This action might not be possible to undo. Are you sure you want to continue?
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 CocaCola 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 (Thecocacolacompany.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 CocaCola 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 Low High Environmental Uncertainty
The Coca-Cola Company uses a wide variety of techniques to manage relationships with its stakeholders, the most useful tool being strategic alliances. A former CEO of the organization claimed that 100 percent of its revenues came from strategic alliances (“The science of alliance,” 1998). The company uses exclusive contracts with its bottling partners and other customers as well (Annual Report, 2006). In 1999, the organization signed a ten-year deal with Burger King to be the restaurants only supplier of beverages. Even though PepsiCo was willing to give Wendy’s a much better deal, the restaurant signed a ten-year deal with The Coca-Cola Company (Deogun & Gibson, 1999). This example shows how powerful the Coca-Cola© brand name really is.
The Coca-Cola Company has done an excellent job managing some aspects of the environment, but done a poor job at managing other parts of the environment. The negative publicity received from its operations in India and the actions of its bottling partner in Colombia has led to boycotts of Coca-Cola© products on some campuses (“Online extra,” 2006). While this is clearly bad for the company, the average consumer is completely unaware of these allegations. This means that The Coca-Cola Company is doing a decent job of damage control. While the company has not had any trouble with suppliers lately, the future is always uncertain. It does not seem like the company is not actively trying to secure supplies, which is why vertical integration was recommended. #8 – Organizational Design & Strategy The core competences that give the organization its best competitive advantages are its strong brand name and its network of bottlers and distributors. Along with its marketing capabilities and broad portfolio of products, The CocaCola Company has core competences which are extremely difficult, if not impossible to duplicate. The strong Coca-Cola© brand name gives the company a great deal of bargaining power and leverage. In 1999, PepsiCo and The Coca-Cola Company were fighting to become the supplier of beverages for the Wendy’s restaurant chain. Wendy’s opted to partner with The Coca-Cola Company even though PepsiCo was offering much more money (Deogun & Gibson, 1999). The brand name recognition that the company enjoys is a powerful bargaining tool. The Coca-Cola name even has an influence on consumer tastes. When The Coca-Cola Company was looking to launch Diet Coke©, they performed some blind taste tests with consumers. The consumers preferred a glass labeled Diet Coke© over a glass labeled Tab© by 12 percent, even though the liquids in each glass were identical (Plasketes, 2004). It has taken the organization over 120 years to build such a strong brand preference, and this cannot be imitated by competitors. The relationships that the organization has with its distributors are another competitive advantage that cannot easily be imitated. The contracts and relationships between the two groups create symbiotic interdependencies, which mean that the success of both companies has a direct impact on each other (Arendt, Ch.3). The Coca-Cola Company agrees not to sell to other parties in the local market, and the bottler agrees to only purchase the syrup and concentrate from the company’s authorized dealers. The Coca-Cola Company at times provides the retailers and distributors with promotions, and capital at times (Annual Report, 2006). Because the organization does not have to worry about the distribution in the local markets, it allows the company to focus on more important issues. The Coca-Cola Company’s business-level strategy is one of differentiation. This is evident in the previous example of consumers preferring identical beverages just because the Coke© brand name was attached. They have been successful pursuing differentiation because the focus of the company has always been on marketing. The Coca-Cola Company is “known for innovative marketing that constantly promotes their brand names and protects their domains from competitors (Jones, 2007, p.211).” The Coca-Cola Company needs to improve upon its portfolio of brand names. More specifically, the organization needs to start introducing new types of beverages, as opposed to entering markets late. The company was late to enter the sports and energy drink markets, as well as the blossoming coffee drink market (Morris, 2006). If The Coca-Cola Company were able to create an entirely new type of beverage, it would be alone in the market for a period of time and force competitors to react instead of act. The hybrid structure of The Coca-Cola Company is ideal for its differentiation strategy. The centralization of the marketing and innovation functions allows the company to retain control over development, marketing and production. By performing extensive market research and creating more local offices, the company is always looking for new ways to serve new customers. The use of complex integrating mechanisms allows coordination between all levels and
