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PRESENTED BY:-
BY:-
ROHIT GOEL
(M.B.A. HONS. 2.2)
ROLL NO - 2207
The case looks at the human resource
restructuring exercise taken up coca-
coca-cola
in the late 1990.
1990. The case essentially
brings out the different circumstances
that lead to the restructuring and
repercussions of the exercise.
exercise.
Three major strands have emerged in cokes
mistakes.. It never managed its infrastructure,
mistakes
it never managed its crate of 10 brands , and
it never managed its people

- business world in 2000


THE LEADER HUMBLED

It all begin with coca-coca-cola India's realization that


something was surely amiss.
amiss. Four CEOs with in seven
years , arch-
arch-rival Pepsi surging ahead, a heavy employee
exodus and negative media reports indicated that the
leader had gone wrong big time. time. The problems
eventually lead to coca-
coca-cola reporting a huge loss of US
$ 52 million in 1999,
1999, attributed largely to the heavy
investments in India and Japan.
Japan. Coca-
Coca-cola had spent Rs
Rs..
1500 crore for acquiring bottlers , who were paid Rs Rs.. 8
per case as against the normal Rs 3 . The losses were
also attributed to the management extravagance such
as accommodation in farm house for executives and
foreign trips for bottlers
bottlers..
Following the loss, coca had to write off its assets in
India worth US $ 405 million in 2000.
2000. apart from the
mounting losses , the write off was necessitated by
Coca--Colas over estimation of volumes in the Indian
Coca
market.. This assumption was based on the expected
market
reduction in excise duties , which eventually did not
happen further delaying the company's break even
targets by some more years
years..

Changes are required to be put in place soon.


soon. With
renewed focus and energy, Coca cola took various
measures to come out of the mess it had landed it self
in
in..
RESTRUCTURING THE MESS

 


 

In 1999,
1999, following the merger of Coca
Coca--Colas four
bottling operations, human resources issues
gained significance at the company . Two new
companies Coca-
Coca-Cola India , and Coca- Coca-Cola
beverages were the result of the merger.
merger.

Coca-Cola had to go in for a massive restructuring


Coca-
exercise focusing on the companys human
resources..
resources
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
plant--in
in--charge as a profit center head
head..

The country was divided in to six regions as against the initial


three, based on consumer preferences
preferences..

Coca
Coca--Cola also declared a voluntary retirement scheme at the
bottling plants, and this was used by about 1100 employees.
employees.

The merger carried forward employees from different work


cultures and different value systems.
systems. This move toward
regionalization caused dilution of several central jobs, with as
many as 1500 employees retiring at the bottling plants.
plants. The new
line of control strengthened entry and middle level jobs at the
regions and downgraded many at the center.
center.
The company introduced a detailed career
planning system for over 530 managers in the
new set up
up..

Coca
Coca--Cola also undertook a cost reduction
drive on the human resources front
front..

Coca
Coca--Cola began benchmarking itself with
other major Indian companies.
companies.
In march 20002000,, Coca-
Coca-Cola received reports of
wrongdoings in its North India operations.
operations. The
company decided to take action after the summer
season . In July 2000,
2000, Coca-
Coca-Cola appointed Arthur
Anderson to inspect the accounts of the North India
operations for a fee of Rs
Rs.. 1 crore
crore.. The team inspected
all offices,godowns,bottling plants and depots of
Jammu, Kanpur, Najibabad, Varanasi, and Jaipur . The
findings revealed that the North Indian team had
violated discounting terms and the credit policy, apart
from being unfair in cash dealings.
dealings. The team was
giving discounts that were five times higher than
those given in the other regions in the country.
country. There
were also unexplained cancellations and
reappointments of dealerships.
dealerships.
In light of the above findings by the Arthur Anderson
team, Coca
Coca--Cola carried out a performance appraisal
exercise for 560 managers.
managers. This lead to resignations in
a mass.
mass. Around 40 managers resigned between July
and November 2000 2000.. Coca-
Coca-Cola also sacked some
employees in its drive to improve the HR functioning.
functioning.
By January 2001 the company had shed 70 managers ,
accounting for 12
12%% of the management.
management.
However, media reports revealed a different side of the
picture altogether.
altogether. The managers who had quit voiced
their thoughts vociferously against Coca-
Coca-Cola , claiming
that the whole performance appraisal exercise was
farcical and that the management had already decided
on the people to get rid of.of. They termed the issue as
Coca--Colas witch hunt in India.
Coca India.
Worried by such adverse comments about the
company , Von Bohr(CEO) decided to take steps
to ensure a smooth relationship with the new
people in the company . He personally met the
finance head in every territory and made the
companys policy clear to them.
them. Coca
Coca--Cola also
standardized the discounting limits and best
practices irrespective of market compulsions
compulsions..
The company launched a major IT initiative as
well, to make the functioning of the entire
organization transparent at the touch of a
button..
button
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In 1999,
1999, after restructuring Coca
Coca--Cola
reported an increase in case volume by 9%,
volumes increased by 14% 14% and market
share increased by 1% after the
regionalization drive.
drive. The companys
improving prospects were further reflected
by the 18%
18% rise in sales in the second
quarter of 2000.
2000.