Cola Company’s expansion into the bottled water industry
(Dasani) and the sports drink world (Powerade). The famous Coca-Cola bears and the
“always Coca-Cola” ad campaign were launched in 1993 (Thecoca-colacompany.com).
Today, The Coca-Cola Company has over 400 different brands, and operates in even
the most remote places of the globe.
2. What does the organization do? What goods and services does it
produce/provide? What kind of value does it create? What does the company’s Annual
Report describe as the organization’s mission?
The inputs for The Coca-Cola Company’s beverages include raw materials, the
employees, and of course the secret recipe. The principal raw materials used by
Coca-Cola are water, nutritive and non-nutritive sweeteners. High fructose corn
syrup is the primary nutritive sweetener used in the United States. Sucrose is
used outside of the United States. Non-nutritive sweeteners used by Coca-Cola are
aspartame, acesulfame potassium, saccharin, cyclamate, and sucralose. Purified
water is also one of the key ingredients in every beverage produced. In regards to
the juice products, orange juice concentrate is the primary raw material (Annual
Report, 2006)
The processes for producing the organization’s products are mixing the ingredients
together in a specific order after measuring them. First, they must make the
flavoring, and then the concentrate. Many of the ingredients are very toxic
(caffeine) or skin irritants so while producing Coca-Cola they must be very
cautious as to not come into direct contact with some of the ingredients (How to
make opencola, 2007). The company must also treat their water before using it
(worldofcocacola.com). Other processes exist with-in the organization that do not
relate to production. Such processes are financing, accounting, managing,
marketing, supply chain management, distribution, maintenance, etc;
Outputs for The Coca-Cola Company are the concentrate and syrup for each of the
many non-alcoholic beverages.
4. Do an initial analysis of the organization’s major problems or issues. What
challenges confront the organization today? How does its organizational design
relate to these problems?
The Coca-Cola Company faces a wide variety of problems. In the United States,
consumers are becoming more health conscious, which has hurt the sales of Coca-
Cola. Due to The Coca-Cola Company’s global presence, the company must deal with
many political challenges. They have been criticized for causing a great deal of
pollution, damaging town’s water supplies, and have been highly criticized for its
alleged anti-union actions. Coca-Cola also faces increased competition from well-
established global companies, and local organizations as well (Annual Report,
2006). The Coca-Cola Company also faces challenges with its supply of raw
materials. The prices for many of its raw materials fluctuate based on market
conditions. When these prices rise, so do production costs. Some of the raw
materials are available only from a few limited suppliers (Annual Report, 2006).
The Coca-Cola Company measures success by volume growth. This measurement is used
because the company believes it measures product trends at the consumer level.
This is not always equal during any period because of some seasonal products,
supply changes, and price increases (Annual Report, 2006). The organization has
also undertaken many initiatives to boost its image as a responsible global
citizen. It currently has over 70 clean-water projects in many countries across
the world (McKay, 2007). Attached in the appendices is a detailed performance
chart from the 2006 Corporate Responsibility Review.
The Coca-Cola Company is doing fairly well when judged in terms of control.
Considering the dynamic nature of their environment, they have been able to keep
sales and net income increasing. Their cost to produce these goods actually
decreased last year, showing that they were able to control their suppliers more
than the prior year (Annual Report, 2006). The organization has done an alright
job controlling the political aspects of their external environment. One problem
that will be discussed later is increased scrutiny of their operations in India
and Colombia. Although organizations have boycotted the company and lawsuits have
been filed, the average consumer is completely oblivious to the allegations
against the company, and growth has continued.
The Coca-Cola Company’s primary focus is marketing (Jones, 2007). Due to this
focus, the company is constantly trying to find out what consumers want, and then
trying to produce it. The Coca-Cola Company is always looking to strategically
launch new products in each of the countries it operates in. From 2005 to 2006,
the organization launched over 1,000 products (Foust, 2006). It would be a mistake
to call the organization highly innovative though. While they are always launching
new products, they are usually not the first to create a new type of beverage.
“The company was late to the game in sports drinks, energy drinks, and coffee,
regarding them as low-volume distractions (Morris, 2006, para. 6).” CEO Neville
Isdell said (as cited in Morris, 2006) "I don't believe we've done more in the
past than dabble outside carbonated soft drinks. We have not been able to think
creatively enough (para. 9).”
The Coca-Cola Company is very efficient in their efforts to produce their
products. They use their assets to stay on top of the market to grow and create
value for shareholders. They also are very good at connecting with their customers
(Annual Report, 2006).
A hierarchy of the top management team is located the appendices. The CEO is also
the chairmen of the board (Reuters.com).
The organization has divisional managers that are the heads of each regional
division. Along with the divisional managers, important functional managers
include the head of Human Resources, Innovation and Development, Marketing, and
Public Affairs (Thecoca-colacompany.com).
A lot of the functional managers seem to have worked for or ran bottling companies
in various parts of the world. The knowledge gained from doing this will give the
organization a better understanding of its bottling partners, and give the company
a better chance to establish and maintain strong relationships with its bottlers.
