Performance Management System and

Strategy Model of
The Coca-Cola Company

Course: PA- 412: Performance Management: Theory and Practice

Date of Submission: 15th July, 2020

Submitted to:

Dr. Nusrat Jahan Chowdury

Associate Professor
Department of Public Administration
University of Dhaka

Submitted by:

Mahdi Munshi
th
7 semester; Roll: MM-042-100
Department of Public Administration
University if Dhaka
Beverage industry is one of the continuously booming industries in the world as beverages have
always been a popular form of treating guests and people around. This industry is subcategorized
into alcoholic beverages and non-alcoholic beverages. The Coca-Cola Company is one of the
most popular non-alcoholic beverage companies. The company is so successful that it really
would be hard to find someone who has not enjoyed the beverages offered. In this paper, I am
going to discuss about the Performance Management System and the Strategy Model of the
Coca-Cola Company. However, this company follows ‘Transnational Strategy’ in their
international business model, meaning, this company centralizes certain management functions
and decision making at the headquarters, but the other functions, including performance
management system, are decentralized to local subsidiaries. So, I am going to explore the
performance management system of one of the company’s subsidiary: Coca-Cola India, as it is
not possible to analyze the whole parent company’s system.

Company Overview
Coca-Cola or The Coca-Cola Company is one of the top 3 non-alcoholic beverage companies
(the other two are – PepsiCo and Nestle) that has been in the business for more than a hundred
years. The company started in 1886, by serving the first glass of Coca-Cola at Jacobs' Pharmacy
in downtown Atlanta, Georgia. The company headquarter is now situated there. Until this day,
the company is offering more than 500 brands of beverages to more than 200 countries. Some of
the most popular beverage brands in our country – Coca-Cola, Sprite and Fanta are being offered
by the Coca-Cola Company. Besides, brands like DASANI (America’s No.1 national water
brand), smartwater (America’s most popular premium water brand) and Georgia Coffee (Japan’s
leading coffee brand) are also from the Coca-Cola Company. The current market value of the
Coca-Cola Company is $197.1 B, making it ranking 31st in the Forbes’ list of the world’s largest
public companies in terms of market value. The workforce of this company is also huge.
According to their website, there are more than 7,00,000 employees across the company and
bottling partners. James Quincey is the current CEO of the Coca-Cola Company who has been
the CEO for more than 3 years.
Performance Management System
Before discussing the performance management system of Coca-Cola India, it is mandatory to
discuss about ‘Key Result Area (KRA)’ as the whole performance management system is
developed on the basis of it.

Key result areas or KRAs refer to the general metrics or parameters which the organization has
fixed for itself or one of its job roles which plays a vital role in achieving organizational goals.

There are 3 KRAs specified by the Coca-Cola India:

1. Business Plan Achievement (Weightage: 60%)

2. People Development (Weightage: 20%)
3. Competencies (Weightage: 20%)

The performance management system of Coca-Cola India is managed through 4 stages. The
stages form a cycle that refreshes every fiscal year.

Stage 1: Annual
Performance
Review

Stage 2: Plan
Stage 4: Mid-term
Performance of the
Review
Year

Stage 3: Reward
and Recognization

Figure 1: Performance Management System

Stage 1: Annual Performance Review

In the first stage of this performance management system, the results from the previous fiscal
year is assessed and the ‘Top Accomplishments’ are appreciated. From the assessment, coaching
and feedback are given on previous Key Result Area (KRA)s and competencies. Upon the
coaching and feedback, preparations to establish a development plan for present fiscal year’s
KRAs and competencies.

Stage 2: Plan Performance of the Year

In the second stage, the KRAs are being set. The development plans for those KRAs and
competencies are also finalized this this stage. The organizational and employee performances
are measured by these development plans for the KRAs.

