Critical Analysis of Coca Cola's Corporate Communication Strategy

INTRODUCTION

Communication is the medium through which companies’ both large and small access the vital resources they need to operate (van Riel 1995). Without effective and integrated communication systems an organization will be unable to develop an appropriate structure for its corporate communication strategy. Given that its corporate communication entails selectively communicating the organization’s views and objectives to its stakeholders (whom it relies on for the success of its business), it can therefore be described as a key management strategy.

This report will critically assess Coca Cola’s Corporate Communication strategy through the evaluation of communication frameworks and models. It will look at the internal structure of Coca-Cola’s organization and how the company utilises corporate communication strategies to both epitomize their corporate identity to stakeholders and improve their reputation. It also looks at the corporate ethics and culture of the company and the impact of Corporate Communication management on the organisation

Background Information

The Coca-Cola Company

Coca-Cola was invented on May 8, 1886, in Atlanta, Georgia by Dr. John Stith Pemberton. It was first offered as a fountain beverage by mixing Coca-Cola syrup with carbonated water. Coca-Cola was then patented in 1887, when another Atlanta pharmacist and businessman, Asa Candler bought the formula for Coca Cola from inventor John Pemberton for $2,300. It was registered as a trademark in 1893 and by 1895 it was being sold in every state and territory in the United States.

By the late 1890s, Coca Cola was one of America’s most popular fountain drinks, largely due to Candler’s aggressive marketing of the product. With Asa Candler, now at the helm, the Coca Cola Company increased syrup sales by over 4000% between 1890 and 1900. In 1899, The Coca-Cola Company began franchised bottling operations in the United States.

Today the Coca-Cola Company operates in more than 200 countries and markets nearly 500 brands and 3,000 beverage products. The company employs over 92,400 associates worldwide and has a consumer serving (per day) of nearly 1.6 billion, with a net operating revenue of over $31.9billion (as of December 31, 2008). Throughout the world today, no other product is as immediately recognizable by its brand as Coca-Cola. (www.thecoca-colacompany.com.html, 2009)

CORPORATE COMMUNICATION

‘Corporate’ refers to complete, entire or total entities of the organization, while ‘communication’ means to impart, share or make common. Therefore, ‘corporate communication’ can be defined as a total communication of the organization or integrating different messages of organizations under one banner (Christensen et al. 2007).

Van Riel and C. Fombrun (2006, p.25), cite Jackson’s (1987) definition of corporate communication as ‘the total communication activity generated by a company to achieve its planned objectives’. That total communication represents all the different forms of communication that is occurring within the organization, including marketing, managerial and organizational interaction. An organisation such as Coca-Cola’s corporate communication strategy plays an important role in aiding stakeholder’s understanding of the organization and communicating the organization’s identity.

Corporate communication within an organization is essential for the implementation of strategic objectives, build brand and reputation and thereby create economic value. It is therefore a set of activities involved in managing and orchestrating all internal and external communications aimed at creating favourable starting points with stakeholders on whom the companies depend (Fombrun and van Riel 2006).

Freeman’s (1984, p. 46) stakeholder approach defines stakeholders as: “any group or individual who can affect or is affected by the achievement of the firm’s objectives.” The stakeholders of The Coca-Cola Company (see Figure 3 below), include:

• consumers,
• customers,
• suppliers,
• employees,
• government and regulators,
• NGOs
• The local communities

Strong centralized functions with direct connection to the Chief Executive Officer (CEO) is the best way for a company to ensure the success of its corporate communication function. (Argenti, 1998). This was evident in Coca-Cola Company, under the leadership of the former CEO Douglas Ivester whose highly formalized, centralized organizational structure, with clear hierarchy of authority and a mechanistic management process has helped maintain control and drive aggressive marketing and expansion plans. This management structure was criticized by the external communities, claiming that the company’s perspective was too global and ignored the local communities.

Under the direction of the company’s new CEO, Coca-Cola began decentralizing some of its activities in order to become more localized. Increased horizontal communication is now occurring within the organization. Sutherland and Canwell (2004, p.130) define horizontal communication as “informal communication between peers or colleagues on the same level of the organizational structure”. Coke immediately began realizing economies of scale and scope, as well as low-cost production from a globalization strategy that enables product design, manufacturing and marketing to be standardized throughout the world.