divisions of the company. #7 – Creating & Managing Organizational Culture The culture of The Coca-Cola organization is mission driven; focused on refreshing the mind, inspiring optimism, and making a difference (Thecocacolacompany.com). The rich history of the organization has allowed the company to compile hundreds of stories of consumers and employees. These stories share real life examples of what Coca-Cola© means to their consumers and gives employees a sense of pride to be apart of something that means so much for so many people. They also inspire new employees to make a positive impact on the world. Stories are so important to The Coca-Cola Company that they created a museum in Las Vegas that focuses on the stories of customers. After visitors heard others’ stories, they could record their own, which the company could use in the future (McLellan, 2006). As stated previously, the company has been trying to change the culture by allowing employees to essentially shape and reform the goals of The Coca-Cola Company (Fox, 2007). The positive stories that the company chooses to focus on provide a foundation to encourage employees to be not only model workers, but model citizens. #9 – Organizational Technology Currently, output processes are the greatest source of uncertainty for the organization. As previously stated, The Coca-Cola Company does not produce the end product. Distributors and bottlers mix other ingredients (mainly carbonated water) with syrups and concentrates and then sell the products. The Coca-Cola© brand name is on the end product, regardless of who bottles it. The company must keep pressure on the bottlers to maintain high quality outputs, or it could have negative consequences for The Coca-Cola Company. There exists very little information about the production of the Coca-Cola© syrup. Even at The World of Coca-Cola©, a museum for the company, there is no mention of how the syrup is produced (Friedman, 1992). Based on assumptions, and some available information, the organization has a moderately high level of complexity due to the fact that it uses mass production. Task variability in production is low because it is extremely mechanized and routine. As a result, task analyzability is high. When a problem occurs, it is not hard to find solutions. The production of Dasani©, the company’s bottled water, is extremely mechanized, and it is fair to assume that the production of every Coca-Cola© product is the same (Thecoca-colacompany.com). This mass production and high mechanization leads to a high level of technical complexity. Classification Level of Technical Complexity Small-Batch and Unit Production Low to Medium Large-Batch and Mass Production Medium to High Continuous Process or Flow Production High The typical structure of a manufacturing company that uses mass production is a mechanistic structure, in which efficient production is the desired end (Arendt, Ch.9). The Coca-Cola Company’s structure is unique in that it has a lot of the characteristics of an organic structure. This is due to its focus on marketing and local appeal. The structural mismatch means that production in the organization may not be as efficient as possible; however, the benefits of the organization’s structure outweigh the consequences. #11 – Organizational Transformations: Birth et al. The Coca-Cola Company was founded in 1888 to take advantage of the already popular Coca-Cola© name. Of the four life cycle stages (birth, growth, decline, death), after 120 years, the company remains in the growth stage because the company’s value creation skills continue to evolve (Arendt, Ch.11). The company has faced a variety of internal problems over the years. A constant struggle in any organization is trying to meet employees’ demands while trying to keep labor costs low. In 2005, workers went on strike because management
wanted to institute a policy where employees would pay a greater portion of their health benefits (Business Insurance, 2005). If the organization experiences any work stoppage, the company may not be able to meet customer demand and lose out on revenue. Another internal problem within the company is that the board exercises a great deal of power and influence. As previously stated, the company failed to attract its top choices for CEO in 2004, and the board has even pulled ads because they thought the commercials did not fit the company’s image (MacArthur, 2004). Uncertainty in the environment has caused many external problems for the organization, ranging from uncertainty with its suppliers and distributors to political and societal pressures. These issues were discussed in section 3. The Coca-Cola Company experienced