The Coca Cola Company, founded in 1886 in Atlanta, the United States, is the world’s largest nonalcoholic beverage company. Coca Cola currently owns and markets more than 500 beverage brands (Anonymous, 2010), including waters, sports and energy drinks, juices, tea and coffee, which are distributed in over 200 countries throughout the world.
Along with Coca Cola, the company also owns Sprite, Fanta and Diet Coke, which are four of the world’s top five nonalcoholic beverage brands (Anonymous, 2010). As a company with a history of over 120 years, the Coca Cola Company now has an operating structure with seven operating segments and approximately 139,600 worldwide employees (Anonymous, 2010). Today, Coca Cola has subsidiaries around the world and has developed its own management and distribution system.
The relative data and evidences shown in the following analysis will illustrate the effectiveness of the current structure model of Coca Cola and how managers of Coca Cola applied the hybrid structure to manage the subsidiaries in different regions efficiently and the strategy of decentralization to reduce the management cost and improve autonomy of these different departments. Furthermore, Coca Cola values its unique organizational culture and has set different mission, vision and values to guide the organization, the segments, and its teams.
These invisible forces have been serving as the “Roadmap” for the company to achieve the long-term goals. In the second part of the report of the company culture, facts and stories mentioned would give examples and interpret how the “liability of a strong culture” could impact Coca Cola’s competitiveness and why it is so important for Coca Cola to understand customers’ needs in order to introduce more customer-orientated organizational culture rather than outcome-oriented culture. Organizational Structure
Coca Cola is a typical complex organization by having seven operative units in geographic areas around the world, six functional departments being responsible for different tasks and a diversified labor force from different nations. Additionally, a combined characteristic of Mechanism and Organism is also one of most representative features of complexity. Under this structure, employees can not only improve their performance to the maximum level, but they also help the company expand global market and adapt the changing environment.
The Coca Cola Company currently employs approximately 139,600 employees (Anonymous, 2010). According to a general organizational chart stemmed from the company’s website, the division of labor is based on diverse job designs which exist specific rules and regulations to direct employees and managers. There are at least 5 hierarchical levels in the corporate. At each level, for instance, one regional director supervises about 10 subordinates on average; therefore, the p of control is fairly wide.
And based on the information of its website, the geographic regions are broken down into the diverse units that are located round the world, which are mainly North America, Middle East, Asia, Europe, Eurasia, Latin America and finally Africa. And then, each subunit has its own organizational structure based on functional departmentalization. For example, in North America, its major departments are marketing, finance, and packaging, sales, and research and development administration.
In addition to that, in terms of the division of the authority, originally, the company has a more centralized structure, which the decision is mainly made by a high-level management, and the communication is restricted due to the hierarchy of the authority. However, as Coca Cola encounters uncertain environments when it expands of its business, the organization realizes that it must meet the changing demands of its customers to win their business.
Thus, Coca Cola began to push towards decentralization in the nineties and even more recently (Fox, 2007), which means that decisions are made on a more local level and communication can spread freely to quickly react to conspicuous market demands. Simultaneously, higher-level management can have the authority to take control of the overall strategies and concentrate on the company’s distal goal. The Coca Coca’s big success is not only due to its continuing effort on producing different beverage, but also its moderate organizational structure plays a salient role.
Firstly, because the Coca Cola Company, based on the annual report, has over 400 products, the product structure seems to be too costly and unrealistic to implement. Therefore, the multidivisional structure is an appropriate structure and brings benefit for the company. A significant strength of this structure can allow the company to react to changing and uncertain environments while also maintaining a level of stability. Moreover, the specific decision and strategy can be made by regional managers to suit particular situation of one area without triggering some conflicts.
For example, when one region wants to conduct a specific marketing promotional strategy which is not be appropriate for another region due to the diverse marketing environment, so decisions about specific marketing tactics are made closer to that region. And thirdly, within each region, the structure is mainly divided based on the functional departmentalization, and undoubtedly, communication among each functional unit’s members is free and efficient because of the same knowledge and expertise. Thus, the work and decision can be done more efficiently.
Another big beauty of its structure is the mix of both centralization and decentralization to run the business. According to an article “Changes in the Organization of Work: An Empirical Assessment” stemmed from a journal of International Conference Proceedings, it concludes that a more decentralized hierarchy improves coordination and reduce monitoring costs. And eventually, since employees are guaranteed more flexibility from the workplaces, more job satisfaction can be acquired through more tasks autonomy and responsibilities.
As a result, it will lead to complementarily effects, which productivity gains can arise. From this perspective, Coca Cola seems to get benefits from this structure change. On one hand, a centralized structure remained at top level is to help senior managers take control of power and provide a distal goal for the whole organization. On the other hand, pushing decentralization also works well in the local units. Because employees can perform tasks from beginning to the end, they can figure out problems and have opinions through the working process.
