coca cola - anaysis

8/4/2019 Coca Cola - Anaysis

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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 Culture 21

#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 afew 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).


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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. Whileownership of a sugar/sweetener company is clearly out of

the companys domain, the move would make their core business more profitable. The Coca-Cola Company

wouldbe able to purchase one of these companies through financing. The organizationhas a high credit rating

and, therefore, would be able to raise money for the acquisition at a low cost.

Recommendation 2

The Coca-Cola Companys 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 theirdecision making and

enforce their organic structure by implementing a strategy fororganizational learning. They can begin by

shaking things up more often bychanging 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 alearning organization and instill the organic culture into everyones mind frame. Because of this, The Coca-

Cola Company will have theability 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 thefuture because problems

will seem like less of an obstacle for them. By including more, lower level employees in their decision making

process, they are promoting leadership and inspiring collaboration and innovation.

Recommendation 3

The Coca-Cola Company has become highly criticized for the actions of its bottling partners in Colombia. The

bottling company is alleged to have killed employees due to their ties with a union, and even while The Coca-Cola Company does not own that plant, The Coca-Cola Company has been the target of boycotts and

lawsuits.

Even if The Coca-Cola Company was unaware and uninvolved in what happened, their name is attached to

the product. In order to make the situation better, The Coca- Cola Company should buy the bottling

partners in Colombia. The company can use its resources to create stable bottling plants. Managers would

need to work with union leaders to create an agreement that was fair for both sides. While taking over and

running the plants would cost the organization money, the company would have full control over the activities

of managers. This increased accountability and dedication to correcting any wrong doings would garner some

positive publicity for the companys operations, and provide the benefit of having a stable distribution channelin the region.


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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

Companys incorporation in 1892 (Coca-Cola, 2007), a strong focus on growth and marketing has existed.

Besides traditional advertisements in the local newspaper, the companys 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. Thisfocus on aggressive marketing is, still, the cornerstone for The Coca-Cola Companys 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 companys 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 ourmanagement and employees worldwide-to achieve long-term

sustainable growth (AnnualReport, 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 ofthe 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 theconcentrate 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. Theprocess to create each beverage is

extremely mechanized in order to achieve quick and efficient production (Thecoca-colacompany.com). Theoutputs of The Coca-Cola Company are the syrups and concentrates of its beverages.


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The Coca-Cola Company faces a number of challenges, many of which stem fromthe 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 andpolitical differences of eachmarket. 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 strongcriticism from other parts of the world for its actions (Thecoca-

colacompany.com).

The company has recently been the subject of strong criticism the companys 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.

TheCoca-Cola Companys 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 organizations 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 companys 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 organizations corporate structure is located in the appendices (Reuters.com) The

organizations 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 companys 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


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innovation/research and development department must come up with the products thatthe marketing

function demands.

The majority of the top level managers at The Coca-Cola Company have worked in many different regions

and areas of the company. Many have worked for or ran the bottling companies that partner with the

organization (Thecoca- colacompany.com). The fact that members of the top management team have well

rounded backgrounds allow for problems to be looked at from multiple angles.

#4 Organizational Design

The Coca-Cola Company realizes that it needs to be able to meet the ever changing demands of its customers.

This is why the company pushed towards decentralization in the nineties, and even more so recently. The

organization has two operating groups called Bottling Investments and Corporate. There are also operating

groups divided by different regions such as: Africa, Eurasia, European Union, Latin America, North America,

and Pacific. Each of these divisions is again divided into geographic regions. By allowing decisions to be made

on a more local level, the organization can quickly respond to changing market demands, and

higher-level management can focus more on long-term planning. Country Managers

(2), an article that appeared in Business Europe (2002) had the following information: According to Jon

Chandler, director of communications for Europe, the responsibility for getting it right and for profit is

firmly at the local level (p.3).

Certain divisions of the company, such as finance, human resources, innovation, marketing, and strategy and

planning are centrally located within the Corporate division of the company. Some of these functions take

place at lower

levels in each of the regions of the company; however, most decisions are made at the top of the hierarchy.

