Practical Application of Management Theories in the Coca-Cola Company

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Introduction

It goes without saying that the understanding and practical application of management theories are immeasurably essential for the success of any organization or company. In general, management theories may be defined as specific concepts that surround appropriate management practices and may include particular tools, such as guidelines and frameworks for their implementation in modern organizations. As a matter of fact, executives traditionally do not rely on a single management theory but introduce multiple concepts of various management theories that will be more suitable for their company’s culture and workforce. The practical implementation of a particular theory or their combination defines the organization’s processes, practices, and behavior to a great extent. The purpose of this paper is to define major management theories that remain relevant and analyze the management strategies and system processes and practices of The Coca-Cola Company on the basis of its correspondence with the theories of management. In addition, this work includes the investigation of the company’s changes and their consequences.

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Company’s Background

The Coca-Cola Company is one of the biggest international beverage company in the world. It evolved from the creation of the first Coca-Cola drink in 1886 that was served at Jacobs’ Pharmacy in Atlanta by Dr. John Pemberton (“Our company,” n.d.). In the present day, the company’s mission is “to craft the brands and choice of drinks that people love, to refresh them in body and spirit” (“Purpose and vision,” n.d., para. 1). In addition, Coca-Cola aims to develop a sustainable business that contributes to the improvement of people’s lives.

The Coca-Cola Company may be regarded as a consumer-centric brand that has shifted its focus from the company’s demands to the customers’ expectations and preferences. It currently offers a large variety of drinks of more than 500 brands that include sparkling and still water, fruit juices, milk, teas and coffees, and plant-based and organic drinks (“In our products,” n.d.). In addition, the company’s complex approach to meet the standards of sustainability and peoples’ changing tastes includes:

  • The reduction of calories and sugar across the majority of brands;
  • The introduction of new drinks with health benefits such as nutrition and hydration;
  • The availability of small and more convenient packages in order to help consumers control sugar more efficiently;
  • The provision of the clear and available calorie information for individuals’ informed decision-making.

Although the Coca-Cola Company implies a global business, it operates in every community on a local scale as well. It has an opportunity “to create global reach with local focus” due to the strength of its organizational system that includes the cooperation with almost 230 bottling partners worldwide (“The Coca-Cola system,” n.d.). The system of the company operates through a substantial number of local channels, and the primary step of production is the manufacturing of beverage bases, concentrates, and syrups by Coca-Cola and their subsequent selling for bottling operations (“The Coca-Cola system,” n.d.). In turn, bottling partners produce, package, distribute, and merchandise final branded beverages to vending partners and customers.

The company’s main strategy may be defined as the globalization of its products in contrast with the creation of local structures in the countries of its operation. The regional departments of The Coca-Cola Company focus on people’s demands and aim to connect with consumers through the evaluation of their perceptions, attitudes, tastes, and lifestyles. In addition, Coca-Cola is not only a customer-oriented company that concentrates on its income through the satisfaction of people’s demands but the company that aims to improve life in developing countries. For instance, RAIN, The Coca-Cola Foundation’s flagship African community program, was established in order to help Africa achieve the goals of the United Nation’s Sustainable Development on sanitation and clean water access (“Replenish Africa initiative (RAIN),” n.d.). In general, RAIN makes considerable investments to improve African people’s lives through multiple water-based initiatives that include the promotion of the sustainable and efficient use of water and hygiene behaviors for health improvement and economic development.

Management Theories

In the present day, management guidelines are required to meet the market’s modern expectations, satisfy the public’s demands, increased productivity, and provide quality in order to achieve success. These common guidelines may be applied by various types of organizations in the context of their motivation terms from the management. In general, the understanding of management theories is highly essential for efficient performance as it helps individuals to “do business in a defined and structured manner since their strategies will be very clear and conceptually correct (Kitana, 2016, p. 17). As management is “a science that dates back to centuries,” throughout the history, several management theories were formed on the basis of multiple organizations’ experiences and research (Kitana, 2016, p. 17). According to a widely accepted classification, management theories include classical, neo-classical, and modern management.

