Question

In any organization, it is important that the three activities namely (i) partition of decision rights, (ii) measurement of performance, and (iii) reward of performance must be designed in sync to keep the organizational architecture or “three-legged stool” (Zimmerman, 2014) balanced. This will ensure that decision makers within an organisation have the relevant information to maximise firm value, as well as the incentives to use this information productively from the firm’s perspective. Unfortunately, in reality, this is often not so. Mismatch among these three legs are common occurrences.

Required:

Select a company you are familiar with or one you are currently working in, or one with information publicly available. Using your own words as much as possible, and in not more than 2,000 words (in total):

(a) Describe the industry the chosen company is operating in, and an outline of the background, nature of business, the industry and the environment it is operating in, its products/services, etc.

(b) Choose one (1) functional area and describe what effective organizational architecture has been put in place by the company to maximise firm value.

(c) Describe any weaknesses of these existing systems.

(d) Suggest possible improvements that the company can adopt.

Answer 1

(A)

COCA COLA : Organisation Description and background

The Coca Cola Company is the most valuable brand name and world largest non alcoholic beverage company. This company was founded in 1886 in united state of America. Now it operates in more than 200 countries. Coca cola also distributes juice, energy drinks, water, and coffee. The company has partnership with more than 300 bottling and canning company worldwide. Who produce and sell coca cola beverages worldwide. The bottling partners are responsible for consumer brand marketing initiatives, handle manufacturing and merchandising.

Coca Cola Business Environment

Over the past years, Coca Cola Company has faced lots of changes in the business environment. Company create counterpart with American sweet test product however, it was commercial failure and coca cola change its strategy and return back to its old formula. Consumers become more health conscious then company lunch new product to address consumer needs, such as diet coke and coca cola zero. Company bought bottling business in South Korea which allow to access in retail store as well as makes easy to entry in Japan, Malaysia and china.

(B)

There are 6 functional areas within Coca Cola, these are:

· Marketing

· Finance

· Packaging

· Sales

· Research and development

· Administration

Administration

This department is essential for keeping the business going. They act as a help support of the company, it is not the central purpose the business but every business organization would need this department.

Most businesses rely on administration to be organized. They deal with enquiries, give messages produce documents and give information to any customer. The complaints that this department will get would be transferred to the research and development department to make the product better or fix the problem that the consumer is having.

These departments are the most important department of The Coca-Cola Company because they helps the company to meets the objectives of The Coca-Cola Company i.e. surviving, customer satisfaction and make more profits. As I said that the help desk department satisfies the customer by providing the information they needs and taking the complaints and passing to the research and development departments who improves the products.

Organizational Architecture:

The Coca-Cola Company uses a variety of competitive strategies to maintain its dominant position in the soft drink industry. The most noticeable strategy is the company's engagement in product differentiation. It is essential for the company to maintain a brand image that appears significantly different than its main competitor, Pepsi. The two companies produce products that are nearly identical, yet their marketing practices have managed to create a high level of brand loyalty for each product. These tactics are expected in the oligopoly market structure.

Most recently, the company launched Coca-ColaZero, which is aimed at customers who are attempting to lose weight. Coke Zero contains fewer calories than its traditional products, which is major concern for health conscious consumers. This product was a response to the growing popularity of Pepsi Max. An aggressive marketing and advertisement campaign was launched to educate the public on the benefits of this product. There is a continual evolution in the branding and marketing of these two companies that is seen by most consumers through television advertisements. It is important to note that this strategy does not include any effort to differentiate on price. It is mutually beneficial for the two firms to remain non-competitive on price, because this will allow both to maximize profits.

The next major strategy of Coca-Cola Company is to make their products available on a global scale. This goal is achieved by entering contracts with restaurant chains to become the exclusive provider of soft drinks. Major fast food chains, such as McDonalds, will only sell Coke Cola products as opposed to Pepsi. This strategy ensures that consumers will always have the option to consume the product in

virtually any location. When a consumer is presented with only one choice in a restaurant, they will rarely leave the establishment to purchase an alternative soft drink. Therefore the main goal of this strategy is to limit the options of consumers when they are eating at restaurants. Coke has extended this strategy to a global scale and is attempting to build brand loyalty everywhere in the world. Requiring distributors to carry their products on an exclusive basis guarantees that they will maintain a dominant position over competing firms.

The last strategy that Coca-Cola engages in can be seen in its product packaging. Coca-Cola cans and bottles are constantly evolving to provide consumers with a new value proposition. if the company failed to update packaging, it is likely that Pepsi would acquire market share from customers who have become bored with Coke products. This strategy is also a form of product differentiation, which is a key characteristic of the oligopoly market form.

