How Effectively Coca-Cola Company Integrates Sustainability Issues in to Business Strategy - Coursework Example

Lecturer: Table of Content Introduction 3 Coca-Cola Business Strategy 3 ment of Long-Term Intent 3 Corporate Social Responsibility 4 Human Resource Strategy 5 Performance Recording 6 Innovations 6 Reasons for Adopting Sustainability 7 Accomplishment of Business Advantage 7 Improvement in Sales and Customer Loyalty 8 Improvement of Shareholder Value 8 Water and Environmental Conservation 9 Addressing Health Concerns 9 Enhancing Participation in the Supply Chain 9 Sustainability Improvement 10 Product Portfolio 10 Performance Improvement 11 Conclusion 11 References 12 Introduction 2 Coca-Cola Business Strategy 2 Statement of Long-Term Intent 2 Corporate Social Responsibility 3 Human Resource Strategy 4 Performance Recording 5 Innovations 5 Reasons for Adopting Sustainability 6 Accomplishment of Business Advantage 6 Improvement in Sales and Customer Loyalty 7 Improvement of Shareholder Value 7 Water and Environmental Conservation 7 Addressing Health Concerns 8 Enhancing Participation in the Supply Chain 8 Sustainability Improvement 9 Product Portfolio 9 Performance Improvement 9 Conclusion 10 References 11 Introduction In the contemporary business environment, sustainability was viewed as a significant, well-integrated component of any progressive company and also as a major driver to the accomplishment of financial goals. This is different from the convectional business model where it was relegated outside the business strategy, being left for business experts, innovators and perfectionists. Coca-Cola is a multinational non-alcoholic beverage company headquartered in Atlanta, Georgia, with over 200 foreign subsidiaries. The company has a market capitalization of 178.67B USD and an enterprise value of 193.97B USD (Isdell, N. & Beasley, 102). It has maintained competitiveness in the contemporary business environment due to its corporate sustainability program integrated in its business strategy. This paper presents a critical evaluation of how effectively the company is integrating sustainability issues in to business strategy. It also explains the specific reasons the company is adopting sustainability. The paper also highlights some failures experienced in maintaining a competitive sustainability strategy as well as an action plan to improve its performance. Coca-Cola Business Strategy Statement of Long-Term Intent Coca-Cola Company has a long term intent for sustainability that is supported by the presence of the position of Chief Sustainability Officer since 2011, which has significantly contributed to its sustainability agenda with the theme dubbed ‘Live Positively’, which is focused on three pillars of people, society and environment (Lester & Tice, 59). The theme is accomplished through partnership with governments as well as non-governmental organizations. The sustainability efforts have been entrenched in all aspects of business, including the company’s affiliates and subsidiaries. Sustainability reports are published annually, which indicates the company’s commitment to its long-term intent (Jean et al, 82). To accomplish long-term sustainability, the company has set smart objectives such as promotion of healthy living, livelihood improvement in poor communities, empowerment of vulnerable groups that are shared among the business linkages. Reduction of the calorie level in its beverages is aimed at addressing the health concerns of consumers with regards to high calories in the diet. Product differentiation has successfully led to the development of over 800 beverages that have little or no calories, such as Diet Coke (Allen, 8). Moreover, the company has strived to achieve a 9% reduction in calorie per portion globally. This strategy has positioned its products competitively by expanding the market share to new consumers who prefer low calorie drinks Further to promote healthy living, the company focuses on establishing a physical health and nutrition program in every nation where it has set up business (Webb, 61). The company recognizes the significance of the health of the society it serves and therefore engages in many activities aimed at improving the livelihoods of communities. The company has sponsored community water projects globally in collaboration with state agencies such as USAID and non-governmental organizations such as WWF (Lester & Tice, 51). There have been efforts to reduce the overall water consumption by 20% in the company’s production processes, while on the other hand enhancing portable water supply to arid and semi-arid areas through collaboration with DEKA Research and Development. This is a design thinking strategy whereby the company applies the innovativeness of a partner to promote its brand name (Vrontis & Sharp, 290). Corporate Social Responsibility On the other hand, the company engages women in entrepreneurship trainings aimed at empowering them to achieve maximum benefits by participating in its value chain. This is one of its CSR strategies to promote economic empowerment among the vulnerable groups in the society (Allen, 12). Through the Coca-Cola Foundation