Classical Management Theory

The classical theory of management frequently called traditional management theory may be regarded as the oldest scientific management theory. It was developed during the 19th and 20th centuries due to the appearance of the factory system of manufacturing that created multiple issues for the management (Kitana, 2016). Executives faced new business processes that were not encountered earlier. However, these processes related to the organization of manufacturing units, tools, and raw materials, the selection and recruitment of employees, and their training inevitably required to be managed properly. In general, the classical management theory may be characterized by the following general features:

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  • This theory provides the foundation for subsequent management theories, especially the modern theory of management;
  • It develops specific management principles that should apply to all types of organizations;
  • According to the classical management theory, employees have substantial economic needs that may be satisfied through relative financial incentives;
  • Traditional theory attempts to find and apply strategies that will help to increase the workers’ output;
  • The theory underlines the significance of work schedules and formal structure to satisfy both organizational and individual needs;
  • It defines an organization as a closed system that does not interact with its external environment.

The necessity of managers to solve arising problems and find essential solutions resulted in the formation of three subfields within the classical theory – administrative principles, bureaucratic organization, and scientific management (Kitana, 2016, p. 17). Administrative principles focus on the organization’s general productivity and control over operations at its high levels. Henri Fayol may be regarded as “the founder and father of the classical management school,” and his contribution to the managerial behavior’s systematic approach is highly appreciated up to the present day (Kitana, 2016, p. 18). In opposition to the common perception that successful managers and leaders are born, Fayol clearly stated that management is a particular skill that may be learned by almost any individual (Kitana, 2016). Management implies organizing, planning, commanding, controlling, and coordinating. Before obtaining experience and specific knowledge, a competent leader should be physically healthy, accept responsibility, and has general knowledge and an ability to analyze information critically. In addition, the theorist formulated the following major principles of management:

  1. Division of work. Employees with specific position-oriented specialties may work more efficiently and in an orderly manner (Kitana, 2016);
  2. Discipline. Employees should respect colleagues and obey orders and instructions given by managers.
  3. Authority. Managers should “balance between the authority and the allocation of work” (Kitana, 2016, p. 18);
  4. Unity of command. In addition to the previous principles, orders should be given from one manager instead of multiple supervisors in order to avoid miscommunication and chaos;
  5. Unity of direction. All functions of an organization should be handled according to the unidirectional plan by one manager. There will be the potential risk of failure if a company is managed by two individuals with opposite views. For instance, two HR managers with completely different recruitment policies will have a highly negative impact on the formation of personnel that will increase the company’s productivity (Kitana, 2016).
  6. Centralization. According to Fayol, “the manager should hold authoritative power due to which the efficiency and effectiveness of the company can be improved” (Kitana, 2016, p. 19).
  7. The hierarchy. The organization’s communication should follow the hierarchy for the establishment and support of an appropriate business system.
  8. Order. All materials required for the production, equipment, and employees should be appropriately managed at the right time and in the right place (Kitana, 2016).
  9. Subordination of individual interests to the organization’s common good. It goes without saying that organizational commitment and goals should inevitably take superiority over any person’s goals and interests.
  10. Equity. Managers should treat all employees equally and fairly.
  11. Remuneration. A successful manager should follow the policy of fair remuneration and equal compensation between workers.
  12. Initiatives. The organization’s performance and productivity may be improved through motivation from supervisors and managers.
  13. The staff stability. As high employee turnover negatively influences the company’s goal achievement, it should be controlled.
  14. Team spirit. The individual’s performance may be improved through the communication between employees. In turn, teamwork always positively contributes to the company’s success.

The theory of bureaucratic management included in the classical theory was formulated at the end of the 19th century by Max Weber, a German sociologist, philosopher, and economist (Kitana, 2016). The formulated theory emphasizes the significance of labor division, hierarchy, and strict rules within an organization. In general, the practical implementation of the bureaucratic theory is typical for companies with a large number of departments, offices, and employees. Their strength and efficient performance is determined by the executable set of regulations, policies, and rules combined with clearly defined authority and hierarchy (Kitana, 2016). As a matter of fact, there are considerable advantages of bureaucratic management that include the absence of overlapping of duties, responsibilities, or job roles, consistent employee behavior, and the possibility to predict the general system behavior. In other words, workers are not confused about their assignments, and such orders definitely improve the company’s productivity.

