Economic Analysis of Organizational Architecture Coca-Cola Coca-Cola, Structural Boundaries and difficulties: Coca-Cola manufactures, distributes and markets beverages and syrups. The beverages are nonalcoholic, mainly carbonated soft-drinks as well as some noncarbonated which includes coffee, water and tea. They are a multinational and produce many products under the Coke name. Each of these products is a division and their organizational chart reveals a complicated division of employees according to different products. Historically, the Coca Cola company has been separated vertically, with the basic units of the firm being divided into the concentrate producers and the bottlers.
This division of coke’s boundaries produces subunits consist of franchisees and bottlers, who are binded in territorial contracts with the parent company. In the recent past, this structure has caused a lot of unresolved tensions between these bottlers, franchisees and the parent company. Coca Cola produces a total of 400 brands and they are sold in 200 countries. Although coke has a tremendous distribution system, strong brand equity and its collection of accounts receivable is better than any of its competitors (Bartolome, C 2003), the last decade has seen a spiral downward in the fortunes of the Coke empire, and experts say that one of the major reasons for this has been the obsolete structural policies of the firm.
Due to this obsolete structure, and the difficulties faced as a result of issues within the board of directors, coke today, has lost much of the respect that it had back until the 1990’s. Recommendation 1. Change the old “Coke Model”: Experts say that the old coke model would have to be deserted. The organization should give serious consideration to revising their organizational model and shrinking its boundaries.
This can be done by either by forming company run bottling subsidiaries worldwide or buying out nearly half of the shares of existing bottlers. This would allow the firm to retain de facto control of the bottling set-ups and also give them the freedom from having to consolidate the results of these subsidiaries into the parent company’s financial reports. This would not only result in healthy revenue generation but would also eliminate the discords and tensions that Coke has in its relationship with its franchisees. 2.
Re-invent: The executives of the company will need to realize the importance of learning to re-invent the organization. This can be done by allowing innovation to become a part of the organizations workings. The organizational culture which has become quite dysfunctional would have to be changed. All of this can be done only if the structural difficulties of the firm are resolved. Coke should also set its eyes on expanding into the snack food business like Pepsi which has increased the size of its portfolio to include a large number of products other than the carbonated drinks.
This would allow the firm to grow in more ways than one. The Heart of a Company is its Employees and the Relationship held with the consumers Coke concentrates all of its energy and finances on expansion of the corporation into countries throughout the world and maintaining brand loyalty. This has done them a lot of good and they are very financially stable. There seems, however, to be a missing link between the corporation and its employees. They have recently had two major problems with employees, one being because of the discontinuation of healthcare benefits and one a discrimination suit.
They are also under investigation by the National Labor Relations Board for serious and repeated violations of federal labor law and unauthorized surveillance of their employees (Routson, 2010). Employees in Copenhagen rale against Coke stating that their human rights record and environmental standards are unusually poor (Hiskes, 2009). Recommendation: 1. Make Employees a Priority at Coke. Coke needs to begin to understand the importance of their employees and the need to become a learning organization and nurture it's human capital.
Long term relationships with any organization promotes a better quality product as well as the ability to assure employee loyalty (Engardio, S, 1990). Employees in a welcoming environment will often work harder than the employer expects but those that are unhappy and do not have their needs met will do only what they have to do. Also bad employee relationships in the news, especially the type that Coke is having are not good for the company as a whole. Assure that all employees are incentivized to do well and assure that their basic needs are met to assure company loyalty. 2.
Create loyalty in employees and get Negative Image out of the News Incentive contracts within a firm are designed to improve each individuals need to their own max, the owner is interested in max profits while the employees are interested in max wages and benefits (Lecture 2). Coca-Cola cancelled health benefits for its employees at a time when there is the most need for better employee and employer relationships. The economy is doing poorly and health care expenses are high.
This creates a major rift between what employees need and what they are getting and it does not encourage loyalty. "People are trustworthy and will be honest unless something significant induces them to be dishonest" (Lecture 3). 3. Resolve discords with the pressure groups and the public: Coke has been accused in the State of Washington of surveillance of their employees. This suit is presently in the courts and the results are not in but Coke has not stated that they were not doing this, only that they have a right too.
The union disagrees. Coke needs to make every attempt it can to get this kind of thing out of the news. Employees feel their privacy has been violated as well as that the company does not trust them. Finally, Coke has a suit against it which is the largest discrimination suit ever upheld in a court. It involves the lack of promotion of blacks within the company and pay differences. There needs to be a major effort in Coke toward cultural equity throughout the company.
This is especially true because Coke is a multinational company that in order to continue to be successful must understand and work with the cultures they are involved with References Bartolone, C. (2003). Looking inside for competitive advantage. Academy of Management; 9(4): 49-61. Coca-Cola (2010). Available at http: //www. cocacola. com. Engardio, Pete. "In Asia, the Sweet Taste of Success. " Business Week, November 26, 1990, p. 96. Hiskes, J (2009). Employees rage against the Coke machine in Copenhagen. Available at http: //www. grist. org/article/2009 Routson A. (2010). Big brother is watching: surveillance of employees provokes strike in Washington State. Business Weekly. Expand Coca-Cola now owns 51% of the market share in the cola industry (Coca-Cola, 2010).
However, it has a great opportunity, at this time to expand into other markets as its competitors have. It is already a worldwide corporation. They can easily afford any kind of expansion at this time. They are very successful at brand loyalty and as a company wield a lot of power in the industry. In adding food industry products there is expansion for the company and continued growth.