Understanding Theories

Topics: Coca-Cola, Organization, Management Pages: 10 (2533 words) Published: August 6, 2014
In a broad manner, organisational theories can be defined as formal social organisations and their interrelationship with the environment in which they operate. This reading provides insight into the agency and the contingency organisational theories, and how management implement these theories into the environment in which their business operates. It also outlines the issues and limitations of these theories, using the Coca Cola company as a relevant case study. In addition, this essay examines different stakeholder perspectives in relation to the theories and their issues, and it concluded by focusing on what type of knowledge, capability, and skills a manager requires in order to deal with these specific issues. Coca Cola was founded during the year 1887, by Doctor John Pemberton, a pharmacist from Atlanta. John established a company which immediately began building its global network, he was known as the man who achieved a “global success through an intelligent risk”. Over the years, the company’s success rate continuously increased, and the deep emotional bond between Coca-Cola and its consumers grew even more powerful and more global (Coca Cola, 2014). In 2014, Coca-Cola advised that the previous year $2.8 billion in stock was purchased, however they had planned to increase that amount to between $3.0 billion and $3.5 billion for the full year, due to positive sales, this is a clear indication of the company’s success (Reuters, 2013). The Coca‐Cola Company, is the world’s largest beverage company, operating in more than 200 countries, across America, Europe, Eurasia, Africa and the Pacific. This multinational beverage corporation and manufacturer, retailer and marketer of non-alcoholic beverage concentrates and syrups, is headquartered in Atlanta, Georgia (Coca Cola, 2014). The secondary sector, international organisation, has not been owned by a single individual in almost 100 years. It is a public company that trades its shares on the New York stock exchange - meaning it is 'owned' by thousands of shareholders and investors worldwide (Coca Cola, 2014). Coca Cola is known as one of the world most successful beverage companies to date, currently operating with over 700 000 employees across the globe, including Muhtar kent; the chairman of the board and chief executive officer (Coca Cola, 2014).

The agency and contingency theory are both of significance to Coca Cola. The Contingency theory is a class of behavioural theory that claims that there is no “one best way” to lead an organisation, organise a corporation or make a decision. Instead, the appropriate organisational structure depends on the contingencies facing the organisation (Travis Seepersad, 2012). Coca cola does not have control over the contingencies that are continuously arising within its internal and external environment; this includes political changes, such as the increased health standards for bottling. The contingency theory was chosen as it typifies that implementation of the appropriate organisational structures, depending on the contingencies the organisation is facing, will result in business success. The managers at Coca Cola are aware that companies whose characteristics fit with the contingencies in the current situation will perform more effectively compared to an organisation whose characteristics do not. Hence, implementation of this theory has allowed managers to adopt certain characteristics of the organisation, such as the structure, to suit contingencies within their environment. The agency theory is concerned with resolving problems that can exist in agency relationships; that is, between principals and agents of the principals (Investopedia, 2013). Generally, in large companies, with managers acting on behalf of their owners, many issues will arise in relation to the principle and the agent. Managers tend to misbehave if the interests of them and the company owners diverge (Eisenhardt, K. M, 1989, page 58). The...
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