Posted: March 24th, 2023

Management Issues at the Coca-Cola Company

Introduction

The Coca-Cola Company is the worldwide leading producer and supplier of soft drinks. With more than 300 brands of products and operations in more than 200 countries in all regions of the world, the company is one of the most popular in the world of business. The company produces ‘concentrates’ and supplies out to licensed bottling units across the world, from which the production of the finished products takes place, awaiting the supply to the market. The model applied to the company has assisted the company to succeed in the distribution, as well as the protection of the coke formula, which is the greatest secret kept by the company for over a decade. The variety of brands offers alternative options in terms of tastes. In addition, the packaging size and type are some of the factors that have enabled the company to succeed for many years (Geringer, Frayne, & Milliman, 2002). An organization such as Coca-Cola has succeeded in its operations not because everything has been smooth. Management issues may hinder the realization of its mission, vision, and objectives. Some of the issues and recommendations on how the issues can be addressed are the noble objective of this paper.

The Coca-Cola Company is an internationally operating organization whose strategic management can be exposed to challenges due to the size and diversity of the market. Strategic management is a systematic process through which the company’s objectives, policies, and plans are developed. The chief executive officers and executive officials are responsible for developing strategic management. The importance of strategic management is to give direction to the entire organization.

Strategic management is a significant issue for the company; hence, executive officials should develop strategies and objectives that are accepted in the diverse market. Importantly, the company operates in an environment where different licensed bottle companies are located in various countries. Cultural diversity is a compelling factor that the executive should put into consideration (Hall & Reed, 1990). Skillful management is required to achieve diverse goals when setting goals and objectives. The management has a duty to come up with strong strategic management approaches that respect the diverse needs of customers and the respect of employees irrespective of their backgrounds.

Strategic Management Issues

There are three management issues, including cultural diversity issues, financial risks, and environmental care concerns, faced by The Coca-Cola Company. The issues identified are of great importance in that they can easily reduce the opportunity to realize the strategic objectives and goals of the company.

The Cultural Diversity

The cultural diversity faced by the company is brought by the racial differences, religion, and racial backgrounds that may interfere with strategic management processes. The company has in the past been in the limelight for the accusation of racial discrimination around the world place. Several lawsuits concerned with the issues have forced the company to a substantial amount of money to the victims of the discrimination. The company has been accused of racial discrimination, a risky concern that can haunt its performance. The human resource capital of the company is likely to suffer because highly qualified individuals from minority groups are likely to avoid joining the company’s workforce (Richard, 2006). In addition, the legal suits and the confirmation of the discrimination can affect the company’s market performance. It may turn hard for the company to convince consumers from minorities who feel discriminated against to consume its products.

Therefore, the competitors can capitalize upon the problem of managing cultural diversity. Discrimination and lack of respect for diversity are unacceptable to many societies, and hence the competitors can use the weakness to expose the company as disrespectful to human diversity (Richard, 2006). In addition, discrimination can lead to political unrest directed toward the company, leading to changes in commercial rules, regulations, and laws. Such changes can adversely affect the strategic goals established by the company to the extent that they can lead to the closure of operations in some communities.

Organizations succeed in their operations by forming united teams that can work together to realize a common vision and objectives. The Coca-Cola Company operates across cultures and has millions of employees, which is a challenge for the management to develop a united team of employees. Cultural diversity implies that the employees are more likely to have diverse interests and beliefs and use different languages of communication (Geringer, Frayne & Milliman, 2002). Disagreement and misunderstanding are likely to create conflicts among the employees and a stressful working environment. Managing an international team effectively implies that the diversity among the team members has been suppressed and that the team members work in a common course. At the regional and the head office levels of operations, diverse representation should be upheld. For example, at the head office, the team should have a representation of all races. In addition, at the regional, national, and community levels, the representation should be witnessed. The aim of inclusiveness is to assist in bringing on board all the diverse ideas for a united team. The Coca-Cola Company may not have been able to succeed in this case because of the domination of some communities or races at the top management at both the regional and head office levels.

 Financial Risks

Financial risks are the risks associated with the changing nature of the operations market that affect operations’ costs, revenue, and profits. As a company, Coca-Cola Company can face issues such as rising costs of raw materials, fluctuating interest rates, and currency exchange rates. The rising cost of raw materials arises because of growing inflation rates in various markets of operation, and hence the cost of production increases. In addressing the issue, the company can either retain its current selling price per unit, reduce its revenue and profits, increase the profit margin earned, and risk losing market share (Horcher, 2005).

