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Diagnostic Analysis of the Coca-Cola Company, Case Study Example

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Case Study

This is a multinational company headquartered in the United States of America but with a massive worldwide representation. It is a corporation that engages in the manufacture, retailing and marketing of non-beverage products in form of syrups and concentrates. The company’s name is sourced from the initial formulation in a flagship project that was invented by John Stith in the year 1886 and was called Coca-Cola. John Stith was a pharmacist who had an overwhelming interest in the manufacture or production of fruit juices. The company was incorporated in the year 1892 (Coca-Cola, 2010).

The company has a unique distribution system that involves franchising and it dates back to the year 1889. It has been noted that the company operates in more than 200 countries or territories of the world by offering more than 500 brands of it products (Terry, 2005). The system has been advantageous to the company since it has enabled many potential customers gain easy access to the company’s products. Many consumers in the more than 200 territories appreciate the easy accessibility to the company’s products which has enabled the company to earn a large amount of income from its business activities. In other territories for example the company applies the use of independent distributors and wholesalers who purchase the products from the company and sell them to other retailers who ii turn sell the products o the final consumers’. This mechanism not only involves and benefits other no-employed individuals but also increases the company’s efficiency in the delivery of the products to the consumer (O’Barr, 2000).

The system of distribution however has in some territories been taken advantage of by the middlemen who hoard the products to create an artificial shortage. These individuals buy the products from the company and then fail to deliver them to the subsequent retailers on time or as required. Holding on the products they create a shortage in specific regions of the given country or territory. This artificially created shortage results in the rising of demand which in turn triggers the price of the beverages to rise unnecessarily. When the price rises as a result of the increase in demand the hoarders then start releasing the products slowly into the supply and distribution channels at a price higher than those anticipated by both the consumers and Coca Cola Company.

The company should therefore put mechanisms in place to minimize such instances of artificial shortage which to some extent affect its sales since some consumers easily get discouraged when the products they believe in start fetching prices that are extremely higher than what they are used to. The company should endeavor to initiate punitive measures in those territories where this habit is common which may include cutting links with the wholesalers or banning them from dealing in their products (Klein, 2008). These measures should be aimed at earning consumer confidence and increasing their trust in their products for the consumer is the main reason why businesses are established and this therefore means that disgruntlement in the consumers is a threat to the success of a company in terms of income from sales. It is this disgruntlement that the company must tackle at all costs or else the company faces the threat of losing the customers to their competitors such as Pepsi and other soft drinks manufacturers such as Del Monte in the African territory. Smooth and open distribution channels which results in sufficient supply at the consumer’s end of the company’s products should be applied all the time (Klein, 2008).

The company attributes its success to the marketing expertise and a unique system employed in branding and bottling. The company also makes significant investments in improving the sales and marketing of its products and brands and also so as to increase the customer awareness of its products (Klein, 2008).  The organization invests heavily in the global marketing force which includes developing the branding strategy, developing strategic consumer-targeted promotions and advertisements that aim at increasing the product awareness among the potential customers (O’Barr, 2000).  The company also has mechanisms in place that solicit for the customer feed back which is normally analyzed and where possible employed or used in the improvement of the service delivery (Sharma, 2008).

The company has embraced acquisition and partnering that have contributed massively towards the company’s success. The partnerships involve delivery of the syrup to other companies which then carry out the bottling process in their respective territories (Raman, (2007).   These mechanisms however have also had their negative impact on the general business doing process of the company which to some extent has tainted its reputation (Terry, 2005).

Acquisitions and mergers have increased the company’s global representation. The advantage that comes with mergers and acquisition are the already existing business infrastructure which includes the human resource, buildings and the already established business supply channels. This reduces the investment capital required by any given company in order to expand for the general cost of the transfer process is cheaper a compare to the time taken to reach the breakeven point of the investment. In addition it easier to meddle through the judicial requirements when another company is already in existence than when one has to start another plant. The mergers cut or minimize the costs of hiring new employees for the new owner of the company makes use of the existing employees and just incorporates them into the new way of doing things.

One of the many problems associated with the mergers and acquisitions is the welfare of the employees whose owner has just been transferred from the old party to the new party. The new party may not adhere to the contracts signed between the employees and the former employer which address issues of increase, whether periodic or spontaneous, in the wages and allowances. In this sense the mergers and acquisition are disadvantageous to the ordinary employees who may have their dreams shattered. The new owners may also have a different strategic mechanism of promotion or career development in general which may not be favorable to the existing group of employees from the newly acquired branch (Dyer, 2004). This has been witnessed on many occasions in the Coca Cola Company whereby the heads of such newly acquired branches are sourced from outside the territories. This discourages some of the employees and kills their psyche or motivation to climb up the ladder. When most of the people have nothing good to work hard for it reduces their morale of doing a good job and hence resulting in poor performance of the newly opened branches.

There is a problem associated with the mergers which include the layoffs of employees or downsizing so as to reach the human resource objective of the new employer. This is disadvantageous to the employees and in some cases costs the new owners a lot. Coca cola for example, had to lay off some employees in newly acquired branches. Even though there was compensation, in most instances as a result of the retrenchment the psychological wounds caused on the victimized employees were not healed. Most of the retrenched are usually not prepared to handle the life without a job especially now that it happens on a short notice. This has portrayed Coca Cola Company as one not concerned with the welfare of the employees (Sharma, 2008).