COO Muhtar Kent has had roles in both marketing and operations. This gives him a
broad understanding of two important functions of the organization.
CEO Neville Isdell started at a bottling company in Zambia in 1966. He has been a
general manager of a bottling plant, regional manager for Australia, president of
a European Division, and president of what it now the Northeast Europe/Middle East
Group.
COO Muhtar Kent has had various roles in marketing and operations. Besides running
a few different regional divisions within The Coca-Cola Company, he also worked
for a few bottling companies. Kent will actually become the CEO of The Coca-Cola
Company on July 1, 2008.
Executive Vice President and CFO Gary Fayard were the vice president and
controller of the company, and serves on the board of the company’s two largest
bottling partners. Besides being a partner, he was a director of audit services
and of manufacturing services at Ernst & Young.
Executive Vice President and President of Bottling Investments and Supply Chain
Irial Finan has done a wide variety of international work. He has worked for three
different bottling partners, having positions such as CEO, managing director, and
finance director.
Senior Vice President and Chief Marketing and Commercial Officer Joseph Tripodi
has been the chief marketing officer at the following companies: Allstate
Insurance Co., The Bank of New York, and Seagrams Spirts & Wine Group. He also was
an executive vice president for MasterCard International and created the
“priceless” campaign.
The operating groups are divided into the following regions: North America, Latin
America, European Union, Africa, North Asia, Eurasia & Middle East, and East,
South Asia & Pacific Rim. Non-geographic operating groups include Bottling
Investments and Corporate (Annual Report, 2006). The corporate segments in 2003
had the following nine functions: “Corporate External Affairs; Customer
Management; Finance; Human Resources; Innovation/Research and Development; Legal;
Marketing; Quality; and Worldwide Public Affairs and Communications (Annual
Review, 2003).”
c. Can you identify any integrating mechanisms used by your organization? What
is the match between the complexity of the differentiation and the complexity of
the integrating mechanisms that are used?
The organization has used teams as an integrating mechanism in the past. Teams of
specialists analyzed consumer research to create new beverages (Rayasam, 2007).
In 2004, Neville Isdell took over as CEO and chairmen of The Coca-Cola Company.
Not being pleased with the 2% growth rate for the company in 2004, Isdell realized
drastic measure needed to be taken. HR first surveyed 400 of the company’s
managers to help assess the company’s troubles. Then 70 of those managers were
interviewed. Isdell had 150 of the company’s top managers from around the globe
meet 3 times in a 4 month span. These managers formed task forces, and each one
analyzed and came up with solutions to the problems that were brought forth in the
surveys. Face-to-face meetings began being held regularly, and the intranet
underwent drastic changes to provide real-time news (Fox, 2007).
Because The Coca-Cola Company must produce the same high quality final product,
behavior must be standardized. The organization has a very strict Code of Conduct,
which outlines how employees at all levels of the organization should act
(Thecoca-colacompany.com). However, mutual adjustment does play a role in the
company. In 2006, in the United Kingdom, the organization emphasized trying to
encourage employees to improve the working environment (Coca-cola.co.uk).
With the push towards a more decentralized and organic structure, the organization
has made strides to increase the role that mutual adjustment plays. In 2004, the
organization created the Manifesto for Growth. This was based on the developments
made by the surveys and the management meetings. One worker said “The manifesto is
a framework that gives a direction and helps me in my role to see the
opportunities where I can make a difference and put my ideas into action (Fox,
2007, para.17).”
e. What can you tell about the level of formalization by looking at the number
and kinds of rules the organization uses?
The company also has voluntary agreements with the largest bottling partners. This
agreement measures their corporate responsibility in the workplace, marketplace,
environment, and then community (Corporate Responsibility Review, 2006).
Mechanistic Organic
Focus Efficiency, stability Flexibility, responsiveness
Specialization High Low
Integrating Mechanisms Simple Complex
Centralization High Low
Standardization High Low
Communication Top-down Network (top-down, bottom-up, lateral)
Due to changes that have been made recently to the organization’s structure and
philosophy, it is hard to say with certainty that the company has a definite
mechanistic or organic structure. Even though decision making has increased in the
lower levels of the organization, it still seems to be more centralized. According
to the company’s website, the organization is making efforts to increase
simplification and standardization. These are characteristics of a mechanistic
structure (Arendt, Ch.4). With the strong approach to marketing and consumer
research, the focal point of the organization is on responsiveness and
flexibility. As stated earlier, complex integrating mechanisms are being used, and
with the use of surveys, information has been flowing from the bottom-up as well
as the typical bottom-down (Fox, 2007). When employees are trained, they learn
multiple skills so they are able to provide back up and are able to rotate,
decreasing specialization (Phillips, 1996). These are characteristics of an
organic structure (Arendt, Ch.4). Based on the chart presented, of the two
structures, the organization is slightly more organic.
We were unable to obtain exactly how many levels there are in the organization,
however according to an organization chart found on the company’s website (located
in the appendices) there are at least five levels. We were not able to find
information on the structure of the regional operating groups.