For example, in 2002 the decision to sponsor the World Cup was done at the corporate level. Corporate

headquarters, however, allowed the local divisions to make the advertising decisions (Country managers (2),

2002). This allowed each division to specifically design commercials and ads that would appeal to the local

market.

When Neville Isdell took over as CEO and chairmen of The Coca-Cola Companyin 2004, he began to using

more complex integrating mechanisms. In order to deal with organizations extremely low growth rate, Isdell

used teams of top managers to create solutions to the organizations 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 standardizationand 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. Isdells 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 Companys 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


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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 organizations flexibility and responsiveness. The recent shift towards a more

decentralized and organic structure corresponds with the uncertainty of the organizations 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 companys 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 companys 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 ofmembers from various divisions, the CEO is able to obtain a wide variety of information.


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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 companys 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 companys 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. Theproduction 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 Companys top choices for the open CEO position decided not


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to join the company because they did not like the actions of the Board of Directors (McKayand Terhune,

2004).

Due to the organizations 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 companys 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 withmake the environment extremely complex. Recently in the United States, two forces have started to become

inter-woven: cultural/social values and political/environmental forces. Many American companies are now

being lambasted if they do not try to be more environmentally friendly, and The Coca- Cola Company is no

different. The company has received plenty of criticism for its operations in India, with claims that they cause

a great deal of pollution and have damaged local water supplies (Online extra, 2006).

Dynamism Low (stable) High (dynamic) Munificence Abundant Scarce Abundant Scarce Complexity

Few Many Few Many Few Many Few Many

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 Wendys 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.


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#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 Coca- Cola 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 Wendys

restaurant chain. Wendys 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 areanother competitive advantage that cannot

easily be imitated. The contracts and relationships between the two groups create symbiotic

interdependencies, whichmean 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 companys 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 Companys 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 anddivisions 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 (Thecoca- colacompany.com). The rich history of the organization has

allowed the company to compile hundreds of stories of consumers and employees. These stories share real lifeexamples 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


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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 ofcomplexity 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 companys 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, Ch9). The Coca-Cola Companys 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 organizations 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 companys 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 companys 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.


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The Coca-Cola Company experienced overwhelming growth in its early years. Aspreviously stated, Coca-

Cola was being sold in Canada just eight years after the organization was founded.

While progressing through each stage in Greiners 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 companys

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 companys growth efforts, Neville Isdell(the current CEO) created an environment in which everyone felt responsible for the companys 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 Greiners 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 companys regional structure, it is hard to say whether the com pany 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 thenmake slight changes in operations to create better

results next year. The companydoes 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 theorganization to find solutions, the company was able to make some drastic changes to the companys 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 directorsis 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 theboard 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.


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#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 organizations ability

to change and adapt quickly, a necessity in the companys extremely uncertain environment. The examplealso 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 Companys) 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 morecapital to the department also allows for each marketing campaign to be

tailoredto 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


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Coca-Cola. (2007, October 2). In Wikipedia, The free encyclopedia. Retrieved

October 2, 2007, from http://en.wikipedia.org/wiki/Coca-Cola

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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-call- transcript

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,

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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 Coca - Cola. 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 companys 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

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colaindia.com/quality/docs/Quality_System_Manufacturing_process.pdf


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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. 29Issue 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 plants 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. Thepause that refreshes. U.S. News & World Report, 5/28/2007, Vol. 142 Issue 19,

p.EE8-EE10

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http://www.reuters.com/investing

Santioli, Michael. Coke may get bigger,bolder. Barrons, 2/20/2006, Vol. 86, Issue 8, p.17

The science of alliance. (1998). Economist, 04/04/98, Vol. 346 Issue 8062, p.69-

70

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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

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Edition


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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. Pembertons

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, thecocaine 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-Colas 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-Colas venture into the juice market. In

the 1980s, taste tests suggested that consumers preferred a sweeter version of Coca-Cola. This led to the

launch of New Coke. Consumers were angry because they had a strong emotional attachment to the original

Coca-Cola. The company listened to consumers, and Coca- Cola became Coca-Cola Classic, and New Coke

ultimately failed.

