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International Operations Management Strategy - Coca-Cola Company - Case Study Example

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Operations management depicts different practices of business administration which assist any organisations to generate highest possible efficiency level for various business functions (Barnes, 2008). …
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International Operations Management Strategy - Coca-Cola Company
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International Operations Management Strategy 06033 Introduction Operations management depicts different practices of business administration which assist any organisations to generate highest possible efficiency level for various business functions (Barnes, 2008). During the current era of globalization of the economy manufacturers from the different parts of the globe find themselves in complicated manufacturing situations. Therefore, proper capacity, quality and inventory planning along with adequate global operations strategies are essential for multinational organisations to maintain sustainability (Brown, et al., 2013). The further discussion will evaluate international operations management strategies of Coca-Cola Company to critically analyze their sustainability. The Coca-Cola Company is an American multinational beverages organization specialized in manufacturing, retaining and marketing of non-alcoholic beverages syrups and concentrates. The organization was established in the year of 1886 and currently it’s headquarter is located in Atlanta, Georgia. 70% of the total production volume of the company along with 80% of the profit is generated from outside of the US (The Coca-Cola Company, 2011). As per the latest data the organisation has generated revenue of $46.8 billion by the end of 2013. The organisation possesses 42.3 % market share within the market of the US (Appendix 1). The globalization of economy has also increased the strength of competitors within the international market. The increase in the availability of local resources has increased the number of different small and medium local players. Hence, the proper analysis of the operations management is essential to evaluate the sustainability of the business (The Coca-Cola Company, 2011). Globalization Globalization emphasizes of the expansion of local economy as well as businesses within a broader and international marketplace. The increasing saturation of local market and higher rate of competition have influenced organisations to opt for the globalization of the business operations (Dunning, 2014). The process of globalization assists organisations to achieve desired economic growth while generating wider ranges of products and services (Gunasekaran and Ngai, 2012). New technologies, rapid and faster communications and improvement in the transportation procedure have increased the accessibility of international market. Hence, businesses that opt for global position in terms of marketing and operations experience competitive advantages in terms of cost effectiveness and brand awareness (Gunasekaran and Ngai, 2012). Figure 1: The Growth Potential of Coca-Cola 2014 (Source: Sure Dividend, 2014) The globalization of business on Coca-Cola Company has assisted the management to successfully take advantages of the rapidly growing non-alcoholic beverages industry across the world. The business has observed positive international growth mainly within the developing countries of the world (Foster, 2014). According to the data of 2014, Coca-Cola has accrued the major share of their revenue and operating income from the market of Eurasia and Africa. In the regions of Eurasia and Africa the organisation has accrued 7% of their overall revenue and 9% of their operating income (The Coca-Cola Company, 2014). The markets of Asia Pacific have also demonstrated higher growth with 4% of overall revenue and 5% of the operating income (Sure Dividend, 2014; The Coca-Cola Company, 2014). Standardization vs. Adaptation Approach Standardization approach enables organisations to offer a unique product for all parts of their global market by setting standard for their products and services across the globe (Schmid and Kotulla, 2011). Alternatively, the differences in the practices, structures and cultures within different market segment influence the multinational organisations to adapt the specifications of different market segments (Döhring, et al., 2014). The success of Coca-Cola Company is hugely dependent on their standardization and adaptation approaches. This vision has influenced the organisation to standardize their product composition and recipe for their worldwide market (Madar and Neacsu, 2010). The standardized structure has provided a number of benefits to the organisation. Standardization has assisted them to generate a centralized decision making structure which has also enabled them to draw economies of scale through bulk purchase discount and sharing of functions such as production, managerial resource, development of product etc (Wang and Yang, 2011). Standardization process has also enabled them to enhance the quality control procedure of their products (Wang and Yang, 2011). On the other hand, the