FIRST THINGS FIRST Coke Needs Shaking Up
“We feel pretty good about the way the company is moving. We just have bumps in the road that are so doggone visible.” —JIMMY WILLIAMS, DIRECTOR, COCA-COLA
At the peak of Coca-Cola’s dominance of the soft-drink industry, about 1996, the company seemed invincible. Coke’s then-CEO Roberto Goizueta and many industry observers dismissed PepsiCo as a loser in the cola wars. Goizueta convinced stockholders that cola purchases were steady through both strong and weak economic conditions, and that cola drinkers were willing to pay a premium price for the number one soft drink. Yet over the last ten years, Coca-Cola’s tale has been one of poor strategy, weak leadership, shoddy implementation, and innovation failures. Everyone failed to predict the coming health backlash against soft drinks, with water and sports drinks replacing cola as the trendiest beverages. Unfortunately for Coke,
LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Justify the importance of history and theory to management and discuss precursors to modern management theory. 2. Summarize and evaluate the classical perspective on management, including scientific and administrative management, and note its relevance to contemporary managers. 3. Summarize and evaluate the behavioral perspective on management, including the Hawthorne studies, human relations movement, and organizational behavior, and note its relevance to contemporary managers. 4. Summarize and evaluate the quantitative perspective on management, including management science and operations management, and note its relevance to contemporary managers. 5. Discuss the systems and contingency approaches to management and explain their potential for integrating the other areas of management. 6. Identify and describe contemporary management issues and challenges.
Coca-Cola has struggled in recent years, in part because its top managers have focused too much attention on quantitative methods and not enough attention on the strategic and behavioral elements of their business.
Specially prepared for d03371341 on 21 Apr, 2010
P A R T O N E • An Introduction to Management
Pepsi regrouped and emerged as a strong competitor. Pepsi’s stock price has climbed by one-third since 2001, while Coke’s dropped by one-third, showing the different investor perceptions of the two rivals. How did Coke, once considered to be the most powerful U.S. brand, fall so far so fast? Lack of strong, consistent leadership is the heart of the problem. Coke has had four CEOs in the previous decade. Goizueta was an excellent manager, but following his death in 1997, Douglas Ivester led the firm for two years until he was ousted by the board of directors. Ivester inherited a well-run machine with excellent control systems that enabled Coke to manage far-flung global operations. Yet Ivester’s analytical, hard-working approach relied heavily on numbers while neglecting to motivate and develop employees. Coke insiders claim he distanced himself, ignoring the people side of the business. Next came Doug Daft, a former head of Coke Japan whose five-year tenure ended in 2004. Daft didn’t improve matters much. He was a good salesman, but again, not much of a “people” person. He focused on operational details, yet lacked a long-term strategic vision and the skills to communicate it. Both Daft and Ivester relied on quantitative management, while failing to consider alternative approaches that focus on behavior. Under their leadership, Coke developed superior technical and operational skills, but vision, motivation, group processes, and culture received little attention. As a result, many capable managers and workers have left Coke. Even worse, although the quantitative models effectively pinpointed trouble spots, poor attitudes and strategic confusion led to weak implementation. Implementation is...