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Coca-Cola is one of the leading manufacturers of carbonated drinks all over the world. Over the past decades, Coca-Cola remained on top of the industry. The company was able to withstand the World War II, and even took it as a business opportunity rather than a liability. It was able to surpass the Asian Financial Crisis and even gained better access in markets that it was not able to fully enter. Coca-Cola exhibited the efficient change management as part of the strategic management process. Change management is the process in which it manages the change in the side of people. There individual change management and organizational change management are the theories of change management. Aside form the theories there are also four strategies of change management which are the Empirical-rational, normative-reductive, power-coercive and environmental-adaptive, which the company has successfully adopted but it is now facing major jolts in its business operations and its competitors are gaining advantage out of the same.
Based on the above case-let, analyse the position of the company with respect to :
i) Coca-Cola Corporation Management Strategies with respect to its technological advancement in 21st centaury.
ii) Change in Information System due to changes in the world -wide market structures.
Coca-Cola Corporation Management Strategies with respect to its technological advancement in 21st century.
Coca-Cola is one of the leading manufacturers of carbonated drinks all over the world. Over the past decades, Coca-Cola remained on top of the industry. The company was able to withstand the World War II, and even took it as a business opportunity rather than a liability. It was able to surpass the Asian Financial Crisis and even gained better access in markets that it was not able to fully enter. Coca-Cola exhibited the efficient change management as part of the strategic management process. Change management is the process in which it manages the change in the side of people. There individual change management and organisational change management are the theories of change management. Aside form the theories there are also four strategies of change management which are the Empirical-rational, normative-reductive, power-coercive and environmental-adaptive.
Over the past years people, systems and the environment have evolved. Change is the only thing that is constant in this ever changing world. From the physical attributes of individuals, up to the environment, change is very evident. Just like the environment and people, businesses also undergoes changes, it can be either massive or minimal. Often times, changes occur in the management of the corporation, in order to keep up with the competition. According to MacCalman and Paton (2000) the people who went home winners and on top have the common characteristics of effectively handling the changes in the situation. Changes in management is a process that any organisation must undergo, a business will not be complete if it never experienced change.
Prior to discussing change management, the word change must be first defined. According to Davidson (2001) "change is the significant difference in what was before." In business it means accomplishing tasks in a new format, following new directions, acquiring new technologies, new management procedures, acquisitions and merging and other important events in corporations. Moreover, Davidson described the characteristics of change. According to him change is significant, prolonged and disruptive and change is a continuous process of alignment. Davidson (2001) argued that change is significant, prolonged and disruptive. In this attribute, change in an organisation includes venturing into new areas of business, such as entering new products in the new market, facing an unexpected event such as economic crisis and redirection of the company.
According to Kudray and Kleiner (as cited by Davidson), an aligned organisation must have a continuous synchronisation of the important management levers such as strategy, operation, culture and reward. Kudray and Kleiner discussed that in these management levers, the managers, chief executive officers and supervisors are responsible for manipulating and rearranging both the human and non-human elements.
In addition, MaCalman and Paton discussed that change is an important aspect in the business world especially in technology and innovation, from simple technologies and procedures up to more complex operating environments, nowadays technologies and products are coming together to achieve a common conclusion or objective.
Organisations that resist changes will inevitably face wider exposure to risks and losses. There are a number of situations in which change is necessary within the organisation such as technological advancement that is being utilised by different companies in order to cope up with the competition. Aside from what was mentioned earlier, there are still many issues and concerns that are necessary for change in the organisation, however the most substantial thing is that organisations acknowledge that changes happen constantly for different reasons and the management must address these changes as soon as possible to prevent great losses. In relation to the discussion of management issues, this paper will be discussing the business strategies of Coca-Cola Company in accordance to change process.
Change Management Theories
Nickols (2006) has four basic definitions of change management, according to him it is a task of managing changes, a field of professional practice, a body of knowledge and information and a control mechanism.
Task of Managing Change- Nickols (2006) defined managing changes as
"the devising of transformation in a planned and systematic fashion."
He stated that the main objective of managing change is to efficiently implement new techniques and methods within the organisation, moreover the changes to be handled depends upon the control of the organisation.
Area of Professional Practice
Years ago, managing changes in a corporation is done by the management, supervisors, and CEO of the company, but nowadays with the constant change in the concepts of business and evolution of new theories a number of people have developed firms that particularly addresses the issues regarding managing changes. According to Nickols (2006), there are a number of individuals and consulting firms that declare they engaged in activities that involves planned change and that the firm exercises change management practices.
