Apply Henri Fayol’s Five Rules of Management to the Coca-Cola
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According to Fayol’s five rules, the first rule is about foresight; the second rule is about organization; the third rule is about command; the fourth rule is about coordination and the fifth rule is about control (cited in Chris, 2005).
Consider the first rule, it refers to either idea or plan for the future development in a company. In the case of Coca-Cola, they showed a clear and proper way for their foresight. Consider the following case, Coca-cola had decided to build a new bottling plant in Malaysia on 16 March and the plant is expected to open before the end of 2011. “With the new plant, one of the most modern of its kind in this part of the world, we will be able to support our core brands of Coca-Cola and Sprite in the coming years ” said Glenn Jordan, Coca-Cola’s president of the Pacific Group (IndustryWeek, 2010).Moreover, Coca-Cola announced that their profit increased 55% in the fourth quarter due to significantly increased in the developing countries such as India and China.(IndustryWeek,2010)Coca-Cola Company can made a idea of building a new plant in order to fulfill their further increase in selling of beverages, which need more bottles for their drinks. Also, their sale figures proved that their plan of building new plant is a proper and right way to deal with their production need.
The second rule is corporation, which means that the company can allow flexible in using their resources. The company did an excellent job in this issue. For example, the company set up a unique Coca-Cola System which provide better corporate with its suppliers like bottling partners (Coca-Cola, 2011). Through the system, Coca-Cola Company can collect and consolidate different types of data like economic and social data in order to the environmental data collected by themselves already, then the company combined all these data to provide a certain degrees of flexibility in their business, such as changing production and marketing strategies.
The third rule is command, which means to arrange and select suitable staff to achieve a sustainable and best work inside a company. According to the case study, Douglas Daft, CEO of Coca-Cola Company, who set up a 10-person executive management team, composed of different titles responsible for specific jobs. “Twenty-four division and operations presidents report to the chief operating officers” (Para 7&8, p.W-117).The management inside Coca-Cola can be strengthened; especially Coca-Cola is a world-wide entrepreneur, it is very important to have a clear division of work which can facilitate the task-oriented management inside Coca-Cola Company. Besides, the resources in each department can be efficiently used. For example, five executive vice presidents of the Coca-Cola Company are responsible for different regions of business in the world, such as Europe, Eurasia and etc. Members of staff in each department can concentrate and responsible for their work tasks with their office or executive presidents in order to achieve a better performance in the company business.
The fourth rule is coordination, which refers to coordinate and communicate between staff and department to facilitate their daily works. Refer to the example given in the third rule, the twenty-four division and operating officers can keep on tracking the process of their works. As departments are separated with specific task, so staff can easily share their data and information within the department. Most important, Coca-Cola Company had business in worldwide, so sharing of information such as business figures and marketing search is a essential element in the company. Also, information can be fully utilized within departments can drive profitable growth, which is one of their six strategic priorities in Annual Report (Para 8, p.W-117).
The fifth rule is control, which refers to the company should monitor their works and make changes if necessary. Refer to the example given in the third rule, the twenty-four division and operations can completely monitor their works which can meet the company’s objectives and goals. Also, the example of making new flavor of soft drink in Coca-Cola Company is another example to show that they make changes if necessary. In recent years, people have been aroused awareness towards healthy diets, especially people know that traditional Coke contains a higher proportion of sugar, which cannot meet the general needs in the market, so Coca-Cola Company decided to introduce “Coca-Cola Zero” in 2004 and it contains zero sugar and zero calories (Coca-Cola, 2011).By introducing “Coca-Cola Zero”, it showed the company realize the market need and create a new flavor to fulfill the change of preference in their customers.
How does Coca-Cola score on the eight attributes of performance excellence?
Coca-Cola Company can be scored eight out of ten in the eight attributes of performance excellence found by Tom Peters and Robert H.Waterman in 1982. The first attribute is “A bias for action, active decision making” (cited in Wikipedia,2011). Regarding to the information given in the case study, Coca-Cola Company set up six strategic priorities and all individuals, employees and partners worldwide should follow these priorities. Employees understand their goals, so proper and active decision can be made. The second attribute is “Close to customer” (cited in Wikipedia, 2011). Coca-Cola Company is always customer-oriented and willing to find out what their customer’s need. For example, “Coca-Cola Zero” has its own Facebook and Twitter website for customers to receive the latest product information and customers can give out opinions towards the brand (Coca-Cola, 2010). The third attribute is “Autonomy and entrepreneurship” (cited in Wikipedia, 2011).
This company always has innovation in their products like introducing new Coke with cherry, lemon, orange favors. Besides variation in their traditional carbonated beverages (Coke), the company also produces fruit juices, tea and coffees with a product list of over 3300 beverages (Coca-Cola, 2011). The fourth attribute is “Productivity through people” (cited in Wikipedia, 2011). Regarding to the case, the new management structure introduced by Douglas Daft can enhance the working efficiency in the company. Every department is responsible for their own tasks and follows the six priorities; issues can be easily handled and no matter senior and junior employees can work in a right track, which can further push up the productivity and turnover. The fifth attribute is “Hands-on, value-driven” (cited in Wikipedia, 2011). Although management was divided into 10 teams, they still commonly shared the six strategic priorities, such as broaden beverage brands, serve customers with creativity and etc (Para 8, p.W-117). We can clearly see that each priority had an evident and clear idea to follow, which can help the company to boost their profit and sales.”