On the other hand, the main disadvantage of the bureaucracy system is the indifferent attitude of employees towards organizational processes due to the emphasis on positions rather than on humans. As bureaucracy “expects conformity in behavior rather than performance,” the personalization of workers does not exist and their professional growth, personal development, initiatives, and individual creativity are not encouraged (Kitana, 2016, p. 19). In addition, this system may be characterized by time-consuming paperwork that traditionally makes operations highly inefficient.

The last component of the classical management theory, scientific management, was developed at the beginning of the 20th century due to the expansion of technological and industrial centers (Kitana, 2016). In general, the scientific management theory implies the solution of managerial problems with the help of science. It concentrates on specific methods that may improve the effectiveness of workers’ performance and their productivity. To be precise, the theory underlines the necessity of work division, specialization, and training of employees, and tangible incentives (Kitana, 2016). It focused on the most appropriate ways of doing a job and the elimination of operations that may result in the wastage of resources or workforce.

The founder of scientific management, Frederick W. Taylor introduced four main principles of his philosophy (Kitana, 2016):

  1. The methods of scientific management should be developed in order to decode the most suitable method for task performance;
  2. For the execution of a task, the most suitable from the position of specialization and responsible employees should be recruited;
  3. The workers’ scientific development and education are highly essential;
  4. Friendly cooperation between the labor and the management is required for effective performance.

In addition, Taylor emphasized that both the management and the labor should common interests to remain high productivity that “automatically results in higher profits” for a company (Kitana, 2016, p. 18). The theorist conducted the research dedicated to management systems and their efficiency on the basis of the production-line time studies (Kitana, 2016). He segmented each job of steel workers to define the appropriate number of employees and the best possible time required for performing a task without the substantial loss of quality (Kitana, 2016). In addition, Taylor analyzed the behavior of employees and discovered that they did not work at full capacity and their productivity was considerably low due to an inappropriate remuneration system. They received a fixed salary on a daily basis and had no motivation to work more or faster. That is why Taylor suggested increased payment for those workers who demonstrated higher productivity.

Neo-Classical Management Theory

In contrast with the traditional management theory that regards individuals as the instruments of production, the neo-classical management theory is more human-oriented. After the implementation of the classical theory’s principles in practice. The results of performance and the workforce’s response were not highly positive. The analysis of these principles showed the theory’s particular focus on the organizations’ mechanical side while the human side was ignored. In turn, the subsequent neo-classical management implies the replacement of production-oriented approach by employee-oriented approach and emphasizes the importance of multiple factors that may affect employees’ behavior within an organization (Kitana, 2016). It considers the employees’ internal reactions that may affect organizational behavior, as well. Moreover, according to the neo-classical theory of management, an organization may be defined as a social system with particular attention to the workers’ socio-psychological needs. At the same time, the remuneration of employees should not be limited by financial incentives – people should feel satisfied with their work and know that their needs are respected by the management. In turn, managers adopt strong work relationships, job enrichment, and participative decision-making to improve the company’s productivity and achieve organizational goals.

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Modern Management Theory

While the traditional theory values the rational economic view and the neo-classical theory emphasizes the significance of the social person view, the modern theory of management focuses on the complex employee view (Kitana, 2016). As a matter of fact, any company implies a complex organization that consists of individuals with diverse potential, motives, needs, and aspirations. According to modern management, the individual characteristics of employees should be “approached through custom-made principles rather than common which not only makes them fed up, but also lose their potentials” (Kitana, 2016, p. 20). In addition, the modern management theory refuses the existence of a single managerial strategy that will be applicable to all workers at all times in any organization as every person has different motives and views. Moreover, new motives that inevitably affect the employee’s behavior may be gained as people are subsequently exposed to work experience. That is why managers should apply different strategies for different workers at different times.

In general, the strategies of modern management include contingency and systems approaches. In the contingency approach developed by researchers, consultants, and managers, an executive “is expected to find the appropriate technique that suits the situation under particular circumstances, and at particular time for the best achievement of management goals” (Kitana, 2016, p. 20). For instance, in the case of untrained or unskilled available labor, work simplification typical for the traditional management will be the most appropriate solution. In turn, in the presence of qualified professionals driven by their ambitions, a job-enrichment program of neo-classical theory will be considerably more efficient (Kitana, 2016). The contingency approach portrays various sets of organizational relationships, behaviors, and processes in their unique circumstances.

