Critical Evaluation of Coca-Colas Response to Corporate & Ethical Forces in the Environment - Case Study Example

Critical evaluation of Coco-Cola’s response to Corporate & Ethical forces in the environment Word count: 3690 words Table of Contents Executive Summary 3 Business environment 5 Ethical Issues 7 Strategy and operations 10 Business Design 11 Strength and weakness Analysis 13 Managing tensions 14 Recommendations 15 Conclusion 16 Appendices 18 References 20 Executive Summary Coca Cola sells above 3500 non-alcoholic beverage drinks such as water and juice drinks, ready to drink tea and coffee, energy drinks and concentrates for syrups preparation in beverage production. For the past five years from year 2007 to last year 2012, Coca Cola seized a 45.84% of the soft drink beverage market share. Coca-Cola’s major competitors are nestle, Pepsi, dr. pepper and Kraft foods. Coca-Cola is a major carbonated non-alcoholic drink sold in many stores, restaurants and retailing machines across nations. The Coca-Cola Corporation claims that the drink is sold in more than 200 countries. It is fashioned by the Coca-Cola Corporation in Atlanta, and is frequently referred to just as Coke. When Coca-Cola was first manufactured in the nineteenth century, it was intended to act as a patent medication. The company was later acquired out by Candler Grings, a businessman, whose selling tactics led Coke to its supremacy in the global market (Coca Cola, 2013). This company manufactures concentrate that is distributed and sold to accredited Coca-Cola bottlers all over the world. The Coca-Cola Corporation has, on instances, introduced additional cola drinks beneath the Coke brand. The most widespread of all is Diet Coke, with others such as Caffeine-Free Coca-Cola and Coca-Cola Zero (Coca Cola, 2013). Brand expansion strategy of Coca Cola has been far reaching and has remained in the public interest since it acquired consumer preference over non-alcoholic consumers. Founded in 1886, the Coca Cola Corporation enjoys being one of the leading nonalcoholic drink companies in the world. It has a circulation system, which makes it unique from the other non-alcoholic drink manufacturers. Over the past few years, Coca Cola passed a few tests of brand enhancement and ensures that its drinks carry on the uniqueness to occupy the minds of the customers (Coca Cola, 2013). The brand growth strategy of Coca Cola consists of redesigning its brand expansion policies and skills to keep up with the highly competitive business environment. Corporate forces Currently cocacola faces threats from the entrance of new soft drink products in the market, entrance of new substitute products, incrreasing bargining power of suppliers and increasing rivalry among existing firms in the soft drink industry that cause high level of competiton. These threats are shown in the figure below. The figure shows the forces that shape industry competition and affect Coca-Cola company. In order to counter the various corporate forces facing the company, Coca-Cola ensures that they promote equal income distribution and changing consumer preference to meet their lifestyle changes. Notably, a state with equal income distribution is likely to create a larger market than a country with poor income distribution. Business environment The operations of Coca Cola Company are affected by business environment, which is categorized into two; external business environment and internal business environment. Since Coca-Cola Company is a multinational company, there are numerous factors under external environment which include social factors, technological changes, economic environment, environmental factors, political factors legal factors and ethical considerations (Cherunilam, 2010, p.20). States with high population growth offer an increased product demand and hence create more market for Coca Cola products than a country or region with low population growth. The company does this through advocating for the need of all workers to joint labour unions. Needless to say, the size of the working population affects the product demand. In this case, a country with a large size of working population will demand more of Coca-Cola products (Henson, 2009, p.100). On the other hand, the company is affected by ocial mobility influences the migration of people from one region to another. A high level of mobility leads to increased sales since rural urban migration is dominant in many developed and developing countries (Worthington, 2012, p.77). through setting up of indutries in urban centres, lifestyle changes, career leisure attitude migration, entrepreneurship spirit and education shows the level at which local people are willing to engage in small scale business such as distribution of Coca-Cola product, this is manifested through initiatives such as offering refrigerators to entrepreneurs. Tastes and preferences and incomes determine the current types of drinks demanded by consumers. This has made Coca-Cola company to increase product ranges that appeal to different consumer groups such as Fanta for children and coke for men. Technological impacts include development of innovations in processing and packaging