5UIBP Level 5 Innovation and

Business Performance
Open-book exam question and
answer booklet

June 2020

Centre name Oxford College of Business

your college name

Learner’s name Sandini Paramullage

First Name Last Name
ABE membership number 6 3 8 2 0 1
your ABE membership number – i.e. 123456

Learner Statement
All work that learners submit as part of the ABE assessment requirements must be expressed in their own
words and incorporate their own judgements. Direct quotations from the published or unpublished work of
others, including that of tutors or employers, must be appropriately referenced. Authors of images used in
reports and audio-visual presentations must be acknowledged.
Sandini Amasha Paramullage
By ticking this box, I Insert your full name

☒ am confirming that the work I am submitting is my own and I have acknowledged ALL
the sources of reference I have used in constructing my assignment.

Date: 08 06 2020
Day Month Year

For ABE use only

ABE 2nd mark
ABE mark (if applicable)
Important information
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Guide to Study and Examination. This guidance document provides important information on
how to prepare for, take and submit an ABE open-book exam.

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General overview
The word count for this examination is 3,500 words (-/+ 10% tolerance, i.e. your submission must
not be less than 3,150 words and must not exceed 3,850 words). There will be word count
requirements indicated next to each question. Markers are instructed to stop marking when the
maximum word count is reached.
NOTE – Appendices and the References list (if used) are all excluded from the overall word
count, i.e. the full word count allowance is for the main body of your submission.
Use allocated space for the business profile of your chosen organisation. Write your answers to
each question in the specified location. It is important that the marker can easily identify which
question is being answered otherwise the submission will not be marked.

Context – Organisation Summary

You must choose an organisation on which to base your answers, i.e. your answers must be set
in the context of this specific organisation. Choose an organisation with which you are familiar. It
must be a real organisation and the type of organisation you choose must be relevant to the
questions.
All your answers must be based on this organisation unless the question instructs you differently.
You must provide a summary of background information on your chosen organisation (200
words). This must include:
 Name of the organisation
 Size of organisation
 Main markets where it operates (geographical locations)
 Examples of products and services
 Key competitors
 Main customer segments
In addition to the above, you can include any other information which might be useful for the
marker to understand the context of your answers. Your organisation summary is not included
in the overall word count.

Syllabus Content
Before you answer the questions it is strongly recommended that you familiarise yourself with
the study content relating to the unit. This content can be found in the Qualification
Specification. Understanding this will help you to construct your answers and will ensure the
content is relevant to the questions set.

NOTE – The organisation summary must be completed and must accompany the
submission otherwise the assessment will not be marked.

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Business profile (200 words)

The Coca-Cola Corporation is a beverage retailer, producer and marketer of concentrates and
syrups for non-alcoholic drinks. In the U.S. there are 500 bottlers and 183000 employees with
retail sales of 61,000,000,000. American soft drinks consume an average of 55 gallons per
person per year. It is home to over 500 brands of beverages, some 20 of those billion-dollar-
brands, including four of the top five soft drinks: Coca-Cola, Diet Coke, Fanta, and Sprite. It also
markets water, juice drinks, energy and sports drinks, dairy and plant-based drinks, and ready-
to-drink teas and coffees, in addition to soft drinks. Minute Maid, Powerade, Dasani, Honest
Tea, and Vitamin water are other top brands. The Coca-Cola Company operates in Atlanta,
Georgia. Its stock is on a New York Stock Exchange (NYSE) list. Coca-Cola manages six
(mostly geographically based) operating segments including Europe, the Middle East, and Africa
(EMEA); Latin America; North America; Asia Pacific; Bottling Investments; and Corporate. Soft
drinks from the Coca Cola are mainly for all consumers but there are some areas where Coca
Cola targets specific consumers. For example, the Coca Cola diet targets the entire market
being older and between 25 and 39 years of age. The biggest rival of Coca Cola is Pepsi who
markets the same product almost and is in direct competition with us. Red Bull, Vitamin C,
Energy Drinks are indirect competitors.

OPEN BOOK EXAM QUESTIONS START ON THE

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Question 1 30 Marks

Propose measurement techniques that might be beneficial for your chosen organisation to use
as an aid to business performance.
Use examples to support your answer.
(1050 words)

Measuring the performance is monitoring budgets or targets against real results to establish how
well the company and its employees are functioning as individuals and as a whole. Performance
measurements may relate to short-term (e.g. cost control) or longer-term (e.g. customer
satisfaction) objectives. Modern performance measurement practises include use of the Balanced
Score Card perspective, Benchmarking, use of Cleaner Production, focusing on key performance
indicators and the philosophy of Total Quality Management.

