The Coca-Cola Company’s Strategic Suitability

Executive Summary

Coca-Cola a structural organization designs to control its operations and has a mix of centralized and decentralized structures. Divisions operation globally while franchise and vendor partners operate locally in decentralized ways. Centralization deals with budgeting and marketing decisions, as well as aspects of the human resource while the decentralized divisions are mostly about processing, distribution, and implementation of other global strategies at local levels.

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This report examines other issues of strategic fit for Coca-Cola and recommends the CEO to improve the room for autonomy by franchisees within a framework of increased scaling of existing brands on a global scale. Besides, it calls for the focus on long-term business goals as a way of maintaining strict adherence to corporate values of Coca-Cola that are likely to disappear when focusing on the short-term.

Introduction

Coca-Cola is a global company, yet its strategy for control of operations mimics a local company. The company can pursue a global outreach because it focuses on the strengths of the control system. The system for the company encompassed the main company headquartered in Atlanta, Georgia and subsidiaries around the world. Besides, it includes more than 250 bottling companies. There are located all over the world. From a managerial perspective, the system appears distributed at granulated. It is not a single entity that can be observed as a single organization in the traditional sense because of technical differences. A fundamental one is that Coca-Cola merely controls operations of bottling companies to an extent, and it does not own them. Private companies registered as different business types around the world are the ones in charge of the bottling companies.

Organization design

The control system as Coca-Cola rides on channels. The core business activities of Coca-Cola determine the scale and scope of its control system, while the values of the company affect the realization of the objectives of control. The main assets for Coca-Cola along its supply and distribution chain are the brands. The parent company is also responsible for handling marketing tasks for all brands. It reaches directly to consumers while its distributors and bottling companies have to meet the other business needs of channel marketing. This involves the actual production and movement of different brand products to various locations for sale to the consumer.

Bottling partners at Coca-Cola are responsible for manufacturing, packaging, merchandising, distribution and final branding of beverages to reach customers, and while doing that, they may rely on vendors and other small-scale partners. Eventually, the channels allow customers to enjoy Coca-Cola products as the main company intended them. The almost perfect control system for channel marketing has been one of the reasons why many customers will see Coca-Cola as a single company rather than joint efforts of partnering bottlers and the parent company.

Based on the characteristics of the company described above, Coca-Cola appears to use a boundary-less organization design. Most of the operations of the partnering organization are driven by Coca Cola’s values, but there is no rigid chain of command beyond the main company. Thus, there are wide spans of control for the overall organization with bottling and regional headquarters having different mandates for bottling and distribution as well as marketing and customer care. The structures work to empower regional and country-specific partnerships that are most responsive to local demand issues for the different brands that Coca-Cola owns (Coca-Cola, 2015).

The company has a global chair and chief executive. It also has a global president and chief operating officer. Lower in the organization structure, global department heads are occupying the same level of authority but with different tasks. They include worldwide communications, human resources, research and development, finance and control, marketing strategy and innovation, and bottling investments. After that, there is another organization level of regional market heads. The regional markets are divided into the North America group, Pacific group, EU group, Africa group, Latin group, and Eurasia group. Within these groups, there are divisions of operations and under them; there are franchises that mainly consists of bottling companies (The Coca-Cola Company, 2015).

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Human resources

Coca-Cola has relied on people, and its brand to grow and in its global business, its human resources department seeks to understand, embrace and elements of a multicultural world. It follows sustainability principles to ensure that the values of the organization are attained in both the marketplace and the workplace. Inclusiveness and fair work policies have been the major concerns that the company pursues in regard to its employees’ welfare and motivation. The company also has associates that help to deliver its brand value across markets.

A major program for the company has been to educate them such that they master skills relevant for delivering organization responsiveness and growth. Continuous training on job skills and diversity coping mechanisms are additional elements to fair and attractive compensation that the company uses as strategic control measures to keep its operation in harmony with its overall values (Heneman, Fisher, & Dixon, 2001). It recognizes employees at different levels as crucial stakeholders that allow it to understand colleagues, suppliers, customers, and other stakeholders.

Budgeting

Financial affairs are handled by a committee established by the Board and in charge of formulating and recommending approvals of financial commitments of the company. The committee also oversees policies and procedures that the company uses to hedge, swap, manage risks and undertake derivative transactions. It evaluates performance and returns on capital expenditures and then reviews and accesses management recommendations concerning budgets, debts and other finances (The Coca-Cola Company, 2015).

Marketing

Coca-Cola has identified markets as part of its overall strategy. Markets are supposed to deliver profitability to the company. Markets have different characteristics. For example, the Chinese market has more than a billion customers. The southeast Asian market, on the other hand, is characterized by a youthful population. The market also exhibits the characteristics of a rapidly expanding middle class. These are just examples of the dynamics that influence a particular strategic marketing application for the company. Overall, the company seeks to sustain high levels of awareness about Coca-Cola products so that customers have a wide choice, and the business can build profitable volume growth (Coca-Cola, 2015).