of Coca Cola beverages. Technological progress accounts for the high sales in the beverage Industry and the focus on technological efforts greatly affects the income levels for any multinational corporations. For example, the cost of research and development of new bottle design for Fanta and the recent establishment of automated Coca Cola warehouse in Las Vegas means that the corporation has reduced on its expenditure in marketing and other development programs to finance the new technology needed (Mercer, 2011. P.23). Economic impacts include the rise in government interest rates that directly affects consumers’ buying behaviour; the company has been able to deal with this through investment in cost cutting technologies hence reduced per unit cost. Environmental impacts include the availability of natural resources for production such as clean and reliable supply of underground water for beverage processing, effects of waste disposal, availability of sustainable energy for running processing and packaging and running machines in production and logistics department and availability of good infrastructure and telecommunication networks (Campbell, 2011, p.67). The political environment has had tremendous effects on Coca-Cola. For instance, government safety regulation determines the nutritional content and working conditions of factory workers. For instance there was a recent demand by the US government to Coca-Cola Company to reduce caloric content in their beverage (Mangeni, 2004, p. 47-58). Beatty ( 2010) affirmed that legal impacts deals with employment laws such law have made this corporation to engage in signing of contracts, consumer protection from harmful products, and laid down corporate governance. These may negatively affect the management style employed by coca cola Company in the world (Beatty, 2010, p. 89). Ethical Issues The aim of market research in multinational corporations such as Coca Cola is to develop an international marketplace and a selection methodology in order to select prospective markets. There are about 200 worldwide and, therefore, Coca-Cola has been keen in identifying uniqueness in every country in expressions of market pleasant appearance. Moreover, adjudicating from the applicable literature, a knowledgeable selection judgment has made this company think over 150 variables that gauge aspects of every foreign market’s trade and industry, political, physical environment, technical, cultural and legal environments down with the organization’s capital, managerial abilities and preference. Considering even a portion of these variables for a sensible number of states would, in the overpowering majority of gear, be beyond the capital of the decision-maker in terms of point in time, money and know-how. The relevant writing suggests that international marketplace selection have to be broken up into 2 major and 2 minor phases. The first two phases in major screening involve a comparatively large amount of countries on the base to choose. The result of this screening phase is the selection of a great deal of smaller sub-sample of nation state (Gerstein, 2009, p. 36). Through the employment of screening technique by Coca-Cola has enabled it to carry out the assortment of an even minor sub-sample, these are usually to one country, to which the organization characteristically exports. However, this can be achieved through strategy and rivalry factor conditions, demand conditions, firm structure, related and supporting industries, and empirically establishing the significant variables that requires mounting a large database (Schroeven, 2004, p. 45). As a result of Coca-Cola’s engagement in international activities, a diversity of important issues that cannot have the same simple answers often happen and are obtainable by doing business in only a single area of legal jurisdiction or state. Because of this tight spot that is more and more plaguing to the large multinational corporation, international dealings ethics has risen to assist address these hot subject matters. Global business ethics attempts to contract with questions of what to do in state of affairs where ethical morals come into disagreement as a result of the conflicting cultural practices. For the past years, Coca Cola Company has engaged in many international commerce ethics discussions on how to act in the home country and the foreign country. The disagreement in favor of behaving according to foreign country socially accepted morality shows reverence both to the citizens as well as the culture of the hosting state in which the business is carrying out its affairs. Such a case would tell the industry to follow the very old world adage: while in Rome, carry out you selves like the Romans do, not just for etiquette, but as well for commerce ethics. The extra side of the case counters with inquiries of what a company’s representative is supposed to do when publicly accepted norms are ethically repugnant to the traditional values of the corporations home. As an illustration in several Latin American states, bribing municipal officials is essential for doing business. Will this expression be replicated by the transnational corporation branches in