And, additionally, under the decentralized structure, the communication is freely flowing. Employees are more encouraged to express opinions and provide recommendations for company’s operation at the weekly me eting, and gradually, a participative and communicative environment is formed which leads to employees’ job satisfaction and organizational commitment. An article appeared in Business Europe (Bogomolny, 2004) 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. ). ” Obviously, productivity increased and company gets the profit in return via this structure. To sum up, it appears that the Coca Cola Company is pursuing for a hybrid structure, which take advantages of both mechanistic and organic structures, while trying to minimize negative effects of each. According to the research above, it seems that the organization works well after all the changes implemented. However, after the in-depth analysis of the organizational structure, one subtle recommendation can be addressed.
According to “Committee on Management and Productivity”, it is beneficial for all levels of company to put various customers’ needs into consideration when designing organizational structure So although the Coca-Cola possesses a hybrid structure, its structure does not adequately focus on the customer side. In order to delivering the best value to customers, a part of structure needs to serve the customers in terms of dividing them into different generations. The reason for this suggestion is that customers are picky and are facing abundant choices of beverage currently, and they also more care about their health. Jones, 2007) Thus, a more cautious decision will be made by customers while purchasing the beverage. Reasonably, if the Coca-Cola Company should focus more on customers to analyze their preference based on different segments, and provides adequate relevant training which guided the employees to deliver satisfied good and service to customers. Consequently, the company can produce the ideal beverage to reach the expectation of different generation, and may acquire a profitable benefit in return. Organizational Culture
One of the most important building blocks for the high success of the Coca Cola Company is its organizational culture. The culture of the Coca Cola Company is mission-driven: focused on refreshing the mind, inspiring optimism, and making a difference (thecoca-colacompany. com). This durable mission facilitates Coca Cola in creating innovation, people orientation, diversity and an aggressive culture since John Pemberton founded it in 1886. The Coca Cola Company has reached its current strong culture through decades’ effort.
Employees share the common values that the company provides leadership, collaboration, integrity, accountability, passion, diversity, and quality (thecoca-colacompany. com). In 2004, the Coca Cola Company came to a reinvigorating stage. E. Neville Isdell was nominated as the new chairman of the board and CEO of the Coca Cola Company. Due to the health and wellness trend, increasing competition in the beverage industry and a series of top leadership changes, Coca Cola had been experiencing hugely decreasing soft drink sales.
By engaging in an open dialogue about the company’s values and future development among 150 managers from worldwide divisions, a “new vision for the sustainable growth” has emerged (Andrew Martin, 2007). This new vision achieved an aggressive marketing strategy by refreshing the coke brand and laid particular stress on advertisement and product development (Andrew Martin, 2007). From the perspective of the dimensions of the culture, Coca Cola wants to be innovative while they are risk-averse. The company becomes more open and flexible since it gives its employees more rights.
It remains aggressive at sales. Lastly, after the 2004 change, the company has become stable and gotten rid of its previous dysfunctional status (Andrew Martin, 2007). Ultimately, the company is measured by its stock value, which saw great increases through the rest of 2005 (see graph 1 in Appendix). In general, the current culture of Coca Cola Company is very effective. Based on the theory of organizational culture and effectiveness, a practical organizational culture has four fundamental traits: involvement, consistency, adaptability, and mission (Denision and Mishra, 1995).
Two of these traits, involvement and consistency, are indicators of openness, flexibility and responsiveness, and are strong predictors of growth. After the changes in 2004, Coca Cola Company favors increasing face-to-face interaction, providing more constructive feedbacks and generating an ideas sharing atmosphere. All of those improvements and changes allow Coca Cola getting open and flexible. Additionally, due to organization focuses more on the opinions and thoughts from lower level of employees, and grants them power to make their own choices under certain level.
The communication and awareness in Coca Cola increase from 65% to 76% (Dianne, 2008). Openness and flexibility contribute significantly to the vision of driving long-term sustainable growth by accelerating innovation and employee’s engagement and satisfaction. The other two traits, consistency and mission, are not only indicators of integration, direction and vision, but also are better predictors of profitability (Denision and Mishra, 1995). The culture of Coca Cola is guided by its enduring mission, which is to be the largest beverage company in the world since it was founded in 1886.
This clear objective directs both employers and employees to create values and make differences for organization. Besides, the vision of Coca Cola, which is people, portfolio, profit, partners, planet, profit and productivity, declares that the employees need to achieve sustainable growth and great profits. Overall, the culture in Coca Cola Company properly reflects four traits, and fosters the effectiveness in the whole organization. What is more, both before and after the change, the company has been emphasized the aggressiveness on sales for a long time.
It is easy to arouse some immoral competitions between the companies and the employees. But after the implementation of the “manifesto for change” policy (Gordon, 2008), which is aimed to improve environment responsibilities, self-discipline at corporate level and social responsibilities. Therefore, the ethic of the organization has been improved significantly, which makes the Coca Cola Company a better and more stable workplace. However, there are two shortcomings in the current culture. First, the Coca Cola Company has hesitated to reinvest and take risks.
In 2005, the Coca Cola Company introduced 2 new products, the Coke Zero and the Diet Coke. Luckily, the Diet Coke took the Pepsi cola’s place and became the No. 2 soda in the US. Unfortunately, the company only improved its product based on its original products. Although Coca Cola has raised the new missions of carrying out health and fitness, due to its resistance to change and one step slower than Pepsi, it has merely no effect. This is exactly the liability of strong culture—resistance to change. Considering the long run sustainable growth, the company should encourage innovation and all employees’ participation.
