Coca-Cola Company’s Strategic Human Resource Management in Vietnam

Abstract

Since entering Vietnam market, Coca-Cola has been trying to increase its market share, as well as its sales volume. Venturing into foreign markets is sometimes costly and risky thus, Coca-Cola has chosen a joint venture strategy. This has helped in reducing the risks because costs were shared besides enabling Coca-Cola to reap from economies of scale, as well as creating a higher market power. The firm ensured that culture, structure, and strategy were well integrated to avoid friction in its operations (Daley 2002). Employee motivation methods were put in place which included rewards, benefits, and promotions to ensure that employees were comfortable and ready to work. Due to the differences in culture and especially in language, Coca-Cola has a strategy of including in its management the Vietnamese who understand the local environment besides knowing what the people need. On the same note, Coca-Cola also values its customers thus producing products that are tailored to match their needs some of which are available only in Vietnam. It has been easy for Coca-Cola to build its employees as well as retain them through the training sessions that are offered to employees coupled with the good working relationships that are maintained. However, Coca-Cola faces competition from many soft drink companies especially Pepsi which had already established its brand by the time Coca-Cola entered the market.

Introduction

Any company highly values human capital which is the most important input into the day-to-day operations of the firm. It is the responsibility of the management to ensure that every employee is satisfied with the conditions of work, salary, and attitude of other employees and managers so that the employee can deliver to the maximum possible. As a result, companies that have invested in better human resource management have advanced more besides getting the best output out of their employees. Therefore, strategic human resource management is important to ensure that the relationship between the firm and the employees is at its best regardless of some minor disagreements observed. Strategic human resource management puts into consideration the interrelationship between strategy, structure, and culture to improve human capital as well as increase profitability for the firm by creating customer value.

Definition

Strategic human resource management is a set of managerial decisions that are proactive and are designed to improve the performance of the firm through proper management of the human capital. It entails coming up with strategies through which the firm can best meet the requirements of employees to maximally tap the input of the employees (Heneman 2002). It mostly involves human development starting from the point when an employee first joins a firm and goes on throughout the period the employee will spend with the firm. Employees are given special concern and ways through which their potential can be maximally tapped are continuously sought and implemented. On top of that, strategic human resource management usually focuses on the management, the working environment, and resources ensuring that the company’s mission and goals are met (Gratton 2000).

The interrelationship between Strategy, Structure, and Culture

Any given strategy that is chosen by a firm should take into consideration the effects it may have on the operations of the firm after implementation. In this light, the relationship between the organizational culture and its structure is very essential in ensuring that the smooth running of the company is not affected whenever a new strategy is introduced. It should also be added that for the intended strategy to be effectively realized during implementation, the environment in which the firm is operating should be given peculiar attention (Luthans & Doh 2008). On top of that, strategies, structure, and culture are so much entangled that a change in one of those requires the others also to be changed to avoid friction in the operations of the firms. Consequently, though a strategy is developed at a specific point in time, its implementation goes on continuously to ensure that it catches up with the changes in the structure and the culture.

For multinational companies like Coca-Cola, the differences in national culture are very essential and must always be put into consideration whenever any strategy is introduced. However, company structure must be maintained when both culture and strategy are being addressed to ensure that company goals are achieved. When Coca -Cola entered Vietnam, it started a joint venture with “Chuong Duong” beverage factory though it did not employ Vietnamese managers in the beginning. This made it difficult for the firm to understand the local consumers’ needs. On the other hand, Pepsi which was the main rival of Coca-Cola had local managers who understood well the feeling of the local people and therefore employed the most effective marketing technologies. A joint venture is advantageous when a company is venturing into a new market because the experience of the local firm in the culture and desires of the local consumers helps in reducing the implementation of wrong strategies (Cavusgil, Knight, & Riesenberger 2008). Unfortunately, the joint venture limited the ability of Coca-Cola to implement any strategy on its own while some of the strategies were not compatible with its structure. Therefore, Coca-Cola bought out all its partners to ensure that all strategies employed are consistent with its structure and organizational mission of affordability, availability, and accountability.

