Coca Cola Performance Appraisal System Management Essay

The Coca-Cola Company is the worlds largest manufacturer, distributor, and marketer of non-alcoholic beverage concentrates and syrups. Based in Atlanta, Georgia, KO sells concentrated forms of its beverages to bottlers, which produce, package, and sell the finished products to retailers. The Coca-Cola Company operates in over 200 countries and sells over 400 different products, including the world-famous Coca-Cola and Sprite lines of soft drinks.

KO faces several challenges today. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks (abbreviated as CSD), which constitutes 74% of KO’s sales. KO’s profits are also vulnerable to the rising costs for the raw materials used to make drinks – such as the corn syrup used as a sweetener, the aluminum used in cans, and the plastic used in bottles. Additionally, as food retailers continue consolidating, they’re gaining more power to negotiate for lower prices, decreasing KO’s price flexibility.

Despite these challenges, Coca-Cola has remained highly profitable. Though the non-CSD market is growing quickly, the traditional CSD market is still much larger in terms of both revenues and volume. The size and variety of KO’s offerings in the CSD category, coupled with the unparalleled brand equity of the Coca-Cola trademark, has allowed KO to maintain its share of the large, high-margin CSD market. At the same time, KO has responded to consumers’ changing tastes and begun launching new, non-CSD alternatives.

The Coca-Cola Company engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company’s sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as energy drinks, and carbonated waters and flavored waters. Its still beverages consist of nonalcoholic beverages without carbonation, including non-carbonated waters, flavored waters and enhanced waters, juices and juice drinks, teas, coffees, and sports drinks. The Coca-Cola Company also offers fountain syrups, syrups, and concentrates, such as flavoring ingredients and sweeteners. The company markets its nonalcoholic beverages under the Coca-Cola, Diet Coke, Fanta, and Sprite brand names. The Coca-Cola Company also owns mineral water brands Kinley. The Coca-Cola Company, nourishing the global community with the world’s largest selling soft drink since 1886, returned to India in 1993 after a gap of 16 years giving a new thumbs-up to the Indian Soft Drink Market. In the same year, the Company took over ownership of the nation’s top soft-drink brands and bottling network. No wonder, their brands have assumed an iconic status in the minds of the consumers. Coca-Cola serves in India some of the most recalled brands across the world including names such as Coca-Cola, Diet Coke, Sprite, Fanta, Thumps Up, Limca, Maaza and Kinley (packaged drinking water).

INTRODUCTION

Human resource management (HRM) is the strategic and coherent approach to the management of an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of the objectives of the business. It is the organizational function that deals with issues related to people such as compensation, hiring, performance management, organization development, safety, wellness, benefits, employee motivation, communication, administration, and training.

Objectives for performance appraisal policy can best be understood in terms of potential benefits

• Increase motivation to perform effectively.
• Increase staff self-esteem.
• Gain new insight into staff and supervisors.
• Better clarify and define job functions and responsibilities.
• Develop valuable communication among appraisal participants.
• Encourage increased self-understanding among staff as well as insight into the kind of development activities that are of value.
• Distribute rewards on a fair and credible basis.
• Clarify organizational goals so they can be more readily accepted.
• Improve institutional/departmental manpower planning, test validation, and development of training programs.

Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.

In many organizations – but not all – appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions.

By the same token, appraisal results are used to identify the poorer performers who may require some form of counseling, or in extreme cases, demotion, dismissal or decreases in pay. (Organizations need to be aware of laws in their country that might restrict their capacity to dismiss employees or decrease pay).

The Performance Appraisal System (PAS) is designed to improve overall organizational performance by encouraging a higher level of involvement and motivation and increased staff participation in the planning, delivery and evaluation of work. The system establishes a process for achieving responsibility and accountability in the execution of programmes approved by the General Assembly. It is based on linking individual work plans with those of departments and offices and entails setting goals, planning work in advance and providing ongoing feedback. An important function of the PAS is to promote communication between staff members and supervisors on the goals to be achieved and the basis on which individual performance will be assessed, encouraging teamwork in the process.

OBJECTIVES

• To get familiar with cooperate world environment and culture.
• To learn how appraisals of a employee in the company is decide by managers.
• To learn the parameters seniors look while doing the appraisals.
• To see what are the factors, which decide how much appraisals, a particular should get.
• Who are the Peoples involved in appraisals system and who takes which decision?
• To understand the appraisals system and methodology for appraisals in Coca-Cola India.
• To get familiar with the work and duties of a Human Resource (HR) Manager.

INDUSTRY PROFILE

REVIEW OF LITERATURE ON THE INDUSTRY

An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability.

Defining the industry

Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits.

Rivalry

Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits. To be sure, there was tough competition between Coke and Pepsi for market share, and this occasionally hampered profitability.

For example, price wars resulted in weak brand loyalty and eroded margins for both companies in the 1980s. The Pepsi Challenge, meanwhile, affected market share without hampering per case profitability, as Pepsi was able to compete on attributes other than price.

Substitutes:

Through the early 1960s, soft drinks were synonymous with “colas” in the mind of consumers. Over time, however, other beverages, from bottled water to teas, became more popular, especially in the 1980s and 1990s. Coke and Pepsi responded by expanding their offerings, through alliances (e.g. Coke and Nestea), acquisitions (e.g. Coke and Minute Maid), and internal product innovation (e.g. Pepsi creating Orange Slice), capturing the value of increasingly popular substitutes internally. Proliferation in the number of brands did threaten the profitability of bottlers through 1986, as they more frequent line set-ups, increased capital investment, and development of special management skills for more complex manufacturing operations and distribution. Bottlers were able to overcome these operational challenges through consolidation to achieve economies of scale. Overall, because of the CPs efforts in diversification, however, substitutes became less of a threat.