At first, reduce barriers of information flows within the organization. Managers must make sure that people can access resources whenever they need. Secondly, reward employees for practical ideas. Management should not only provide premium to creativity ideas, but try to find out and stratify employees’ internal needs. Thirdly, participation can always help to overcome resistance to innovation. When employees actually involve into the organization, they would realize some flaws of existing products. And this will stimulate them to get fascinating thoughts and ideas.
Lastly, it is necessary to get supports and encouragements from managers. Moreover, company can introduce new members to speed up the change because new blood can always bring fresh visions into organization. Second, currently, the Coca Cola Company is outcome orientation and aggressive on sales. In order to match with its new culture, the company should better move towards the strong establishment of basic values and assumption. Therefore, the company can turn to other direction and explode a new dimension of culture for a better fit.
First of all, pay more attention to the customers and employees by fulfilling the healthy ideas and assumptions penetrated to them level by level and gradually, they can harbor those views to establish a norm which is to chase a healthy lifestyle. Secondly, since the brand has already been highly recognizable, what the company needs to do next is to animate the brand. By taking actions of inventing some rituals and create more stories, it can also set up some employee orientations to share the work experiences and internalize the organization basic assumptions.
Moreover, the company needs to bring in more new members in order to better change the aggressive culture to a friendlier one. In conclusion, it is always difficult for companies to change their business culture, especially for Coca Cola, a large and stable organization with a hundred years of history. In order to keep growing and thriving, Coca Cola should try to look ahead and make internal changes to adapt to the outer environment. In fact, whether introducing new cultures or changing the current culture, managers should first let these values or beliefs infiltrate the organizational members’ minds.
Only when these values and beliefs are commonly accepted by the organizational members, can they form a new culture. However, people’s values are hard to change. By increasing communication with employees, rewarding desirable behaviors, encouraging participation and offering necessary support, Coca Cola’s managers can avoid unnecessary losses. Moreover, proper structure design can benefit large multinational corporations like Coca Cola by allocating resources and assigning personnel more efficiently and effectively.
Decentralization of the organization’s structure offers more flexibility to Coca Cola’s local subsidiaries in different regions and can also reduce conflicts between departments. A hybrid structure requires Coca Cola to develop more understanding of customers’ needs, which is the most important force to push the organization forward. Overall, the analysis mentioned above illustrates that a strong business culture should always remain responsive to change, and a well-designed corporate structure is important for the organizational effectiveness. Reference Bogomolny, L. (2004). “Thirst for change. Canadian Business, Vol. 77 Culhane, D. (2008, February). Blog logs a culture change: Coca-Cola’s short-term Blog Blast takes the pulse of employees on key company values. Communication world. Retrieved from http://www. entrepreneur. com/tradejournals/article/173021690. html Denison, R. D. , ; Mishra, K. A. (1995). Toward a Theory of Organizational Culture Effectiveness. DOI: 10. 1287/orsc. 6. 2. 204 Fox, A. (2007, November). Refreshing a beverage company’s culture. HR Magazine, Vol. 52, No. 11. Retrieved from http://www. shrm. org/Publications/hrmagazine/PastIssues/2007/Pages/200711. spx Foust, D. (2006, August 7). Queen of pop. BusinessWeek, Retrieved from http://www. businessweek. com/magazine/content/06_32/b3996401. htm Gordon, D. (2010). Manifesto For Change. Retrieved from http://www. scribd. com/doc/24111308/Manifesto-for-Change Macarthur, K. (2004, May 10). Hiring of Isdell is classic Coca-Cola. Advertising Age. 75, 3-68. Martin, A. (May 27, 2007). Coke Struggles to Keep Up With Nimble Rivals. Retrieved from http://www. nytimes. com/2007/05/27/business/yourmoney/27coke. html? pagewanted=1;sq;st=nyt;scp=87 Martin, B. Wilcox, S. ; Harris, R. 2000). Committee on Management and Productivity. Transportation Research Board, NW: Washington, DC. McKay, B. , ; Terhune, C. (2004). 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), A1. Radic. D. (2004). An Enterprise Odyssey. International Conference Proceedings. p. I. 27. Solar site index. (2007). Retrieved from http://www. solarnavigator. net/sponsorship/coca_cola_chairman_neville_isdell. tm The Coca Cola Company. (2011). Retrieved from http://www. 123HelpMe. com/view. asp? id=148943. The Coca Cola Company. (2010). Retrieved from: http://www. thecoca-colacompany. com/careers/unique_culture. html http://www. thecoca-colacompany. com/ourcompany/mission_vision_values. html The Coca Cola Company. (2010). Forward Looking Statements. Retrieved from http://www. thecoca-colacompany. com/investors/pdfs/10-K_2010/03_Coca-Cola_Item1. pdf Appendix Chart 1 Quarterly Stock Price Chart (2001-2010) Retrieved from http://www. thecoca-colacompany. com/
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