The sixth attribute is “Stick to the knitting” (cited in Wikipedia, 2011). Refer to example given in the third attribute; the company absolutely focuses on either carbonated or non-carbonated beverages, as these items are the core part of the business. Also, focusing on their core business can strengthen their market leadership in the world because they have already experience on doing beverages business for over 100 years. The seventh attribute is “Simple form, lean staff” (cited in Wikipedia, 2011). The most obvious issue is that CEO Douglas Daft axed 6000 employees and rearranged the management into 10 person executive management team(Para 7, p.W-117). By doing so, it is much easier to manage and control the company because the complexity of management is minimized, so departments can work efficiently and officers can easily adopt managerial tasks.
The eighth attribute is “Simultaneous loose-tight properties” (cited in Wikipedia,2011), which refers to flexibility inside the company. Coca-Cola Company shows a higher degree of flexibility in the marketing strategies .The company knows that people in different countries have different views and preference about the Coke. For example, Coke with lime was introduced in the United Kingdom and North America; the Coca-Cola Cherry was not introduced in the UK, but in the America and Canada. These variations provide flexibility in their business and strengthen their reputation around the world. Do you think Douglas Daft will be successful in regaining the growth and value experienced under Roberto Goizueta?
Personally speaking, I do not think that Douglas Daft will be that successful in regaining the growth and value experienced under Roberto Goizueta. When Roberto was doing the CEO in 1980 to 1997, Coca-Cola Company may have better marketing research, strategies and advertising than other competitors. These elements allow the company to stand on a vantage position. It was not surprised that the market value was apparently increased around 38 times in 1980 to 1997 like mentioned in the case study. However, once it become a successful company, other competitor may imitate your business model, operating strategies and even modified to become a more comprehensive and better strategies and then adopt in their company, causing a direct competition with Coca-Cola Company.
Currently, there are many competitors around the world and cause a threat to the profit of Coca-Cola Company, such as Pepsi in worldwide, New Cola in Mexico, Robinsons in the UK, Qibla Cola in the Middle East and Future Cola in China (Wikipedia, 2011). Obviously, Coca-Cola Company is facing a vigorous competition with its competitors. Without doubt, Douglas Daft made changes in the management and six strategic priorities which are controllable inside the company; however, customers have more choices than before which means the preference of customers is uncontrollable, especially people become aware of their health, so they maybe tend to drink less Coke in the future. Moreover, the price fluctuation of raw material such as oil price and aluminum price cause barriers in regaining the profit. These elements are essential for manufacturing plastic bottles and aluminum cans so the company will be highly influenced by the price fluctuations.
What are Coca-Cola underlying beliefs? What insights does it provide?
The underlying beliefs of Coca-Cola Company including “to refresh the world”, “To inspire moments of optimism and happiness” and “To create value and make a difference” (Coca-Cola,2010). Generally speaking, the company wants to become a well-known and with good reputation company around the world. For example, the company widens their product list of beverages and makes innovative changes in different places in order to give out impressive memories to customers through advertisements and promotions. These issues allow the company to fit with their three main beliefs and maintain a sustainable development in the future.
The insights which the company provided are 6 “P”s, including profit, people, portfolio, partners, planet and productivity (Coca-Cola, 2010).
Consider profit, the company earn money in each year, which can satisfy their shareholders and stakeholders; however, the company do not neglect the importance of corporate social responsibility. For example, the company ensures that they do not hire child labor in their operations and their supplier network (Coca-Cola, 2011).
Consider people, they tend to provide a better working environment to their employees. “We value the relationship we have with our employees. The success of our business depends on every employee in our global enterprise”(Coca-Cola 2011).The company knows that employees is the most important resources inside a company, so they focus on their employees such as providing a fair and better workplace to them. For example, “The Coca-Cola Safety Management System” (TCCSMS) was introduced in order to provide a safe and ideal workplace to its employees (Coca-Cola, 2011).
Consider portfolio, the company keep making investment to their business such as producing verities of new beverages and improving their production facilities. By introducing new flavor of Coke, it can generally meet the customer’s need and benefits to their reputation. For example, currently the company had more than 3,300 beverages in the beverage portfolio (Coca-Cola, 2011).
Consider partners, the company know the importance of maintaining a good relationship with its partners especially suppliers, which can smoothen the operation of the business. For example, “Our Supplier Guiding Principles (SGPs) communicate our values and expectations for our bottling partners and business partners” (Coca-Cola, 2011).This ensure the company with not have conflicts with its suppliers, as both Coca-Cola Company and suppliers have the similar principles and ideas, so it can gain satisfaction with each other.
Consider planet, they aimed to become a “responsible global citizens” (Coca-Cola, 2011).The company make changes in the configuration of the fountain, coolers and vending machines, which aimed to reduce pollution to the planet. For example, usually coolers contain a chemical called “Chlorofluorocarbons” (CFCs), causing greenhouse effect to the planet. The company realized the issue and decided to stop using coolers with CFCs, which had already reduced 52.5 million metric tons of CFCs to the planet (Coca-Cola, 2011).
Consider productivity, the company stated “Be a highly effective, lean and fast-moving organization”(Coca-Cola,2011). For example, there are only 7 operating groups leadership in the company and each group focus on specific tasks which can fully utilize their own resources in each department. The division of operating groups shows simplicity in management that can facilitate deal with operating issues such as planning, organizing and coordinating inside the company.
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