Case Study

The Coca Cola

It all began with Coca Cola India's (Coca-Cola) realization that something was surely amiss. Four CEOs within 7 years, arch-rival Pepsi surging ahead, heavy employee exodus and negative media reports indicated that the leader had gone wrong big time. The problems eventually led to Coca-Cola reporting a huge loss of US $ 52 million in 1999, attributed largely to the heavy investments in India and Japan. Coca-Cola had spent Rs 1500 crore for acquiring bottlers, who were paid Rs 8 per case as against the normal Rs 3. The losses were also attributed to management extravagance such as accommodation in farmhouses for executives and foreign trips for bottlers. 

Changes were required to be put in place soon. With a renewed focus and energy, Coca-Cola took various measures to come out of the mess it had landed itself in. In 1999, following the merger of Coca-Cola's four bottling operations, human resources issues gained significance at the company. Two new companies, Coca-Cola India, the corporate and marketing office, and Coca-Cola Beverages were the result of the merger. The merger brought with it over 10,000 employees to Coca-Cola, doubling the number of employees it had in 1998.

Coca-Cola had to go in for a massive restructuring exercise focusing on the company's human resources to ensure a smooth acceptance of the merger. The first task was to put in place a new organizational structure that vested profit and loss accounting at the area level, by renaming each plant-in-charge as a profit center head. The country was divided into six regions as against the initial three, based on consumer preferences. Each region had a separate head (Regional General Manager), who had the regional functional managers reporting to him. All the Regional General Managers reported to VP (Operations), Sanjiv Gupta, who reported directly to CEO Alexander Von Bohr (Bohr). Coca-Cola had to accept the fact that a major change on the human resources front was inevitable, although the changes in the were necessitated by radically different circumstances. More importantly, the restructuring seemed to have been extremely beneficial for them. Besides improved morale and reduced employee turnover figures, the strategic, structural and operational changes on the HR front led to an overall 'feel-good' sentiment in the companies. However, in spite of all the moves, Coca-Cola's workforce was still large. Given the scale of its investments, the future was far from 'smooth sailing' for the company. With the new found focus and a streamlined human resources front, Coca-Cola hoped to break even by the end of fiscal 2001.

Question

Q1. Discuss the core issue in the case.

Q2. What are the main benefits reaped by the company as per the core issue of the case.