overwhelming growth in its early years. As previously stated, Coca-Cola© was being sold in Canada just eight years after the organization was founded. While progressing through each stage in Greiner’s Model of Organizational Growth, The Coca-Cola Company experienced a myriad of problems. The progression through each stage is detailed in Analysis Module #11, located in the appendices. What will be discussed here are the changes in the organization which came as a result of the challenges. The board of directors has pulled ads from running because they felt the ads did not fit with the company’s image (MacArthur, 2004), which created a crisis of autonomy. While there was not information regarding policy changes because of this, many believe that the power of the board will diminish because longtime director Warren Buffet has stepped down. Buffet has been viewed as rather conservative and also involved himself in the decision making of the organization (Santioli, 2006). As the company has continued to grow, top managers have pushed operational responsibility and decision making down to the local levels. This move allows the company to react better to each market, and it also allows corporate managers to concentrate on strategic and long-term planning. By allowing lower level managers to become intricately involved in the company’s growth efforts, Neville Isdell (the current CEO) created an environment in which everyone felt responsible for the company’s performance (Fox, 2007). He has also promoted employees within the organization, which aligns both the goals of the managers and the organization (Jones, 2007). The fifth and final stage of Greiner’s model is focused on reducing bureaucracy to speed up decision making (Jones, 2007). In April 2007, COO Muhtar Kent stated that the company is focusing on simplifying the structure to reduce bureaucracy (Seekingalpha.com). The text book postulates that an organization in this stage would be wise to pursue a product team or matrix structure. Because The Coca-Cola Company only operates in one domain and has over 400 products, the product team structure would be too costly and unrealistic. A matrix structure would be an idea worth considering; however the organization uses divisions based on geography, not product. Due to lack of information about the company’s regional structure, it is hard to say whether the company should pursue a matrix structure or remain as a multidivisional structure. #12 – Decision Making The majority of decisions made by The Coca-Cola Company are done so by using the incremental method. Each year, the company would analyze results, and then make slight changes in operations to create better results next year. The company does not just quickly decide to create a new product, or change operations. Drastic changes take time. Recently, realizing that the company was in desperate need for a drastic change, Isdell sought to figure out why the company performance was declining. By starting at the lower levels of the organization to find solutions, the company was able to make some drastic changes to the company’s culture, how employees were rewarded, and made efforts to get employees more involved (Fox, 2007). The changes brought on by using the unstructured decision making model created much better results for the company. One of the biggest flaws in the organization is that the board of directors
is responsible for some of the non-programmed decisions made by the company. When The Coca-Cola Company was seeking to purchase Quaker Oats, the deal was almost finalized, but then stopped because the board felt the price was too high (Deogun, Eig, McKay, & Spurgeon, 2000). When decisions are made by the board, it means they lack confidence in the upper management of the company to make vital decisions. This is problematic for the company for a few reasons. Because members of the board have so much money invested in company stock, they want to minimize risk, and thus, are extremely prone to take fewer chances. The members of the board (except the CEO) do not or have not worked for the company, so they are not close enough to know all the pertinent information required to make complex decisions. #14 – Managing Conflict, Power, and Politics Conflicts can be a healthy way for an organization to improve decision making, and create new ways for looking at problems. Conflicts can also be a significant source of trouble for an organization when they cause production declines or important decisions cannot be made. (Jones, 2007). When the organization sought a new CEO in 2004, their top choices turned them down because the prospects felt that the board had too much power (McKay and Terhune, 2004). This type of conflict can drastically affect the organization’s ability to change and adapt quickly, a necessity in the company’s extremely uncertain environment. The example also shows that it can prevent the organization from acquiring important human resources. The marketing department is the most powerful subunit