limitation of standardization process has reduced the flexibility of the organisation in terms of fulfilling the regional requirement of the consumers. It also eliminates the decision making power in the local level (Madar and Neacsu, 2010). The brand and positioning of the organisation remain constant for its global market but the execution is influenced by the local market. This process enables the management to utilize the native language in terms of packaging and levelling their bottles and cans. The size of packaging is also influenced by the offerings of local competitors (Dumitrescu and Vinerean, 2010). The adaptation process has assisted the organisation with a number of benefits. The adaptation strategy has allowed them to increase their market reputation in local and regional market. It has also increased consumer preferences by emphasizing on local languages and consumer preferences. On the other hand, the limitations of this process have enforced the organisation to increase their operational cost in the local level. This process has also influenced the management to distribute the decision making power regarding the packaging facility to the franchised organisations which has reduced their hold on many actions (The Coca-Cola Company, 2014). Coca-Cola Global Supply Chain The system of supply chain in any organisation assists the management to properly handle different activities, resources, people and information which are involved in the process of moving products from suppliers to consumers (Rushton, 2007). The global supply chain of Coca-Cola is a complex network of bottlers, plants, warehouses as well as customers. The supply chain of Coca-Cola efficiently delivers over 1.8 billion goods everyday to their global consumers (Chopra and Meindl, 2013). Supply Chain Management The typical supply chain of Coca-Cola involves different stages such as supply of raw materials and components collection, manufacturing over plant, packaging, distribution/wholesaling, retailing, customer demand fulfilment and recycling (Appendix 2). Inventory and Warehouse system: The first part of the material flow system in the supply chain of Coca-Cola demonstrates proper handling of inventories (Figure 2). The organisation follows ABC classification process in terms of their inventory management method. This method assists them to identify items which have significant impact on overall inventory cost. To manage the inventories in a cost effective and efficient manner the organisation has initiated just-in-time inventory management procedure that assists the management of the organisation to increase the final product flow to the customers while lowering down the inventory storage cost (Adeyemi and Salami, 2010). On the other hand, the just-in-time inventory management process has different limitations. This process is quite difficult to implement while require close management for efficiency and consistency. (Adeyemi and Salami, 2010). Though just-in-time inventory management system has enabled the business to manage their productivity as per consumer demand, they sometimes lack in coordinating dealers activity and productivity (CSC, 2015). Manufacturing system: The next step of supply chain of Coca-Cola Company is product manufacturing (Figure 2). Coca-Cola Company provides guaranteed quality support in terms of their overall manufacturing process by assuring an efficient manufacturing process which in internationally validated and established. The organisation always prefers to establish their manufacturing plants just after fresh water sources. The organisation also confirms that the water sources used by them are providing drinkable water through sovereign third-party laboratory tests. These sources of tested water therefore properly stored and protected by different manufacturing locations of the organisation while conducting frequent examinations to assess their purity as per global standard (Govindan, et al., 2015). The excess requirement of time is the major limitation of the process. Along with long time requirement the increased cost of this process can also be considered as major disadvantage (Govindan, et al., 2015). Bottling system: In terms of the product assembly process the organisation focuses on local approach. Coca-Cola does not control or own their bottling partners. The product assembly of the organisation operated through a number of local channels. Bottling Investment Group (BIG) of Coca-Cola is responsible for investing and providing support. The bottling partners of the organisation mainly handle the packaging, distribution and sales of the final products (Jordan, 2013). The scattered structure of bottling company provides very less capacity to the organisation to handle the overall processes. Therefore, it limits the capacity of the organisation to control the quality of the final good (Jordan, 2013). Product Distribution and selling: The bottling companies with the assistance of Coca-Cola franchisees handle the distribution and selling of the final goods to the local levels. The distribution and selling process of the product is done as per the local preferences and demand. All the bottling partners of the organisation work quite closely with their buyers such as grocery stores, convenience stores, movie