Coca Cola's performance management system (PMS) directly links to rewards and recognition,
and career development. The Coke PMS follows the basic steps of PMS from coaching and input
preparation to. However, proper control and balance system should be introduced between goals
and performance, performance evaluation of current annual bases has been carried out, for high
motivational level, high quality it requires quarterly bases. A programme of communication should
be in place between employees and management about the career direction of workers, it is
easier for management to recognise and assess what workers really want and then assign them
compensation.

KPIs and metrics offer a way of assessing how well organisations, business groups, programmes
or individuals perform in relation to their strategic objectives and goals. But the primary benefit of
KPIs is not calculation per se, but allowing rich data-driven conversations of success and better
decision taking. If Coca Cola Company wants to identify the Key Performance Indicator (KPI), the
best approach to use is the top-down approach. The first step in this approach includes decision-
making which defines the scope. The marketers predict the likely results they are trying to
influence in order to come up with KPI and metrics. It follows that asking opposite questions (Shaw
et al, 1997), the answers help to determine the relation between the questions and the outcome.
Then the data is determined which is needed to answer the query. Marketers then check for this
data and decide what corrective steps to take. The measures taken aim to enable the
achievement of the goals.

In addition to KPIs, performance appraisals are probably the performance management tool most
commonly used. When properly used, performance assessments are incredibly powerful in
aligning individuals' goals with the organization's strategic goals. However, in order to get the most
out of this tool, employees need to feel the appraisal process is a regular, honest, fair and
constructive two-way conversation. If not, appraisals can be a powerful de-motivator, resulting in a
performance decline. Performance appraisal of coca cola is done annually. They appraise the
employee because of the organisation's performance on goals. At the beginning of the year, they
set the goals and tell the employees about the goal if the employees accomplish this goal they
appraise. Defining the job means making sure you and your subordinate decide on their roles and
quality of employment. Appraise the results: Means comparing the actual performance of your
subordinate to the set expectations. Providing the feedback means reviewing the subordinate
output and progress and making plans for any necessary growth.

Tsang (1998) adapted the balanced scorecard created by Kaplan and Norton (1992) to provide a
strategic approach to the measurement of maintenance efficiency. The balanced scorecard
includes operational measures relating to customer satisfaction, internal processes and the
innovation and improvement activities of the organisation as well as financial measures. Tsang
(1998) recommends that the balanced scorecard would consist of a combination of both outcome

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indicators and output generators, as explicitly applied in maintenance. Outcome indicators
represent the outcome of past decisions; the drivers of success have the ability to predict future
outcomes.

Benchmarking can be defined as a structured approach to learning from other organisations about
processes and operations and applying that knowledge gained within the organisation. In order to
identify causes for superior performance, it consists of dedicated work in measuring, comparing
and analysing work processes among various organisations. Benchmarking aims to speed up the
process of strategic change that leads to product , service or process breakthroughs or continuous
improvement. Consequently, it results in increased customer satisfaction, lower operating costs
and improved competitive advantage.

Coca-Cola bottling plants based more on key performance metrics, and as success assessment
methods, benchmarking. These practises are communicated through company notice boards,
departmental meetings and at management level in the organisation.

Another way of measuring the performance of an organisation is to analyse the financial situation.
―A company's financial output is reflected in the aggregated analysis of all of its operations.
Financial analysis represents overall performance and production efficiency, marketing and
business operation level and price, developments, and other company activities. Financial
performance is obviously a multi-criteria model composed of a large number of partial
characteristics and relationships "(Dluhošová et al., 2014, p. 71). To measure these performances
we can use financial ratios like Return on Equity (ROE), Operating profit margin, Investor ratios
etc. Financial Ratio Analysis Method: To understand the growth prospects of businesses by
measuring the proportion of related indicators in financial statements, evaluating the financial
condition of the enterprise and operating performance; It is the most basic instrument of financial
analysis. By comparing the data of several important items in the same financial statement, we
can find the proportion of the company's business activities analysed and evaluated, as well as the
company's current and historical situation.

ROE measures a company's return on its equity capital including preferred equity and common
equity. The return is measured as net profit, as noted (i.e. interest on debt capital is not included in
the return on equity). ROE also measures how managers use equity to fund their daily operations
and the development of follow-ups. Return on equity is the ratio of net income and equity of
companies. A higher return on equity suggests a reinvestment of the company's earnings to
generate more revenue. According to Appendix 02 this is not good news for shareholders since
the return on equity fluctuated between 2014 and 2017. For other investors more needs to be
remembered.