Power of Suppliers

The inputs for Coke and Pepsi’s products were primarily sugar and packaging. Sugar could be purchased from many sources on the open market, and if sugar became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s. So suppliers of nutritive sweeteners did not have much bargaining power against Coke, Pepsi, or their bottlers. NutraSweet, meanwhile, had recently come off patent in 1992, and the soft drink industry gained another supplier, Holland Sweetener, which reduced Searle’s bargaining power and lowering the price of aspartame.

With an abundant supply of inexpensive aluminum in the early 1990s and several can companies competing for contracts with bottlers, can suppliers had very little supplier power. Furthermore, Coke and Pepsi effectively further reduced the supplier of can makers by negotiating on behalf of their bottlers, thereby reducing the number of major contracts available to two. With more than two companies vying for these contracts, Coke and Pepsi were able to negotiate extremely favorable agreements. In the plastic bottle business, again there were more suppliers than major contracts, so direct negotiation by the CPs was again effective at reducing supplier power.

Power of buyers

The soft drink industry sold to consumers through five principal channels: food stores, convenience and gas, fountain, vending, and mass merchandisers Supermarkets, the principal customer for soft drink makers, were a highly fragmented industry. The stores counted on soft drinks to generate consumer traffic, so they needed Coke and Pepsi products. But due to their tremendous degree of fragmentation (the biggest chain made up 6% of food retail sales, and the largest chains controlled up to 25% of a region), these stores did not have much bargaining power. Their only power was control over premium shelf space, which could be allocated to Coke or Pepsi products. This power did give them some control over soft drink profitability. Furthermore, consumers expected to pay less through this channel, so prices were lower, resulting in somewhat lower profitability. National mass merchandising chains such as Wal-Mart, on the other hand, had much more bargaining power. While these stores did carry both Coke and Pepsi products, they could negotiate more effectively due to their scale and the magnitude of their contracts. For this reason, the mass merchandiser channel was relatively less profitable for soft drink makers. The least profitable channel for soft drinks, however, was fountain sales. Profitability at these locations was so abysmal for Coke and Pepsi that they considered this channel “paid sampling.” This was because buyers at major fast food chains only needed to stock the products of one manufacturer, so they could negotiate for optimal pricing. Coke and Pepsi found these channels important, however, as an avenue to build brand recognition and loyalty, so they invested in the fountain equipment and cups that were used to serve their products at these outlets. As a result, while Coke and Pepsi gained only 5% margins, fast food chains made 75% gross margin on fountain drinks.

Vending, meanwhile, was the most profitable channel for the soft drink industry. Essentially there were no buyers to bargain with at these locations, where Coke and Pepsi bottlers could sell directly to consumers through machines owned by bottlers. Property owners were paid a sales commission on Coke and Pepsi products sold through machines on their property, so their incentives were properly aligned with those of the soft drink makers, and prices remained high. The customer in this case was the consumer, who was generally limited on thirst quenching alternatives.

The final channel to consider is convenience stores and gas stations. If Mobil or Seven-Eleven were to negotiate on behalf of its stations, it would be able to exert significant buyer power in transactions with Coke and Pepsi. Apparently, though, this was not the nature of the relationship between soft drink producers and this channel, where bottlers’ profits were relatively high, at $0.40 per case, in 1993. With this high profitability, it seems likely that Coke and Pepsi bottlers negotiated directly with convenience store and gas station owners. So the only buyers with dominant power were fast food outlets. Although these outlets captured most of the soft drink profitability in their channel, they accounted for less than 20% of total soft drink sales. Through other markets, however, the industry enjoyed substantial profitability because of limited buyer power.

Barriers to Entry

It would be nearly impossible for either a new CP or a new bottler to enter the industry. New CPs would need to overcome the tremendous marketing muscle and market presence of Coke, Pepsi, and a few others, who had established brand names that were as much as a century old. Through their DSD practices, these companies had intimate relationships with their retail channels and would be able to defend their positions effectively through discounting or other tactics. So, although the CP industry is not very capital intensive, other barriers would prevent entry. Entering bottling, meanwhile, would require substantial capital investment, which would deter entry. Further complicating entry into this market, existing bottlers had exclusive territories in which to distribute their products. Regulatory approval of intrabrand exclusive territories, via the Soft Drink Interbrand Competition Act of 1980, ratified this strategy, making it impossible for new bottlers to get started in any region where an existing bottler operated, which included every significant market in the US. In conclusion, an industry analysis by Porter’s Five Forces reveals that the soft drink industry in 1994 was favorable for positive economic profitability, as evidenced in companies’ financial outcomes.

MAJOR COMPANIES

In India there are only two major companies

• Hindustan Coca Cola Beverages Private Ltd.
• Pepsi Co.

Hindustan Coca Cola Beverages Private Ltd.

The Coca-Cola Company engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide. It principally offers sparkling and still beverages. The company’s sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as energy drinks, and carbonated waters and flavored waters. Its still beverages consist of nonalcoholic beverages without carbonation, including non-carbonated waters, flavored waters and enhanced waters, juices and juice drinks, teas, coffees, and sports drinks. The Coca-Cola Company also offers fountain syrups, syrups, and concentrates, such as flavoring ingredients and sweeteners. The company markets its nonalcoholic beverages under the Coca-Cola, Diet Coke, Fanta, and Sprite brand names. The Coca-Cola Company also owns mineral water brands Kinley. The Coca-Cola Company, nourishing the global community with the world’s largest selling soft drink since 1886, returned to India in 1993 after a gap of 16 years giving a new thumbs-up to the Indian Soft Drink Market. In the same year, the Company took over ownership of the nation’s top soft-drink brands and bottling network. No wonder, their brands have assumed an iconic status in the minds of the consumers. Coca-Cola serves in India some of the most recalled brands across the world including names such as Coca-Cola, Diet Coke, Sprite, Fanta, Thumps Up, Limca, Maaza and Kinley (packaged drinking water).