The organization is tall. There are at least 5 levels, but it is safe to assume
there are at least a few more on the regional level. One of the larger problems
the company has been trying to deal with is motivation problems, more specifically
trying to get the workers engaged. Another problem indicated by the survey
performed in 2004 was that “The business and its people lacked a clear direction
and a common purpose (Fox, 2007).” This problem is the result of poor
communication from upper management.
6. Do you think your organization does a good or a poor job in managing its
hierarchy of authority? Why or why not?
Overall, The Coca-Cola Company does a good job of managing its hierarchy of
authority. Considering they have a tall structure, they are still able to keep a
slightly more organic style of management, allowing them to be more adaptable to
changing conditions. The CEO and CFO both have six people that report to them.
With the exception of the North America, which has ten divisions, each operating
group has six or less divisions. By pushing the day to day decisions down the
hierarchy, upper management can focus on long-term strategy and planning. In order
to help facilitate the flow of information, the organization conducts surveys of
its employees, and also has frequent meetings, and uses a more sophisticated
intranet (Fox, 2007)
2. Why does your organization use this kind of structure? What are the
advantages and disadvantages associated with this structure for your organization?
Is there a more appropriate structure for your organization to use?
This structure is used because it allows each division to be independent and have
its’ own set of support functions. This structure works well because it gives the
company more flexibility to help deal with its uncertain environment and it allows
each product to be tailored to each individual market in some way. The
multidivisional structure allows each division to be accountable for its results
and responsible for creating profits (“Country Managers (2),” 2002).
The Coca-Cola Company has over 400 brands and operates in 200 countries. The main
products that offered are energy drinks, juices/juice drinks, soft drinks, sports
drinks, tea and coffee, water, and “other.” The organization operates specifically
in the non-alcoholic beverage domain (Thecoca-colacompany.com)
Some of the energy drinks the company offers in the United States are Full
Throttle, TaB Energy, and KMX. There are over 20 juice drink brands including Five
Alive, Fuze, Hi-C, and of course Minute Maid. Besides the various types of Coca
Cola soft drinks, they also produce Barq’s root beer, Citra, Fanta, Mellow Yellow,
Mr. Pibb, Fresca, Sprite, and Tab. Powerade is there lone brand of sports drink.
Nestea is their most popular tea beverage, and they also have Enviga and Gold
Peak. Dasani and Dannon make up their two brands of water (Thecoca-
colacompany.com).
The customers of The Coca Cola Company are actually not the people that consume
the beverages. The customers for the organization are bottlers, fountain
wholesalers and retailers, and distributers (Annual Report, 2006). The bottlers in
turn sell the finished product to supermarkets, retail chains, restaurants, etc.
The forces in the general environment are as follows: demographic and cultural,
international, political, technological, economic, and environmental.
The forces in the task environment that affect the company are as follows:
customers, distributors, unions, competitors, suppliers, and governments.
One extremely interesting piece of information that deals with both political
factors and social/cultural factors is the recent criticism of Coca Cola in a few
different aspects of the company’s operations. Recently the company has been
strongly criticized for its pollution and contamination of groundwater and soil in
India (Walters, 2006).
The main focus of The Coca-Cola Company is on their consumers. Since Coca Cola
operates in so many diverse areas in the world, they must be aware of what each
region’s consumers desire. Coca Cola has a very “local” oriented focus. Nearly all
of Coca Cola’s beverages are produced by local people and local resources
(Thecoca-colacompany.com). Because the production and distribution are so
intertwined in each market, the organization is more able to meet and adapt to
what the consumer wants.
The environment that the organization operates in is extremely dynamic. Once again
this can be attributed to the global nature of the company. As stated in Jones
(p.63, 2007), “global expansion makes the environment more difficult to predict
and control.” One example of an unpredictable event occurred in 2004. A region in
India faced a severe water shortage, and thus ordered both The Coca-Cola Company
and PepsiCo. to shut down their operations. PepsiCo. decided to build a well with
the help of the locals, and was able to begin operations again within a month.
Coca Cola’s plant was still shut down after 5 months, and it cost the organization
millions of dollars (Bogomolny, 2004).
The previous example also ties in with the environment’s munificence. In certain
areas, PepsiCo., The Coca-Cola Company, and other beverage makers (including local
companies) must compete for resources. The example of the water shortage in India
shows that the certain regions may not be able to support multiple beverage
makers. The Coca-Cola Company must compete with other organizations for human
resources as well. In 2004, the organization was having a difficult time finding a
new CEO. Their top choices would not take the position because they felt the board
had too much control (McKay & Terhune, 2004).
The organization not only faces global competition from companies like PepsiCo and
Cadbury Schweppes, they face competition from local beverage producers as well.
They all compete for the most scares of all resources: customers.
The company has pretty high credit ratings (Annual Report, 2006), which would
allow the company to finance projects and expansions through the use of debt if
needed.