in the organization. According to the text (Jones, 2007), “The (Coca-Cola Company’s) marketing department has considerable power because it is the department that can attract customers – the critical scarce resource (p.406).” The heavy emphasis on marketing could prevent the company from finding ways to become more efficient in production or distribution. The benefits derived from the power allocated to the marketing function greatly outweigh any negative consequence. By providing the department with more resources, the company can conduct greater market research. For example, even though the organization had a diet beverage (Tab©) on the market, research indicated that by simply using the name Diet Coke©, preferences for the same tasting beverage increased dramatically. (Plasketes, 2004). Allocating more capital to the department also allows for each marketing campaign to be tailored to specific markets, making advertisements more effective. Market research also saves money for the company. If consumer data shows the company that one of their ideas would not do well, the company can decide not to produce that beverage. The strong emphasis on marketing has allowed Coca-Cola© to become one of the most recognized brand names in the world, which gives the company an advantage over its competition and gives it more bargaining power. One negative consequence of putting such a great emphasis on marketing research is evidenced in what has become known as one of the greatest flops in history. Taste tests indicated that consumers would prefer a new, sweeter version of Coca-Cola©, which lead to the creation of New Coke© in 1985 (New Coke, 2007). The strong brand attachment that the company worked so hard to achieve with consumers caused a severe backlash towards the reformulation of Coca-Cola©. This example proves that market research cannot always be an indicator of what will actually happen. Works Cited Bellis, Mary. (n.d). “The history of Coca-Cola.” Retrieved October 7, 2007 from: http://inventors.about.com/od/cstartinventions/a/coca_cola.htm Blumenstyk, Goldie. “U. of Michigan to buy Coke again.” Chronicle of Higher Education, 4/21/2006, Vol. 52 Issue 33, p.A38-A39 Bogomolny, Laura. (2004). “Thirst for change.” Canadian Business, 8/30/2004, Vol. 77 Issue 17, p.13 Business Insurance. (Anonymous). May 30, 2005 Butler, Rachael. “Always Coca-Cola.” Beverage World, 3/15/2000, Vol. 119 (1688) Carbonated Soft Drinks Manufacturing Process flow chart retrieved December 2, 2007 from http://www.coca-
colaindia.com/quality/docs/Quality_System_Manufacturing_process.pdf Coca-Cola. (2007, October 2). In Wikipedia, The free encyclopedia. Retrieved October 2, 2007, from http://en.wikipedia.org/wiki/Coca-Cola Coca-Cola C2. (2007, October 26). In Wikipedia, The free encyclopedia. Retrieved November 23, 2007 from http://en.wikipedia.org/wiki/Coca-Cola_C2 Coca-cola.co.uk Coca-Cola Q1 2007 Earnings Call Transcript retrieved December 8, 2007 from http://www.seekingalpha.com/article/32593-coca-cola-q1-2007-earnings-calltranscript “Country managers (2).” Business Europe, 10/2/2002, p.3 Criticism of Coca-Cola. (2007, September 24). In Wikipedia, The free encyclopedia. Retrieved on October 2, 2007, from http://en.wikipedia.org/wiki/Criticism_of_CocaCola Dawson, Havis & Halpert, Hedy.. “Stahl-ways Coca-Cola.” Beverage World, 10/15/1999, Vol. 118 (1681), p.50-54 Deogun, N., Eig, J., McKay, B., & Spurgeon, D. “Behind the Coke board's refusal to let CEO Daft buy Quaker Oats.” Wall Street Journal (Eastern Edition), 11/30/200, p.B1 Deogun, Nikhil & Gibson, Richard. “Coke beats out Pepsi for contracts with Burger King, Domino's.” Wall Street Journal (Eastern Edition), 4/15/1999, p.B2 Donovan, Karen. “SunTrust: It's the real thing.” Trusts & Estates. Mar 2006. Vol. 145, Issue 3, p.49-54 Fisher, Richard. (2007). “The last place on earth where no one has tasted CocaCola.” New Scientist, 6/16/2007, Vol. 194 Issue 2608, p.21 Foust, Dean. 2006. “Queen of pop.” Business Week, 8/7/2006, Issue 3996, p.44-53 Fox, Adrienne. “Refreshing a beverage company’s culture.” HR Magazine, November 2007 Friedman, Ted. “The world of Coca-Cola.” Communication Research, October 1992, Vol. 19 No 5, p.642-662 Ghemawat, Pankaj. “Globalization: The strategy of differences.” November 10, 2003. Retrieved on November 28, 2007 from http://hbswk.hbs.edu/item/3773.html How to make opencola. (2007, October 19). In Wikihow. Retrieved on October 23, from http://www.wikihow.com/Make-OpenCola MacArthur, Kate. “Hiring of Isdell is classic Coca-Cola.” Advertising Age, 5/10/2004, Vol. 75 Issue 19, p.3-68 Manufacturing Process flow chart retrieved December 2, 2007 from http://www.cocacolaindia.com/quality/docs/Quality_System_Manufacturing_process.pdf McKay, Betsy and Terhune, Chad. “Bottled up -- behind Coke's CEO travails: A long struggle over strategy; although profits are strong, rivals are gaining cachet; all-star board calls shots; search for a red bull fighter.” Wall Street Journal (Eastern Edition), 4/4/2004, p.A1 