Stage 3: Reward and Recognization

The reward and recognition stage is to motivate the workforce to improve their performances
leading to enhancing the organizational performance. The payment of employees is decided upon
individual performances from previous year’s Annual Performance Review (performance linked
payment). The top performers are recognized and rewarded, which encourages other personnel to
give their best.

Stage 4: Mid-term Review

In the middle of the fiscal year, a mid-term review is conducted to inspect if the actual
performance is going parallel with the development plans for the KRAs. Based on the review,
coaching and feedbacks are given on the KRAs. In this stage, competencies get the most
attention: feedbacks on them are given through 360-degree feedback model. If the competencies
are in the way of the development plans, a separate plan is prepared to develop the competencies
which is called the Competency Development Plan.
With the completion of the final stage, the organizational activities keep on progressing towards
the end of fiscal year by the steps taken on that stage. Then the system cycles back to ‘Annual
Performance Review’ which is the first stage of this performance management system.

Performance Management Objectives

For every step taken in any performance management system, there are always some objectives
that answer the question: for exactly what reason that step is taken? Those objectives behind the
steps taken in the performance management system are called Performance Management
Objectives. From the performance management system, we can identify 4 core steps and they
have distinctive objectives. They are discussed below.

1. Performance Delivery and Results Review

This step is on the very first stage of the performance management system. Here, the results from
the previous fiscal year is assessed. The performance management objectives for this step are:

• To assess progress on ‘What’ ― Business Results

• To assess progress on ‘How’ — Self/People Development and Competencies
• To clarify the actions to be taken next year to maximize performance

2. Performance Development Coaching

The performance development coaching is conducted twice throughout the performance

management process – right after the both annual and mid-term review, that is, at the very first
and the very last stage. This step is carried out in order to ―

• review progress on Performance Development Plan for KRAs and competencies

• credit and compliment good progress
• coach associates to maximize their performance for next year
3. Recognize and Reward Top Performers

It is an essential step for every organization’s performance management system to recognize and
reward top performers. In fact, it is the most important step in order to keep employees’
performance on check. Broadly speaking, recognizing and rewarding top performers are carried
out to ―

• recognize and provide positive feedback to top performers to ensure they are motivated
and also challenged/stretched to improve their growth
• motivating other employees (general and bottom performers) to bolster their
performances

4. Performance Improvement Planning

Or the ‘Competency Development Planning’. This step is taken at the last stage of the
performance management system: Mid-term Review. The objectives of this step are:

• To review status of the previous bottom performers and take appropriate actions
• To prepare Performance Improvement Plan for newly identified bottom performers

Performance Management Outcome

Typically, the outcome of any performance management system is measured through a rating
process. Organizations can measure the performances of the employees through that process. The
performance management outcome of the Coca-Cola India is measured through a scale, which is
‘the 4-point rating scale’. It is a scale that categorizes the company employees and other
personnel into 4 categories based on their performance level defined by the performance
management system. The categories are:

1. Exceptional Performance (EP)

2. Successful Performance (SP)
3. Developing Performance (DP)
4. Not Meeting Performance Expectations (NP)
 Not Meeting
Performance Successful
Expectations (NP) Performance (SP)

Developing Exceptional
Performance (DP) performance (EP)

Figure 2: Performance Management Outcome

Based on the scale, a performance matrix has been developed to define the categorization of the
personnel in an explicit way. The matrix is discussed in the next section.

The Performance Matrix

(Competencies and People Development)
High

EP = Exceptional
Performance
SP = Successful
Performance
Medium
How

DP = Developing
Performance
NP = Not
Meeting
Performance
Expectations
Low

Low Medium High

What
(Achieving Results)
Figure 3: The Performance Matrix
The performance matrix shows exactly how an employee would be categorized into one of the 4
categories defined by the 4-point rating scale. For example, if an employee’s result achieving
level was so-so but the way he achieved it was exceptional, his performance can be categorized
as Successful Performance.

