ORGANIZATIONAL DEVELOPMENT

PROCESSES

ASSIGNMENT #3

Submitted by:
Hira Rashid

Submitted to:
Maa’m Naintara Sarfraz Raja

Date of Submission:
15th March, 2011
Question #1
Draw a chart of your organization’s domain. List the organization’s products and customers and
the forces in the specific and general environments that have an effect on it. Which are the most
important forces that the organization has to deal with?

Answer
Due to its tremendous global presence, The Coca-Cola Company operates in an extremely
uncertain environment. Increased competition from global and local companies has led to
competition over the most important resource: customers. The Coca-Cola Company must not
only compete for customers, but also raw materials needed for each product. In some parts of the
world, clean water is becoming increasingly hard to come by. The Coca-Cola Company has only
one or two suppliers for some of its raw materials. For example, they view The NutraSweet
Company as one of only two viable sources for the ingredient aspartame. The Coca-Cola
Company is at a strong disadvantage if they cannot decrease their reliance on a small number of
suppliers. If relations with suppliers deteriorate, or if the suppliers go bankrupt, it would have
dire consequences for The Coca-Cola Company. The Coca-Cola Company must also compete to
get the best employees possible. The production of the beverages does not require skilled labor,
but the organization has had problems finding the proper personnel to run the organization. In
2004, The Coca-Cola Company’s top choices for the open CEO position decided not to join the
company because they did not like the actions of the Board of Directors. Due to the
organization’s high credit rating, the company has the ability to raise funds at a lower cost. This
allows the organization the opportunity to finance operations such as expansion through the
issuance of debt. This may be necessary if The Coca-Cola Company looks to expand into new
markets, or purchase new brands.

Question #2
Analyze the effect of the forces on the complexity, dynamism, and richness of the environment.
From this analysis, how would you characterize the level of uncertainty in your organization’s
environment?

Answer
The environment in which The Coca-Cola Company operates in is extremely dynamic. The
environment is difficult to predict and control due to the global nature of the operations. The
Coca-Cola Company faces the threat of reduced production or disruption in distribution if there
is a problem in a market. The Annual Report (2006) lists risks, such as worker strikes, work
stoppages, and the chance a distributor falls on harsh economic times. Another reason the
company’s environment is tremendously dynamic is due to the nature of their raw materials.
Some of their key raw materials are dependent on specific climates. Climate changes may impact
the price of the materials they need to obtain and, in turn, affect the cost of production. The
strength and interconnectedness of the general forces that The Coca-Cola Company must deal
with make the environment extremely complex. Recently in the United States, two forces have
started to become inter-woven: cultural/social values and political/environmental forces. Many
American companies are now being lambasted if they do not try to be more environmentally
friendly, and The Coca-Cola Company is no different. The company has received plenty of
criticism for its operations in India, with claims that they cause a great deal of pollution and have
damaged local water supplies.
Question #3
Draw a chart of the main inter-organizational linkage mechanism (for example, long-term
contracts, strategic alliances, mergers) that your organization uses to manage its symbiotic
resources interdependencies. Using resource dependence theory and transaction cost theory,
discuss why the organization chose to manage its interdependencies in this way. Do you think
the organization has selected the most appropriate linkage mechanisms? Why or why not?

Answer
The Coca-Cola Company uses a wide variety of techniques to manage relationships with its
stakeholders, the most useful tool being strategic alliances. A former CEO of the organization
claimed that 100 percent of its revenues came from strategic alliances. The company uses
exclusive contracts with its bottling partners and other customers as well. In 1999, the
organization signed a ten-year deal with Burger King to be the restaurants only supplier of
beverages. Even though PepsiCo was willing to give Wendy’s a much better deal, the restaurant
signed a ten-year deal with The Coca-Cola Company. This example shows how powerful the
Coca-Cola© brand name really is.
The Coca-Cola Company has done an excellent job managing some aspects of the environment,
but done a poor job at managing other parts of the environment. The negative publicity received
from its operations in India and the actions of its bottling partner in Colombia has led to boycotts
of Coca-Cola© products on some campuses. While this is clearly bad for the company, the
average consumer is completely unaware of these allegations. This means that The Coca-Cola
Company is doing a decent job of damage control. While the company has not had any trouble
with suppliers lately, the future is always uncertain. It does not seem like the company is not
actively trying to secure supplies, which is why vertical integration was recommended.