There is a great deal of complexity in the company’s environment. According to
Jones (p.62, 2007), “complexity can increase greatly when specific and general
forces become interconnected.” Two factors that have become interconnected are the
social and political factors. Coca Cola has been increasingly criticized for how
it handles business in certain countries. One such country is Colombia in South
America. Bottling plants in Colombia have been accused of participating in
numerous terrible acts against its employees to prevent and scare people from
being unionized. The pressure and attention generated by public outcries have led
to two different judicial inquiries in Colombia, and also a lawsuit was also filed
in the U.S Courts system. The increased pressure has even led some universities
like NYU and the University of Michigan to ban the sale of Coca-Cola on their
campuses. (Blumenstyk, 2006; Online extra, 2006)
Environmental Uncertainty
Low High
3. What mechanisms does your organization use to manage relationships with its
stakeholders, e.g., long-term contracts, strategic alliances, mergers? Do you
think the organization has chosen the most appropriate mechanisms? Why or why not?
The main tool the company uses to manage its relationships with stakeholders is
strategic alliances. “Asked what proportion of Coca-Cola's revenues come from
alliances, Mr. Ivester used the term ‘100%’ when explaining that every dollar
which the soft-drink giant earns comes from some form of partner-a bottler, a
distributor, and so on (“The science of alliance,” para.6, 1998).” The company has
no formal alliance with McDonald’s; however they have a strong alliance based on
“a common vision and a lot of trust (“The science of alliance,” para.8, 1998).”
The Coca-Cola Company has supplied McDonald’s with their cola since the 1950s, and
has helped McDonald’s set up new operations around the world, and has even helped
them with banking relationships and equipment design. The Coca-Cola Company also
has an alliance with Disney. Since 1955, they’ve been the sole provider of
beverages in the theme parks (“The Science of alliance”).
The Coca-Cola Company also uses long-term contracts in order to become the sole
provider of beverages for certain organizations. In 1999, in order to prevent
PepsiCo Inc from stealing some business with Burger King, Coca Cola signed a ten
year deal with the company. Coca Cola also signed a five year deal with Domino’s
Pizza. Coca Cola also signed a ten year contract with Wendy’s, even though PepsiCo
Inc was willing to pay much more. This example shows what kind of power Coca Cola
has simply because of its brand name (Deogun & Gibson, 1999).
The organization also uses exclusive contracts with its bottlers in their regions,
using a franchise model. The Coca-Cola Company ships the bottler the syrup, and
the bottler creates the finished product by adding filtered water and sugar, along
with carbonation. The bottlers then handle the distribution of the finished
product.
Because of how well known and respected the Coca-Cola brand name has become, the
use of strategic alliances is ideal for their strategy. The strategic alliances
help generate a great deal of revenues without having to invest in new capital, or
trying to expand into new industries.
There are examples of cooptation within the organization as well. The chairmen of
the board and CEO of SunTrust Banks, Inc. is a member of the board of directors
for Coca-Cola. SunTrust is the second largest stockholder of Coca-Cola stock and
also houses the secret formula for Coca-Cola (Coca-Cola, 2007; Donovan, 2006).
Such a relationship could allow the organization to obtain financial resources
because it would be in the best interests of SunTrust for the company to do well.
4. Overall, do you think your organization is doing a good job of managing its
environment? What recommendations would you make to improve its ability to obtain
resources?
Overall the company has been doing an alright job of managing its environment.
Strategic alliances and long-term contracts will help secure the most important
resource, customers. The Coca-Cola Company also has control over its most
important input which makes the product unique, its secret formula.
The Coca-Cola Company must figure out some type of way to deal with the political
problems that arise from doing business in so many parts of the world. In the
Middle East, The organization initially decided not to operate in Israel, for fear
of losing its customers in the Arab world. Criticism arose, with the claim that
The company boycotted Israel to appease the Arab market. The Coca-Cola Company
then promised to open a bottling plant in Tel Aviv. This caused the Arab League to
boycott the product for over 20 years (Criticism of Coca-Cola, 2007).
The Coca-Cola Company may face some significant challenges when it comes to
obtaining resources. Some raw materials such as saccharin and sucralose are
readily available. Aspartame, which is an extremely important non-nutritive
sweetener, is primarily supplied by the NutraSweet Company and Ajinomoto Co., Inc.
The ingredient acesulfame potassium is primarily supplied by Nutrinova Nutrition
Specialties & Food Ingredients GmbH (Annual Report, 2006). Although The Coca-Cola
Company has not had any problems obtaining ingredients from these companies, the
fact that there are an extremely limited number of suppliers could cause problems
for the company in the future. Vertical integration would be a way for the company
to improve the reliability to obtain resources.
Orange juice concentrate is the main ingredient for a lot of the organization’s
juice drinks. The citrus industry is obviously impacted on weather conditions,
which are of course not controllable. Harsh weather could lead to increased costs
to produce some of their beverages. Some of the orange juice concentrate comes
from the Southern Hemisphere, so it does not have to rely solely on Florida
(Annual Report, 2006).
1. What core competences make your organization unique or different from other
organizations? What are the sources of the core competences? How difficult do you
think it would be for other organizations to imitate these distinctive
competences?