The operating profit margin refers to the ratio of operating profit to the operating income of the
business. In other words, operating profit margins reflect the remaining income after payment of all
the contingent or fixed costs. From Appendix 01, we can see that the operating profit margin from
2014 to 2017 did not exceed 30%. This shows that the Coca-Cola Company did not get enough
revenue from normal operations, and insufficient funding for the business was provided by its
operations and revenue.

An important part of creating a high-performance culture is investing in or developing performance

management tools, techniques, and processes like these. And that's exactly what every company
in every sector, regardless of scale, should be looking for – good results at every single
organisational level.

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Question 2 25 Marks

Discuss potential sources, drivers and patterns of adoption of innovation appropriate

to your organisation’s goods or services.
Use examples and theory to support your answer.
(875 words)

Far from eschewing creativity today, Coca-Cola is a hotbed of development today and is using the
power of design-thinking techniques to drive business growth. The Coca-Cola Company knew its
continued success due to the greatest venture in the cycle of innovation. Innovation has proven to
be vital equipment consumed within the countries from their various brands. Coca-Cola Company
believes that the innovation process involves a combination of different resources and opinions
which will result in more sales. The company has gone into packaging creativity that is
distinguished by the unusual contour-shaped bottles used by the company to packaging their
beverages.

A more recent innovation – and one with more sex appeal – is Coca-Cola's Freestyle Mobile app.
"The U.S. quick-service restaurants now have more than 20,000 machines. In a self-service drink
dispenser, you typically get four choices: coke, diet coke, sprite and Fanta etc. Freestyle is a new
interactive platform where customers select combinations on an iPad-like screen and can have
120 different combinations-fully personalised, all coming from the same spout. It revolutionises the
whole experience of quick-service-restaurant drinks.

Coca-Cola's customers are a key source of outside talent. One lesson from the New Coke fiasco
is that consumers' feelings about the brand are very proprietary. Today, companies providing
services and products on the marketplace are incredibly privileged as compared to previous
generations, as there are all these social media platforms that you can tap into directly and get
instant feedback. They can co-create new products and services. That is an incredible privilege
that today's companies have – speeding up times and testing things with customers and
consumers, like never before. Input from consumers tends to bring about incremental innovation,
not disruptive innovation. So while customer engagement is important, companies need to rely on
their own staff, as well as experts from outside, to generate big breakthroughs.

Coca-Cola’s business was originally defined as one operating in the market for carbonated soft
drinks (CSD). To reach these markets further, Coca-Cola has broadened the company concept of
"fully packed liquid refreshments." This has enabled the company to look beyond its traditional
market for CSD, to markets such as bottled water, fruit juices, and innovative market-ready tea.
Consequently, they used a Diversification Approach effectively.

EYeka is a platform for co-creation, where creativity is put into action to engage in co-innovative
projects. Coca-Cola, for example, used the innovative medium of eYeka to gather fresh
interpretations of its brand promise: "energising refreshment." Over a couple of weeks they
received over 2,500 pieces of content. Eventually 6 videos were broadcast to millions of Coca-
Cola fans worldwide on their Facebook, Twitter, Google+ and YouTube pages and 2 of them were
selected by Coca-Cola to join the prestigious 2012 Cannes Lions International Creativity Festival.

Innovation in the product is important to counter the purchaser's need and demand for a range of
beverage varieties. Coca-Cola differentiates by taste, already. Recent additions to the product
portfolio at Coca-Cola include regular Coke Zero, C2, Fresca, Diet Cherry Coke, and Cherry Coke,
Vanilla coke, Coca-Cola with Lime, Lemon Coca-Cola and many more. Constant product
innovation is primarily imperative. Coca-Cola must be able to understand the needs and
preferences of customers, while retaining the flexibility to change with the changing market. Coca-
Cola needs to keep up with the changing trends.

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Coca-Cola uses a differentiation strategy to create value for its customers and consumers, in order
to compete on the global beverage market. The mission statement of Coca Cola reflects this: "To
refresh the world, to inspire moments of optimism, to create value and make a difference" Coca-
Cola takes the following strategic growth paths to accomplish this mission. This is the lucrative
non-carbonated market, with coffee, energy drinks and sports drinks included. Coca-Cola will
enter this market with an initial emphasis on the platforms for tea, coffee, soy and enhanced
hydration. Coca-Cola implements a market-by-market approach to System Health, including
growth in bottler sales, balancing volume, size, combining investment and share costs,
emphasising pricing, cost efficiency, and market efficiencies. Another goal for Coca-Cola here is
the freshly brewed tea and coffee pilot called Far Coast, launched in Toronto, Singapore and Oslo.
Other incentives include iCoke (a Coca-Cola campaign to support its online contests), product
formats within retailers, and licencing of technology and ingredients.