The systems approach views the management as a unified system composed of interrelated parts rather than individual segments, and managers receive an opportunity to surveil an organization as a part of the large external environment (Kitana, 2016). According to this approach, managers are not supposed “to confine to their department output as in traditional methods, but the organization as a whole as a mesh” (Kitana, 2016, p. 20). That is why, for the achievement of organizational goals, constant communication with employees, representatives, other departments, and organizations is required. In other words, the systems approach focus on the importance of mutual efforts and business relationship webs.

The Coca-Cola Company’s Management

It goes without saying that the performance of The Coca-Cola Company at the international level determines its management strategies to a great extent. In general, the company applies the modern management theory that implies the combination of rational economic and social person views for the achievement of corporate goals. It follows the model of decentralization within centralization with the global headquarters that defines the company’s global values, processes, and strategies and departments divided into geographical territories and regions. The success of the company’s organizing function is determined by the incorporation of employees with common duties and professional skills into groups in order to avoid substantial redundancies in working processes and establish functional autonomy.

Moreover, the organizing function follows cross-functional reporting and the strategy of five direct reports. In other words, the company’s functional heads and managers report both to country heads and divisional heads, and an employee cannot have more than five reporting subordinates. In addition, the organizational structure of Coca-Cola is characterized by the absence of redundant layers and free information flow within the company without blockages caused by bureaucratic mindsets and communication gaps. Finally, regional managers are provided with a considerably high degree of organizational autonomy and decision-making in relation to the department’s local needs. Due to these strategies, The Coca-Cola Company promotes complex and comprehensive cooperation within the organization and underlines the significance of subordination and hierarchy. At the same time, hierarchy may be regarded as relatively limited for employees’ freedom of creativity and job satisfaction.

It goes without saying that The Coca Cola Company emphasizes the importance of corporate culture and employees’ job satisfaction. In general, according to its vision, the inclusion and diversity of its workers as a highly essential part of its success are at the heart of its growth strategy and general values (“Diversity and inclusion,” n.d.). Coca-Cola implements the strategy of employees’ remarkable diversity in order to achieve its purpose of “refreshing the world and making a difference” (“Diversity and inclusion,” n.d., para. 1). It creates an inclusive workplace and a diverse workforce and identifies them as its strategic business priority to foster innovation, creativity, and connection to multiple communities across the world. According to Lori George Billingsley, The Coca-Cola Company’s Chief Diversity and Inclusion Officer, the creation of an inclusive culture where employees take part in discussions concerning the improvement of the company’s processes and strategies is immeasurably essential (“A Q&A with Lori George Billingsley,” 2019). In addition, the company’s management respects the right of people to express their opinions and considers their needs and demands.

At the same time, Coca-Cola applies the principles of contingency approach in relation to human resources as people across the world have different sources of motivation. In general, the corporate culture that includes team relations and the work environment has a substantial impact on employee engagement and employee performance (Maisoni, et al., 2018). At the same time, in other regional departments of the company, organizational culture does not have any significant effect on employee engagement (Maisoni, et al., 2018). In other words, with the development of organizational culture, the attachment of workers changes insignificantly. At the same time, these workers may be strongly motivated by leadership and compensation. That is why, the managers of particular departments focus on the improvement of working conditions, while the managers of other departments encourage employees with incentives to stimulate their productivity and increase their engagement.

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Company’s Changes

It goes without saying that changes in the systems, strategies, structures, and practices of the majority of companies across the globe are inevitable as previously adapted reforms become outdated and inefficient. As a matter of fact, organizational changes are complex, affect various parts of the company, and require the evaluation of its capacity for these changes. In addition, the successful implementation of changes is impossible without the agreement of motivated workers. Concerning The Coca-Cola Company, its changes may be divided into external and internal.

In general, external changes are determined by the pressure of changing standards of health and the society’s culture. That is why, in the present day, Coca-Cola supports the recommendations of the World Health Organization and other leading health authorities concerning the limitation of people’s daily intake of added sugar (“New business strategy to focus on choice, convenience, and the consumer,” 2017). In 2017, the company reduced sugar in more than 500 beverages all over the world “adding to the 30 percent of more than 3,900 beverages that already fall into the low or no-sugar category” (“New business strategy to focus on choice, convenience, and the consumer,” 2017, para. 8). Moreover, following the modern requirements for sustainability, Coca-Cola collects and recycles its cans and bottles, makes all packaging fully recyclable and plans to reduce its carbon emissions in the future. In addition to the pressure of sustainability, global corporations are currently expected to use their opportunities in order to improve people’s lives. In cooperation with local and international partners, the Coca-Cola Company established programs to empower youth and women, promote hygiene behaviors in developing countries, improve water management, and provide community access to clean water.