theatres, amusement parks and many other (Phillips, 2015). The organisation does not sell their product through any exclusive store and they demonstrate lack of promotional activity within their distribution process. Therefore, it demonstrates limitations in terms of tracking the sales potential of the product (Phillips, 2015). Information flow system: Coca-Cola Company maintains a strong and well-structured information flow system across their different parts of the supply chain (Figure 2). The developed and advanced information technology plays a vital role in terms of increasing the collaboration between the different supply chain members. This information flow system coordinates the orders, production schedule as per the demand forecast of the market (Jordan, 2013). The major limitation of their information flow process is the increased data redundancy. The complex structure of their information flow also sometimes lacks the capability to timely delivery of information (Jordan, 2013). Figure 2: Supply Chain Process of Coca-Cola (Source: Pendergrast, 2013) Technology Driven Success of Coca-Cola Supply Chain The integration of SAP ERP system in the supply chain process of Coca-Cola has enabled the organisation to develop their software technologies for overall supply chain. The implementation of the SAP system within the supply chain is targeted to provide vast and in-depth information about retail functioning and account improvement in terms of the customer relationship (CSC, 2015). As per chief information officer of Coca-Cola, Margaret Carton, new software integration should reduce the paperwork. She has also mentioned that this software system will enable the organisation to ensure proper cash settlements while reducing the space wastage in delivery transports. She has also mentioned that the organisation has already SAP R/3 for material as well as production planning. On the other hand, this process currently does not connect with back-end functions and store deliveries (Thomas, 2015). Ethics in the Supply Chain Management Hellenic Bottling Company (HBC) is one of the largest bottlers of Coca-Cola Company. Lately Coca-Cola HBC has initiated their partnership with Sedex which is a global expert in terms of responsible sourcing, sharing and managing supply chain data. Coca-Cola HBC is consisted over 38,000 workforces that are responsible for serving 585 million consumers across 38 countries. The partnership with Sedex has increased the transparency of the organisation’s supply chain. This process has also assisted the company to effectively monitor the standard of their supplier while helping them to drive improvements in terms of ethical business practices (Sedex, 2014). On the other hand, the organisation has also demonstrated a number of ethical issues which has increased the concern of the management. Improper water usage for their production purposes is one of the ethical issues that the organisation has faced in their operation in India. The decreasing of ground water level and water pollution due to their production facility has also decreases their global reputation as an ethical business (Berglund and Helander, 2015). Apart from this, detection of inappropriate amount of pesticide in their product has also affected the global image of the company (Berglund and Helander, 2015). Coca-Cola Outsourcing vs. Foreign Direct Investment (FDI) Strategies Outsourcing Outsourcing can be proved as a cost saving as well as effective strategy if it is applied carefully. This process involves the practices of contraction out any business processes to a third party (Burkholder, 2006). The outsourcing strategy of the organisation is mainly termed as ‘Coca-Cola Capitalism’ which was initiated by the organisation but followed by a number of larger corporations across the world in the later stage (Elmore, 2014). Their outsourcing process describes an opportunistic strategy for generating revenue and profit while handling few factories to weigh it down in specific locales (Tas and Sunder, 2004). Their outsourcing process only focuses on manufacturing the concentrated syrup as well as distributing them to the bottler companies across the world (Kant, et al., 2008). Outsourcing, on the other hand, has limited the hold or control of the company over the quality management of the production. The lack of handling the ethical issues within the outsourcing firms has also caused legal issues for the organisation. The bottling plants of Latin America have demonstrated a number of unethical issues in terms of worker management including kidnapping and torture of union leader. Therefore, it can be said that the outsourcing process has debarred the organisation to handle the unethical issues in these plants which has highly affected the market reputation of the company (Mokiejewski, 2015). Foreign Direct Investment (FDI) The process of FDI emphasises on the practices of investment of one company in one particular location to another company in different country or market. It differs from the direct investment process in terms of control and monitoring power. The FDI process provides very limited control to the organisation on the other entities (Blonigen and Piger, 2014). The increased globalization and enhanced number of competitors in the market as