Performance Appraisal System

Coca-Cola India has a unique appraisal system, which is a lot different from the performance
management system. While the performance management system is an annual process, focusing
on improving the individual and company performances, the performance appraisal system is a
continuous process that keeps monitoring an employee’s performance. The unique appraisal
system adopted by the company is ‘Management by Objectives (MBO)’. This system was first
introduced by Peter Drucker in the early 1950s.

Management by Objectives (MBO) is a process by which employees and their seniors meet to
identify the underlying goals and objectives. In this process, employees set their own goals, but
the set company standards are used as standard measures against which their performance will
be rated.

The performance appraisal system of Coca-Cola India is a 6-stage cycle. The stages are
described below.

1. Define Organizational Goals: Coca-Cola India sets the goals for itself. The goals
statements are published to the employees.
2. Defining Employee Objectives: The employees then set their goals for themselves
which should match with the organizational goals.
3. Continuous Monitoring of Performance and Progress: The set goals for the
employees by themselves are then kept into close monitoring by specific department
supervisors and human resource managers.
4. Performance Evaluation/Reviews: The supervisors/managers perform a performance
review once in every certain frequency of time or other factors (units sold/revenue
 collected) to track if the employee performances are going along with their set goals and
parallel to the organizational goals.

Define
Organizational Goals

Rewards/ Define Employee

Punishment Objectives

Performance Appraisal
System of Coca-Cola India

Continuous
Monitoring of
Providing Feedback
Performance and
Progress

Performance
Evaluation/Reviews

Figure 4: Performance Appraisal System

5. Providing Feedback: Supervisors/Managers then provide feedback to the employees if

they are behind the target or on it.
6. Rewards/Punishment: Based on the feedback provided by the supervisors/managers, the
employees may be rewarded or punished. The form of rewards and punishments are often
promotion-demotion and salary raise or reduction.

Unlike the performance management system, this performance appraisal system is operational in
the company on a continuing basis. This system is a never-ending process that is all about
monitoring personnel performances, not that much about enhancing them like the performance
management system.
Challenges of the Performance Management System
The performance management system of Coca-Cola India is a very effective one without much
negative issues. Still there are a couple of concerns regarding it.

1. The performance management system adopted by Coca-Cola India is effective

undoubtedly, but it might not be not that efficient. The system is somewhat enormous and
complicated. The time consumed due to this performance management system might be
detrimental to the overall productivity and performance itself of the company.
2. To maintain this massive and complex system, a large quantity of workforce is being
appointed and used. The resources spent after the workforce and to sustain the system
might be dragging down the company’s business.

Strategy Model
Coca-Cola India, being the subsidiary company for The Coca-Cola Company (headquartered in
Atlanta, Georgia), follows the strategy model of its parent company. Before jumping into the
strategy model, the SWOT analysis of the company should be studied briefly as most of the
strategies are based on it.

Strengths Weaknesses
1. Unhealthy competition with
1. Strong brand identity
PepsiCo.
2. Dominant market share in the 2. Adherence to beverage
beverages industry industry only
3. Water management issue
3. Vast global presence 4. Health concerns against the
4. High customer loyalty products
5. Diversified product portfolio in the 5. Declining revenue

same category
6. Exceptional marketing strategies
 Opportunities Threats
1. Creating new products 1. Water usage controversy
2. Diversifying existing 2. Plastic packaging
products controversy
3. Having packaged drinking 3. Indirect competitions with
water Starbucks, Nestle,
4. Marketing the lesser selling Costacoffee etc.
products 4. Customer preference
5. Advanced supply chain reduction due to health
system concerns

The strategy planning of The Coca-Cola Company is built upon company’s SWOT analysis and
manifests the strategies on 4 different levels, following 4 different models. The 4 levels are:

1. Organization-level Strategy
2. Business-level Strategy
3. Corporate-level Strategy
4. International and Global Strategy

Organization-level Strategy
The strategy model The Coca-Cola Company uses on the organization-level is ‘Goal-based
Planning’ model. This model solely relies on the SWOT analysis. After analyzing the internal
and external factors ― Strengths, Weaknesses, Opportunities and Threats, the company sets
goals based on the analysis. The goals also include the contingency plans to tackle the
weaknesses and threats. This model is a yearly plan and refreshes every fiscal year. Regular
evaluation, monitoring, and updating of the strategic plan is critical to its effectiveness.