McKay, Betsy. “Why Coke aims to slake global thirst for safe water.” Wall Street Journal (Eastern Edition), 3/15/2007, p.B1-B2 McLellan, Hilary. "Corporate storytelling perspectives.” Journal for Quality & Participation, Spring 2006, Vol. 29 Issue 1, p.17-20 Morris, Betsy. “Coke gets a jolt.” Fortune, 5/15/2006, Vol. 153 Issue 9, p.77-78 “Online extra: How NYU chose Colombia over Coke.” Business Week Online, 1/17/2006, p.21 Phillips, Sandra N. “Team training puts fizz in Coke plant’s future. Personnel Journal, January, 2006, v.75, p.87 Plasketes, George “Keeping Tab: A diet soft drink shelf life.” (2004). Journal of American Culture, March 2003, v. 27 no.1, p.54-66 Rayasam, Renuka. “The pause that refreshes.” U.S. News & World Report, 5/28/2007, Vol. 142 Issue 19, p.EE8-EE10 Reuters. (n.d.). Coca-Cola Co: Management. Retrieved on November 29, from http://www.reuters.com/investing Santioli, Michael. “Coke may get bigger, bolder.” Barron’s, 2/20/2006, Vol. 86, Issue 8, p.17
“The science of alliance.” (1998). Economist, 04/04/98, Vol. 346 Issue 8062, p.6970 The Coca-Cola Company. (2003). Annual Review. Retrieved on December 1, 2007 from http://www.thecoca-colacompay.com The Coca-Cola Company. (2006). Annual Report. The Coca-Cola Company. (2006). Annual Review. The Coca-Cola Company. (2006). Corporate Responsibility Review. July, 2006. The Coca-Cola Company. (2007, October 2). In Wikipedia, The free encyclopedia. Retrieved October 2, 2007 from http://en.wikipedia.org/wiki/The_Coca-Cola_Company Thecoca-colacompany.com Walters, Anne K. (2006). “Soft drinks, hard feelings.” Chronicle of Higher Education, 4/14/2006, Vol. 52 Issue 32, p.A30-A32 Ward, Andrew. “Faces in the frame amid talk of Coke's rising stars.” Financial Times (London, England). 1/20/2006, Friday London Edition “Wendy's Says No to Pepsi, Yes to Coca-Cola.” The New York Times, 8/25/1998, Late Edition World of Coca Cola. (2007, November 20). In Wikipedia, The free encyclopedia. Retrieved December 7, 2007 from http://en.wikipedia.org/wiki/World_of_Coca-Cola Worldofcocacola.com Appendices Analysis Module #1 – Organizations and Organizational Effectiveness 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. Coca-Cola was invented 1885 by a pharmacist, John Stith Pemberton (Coca-Cola, 2007). It was initially an alcoholic beverage intended to cure morphine addiction, but the alcohol was removed when the temperance movement gained momentum. In 1886, Pemberton began to sell the product at a local pharmacy. Pemberton’s partner and bookkeeper actually came up with the name Coca-Cola, and was also the creator of the famous Coca-Cola script that is still used today. Coca-Cola was named after a main ingredient: coco leaves, which cocaine comes from. Coca-Cola was initially marketed as a fix-all tonic, used to cure morphine addiction, headaches, impotence, and many other ailments (Coca-Cola). In 1887, Pemberton sold it to Asa Griggs Candler, who incorporated it as The Coca Cola Company a year later. In the same year Pemberton also sold it to two other businessmen, while his son also sold his own version. After some legal actions, Candler once again incorporated the company in 1892, this time using the name The Coca-Cola Company. 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 CocaCola 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? “Our business is nonalcoholic beverages—principally carbonated soft drinks, but also a variety of noncarbonated beverages. We manufacture beverage concentrates and syrups, which we sell to bottling and canning operations, fountain wholesalers and some fountain retailers, as well as some finished beverages, which we sell primarily to distributors. We also produce, market, and distribute certain juice and juice drinks and certain water products. In addition, we have ownership interests in numerous bottling and canning operations, although most of these operations are independently owned and managed. The organization produces a product widely known, Coca-cola or Coke. Besides the namesake, it also has approximately 400 other brands, including an array of other Coke variations. Another facet of the organization bottles and distributes the products. The value it creates for its consumers is that it is a good tasting drink that consumers would like to have. For some, it may give more energy to do to the caffeine, for others, it may just be the taste that they enjoy. We believe that our success depends on our ability to connect with consumers by providing them with a wide variety of choices to meet their desires, needs and lifestyle choices. Our success further depends on the ability of our people to execute effectively, every day. Our goal is to use our Company's assets—our brands, financial strength, unrivaled distribution system, and the strong commitment of management and employees—to become more competitive and to accelerate growth in a manner that creates value for our shareowners (Annual Report, 2006, p.33).” 3. Describe the organization’s inputs, processes, and outputs.
