Coca Cola Performance Appraisal System Management Essay

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 KOs sales. KOs 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, theyre gaining more power to negotiate for lower prices, decreasing KOs 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 KOs 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 companys 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 worlds largest selling soft drink since 1886, returned to India in 1993 after a ga p 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 nations 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 organizations 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 Porters 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 â€Å"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 Pepsis 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 Searles 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 car ry 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 â€Å"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 wh ere an existing bottler operated, which included every significant market in the US. In conclusion, an industry analysis by Porters 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 companys 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 worlds largest selling soft drink since 1886, returned to India in 1993 after a ga p 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 nations 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 countrys 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 Indias 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. PepsiCos 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 Lays Potato Chips; Cheetos extruded snacks, Uncle Chipps and traditional namkeen snacks under the Kurkure and Lehar brands. The companys 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 consu mers. Frito Lays core products, Lays, 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 groups 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned. In addition to this, PepsiCos Frito Lay snack division has 3 state of the art plants. PepsiCos 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 Coca Cola Co. Pepsi Co. Strengths Established Market Share Well Established Network Parle brands acting as Substitutes Regional Presence of some Brands Strengths Market presence felt by customers. Increasing influence and identification. Strong promotional Campaign In touch with customer Weakness Alienation of Bottlers Not in touch with Customers Weakness Smaller Market Share Other brands are not very popular (except Pepsi and Mirinda) Opportunities Regaining Previous Market Share by promoting parle brands Opportunities Can gain a large Share in Existing Market while Coca Cola consolidates its position. Threats Pepsi co, the biggest competitor Pepsi cos ability to judge the market mood accurately. Threats Coca Colas change in strategy which will be taking away the advantage. Coca cola ability to bring about price war. 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 RD 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 SKUs 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 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 KOs sales. KOs 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, theyre gaining more power to negotiate for lower prices, decreasing KOs 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 KOs 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 worlds 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. Sales and income data, in millions 2004 2005 2006 2007 2008 Net sales $20,857 $21,742 $23,104 $24,088 $28,857 Net income (profits) $4,347 $4,847 $4,872 $5,080 $5,981 Units sold, in billions 19.4 19.8 20.6 21.4 22.7 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 Companys 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 Companys 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 KOs 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 CCHs 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 KOs 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 Companys 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 Companys major CSD offerings include: Coca-Cola Diet Coca-Cola Sprite Fanta Barqs Root Beer Coke Zero Introduced in 2005, Coke Zero is the most significant of KOs 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 KOs 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 KOs 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 KOs 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