In addition, the company is involved in international trade, so the exchange of currencies from one economy is inevitable. The risk, in this case, is that the company will likely lose its money’s value in the exchange process due to fluctuating currency exchange rates. In many countries, interest rates have increased significantly. The implication of this for Coca-Cola Company is that the cost of acquiring and servicing loans is high (Horcher, 2005). Despite the large scale and strong financial position, the company is in need of borrowed funds from time to time. For example, the company is forced to invest heavily in projects that support environmental care; hence, borrowing the required funds becomes inevitable. The risks, in this case, are management issues in that the management has to identify them and develop strategies to improve opportunities for achieving financial objectives.

Environmental Concerns

Communities are more enlightened about their rights than at any other time in history. Business organizations are likely to be keen on protecting the interests and expectations of communities where they operate or they should be prepared to face adverse consequences such as boycotts. Environmental care concerns are one of the most powerful setbacks for many organizations worldwide, which organizations are required to observe. The Coca-Cola Company is a large-scale organization, and its production and distribution functions have been identified to have massive adverse effects on the environment. The production process of soft drinks consumes a lot of water, while distribution has been identified to have a significant amount of carbon gasses emitted (Baxi & Prasad, 2005). In addition, The Coca-Cola Company has been accused in many countries concerning the implication of landfill dry waste products from its bottling units.

The issues identified can affect the realization of the company’s strategic management in various ways. For example, civil activists have organized massive demonstrations in communities where the water supply has been an issue. The company consumes thousands of liters of water in its production units to clear the bottles and dilute the concentrated products. In addition, the waste products are drained into the water bodies leading to the contamination of ground water bodies. Coca-Cola India is one of the examples of the bottling unit that has affected the realization of the company’s management objectives (Baxi & Prasad, 2005). The civil unrest and demonstrations lead to the closure of one of the bottling units in the market. The problem has shown signs of spreading to other countries, particularly in dry regions where water shortage has been a great concern.

Recommendations

The management issues identified should be addressed through the application of several strategies. Concerning diversity in the workplace and the discrimination cases reported, the top leadership should ensure that all the managers at various levels understand the importance of diversity. Training would be the primary approach through which the managers can be prepared to respect diversity at their workstations and encourage the junior workers to follow the same. The company should develop a cultural diversity policy that guides the employees and the management to respect the diverse views and backgrounds of others (Kwasi, 2013). In addition, international and local laws concerned with racial discrimination and labor relations,, among others, should be observed critically.

The financial risks should be mitigated to avoid the negative implications of their occurrences. The foreign currency exchange risks should be reduced by using stable currencies such as the euro and US dollar. Applying a hedging policy should encourage short-term hedging of less than one year. The shortest period is important in that it assists the management in adjusting the hedges based on changes. The company should avoid borrowing in countries that are prone to rise interest rates. The bottling units sometimes should be allowed to borrow from other countries, and where possible,, the head office should offer advancements out of its reserves and profits to support the units that are in need. In addition, the management should seek loans from financial institutions that offer fixed-rate interest terms on negations (Horcher, 2005). Fixed interest rates can assist the management in making realizable financial plans.

Lastly, it is high time that the top leadership considers overhaul its sustainability and environmental care strategies. The management should be aware that apart from meeting the expectation of the community members, it is important to care for the environment to sustain operations in the future. Investment in projects such as water harvesting, recycling, and treatment of wastewater before disposal to the environment should be given priority. The company has shown a lot of commitment in countries where civil activism has been rampant. Therefore, the same commitment should also be witnessed in other countries, particularly where water has not yet turned out to be a scarce commodity.

In essence, many organizations’ management issues can be diverse and intensive to be understood easily. Therefore, the management should understand the issues and then put the efforts in place to enlighten others and introduce the strategies required to address them. The Coca-Cola Company is an example of an organization that faces management issues such are cultural diversity issues, financial risks, and environmental care in its operations. The risks are intensified because the company operates in a large market in different countries across the world. Thus, the challenges are also diverse.

References

Hall, E., T. & Reed, H., M., (1990). Understanding Cultural Differences: Germans, French and Americans, Yarmouth, ME: Intercultural Press.

Richard, D. (2006). When Cultures Collide. London: Nicholas Brealey Publishing

Kwasi, D., (2013). The Cultural Approach to the Management of the International Human Resource: An Analysis of Hofstede’s Cultural Dimensions. International Journal of Business Administration. 4 (2). 39-42.

Horcher, K., (2005). Essentials of Financial Risk Management. Inc. John Wiley & Sons, Inc., Hoboken, New Jersey.

Geringer, M. J., Frayne, A. C., & Milliman, F. J. (2002). In Search of “Best Practices” in International Human Resource Management: Research Design and Methodology. Human Resource Management, 41(1), 5-30.

Baxi, C. V., & Prasad, A. (2005). Corporate social responsibility: Concepts and cases : the Indian experience. New Delhi, India: Excel Books.