influenced the management of Coca-Cola Company to shift their focus to FDI process. The organisation’s initiation and implementation of FDI in Europe is one of the major examples in this area. The organisation had initiated FDI process to increase their effectiveness in the operations management of global market. This process has also allowed the management to increase their marketing expenditure to lower down product price while increasing consumer awareness. The organisation has also successfully initiated their FDI venture in China and India (Hawkes, 2005). Conflict due to differences in regulations and legislations is the major limitation in terms of adopting the FDI strategy in the foreign market. The lack of compliance to the foreign share holding legislation has affected a huge portion of Coca-Cola’s FDI venture in India. According to the legislation foreign shareholders are allowed to possess maximum of 40% of share. On the other hand, the FDI of Coca-Cola in India tends to possess higher amount of share which has resulted in the shutdown of a number of FDI activities of the organisation (Beena, et al., 2004). Corporate Social Responsibility (CSR) of Coca-Cola Company Corporate social responsibility (CSR) is a strategic approach taken by organisation in terms of increasing market reputation, market share and profitability by integrating environmental and social concerns in business operations (Juščius and Snieška, 2015). According to the CSR report of Coca-Cola Company, the major responsibility of the organisation is to fulfil their global stakeholder’s expectation. Their CSR strategies have also expressed their urges to rigorously improve the economic, environmental and social performances while assuring the sustainability as well as operational success. The ‘Life Plus’ foundation of Coca-Cola defines their roles and responsibilities towards energy management, sustainable packaging, water stewardship etc (Coca-Cola FEMSA, 2015). The CSR approaches of the organisation strictly follow the stakeholder’s theory and triple bottom line theory. The stakeholder theory depicts the relationship of organisation with its internal as well as external stakeholders that include customer, employee, management, investor, shareholder and community. Therefore, this CSR theory assists the organisation to properly fulfil their responsibility to the community. The triple bottom line theory describes that the bottom line results of any organisation is not only generating revenue, it also consist the concern regarding social up building and environmental up-gradation. This theory enables the organisation to focus on different social and environmental CSR activities across the world (Hubbard, 2009). Figure 3: Triple bottom Theory (Source: Hubbard, 2009) Energy management: The organisation is targeted to reduce their energy consumption to minimize their carbon footprint. Since 2007, the organisation has decreased carbon footprint of “the drink in your hand” by 19%. They have also reduced carbon footprint of the business operations by 29.13% (Environmental Leader, 2013). They have also modelled the level of emission in each step of their value chain (Figure 3). Figure 3: Carbon Emission across Value chain (Source: Coca-Cola Enterprises, 2015) Sustainable packaging: the organisation is targeted to reduce the environmental impact of their packaging material along with increase in the recycling facilities. The organisation has enhanced the global production of different plastic packaging materials from plants. The partnership of Coca-Cola with BJF Industries Ltd has continued its process in terms of utilizing lower-carbon and renewable plastics. This facility assists them to move closer to their target of utilizing Plant Bottle packaging technology by 2020 (CSRwire, 2015c).   Water stewardship: The major business strategy of the organisation is concentrated on introducing and establishing sustained water management model that can assist them to reduce their water footprint. The 2020 water replenishing goal of the organisation has influenced them to balance 68% of their water usage for manufacturing. By 2013, the organisation has replenishes 108.5 Billion Litres Water to communities (CSRwire, 2015a). Apart from their CSR activities the organisation has also faced various drawbacks and protests in terms of natural water management. The allegation against their operations in Kerala, India has demonstrated their lack of corporate citizenship in terms of water management (Berglund and Helander, 2015). Community responsibility: The CSR aim of the organisation also motivates them to bring sustainable development in communities by contributing for social welfare. For instance, “Project Last Mile" initiative of the organization has influenced the management to improve the availability of life saving medicines in at least 10 countries of Africa (CSRwire, 2015b). CSR Issues: The complaints regarding health hazard and obesity against the products of Coca-Cola Company are one of the major CSR or ethical issues faced by the organisation. The undesirable limits of pesticide in the final products of Coca-Cola in different plants have also reduced their ethical standards (Coca-Cola İçecek, 2012). Sustainability of Operations Management of the Coca-Cola Company