Coca-Cola understands that job satisfaction plays an important role in ensuring that services offered to customers are of high quality. In this regard, Coca-Cola ensures that employee satisfaction is achieved through motivation which is part of its organizational culture. This is achieved through a special focus on the health and welfare of the employees as well as protection from unexpected lifestyles after being employed. Coca-Cola has also incorporated telecommuting and alternative work patterns to further motivate employees since Vietnam is not advanced as far as technology is concerned (Storey 2004). To further ensure job satisfaction, Coca-Cola usually interviews its employees in Vietnam to measure the level of employee satisfaction and also to know what can be done to boost employee satisfaction.

Since culture plays an important role in Coca-Cola’s activities, the firm does not try to force an organizational structure of one region to another one. As a result, Coca-Cola implemented an organizational structure that is compatible with the Vietnamese culture (McLeod 2001). On top of that, Coca-Cola employs a democratic type of management where employees also give their ideas concerning what should be done besides them being allowed to make some decisions as a team. This enables the firm to motivate employees as well as enhance employee empowerment which is part of the organizational culture. On top of that, this management style enables the implementation of any strategy to be achieved easily since it builds a sense of belonging among the employees besides fostering the organizational culture.

Additionally, the Vietnamese have a collectivist culture and respect for everybody including the foreigners, especially the elderly, and expect the same from the people who come to their country whether for business or leisure (Marcus 2004). As a result, the traditional roles of men and women are insisted though this has been changing over time. Consequently, Coca-Cola’s strategy of allowing people to be promoted based on performance goes a long way in ensuring that employees’ morale for work is improved. In addition to that, it is important to note that Coca-Cola’s strategy of rewarding the employees to increase job satisfaction is in line with the Vietnamese culture where gift-giving is valued because it reflects good interpersonal relationships.

It is paramount to note that, language was another hindrance to the penetration of Coca-Cola in Vietnam. Unfortunately, the Vietnamese language which is used by many people in Vietnam is not very common in other parts of the world. Therefore, this required local people to be involved in the management to make marketing easy. The organizational structure has junior managers at some point and locals are hired to fill these positions. This makes communication easy since the feedback from the market would easily be relayed to the top management for actions to be taken (McLeod 2001). On top of that, Coca-Cola employs a well-defined structure where everybody has a role to play and knows the expected results from him/her, as well as whom he/she should report to. It is also the culture of Coca-Cola to lay down objectives in advance and the procedures to be followed whenever something is to be done.

Implications to the Company

Though Coca-Cola met some well-established brands by the time of its entry into the Vietnam market, it has done well in matters of market possession within a very short time. This success has been attributed to the proper management of the interrelationships between strategy, the organizational structure, and culture, which include organizational culture and the Vietnamese national culture. To begin with, it is the culture of the Vietnamese people to value a gift-giving a fact that Coca-Cola has put into consideration. Coca-Cola employs a flexible kind of organizational structure that depends on the region in which the branch is located. In Vietnam, Coca-Cola employs the strategy of rewarding its employees whenever they perform well and this has helped in boosting the morale of the employees, their satisfaction, and consequently their output (Laurie 2001).

Since Vietnamese attach much importance to businesses referrals, the entry mode as a joint venture helped in ensuring that at least Coca-Cola had a starting point, because the local firm has already had its customers who could be used to market the Coca-Cola products. The management structure of Coca-Cola, which is democratic, also helps in making the employees feel valued and thus they offer better services to customers which increases the number of customers hence raising the profitability of the firm (Chow 2004).

On the same note, Coca-Cola employs local people as managers who speak the local language and understand well the needs of the people. They can include the cultural differences in their decisions and this eliminates the cultural shock that could have hindered the progress of Coca-Cola. Additionally, it is easy for the local employees to extend the business relationships to personal relationships. This makes the local people take Coca-Cola as a local company and thus increase their consumption of Coca-Cola products which enhances the Coca-Cola market share (Walton, Cutcher-Gershenfeld & McKersie 2000).

Vietnamese value interpersonal relationships and respect other people both in their personal and professional life. To this extent, the strategy that Coca-Cola employs to ensure that all the employees are satisfied with the conditions of work depicts that the firm respects and values them in return. Consequently, the employees dedicate their best to the firm thus providing high-quality services to the customers, therefore, enhancing customer value (Chow 2004). On top of that, it is the Coca-Cola culture to have guidelines on what should be achieved. By stating their mission, to focus on improving the value they offer to their customers, and ensuring that every employee understands and works on achieving the goals, the firm ensures that customers’ value is given priority.