PEPSI Co.

PepsiCo is a world leader in convenience foods and beverages, with 2007 revenues of more than $39 billion and more than 185,000 employees across the world. Its world renowned brands are available in nearly 200 countries and territories.

PepsiCo entered India in 1989 and has grown to become the country’s largest selling food and beverage companies. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India.

PepsiCo India and its partners have invested more than U.S.$700 million since the company was established in the country in 1989. In India, PepsiCo provides direct employment to 4,000 people and indirect employment to 60,000 people including suppliers and distributors.

PepsiCo India’s expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options- Diet Pepsi and 7Up Light; hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks – Gatorade, and 100% natural fruit juices and juice based drinks – Tropicana, Tropicana Twister and Slice. Our local brands – Lehar Evervess Soda, Dukes Lemonade and Mangola complete our diverse spectrum of brands. PepsiCo’s snack food company, Frito-Lay, is the leader in the branded potato chip market and was amongst the first companies to eliminate the use of trans fats and MSG in its products. It manufactures Lay’s Potato Chips; Cheetos extruded snacks, Uncle Chipps and traditional namkeen snacks under the Kurkure and Lehar brands. The company’s high fibre breakfast cereal, Quaker Oats, along with Lehar Lites, low fat and roasted snack options enhance the choices available to the growing health and wellness needs of our consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets.

The group has built an expansive beverage, snack food and exports business and to support the operations are the group’s 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned. In addition to this, PepsiCo’s Frito Lay snack division has 3 state of the art plants. PepsiCo’s business is based on its sustainability vision of making tomorrow better than today. Our commitment to living by this vision every day is visible in our contribution to our country, consumers, farmers and our people.

SWOT ANALYSIS

SWOT ANALYSIS FOR THE INDUSTRY

SWOT stands for Strengths Weakness Opportunities Threats

SWOT analysis is a technique much used in many general management as well as marketing scenarios. SWOT consists of examining the current activities of the organization- its Strengths and Weakness- and then using this and external research data to set out the Opportunities and Threats that exist.

Strengths:

Strong and well differentiated brands with leading share positions. Brand portfolio includes both global Unilever brands and local brands of specific relevance to India.

• Consumer understanding and systems for building consumer insight.
• Strong R&D capability well linked with business.
• Integrated supply chain and well spread manufacturing units.
• Distribution structure with wide reach, high quality coverage and ability to leverage scale.
• Access to Unilever global technology capability and sharing of best practices from other Unilever companies.
• High quality manpower resources.

Weaknesses:

• Limited success in changing drinking habits of people.
• Complex supply chain configuration, unwieldy number of SKU’s with dispersed manufacturing locations.
• Price positioning in some categories allows for low price competition.

Threats:

• Low priced competition now present in all categories.
• Changes in fiscal benefits.
• Unfavorable raw material prices in sugar, aluminum, commodity etc.

Opportunities:

• Market and brand growth through increased penetration especially in rural areas.
• Brand growth through increased consumption depth and frequency of usage across all categories.
• Upgrading consumers through innovation to new levels of quality.
• Leveraging the latest IT technology.

COCA-COLA PROFILE

REVIEW OF LITERATURE

The Coca-Cola Company (NYSE: KO) is the world’s largest manufacturer, distributor, and marketer of non-alcoholic beverage concentrates and syrups. Based in Atlanta, Georgia, KO sells concentrated forms of its beverages to bottlers, which produce, package, and sell the finished products to retailers. The Coca-Cola Company operates in over 200 countries and sells over 400 different products, including the world-famous Coca-Cola and Sprite lines of soft drinks.

KO faces several challenges today. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks (abbreviated as CSD), which constitutes 74% of KO’s sales. KO’s profits are also vulnerable to the rising costs for the raw materials used to make drinks – such as the corn syrup used as a sweetener, the aluminum used in cans, and the plastic used in bottles. Additionally, as food retailers continue consolidating, they’re gaining more power to negotiate for lower prices, decreasing KO’s price flexibility.

Despite these challenges, Coca-Cola has remained highly profitable. Though the non-CSD market is growing quickly, the traditional CSD market is still much larger in terms of both revenues and volume. The size and variety of KO’s offerings in the CSD category, coupled with the unparalleled brand equity of the Coca-Cola trademark, has allowed KO to maintain its share of the large, high-margin CSD market. At the same time, KO has responded to consumers’ changing tastes and begun launching new, non-CSD alternatives.

History and Corporate Overview

The Coca-Cola Company traces its origin to 1884, when an entrepreneur named John Stith Pemberton concocted a cocaine-infused wine for sale in the U.S. A non-alcoholic version, called Coca-Cola, was introduced in the following year in response to new laws prohibiting alcoholic beverages, and the company was officially incorporated in 1888 in Atlanta, Georgia.

The entire Coca-Cola system is divided into two parts: the Coca-Cola Company and its bottlers. KO manufactures concentrates and syrups for its beverages, which it then sells to bottlers for packaging and distribution. KO owns all the rights for its brands, which include some of the world’s most popular non-alcoholic beverages, though it does grant bottlers some rights as part of its bottling agreements. In addition to manufacturing the concentrates, KO is also primarily responsible for marketing its brands, which includes running advertising and promotional campaigns. Bottling companies are generally independent of the Coca-Cola Company, though some are either partially or completely owned by KO.

KO is now one of the largest corporations in the world, with a global workforce of over 90,000 and revenues of $28.8 billion in revenues in 2007. Over the years, the brand equity of the Coca-Cola trademark, as well as that of other KO-produced brands, has established KO as a prominent figure in the non-alcoholic beverage industry and allowed the company to keep both revenues and profits high.