The sustainability of global business operations mainly describes a triple bottom line which includes the processes that assist any organisation to manage their environmental and social risks, opportunities and obligations while efficiently handling their finances (Carroll and Buchholtz, 2014). The 2012-2013 sustainability report of Coca-Cola Company has evaluated their 2020 sustainability commitments which have described their enhanced focus towards developing strong communities, enhancement of personal relationship, environmental protection and social welfare. The organisation mainly focuses on the four capital model of sustainability that allows them to focus on human capital, natural capital, financial capital and manufacturing capital. In order to create and maintain sustainability the organisation need to provide proper importance to all these sections of sustainability (Dudovskiy. 2012). On the other hand, the organisation is still fighting with a number of ethical and supply chain related issues that has highly affect the long-term sustainability program of the organisation (Berglund and Helander, 2015). The overall global operations management of Coca-Cola has demonstrated various drawbacks which has affected their long-terms sustainability program. Health related hazards of their overly sugary and carbonated products and false claim for vitamin water are the major issues that the organisation is facing in terms of sustainability challenges. Various scientific research reports have established a strong link between higher level of phosphoric acid contain in the diet as well as sugared cola with the increased tendency of osteoporosis within older women who are consuming Coca-Cola for a long time. A huge amount of sugary content in the drinks has also attracts a number of negative reviews in term of their effects in enhancing obesity (Hsu, 2013). Through a long phase of time the organisation has claimed the health benefits related to their “VitaminWater” product which can be used as the replacement for the regular water (Huff, 2013). By 2010, the organisation has faced a huge lawsuit in terms of their claims for this product. Centre for Science in the Public Interest (CSPI) has explained in their statement that the claim for the organisation to provide zinc mineral and vitamin C through this drink is absolutely false. Executive Director of CSPI, Michael Jacobson, has stated that "The marketing of vitaminwater will go down in history as one of the boldest and brashest attempts ever to affix a healthy halo to what is essentially a junk food, a non-carbonated soda” (Huff, 2013). By the time of 2004 to 2007 the organisation has faced a huge opposition in terms of their water management practices in different parts of their operating market mainly in India. During 2004 the local officials of different parts of India, mainly Kerala, has opposed the water management practices of the organisation and demanded to shut down the $16 million worth of bottling plant of Coca-Cola Company. These oppositions have certainly hampered the long-term sustainability approaches of their global operations management process (Berglund and Helander, 2015). By the end of 2007, the organisation has announced their worldwide water neutrality project to neutralize all these negative claims and protests against the organisation. This strategy has assisted the organisation to efficiently replenish every drop of water that they use for the manufacturing process of their products (Karnani, 2014). The liberal outsourcing strategy and poor hold over the manufacturing and assembling process of the final product within the franchised locations ahs also restrict the organisation to properly maintain the quality parameter of their products. This situation has increased challenges for the organisation due to quality breach of the products in different manufacturing locations across the globe. The sustainability of the operations management of the organisation within different developing countries faced strong hit while the research report of Centre for Science and Environment (CSE) described the high level of pesticide contents in their soft drinks of Coca-Cola Company, mainly in their Indian manufacturing locations. The report has claimed a high degree of toxin contents such as lindane, DDT and chlorpyrifos in Coca-Cola which strongly contradict the permitted pesticide residue as per the US regulations. This situation has strongly affected the sustainability approaches of the organisation and the management faced a number of lawsuits (Karnani, 2014). The organisation was charged for forcing few bottlers to buy a huge amount of unnecessary concentration of beverages to display higher sales rate. Carpenters Health & Welfare Fund of Philadelphia & Vicinity charged Coca-Cola Company for “Channel Staffing” which led to provided investors a manipulated picture of the organisations operations. These unethical practices in the supply chain management not only forced them to compensate $137.5 million but also hampered the overall sustainability of the organisation (Markley, 2014). Apart from all these charges and sustainability issues that organisation has demonstrated excellent performance over the period of time. The latest sustainability report of the organisation