Global Soft Drinks Issues - Case Study Example

Name: Course: Tutor: Date: Organizational Behavior Abstract The discussion on this paper contains an evaluation of organizational behavior by discussing various issues of an organization. The paper highlights elements of organizational leadership, organizational effectiveness, organizational behavior and organizational arrangement and human resource management. Further a case study on the Coca-Cola Company shall be conducted by analyzing the structural and cultural practices of the Company. Challenges affecting the company in terms of decision making shall be considered and recommendations offered to tackle the company’s issues and structure. Introduction Organizational behavior (OB) is a field of human resources that is dedicated in recognizing, explaining and developing the attitudes and behaviors of the workforce within a company. Kaifi (20) suggests that organizational behavior derives its knowledge from science and applied practices. Understanding organizational behavior is a continued process that requires one to recognize issues affecting the organization, explaining the long and short term consequences of each behavior and developing an implementation strategy that suit an organization’s goals. Thus organization behavior aims at implementing transformational leadership which will assist a company in developing into a successful and dynamic entity. The primary focus of organizational behavior is to address topics related with employee performance and commitment as well as quality work life (Forrester & Taschian, 463). Situational analysis of Coca-Cola Company Company History The Coca-Cola Company is the world’s largest beverage manufacturer. The Coca-Cola Company was formed in the early 1800 as the J. S Pemberton Medicine Company by Dr. John Smith Pemberton and Ed Holland. In 1884 the company became a stock company whereby the name changed to Pemberton Chemical Company before it was rebranded and named Coca-Cola Company. The Company is a beverage company that manufactures, distributes and markets non-alcoholic drinks and syrups. Currently the company represents over 400 brands all over the world. Since 1889, the company has conducted a franchised distribution system by supplying to retailers and bottlers globally. The company’s headquarters is in Atlanta, Georgia. The Coca-Cola Company distributes and sells over 100 brands whereby specific brands are manufactured and sold in specific areas due to cultural barriers. However, the company’s main brand is the Coca-Cola beverage which is distributed worldwide and is popular for its unique taste and original formula (Coca-Cola Company, 1). External Environment Analysis Industry Analysis Coca-Cola Company operates in the soft drink industry which it has highly dominated since its incorporation. To have a clear understanding of this industry Porter’s five competitive forces will be analyzed. According to Murray (12), “For years the story in the nonalcoholic sector centered on the power struggle between…Coke and Pepsi. But as the pop fight has topped out, the industry's giants have begun relying on new product flavors…and looking to noncarbonated beverages for growth.” The market size of this industry has been influence by the growth rate, market size and revenue income. This has further contributed to the changes identifies in this industry in terms of consumption and consumer spending habits. According to Datamonitor (15), consumer consumption of soft drinks within the non-alcoholic beverage industry accounts for 46.8% of the market share. This is relative to the market value that is at $307.2 billion as of 2004 and was expected to rise to $367.1 billion in 2009 (Datamonitor, 25). Despite the increased growing patterns noted in the industry, the global soft drinks industry has encountered slight market changes due to the growing completion from other non-alcoholic drinks such as tea and coffee (Datamonitor, 13). The growing popularity of energy drinks and sports drinks also pose a threat for the soft drink industry as different companies focus on producing different product lines. Porters Five Forces of Analysis Porter’s five forces enable one in understanding how these forces influence a company’s performance in the industry. By understanding the strength of these forces, one is able to identify Coca-Cola’s position in the market place. The competitive nature of the soft drink industry is a threat to all business entities operating within this industry. Thus companies are forced to consider the competitive pressures associated with; the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, competitive rivalry from companies within the industry and threat of substitute products. Competitive Rivalry Competitive rivalry is one of the main threats that are facing Coca-Cola in the soft drink industry. Coca-Cola and Pepsi Co. are the dominating brands in this industry and receive significant recognition worldwide