(C) Weakness of Existing System

The legendary nature of Coca-Cola brands is slowly withering away as customers are shifting their attention to new brands. Recently, the company is experiencing brand recalls. For example in 2010, the company was forced to abandon the production of Smart Water with concern that the product didn’t meet FDA’s quality standards. Similarly, in 2009, an Israel Coca-Cola Company was forced to withdraw several brands such as 1.5 L of Coca-Cola and Diet Coke after the discovery of benzenes and sulphur traces in the drinks.

As similar cases continue to emerge, the once faultless brand name is becoming stained and is no longer faultless. A section of consumers are concerned over the nutritious aspect of the popular drinks since are purely made out of artificial materials. As the popularity of the products erodes, customer confidence is strained which in turn is reducing the company revenues margins.

The global market is also experiencing a shift in the consumption trend with a preference to value products. The conservative nature of Coca-Cola Company to alter its legendary brand has seen massive exodus of its customers to consume alternative beverages in search of value. For instant, in 2009, the company Costco stopped restocking Coca-Cola products in its stores country wide since the company decline to reduce retail prices. This prompted Pepsi, Coca-Cola main rival to grab the opportunity and increase its revenues.

(D) IMPROVEMENTS

Organizational Strategy

Product/Market Focus

Coca cola is a company that knows that their main priority is to reach their products to the customers. Coca cola focuses on improving the product itself either by design, taste, ingredients, size, convenience, and many other factors. Coca-Cola’s target market satisfies a wide variety of cultural consumers around the world. Moreover, their products target people who are health conscious and people who are on a diet. Their products do fit all age groups from the young to the old. There are Coca-Cola products for the athletes who train for a sport, such as Powerade (Coca-Cola Product). Also, this company has focused on people who need coffee in the morning before they go to work. Coca- Cola owns a joint venture with Illycaffe, Italy coffee brand which is primarily for the people who are coffee-lovers. The focus of this market, Coca Cola, is applicable to both male and females. Coca- Cola does engage in product diversification throughout the world. Coke a product is mainly directed to the young children. Their advertisements are mostly directed to the young. Coke wants to target the young because they know their product will give youth’s power and energy. Brand extension strategy has played a key role on Coke. Coke introduces new products under their trademark Coca-Cola. Brand extension strategy is quite effective under the Coke trademark. There will be this recognition and realization from consumers, that they will be drinking a Coca Cola product. Brand extension strategy puts a new product into an existing market. Diet Coke is an example of brand extension strategy which became successful. For instance, Diet Coke has been recognized gradually by consumers worldwide, it has low calories and has been sold over 100 countries. It promotes liveliness and energy to consumers similar to Coke. Many consumers who do enjoy coke as a soft drink, there would be a higher probability for a consumer to try a can of diet-coke due to brand awareness.

Rationale: Coca Cola Company wants to continue focusing their needs for consumers with regards to delivering innovative food products which includes energy drinks, vitamins, and antioxidant drinks. Furthermore, Coca Cola is focusing on creating a healthy and active lifestyle that is more adaptive to consumer behavior. Coca cola is working with their bottling partners to enhance customer relationships and make their products widely known and distributed everywhere.

Growth Strategy/Goals

Hard goals

In terms of its growth strategy, which is their market position in the beverage industry, Coca Cola Company is concentrating in opening more opportunities in developing markets by leveraging the scale & reach of the Coca Cola system to shape & capture value. The company intends to accomplish it by sharpening their execution at the point of sale and expanding the brand portfolio. The company has projected that these developing markets are expected to contribute approximately 20 percent of incremental population growth over the next 10 years. Personal expenditure per capita in these markets is expected to increase by 65% over the next decade. Furthermore, Coca Cola company anticipates that developing markets will contribute approximately ¼ of the incremental unit case volume by 2020.

Rationale

The coca cola company’s long term growth strategy of investing in emerging markets, is related to the Coca Cola Company projections in these markets. The CCC attributes this to a positive correlation between wealth and the increase in consumption of Nonalcoholic ready-to-drink(NARTD) beverages. From now to 2020, more than 1 billion people will join the middle class, and the per capita wealth for individuals will increase by nearly 30 percent. They have the ability to invest in new plants in places like china & India. Over the next 3 years Coca Cola company plans to invest $2 billion, 3 new plants are expected to be finished in that time period. The company clearly understands in order for intended strategy to be attained, consumer access and system alignment is key to their growth in these emerging markets. This means placing more coolers throughout these countries, in order to drive on-the-go consumption.