A Body of Knowledge
The body of knowledge in change management according to Nickols (2006) includes the following, models, methods and techniques, tools and various forms of knowledge that constructs the change management practice. Moreover, Nickols discussed that the content of change management is influence by sociology, psychology, business administration, industrial engineering, economics, systems engineering and human and organisational behaviour.
Over the past years groups and individuals handling the information systems of organisation have tried to control and direct changes to the applications and systems of the company, however, in recent years people working in this particular area have referred this mechanism of control as "Change management."
Perception regarding change management has evolved over the past years. Change management is utilised in new procedure, structures, and technologies in order to overpower the resistance to change, however as studies and ideas regarding change management evolved over the past years, the view on change management switched from a tool in overcoming resistance to developing strength and involvement in transformation. Due to this change management is now regarded as leadership ability than a responsive instrument in handling resistance.
Coca-Cola Corporation Management Strategies
Coca-Cola was established on May 8, 1886 by Dr. John Stith Pemberton, a local pharmacist in Atlanta, Georgia. It was first sold in Jacob's pharmacy for five cents per glass. Initially Coca-cola was sold as a drug, Pemberton during that time considers Coca-cola as a cure for diseases such as dyspepsia, morphine addiction, headache and impotence (North America Operating System, 2008).
In the year 1985, due to the aggressive campaign of its rival Pepsi, the Coca-Cola Company reformulated the popular carbonated drinks to suit the preference of the consumers which is sweeter soda. However, the New Coke became a commercial failure which leads to the adverse reaction of the public. Protests from different sectors of the society emerged. Due to these events the company return the original formula and named it Coca-Cola Classic. Despite returning the original formula, the company still received accusations from different groups. In the year 2005 the company launched and announced their upcoming products which are the Diet Coke and Coca-Cola Zero (The Coca-Cola company case n.d.).
Coca-cola Company is clearly one of the most popular companies in the world. Aside from the fact that it is also one of the oldest corporations that was able to withstand World War II and other changes in the economy over the past years. The fact still remains that it is one of the most famous brands of Cola in the world (The Coca-Cola company case n.d.).
The Coca-Cola Company was able to resist the hindrances that occurred; the company was able to utilised change management as efficiently as possible to withstand the obstacles.
As mentioned earlier, changes in management is caused by three different factors which are the external environment, internal changes and the proactive reaction to possible threats and difficulties.
External Environment Evaluation- over the past decades, the Coca-Cola Company has faced a number of changes in the external environment that have transformed the management of the company. One of the best examples is during the World War II. The company was able to maintain the status of the company, at the same time, was able to enter new markets despite the environment. Instead of lying-low because of the war, the company became more aggressive through providing free drinks for the GIs during the World War II. Through this the corporation was able to hit two birds at one stone. First, because the carbonated drinks sent by the company, it became a patriotic symbol by the United States soldiers in which led to consumer loyalty. Second, the company was able to take advantage of the situation and established the product in newly-occupied countries by the Ally forces and because of that the company established plants in various locations worldwide paving the way for its post-war expansion.
Another aspect in the external environment is the change of taste and expectations of the consumers. During the mid-1980s wherein the Americans favoured the sweet taste of the rival product, the company created its counterpart but became a commercial failure; however instead of backing down, Coca-Cola changed its management strategy and returned the old formula, and just renamed it as Coca-Cola Classic. And with the rise of obesity in the United States and consumers became health conscious the company released new versions of Coke in order to address the needs of these type of consumers, such products include Diet Coke and Coca-Cola Zero.
In addition, according to Bool (2008) companies such as Coca-Cola are compulsory to transform due to trends that have a huge impact on their business, and one of these trends is the health and fitness. A number of people are noe investing more in their health, and in order to keep up with the trend, Coca-Cola introduced their new product which is a calorie burning soft drink, the Enviga. Moreover, Coca-Cola is collaborating with the Swiss company Nestle. Coca-Cola is dealing with innovation and change. During the Asian Financial Crisis, Coca- Cola was also triggered to change its course of management in that particular region. The responses and reactions of Coca-Cola with the external environment are its internal changes.