thus establishing a great market competition. However, Coca-Cola registers increased sale rates as compared to Pepsi Co. according to Murray (26), Pepsi Co. and Coca-Cola have struggled for total market control for a long time now. The market share occupied by other brands in the industry is too low hence do not pose a significant competitive threat to Coca-cola. Nonetheless, Coca-Cola has gained a competitive advantage due to its well known trade mark and marketing strategies. Threat of New Entrants The introduction of new entrants does not pose a big threat in the soft drink industry for Coca-Cola. As previously mentioned, Coca-Cola and Pepsi Co. have already established their position in the market place. These two companies use the influence of their strong brand names and distribution systems to dominate the industry. Moreover, the soft drink industry is saturated with different products and brands thus making it hard for new organizations within the industry to mature or grow. It is challenging for new entrants to establish themselves in this markets and favorably compete with already existing firms. High fixed cost on manufacturing and distribution as well as the economies as well create a barrier making it difficult for firms to penetrate this industry (Murray, 16). Threat of Substitute Products Substitute products refer to similar products that meet consumer needs but are not in the soft drink industry. Substitute products that pose a threat for Coca-Cola include; sports drinks, coffee, energy drinks, tea and bottled water. Health conscious consumers strengthen the power of these substitute products especially that of bottled water and sports drinks. The industry has an increasing number of various brands of sports drinks and bottled mineral water which are more appealing to consumers as they are considered to be healthier drinks. Additionally consumers who want to cut off their sugar intake and carbonation take either tea or coffee as a substitute product for soft drinks. Specialty coffees served in coffee shops may offer different flavors that consumer prefer as compared to soda intake. For example the increased number of Starbucks stores which offer a variety of flavored drinks is appealing to consumers making them shift from soda intake to specialty blend coffees. Moreover, these substitute products are affordable making it easy for consumers to switch hence strengthening the threat of substitute products (Datamonitor, 25). Bargaining Powers of Buyers and Suppliers The bargaining power of suppliers is relatively low thus does not hold much competitive advantage in the soft drink industry. The main suppliers for Coca-Cola Company include manufacturers of bottling equipment and secondary packaging suppliers. Murray (26) mentions that Coca-Cola Company owns 36% of the company’s enterprise which is identified as the largest bottler worldwide. The fact that Coca-Cola is able to control 36% of the bottling supplies, suppliers bargaining power is minimal. Suppliers of manufacturing equipments provide the same products thus it is easy for the company to easily change suppliers. The bargaining power of buyers is very strong. The main buyers for Coca-cola are retail stores that buy large volumes at wholesale price in order to resale to consumers. These retail stores include; shops, supermarkets, grocery stores, discount stores and restaurants. However, the power of substitute products could potentially influence the bargaining power of buyers. This is because if the number of customers drinking sodas decreases, the bargaining power of buyers has the ability to increase since there is a decreasing demand by buyers (Murray, 27). Analysis of Five Porters Coca-Cola is able to implement the evaluation through Porter’s Five Forces to assist it in learning its market position in the soft drink industry. From this study it is evident that the competitive rivalry factor poses a medium to high threat on Coca-Cola. The power of suppliers is low, while that of buyers is low to medium. The threat of entrant is low since it is difficult for new companies to penetrate the industry but the threat of substitute products is medium to high. Internal Environment Analysis By studying its internal environment, Coca-Cola is able to identify its strengths and weaknesses and use them to improve its organizational performance. Through this analysis, the company can be able to formulate business and corporate strategies which will enable it to address current and future challenges affecting the company as well as assist it in growing its revenue and growth globally by the year 2020. SWOT Analysis Strengths Coca-Cola has several key competencies that act as its major strengths. The company’s recognizable brand offers it a competitive advantage in local markets and globally. Its popularity globally makes it a superior brand which cannot not be compared to others which allows it to easily penetrate new markets. Its large