Corporate communication if strategically implemented within an organisation helps build favourable corporate reputation, which in turn is influenced by corporate identity, behaviour, symbolism and has an impact on organizational performance (van Riel and Balmer, 1997). According to Argenti (1998) corporate communication model below (Figure 2), an organization communicates to its stakeholders through messages and images, who then respond by associating themselves with that particular organization. It affects the perceptions of stakeholders about the organization’s prospects and so influences the resources that would be available to them (Fombrun and van Riel, 2006). Image, Identity and Reputation, Crisis Management, Community Relations and Corporate Ethics, Employee Relations and Human Resource Management (HRM) are all essential functions of an organization that depend on effective corporate communication to be successfully implemented.

Image, identity and reputation

Corporate identity is the reality and uniqueness of an organization, which is integrally related to its external and internal image and reputation according to Gray and Balmer (1998), and is a means to achieve a competitive advantage (Schmidt, 1995), while the ‘Image’ of a company is the reflection of the organization’s reality. It is the corporation as seen through the eyes of its stakeholders (Argenti, 1998). Corporate image has 3 dimensions:

• Relational dimension – relationship the company has with the government, the local community and its employees;
• Management dimension – what the corporate goals, decision-making processes, knowledge management and understanding of company objectives;
• Product dimension – product endorsement and support, competitive advantage and promotional distinctiveness.

Coca-Cola’s corporate communication strategy within the company includes conducting stakeholder analysis to understand their individual stakeholders’ needs and attitudes. This involved a series of focus groups with consumers aged 18 and over and with employees of the Coca-Cola Company. It also included interviews with customers, non-governmental organizations and the media. The consistent use of the colours red and white, the lettering and the model-wave over time is an integral part of the company’s corporate visual identity and is important to all stakeholder groups.

If managed effectively corporate reputation can be a valuable asset that makes an organization more resilient in today’s competitive environment. “Corporate reputation is influenced by the way in which the company projects its image via behaviour, communication and symbolism” (Gotsi and Wilson, 2001, p. 30).It is a ‘multi-stakeholder’ construct that can be used to measure how effective an organization’s communication system is (Fombrun and van Riel, 2006). When information that stakeholders need to make a decision about a company is insufficient, they will sometimes turn to the reputation of that company to seal the decision.

Crisis management and culture

According to Jones (2000), a good reputation acts as a buffer to companies in times of crisis. After over 200 people, including school children reported feeling unwell in 1999; Coca-Cola was forced to issue recall of its soft drinks in countries in Western Europe including Belgium, France, the Netherlands and Luxembourg (Taylor, 2000).

Taylor (2000) explained in his case study that a company’s public relations and communication strategy should be executed on a global scale. He did this using Hofstede’s (1980) theory of cultural dimension, which explained how values are influenced by culture in differing nations. Taylor (2000) proposed that in countries with high uncertainty avoidance and high power distance, citizens reacted more strongly to this tainting crisis, by forcing the government to place bans on the sale of Coca-Cola related products, while the governments of countries with low uncertainty avoidance and low power distance did not really react to the crisis.

Culture management was also needed to accurately understand the environment they were embarking on. “Culture…consists in those patterns relative to behaviour and the products of human action which may be inherited, that is, passed on from generation to generation independently of the biological genes” (Parson, 1949 p. 8).

Under the guidance of the new CEO, the company adopted a “think local, act local” approach to marketing, which highlighted the importance of addressing the cultural needs of customers in the local market. Daft maintained the view that although Coca-Cola is a global brand, customers do not drink Coca-Cola globally. As a result, Coca-Cola has been adopting a localized strategy in marketing, advertising, and public relations by carrying out extensive stakeholder analysis as seen in Figure 3. The company also adopted a risk management approach that includes financial, operational, social, environmental and ethical considerations and are of the view that by identifying these risks and the potential consequences they could have on the business, they can proactively focus on these areas and identify ways to more effectively manage their impact on their operations.