Bottlers

Coca-Cola holds controlling and noncontrolling interest in 64% of its worldwide bottlers

Coca-Cola holds controlling and non controlling interest in 64% of its worldwide bottlers. Bottling and canning companies are typically separate from the Coca-Cola Company’s main concentrate manufacturing business. However, KO does maintain ownership interests in many of its bottlers, ensuring that the relationship between the two parts of the Coca-Cola system remains close.

Some of the Coca-Cola Company’s principal bottlers are:

• Coca-Cola Enterprises (CCE) (NYSE: CCE), which is the largest member of the Coca-Cola bottling network by volume. CCE accounts for 80% of all domestic Coca-Cola sales and 18% of all sales worldwide. KO retains a 35% share of CCE stock, as well as two of its thirteen board seats.
• Coca Cola Femsa S.A.B. de C.V. (KOF) (NYSE: KOF), the second-largest bottler in the Coke system, produced 2 billion unit cases of beverages in 2007. KO owns 32% of Coca Cola Femsa S.A.B. de C.V. (KOF), which has a strong presence in Central and South America.
• COCA COLA HELLENIC BOTTLING CO (CCH) S.A. (NYSE: CCH) is KO’s fourth-largest bottling company, selling 1.81 billion cases in 2007. CCH has a large market presence in Europe, Asia, and Africa with its operations spread among 26 different countries. KO currently owns 23% of CCH’s stock.

Products

The Coca-Cola Company produces over 400 brands of non-alcoholic beverages, including carbonated and non-carbonated beverages, such as ready-to-drink juices, coffee drinks, tea and bottled water. Of these over 400 brands, there are more than 2,600 different varieties. Most of KO’s beverage portfolio is composed of CSD, though the company has been expanding into the non_CSD category in response to a shift in consumer demand and a greater emphasis on healthy options.

Carbonated Soft Drinks

Carbonated soft drinks are the single largest component in the Coca-Cola Company’s collection of beverages, accounting for around 74% of total volume sold in 2006. Within the CSD category, KO offers other sugared drinks and diet drinks. Of all CSD sales, beverages bearing the Coca-Cola or Coke trademark make up 55% of total volumes.

Some of the Coca-Cola Company’s major CSD offerings include:

• Coca-Cola
• Diet Coca-Cola
• Sprite
• Fanta
• Barq’s Root Beer
• Coke Zero

Introduced in 2005, Coke Zero is the most significant of KO’s new innovations. This beverage is marketed as a “calorie-free” version of Coca-Cola Classic, omitting the diet label in an attempt to appeal to new demographics. This brand alone accounted for nearly on third of all 2006 growth for beverages bearing the Coca-Cola trademark. Most of KO’s carbonated soft drinks come in several varieties with different flavors, caloric values, etc.

KO also offers energy drinks such as TaB and Full Throttle, which are carbonated but are aimed at different demographics, putting them in a special category of their own.

Non-carbonated Soft Drinks

The remaining 26% of KO’s total volume is composed of non-carbonated soft drinks, which include a variety of beverages such a fruit juices, waters, sports drinks, and teas. This non-CSD segment has been showing higher growth rates than the CSD category, resulting from higher demand for healthy alternatives to traditional CSD.

Among KO’s significant non-CSD beverages are:

• Dasani bottled water
• Glaceau Vitamin Water
• POWERade sports drinks
• Minute Maid and Minute Maid To Go juices
• Nestea
• Fuze Healthy Infuzions
• Odwalla Juice drinks

Within the non-CSD category, bottled waters like Dasani and Spring! by Dannon are showing the highest rates of consumption growth.

Trends & Forces (Changing consumer preferences risk)

74% of the Coca Cola Company’s products are classified as carbonated soft drinks, making it particularly sensitive to changes in demand for CSD.

• Recently, consumer demand for CSD has been negatively affect by concerns about health and wellness. This is true across most of KO’s markets.
• There has been an increase in the number of regulations regarding CSD in the United States in response to the heightened desire for healthy food consumption.
• Many public schools now ban the sale of soft drinks on their campuses.
• The Center for Science and Public Interest proposed that a warning label be placed on all beverages containing more than 13g of sugar per 12-oz serving. This proposal would affect all non-diet, full calorie drinks produced by KO.
• These factors have driven a shift in consumption away from CSD to healthier alternatives, such as tea, juices, and water.
• Within the CSD segment consumers have been moving away from sugared drinks, opting instead for diet beverages, which do not generally contain any sugar or calories.

Though KO has been somewhat slow to respond to this shift in consumer preferences, it has recently begun to increase its development of both diet CSD and non-CSD beverages. KO is faced with the task of balancing the risk of new innovations with the low growth rates of established brands, a predicament for manufactures throughout the beverage industry.

Revamped Bottler Strategy

After CEO Neville Isdell was brought out of retirement in 2004 to revive the then flagging beverage maker, one of the first areas that he targeted for improvement was KO’s frayed relations with its extensive network of bottlers. Since consolidating all company-owned bottlers into the Bottling Investments division, Isdell has continued to increase KO’s interest in its bottlers through stake purchases or outright buyouts. This strategy represents a weakening of the division between KO’s production and distribution operations. Isdell believes that by combining production and distribution operations the company will have enhanced its ability to quickly respond to changing market conditions. In KO’s 2007 Q3 Analyst call, Isdell credited the outright purchase of Coca-Cola Bottlers Philippines (CCBPI) for double-digit volume growth in that country. Additionally, KO has signed new agreements with many of its bottlers which allow them to distribute drinks produced by other companies. For example, Coca-Cola Enterprises (CCE) now distributes AriZona, a ready-to-drink tea made by Ferolito, Vultaggio & Sons, an American iced-tea company. Isdell sees these agreements as another way of taking advantage of the rapidly growing non-CSD market.