global presence has enabled the company to acquire a significant market share by expanding to different regions worldwide. Additionally Coca-Cola’s marketing strategies and campaign programs are unique and focus on their target market thus attracting potential customers as well as retaining consumer loyalty. Weaknesses One of the main weaknesses that Coca-Cola faces is its inability to meet the consumer needs of health conscious customers. The company’s effort to introduce healthier brands into the market continues to be difficult. This is because most consumers identify Coca-Cola’s products as unhealthy junk foods which are not healthy. Opportunities Coca-Cola has the opportunity to penetrate into new markets such as Asia which posses a significant population growth. This way the company is likely to increase its market share and double its revenue incomes. Moreover, the company can also create new drinks that address consumer health concerns as more customers are concerned with leading healthy lifestyles and reducing their carbonated drink intake and sugar intake. The healthy lifestyle trend is currently popular and Coca-Cola will benefit as it has the potential to grow within this new market segment. Threats Coca-Cola faces great threats from its main competitor Pepsi Co. Pepsi Co. is rapidly growing and gaining popularity globally as it continues to diversify and penetrate global markets. Pepsi Co. continues to increase its consumer base due to its ability to produce different products such as snacks. The health conscious consumers also pose a threat for Coca-Cola as their numbers increase. The increasing awareness of health concerns linked to carbonated drinks and sugar has reduced the number of consumers taking sodas. Thus the company has to diversify and offer new product that meet these specific consumer needs. SWOT Analysis Summary Coca-Cola needs to implement an aggressive organizational strategy to overcome its weaknesses and threats. The company has the potential to use its strengths and opportunities to increase market share by introducing an aggressive strategy. Pearce and Robinson (158) affirm that, “this is a favorable strategy; the firm faces several environmental opportunities and has numerous strengths to support it.” Business Strategy The Coca-Cola Company uses the following strategies in its international and organizational activities. Differentiation Strategies Companies incorporate the use of differentiation strategy as a means of maintaining their unique features and stand out within the industry an organization operates in (Johnson & Scholes, 430). Since its inception in the early 1800s, the Coca-Cola Company has established a differentiation strategy through its various products so as to maintain a unique and stable position in the beverage industry globally. The Company manufactures its products with unique formulas that are exclusive to the Coca-Cola and are processed under strict quality codes. Through this strategy, Coca-Cola has been able to use its three top brands (Coca-Cola, Fanta and Sprite) to retain consumer loyalty and increase market share thus acquiring a strong leadership position in the industry. Coca-Cola’s differentiation strategy is evident in every area of its business operations starting with manufacturing, distribution and sells. For instance, the company introduces different varieties of flavors for consumers to test and those that respond to current consumer trends. The company also implements unique marketing strategies by incorporating exemplary advertising techniques such as their bottle shapes, labels and campaigns. Additionally, the company has advanced plant machineries in its factories to manufacture high quality brands (Coca-Cola, 2). Cost Leadership Coca-Cola Company uses cost leadership as a strategy to increase market expenditure and operational costs (Sicher, 14). Cost control is a vital business strategy for Coca-Cola as it has implemented it as a way of maximizing on its revenue and gain a competitive advantage in the industry. Evidently, the company has been operating on low cost leadership since it was incorporated as one of its main business level strategies. Murray (18) argues that Coca-Cola Company invests in internal efficiency to reduce operational costs. Nonetheless, the Company is keen on standardization of its products in their production process, distribution and marketing. It maintains strict control over its manufacturing, marketing, overhead and R&D expenditures (Coca-Cola Company, 13). Focus Strategy Coca-Cola’s focus strategy can be identified in its differentiation and cost leadership strategies. In low cost focus strategy, the company has produced affordable beverage drinks which are manufactured under efficient standards while targeting a specific market segment. For instance, the Coca-Cola drink which is very popular is produced and marketed following a low cost focus strategy. Despite the popularity of this beverage