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 CocaCola. 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 wellestablished 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). Coca-Cola has more of a decentralized structure, separated by region. Since the majority of the company’s problems are based geographically, the decentralized structure is ideal. Each region has different regulations, different consumer needs, and different problems to deal with. With a decentralized structure, problems can be solved quickly and effectively. Some functions remain centrally located, such as marketing and innovation. This allows the company to formulate one global message, but also allow that message to be tailored at the local level. 5. Read the organization’s annual report or other documentation and determine which kinds of goals, standards, or targets the organization is using to evaluate its organizational performance. How well is the organization doing when judged by the criteria of control, innovation, and efficiency? 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). Analysis Module #2 – Stakeholders, Managers, and Ethics 1. Identify the organization’s major stakeholder groups. What kinds of conflicts between its stakeholder groups would you expect to occur the most? The organizations major stakeholders in the company are: shareowners, associates, bottling partners, suppliers, government, NGOs, customers and consumers and their local markets (Corporate Responsibility Review, 2006). The most expected major conflicts are between the shareowners of the organization and the local markets’ governing bodies and consumers. The main goal of a shareowner is obviously profit. Lawmakers and consumers in every market have become increasingly demanding of corporations to become more environmentally friendly, and adhere to certain labor standards. The reduction of pollution and improving working condition reduce the ability of the shareholders to profit. The Coca-Cola Company has received a great deal of criticism for pollution and water consumption, which will be discussed later. Conflicts with suppliers also result from the fact that each party’s goal is to maximize profit. The supplier wants the most money for their products, while The Coca-Cola Company wants to pay the least amount possible for high quality inputs. Different divisions may also become in conflict with each other over resources. Two regional plants may want to invest in new technology, but the organization may not have the money spend on both divisions. 2. Draw a picture of the organization’s hierarchy of authority. Try to identify the members of the top management team. Is the CEO also the chair of the board of directors? A hierarchy of the top management team is located the appendices. The CEO is also the chairmen of the board (Reuters.com). 3. Does the organization have divisional managers? Which functional managers seem to be most important to the organization in achieving a competitive advantage? What is the functional background of each member of the top management team? 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. The following information was all found at Thecoca-colacompany.com. 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. Analysis Module #4 – Organizational Design 1. a. How has your organization responded to its design challenges? Is it centralized or decentralized? How do you know?
The Coca-Cola Company is moving towards a more decentralized structure. The company is divided by region. Groups are as follows: Africa, Eurasia, European Union, Latin America, North America, and Pacific. (Thecoca-colacompany.com) Changes in structure freed up the Chief Marketing Office from the day to day operations so she could focus on the direction of the company (Rayasam, 2007). In 2006, the organization moved the Africa operating group from the United Kingdom to South Africa (Annual Review, 2006). Since its inception, the organization believed that the love for Coca-Cola was universal. This led to a strong centralized organization. In the 1990’s, Coca-Cola’s growth slowed significantly. The CEO at the time, Douglas Daft pushed power down the organization, and let the countries have more autonomy. For example, the decision to sponsor the 2002 world cup was made at the corporate level. The implementation however was up to the local markets. Each type of advertisement was tailored to each specific market (“Country managers (2),” 2002). b. Is it highly differentiated? List the major roles, functions, or departments in your organization. Does your organization have many divisions? If your organization engages in many businesses, list the major divisions in the company. 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).” The organization is extremely differentiated, both vertically and horizontally.
The horizontal differentiation is evident because they have different departments for finance, human resources, marketing, etc. The vertical differentiation can be seen with how many levels the organization has. The company is also spatially differentiated, with divisions based upon geographic location. 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). d. Is behavior in the organization very standardized, or does mutual adjustment play an important role in coordinating people and activities? 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 organization is extremely formal. There is a strict code of conduct which Coca-Cola rigidly enforces. The code of conduct is expansive, and if violated, employees will be disciplined. Every employee hired is trained on the code (Corporate Responsibility Review, 2006). 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). f. How important is socialization in your organization?
Socialization is very important in the organization. The company uses a variety of training methods to create a culture that is open to diversity. The organization also uses its rich history to instill a sense of pride and purpose into its
employees. g. In general, does your organization conform more to the organic or to the mechanistic model of organizational structure? Explain why you think it is organic or mechanistic. 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. Analysis Module #5 – Designing Organizational Structure: Authority & Control 1. How many people does your organization employ?
The Coca-Cola Company employs 71,000 people 2. How many levels are there in the organization’s hierarchy?
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. 3. Is the organization tall or flat? Does the organization experience any of the problems associated with tall hierarchies? If yes, which ones? 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. 4. What is the span of control of the CEO? Is this span appropriate, or is it too wide or too narrow?
