Coca Cola Analysis

Coca Cola Analysis

2. Coke’s strategy and structure before Daft Leadership

- The structure was more centralized in the model of command and control with all the instructions and decisions, Atlanta - ‘Concentrate on Concentrate’ strategy - the high cost operations (trucks purchases, product delivery, and execution of local marketing) is left to worldwide bottlers. - Consolidation of the vast bottling network into 10 anchors bottlers. - Strategy, expansion of market share (Global presence) and increased sales ‘400 servings of coke’ - Aggressive marketing drive

Strengths

- Coke had a very powerful global presence - The distribution strategy of consolidating bottlers enabled Coke to have an effective distribution markets in a vast market without taking any financial risks. - Transferring the financial risks to bottling companies, Coke had a little effect in the event of a financial crisis e.g. currency devaluation/ economic downturn.

- Initial focus was clear, and the environment was simple and stable thus with command and control enabled growth - The ‘Concentrate on concentrate’ strategy led to giving production rights without giving intellectual property

Weaknesses

- As a result of the vertical hierarchal management, there was Slow reaction to situations, decision making leading to huge opportunity costs - The centralized system led to lack of consciousness to the changes in the regional market trends and consumer preferences - Quest for global presence, led to neglect in some important functions like quality control (standardized operations), inefficient internal communication and conflict with regional authorities (government). - Aggressive marketing initiative led to cultural insensitivity - By Transferring high operation cost activity to bottlers, thus bearing the brunt of any economic downturn, the good working relationship with the bottlers was risked.

3. Analysis of Coke’s problems

- Antitrust problems

Takeover of Orangina was blocked by the French government, since the Government felt Coke was abrasive, domineering. The government also wanted to protect its local company, Pernod, which it felt coke’s profit.

Due to Coke’s quest for global presence, the company resorted to aggressive expansion initiatives, which let the company to the collision course with the French government.

In the cadburry scheweppes takeover case, it became apparent that Coke, in its quest to increase its market share, in the collisions with the government, they took the view that it was a legal process similar to FTC hearings in the US completely missing the point that it is political.

The point here is that the company had a homogenous approach (US culture) in its actions and product, thereby the French government felt that its culture was disregarded.

- Product contamination

The food poisoning in Belgium, Bornem in June 8, 1999 raised the question about Coke’s centralized structure leads to inefficient internal communications which in turn increases possibility for flawed implementation of enterprise standards.

The inefficient internal communications refers to slow reaction time and the possibility of mistakes.
The quality worker released the contaminated material for production without receiving positive chemical analysis which is the requirement of the headquarter.

The workers did not perform any routine test during production.

This is one of the effects of the centralized management structure, as well as the strategy to have global presence thus overlooking important aspects of operations.

- Competition

Coke centralized marketing strategies and approval process which caused low reaction to new market initiative. One case is China operation intended to launch a new tea drinking product but it took several months to get response from headquarter and lose market share to the competitor.

Such regional strategic decisions should be delegated to regional executives for faster and more effective decision making which will minimize loss of opportunity costs.

The regional executives should also be empowered to conduct regional market research and patterns and thus make new product introduction decisions quicker.

5) Recommendations

- Glocal: This means that Coke needs more understanding of the local regions in their global market, thereby when making decisions, they should consider local requirements, trends, culture into consideration. - They should maintain & strengthen their new decentralized structure, empowering regional executives with strategic regional decision making. - Improve relationship with the bottlers and create win-win agreements in dealings with them. - Continue to improve relationships with governments, governmental bodies - Through regional empowered offices, Coke should continue to understand and respect diverse cultures. - Strengthen ‘connect and collaborate’