Internal Changes- as mentioned earlier, Asia experienced its financial crisis in 1997. According to Barton, Newell and Wilson (2002) as the financial crisis swept the Asian region, the chief executive officer, Douglas Daft responded to this by mobilising his executives to workshops about how Coca-Cola would seize new growth opportunities. Barton et al, stated that Coca-Cola gave emphasis on acquisition opportunities, Coca-Cola bought acquired bottling business in South Korea which gave more access in retail stores in South Korea, as well as, better entry in China, Japan and Malaysia. Coca-Cola disregarded its country-defined market perspective and focused on regional strategic view and acquired local brands of tea and coffee.
In the case of health trends and changing taste of the consumers, Coca-Cola responded to this through innovation and change. Innovation is accomplished through development of new products such as the Enviga, Diet Coke, Coca-Cola Zero, and other variants of Coke. The change is incited by the trend in health and fitness and consumer tastes which had an impact on the business of Coca-Cola. During World War II, the response of Coca-Cola to the situation is to provide free drinks to the GIs in order to access new markets in which the company was able to do.
Risk Management- Companies whether it is small or large are already acting in advance in order to combat the possible risks that may arise in the future. According to Neville (2005) in the wake of 911, the insurance market have changed, big companies reconsider the possible risks and how are they going to use insurance, in Coca-Cola after the prices increased the company look past the typical path of buying insurance directly but instead Coca-Cola considered wholesale insurance through captives.
In the year 2000, The Business Wire, reported that Coca-Cola changed its senior management team and organisational structure for the purpose of facing the opportunities, threats and challenges as the company enters the new phase of management. Moreover, Coca-Cola North America is decentralising its organisation, as well as, pushing accountability and authority into the field of the organisation.
The change in the senior management is one change management step that Coca-Cola have undergone in order to increase the efficiency of the company. The appointed individuals are seasoned beverage bottling executives; therefore Coca-Cola sees consistent increase in the revenues of the company. The change in the senior management has been effective because the sales of Coca-Cola in North America have been consistent.
In addition, according to North America Operating System. (2008), the company undertook a significant change in which an organisational structure was developed to respond to the needs of consumers through incorporating the North American bottle and can, fountain and juices in a single unit of operation. Through this change it enhanced the way beverage choices are created, and it unifies the system of the supply chain, procurement and distribution in which it increased the efficiency of services to consumers.
Individual Change Management- According to Hiatt and Creasey (2002) individual change management is the process in which the company provides tools and training to its employees to be able to handle their personal transition through change. The ADKAR Model, according to Hiatt and Creasey is a model that can be use as an individual change management. The ADKAR model shows five stages an individual undergoes during the process of change (Hiatt and Creasey 2002):
Awareness of the need to change- in Coca-Cola employees, stakeholders and even consumers are informed in the changes, especially in the management, just like in the case of appointing Shaun B. Higgins as the new president of the Coca-Cola Company in 2005.
Desire to participate and support the change- the employees in Coca-Cola especially the ones in the management positions participate in the changes that the company must undergo, like in the case of changing the packaging of Coca-Cola.
Knowledge about how to change- the senior managers of Coca- Cola have adequate knowledge regarding the changes that must take place within the company, an example is in the case of Daft in which he had knowledge on changes that must be done in order to counter the Asian Financial Crisis in 1997.
Ability to implement new skills- Coca-Cola has a long history of changes, some are failures, but most of the time it is effective, therefore the company has the ability to put into action the changes that the company have developed, take the case of Daft, together with his team, they were able to implement the changes, not just in one country but a whole region successfully.
Reinforcement to keep the change in place- Coca-Cola is an established company and has already made a mark not just in the lives of Americans but most people in this world. The successful implementations of the changes in the company are due to the strict reinforcement of changes in the company.
Organisational Change Management- this theory presents a general procedure for managing the change in the side of the people at an organisational level (Kotter, 1996). According to Hiatt and Creasey, the organisational change management is consists of three phases, which are, preparing for change, managing change and reinforcing change.
The theory of organisational change management was effectively utilised by Coca-Cola. Different managers in various parts of the world have used organisational change management in order to address the issues that the Coca-Cola faced. From the case study (The Coca-Cola company case n.d.) these people are:
One of the most notable CEOs of Coca-Cola Company is Mr. Gouzueta, he was the chief executive officer of Coca-Cola for seventeen years. He was able to determine the problem against other manufacturer of carbonated drinks. Mr. Gouizetta played a huge role in measuring the operation of Coca-Cola and developed strategies that aided the Coca-Cola to defeat competition. In addition, Mr. Gouizetta played important roles in planning and leading the tasks in achieving the goals and objectives. In addition, Mr. Gouizetta also appointed Mr. Ivester whom transformed the weakness of Coca-Cola into opportunities and strengths (The Coca-Cola company case. n.d.).