The span of the CEO according to the hierarchy is two (The CFO/Executive Vice President Gary Fayard, and Executive Vice President/President of Bottling/Supplies Irial Finan). This may seem like a slim span of control, however but the CEO is able to obtain information from other divisions with the use of the Senior Leadership Team. This team consists of the presidents of each regional operating group, and also other high executives like the Chief Marketing Officer and Commercial Officer, and the Chief Innovation and Technology Officer (Thecocacolacompany.com) 5. How do centralization, standardization, and horizontal differentiation affect the shape of the organization? Because of the push towards decentralization, The Coca-Cola Company’s structure has changed over the recent years. In 2006, the company opened a new office in Cairo, so that decisions could be made on a more local level (Annual Review, 2006). The organization has also decided to centralize some functions, such as marketing. Due to problems in Asia, the organization moved the central marketing functions back to the company headquarters in 2003 (Ghemawat, 2003). Based on employee surveys, the organization is making more efforts to increase operational effectiveness by increasing standardization (Thecoca-colacompany.com). There was not much information on how standardization has shaped the structure of the company. Horizontal differentiation has a major affect on the shape of the organization. They are divided into separate subunits for each of their operating groups (i.e. Eurasia, Pacific, North America, etc.). Each manager for an operating group is responsible for everyone else in their division, and they report to the CFO of corporate headquarters. This helps them keep a more organic perspective because each operational group is basically run by itself. 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) Analysis Module #6 – Designing Organizational Structure: Specialization & Coordination 1. What kind of structure does your organization have, e.g., functional, divisional, matrix? Draw a diagram showing its structure, and identify the major subunits or divisions in the organization. The Coca-Cola Company has a multidivisional structure based on geography. A general organizational chart showing these geographic divisions can be found in the appendices (Thecoca-colacompany.com). 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). Disadvantages associated with a multidivisional structure are coordination problems between divisions, high bureaucratic costs, and communication problems (Jones, 2007). As stated in Fox (2007), the company’s goals were unclear, which is a sign of poor communication from upper management. A multidivisional matrix structure may be more fitting for the organization. In these structures, corporate-level specialists would evaluate an individual division and then create a functional plan (Jones, 2007). This structure would increase coordination between levels, and decisions would be made by both divisional and corporate managers. Some weaknesses of a matrix structure include its complexity and it may be too time-consuming (Arendt, Ch.6). The Coca-Cola Company has plants all around the world, so it would be complicated to set up the required meetings, and travel is also expensive. Analysis Module #3 – Managing in a Changing Global Environment 1. List the organization’s products/services and customers and the forces in the specific (task) and general environments that affect it. Which are the most important environmental forces that the organization has to deal with? 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 (Thecocacolacompany.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. The organization is most greatly affected by the general environment. Political and environmental forces and demographic, cultural and social forces all have the strongest impact on the company. The broad portfolio of the organization actually limits the effects of economic forces on the company. In 2006, for North America,
there was no growth in case volume, and in the Philippines, consumption actually declined. This was offset by double digit volume growth in countries such as Russia, Argentina, and China. (Annual Report, 2006). An extremely important force is the political consequences of operating on such a large scale, in so many countries. The organization must be aware of the different laws of each area of the world they operate in. Since the company strives to be an ethical company, they must also be aware that although some things may be legal in one country, they may be frowned upon in other parts of the world (Fisher, 2007). The Coca-Cola Company actually operates in more countries than there are in the United Nations. It has also made it into countries in which U.S companies are not allowed to do business in, like Cuba and Iran. The organization is able to do this because it does not actually operate there. Third parties do the selling. 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. 2. Analyze the effect of the forces on the dynamism, munificence, and complexity of the environment. How would you characterize the level of uncertainty in your organization’s environment? 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) Because of these factors, the environment in which Coca Cola operates in is extremely unstable. Dynamism Low (stable) High (dynamic) Munificence Abundant Scarce Abundant Complexity Few Many Few Many Few Many Low High Environmental Uncertainty Scarce Few Many
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. The organization should possibly look at using mergers or acquisitions in strategic locations. In order to fix the problems in Colombia and India, The CocaCola Company needs to be able to exercise greater control of those situations, which could be done with a merger or acquisition. Franchises do not allow the company as much control as it sometimes may need. 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). 5. Does your organization’s environment match its structure (in terms of organic vs. mechanistic)? What are the consequences of this match or mismatch? The extreme uncertainty of the environment matches the organization’s efforts towards a more organically structured company. The use of complex integrating mechanisms has led to increases in employee satisfaction, and also increased sales growth (Fox, 2007). The decentralization of specific parts of the organization gives the company more flexibility when trying to deal with the uncertainty of its