has emphasized on their enhanced level of corporate social responsibility and ethical functions. This report has detailed their positive steps in terms of generating more healthy and safe approach in terms of their product offering, supply chain management and community welfare (Coca-Cola Company, 2014b). The organisation has invited various top suppliers of the global market to indulge in a discussion about the need of embedding sustainability in the overall operations. The organisation has declared their aim to reduce the calorie consumption of their soft drink product up to 20% by 2025. During 2008 to 2013 the organisation has successfully reduced 9% sugary concentration of their soft drinks while they have increased their revenue by almost 14%. Therefore, it can be said that they have strongly established their market reputation and position after all those charges and allegations (Covington, 2013). The sustainable packaging strategy has also elevated the long-term sustained business approach of the organisation. PlantBottle technology has been promoted in their report as a process for positively reduce carbon footprint in their manufacture process while enhancing the recycling process. The organisation has already shipped over 15 billion PlantBottles till date (Covington, 2013). Hence, it can be said that apart from a number of past charges and issues related to production, quality and ethics the organisation is efficiently managing and enhancing their long-terms sustainability plan for operation management strategy by introducing and strategically maintaining different sustainable actions. Appendices Appendix 1: Coca-Cola Company Market Share in the US (Source: Statista, 2015) Appendix 2: International Supply Chain of Coca-Cola (Source: Pendergrast, 2013) Appendix 3: CSR Strategies of Coca-Cola Company (Source: Coca-Cola İçecek, 2012) References List Adeyemi, S. L. and Salami, A. O., 2010. 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Pendergrast, M., 2013. For God, country, and Coca-Cola: The definitive history of the great American soft drink and the company that makes it. New York: Basic Books. Phillips, A., 2015. From factory to fridge: Inside Coca-Colas supply chain. [Online] Available at [Accessed 17 June 2015]. Rushton, A., 2007. International logistics and supply chain outsourcing: from local to global. London: Kogan Page Publishers. Schmid, S. and Kotulla, T., 2011. 50 years of research on international standardization and adaptation—From a systematic literature analysis to a theoretical framework. International Business Review, 20(5), pp. 491-507. Sedex, 2014. Coca-Cola HBC partners with Sedex to further enhance its responsible supply chain. [Online] Available at [Accessed 17 June 2015]. Statista, 2015. Coca-Cola Companys market share in the United States from 2004 to 2014. [Online] Available at [Accessed 17 June 2015]. Sure Dividend, 2014. Coca-Cola’s Growth Potential & Dividend Analysis. 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The paper describes the ethics behind the globalization of a company that lies in the fact that how much that company contributes to the society and the economy of the country in which it enters.... The Root Glass company of Indiana had designed the contour bottle to address the problem of imitation.... Bradley bought the company.... Ernest Woodruff's son Robert Woodruff led the company for more than six decades....
10 Pages (2500 words) Research Paper

Operations and Project Management in Coca Cola Company

The coca-cola company is the largest global beverage company.... The coca-cola company is the largest global beverage company.... The paper 'Operations and Project Management in Coca Cola company' is an affecting example of the management case study.... The paper 'Operations and Project Management in Coca Cola company' is an affecting example of the management case study.... coca-cola offers soft drinks and beverages through 500 popular brands to its customers....
7 Pages (1750 words) Case Study

Strategic Management Practice - Coca-Cola Company

The paper 'Strategic Management Practice - coca-cola company" is a great example of a management case study.... This report will highlight the strategic management practices of the coca-cola company.... The paper 'Strategic Management Practice - coca-cola company" is a great example of a management case study.... This report will highlight the strategic management practices of the coca-cola company.... The paper 'Strategic Management Practice - coca-cola company" is a great example of a management case study....
20 Pages (5000 words) Case Study

The Impact of Boycotting Campaigns on Coca Cola International Company

The paper "The Impact of Boycotting Campaigns on Coca Cola International Company" studies analytically the conditions under which consumer boycott is successful with coca-cola company.... The coca-cola company is among the most successful international companies globally.... Penderton was the man behind this great discovery of Coca Cola company in 1886.... By 1994, it became a registered company and today it has spread out to 200 countries with a production of over 500 brands, and 3300 different beverages (Tucker 121)....
12 Pages (3000 words) Case Study
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