The competitive advantages outlined in the annual report are “powerful brands with
a high level of consumer acceptance; a worldwide network of bottlers and
distributors of Company products; sophisticated marketing capabilities; and a
talented group of dedicated employees (Annual Report, p.10, 2006).” The secret
formula for Coca-Cola has not be duplicated, even though it’s been tried several
times. This has become less important however because competitors are creating new
formulas and flavors that compete with the sale of Coca-Cola. It’s not easily
copied, but it is easily imitated.
The most unique competence for the organization is its high level of brand
acceptance. The Coca-Cola Company has worked for over 120 years to achieve such a
high level of brand name recognition, so this is cannot be imitated. As previously
stated, Wendy’s was offered a better contract by PepsiCo, but took the contract
with Coca-Cola instead (“Wendy’s says no to Pepsi,” 1998).
Another unique core competence for The Coca-Cola Company is its relationship with
its 300 bottlers and distributors. The relationships are symbiotic
interdependencies, meaning that both organizations have a stake in how the other
is performing (Arendt, Ch.3). Coca-Cola agrees not to sell to third-parties in the
area, and the bottler agrees to purchase the concentrates from the Company or
Company-authorized sellers (Annual Report, 2006). The fact that The Coca-Cola
Company does not have to worry about distributing the end product allows the
organization to focus on its marketing strengths.
The fact that the company has over 400 brand names is a core competence. The
organizational offers a wide variety of beverages, not just soft drinks. This core
competence can be imitated by large companies. Coca-Cola does develop its own
flavors and products; however it also purchases products as well. Companies like
PepsiCo could easily purchase a company if they wish to expand into that market.
The core competence that the company needs to improve on is related to the
beverages and brands it offers. Any company can compete with Coca-Cola; maybe not
on a global scale, but certainly on a local level. Because of the high
competition, the organization needs to do a better job of beating competitors to
the market with new types of beverages. As previously stated, Coca-Cola has
entered many different markets late, like the diet and sports drink market. If the
company wants to dominate at the local levels, it needs to become more innovative
and introduce new brands before competition exists.
The-Coca Cola Company operates only in the nonalcoholic beverages domain; however,
because they are a global company, they need to serve many different customer
groups. One way in which they do this is by applying its high quality marketing
skills globally. Coca-Cola has a corporate-level strategy of vertical integration.
They have already entered into the bottling industry with Coca-Cola Enterprises
using forward vertical integration. The value created by this is that it has
significant control over the bottling and distribution over their product. This is
very successful because they have been able to distribute their product
successfully to many countries. It is also proved to be successful because their
competitors do not have the ability to be as widespread.
They also use vertical integration by controlling their inputs, such as their
recipe, from competitors. This calls attention to their product’s uniqueness and
defends the fact that no one else in the industry has the same tasting soft drink
(Jones, 2007).
1. Do managers and employees use certain words and phrases to describe the
behavior of people in the organization? Are any stories about events or people
typically used to describe the way the organization works?
One common word that is used by the company is diversity. They organization
strongly emphasize diversity. Employees are regularly trained to handle diversity.
According to their website, diversity means “1) respecting individuals, 2) valuing
differences, and 3) representing our consumers and the markets where we do
business (Thecocacolacompany.com).”
The organization also commonly refers to its employees as associates. The word
associate gives an employee the feeling that they are not working for someone, but
with someone, on an equal level.
Besides posting stories on the website, The Coca-Cola Company has two museums
called The World of Coca-Cola Atlanta and The World of Coca-Cola Tokyo. There was
also one in Las Vegas, but it closed in 2000 (World of Coca-Cola, 2007). The
museum in Las Vegas was centered on storytelling. Visitors would listen to other
consumers’ story about the beverage, and then afterward, guests could record their
own stories which the company could later use (McLellan, 2006).
2. How does the organization socialize employees? Does it put them through
formal training programs? What kind of programs are used, and what is their goal?
Employees are put through a formal training program. Much of their training
involves diversity education. In this they focus on minimizing differences and
amplifying, respecting and valuing each other to help get better results. The
Coca-Cola Company believes that this training helps power employee commitment, and
creates a work environment that values diversity and improves productivity
(Thecocacolacompany.com).
The Coca-Cola Company also uses a lot of team training. This team training allows
new employees to get to know one another and learn how to respond to certain
situations. According to Earl Bensinger (as cited in Phillips, para.2, 1996), a
maintenance mechanic in the Baltimore Syrup Plant, teams “are the best tools
organizations can use to ensure employees are well-informed.” His statement shows
that using teams for training helps employees retain information they learn. This
same article states that through the team training, employees learn a variety of
different skills (Phillips, 1996). An objective of this training is to reduce
specialization to help employees get a better grasp of other jobs. One way this
training achieves these objectives is by training the employees in at least four
different jobs.
The organization also provides all new hires with guidelines on conduct and
employee involvement in the political process in the business code of conduct.