Commodity Cost Inflation

2007 aluminum prices, $/ton

2007 corn prices, $/bushel

2007 PET resin prices, ¢/pound

The Coca-Cola Company’s profitability can be affected both directly and indirectly by the costs of various production inputs. KO itself is responsible for purchasing the raw materials used to make its concentrates and syrups. Variations in the prices for these goods can affect the company’s total cost of production as well as its profit margins. Changes in the production costs of bottlers can also impact KO’s profitability, though in a more indirect way. If the raw materials necessary for bottling become more expensive, the bottler may be forced to drastically raise prices to compensate. Such a price increase would likely hurt KO, given the competitive nature of the non-alcoholic beverage industry, and provide a possible incentive for consumers to switch to other companies’ beverages. Aluminum, corn, and PET resin are three examples of such production goods used by bottlers that could have significant bearing on the Coca-Cola Company’s profit margins.

The Dollar

Another trend affecting Coca-Cola is the relative strength of the dollar. Although the company is based in the US, KO derives almost 80% of its operating income from outside United States. Because of this, the company is very sensitive to the strength of the dollar. Over the past few years, the dollar been consistently weakening. As foreign currencies strengthen relative to the dollar, goods sold in foreign markets are suddenly worth more dollars back in the US, boosting earnings. If the dollar continues to weaken, it will continue to have a positive effect on KO’s earnings.

KO has broad exposure to foreign currencies and actively hedges a large portion of these to avoid wide swings in earnings from currency fluctuations. Although this hedging limits the potential upside of a weakening dollar, it also insulates the company from drastic upswings in the dollar’s strength.

Diminished pricing flexibility

The Coca-Cola Company’s pricing flexibility has been diminished in recent years. Many of the food retailers that sell KO’s products are consolidating, which gives them more power to bargain for lower prices. In addition, the emergence of Wal-Mart as one of the world’s largest food retailers stands to harm KO’s branded beverages due to Wal-Mart’s emphasis on private label brands. Also, the competitive nature of the non-alcoholic beverage market limits pricing flexibility. It’s crucial for KO to maintain the balance between price growth and volume growth, or it could risk losing market share to competitors.

Domestic competition and market share

U.S. non-alcoholic beverage market share, by volume

Coca-Cola’s main competitors in the U.S. are Pepsico (PEP) (NYSE:PEP) and Cadbury Schweppes (CSG)(NYSE:CSG). There are many smaller beverage companies competing domestically, and marketers of non-CSD brands sometimes possess significant shares of their specific sectors. Examples include Red Bull GmbH’s Red Bull energy drink, Monster energy drink, produced by Hansen Natural (HANS), and Ferolito, Vultaggio & Son’s AriZona iced tea.

Coke vs. Pepsi

PepsiCo is the second-largest company in the domestic non-alcoholic beverage industry. Its 31.1% market share in the CSD market in 2007 comes second only to KO’s 42.8% share. PEP counts among its brands some very well known trademarks, most notably:

• Pepsi
• Mountain Dew
• Gatorade
• Aquafina
• Tropicana
• Lipton

For decades now, Coke and Pepsi have battled for the title of tastiest soda producer, but which company will add the best flavor to your investment portfolio? Although both companies share powerful brand names and global franchises, there are two important distinctions between PepsiCo and Coca-Cola that any investor should consider before choosing between these comestible titans:

Global Footprint

When it comes to international presence, Coca-Cola easily trumps PepsiCo. In 2007, Coca-Cola generated around 70% of its revenue overseas compared to just over a third of revenue for PepsiCo. Coca-Cola’s impressive global footprint puts it in a better position to benefit from strong growth across the globe, particularly in the developing world. Furthermore, because Coke generates so much of its revenue abroad, it stands to benefit greatly from the continuing weakening of the dollar as sales denominated in foreign currencies are suddenly worth more dollars back home. At the same time, PepsiCo’s heavy dependence on North America makes it much more susceptible to a slowing US economy.

Diversified Product Offering

Another important distinction between the two companies is their product offering. Though KO is the largest company in the non-alcoholic beverage industry, Pepsico (PEP) has larger revenues, due to the diversification of its product lines. Non-carbonated soft drinks make up 39% of PEP’s beverage product line, compared to 26% at KO. PEP also owns the Frito-Lay and Quaker Oats brands in addition to its beverage holdings. This relatively more diversified portfolio provides PEP with a certain degree of protection from weak performance in any one market or industry, in addition to generally higher revenues. PEP’s 2006 gross revenues were $39.4 billion as compared to KO’s $28.8 billion, reflecting PEP’s more varied product offerings. Furthermore, Coca-Cola’s heavy dependence on beverages, particularly carbonated beverages, makes it more susceptible than PepsiCo to a growing aversion to carbonated beverages which are perceived as fattening and unhealthy. On the other hand, Pepsico’s extensive portfolio of beverages, foods and snacks puts it in a better position to benefit from the movement to healthier eating.

International Competition

Internationally, the Coca-Cola Company’s largest competitor is, again, PepsiCo (PEP). Both companies have significant presence in the domestic market, but KO sells more beverages outside of the U.S. KO receives nearly 80% of its operating income from international sources and holds over half of the global market share for non-alcoholic beverages. PEP, meanwhile, makes only 6% of its beverage operating income from outside the U.S. and holds a 15-20% stake in the global beverage market. A large portion of PEP’s income comes instead from its snack business, a market in which KO does not participate.

Coke in India

Indian History

India is home to one of the most ancient cultures in the world dating back over 5000 years. At the beginning of the twenty-first century, twenty-six different languages were spoken across India, 30% of the population knew English, and greater than 40% were illiterate. At this time, the nation was in the midst of great transition and the dichotomy between the old India and the new was stark. Remnants of the caste system existed alongside the world’s top engineering schools and growing metropolises as the historically agricultural economy shifted into the services sector. In the process, India had created the world’s largest middle class, second only to China.