Furthermore, the paper of Pigseye, the following organisational management changes that occurred in Coca-Cola over the past years. Coca- Cola has distinguished various forms of its advertisements in order to target different forms of consumers instead of focusing on one group. The company changed the packaging of Coke. Coca- Cola also developed new products such as Gatorade and it extended globally which is composed of the African group, Middle and Far East group, the Latin America group and the European Group (The Coca-Cola company case. n.d.).
Change management is a process in which all companies undergo. This is an important procedure because it enables the organisation to make decisions that will be advantageous and beneficial to the company. In addition, organisations that are open to change are generally more successful compare to companies that resist it. In a globalise market, new technologies and procedure are emerging rapidly, in order to keep up with this progress a company must be willing to adapt to management changes. The international, as well as, the local market has a very stiff competition, therefore in order to be on top change management must be utilised by companies. Coca-Cola is one of the best examples of companies that utilised change management efficiently and have yielded positive results. The evidence is the dominance of Coca-Cola in the soft drink industry not just in the United States but all over the world.
Change in Information System due to changes in the world wide market structures
The Coca-Cola Company is the world's largest beverage company, and markets four of the world's top five leading soft drinks: Coke, Diet Coke, Fanta, and Sprite. It also sells other brands including Powerade, Minute Maid, and Dansani bottled water. The company operates the largest distribution system in the world, which enables it to serve customers and businesses in more than two hundred countries. Coca-Cola estimates that more than 1 billion servings of its products are consumed every day. For much of its early history, Coca-Cola focused on cultivating markets within the United States.
Coca-Cola and its archrival, PepsiCo, have long fought the "cola wars" in the United States, but Coca-Cola, recognizing additional market potential, pursued international opportunities in an effort to dominate the global soft-drink industry. By the 1993 Coca-Cola controlled 45 percent of the global soft-drink market, while PepsiCo received just 15 percent of its profits from international sales. By the late 1990s, Coca-Cola had gained more than 50 percent of the global market in the soft-drink industry. Pepsi continued to target select international markets to gain a greater foothold in international markets. Since 1996 Coca-Cola has focused on traditional soft drinks, and PepsiCo has gained a strong foothold on new-age drinks, has signed a partnership with Starbucks, and has expanded rapidly into the snack-food business. PepsiCo's Frito-Lay division has 60 percent of the U.S. snack-food market. Coca-Cola, on the other hand, does much of its business outside of the United States, and 85 percent of its sales now come from outside the United States. As the late Roberto Goizueta once said, "Coca-Cola used to be an American company with a large international business. Now we are a large international company with a sizable American business."
Coca-Cola has been a successful company since its inception in the late 1800s. PepsiCo, although founded about the same time as Coca-Cola, did not become a strong competitor until after World War II when it began to gain market share. The rivalry intensified in tl1e mid-1960s, and tl1e "cola wars" began in earnest. Today, the duopoly wages war primarily on several international fronts. The companies are engaged in an extremely competitive and sometimes personal-rivalry, with occasional accusations of false market-share reports, anti competitive behaviour, and otl1er questionable business conduct, but without this fierce competition, neither would be as good a company as it is today.
By January 2006, PepsiCo had a market value greater than Coca-Cola for the first time ever. Its strategy of focusing on snack foods and innovative strategies in the nonÂÂ¬-cola beverage market helped the company gain market share and surpass Coca-Cola ill overall performance.