all its locations or instead dispute against engaging in such an act as it is ethically repugnant to the residents of the country of the trade in question? (Rosenthal, 2009, p. 57). In addressing the above challenges of ensuring that Coca Cola Company does not engage in activities that hinder business in a given state or country by conflicting with member state ethics and morals, the company advocates for formation of middle opinion approaches that emerge as central to global business ethics (Burchell, 2011, p. 55). This is seen in creating a list of internationally acknowledged morals that should be considered in the performance of transnational business transaction. Notably, globalisation offers both advantages and challenges to Coca-Cola. Some of the advantages that have accrued to Coca Cola Company include increased market share as a result of economies of scale. This enables the firm lower its product price due to decreased per unit cost; increased level of labour specialisation and high labour productivity due to production dependence on comparative advantage, opportunity cost and comparative cost analysis. On the other hand, the risks involved include, investing in unknown environment with political uncertainty such as south Sudan and terrorism stricken country such as Iran and Iraq. A control mechanism for this risk is ensuring constant management on effective feasibility and control (Coker, 2002, p. 89).Additionally, the company experiences increased risk profile due to increased scale of operation; this involves supply chain piracy fluctuation of interest rate and exchange rates. Regulatory obstacles hinder coca cola from achieving its objectives in some countries. Regulatory obstacles include local polices that can impact on cross border investments. Cultural differences have impacted negatively on firm operations. Maintaining a close team of different cultural background will create diversity among the workforce. Other problems and accusations against coca cola include creating unemployment because of closure of local beverage processing industries and loss of economic and cultural diversity due to increased mobility of people. This has led to increased levels of trade imbalance and inflation due to high demand for energy and food and increase in commodity prices. Flexibility problem and resource constraints such as rigid marketing chain, limited skills and financial resources may hinder globalisation strategies. High taxation hence reduced level of capital (Feldstein, 2000, p. 34). Strategy and operations Coca cola has adopted various growth strategies that include acquisitions and mergers. A merger involves exchange of stock between two companies but only one of the companies survives. Acquisition is almost similar to mergers but happens between firms of different sizes. For example, a recent acquisition took place between coca cola and ZICO Beverages LLC. On the other hand, Coca-Cola establishes bottling branches in various countries worldwide through direct investment and carrying out franchising and licensing in areas where there is high level of uncertainty and where high level of technology and management expertise is required (Kumar, 2010, p. 25). Coca cola enjoys the highest level of technical expertise compared to other beverage suppliers in worldwide. For more than one hundred years, coca cola has been able to keep their concentrate formula a secret, despite concerns by consumer interest groups and pressures to reveal its contents. This has given coca cola high level of competitive advantage over other beverage processors such as Pepsi. The Coca-Cola Company is the world biggest beverage business. Documented as the worlds leading valuable brand, the corporation markets four of the global top five nonalcoholic radiant brands, which include Fanta, Diet Coke, and Sprite, and an extensive range of other drinks that includes diet and light drinks, juice drinks, waters, juices and, teas, energy, sports drinks and coffees. Throughout the worlds largest drink distribution system, customers in more than 200 countries take pleasure in the companys drinks at a rate exceeding 1.4 billion serving each day (Cortes, 2012, p. 45). Business Design Many people equate business design with an organizational structure. In fact, organizational plan encompasses much more than simply the structure. Business design is the process of bring into line an organizations structure with its mission (Dugdale, 2010, p. 89). Coca-Cola has ensured excellent organizational design hence promoting good communications, production, and innovation. Fig.1 shows the organizational structure of Coca Cola. The company offers an ample environment where its workers can work effectively. Many efficiency and performance concerns can be traced to deprived organization design. A corporation can have a grand mission, great employees, and great leadership and still not execute well because of deprived organizational design (Allinson, 2009, p. 90). For instance, Coca Cola Company’s sales section and production division work well as disconnected units yet they need to converse about buyer needs and yet not been prearranged to do so: corporation performances