The introduction of drinks to match local tastes has been a key aspect of the new product
development programme, and there is a strong regional bias to spat on new releases. Efficient
technologies, new product launch and the ability to respond to growing customer and market
demands with agility are important. This will be achieved by implementing new products and
formats which are designed and implemented with success. Diffusion of research into
technologies aims to improve our understanding of how social change happens, a crucial concern
for all social scholars. Hence, at the aggregate level, research on innovation acceptance is mainly
concerned with analysing whether the overall population embraces an innovation in the adoption
process, without taking into account the behavioural and perceptual characteristics of the
individual customer.

Looking ahead, a key recommendation to Coca-Cola is to continue product innovation and extend
its product line. The soft drinks industry is a mature, competitively-saturated industry. The industry
is also no longer expanding, and market share is actually declining as more customers search for
healthier alternatives. Coca-Cola will be able to boost its profits by continually introducing new
products and allowing the company to continue growing. Having a diverse product portfolio would
also make the company very profitable, which is appealing to both investors and creditors. Coca-
Cola would agree that creativity generates value. Innovative concepts may be in merchandising,
developments in the supply chain or new goods, packages or services.

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Question 3 25 Marks

Assess the information requirements needed to maintain and manage an appropriate level of
innovation within your organisation.
Use examples to support your answer.
(875 words)

Focusing on creativity and cooperation with its clients, staff and partners is an important aim for
the company. This goal is particularly important for a multinational business like Coke and needs a
substantial expenditure in time, money, and capital. For Coke, some of the changes which
fostered creativity and collaboration in the most effective way have come in the form of new
information systems. One influential example was a revision of the 'digital asset management' of
the company. While Coke began to broaden its global footprint, an growing quantity of digital
content was distributed in an unorganised way. Employees had to spend considerable time
researching market demographics, sales figures, images, videos, and cultural information, as well
as grappling with disorganised record keeping through a growing mountain of content.
The strength of Coke is focused on savvy photos, texts, and promotions, but sales and marketing
teams around the globe lacked easy access to this knowledge. Coke used IBM Content
Management software to create an online image library and digital archive containing
photographs, documents and videos that can be accessed via a centralised web portal by all
employees.
By developing the Common Innovation Framework, Coke continued its efforts to foster innovation
through information technology: a system that allows Coca Cola employees worldwide to search
for and apply concepts to all 2,800 beverages from Coke. The programme blends project
management with business intelligence and is designed to produce products and sell them across
all Coke’s assets in a clear and effective way. The system is used for the production of new drinks,
the design of new equipment and the creation of packaging designs for new existing items. The
system's aim is to make beverage and brand ideas readily accessible to marketers and developers
around the global industry that have led to the success of such products, so that such ideas can
also be used in potential products.
Coke Zero is an example of how the Modern Innovation System drives entrepreneurial creativity
and collaboration. Coke Zero is the company's most recent smash hit. It is sold without the bitter
aftertaste, as a diet cola. The Common Innovation Framework enabled managers and personnel
to view the practises that made it successful in other countries and apply those concepts to future
products in different areas of the company and different regions (finance, legal, marketing, R&D).
In terms of what's going to be common, Japan is known to be the most cutting-edge country; the
Shared Innovation Framework enables development teams in the United States and Europe to
see what's popular in Japan and encourages them to take those trends into their own markets.

Coke is also innovating for marketing its products within existing social networks such as
Facebook. Burn Energy Drinks, a Coca-Cola Europe-developed coke brand, introduced an
innovative application, Burn Alter Ego, which blends established Facebook friendships, avatar
mash up photo technology, and party storytelling. The application enables users to develop a
virtual person with a 'nightlife' that is completely separate from the displayed. The more you use
your character, the more options you have to tailor your avatar to your needs. The application will
bring excitement and randomness to established friendships and the developers hope to generate
more hype around Burn Energy Drinks in the process.

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There are many factors, both internal and external, that affect management's planning function
within an organisation and Coca-Cola is no exception. For Coca-Cola products, thirsty people
worldwide reach for refreshment more than a billion times a day. Coca-Cola is traditionally the
most popular and largest-selling soft drink as well as the world's best-known beverage. The Coca-
Cola franchise encompasses about 398 million people. Coca-Cola Companies employs about
72,000 people who run 463 plants, 54,000 cars and about 2.4 million vending machines, soda
dispensers and coolers.