This code is communicated through orientation of new-hires to ensure all employees
will conduct themselves with honesty and integrity that governs the company’s
culture. They also mandate training on the “code” to ensure their employees are
continuously improving their knowledge through web-based or in-person training at
least every three years (Corporate Responsibility Review, 2006).
3. What beliefs and values seem to characterize the way people behave in the
organization? How do they affect people’s behavior?
The driving forces in the organization are the values of honesty and integrity.
These characteristics are the expectation for each individual. Honesty and
integrity are the chief expectations for employees to uphold and carry out in all
matters. This concerns employees behaviors within the company and their personal
life because The Coca-Cola Company needs to make sure employee actions and
behaviors will not negatively effect the company directly or indirect. These
concerns of potential problems are conveyed through the code of business conduct,
such as conflict of interest, financial interest or use of company assets.
4. Overall, how would you characterize the organization’s culture and the way
it benefits or harms the organization? How could the culture be improved?
The changes implemented in 2004 helped the culture to be more open to all
employees. As Alba Adamo, an employee stated (as cited in Fox, para.8, 2007),
“prior to 2004, it ‘felt we were all working independently of each other. The
company as a whole didn’t have a clear direction.” She implies that after the
manifesto was set in place, Coca-Cola has been able to change their culture to
create an environment in which employees are comfortable to work together. Since
the organization started to revolutionize its culture in 2004, the company has
benefited from less turnover and greater growth (Fox, 2007).
The company should keep its focus on employee involvement and enrichment. The
culture could be improved with increased decentralization. By allowing divisions
to be even more independent, it would further push the culture towards more
innovation.
5. Does your organization’s culture match its structure (in terms of organic
vs. mechanistic)? What are the consequences of this match or mismatch?
When the culture matches the structure of the company, it leads to growth and
success of the company. In a decentralized organic organization, employees cannot
be afraid to make decisions or take risks everyone once in awhile. If the company
creates a culture that punishes risk taking, lower level employees will not want
to make important decisions, even if given the power to.
Output activities provide the greatest uncertainty for the Coca-Cola Company. The
reason for this is because of the relationships with Coca-Cola’s bottling
partners. Coca-Cola sells the concentrates and syrups for the beverages to
bottlers. The product that is sent is constant and does not provide uncertainty.
The uncertainty exists from the time the bottler receives the concentrate to the
time the end consumer drinks the beverage. “In 2006, approximately 83 percent of
our worldwide unit case volume was produced and distributed by bottling partners
in which the Company did not have controlling interests (Annual Report, p.14,
2006).” The annual report also talks about how a disruption at a bottling plant
(such as strikes and stoppages) could indirectly and negatively affect the results
of the Coca-Cola Company. Inputs could be viewed as uncertain, due to the minute
number of suppliers, and the climate-dependent nature of some ingredients; however
in the past; these have not been a problem (Annual Report, p.14, 2006).
2. Does your organization use service or manufacturing technology? What is the
level of the organization’s technical complexity? If the organization uses service
technology, does it use service factory, service shop, mass service, or
professional service technology? If the organization uses manufacturing
technology, does it use small-batch, mass production, or continuous process
technology?
The Coca-Cola Company uses mass production manufacturing technology, which has a
moderately high technical complexity. “Examples of such organizations (companies
that use mass production) include Ford, Gillette, Crown Cork and Seal, and Coca-
Cola (Jones, p.242, 2007).” It was extremely hard to find any information on how
the syrup for Coca-Cola is actually made. Even at The World of Coca-Cola, the
company’s museum, there is no information presented that describes how it is
created. “Nowhere in any exhibit is there a word about the most fundamental
function of the Coca-Cola Corporation: making Coca-Cola syrup (Friedman, 1992).”
In the appendices are two diagrams that show how basic production of Coca-Cola
works, however only at the bottling level (Coca-colaindia.com). These diagrams
still indicate how mechanized the processes are. Production for Dasani, the
organization’s bottled water product, is extremely mechanized, and it is safe to
assume that the production each beverage is the same.
3. Use the concepts of task variability and task analyzability to describe the
complexity of your organization’s activities. Which of the four types of
department-level technology identified by Perrow does your organization use?
Because the organization uses mass production, task variability is low. Tasks are
highly standardized, and few exceptions occur. Task analyzability for the company
is high. The tasks performed to produce Coca-Cola’s beverages are extremely
routine, thus little search activity is required to find a solution when a problem
does arise. It is not surprise that The Coca-Cola Company uses routine
manufacturing. Standardization and simple tasks minimize the possibilities for
problems to occur.
5. Does your organization’s technology match its structure (in terms of organic
vs. mechanistic)? What are the consequences of this match or mismatch?
According to the class outlines (Arendt, Ch.9), a company that uses long-linked
technology and uses mass production should generally use a mechanistic structure.
As previously stated, The Coca-Cola Company uses a structure that is slightly
organic. There is not a definite match between the technology used and the
structure. Although there was no evidence to suggest it, production may not be as
efficient because of the mismatch between structure and technology.