A British colony since 1769 when the East India Company gained control of all European trade in the nation, India gained its independence in 1947 under Mahatma Gandhi and his principles of non-violence and self-reliance. In the decades that followed, self-reliance was taken to the extreme, as many Indians believed that economic independence was necessary to be truly independent. As a result, the economy was increasingly regulated and many sectors were restricted to the public sector. This movement reached its peak in 1977 when the Janta party government came to power and Coca-Cola was thrown out of the country. In 1991, the first generation of economic reforms was introduced and liberalization began.

Coke in India

Coca-Cola was the leading soft drink brand in India until 1977 when it left rather than reveal its formula to the government and reduce its equity stake as required under the Foreign Exchange Regulation Act (FERA), which governed the operations of foreign companies in India. After a 16-year absence, Coca-Cola returned to India in 1993, cementing its presence with a deal that gave Coca-Cola ownership of the nation’s top soft-drink brands and bottling network. Coke’s acquisition of local popular Indian brands including Thumps Up (the most trusted brand in India), Limca, Maaza, Citra and Gold Spot provided not only physical manufacturing, bottling, and distribution assets but also strong consumer preference. This combination of local and global brands enabled Coca-Cola to exploit the benefits of global branding and global trends in tastes while also tapping into traditional domestic markets. Leading Indian brands joined the Company’s international family of brands, including Coca-Cola, diet Coke, Sprite and Fanta, plus the Schweppes product range. In 2000, the company launched the Kinley water brand and in 2001, Shock energy drink and the powdered concentrate Sunfill hit the market.

From 1993 to 2003, Coca-Cola invested more than US$1 billion in India, making it one of the country’s top international investors. By 2003, Coca-Cola India had won the prestigious Woodruff Cup from among 22 divisions of the Company based on three broad parameters of volume, profitability, and quality. Coca-Cola India achieved 39% volume growth in 2002 while the industry grew 23% nationally and the Company reached breakeven profitability in the region for the first time. Encouraged by its 2002 performance, Coca-Cola India announced plans to double its capacity at an investment of $125 million (Rs. 750 crore) between September 2002 and March 2003. Coca-Cola India produced its beverages with 7,000 local employees at its twenty-seven wholly owned bottling operations supplemented by seventeen franchisee-owned bottling operations and a network of twenty-nine contract-packers to manufacture a range of products for the company. The complete manufacturing process had a documented quality control and assurance program including over 400 tests performed throughout the process.

The complexity of the consumer soft drink market demanded a distribution process to support 700,000 retail outlets serviced by a fleet that includes 10-ton trucks, open-bay three wheelers, and trademarked tricycles and pushcarts that were used to navigate the narrow alleyways of the cities. In addition to its own employees, Coke indirectly created employment for another 125,000 Indians through its procurement, supply, and distribution networks.

Sanjiv Gupta, President and CEO of Coca-Cola India, joined Coke in 1997 as Vice President, Marketing and was instrumental to the company’s success in developing a brand relevant to the Indian consumer and in tapping India’s vast rural market potential. Following his marketing responsibilities, Gupta served as Head of Operations for Company-owned bottling operations and then as Deputy President. Seen as the driving force behind recent successful forays into packaged drinking water, powdered drinks, and ready-to-serve tea and coffee, Gupta and his marketing prowess were critical to the continued growth of the Company.

The Indian Beverage Market

India’s one billion people, growing middle class, and low per capita consumption of soft drinks made it a highly contested prize in the global CSD market in the early twenty-first century. Ten percent of the country’s population lived in urban areas or large cities and drank ten bottles of soda per year while the vast remainder lived in rural areas, villages, and small towns where annual per capita consumption was less than four bottles. Coke and Pepsi dominated the market and together had a consolidated market share above 95%. While soft drinks were once considered products only for the affluent, by 2003 91% of sales were made to the lower, middle and upper middle classes. Soft drink sales in India grew 76% between 1998 and 2002, from 5,670 million bottles to over 10,000 million and were expected to grow at least 10% per year through 2012.28 In spite of this growth, annual per capita consumption was only 6 bottles versus 17 in Pakistan, 73 in Thailand, 173 in the Philippines and 800 in the United States. With its large population and low consumption, the rural market represented a significant opportunity for penetration and a critical battleground for market dominance. In 2001, Coca-Cola recognized that to compete with traditional refreshments including lemon water, green coconut water, fruit juices, tea, and lassi, competitive pricing was essential. In response, Coke launched a smaller bottle priced at almost 50% of the traditional package.

Marketing Cola in India

The post-liberalization period in India saw the comeback of cola but Pepsi had already beaten Coca-Cola to the punch, creatively entering the market in the 1980’s in advance of liberalization by way of a joint venture. As early as 1985, Pepsi tried to gain entry into India and finally succeeded with the Pepsi Foods Limited Project in 1988, as a JV of PepsiCo, Punjab government-owned Punjab Agro Industrial Corporation (PAIC), and Voltas India Limited. Pepsi was marketed and sold as Lehar Pepsi until 1991 when the use of foreign brands was allowed under the new economic policy and Pepsi ultimately bought out its partners, becoming a fully owned subsidiary and ending the JV relationship in 1994. While the joint venture was only marginally successful in its own right, it allowed Pepsi to gain precious early experience with the Indian market and also served as an introduction of the Pepsi brand to the Indian consumer such that it was well-poised to reap the benefits when liberalization came. Though coke benefited from Pepsi creating demand and developing the market, Pepsi’s head start gave coke a disadvantage in the mind of the consumer. Pepsi’s appeal focused on youth and when Coke entered India in 1993 and approached the market selling an American way of life, it failed to resonate as expected.