In current scenario market structures are changing as demand increases due to increase in population , so there is a need for change in information system and coca cola came with the new information system to effectively cater the demand of the masses.
when they started the SAP program back in 2000, our primary intention was to reduce and replace the large number of business applications (more than 170) they had inherited, each requiring specialist IT skills, unique infrastructure and compliance to increasingly more demanding controls such as Sarbanes- Oxley, the ever increasing threats of virus and intrusions and more recently the need to provide more secure business critical systems disaster and recovery in the wake of external threats and environ- mental disasters. Over the last five years, they have built up vast experience and learning, resulting in the delivery of Wave 1, which is the template covering our Back- office and Supply Chain activities as well as some planning processes. First and foremost, they have realized there needs to be an equal balance between Technology, People and Processes, thus requiring strong business representation and leadership to bring about the Change Management that is implicit in introducing "Best Practice" Business Process and data standards. Secondly, it is critical there are strong measures for success, and with this in mind we introduced FAM (Functional Assessment Model) as a methodology to pre-measure countries' readiness prior to introducing the SAP Wave 1 template, as well as post-measurement to validate that success criteria making up the business case have been achieved. Thirdly, we identified that the only method for sustaining standards as well as supporting inter-country business activities was to centrally host the countries on a single Hardware Platform and provide the necessary support resources leveraging skill and scale out of a central "Shared Services" facility in Bulgaria. Then they started next phase of evolution for the SAP program called Wave 2, which will address the Customer Facing business processes and capabilities required to meet the demands of our business today and in the future. This program is closely linked and aligned with our Coca-Cola HBC strategic imperative, Excellence Across the Board, to ensure that Wave 2 delivers the necessary capability to sustain the changes introduced by the EATB country and group
teams as well as address the operational enhancements that have been constrained due to our core legacy system BASIS.
Coca-Cola HBC's success with Wave 1 and the recognized ability they have demonstrated in delivering large and complex SAP programs has led to our Wave 1 and Wave 2 standards being identified as the core base for the rest of the Coca-Cola sys- tem in a global initiative called Project SCALE. There are obvious benefits for Coca-Cola HBC in Wave 2 being the base for TCCS standards, in that we will get input of best practices from across the system for Wave 2 design, as well as limit the associated change impact of complying with these standards. As they strive towards transitioning Coca-Cola HBC to Wave 2 over the next five years, they believe that they will have a place in the foundations of a world-class IT environment built upon an engagement model comprising BPL's and BSL's (Business Process and Business Systems Leaders) at a group and country level, Governance through the IT Steering Committee made up of Region Directors, Function Heads, BPL's and key Enterprise IT representatives, Shared Services that will provide measured services in terms of response and quality and of course SAP, a solution that has the capacity to grow in line with future demands and opportunities.
The roll-out of SAP 'Wave 2' in our markets is already enhancing the speed, accuracy and performance of our operations and improving service levels.
For example, a Direct Store Delivery application equips drivers with hand-held electronic devices to quickly access delivery and inventory information, reduce errors, save time and reduce out- of-stocks. A Finance application enables our drivers to send information directly from their hand-held electronic device to the Finance Department. A Sales Force application helps our sales force people keep customer records thereby improving service. A Warehouse application has vastly improved inventory control.
Our experience in the Czech Republic and Slovakia, where these new business processes were introduced in 2008, has clearly demonstrated the value of the programme. Learning from these 'pilot' countries influenced our preparations for SAP 'Wave 2' to 'go live' in Bulgaria, Cyprus, Greece and Italy on January 1, 2010.
Through SAP 'Wave 2', we are introducing best practices across our entire organisation to increase the efficiency of our operations, while optimising our supply chain and enhancing customer service.
SAP Wave 2 is a fully integrated business tool which will enable us to standardise all of our systems and processes by using a common technology across all functions. We have continued our investment in SAP Wave 2, introducing new and more efficient methods to improve productivity and performance throughout the organisation. SAP Wave 2 also enables us to provide superior levels of customer service by improving customer-centric processes such as inventory management and invoice accuracy.
They are in the process of rolling out SAP Wave 2 across all of our markets. Till date, it has been launched in 12 markets: Czech Republic and Slovakia (January 2008); Bulgaria, Cyprus, Greece and Italy (January 2010); and Austria, Hungary, Moldova, Poland, Romania, Slovenia (January 2011). In 2012, SAP Wave 2 will 'go live' in an additional eight markets (Belarus, Bosnia, Croatia, Montenegro, Northern Ireland, Republic of Ireland, Switzerland, Ukraine), bringing the total to 20. By 2014, SAP Wave 2 will be operating in all 28 of our markets.
Coca-Cola HBC started out on its SAP journey back in 2000, following a merger that enabled the newly formed company to leverage its skill and scale across 26 countries. The SAP initiative was aimed at enabling the company to become more competitive, as this program brought a structured approach to identifying best practices and making them sustainable through systems used in day-to-day activities.