which is the company’s charity department, the living standards of poor communities have been uplifted by annual donations to support basic needs programs. Further in the efforts for environmental conservation, the company has developed innovative plastic bottles that are recyclable thereby reducing its carbon footprint (Brian, 84). Recycling plastic bottles has succeeded in 24 countries through the company’s collaboration with industries such as JBF Industries LTD. The polar bear and habitat conservation campaign was a major CSR and marketing strategy in which all the Diet Coke cans were decorated with white colour. Even though a substantial expense was incurred, the company achieved great recognition and popularity globally, which have had a positive impact on its competitiveness (Isdell & Beasley, 113). Human Resource Strategy Coca-Cola’s management considers its human resources as a core component of its sustainability strategy. The company is able to attract and retain experienced human resources who are valuable in maintaining innovativeness and competitiveness. According to Jean et al, high employee turnover is detrimental to an organizations success and hence the need to retain employees (61). Employee retention is accomplished through benefit and reward schemes among other strategic human resource practices. Efforts to motivate workers are a key component in Coca-Cola’s strategic human resource management. The company strives to maintain a satisfied workforce. Diversity in the workplace is highly valued and it reflects the diverse culture of consumers of its product (Webb, 61). Employees are motivated to achieve the desired results through engagement in the company’s affairs. It encourages open communication and innovation in the workforce, which is behind the successful innovations that have been accomplished over the years (Lester & Tice, 61). Employees enjoy benefits and rewards that have been rated among the best performing companies globally. Career development is encouraged such as through the Coca-Cola University program. The performance management system is shared among all the global associates. Constant research and development in human resource practices has helped to maintain a satisfied and competent workforce (The Coca-Cola Company). Performance Recording Coca-Cola is an ISO certified company and applies the quality management strategy in line with the requirements and the fundamentals recommended by ISO 9001. These include indicated requirements for suppliers to be licenced to deliver and also offer post-delivery services. All the manufacturing processes must be in line with the relevant laws of the country within which they are manufactured (Allen, 10). The company reports its sustainability strategy annually, which includes the Corporate Social Responsibility review in line with the guidelines stipulated in the Global Reporting Initiative (GRI). These are globally recognized guiding principal that have been put forward to aid organizations in sustainability performance reporting (Webb, 61). The company’s report is based on strategic indicators of performance that are applied in the effective measurement of financial, environmental and social accomplishments. The GRI G3.1 guidelines rating scale helps the organization to assess its own performance and assign a score, such as the B+ that it scored in the financial year 2010/2013 (Jean et al, 36). Moreover, the company allows external assessment of performance by performance measurement urgencies such as the FIRA Sustainability BV, which added a ‘+’ sign to the grade B that the company had assigned itself. This is an indicator of the competence of the company’s performance measurement tools (Isdell & Beasley, 113). Innovations Coca-Cola applies a design thinking approach through strategic collaborations that have enhanced creativity and innovations focused on doubling its operations by 2020 (Webb, 61). The share a coke promotion is one of the recent innovative marketing strategies that applied mobile technology and social networks that allowed customizable packing whereby consumers were able to send an image of Coke with their first name written on it. Such innovations have made it possible for customers to identify with coke thereby strengthening the company’s market share (Brown, 71). Continuous innovations have placed more products in the company’s supply chain, which offer a wide range of options for consumers. New beverages are customized to suit consumer desires, which has been facilitated by continuous research and development (Allen, 10). The new marketing strategy is focused on generating happiness whereby consumers are able to put forward their imaginations through the application of technology such as the interactive vending machines that provided an interphase for consumers to connect in India and Pakistan (Webb, 61). Reasons for Adopting Sustainability Accomplishment of Business Advantage Coca-Cola has adopted sustainable business practice to accomplish an apparent business advantage and also as a demonstration of business ethics. The company has maintained efficiency and competitiveness through sustainability efforts. It strives