2001 Marketing Strategy

Coca-Cola CEO Douglas Daft set the direction for the next generation of success for his global brand with a “Think local, act local” mantra. Recognizing that a single global strategy or single global campaign wouldn’t work, locally relevant executions became an increasingly important element of supporting Coke’s global brand strategy. In 2001, after almost a decade of lagging rival Pepsi in the region, Coke India re-examined its approach in an attempt to gain leadership in the Indian market and capitalize on significant growth potential, particularly in rural markets. The foundation of the new strategy grounded brand positioning and marketing communications in consumer insights, acknowledging that urban versus rural India were two distinct markets on a variety of important dimensions. The soft drink category’s role in people’s lives, the degree of differentiation between consumer segments and their reasons for entering the category, and the degree to which brands in the category projected different perceptions to consumers were among the many important differences between how urban and rural consumers approached the market for refreshment.

In rural markets, where both the soft drink category and individual brands were undeveloped, the task was to broaden the brand positioning while in urban markets, with higher category and brand development, the task was to narrow the brand positioning, focusing on differentiation through offering unique and compelling value. This lens, informed by consumer insights, gave Coke direction on the tradeoff between focus and breadth a brand needed in a given market and made clear that to succeed in either segment, unique marketing strategies were required in urban versus rural India.

Brand Localization Strategy: The Two Indias

India A: “Life ho to aisi”

“India A,” the designation Coca-Cola gave to the market segment including metropolitan areas and large towns, represented 4% of the country’s population.33 This segment sought social bonding as a need and responded to aspirational messages, celebrating the benefits of their increasing social and economic freedoms. “Life ho to aisi,” (life as it should be) was the successful and relevant tagline found in Coca-Cola’s advertising to this audience.

India B: “Thanda Matlab Coca-Cola”

Coca-Cola India believed that the first brand to offer communication targeted to the smaller towns would own the rural market and went after that objective with a comprehensive strategy. “India B” included small towns and rural areas, comprising the other 96% of the nation’s population. This segment’s primary need was out-of-home thirst quenching and the soft drink category was undifferentiated in the minds of rural consumers. Additionally, with an average Coke costing Rs. 10 and an average day’s wages around Rs. 100, Coke was perceived as a luxury that few could afford.

In an effort to make the price point of Coke within reach of this high-potential market, Coca-Cola launched the Accessibility Campaign, introducing a new 200ml bottle, smaller than the traditional 300ml bottle found in urban markets, and concurrently cutting the price in half, to Rs. 5. This pricing strategy closed the gap between Coke and basic refreshments like lemonade and tea, making soft drinks truly accessible for the first time. At the same time, Coke invested in distribution infrastructure to effectively serve a disbursed population and doubled the number of retail outlets in rural areas from 80,000 in 2001 to 160,000 in 2003, increasing market penetration from 13 to 25%. Coke’s advertising and promotion strategy pulled the marketing plan together using local language and idiomatic expressions. “Thanda,” meaning cool/cold is also generic for cold beverages and gave “Thanda Matlab Coca-Cola” delicious multiple meanings. Literally translated to “Coke means refreshment,” the phrase directly addressed both the primary need of this segment for cold refreshment while at the same time positioning Coke as a “Thanda” or generic cold beverage just like tea, lassi, or lemonade. As a result of the Thanda campaign, Coca-Cola won Advertiser of the Year and Campaign of the Year in 2003.

Rural Success

Comprising 74% of the country’s population, 41% of its middle class, and 58% of its Disposable income, the rural market was an attractive target and it delivered results. Coke experienced 37% growth in 2003 in this segment versus the 24% growth seen in urban areas. Driven by the launch of the new Rs. 5 product, per capita consumption doubled between 2001-2003. This market accounted for 80% of India’s new Coke drinkers, 30% of 2002 volume, and was expected to account for 50% of the company’s sales in 2003.

Corporate Social Responsibility

As one of the largest and most global companies in the world, Coca-Cola took seriously its ability and responsibility to positively affect the communities in which it operated. The company’s mission statement, called the Coca-Cola Promise, stated: “The Coca-Cola Company exists to benefit and refresh everyone who is touched by our business.” The Company has made efforts towards good citizenship in the areas of community, by improving the quality of life in the communities in which they operate, and the environment, by addressing water, climate change and waste management initiatives. Their activities also included The Coca-Cola Africa Foundation created to combat the spread of HIV/AIDS through partnership with governments, UNAIDS, and other NGOs, and The Coca-Cola Foundation, focused on higher education as a vehicle to build strong communities and enhance individual opportunity.

Coca-Cola’s footprint in India was significant as well. The Company employed 7000 citizens and believed that for every direct job, 30-40 more were created in the supply chain. Like its parent, Coke India’s Corporate Social Responsibility (CSR) initiatives were both community and environment-focused. Priorities included education, where primary education projects had been set up to benefit children in slums and villages, water conservation, where the Company supported community-based rainwater harvesting projects to restore water levels and promote conservation education, and health, where Coke India partnered with NGOs and governments to provide medical access to poor people through regular health camps. In addition to outreach efforts, the company committed itself to environmental responsibility through its own business operations in India including:

• Environmental due diligence before acquiring land or starting projects
• Environmental impact assessment before commencing operations
• Ground water and environmental surveys before selecting sites
• Compliance with all regulatory environmental requirements
• Ban on purchasing CFC-containing refrigeration equipment
• Waste water treatment facilities with trained personnel at all company-owned bottling operations
• Energy conservation programs
• 50% water savings in last seven years of operations

SWOT Analysis for Coca-Cola

SWOT stands for Strengths Weakness Opportunities Threats

SWOT analysis is a technique much used in many general management as well as marketing scenarios. SWOT consists of examining the current activities of the organisation- its Strengths and Weakness- and then using this and external research data to set out the Opportunities and Threats that exist.