The 1990s saw The Coca-Cola Companys 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 companys Annual Report describe as the organizations mission?

Our business is nonalcoholic beveragesprincipally 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


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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 assetsour brands, financial strength, unrivaled distribution system, and

the strong commitment of management and employeesto become more competitive and to accelerate

growth in a manner that creates value for our shareowners (Annual Report, 2006, p.33).

3. Describe the organizations inputs, processes, and outputs.

The inputs for The Coca-Cola Companys 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 tothe juice products, orange juice concentrate is the primary raw material

(AnnualReport, 2006)

The processes for producing the organizations 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 ingredientsare 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 organizations major problems or issues. What challenges confront the

organization today? How does its organizational design relate to these problems?

The Coca-Cola Company faces a wide variety of problems. In the United States, consumers are becoming more

health conscious, which has hurt the sales of Coca- Cola. Due to The Coca-Cola Companys global presence,

the company must deal with many political challenges. They have been criticized for causing a great deal of

pollution, damaging towns water supplies, and have been highly criticized for its alleged anti-union actions.

Coca-Cola also faces increased competition from well- established global companies, and local organizations

as well (Annual Report,2006).

The Coca-Cola Company also faces challenges with its supply of rawmaterials. 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 companys problems are based

geographically, the decentralized structure is ideal. Each region has different regulations, different consumer


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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 organizations 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 Companys 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 NevilleIsdell 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 withtheir customers (Annual Report, 2006).

Analysis Module #2 Stakeholders, Managers, and Ethics

1. Identify the organizations 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.


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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 partys 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 organizations 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 divisionalmanagers, 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 ofa European Division, and president of what it now the Northeast Europe/Middle

EastGroup.

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 companys 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 wasan executive vice president for MasterCard International and created thepriceless

campaign.


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Analysis Module #4 Organizational Design

1. How has your organization responded to its design challenges?

a. 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 dayoperations 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 1990s, Coca-Colas 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 yourorganization 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 companys managers to help assess the

companys troubles. Then 70 of those managers were interviewed. Isdell had 150 of the companys 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).


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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 alsouses 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 organizations 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 thecompanys 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 andflexibility. As stated earlier, complex

integrating mechanisms are being used, andwith 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.


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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 organizations hierarchy?

We were unable to obtain exactly how many levels there are in the organization, however according to an

organization chart found on the companys 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 (Thecoca-

colacompany.com)

5. How do centralization, standardization, and horizontal differentiation affect the shape of the organization?

Because of the push towards decentralization, The Coca-Cola Companys structure has changed over therecent 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 separatesubunits 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 hassix 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 faclitate the flow of information, the organization conducts

surveys of its employees, and also has frequent meetings, and uses a more sophisticated intranet (Fox, 2007)


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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 companys 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 organizations 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 Barqs root beer, Citra, Fanta, Mellow Yellow, Mr.Pibb, Fresca, Sprite, and Tab. Powerade is there lone brand of sports drink. Nestea is their most popular tea

beverage, and they also have Enviga and Gold Peak. Dasani and Dannon make up their two brands of water

(Thecoca-colacompany.com).

The customers of The Coca Cola Company are actually not the people that consume the beverages. The

customers for the organization are bottlers, fountain wholesalers and retailers, and distributers (Annual Report,

2006). The bottlers in turn sell the finished product to supermarkets, retail chains, restaurants, etc. The

forces in the general environment are as follows: demographic and cultural, international, political,

technological, economic, and environmental. The forces in the task environment that affect the company are

as follows: customers, distributors, unions, competitors, suppliers, and governments.


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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 companys 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 regions consumers desire. Coca Cola has a very

local oriented focus. Nearly all of Coca Colas 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 organizations 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 Colas 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 environments 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 companys 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


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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 campu

coca cola - anaysis

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