drink, Coca-Cola slightly differs depending on the region of production. The taste, flavor and shape of bottle or can are all manufactured to meet the consumer preferences in a region. Thus the company is able to produce Coke in large scale to meet all its consumer needs and maintain a low cost leadership in the industry. The marketing campaigns and distribution channels used by Coca-Cola focus on consumer trends in a specific area and attract potential customers within that market by implementing effective and efficient strategies (Coca-Cola, 23). Through its focus strategy, the company has been able to increase its market share, developed a competitive edge for its rivals whilst improving organizational performance. Organizational Structure and Leadership Forrester and Tashchian (464) define leadership as the process of leading others towards achieving the set goals and objectives. Organizations require the leadership of strong managers that are talented and have the ability to manage an organization’s behavior. Managers who have a vast knowledge in human resource management and strategic management have the capability of influencing certain behaviors that contributing in building the culture and structure of a company (Kaifi & Noori, 22). Managers are therefore expected to diagnose any issues affecting their company and implement effective strategies that address such challenges. Organizational structure, culture and leadership play a significant role in Coca-Cola’s success. The company needs to implement strategies that are effective and are aligned with its structure, culture and leadership. Coca-Cola organizational structure is divisional; this means that “its units or divisions have its own functional specialists who provide services and products or services different from those of other divisions” (Pearce and Robinson 339). This form of structure improves communication and decision making within the organization. Additionally the company is divided into various geographical units which are in need of independent operational and organizational units. Coca-Cola core principle is to include diversity in its organization. The global position of the company makes diversity an integral part in its organizational management. The company conducts regular programs that offer training to its employees on the importance of diversity and it role in the company’s cultural practices. Managing organizational behavior can be a difficult task to undertake due the changing human behavior and work environment. The diversity programs by Coca-Cola promote unity and harmony at the work place as they minimize organizational conflicts and strengthen respect (Pearce and Robinson, 255). Human behavior towards an organization can be unpredictable due to the varying attitudes and perspectives (Nelson & Quick, 201). For instance new employee recruits bring with them their previous experiences and expectations which may not be relative to the organization’s mission or vision. As a result this leads to organizational conflicts that may interfere with employee performance and the development of organizational ills. Conclusions The Coca-Cola Company has consistently grown over the years enabling it to occupy a strong market position globally. Its reputation as an iconic brand has assisted the company in evolving and attracting consumers to its products. Although the company has not experienced a significant growth over the past few years it still maintains a strong consumer base which enables it to retain its market position. Coca-Cola’s main competition is Pepsi Co. which it has the ability to beat if the company embraces aggressive strategies by maximizing on its opportunities and strengths. The organizational structure, leadership and culture of Coca-Cola are quite exemplary as the company has an effecting managerial team. Works Cited Datamonitor. Global Soft Drinks: Industry Profile. New York. 2005. Reference Code: 0199- 0802. Forrester, William R., and Armen Tashchian. "Modeling the relationship between cohesion and performance in student work groups." International Journal of Management 23.3 (2006): 458-464. Johnson, G. and Scholes, K. Exploring Corporate Strategy. New York: Prentice Hall. 2003 Kaifi, B. A., & Noori, S. N. Organizational management: A study on middle managers, gender, and emotional intelligence levels. Journal of Business Studies Quarterly. 1.3(2010):13- 23. Murray, Barbara. The Coca-Cola Company. Hoovers. 2006. Retrieved from http://premium.hoovers.com/subscribe/co/factsheet.xhtml?ID=10359 Nelson, D.L., and Quick, J.C. Organizational behavior (7th ed). Mason, OH: Cengage Learning. 2011 Pearce, J. and Robinson, R. Strategic Management. New York: McGraw-Hill. 2003 Sicher, J. D. Beverage Digest/Maxwell ranks U.S. soft drink industry for 2004. 2005. Retrieved February from http://www.beverage-digest.com/pdf/top-10_2005.pdf Coca-Cola Inc. 2004 Annual Report. 2004. Retrieved from http://www.cocacola.com Read More