suffer as a result of poor communication. When setting up appropriate organisation structure Coca Cola Company considered the external business environment factors, which are political, social, economic environmental, legal and ethical factors as discussed earlier. Coca cola has a different Organizational design that is dependent on a variety of factors, such as the size of the corporation, the variety of the organizations operation, and the surroundings in which it functions. Deliberation about the external environment is an explanation for organizational design. Complexity theory is a solitary perspective, which assumes that organizations have to adapt to doubt in their environments. Another viewpoint that coca cola employs is based on resource dependence hypothesis, or the research of how the external incomes of organizations coming from the firm’s environment affect the performance of the organization. The acquisition of external resources is a significant tenet of both the long-term and short-term tactical issues. Management of any firm’s resource dependence theory has implications on the best divisional structure of a business, recruitment of board directors and employees manufacture strategies, agreement structure, external managerial links, and many other facets of business strategy. Another major ecological factor to be considered is competition. Coca-Cola employs different styles of management in advanced levels of competition because of the need for varying managerial structures in different countries to efficiently counteract the competitive advantage of competitors while at the same time emphasizing on the firms strengths. If the companies demonstrate strength in differentiation in relation to competition, it would be perfect to put into practice a divisional or matrix strategy that allow for companies to administer a wide diversity of demographic-specific goods or services. Alternatively, if the corporation demonstrated a low cost strength that is producing goods at cost cheaper than the competition it would profit the company to utilize a structural or bureaucratic strategy to make more efficient operations. Bearing in mind organizational design, virtual pictures to the environment has been helpful for Coca-Cola to employ two precise frameworks to recognize external aspects and internal strengths and weaknesses. Strength and weakness Analysis In this picky model, an organization’s strengths and weaknesses are examined in relation to opportunities and threats present in the industry environment. This allows a company to recognize its potential in order to utilize and maximize their internal strengths and external opportunities while evading the external threats. Coca cola employs Porters five forces analysis. This identifies changeable factors of the industrys aggressive environment that may significantly influence the firms’ strategic design. The five forces include rivalry, power of suppliers, barriers to entry, power of buyers, and substitutes. Understanding these unstable forces will allow the company plan on how to adapt to the different situations in order to capture value. Fig.2 shows the Porter’s Five Forces Model. Thoughtfully, the tools and frameworks next to the varying external services that take action upon an industry, will allow a strategic choice to be completed on how the firm should put its funds to realize its competitive strength. Smaller and agile companies flourish better in doubtful or continually changing industries and marketplaces while larger and more structural corporations like Coca Cola function best in reliable and conventional environments. Managing tensions Recently, Coca-Cola has been criticized for a variety of subjects, including wellbeing effects, ecological issues, and trade practices. The Coca-Cola Company’s auxiliaries and products are subjects to sustained condemnation by both consumer clusters and watchdogs. Allegations touching on the company are diverse, including; probable health effects of Coca-Cola’s products, a deprived environmental documentation, awareness of the companies practices in monopolistic trade practices, dubious labour practices this includes allegations of participation with paramilitary associations in restraint of trade unions; uncertain marketing strategy, and allegation of violations of intellectual chattels rights. To offset this claims, the CEO of Coca Cola Company, Mr. Muhtar Kent, has been running to counter the sensitivity that the soft-drink manufacturer contributes to America’s plumpness epidemic. Coca-Cola some few months ago rolled out advertisements highlighting the corporation’s low and zero calorie drinks and telling people to pay attention to the calories they drink in order to deal with their weight (cocacola, 2013, p. 72). In order to also restore the company’s image, the Coca Cola has invested in various advertisements such as the Coca-Cola zero that informs and reminds people that Coca-Cola Company is health conscious as opposed to the earlier claims by their competitors. Other techniques include sponsoring games, offering scholarships to need student and engagement with local authorizes in joint development of local areas such as