to create an image of responsible business, which enhances customer loyalty and effective collaboration with other businesses, thereby maintaining operational effectiveness. This is accomplished through the maintenance of brand value and reputation (Isdell & Beasley, 113). Moreover, sustainability enhances conformity with the generally accepted values and principles thereby lowering the risk for stakeholders. Demonstrating business ethics helps the company to avoid negative publicity which can harm its market share and also expensive legal suits (Vrontis & Sharp, 290). The practice has generated public confidence in the company and hence greater competitiveness. Improvement in Sales and Customer Loyalty The sustainability efforts have also been aimed at improving sales and customer loyalty to maintain and continue expanding the company’s market share. Organizational growth has been accomplished through linkages provided by research and development, which help the company to understand consumer needs and hence identification of opportunities for innovation (Brian, 64). The high competition and imitation of products requires efforts to ensure that the company maintains a strong bond between it and its prospective customers. Product differentiation has been accomplished through research and development, which has helped in the successful entry of new market segments globally (Jean et al, 82). Improvement of Shareholder Value The supply chain is highly developed and has played a significant role in maintaining a smooth flow of products globally and hence a direct financial impact on shareholders’ value. Failure in the supply chain may negatively affect business success and hence the need to maintain supplier commitment through sustainable business practice. On the other hand, community relations are significant in the maintenance of a strong market share and hence the need to strengthen them through corporate social responsibility (Webb, 61). As part of the global business, the company has engaged in responsible leadership through environmental conservation to contribute in enhancing environmental integrity such as the polar bear conservation efforts and tree planting activities the company has been participating in. The company also applies technological innovations by partners to accomplish its macro-level sustainable development agenda, such as the collaboration with Sotify and EKOCENTER and DEKA to promote clean water supply to poor rural communities (Brown, 56). Water and Environmental Conservation Being a beverage production company, Coca-Cola is one of the firms that use water as a major raw material. Water is critical to the health of communities, bearing in mind that many people have no access to clean drinking water. This has made sustainability strategies necessary, such as through partnerships to enhance access to portable water among these communities (Isdell & Beasley, 113). Further, the company is a significant contributor to the global greenhouse gas emissions, not only through its manufacturing processes but mainly through its carbon based preservatives. Whenever a bottle of soda is opened, carbon dioxide is released in to the atmosphere. To reduce the company’s carbon foot print, it is necessary to engage in environmental conservation to help in the global efforts to develop sustainable forest cover intended to act as a carbon sink and hence reduce the impact of global warming (Lester & Tice, 86). Addressing Health Concerns On health matters the Coca-Cola Company’s products are grouped among contributors to obesity, which is a potential health concern in the modern lifestyles of consumers. It is therefore necessary to maintain a positive image through promoting healthy lifestyles and also offering low calorie products in its global portfolio and hence maintain brand equity. The company promotes sports through sponsorships and also encouraging its workforce to engage in regular exercises. Moreover, the company has continuously upheld its long-standing policy of not selling its products to children (Brian, 64). Enhancing Participation in the Supply Chain Women empowerment is also a sustainability practice that the company engages in due to industry demands. Soft drink vendors are usually small scale entrepreneurs whose combined efforts have a significant impact in the global sales (Lester & Tice, 86). The company’s research and development department established that women are the majority in this trade and hence their economic empowerment means greater sales volumes and hence more shareholder value. However, the women engaged in the empowerment program include fruit vendors and farmers, which is a strategy aimed at making it look inclusive (Webb, 102). Sustainability Improvement Product Portfolio The company’s sustainability strategy has failed to address the product portfolio effectively, which has significantly affected its operational effectiveness and failed to accomplish effective risk management. According to Allen, the global market share of Coca-Cola dropped by 2% between 2006 and 2007 (14). First, the company has concerted efforts in developing and marketing carbonated drinks such as