environment. The company did experience problems in communication with its employees because of its tall hierarchy. Analysis Module #8 – Organizational Design & Strategy 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. 2. What is your organization’s principal business-level strategy: low-cost or differentiation? How successfully is the organization pursuing this strategy? In what ways does it need to improve its core competences to improve its competitive position? Coca-Cola’s business level strategy is differentiation. They are successful using this strategy because their focus remains on marketing. Coca-Cola is “known for innovative marketing that constantly promotes their brand names and protects their domains from competitors (Jones, p. 211, 2007).” 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. 3. Does your organization’s business-level strategy match its structure (in terms of organic vs. mechanistic)? What are the consequences of this match or mismatch? The organization’s structure is extremely suited for their differentiation strategy. The outline says that three factors affect a firm’s choice of a structure to create a competitive advantage. An organization that produces a greater number of products will need control over development, marketing and production (Arendt, Ch.8). As previously mentioned, the organization’s marketing function is mostly centralized, to make sure the message being sent is constant. The chapter 8 outline also says that an organization seeking new customers will need a structure that will serve the new customers’ needs. With divisions based upon region and the extensive market research the company does, the organization is always looking to serve its customers. The third factor says that as the need for new product development increases, an organization will need to be able to coordinate all of its functions. The integrating mechanisms that Isdell began using in 2004, especially the revamped intranet, allows the entire organization to coordinately quickly and effectively (Fox, 2007). The benefits of such a match are evident in the fact that return on equity went from being negative to being 20 percent (Fox, 2007). 4. Is your organization operating in more than one domain (the set of goods/services that an organization produces and the customer groups that are served)? If yes, what corporate-level strategies is it pursuing? How is it creating value from these strategies? Is it successful? 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). Analysis Module #7 – Creating & Managing Organizational Culture 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. Stories are extremely important to The Coca-Cola Company. On the company’s website, there are probably a hundred different stories that are separated in categories. Many of the stories are memories people have about how just the image of the company can take them back to a special time in their lives. All of these stories show just how embedded Coca-Cola is in the American culture. Stories about how previous employees helped someone create a sense of pride in an organization, and also inspire current employees to do the best they can do. 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? To socialize employees, The Coca-Cola Company offers an array of different forums for their employees to go to. At these forums, employees are able to associate with colleagues that are interested in similar things. This allows each employee to support another’s growth, personally and professionally (Thecocacolacompany.com). 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? The company’s culture tends to be more of a mission culture, where there is a shared understanding of the mission and vision. The mission and vision are communicated throughout the company and have the employees collaboratively involved in the culture. The aspect of employees being involved in the creation of a new vision and mission shows that the company is trying to keep its employees involved. The push towards decentralization goes hand in hand with the culture that the organization is trying to create. 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. Analysis Module #9 – Organizational Technology 1. Are input, process, or output activities the source of greatest uncertainty for your organization? Choose one and explain. 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 CocaCola (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. Classification Level of Technical Complexity Small-Batch and Unit Production Low to Medium Large-Batch and Mass Production Medium to High Continuous Process or Flow Production High 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. 4. What forms of task interdependence between people and between departments characterize your organization’s work process? Which of the three types of technology identified by Thompson does your organization use? The Coca-Cola Company is characterized by sequential interdependence. Marketing is the central function for the organization. Once they determine what opportunities the company should pursue, it is up to research and development to find ways to create the beverage. When this is finished, manufacturing needs to manufacture the product at the lowest cost. Because the Coca-Cola Company is characterized by sequential interdependence, the organization uses long-linked technology. 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. Analysis Module #11 – Organizational Transformations: Birth et al. 1. When your organization was founded, what opportunity was it founded to exploit? 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). The company’s main external problem is the uncertainty of its environment. Uncertainty with supplies, intense competition, and the political and social pressure that exist were discussed in Analysis Module #3. 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 (Thecocacolacompany.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 1- Candler marketed Coca-Cola relentlessly. His creativity in his marketing caused the market to expand rapidly. Three years after the company was created,
manufacturing plants existed on each coast and in the Midwest (Thecocacolacompany.com). When Candler decided to stop running the company, he appointed his son Charles Howard Candler the new president. He was fired twice, and has been called one of the worst American business men in history (Butler, 2000). This could be viewed as a crisis of leadership. The issue was not solved by the company itself. Asa Candler’s nephew was furious that was he not given the company, so he organized the first ever buyout in U.S. history. (Butler, 2000) 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. Stage 5- According to the Coca-Cola Q1 2007 Earnings Call Transcript (Seeking Alpha, par.30, 31), Muhtar Kent stated that the changes being made to the company was an “effort to enable the organization to be more effective, efficient and to remove bureaucracy…These initiatives will result in some cost savings, but importantly will improve clarity on decision-making which will allow for more time to be focused on revenue-generating activities.” 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. Analysis Module #12 – Decision Making 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 decisionmaking 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. 1. At what hierarchical level does responsibility for non-programmed decision making seem to lie in your organization? What problems do you see with the way your company makes decisions? 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. Analysis Module #14 – Managing Conflict, Power, and Politics 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).” 2. Which subunit (department, division) of your organization is the most powerful? How do you know? What are the consequences of this subunit being the most powerful? 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 CocaCola to have a strong advantage over lesser known brand names, and also helps when dealing with potential partners.