In as much as mergers and acquisitions lead to faster growth and/or expansion they are also known to limit the potential sources of competition to the company involved. In fact acquisitions are in most cases viewed as a mechanism of buying the potential competitor thereby creating a world with less competition around. This results into a monopolistic kind of environment which in most cases is not favorable to the customer base (Dyer, 2004).

When one company endeavors to produce a given product or commodity in a given region or territory and faces no competition from another company with similar business objectives, the potential customers are likely to face exploitation limited to the company’s mercy. The most area of exploitation is in the pricing for the company has the ultimate power to decide the price at which their products will go for (Dyer, 2004). The situation becomes worse if the products or commodities in question are basic needs. Coca Cola Company has been accused of seeking mergers with and acquiring other bottling companies which were producing brands different from those produced by Coca Cola Company. This with time led to the abandonment of the brands initially being manufactured by the respective bottling companies and continuation with the production of Coca Cola’s products.

Coca cola has in the recent past been facing numerous challenges especially since the demise of its former chief executive officer Roberto Giozueta coupled with other macroeconomic factors such as the crisis in the Asian continent and the product recall. The decrease in the amount of profits over the years has however not affected the company’s position on the globe as one of the most successful (Foster, 2007). It is alleged that the death of Roberto Giozueta saw an overhaul in the approach of doing business with an aim of increasing the profits using mechanisms which the former chief executive officer was opposed to. The new management put in place strategies focused only on profit making activities and never on the quality of services delivered a weakness that the opponents took to their advantage. The strategies have backfired which has resulted into the current top management taking the blame. Most territory managers or heads have been quoted openly disagreeing with the strategies as implemented by the top management (Tucker, 1964). This is a managerial problem that can be solved by the top management embracing consultation approach to enhance consensus on the manner in which the company should be effectively managed so as to deliver the desired fruits. Even as the company endeavors to become successful, it should also consider the quality of products or services delivered to the customers (Sharma, 2008).

The company has also not been spared of several lawsuits which have to some extent tarnished the company’s reputation. The company has been sued on several grounds which include using crude marketing strategies aimed at destroying the competition, murder of the union officials to silence the employees and provision of the substandard products to the public (Zhang, 2008).  Such allegations have resulted into court rows some of which have been costly to the company in the sense that it has been forced to pay for the damage caused. Some lawsuits have been settled outside the courts and most of these involved the company with other neutral parties who have no interest in the beverage or bottling industry (Dyer, 2004).

In any company the relationship between the company and employs dictates on the success of the company. Unions exist in companies as the employees’ savior during the times in which the company’s management seems to have a deaf ear on their needs. So the allegation that Coca Cola Company has been linked to the murder of some of the union official as a scheme to silence the other employees has had a destructive effect on the reputation of the company and has even in some instances led to consumers’ boycott of the company’s products. Coca Cola faces the challenge of coming out clean from such allegations (Sharma, 2008).

As for the marketing strategies, it is expected that Coca Cola will uphold good business practices that allow for a free and a fair market where the competition is not destroyed using unconventional means. In order to gain respect from the business world it is expected that the Coca Cola Company management will endeavor to put in place measures to minimize court rows that involve using abnormal means of marketing that disadvantage the competition

Complains relating to quality of products have in some territories had a significant impact on the company’s sales. For example, in 2003 an NGO based in India, Centre for Science and Environment claimed that it had identified that the groundwater used in the company’s bottling plant contained some carcinogenic compounds in levels that can cause harm to consumers. That reduced the sales of the Coca-Cola products by 11% even though the claims were later found to be false. Quality is an important aspect of business that any serious business company aimed at making profits should put into consideration (Foster, 2007). Taking the Indian incidence for example, it was found that the products were as per the required standards in India contrary to the claim but did not adhere to the UK standards. The idea developed from this is that in some territories the quality is not as it should be. The moment a competitor comes up with a product that is deemed to be fit i.e. to be of higher quality than what coca coal is providing for the consumers in a given territory, it will always be disastrous to the coca cola company and the damage may not be irreparable. That explains the massive drop in the amount of Coca-Cola sales in India and Asia as a continent (Sharma, 2008).

References

Coca-Cola, (2010). The Coca-Cola Company. The Coca-Cola Company, Web. 9 Dec 2010.             <http://www.thecoca-colacompany.com/>.

Dyer, J. H., (2004). Prashant Kale, & Harbir Singh. “When to Ally & When to Acquire.” Harvard Business Review July-August 108-15.

Foster, R. J., (2007). “The Work Of The New Economy: Consumers, Brands, and Value Creation:.” Cultural Anthropology. 22.4 707 – 731

Klein, B., (2008). “In Perfect Harmony: Popular Music & Cola Advertising.” PopularMusic & Society, 31.1

O’Barr, W.M., (2000). “The Airbrushing of Culture: An Insider Looks At Global Advertising.”             Advertising & Society Review.

Raman , K. R., (2007).  “Community-Coca-Cola Interface: Political-anthropological Concerns on          Corporate Social Responsibility.” Social analysis [Adelaide]. 51.3 103-120. Web.

Sharma, A. (2008). “Water in Coca-Cola in India pesticide free”. USA Today. 23-24.

Terry, M. (2005). “Coke adds life to health drinks sector.” Scotland on Sunday (UK). 24-37.

Tucker, W.T., (1964). “The Development of Brand Loyalty.” Journal of Marketing Research. 1.3 32-35.

Zhang, F., (2008). “Corporate Social Responsibility in Emerging Markets: The Role of Multinational Corporations.” Foreign Policy Centre, 13.

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