Challenges

Goal-based Planning model is an effective model for the companies that are established and want
to establish a strong strategic planning, just like The Coca-Cola Company. The only concern is
that, it does not include anything about uncertainties. So if the company happens to face
unscheduled issues, it would be very hard to manage.
Business-level Strategy
Business-level strategies are discussed into two classes ― Porter’s Generic Strategies &

The Miles and Snow Typology.

Porter’s Generic Strategies discuss three different model of strategies, among them, the Coca-
Cola Company follows Differentiation strategies (the other two being Overall Cost Leadership
and Focus Strategies). According to this model, the Coca-Cola Company seeks to distinguish
itself from its closest competitor PepsiCo through the quality and pricing of the products.

The Miles and Snow Typology studies 4 models of strategies ― Prospector, Defender,
Analyzer and Reactor. Though the Coca-Cola company was a ‘Defender’ that protected current
markets, maintained stable growth and served only the then current customers, with no focus on
external factors of opportunities and threats, it has now emerged as an ‘Analyzer’ with a good
deal of emphasis on innovation and a lot focus on opportunities and threats. For example, the
Coca-Cola Company has started introducing more health-friendly beverages and also marketing
about how much they have reduced sugar amount in their drinks. According to the 2019
sustainability and finance report, the Coca-Cola Company has cut down 4% of sugar usage in
their beverages.

Challenges

The differentiation strategy of the Coca-Cola Company is one of the most challenging factors in
its strategy planning. This strategy has created an unhealthy competition with PepsiCo. As
PepsiCo is not a ‘beverage only’ company unlike the Coca-Cola Company, thus having more
opportunities then the Coca-Cola Company often hurt the business for them.

Corporate-level Strategy
The Coca-Cola Company follows a certain model in its interaction on the corporate-level. It
follows ‘Single-Product Strategy’, which is basically one organization, one product or service.
Though it has a variety of products, they are all of the exact same category ― non-alcoholic
beverages and compete in the same industry and they do not relate to or contribute each other on
the sales.

Challenges

Single-product strategy turns out to be successful when the company is the only manufacturer of
that single product (like WD-40) or a manufacturer with no noteworthy competitors. But the
Coca-Cola Company faces hard competition from PepsiCo with almost the similar type of
products, cutting off a lot of its sales.

International and Global Strategy

International businesses typically adopt one of the 4 strategic models in their attempts for
borderless business ― Home Replication Strategy, Multidomestic Strategy, Global Strategy and
Transnational Strategy. The Coca-Cola Company follows the Transnational Strategy in which
the company attempts to combine the benefits of global scale efficiencies with the benefits and
advantages of local responsiveness. In this model, company centralizes certain management
functions and decision making (R&D, finance, strategic planning) at the headquarters, but the
other functions (human resource management, performance management, marketing) are
decentralized to local subsidiaries. For example, the strategic planning process in centralized in
the headquarters of the Coca-Cola Company but the performance management and appraisal
systems are decentralized to subsidiaries like Coca-Cola India. This strategy allows the company
to contribute in the local economy, making it more acceptable to localities.

Though the performance management system and the strategy models show some concerning
challenges, the Coca-Cola Company is one of the most successful companies out there,
positioning itself 31st in Forbes Global 2000 2020 and also being one of the top 3 beverage
companies. Still the company should focus more on coming off the traditional objective of being
a ‘beverage only’ company, if it really wants to shake off its competitions including PepsiCo.
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