building shades for local cottage industry persons (Hunnicutt, 2010, p. 89). Between 2009 and year 2011, Coca-Cola, spent as a great deal of $70 million in conjunction with other consumer organizations in order to address health concerns through advertisements. Coca Cola fights against highsoda levies and taxes. It has a center responsible for science in the public image. The cash used in the adverts helped hamper efforts to pass such levies in 30nations that helpedthe company to maximize its profits because of reduced taxes and hence increase profits (May, 2010, p. 37). Increase in profits has led to increase in share per capital that helps in creating and enhancing shareholder satisfaction and building strong confidence in the company management committee. Recommendations Coca Cola Company should endeavor to grow their business without raising the carbon footprint. Increase advertisement to create, awareness and act as constant reminder for its effort in creating health awareness among consumers in the world The company should consider investing in sponsoring sports activities in various countries as a way of giving back to the society as well as a way of creating harmony with their prospective customers and act as among the most effective ways to manage tension in the organization. The company should consider changing the bottling de sign to create more appeal to customers due to their constant expectation for improvement in brands. Coca-Cola should consider employing concentric and conglomerate diversification strategies to increase their financial gain as well as reduce risks from competition and create synergy which leads to increased market share Conclusion The screening steps employed by Coca-Cola Company have led to an assortment of the right group of marketplace. The company carries out an in depth analysis of its market places before establishing its subsidiaries. This in-depth evaluation involves deliberations practiced by Coca-Cola and involves the utilization of superior variables and measuring such issues as industry-specific and or corporation-specific trade potentials that comprise data gained from main sources. Through critical evaluation of corporate forces, Coca-Cola has been able to manage growing inter-firm rivalry. Notably, high competition has led to the development of aggressive advertisement in various forms both through print and audio visual forms (squaki). Adoption of appropriate ethics has enabled the organization to stick to the morals and believes of the host country, which is important in reducing conflicts between different communities and increasing consumer confidence. Coca cola’s employment of decentralized management style has enabled it to create strategies that address a specific market segment. Employment of matrix organization structure has enabled managers in different countries to acquire authority in a specific product of market segment this has led to market concentration. No research of business achievement in the 20th century would be whole without touching on Coca-Cola. This company has the product that possibly best exemplifies worldwide marketing. The Coca-Cola brand name is acknowledged by 94 per cent of the earths inhabitants and Coca-Cola is the succeeding most universally tacit phrase following OK. Since coca cola is the world’s most influential brand. The iconic drink maker, which has conquered the global soft drink marketplace for more than a hundred years due to it efficient marketing strategies, brand name and efficient management and effective market chain a top priority is replacing dated systems with a modernized platform across markets to create a cohesive view of metrics and streamlined processes. Coca-Cola’s achievement is a by-product of a vision and a working framework that is established on excellence. At Coca-Cola Company, the exclusive Coca-Cola beverage producer for the territories in Western- Europe, its primary is to be the number one or strong number two choice in each category it competes. Coca cola has been able to set top priority is replacement of dated systems with a restructured platform across marketplace to create a cohesive scrutiny of metrics and streamlined progression. Development of good organisation culture has greatly contributed to the achievements of Coca Cola Company since it has created a good working relationship with majority customers this has led to repeat purchase hence more sales compare to other soft drinks companies in the world. Appendices Fig.1 Organizational Structure of Coca Cola Fig. 2 Porter’s Five Forces Model References Allinson, C. (2009). Bureaucratic personality and organisation structure. . Aldershot: Hants, England: Gower. Beatty, J. S. (2010). Legal environment. 2nd ed. . Mason, Ohio: Thomson/South-Western West. Burchell, J. (2011). The corporate social responsibility reader. Milton Park, Abingdon, Oxon : Routledge,. Campbell, D. J. (2011). Organisations and the business environment. 2nd ed. . Amsterdam:: Elsevier Butterworth-Heinemann . Cherunilam, F. (2010). Business environment. mumbai: Himalaya Pub House. cocacola. (2013). S.l. . Spruce Books. Coker, C. (2002). 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