Question #4
Draw a chart of the main inter-organizational linkage mechanism (for example, collusion, third-
party mechanisms, and strategic alliances) that your organization uses to manage its competitive
resources interdependencies. Using resource dependence theory or transaction cost theory,
discuss why the organization chose to manage its interdependencies in this way. Do you think
the organization has selected the most appropriate linkage mechanisms? Why or why not?

Answer
The core competences that give the organization its best competitive advantages are its strong
brand name and its network of bottlers and distributors. Along with its marketing capabilities and
broad portfolio of products, The Coca Cola Company has core competences which are extremely
difficult, if not impossible to duplicate.
The strong Coca-Cola© brand name gives the company a great deal of bargaining power and
leverage. In 1999, PepsiCo and The Coca-Cola Company were fighting to become the supplier of
beverages for the Wendy’s restaurant chain. Wendy’s opted to partner with The Coca-Cola
Company even though PepsiCo was offering much more money. The brand name recognition
that the company enjoys is a powerful bargaining tool. The Coca-Cola name even has an
influence on consumer tastes. When The Coca-Cola Company was looking to launch Diet
Coke©, they performed some blind taste tests with consumers. The consumers preferred a glass
labeled Diet Coke© over a glass labeled Tab© by 12 percent, even though the liquids in each
glass were identical. It has taken the organization over 120 years to build such a strong brand
preference, and this cannot be imitated by competitors.
The relationships that the organization has with its distributors are another competitive advantage
that cannot easily be imitated. The contracts and relationships between the two groups create
symbiotic interdependencies, which mean that the success of both companies has a direct impact
on each other. The Coca-Cola Company agrees not to sell to other parties in the local market,
and the bottler agrees to only purchase the syrup and concentrate from the company’s authorized
dealers. The Coca-Cola Company at times provides the retailers and distributors with
promotions, and capital at times. Because the organization does not have to worry about the
distribution in the local markets, it allows the company to focus on more important issues.
The Coca-Cola Company’s business-level strategy is one of differentiation. This is evident in the
previous example of consumers preferring identical beverages just because the Coke© brand
name was attached. They have been successful pursuing differentiation because the focus of the
company has always been on marketing. The Coca-Cola Company is “known for innovative
marketing that constantly promotes their brand names and protects their domains from
competitors”
The Coca-Cola Company needs to improve upon its portfolio of brand names. More specifically,
the organization needs to start introducing new types of beverages, as opposed to entering
markets late. The company was late to enter the sports and energy drink markets, as well as the
blossoming coffee drink market. If The Coca-Cola Company were able to create an entirely new
type of beverage, it would be alone in the market for a period of time and force competitors to
react instead of act.
The hybrid structure of The Coca-Cola Company is ideal for its differentiation strategy. The
centralization of the marketing and innovation functions allows the company to retain control
over development, marketing and production. By performing extensive market research and
creating more local offices, the company is always looking for new ways to serve new
customers. The use of complex integrating mechanisms allows coordination between all levels
and divisions of the company has a high credit rating and, therefore, would be able to raise
money for the acquisition at a low cost.

Question #5
In view of the analysis you have just made, do you think your organization is doing a good or
not-so-good job of managing its environment? What recommendations would you make to
improve its ability to obtain resources?

Answer
The Coca-Cola Company has a high level of uncertainty when it comes to the raw materials it
uses. For a few of the ingredients, the company only has one or two viable suppliers. This could
be extremely problematic for a variety of reasons. The Coca-Cola Company has less bargaining
power if there is little substitutability in suppliers. Another problem could arise if a supplier
experiences an event that economically devastates them. If a supplier goes bankrupt, or is in
some type of natural disaster, The Coca- Cola Company would suffer greatly as well.
The Coca-Cola Company can improve and secure relationships with suppliers using a few tactics
such as minority ownership or strategic alliances. The most optimal method would be to use
backward vertical integration and purchase a supplier. The results of such a strategy would allow
the company to keep profits that used to be earned by the supplier, save on costs, and have a
reliable source of supplies.
Besides the actual purchase of the organization, another costly aspect of vertical integration is
high bureaucratic costs. The Coca-Cola Company should look at buying the following
companies: The NutraSweet Company, Ajinomoto Co., Inc., Nutrinova Nutrition Specialties &
Food Ingredients GmbH, or Tate & Lyle. These companies are one of two possible suppliers for
important raw materials. Although the company has not experienced significant problems, future
events are always uncertain. The most secure way to control suppliers for a company is through
ownership. While ownership of a sugar/sweetener company is clearly out of the company’s
domain, the move would make their core business more profitable. The Coca-Cola Company
would be able to purchase one of these companies through financing.