Internal changes of the company are directly connected with the changes of its management that imply a specific strategy of shifting an organization and its workers from an existing stage of development to an improved position in the future. Management changes may include the implementation of innovative marketing strategies that will form the understanding of leadership styles and facilitate communication within the organization. Specific changes should be implemented to increase the employees’ job satisfaction on the basis of their needs and expectations and improve the coordination of teams and people’s training to provide the company’s long-term performance. Internal changes may be affected by external factors as well. Customers currently require products that may meet their health and fitness needs and be environmentally friendly. With the use of its managerial strategies, the Coca-Cola Company is changing its corporate culture according to the changing impact of the international beverage industry to increase its productivity and face competition.

Conclusion

Management theories are specific concepts that surround appropriate management practices and may include particular tools, such as guidelines and frameworks for their implementation in modern organizations. The understanding and practical application of management theories are immeasurably essential for the success of any organization or company as they define the organization’s processes, practices, and behavior to a great extent. In the present day, the guidelines of management theories are required to meet the market’s modern expectations, satisfy the public’s demands, increased productivity, and provide the quality of services or products.

According to a widely accepted classification, management theories include classical, neo-classical, and modern management. Classical management theory focus on the company’s productivity and view employees as its sources. It attempts to find and apply strategies that will help to increase the workers’ output, underlines the significance of work schedules and formal structure to satisfy both organizational and individual needs, and defines an organization as a closed system that does not interact with its external environment. In contrast with the traditional management theory that regards individuals as the instruments of production, the neo-classical management theory is more human-oriented. It defines an organization as a social system with particular attention to the workers’ socio-psychological needs. Finally, while the traditional theory values the rational economic view and the neo-classical theory emphasizes the significance of the social person view, the modern theory of management focuses on the complex employee view. It underlines the significance of the application of various management techniques that suits the situation under particular circumstances, and at a particular time for the best achievement of management goals.

In general, The Coca-Cola Company applies the modern management theory that implies the combination of rational economic and social person views for efficient performance. On the one hand, the company values the division of functions, centralization, and hierarchy. On the other hand, it considers the employees’ needs, demands, and opinions, focus on diversity and inclusion, and promotes the autonomy of regional departments. In addition, regional managers have an opportunity to apply different strategies in order to increase employee engagement as people across the world have different sources of motivation. In general, the company’s strategies may be regarded as effective as it remains one of the biggest international beverage company in the world that aims to improve people’s lives.

On the basis of the analysis of The Coca-Cola Company’s external and internal changes it is possible to conclude that, in the present day, the consideration of rational economic and social person views and their changes is insufficient for the achievement of corporate goals. While Coca-Cola values its employees and produces various types of drinks to satisfy its consumers’ needs, the company’s long-term success is determined by the implementation of the standards of sustainability and the establishment of multiple programs that help to improve communities across the globe. In other words, the company’s success currently depends on the society and culture rather than the internal business structure and the volumes of production.

References

A Q&A with Lori George Billingsley. (2019).

Diversity and inclusion. (n.d.). The Coca-Cola Company.

In our products. (n.d.). The Coca-Cola Company.

Kitana, A. (2016). Overview of the managerial thoughts and theories from the history: Classical management theory to modern management theory. Indian Journal of Management Science, 6(1), 16-21.

Maisoni, H., Yasri, Y., & Abror, A. (2018). Effect of organizational culture, leadership and compensation on employee engagement in Coca-cola Amatil Indonesia Central Sumatra. Advances in Economics, Business and Management Research, 64, 837-845.

New business strategy to focus on choice, convenience, and the consumer. (2017).

Our company. (n.d.). The Coca-Cola Company.

Purpose and vision. (n.d.). The Coca-Cola Company.

Replenish Africa initiative (RAIN). (n.d.). The Coca-Cola Company.

The Coca-Cola system. (n.d.). The Coca-Cola Company.

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