Multinational corporations are companies with operations in different regions or countries around the globe. Organizational structure is a set system by companies to outline how they direct certain activities to achieve their organizational goals and objectives. The activities entail rules, responsibilities and roles played by everyone in the organization. One such organization with activities or business abroad is Coca Cola a soft drink company with subsidiaries all over the world. To operate abroad, Coca Cola has had to face two opposing forces when designing an organizational structure of which they wished to operate. They have had to integrate with the different business environment and differentiate between being specialized and competitive in different local markets (Varadan, 2019). Coca Cola also had to resort to three criteria of departmentalization that support the organizational structure. These are the functions of the organization, its product and the region the organization expects to operate in (Schollhammer, 1971).
The Coca Cola Company uses the subsidiary model for an organizational structure. When the company considered globalization, it was pursued to establish markets in other regions of the world. The concept would have challenging if the organization had to export its soft drink from the headquarters in Atlanta. Therefore, forming and accepting to go into partnership with a local organization in the formation of subsidiaries in their local countries was advantageous for Coca Cola. The benefits of using the subsidiary model include having self-contained branches that are independent of the parent company. Subsidiaries can then customize their operations to fit the environment they plan to operate in.
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In some cases, the subsidiaries are completely independent, like in the case of Swire Group based in Hong Kong or Kirin Company in Japan. In other instances, Coca Cola owns shares in the subsidiaries like Coca Cola Beverages, where it owns 68.3% of the subsidiary. The major drawback of Coca Cola to the subsidiary model is that its reputation is tied to the subsidiary organization while it may not have control over it (Tian, 2016). It may also not be able to access the financial of fully independent subsidiaries.
An alternative organization structure for Coca Cola to consider is the functional structure, which is based on the functions of departments in the multinational company. The structure can be production-based, operations, marketing or human resources. For instance, for Coca Cola, its main operation is production. Therefore the production personnel should work under the production parameters set by the production department in the parent company (Dutta, 2010). A functional structure is advantageous because Coca Cola can achieve greater specialization within the departments and a standardized process within its global networks. This means it would be easier for them to pull financials for their subsidiaries around the globe, make key changes to the product and organization without facing local impediments. Therefore, all subsidiaries can be aligned to the whims of the parent company and fully represent the image of the parent company in Atlanta. However, to consider the functional structure is to forgo the ability of interdepartmental communication and networking that comprises the contribution for more rigidity in the organization. Therefore, the flexibility that Coca Cola enjoys in the different markets will be lost, and they would have to jump through hoops to attain operational status in different countries. Coca Cola should choose what is best for them. The company can end up customizing an organizational structure that, for instance, comprises a part of the subsidiary model and a part of a functional structure.
Works Cited
Varadan, S. (2019, February 11). The Organization Structure of a Multinational Company . https://bizfluent.com/about-6362469-organization-structure-multinational-company.html.
Schollhammer, H. (1971). Organization Structures of Multinational Corporations. Academy of Management Journal , 14 (3), 345–365. https://doi.org/10.2307/255079
Tian, X. (2016). Managing international business in China . Cambridge University Press.
Dutta, B. (2010). International Business Management Text And Cases . Excel Books.