Community relations and corporate ethics

Coca-Cola is now working to become a model citizen by reaching out to local communities and getting involved in civic and charitable activities. Like reputation, corporate ethics and relationship with the external stakeholders is very important for building a positive image. Coca-Cola’s social responsibility and corporate ethics helps build company integrity. In 1960, Keith Davis suggested that corporate social responsibility refers to business decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest. Stakeholder management is important here as it reconciles the company’s objectives with the claims and expectations being made by them of various stakeholder groups.

Employee relations and Human Resource Management

Human Resource Management (HRM) is one of the most important forms of management within an organization and effective communication is essential for HRM to be successful. HRM is as defined by Bratton and Gold (1999):

that part of the management process that specializes in the management of people in work organizations. HRM emphasizes that employees are critical to achieving sustainable competitive advantage, that human resources practices need to be integrated with the corporate strategy, and that human resource specialists help organizational controllers to meet both efficiency and equity objectives.

The Coca-Cola Company links employee (internal) communications and employee relations and believe that they are integral components needed for the success of the organization. Employee Relations, according to Heery and Noon (2001), involves the body of work concerned with maintaining employer-employee relationships that contribute to satisfactory productivity, motivation, and morale. Essentially, Employee Relations is concerned with preventing and resolving problems involving individuals, which arise out of or affect work situations. The employees are the most valued internal stakeholders, as they communicate the product to the company’s external stakeholders. Internal Corporate Communication falls under the organizational management department, as seen in van Riel (1995) model of integrated corporate communication. It is defined, according to Welch and Jackson (2007) as communication between an organisation’s strategic managers and its internal stakeholders, [in the case of Coca-Cola, its employees] designed to promote commitment to the organisation; a sense of belonging to it; awareness of its changing environment and understanding of its evolving aims. The Coca-Cola Company follows a similar structure regarding internal communication as depicted in Welch and Jackson’s (2007) model (Figure 2).

Within the company, corporate messages relayed directly to employees aid in reinforcing employee commitment towards the overall organizational objectives. On the same level, direct communication between managers and their employees helps create a sense of belonging to the organization. This sense of belonging then motivates employees to promote awareness and understanding of the corporate brand to the external stakeholders.

Guest (1990), in his approach to strategic HRM draws on the Harvard model (proposed by Beer et al., 1984), which was associated with the softer side HRM and the Michigan model (proposed by Fombrun, Tichy and Devanna, 1984), which proposes the hard HRM approach. Hard HRM see human “resources” as mainly a factor of production, an expense of doing business rather than the only resource capable of turning inanimate factors of production in to wealth. In contrast, soft HRM places an emphasis on “human” side of things. The soft model focuses on treating employees as valued assets and a source of competitive advantage through their commitment, adaptability and high quality skill and performance (Legge, 1995).

The Coca-Cola Company incorporates both ‘hard’ HRM and ‘soft’ HRM within their organization reflected in the ‘Choice Model’ adapted by Analoui (2002, p. 30). This model depicts a more holistic approach to HRM as seen in Figure 5 below.

The Input Stage of HRM policies and frameworks

This model represents the communication strategy with emphasis on HRM, being used by global organizations like Cola-Cola. It explains how the input stages of HRM policies are formulated at senior management levels based on the knowledge and information attained from internal, personal and external sources. These policies are then passed on to the functional and line management level where they are implemented, and finally ends at an output level that affects the individual, organisation and society bringing about, improved performance and effectiveness and quality of work life. This model proves effective as it takes into consideration the culture of the organization, as well as individual and stakeholders perception of the company and can be interpreted on an international basis for a company such as Coca-Cola.

CONCLUSION

This report critically reviews the corporate communication strategies being utilized within the Coca-Cola Company. It reflects on the nature, scope and focus of corporate communication, with emphasis on Human Resource Management and Employee Relations. It describes how corporate communication is essential for corporate image, identity and reputation to be understood by stakeholders. It explained how under the corporate communication strategy, Cola-Cola is able to formulate a more holistic approach to HR management, linking the needs of the internal stakeholders with those of its external stakeholders to achieve a more effective organization. Finally it concludes that company performance and efficiency is linked to the corporate communication strategy of an organization and how successful its implementation is.

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