The following analysis deals only with strengths, opportunities, and threats.

Strengths:

• Established Market Share.
• Well Established Network.
• Parle Brands acting as substitute.
• Regional Presence of some brands.

Weaknesses:

• Alienation of bottlers.
• Not in touch with customers.

Opportunities:

• Regaining Previous Market Share by Promoting Parle Brands.

Threats:

• Pepsi Co, the biggest Competitor.
• Pepsi Co’s ability to judge the market mood accurately.

ISSUES AND CHALLENGES FACING THE ORGANIZATION

(In Terms of Performance Appraisal)

Issues in Performance Appraisal

In Hindustan Coca Cola Beverages though the performance appraisals is conducted in very fair way but still there are some wanted issues is seen sometimes during appraisal period.

1. Religion and Performance Appraisal

Although religion should not be considered in the appraisal process, coca-cola make sure that all supervisors or employees to cognizant of the religious customs and practices of employees they supervise. This will make sure that employees are not held liable for actions inappropriately.

2. Gender Issues in Performance Appraisal

• Evaluate the employee on work related elements, which have been made clear.
• Do not evaluate on differences in communication style.

3. Difficulty in defining the work.

When conducting performance appraisals, supervisors should clearly convey work expectations and make sure that employees understand expectations.This can be accomplished by incorporating equal performance standards for all employees.

4. Biasing

Equally important is realizing that some managers expect some workers to be superstars and from others they will expect very little. Supervisors should reexamine judgments to make sure that poor performance is not overlooked due to being uncomfortable about providing feedback to those different than oneself. If supervisors provide feedback often and equally to all members of the workforce this issue should not prevail.

CHALLENGES IN PERFORMANCE APPRAISAL SYSTEM

In order to make a performance appraisal system effective and successful, an organization comes across various challenges and problems. The main challenges involved in the performance appraisal process are:

• Determining the evaluation criteria
  Identification of the appraisal criteria is one of the biggest problems faced by the top management. The performance data to be considered for evaluation should be carefully selected. For the purpose of evaluation, the criteria selected should be in quantifiable or measurable terms
• Create a rating instrument
  The purpose of the Performance appraisal process is to judge the performance of the employees rather than the employee. The focus of the system should be on the development of the employees of the organization.
• Lack of competence
  Top management should choose the raters or the evaluators carefully. They should have the required expertise and the knowledge to decide the criteria accurately. They should have the experience and the necessary training to carry out the appraisal process objectively.
• Errors in rating and evaluation
  Many errors based on the personal bias like stereotyping, halo effect (i.e. one trait influencing the evaluator’s rating for all other traits) etc. may creep in the appraisal process. Therefore the rater should exercise objectivity and fairness in evaluating and rating the performance of the employees
• Resistance
  The appraisal process may face resistance from the employees and the trade unions for the fear of negative ratings. Therefore, the employees should be communicated and clearly explained the purpose as well the process of appraisal. The standards should be clearly communicated and every employee should be made aware that what exactly is expected from him/her.

LEARNINGS DURING TRAINING

During the training a learn lot of things, it is not confined only to training purpose but in a whole, it taught me the importance of teamwork, ethics and behaviors in the office. This training for me was a whole new experience of a MNC culture and work method in it. It taught me, every single work whether it is small or big in cooperate world is very important in its aspect and meeting the deadlines to complete the given work is even more important.

Some of my major learnings are

• What are Basic HRM Practices are.
• What is a performance appraisal system is.
• What are the key elements of performance appraisal system are.
• What are the factors that are responsible for performance appraisal of an employee.
• What is the difference between 180 degree and 360 degree performance appraisal system.
• What type of performance appraisal system is followed by Hindustan Coca Cola Beverages Private Ltd and what is the System followed for giving performance appraisal to their employee.

BASIC HRM PRACTICES

PERFORMANCE APPRAISAL

Performance appraisal can be viewed as the process of assessing and recording staff performance for the purpose of making judgments about staff that lead to decisions. Performance appraisal should also be viewed as a system of highly interactive processes which involve personnel at all levels in differing degrees in determining job expectations, writing job descriptions, selecting relevant appraisal criteria, developing assessment tools and procedures, and collecting interpreting, and reporting results.

Objectives for performance appraisal policy can best be understood in terms of potential benefits

• Increase motivation to perform effectively
• Increase staff self-esteem
• Gain new insight into staff and supervisors
• Better clarify and define job functions and responsibilities
• Develop valuable communication among appraisal participants
• Encourage increased self-understanding among staff as well as insight into the kind of development activities that are of value
• Distribute rewards on a fair and credible basis
• Clarify organizational goals so they can be more readily accepted
• Improve institutional/departmental manpower planning, test validation, and development of training programs

Appraisal System Attributes:

Clarity, Openness, and Fairness

The performance appraisal system must possess the attributes of clarity, openness, and fairness. These attributes are related to the historic values of the student affairs profession. While specific implementation of these attributes may vary, the following should be represented in effective performance appraisal:

Ongoing Review of Position and Performance – Effective performance appraisal systems conduct ongoing evaluations of both the position and the staff member occupying it. With ongoing position analysis and performance appraisal, there are few surprises, and changes in the environment are quickly incorporated into the official appraisal system.

Job Descriptions – Job descriptions should be reliable, valid, understandable, and specific enough to provide direction for staff behavior. Job descriptions should focus on what the staff member does (e.g. advises the student government association) and what outcomes are expected. These outcomes should be clearly linked to departmental and institutional objectives and needs. Job descriptions should use action words such “plans” or “supervises” rather than “demonstrates initiative” or “is likable.” Job descriptions should provide guidelines for staff so they know the specific behaviors expected to perform. The responsibilities of the staff memb