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Question 4 20 Marks

Evaluate the risks and uncertainties that innovation might create in relation to the performance
of your organisation.
(700 words)

Coca Cola Company regards their challenges and opportunities in a global sense as a business
that operates with a growth mentality and presence in almost every nation and territory in the
world. Many of the challenges we face are interconnected and constantly changing, and we need
to consider them in order to achieve our long-term vision of expanding in a way that generates
value for all people — consumers, buyers , suppliers and communities — while working towards
solutions that support us all. Coca-Cola took one of the biggest risks in consumer product history
on April 23, 1985 by announcing that it will reinvent the formula for the most popular soft drink in
the world. New Coke was introduced by Coca-Cola which marked the first change in formula in 99
years. What followed was an unintended firestorm of media and general public protests and
criticism. The move is now considered one of the most important marketing blunders of all time.
Consumers follow healthy diets and behaviours, including eating and drinking less sugar, creating
demand for a wider range of low- or no-sugar products, and new ingredients, such as protein
based on plants. This phenomenon is a growth opportunity for us, and as we develop our long-
term market plan, we listen to the customers. There are also real risks, as well as the market
potential. For instance, consumers, public health practitioners and policy officials are deeply
concerned about the growing incidence of obesity, linked to a variety of non-communicable
diseases. The food and beverage industry has a responsibility to help effectively tackle these
issues through creativity and new product offerings.
Concern about plastic waste has risen sharply, as waste collection and recycling infrastructure has
not kept pace with plastic production, leading to an increase in environmental plastic waste. Issues
such as shifts in local laws to deter plastic use and the cost of material inefficiencies in linear
models in production all pose risks in our global operations. There are hotspots in regions where
waste recycling is lowest and/or where pollution harms to the environment is most severe,
including oceans and coastal areas.
There are multiple opportunities for innovations in packaging materials, such as plant-based raw
materials that replace petrochemical feedstock, and circular models that turn post-consumer
plastics into new, economically viable value streams. These modern plastic manufacturing models
give enhanced impacts on the environment and reductions in carbon emissions, accelerate the
transition away from single-use plastic and also generate new employment in some regions.

Water quality and availability are at great risk, including unsustainable farming practises, poor
sanitation infrastructure, runoff and industrial pollution, and overuse of water resources. In
addition, climate change is exacerbating water scarcity through increased droughts and floods,
which in turn impacts farmers and other water users in many different regions who will need to
adapt to water stress. Our goods, like the people living in the communities where we do business,
rely on the availability of good quality water.
There is growing concern that rising global average temperatures and the resulting climate
changes will lead to significant weather pattern disruptions around the globe, creating more
frequent and severe natural disasters, including fires, storms and floods. This may affect food
security in addition to direct impacts on our operations and communities, and also decrease the
agricultural productivity — and / or increase the cost — of key agricultural commodities. Also rising
are policies that incentivize pollution cuts, and programmes that reduce deforestation or other
negative impacts by improvements in land use for food production. These changes are important
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considerations for companies as they assess CO2 emissions as well as key supplier relationships
in their value chains. These and other factors combine to create a growing financial business risk
which is becoming increasingly aware of by investors and other stakeholders.
Companies have to respond to customer demand needs, even if this means competing with them.
Survival by trying to do what has always been done is not a viable tactic on the marketplace of
today. Companies must aim for grandeur in this setting and not just choice among existing
options. Marketing isn't about the art of selling goods; it's about keeping the business important to
the needs of the consumer, even if that means a leap of faith. If Coca-Cola had refrained from
taking the gamble and refused to launch the 'fresh coke' initiative, Pepsi may very well have
overtaken it as the market leader. In an ever-changing, turbulent business landscape, it's not
enough to approach marketing from the perspective of products and services alone to engage
consumers effectively. Intelligent risk-taking is needed to keep our company important, is worse
than failing over and over again to sit around and follow the same methods that have worked for
years. You learn nothing from standing still in the 21st century, and achieve nothing.

In order to remain innovative Coca-Cola must continue to invest in new products and technology.
By encouraging innovation in its daily operations, Coca-Cola can create a business culture that
remains innovative. Investing in higher research has different reasons and threats to it. The
business will create new and improved products and technologies by studying industry dynamics
and deciding how Coca Cola should respond to those changes.

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 END OF PAPER

TOTAL NUMBER OF MARKS FOR THIS

PAPER IS 100

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Reference list
1. The Beverage Marketing Corporation (August, 2019) 2019 Carbonated soft drinks in the
US.
2. Walston, C. (2014) Coke vs. Pepsi: Where the real difference lies.
3. West, L. (2015) What is the problem with soft drinks?

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Appendix (optional)

Appendix 01

Appendix 02

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