The Coca-Cola Company was originally founded in 1888. Because there were three
different formulas being used, Asa Griggs Candler wanted to establish a legal
claim to the beverage. He had used two other names for the drink, but none caught
on, so he wanted to use Coca-Cola because it was already popular (Coca-Cola,
2007).
2. What stage of the life cycle is your organization in now? What internal and
external problems is it encountering? How are managers trying to solve these
problems?
Currently, The Coca-Cola Company is in the growth stage. Although their revenues
and growth have fluctuated slightly through the years, they remain in the growth
stage because their value creation skills have continued to evolve (Arendt,
Ch.11).
One struggle that is always present internally is the conflict between low-level
employees and management. Labor costs could increase for the organization if they
are not able to renew collective bargaining agreements with employees at its
manufacturing plants (Annual Report, 2006). For example, workers went on strike in
2005 because management wanted employees to contribute more to their heath benefit
plan (Business Insurance, 2005). Another struggle that exists within the company
is trying to balance power between the board and the corporate managers (McKay &
Terhune, 2004). The board also has the power to decide what ads get shown. This
has caused a power struggle with the marketing function (MacArthur, 2004).
Managers are trying to solve these problems through a variety of ways. In order to
do a better job of keeping its employees happy, the company is trying to get
employees more involved in decisions processes, and used input from them to create
the company’s growth initiative. Current CEO Isdell’s changes have created greater
sales growth and better return on investment, which should give the CEO more power
when dealing with board members (Fox, 2007).
3. How rapid was the growth of your organization, and what problems did it
experience as it grew? Describe its passage through the stages outlined in
Greiner’s model. How did managers deal with each crisis that the organization
encountered as it grew?
The company’s growth was very rapid. It grew from not being known at all to having
the first celebrity spokesperson for a product ever in about 15 years (Thecoca-
colacompany.com). The Coca-Cola Company experienced many problems as it grew, the
first was Asa Candler not realizing the full potential of Coca-Cola becoming a
portable amenity. After the second offer by two lawyers, Asa sold the rights to
bottle the beverage for a dollar (Thecoca-colacompany.com).
Stage 2 – The 1920s and 1930s were a period of great expansion for the company.
The organization created a “Foreign Department.” Its main purpose was to market
the product outside of the United States (Thecoca-colacompany.com). The focus of
finding new markets still exists in the company today.
A crisis of autonomy has existed within the organization because the board has
been so controlling. According to the text, a crisis of autonomy exists when
creative functions of the organization feel frustrated because they lack control
(Jones, 2007). The board has had some oversight as to what ads get shown, and this
has created frustration in the marketing department (MacArthur, 2004).
Stage 3 – In recent times, decision making has been pushed further down the
organization. Since the company cannot use the same campaign ad for every market,
these decisions have been pushed down to the regional divisions (“Country managers
(2),” 2002). There was not any information to indicate a crisis of control. There
was very little information about conflicts between corporate and functional
managers.
Stage 4- According to the text (Jones, 2006), companies in this stage “must
initiate company-wide programs to review the performance of the various divisions
(p.317).” This is exactly what Isdell Neville did when he became CEO in 2004. By
polling 400 managers throughout the company, he was able to create an initiative
that the employees felt they were involved in (Fox, 2007) Isdell also has used
promotion within the company to help align mangers’ goals with that of the
company. Muhtar Kent was promoted to COO of the organization because he did so
well as the COO of the North Asia, Eurasia, and Middle East group (Ward, 2006).
There were not specific bureaucratic problems available; however the company must
have experienced some type of crisis of red tape, because one of the company’s
main goals is to cut down on the bureaucracy as will be demonstrated in the next
stage.
4. Has your organization ever shown any symptoms of decline? How quickly were
managers able to respond to the problem of decline? What changes did they make?
Did they turn the organization around?
The Coca-Cola Company showed signs of decline in the 1990s and in 2004. 1998,
capped off a five year run of having significant growth. This was due to the
prices being locked for many years at a time. Prices were actually below what they
had been four years earlier. Growth decreased rapidly as prices rose in ’99.
Managers tried to respond quickly to the initial immobility of growth, but they
did not notice immediately. When they did respond with what the company needed to
do, the response was not accepted well by the market. Eventually, the rest of the
market raised their prices as well and The Coca-Cola Company reclaimed their
regular growth (Halpert & Dawson, 1999).
Changes have been made which has turned the company around. These changes have
been previously discussed, but include the push towards decentralization, creating
more employee involvement, attempting to change the company’s culture, and the
elimination of bureaucracy.
5. Does the organization’s structure appear appropriate given its stage in its
life cycle? Explain.
The company’s structure is appropriate given its stage in the life cycle. The
Coca-Cola Company has gone through all of the growth stages, and has been able to
meet each challenge along the way. The company has not moved towards a product
team or matrix structure as suggested in the text (Jones, 2007), however given
that the organization operates in one domain, this is not necessary for the
company to grow and succeed.
1. Given the pattern of changes made by your organization over time, which of
the decision-making models best characterizes the way it makes decisions?
