Buy Glackau, an American maker of vitamin-enhanced water, for $4.1 billion which was Coca-Cola\u2019s largest acquisition to Subsequently, however, Coca-Cola lost out to its rival, PepsiCo, in a battle to acquire Sandora, a Ukrainian juice company.<\/li>\n<\/ul>\nMr. Isdell once ran Coca-Cola Beverages, a European bottler, so he paid close attention to the company\u2019s poor relations with many of its bottling companies. Under agreements that sometimes date back more than a century, Coca-Cola supplies concentrate to local bottlers, which then make and distribute soft drinks. The actual production and distribution of Coca- Cola follows a franchising model. The Coca-Cola Company only produces a syrup concentrate, which it sells to various bottlers throughout the world who hold Coca-Cola franchises for one or more geographical areas. The bottlers produce the final drink by mixing the syrup with filtered water and sugar (or artificial sweeteners) and then carbonate it before filling it into cans and bottles, which the bottlers then sell and distribute to retail stores, vending machines, restaurants and food service distributors. Mr Isdell gave the bottlers permission to team up with other firms in order to cater better to the boom in healthy drinks. Since Coca-Cola owns stakes in many bottlers, and owns some outright, this was another way to diversify. Coca-Cola Enterprises, a big American bottler in which Coca-Cola owns a large stake, now distributes Arizona, a ready-to-drink tea made by Ferolito, Vultaggio & Sons, an American iced-tea company. Mr Isdell also increased Coca-Cola\u2019s stake in some bottlers or bought them outright.<\/p>\n
Mr. Isdell\u2019s efforts started to yield results fairly quickly. Coca-Cola\u2019s share price rose by 20% during 2006, and in the first quarter of 2007 sales jumped by 17%, to $6.1 billion, and profits increased by 14% compared with a year earlier. Analysts at Stifel Nicolaus, a financial-services firm, considered these results the best evidence that Mr Isdell\u2019s plan was working and that his long-term aims were sound. Bonnie Herzog, a beverage analyst at Citigroup, upgraded Coca- Cola to a \u2018buy\u2019 rating for the first time in four years, mainly because of the Glackau takeover. It shows that the firm is \u2018getting its act together\u2019, she says.<\/p>\n
But others remained sceptical. Robert van Brugge of Sanford Bernstein, an investment-research company, thought the acquisitions of Glackau and Fuze, an American juice and tea firm, were good deals, but both are relatively small companies. Static sales in the developed world need a lift, he says. Europe, America and Japan accounted for roughly 70% of profits, but recorded low growth in 2006. And many new drinks, such as Coke Blak, a coffee-infused soft drink, and Gold Peak, an iced tea, were flops.<\/p>\n
According to Euromonitor, a market-research company, Coca-Cola has been losing global market share since 2000. Pepsi appears to have done a better job of moving into health drinks in America and, because it makes snacks as well as soft drinks, has another business as a hedge which Coca-Cola does not. Mr. Isdell had no plans to diversify soon into snacks because he wanted to fix things inside Coca-Cola first.<\/p>\n
He pointed out at the end of 2006 that his firm has beaten analysts\u2019 expectations in each of the past ten quarters, though he admitted that \u2018we are not declaring victory yet.\u2019 Some analysts would have preferred more radical measures, such as bolder acquisitions and job cuts. But they thought an insider was unlikely to make drastic changes and have actually been surprised by how much Mr. Isdell achieved. Clearly, it is fatal to underestimate the difficulty of stopping the rot at a huge firm like Coca-Cola. But for Mr. Isdell to be seen as the company\u2019s saviour it was felt that he needed faster growth.<\/p>\n
\u00a0Required:<\/strong><\/h4>\n\n- This account lays stress on the fact that Mr. Idsell was a Coca-Cola Did the fact that he was a Coca-Cola veteran have a positive impact on how well he tackled the strategic problems facing Coca-Cola? Assess what happened using the process model.<\/li>\n
- What changes might CEOs such as Mr. Kilts or Mr. Guitierrez have m<\/li>\n<\/ol>\n
\u00a0<\/strong>Question 3<\/h3>\nKenwood Technologies has been facing increasing competition for several years in all its markets with the result that overall profitability has decreased significantly. Last year the CEO exhorted his 25 SBU managers in 14 countries to improve performance but profits had continued to decline. The CEO came to the conclusion that \u2018they are not really trying\u2019 and needed inspiration to make greater efforts so he made the following announcement to a meeting of SBU managers.<\/p>\n
\u201cI know you can all do great things, and it is my job to push you until you do. Here is what I expect you to achieve:<\/p>\n
\n- Position Kenwood Technologies as the leading high-quality low-cost brand in all our markets<\/li>\n
- Increase return on sales for every SBU by 5%.<\/li>\n<\/ul>\n
Now that you know what I believe can be achieved I am certain that you will go out and do it.\u201d<\/p>\n
1. Are managers likely to react positively to these \u2018inspiring\u2019 objectives?<\/p>\n
2. Given Kenwood Technologies\u2019 situation, what two \u2018inspiring\u2019 objectives would you propose and why?<\/p>\n
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