Critical evaluation of the fit between the company’s mission, strategy, and organizational components crucial to implementation

The parent Coca-Cola Company has set up rules and policies that bottling companies and its partners must follow. It also undertakes measurements of performance and quality for its bottling partner firms to ensure that the product served in any parts of the world that bears the Coca-Cola brand name lives up to the quality reputation of Coca-Cola. The current company variance is 1.18, which measures the stock risk concerning dispersion of equity returns, which in this case appears relatively stable and serves as an indication of the fit between the company’s strategy and its mission of delivering happiness to people around the world (Macro Axis, 2015).

The company faces organization capability and capacity challenges. Managing over 200 individual markets is difficult. These markets have political, social and regulatory changes that arise unannounced, and they have to be handled effectively for the business to sustain its profitability. Besides, markets have different purchasing abilities, yet products sold are similar. Therefore, pricing and other marketing mix choices in the respective markets are a challenge for Coca-Cola. This forces the company to rely on a strategy of gradually building trial, preference, and consumption habits that take time and rely heavily on well-established channel distribution infrastructure. Therefore, organization design complements its strategy (Klosowski, 2012).

To this end, the company maintains a variety of control measures seeking to ensure that irrespective of the market differences, it is still able to promote effective competitive capabilities in all its partners. Its biggest concern for all markets is growth acceleration. Thus, partners are evaluated based on how fast they scale their operations in a sustainable way. The company, on the other hand, sustain product quality and marketing reach campaigns to make sure that its overall cost structure improves to offer support for specific investments in brands having strong growth potential. This is an indication of a fit in the strategy and mission of the company.

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The value of sustainability cuts across all global operations. Consolidation has been a major theme among the bottling companies to gain economies of scale in respective market regions. The country operations are relevant for offering performance feedback. They localize marketing campaigns, and they allow the company to have market-specific corporate social responsibility activities. Besides, Coca-Cola operates a franchise system for its bottling companies. Thus, all bottlers are localized in their markets, and they have a better grasp of local dynamics of the market and the external environment conditions. In this regard, there is a fit between the company’s mission strategy and its control design (The Coca-Cola Company, 2015).

As the company seeks to create a difference in everywhere that it engages, it must rely on an adequate local capacity to gain its goals. With local franchises for its bottling business, it can handle specific challenges for distribution; it can have localized staff and management teams that are best equipped to deal with local business issues. Control levels are available at the global level through the parent company’s leadership for corporate governance and marketing (Grünig, Clark, & Kühn, 2011).

Regional levels are available through the subsidiaries of Coca-Cola and these regional divisions are responsible for regulating the conduct of franchisees, adapting global governing, and marketing principles to local conditions. They also absorb feedback from bottlers and the market. Thus, the corporate and divisions levels of control are available and sufficient to execute the company’s strategies for growth and development of its markets.

The available controls most used by Coca-Cola are structural through the franchise system, financial through the funding of marketing programs and operations of the regional headquarters, and behavioral through the establishment of codes of conduct for franchisees to follow. Besides, Coca-Cola has established a global culture that encompasses direct employees and partner organization employees, which helps to deliver the company’s values to its markets.

Changes to make as CEO to better assure the success of the company’s strategy

The company needs to increase its presence in all its markets, and it should, therefore, consider increasing its marketing budgets for the respective markets across the board. It faces competitors from all levels of the business and needs to ensure that partners are gaining better returns from Coca-Cola to dissuade them from seeking to shift their business focus.

The business’s values realization relies on global growth, and this is what the CEO should be focusing on. The company has taken small brands and scaled them and now it must export the small brands to all its markets in a massive scaling effort to show that it is serious about its values of creating differences for users of its products. It will also be a way of tackling an onslaught of new entrants into its markets (Grünig et al., 2011).

The company must focus on long-term business prospects and allow its franchises to concern themselves with localized short-term goals and challenges. The company can afford to let franchises have autonomy in other aspects of the business if it delivers leadership through regulations, franchise structures, and global marketing in a localized way. Therefore, as it seeks to expand its portfolio of products in different markets, it should avoid tendencies to micromanage growth by dictating the absolute conduct of franchises.

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The best strategy would be to continue offering business support to partners and vendors through infrastructure development of marketing channels and financing assistance without interfering with the localization tactics of the partners. This will ensure that operations remain solid and geared towards the delivery of company values in a way that supports the interests of all stakeholders.

Conclusion

Coca-Cola has well-established control systems for its global business strategy. The systems have been responsible for the growth of the company in recent years. Nevertheless, continued change in its markets call for additional investment in brand building strategies because the brand serves as the anchor point for other strategic controls that the company can sustain. Using its organization design and its localized operations arrangements with vendors and franchise holders, the company should improve relations and sustain a healthy level of autonomy so that the overall business remains responsive to local conditions.

References

Coca-Cola. (2015). Shaping out future – 2014 year in review. Web.

Grünig, R., Clark, A., & Kühn, R. (2011). Process-based strategic planning (6th ed.). New York, NY: Springer.

Heneman, R. L., Fisher, M. M., & Dixon, K. E. (2001). Reward and organization systems alignment: An expert system. Compensation & Benefits Review, 33(6), 18-29.

Klosowski, S. (2012). The application of organizational restructuring in enterprise strategic management process. Management, 16(2), 54-62.

Macro Axis. (2015). CocaCola Company variance. Web.

The Coca-Cola Company. (2015). Coca-Cola. Web.

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