Coke, Fanta and Sprite among others with the focus on emerging opportunities in the developing economies. This strategy fails to take in to consideration the company’s long-term growth plans due to the fact that global efforts to reduce obesity are increasing and may eventually undermine these products thereby affecting the organization’s competitiveness in the beverage industry as consumers seek improved foods and drinks (Jean et al, 82). Moreover, the product portfolio is highly undiversified, with the company focusing on drinks only rather than diversifying in to other foods that can complement the beverages. Sustainable growth can only be achieved when there are no possibilities of stagnation with regards to consumption of soft drinks (Lester & Tice, 86). However, winter seasons are characterized by low consumption of cold drinks thereby causing a period of low activity in the market. Lack of diversification of products in the market affects the company’s risk management strategy since it is highly dependent on brand popularity. This does not shield the organization from competitors with similar products (Vrontis, D. & Sharp, 302). Performance Improvement A product focused approach to sustainability strategy needs to be adopted whereby the company can focus its resources on customer focused innovations. These will lead to product development that seeks to solve the problems that customers are facing, including providing alternatives to the high calorie beverages. The Diet Coke is one such innovation which was aimed at addressing the health concerns (Brian, 64). However, the innovation was marginal compared to the hundreds of high calorie drinks in the market. There needs to be a strong linkage between marketers, research and development and the management so that consumer needs can be understood by all the players in the design thinking strategy (Brown, 56). It is also important to invest in a parallel product line that can support the main merchandise, such as cakes and snacks that can be sold together with the soft drinks. This is an important marketing strategy that can help the organization to protect its market share from new market entrants that may offer inferior products (Allen, 13). For example, if a loyal customer consumes a Coke and an adulterated snack, he/she may not notice the quality of the cake but most likely will acquire a different attitude with regards to both products. This kind of dissatisfaction can be avoided through Coca-Cola offering quality snacks for its customers. Conclusion Coca-Cola Company strives to accomplish its long-term intent for sustainability with a theme dubbed ‘live positively’. The company promotes health living through efforts to reduce calorie levels in its beverages and also encouraging exercises among consumers and workers. Corporate social responsibility has enabled the company to gain popularity globally through improvement of livelihoods of poor communities, economic empowerment of vulnerable groups, community water projects and environmental conservation. Strategic human resource practices have promoted innovations in the company. The benefit and reward schemes have been significant in recruitment and employee retention. The company is ISO 9001 certified and reports sustainability in line with the guidelines of the Global Reporting Initiative. The company’s design thinking approach has enhanced significant innovations. Sustainable business practice allows the company to accomplish a business advantage, customer loyalty and strong market share. It has a strongly developed global supply chain. Water conservation efforts are necessary for the company since the company is a major water consumer in its production process. Engaging in health matters is important to maintain brand equity. The company needs to diversify its product portfolio to promote its sustainability strategy. References Allen, F.L, Secret Formula: How Brilliant Marketing and Relentless Salesmanship Made Coca-Cola the Best-Known Product in the World, Harper Paperbacks, 2010 4(2) pp. 9-15 Brian L., Design thinking – a new mental model of value innovation, Emerald Group Publishing Limited, 2010 Brown, M. G. Beyond the Balanced Scorecard: Improving Business Intelligence with Analytics, Productivity Press, 2007 Jean, H., Dye, K. & Mills, A. J. Understanding Organizational Change, Taylor & Francis, 2008 Isdell, N. & Beasley, D., Inside Coca-Cola: A CEO's Life Story of Building the World's Most Popular Brand, Pan Macmillan-St. Martins Press, 2011 Lester, D. & Tice, C., How they Started: How 25 Good Ideas Became Great Companies, Crimson Publishing, 2012 The Coca-Cola Company, Hours of Work Improvement Guide The Coca-Cola Company, 2011, Viewed on 5th Nov. 13 at , 20http://assets.cocacolacompany.com/78/f5/2e04a53e4d85a3511d3de8bdd1ba/Hours_of_Work_Improvement_Guide_May2011_external.pdf Vrontis, D. & Sharp, I. 2003, “The Strategic Positioning of Coca-Cola in their Global Marketing Operation”, The Marketing Review, Vol. (3)2003: 289-309 Webb, C. 2006. “Avoiding ageism at Coca-Cola: Company initiatives earn Employer Champion status”, Human Resource Management International, Vol. (14) 7, 2006: 9 - 11 Read More