Organizational Ecology
Reports on February 9th this year show that the Coke Company managed to overshadow the Wall Street’s anticipation by reporting substantial profits which were attributable to the higher prices of its products. Revenue in the quarter of the financial year ending December decreased to $10 billion, which was 8 percent drop. At the same period in the previous quarter, the company recorded $10.9 billion. Somer (2010) says that “These figures exceeded the anticipation of the analysts. Equivalently, the profit went up to $1.24 billion traded at 28 cents per share, up from $770 million trading at 17 cents per share in the previous year. Excluding one-time items, earnings were 38 cents a share, which was a penny more than had predicted (Somer, 2010).
On the other hand, the sales of the Coke Company decreased to $44.3 billion, an equivalent of 4 percent, as compared to a $46 billion a year before. Profit for the year increased to $7.4 billion, a 3 percent earn over $7.1 billion in 2014.
In the same year, although higher volume sales, the company reports showed that revenue had a 4.6 percent drop, standing at $11.4 billion. This was much as compared to the analysts’ expectation which was at 11.58 billion (Somer, 2010).
In conclusion, the statistics have been helpful to state and affirm the theory of the organizational ecology. The theory tends to analyze the environment of operation of the company and more so, it the falls and growth in the revenues in a fiscal year, in this case, 2014 and 2015. As the theory states, organizational ecology examines the firm mortality in the situation when it records fewer sales as expected, as well as corporate growth in circumstances when revenues are high. Coca-Cola has satisfied this theory in its years of operation.
Institutional theory
Coke largely depends on water. However, the amount of water used in the manufacturing process is more than the amount used in beverages, and most of that ends as waste. Landsberg (2007) asserts that the company aims to be responsible for all the water it uses by lowering its usage, recycling, and restocking. The main purpose of the organization is to create a water-sustainable firm that meets the international standards. The company is part of a campaign which is in partnership with an environmental group. The former CEO of the company, Miss Isdell said that corporate ethics drives the move, and it is to create a good business sense
Landsberg (2007) continues to state that, “In 2010, Coca-Cola set a target for returning all water that it uses for manufacturing processes to the environment in a concentration amount that is in support of both the marine life and agriculture."
Also, Coke had a more expenditure on health studies and partnership that is had prior publicized. This was a move for the company’s need to be more transparent in its operations. In an attempt to show its level of transparency, Coca-Cola affirmed it would make known all its expenditure on scientific research and health partnerships. Between 2010 and 2015, the company asserted that I had an expense of $118.6 million in its effort for social transparency (Landsberg, 2007).
In summary, just as the institutional theory states, Coca-Cola has shown focus on its social structure, which are the norms, routines, and social behavior. It has demonstrated that it is social authoritative when it comes to helping and solving problems that are as a result of its operations. Coke, as a company consists of the cultural-cognitive, normative, and regulative aspects that, together with related tasks and resources, offer stability and essence to social life.
Transaction cost economics
The company has reported sales of 3,300 products in over the 200 countries. Approximately three-quarters of its proceeds come from its operation outside the U.S. For example; the company recently gave a prediction of its sales in Peru would knock $1 billion marks in a span of five years. (Strom, 2016)
In the last financial year, Coca-Cola recorded sales totaling to $6.8 billion the $30.9 billion. However, the popularity of the carbonated drinks at large has reduced with an increase in the sales of the non-carbonated drinks that the company also produces. This downfall is associated with an adverse publicity regarding the health hazards. Importantly, the high sugar levels from the beverages could further lower their sales.
This month, Coca-Cola Company negotiated a deal that saw it acquire the North American operations of its bottling and distribution sister company, Coca-Cola Enterprises Co. Strom (2016) asserts that “The act of the acquisition of the enterprise was valued at $12.3 billion. The deal was inclusive of the notion of $8.8 billion in debt”.
Additionally, not only did the purchase result into Coke having more than 90% of direct control its North American sales capacity, but it also gave the company a platform to have a closer relationship with retailers.
Regardless of the billions of dollars of debt taken on in the acquisition deal, Coca-Cola Co. prevails in outstanding financial position (Strom, 2016). This can be reflected by the rise in stock by 7.6% this year after going up to 26% in the previous year.
The above shows exactly how the transaction cost economics has come into play. The bargaining price is seen when the company entered to acceptable terms with the Coca-Cola Enterprise Co., despite the purchase being done in debt. However, the result of this was a rise in stock keeping the company’s shareholders in place.
Resource Dependence Theory
The primary raw material used by the soft-drink companies, like Coca-Cola in the United States is high fructose corn syrup, a type of sugar, which is available from various sources. Sucrose if the primary raw material used in the production of soft drinks outside the United States. Similarly, it available from several suppliers. This implies that the manufacturing process cannot be slowed down as the raw materials are readily supplied, and the competitor company cannot take advantage by monopolizing the sources of the raw materials (Kent, 2015)
Demography presents itself to be key to the enterprise. Consumption of soft drinks for a long time had an inverse correlation with the age of a person. This is to say that, as one grows older, the person consumes less amount of the carbonated drinks, while the young people drink a lot of the non-alcoholic beverages. This means that the number of potential consumers regarding the units consumed is reducing.
Kent (2015) say that “There is stiff competition in the commercial beverages industry. The soft-drink companies like Coke being part of it also experience the same level of competition”. Demand for soft drinks is escalating in a situation that is not favoring the commercial beverages. The competitive aspects in this context are advertising, product innovation, and increased competence in production methods.
It can be summarized that Coca-Cola can collect gather, transform and exploit raw materials and other external factors that impact on the manufacturing process faster than competitors. This is fundamental for the success company. Coca Cola just like any other firm has eliminated redundancy into resource acquisition through liaising with various suppliers.
The Theory of Dominant Coalition
Long ago, Coca-Cola embraced the centralized organizational structure, in which the key sections like manufacturing, marketing, and finance together with the corporate employees were the decision makers. In his work A Profile of the Coca-Cola Company, Hartogh explains that “Since 2014, the management at Coke brought in changes in the management of the organization. This was to put a focus on the managers in an attempt to reduce the costs with a proportional increase in efficiency”.
Coke has restructured its vision. Its mission is to 'inspire moments of hopefulness and delight while giving value for shareholders and creating a difference globally. Hartogh continues to assert that, to be in support of this, the company assumed an initiative to alter its management process and level its North American branch, which is where the company is projecting the most growth capability. The company also was the notion of centralizing its bottling operations under this section.
The employees at Coca-Cola Company loyal and the company’s strong trend to promote from within has positively resulted in the employees. Coke offers attractive compensation; stipulates a significant emphasis on the training of its workers and training into “the Coke way.” This is geared towards making its employees across the world to share the same understanding of and appreciation for the meaning of their product and not forgetting to bear what could be in the mind of their consumers.
References
Hartogh, M. (2003.). It's Still the Real Thing: A Profile of the Coca-Cola Company. SSRN Electronic Journal SSRN Journal. doi:10.2139/ssrn.1030577
Kent, M. (2015). Coca-Cola: We'll Do Better. The Wall Street Journal, 15-18.
Landsberg, M. (2007). Coca-Cola dives into an effort to save water. Los Angeles Times, 20-22.
Somer, J. (2010). Coca-Cola Co. outlook after a big acquisition. Los Angeles Times, 35-40.
Strom, S. (2016). Coca-Cola Reports Solid Profit Topping Wall St. Forecasts. The New York Times.
