Management of Financial Resources in Coca Cola
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Published: Mon, 5 Dec 2016
This assignment is made as part of the course work of the subject of Management of Financial Resources, since any strategic plan for any organization consists of different aspects of the business that ranges from planning, implementation and control. Therefore management of internal and external performance of any organization is a critical part of any strategic plan.
Since management of internal and external performance of organization is dependent upon the resource decisions made by top management, the resource strategies are of vital nature. This assignment will explore the various aspects of resource decision by analyzing the performance management strategy of a selected organization. In below line its has been discussed that what are the resource needs of the organization, different methods that are used to allocate, manage and control the resources within the formulation of the strategic plan. Moreover this paper also discusses the various strategies applied to identify and rectify the resource gaps.
Introduction to the Organization
For the understanding of the subject and for analyzing the practical implications of the theories, I have selected Pakistan’s leading beverage company Coca Cola Pakistan (Coke), which is a subsidiary of Coca Cola Export Corporation. While operating in highly competitive and predominant market by Pepsi, Coke have been able to give tough competition to Pepsi and gain a good market share in beverage and soft drink markets of Pakistan. Their business model is called COBO, which is an abbreviation of Company Operated Bottler Organizations.
Since they are competing with a huge player in Pakistan which had a first mover’s advantage and they also have a different business model from their main competitor, their strategic planning is highly dependent upon the right resource management throughout the organization. With the increase in their market share and penetration, their resource planning is being more vital and critical for the achievement of their objective. Below we shall see how Coke has been able to manage their resource in relation to the theoretical background from the literature (Brown & Gilbert, 2006).
Resources Required within a Strategic Plan
A general strategic plan for different organizations takes care of different kinds of resources, these resources ranges from financial resources, physical resources, human resources and technological resources. These resources are acquired and allocated according to different business level and organizational level strategies. These resource allocation and identification also has a direct link with overall business strategy of the firm (Grant, 2005).
Here we see that overall business strategy of Coke for their Pakistan operations is cost leadership, therefore the entire resource management will revolve around this business philosophy, since every department will be working towards the same goal therefore their resource allocation will be done accordingly (Grant, 2005).
Financial Resources – financial resources are the backbone for any organization and should be managed carefully, as they are necessary for every kind of business operation, their timely and efficient management is vital. Coke, for its Pakistan operations are managing their financial resource with the consultation of their Asian region offices (David, 2004). These financial resources are acquired from head offices after the completion of their business plans for the year. These financial resources are acquired for marketing, research, production planning and infrastructure. Every department is required to submit their business forecast at the end of the year and then these forecasts are converted into financial forecast for the following year (David, 2004).
Physical Resources – physical resources include building, production plants, physical infrastructure for offices, and logistics. These resources are also vital for any business and their management has strategic importance. Since Coke is involved in FMCG business, their logistics management has a very important role to play in the overall success of their business. As competition is increasing, they have to manage their logistics to provide timely delivery to the maximum areas of the market to gain market share that is why their logistics management facilities are of the maximum importance in their entire physical resource management plan (Saloner et al., 2000).
Human Resources – In modern business environments, human resources are the most important resources that an organization can have, in most of the case these are the resource that can make or break the future of any organization. Therefore business companies and Coke as well put the maximum emphasis on allocating the right resources at the right time and at the job (Saloner et al., 2000).
In case of Coke they have realized the importance of training and development of their sales team and other human resources, right from the hiring processes, training and development and compensation and benefits, the company does not compromise on quality and manage the resources up to the industry standards, they believe that their competitive advantage is derived from their human resources and they are the deciding factor for this (Barney, 1991).
Technological Resources – Whether it is high end technological industry or production set up or service industry, the importance of application of technology in unquestionable, technology application throughout the organizational processes can stand alone be a source of competitive advantage, therefore organization manage their technological resources in their strategic plan while keeping the future requirements in mind (Saloner et al., 2000).
Coke, having the same vision has applied state of the art technology their business processes through an ERP system in Pakistan, where they can manage their supply chain and value chain efficiently and have an edge on their competitors. In their strategic plan, technological needs forecasting and management is of strategic importance and every short term and long term plan this factor in also kept in mind (Saloner et al., 2000).
Methods of Resource Allocation
Resource allocation is an important part of any strategic plan; this step is intended towards the alignment of the organizational plan and the operational plan, because without the efficient and effective resource allocation, company cannot be able to execute any strategic plan. Therefore it has been suggested by the management practitioners that organization should align the resource allocation strategy with business unit strategy and resource allocation should reflect and get inspirations from business strategy (Brown & Gilbert, 2006).
In below line we have discussed how our selected organization allocates the resources and what are the steps that are taken for this section of strategic planning.
Planning of Resources
The first step in resource management for selection organization is to plan the resources, this step includes the evaluation of current resources, Coke at the time of strategic planning, evaluates the current resources available to the organization. In this step it is checked that whether these resources are in fit with future plan.
Forecasting of Resources
After the making of the resources evaluation report Coke checks the strategic plan and see if the current resources will be able to achieve the goals and needs for the future requirements derived from the strategic plan of the organization (Brown & Gilbert, 2006).
Once it has been identified that organization will be requiring more resources for their upcoming strategic plan then the next step is to forecast the resources required to different departments and at different times for the effective implementation of the plan. In this process all the departments are required to forecast their required resources for the time period specified in the strategic plan so that budgeting of the resources can be done.
Resource Allocation- The second last step for the resources management would be to budget the resources of Coke, this step involves the careful evaluation of the forecasted resources for each department and then allocating required budgets for each of them (Brown & Gilbert, 2006).
For example, if strategic plan requires expansion of the market by the company then may be logistics department would required more logistics to cope with the market expansion strategy of Coke. For this purpose they would be looking to have more fleets or human resources for management of logistics in the new or expanded markets. After the allocation of the budgets the resource allocation process moves to the next step that is contingency planning.
Contingency Planning – As Coke is operating in highly competitive environment and such competitive environments are always rapidly changing, therefore Coke has made this a practice to allocate some financial resources as part of their contingency planning so that if organization has to make some unexpected decisions then they are able to have the required financial resource.
Resource Monitoring and Controlling Method
As it important for Coke and any other organization to have a close look on monitoring of their resource management strategy, we have discussed below that how Coke make sure that everything is according to plan.
Budget & Cost Method – For the better management of the resources and to eliminate the waste organization has a mechanism that manages the budgets of each of the department. As each of the department have their own budget, organization through their team heads makes sure that every activity and utilization of budget is in line with the strategic direction set in the strategic plan (Grant, 2005).
For this purpose they have management committee that reviews and approves every expense and utilization of the resource, this committee makes sure that every department is using their budget in a way that their actions are in line with the strategic plan of the organization.
Identification of Resource Gaps
Shortage of any resources in any business units of the organization with respect to their business needs is called resources gaps. Coke for their business operations in Pakistan keep on reviewing their business needs, business plans and then indentifying the resources gaps for current and future business needs (Grant, 2005).
For this purpose they review their resource management plan twice a year and then they identify any resources which are short for their current business need. Resource gaps are also found at the time of the making of strategic plan for coming years. They also fill the identified resource gaps for future and current need.
Strategic plans are at the heart of every organization, and resource management is at heart of every strategic plan, therefore for organizations to thrive in business and gain the sustainable competitive advantage it is very important to strategically manage their resource. For strategic management of the resources, organizations have to create a link between their strategic plan and their resource management plan. This way they can gain the required results from their planning and gain the competitive advantage.
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