The Coca-Cola Company uses the incremental method in decision making. Especially
in the last 20 years or so, the board was extremely conservative and looking to
avoid any drastic changes. However, recently they used the unstructured decision-
making model. This is demonstrated through the process that CEO Isdell used when
creating the company’s Manifesto For Growth in 2004 (Fox, 2007). Rather than
slightly modifying what the company has been doing, the company surveyed 400 of
their top managers about what they thought was problematic in the company. Based
on information in the surveys, 150 leaders in the company met to create solutions
for the problems. The alternatives were analyzed and all final decisions were made
by groups (Fox, 2007). This was a non-programmed decision because there is no
procedure to fix this certain problem (Arendt, Ch 12). The top executives and
board members created the manifesto which specifically outlined its future plans
for the company’s goals and corporate culture. Today many employees have accepted
this new culture (Fox, 2007).
For The Coca-Cola Company, the use of the unstructured decision-making model, in
theory, is appropriate for Coca-Cola because they are in a very uncertain
environment and any major problems need to be solved from the bottom up (Arendt,
Ch 12). This is how the “Manifesto for Growth” was developed. This was the only
example of the company using the unstructured decision-making model. It seems that
the majority of decisions are made using the incremental method.
For non-programmed decision making, the solutions are generally brought about by
senior level executives. When decisions are made at this level in an organization,
problem solving is often slowed. Another potential problem is that upper
management may propose an extremely complex solution, whereas someone closer to
the problem may know a simple fix. One last problem is that decisions made could
potentially be biased in respects to the specific manager’s thoughts. Top
management may lack international experience, and therefore, harm the company’s
global strategy.
As stated earlier, the board of directors is responsible for some of the decision
making in the company. When the company was moving in on purchasing Quaker Oats,
the board decided the deal was too expensive and put a stop to it (Deogun, Eig,
McKay, & Spurgeon, 2000). This is a significant problem for the company, because
in such a dynamic environment, the company cannot afford to let outsiders make
such important decisions. The board members do have a great deal of money invest
in the organization; however no one (except the CEO) actually worked for the
company. They are not nearly informed about decisions as the senior managers at
the company.
1. What do you think are the likely sources of conflict that may arise in your
organization? Is there a history of conflict between managers or between
stakeholders?
Due to the immense size of The Coca-Cola Company, the most likely sources of
conflict that could arise in the organization arise from incompatible performance
criteria and competition for resources. These two sources of conflict are
intertwined because if the goals of each geographical division conflict,
competition for resources amongst the divisions will exist. If the organization
creates a competitive climate amongst the divisions, (ex: whatever division shows
the greatest sales growth gets more rewards) divisions may stifle information that
it normally would have shared with other divisions of the organization. While
perhaps benefiting that division, it ultimately hurts the entire organization.
Another source of conflict could develop if resource allocation angers people.
Production managers would obviously want the company to invest in technology that
would reduce costs. The marketing department would want to increase spending in
order to increase sales.
When the organization was developing a calorie free soda, there was even conflict
within top managers was to what it would be called. Eventually Tab was created,
and this leads to more conflict. Market research indicated that consumers
preferred Tab narrowly over Diet Pepsi. When researchers labeled Tab as Diet Coke,
the preference sky rocketed. Managers within the organization butted heads about
the decision to create another diet drink. “Tab loyalists believed a new diet
drink would cannibalize its proven product… Another product with the Coke name
would likely dilute the brand, confuse consumers, and contribute to already
strained relations with bottling companies (Plasketes, p.59, 2004).”
There has been a history of conflict between top-level executives at The Coca-Cola
Company and the board of directors. In early 2004, the organization was having
difficulty filling its vacant CEO position because there were “concerns that its
star-studded board is wielding too heavy a hand in operations (McKay & Terhune,
2004).”
"The sense among investors right now is that the Coke board is meddling in the
operations of the company instead of choosing the right leader and letting him or
her do their job (McKay & Terhune, 2004).”
The marketing department of The Coca-Cola Company is clearly the most powerful
subunit of the organization. “The (Coca-Cola Company’s) marketing department has
considerable power because it is the department that can attract customers – the
critical scarce resource (Jones, p.406, 2007).”
There are positive and negative consequences that result from the marketing
department being the most powerful division in the organization. Since marketing
is the key focus of The Coca-Cola Company, the organization may overlook chances
to reduce costs in the manufacturing or distributing processes. The heavy emphasis
on marketing may also take away resources that could be used to invest in new
technology for other aspects of the company.
The benefits that derive from the organization’s marketing focus greatly outweigh
the negative consequences. By focusing on marketing, The Coca-Cola Company has a
much greater chance to find out each market demands. This allows them to beat
competitors in releasing new products, or avoid the introduction of products that
could flop. The emphasis on marketing allows the company to save money by not
investing millions of dollars on the development of a product that consumers do
not actually want. The strong marketing position of Coca-Cola is also the reason
why the brand name is globally the most recognized. This positioning allows Coca-
Cola to have a strong advantage over lesser known brand names, and also helps when
dealing with potential partners.