Coca-Cola incorporates the cultural differences in its production and therefore ensures that each region has a drink that is adapted to the people’s preferences. After learning the culture of the Vietnamese, who do not like sweet drinks when they are tired, Coca-Cola came up with a drink, Samurai, which is specifically meant for the Vietnamese market. This has sent the message to the locals that their culture is given priority by Coca-Cola and that they are valued thus enhancing customer value besides, increasing the sales volume and therefore the profitability.

To meet the needs of the people in Vietnam, feedback from the people must reach the management as quickly as possible. To achieve this, Coca-Cola embraces the use of advanced ICT to speed up communication both internally and externally (Marcus 2004). E-mails, pagers, faxing and even video conferencing are used to speed up the process of communication both with the customers and within the company to ensure timely decisions. On top of that, production technology is also constantly improved to ensure that the changing socio-cultural needs of the people are met. As a result, Coca-Cola continuously improves its production technology in Vietnam, an example being the move from S5 PLC to S7 PLC increased the rate of production as well as the elimination of interruptions in production (Millmore 2007). This has ensured that production kept up with the growing demand thus increasing the profitability of the firm.

Though the company has highly educated and experienced managers, it recognizes that the company’s structure greatly depends on the lower employees to achieve its mission. Therefore, in Vietnam, the firm implements a strategy in which it seeks to maintain a positive attitude towards work among the employees. This is not only done to get the best output from the employees but also to increase the customer value through better service provided. With more settled employees who are ready to work, Coca-Cola is able to easily meet its objectives thus enhancing its profitability. Besides, Coca-Cola also takes into consideration the well-being of its customers and therefore employs strategies of sustainable growth. Through its “live positively” strategy that was recently unveiled in Vietnam, the firm aims at ensuring environmental sustainability as well as giving back to society (Lasserre 2012). As a result, the firm has achieved enhanced customer value because Vietnamese highly value a firm that gives back to society and identifies itself with the people on a more personal level.

Along with that, the organizational culture of Coca-Cola requires that each person performs his/her duty as prescribed and people of a certain unit work together as a team to achieve the goals of the firm. This method ensures that there is minimal friction among the employees, and also between the employees and the management. On top of that, this culture ensures easy implementation of any strategy that might be put forward while at the same time allowing the improvement of the profitability of the company and customer value (T. Moran, Harris & S. Moran 2007). This is because the employees feel that they contribute to the decisions made by the company and thus their confidence in the job increases.

Influence on Human Capital

To any firm, labor is the most priced input as it determines the running of the day-to-day activities of the firm. In this regard, Coca-Cola has invested a great deal on matters affecting its employees and their welfare while they are working with them. Employees’ satisfaction is of paramount importance to the management of Coca-Cola in Vietnam, therefore, everything is done to ensure that the employees are comfortable. Employees will be willing to work in a firm where they feel that their needs are given particular attention and they will be willing to stay longer in these firms (Andrews, Chompusri & Baldwin 2003). Employees’ welfare as well as other issues, including their health, are given priority by the Coca-Cola Company in Vietnam which ensures that they are ready to work for the firm and they do not think of leaving it.

Once employees have been hired into the firm, a relationship is established whereby the hierarchy of needs satisfaction is the guide. Employees are built and groomed continuously through inside training and other workshops. On top of that, employees are also given incentives like rewards and benefits to improve their attitude towards their responsibilities, therefore, increasing their probability of staying in the firm. Promotions are also given to employees depending on the performance of a person and other more measurable factors, which make the process open and transparent. This not only motivates the employees to deliver to their maximum but also satisfies them that their efforts will not go to waste thus encouraging them to continue working for the company.

Along with that, seniority is highly respected among the Vietnamese and everybody will want to be a senior in the company where he/she works. Maximizing on that cultural trait, Coca-Cola has incorporated in its structure the strategy of promoting people on merit which attracts the employees to want to stay in the firm. Each employee is waiting for the opportunity of being promoted one day, and will therefore be unwilling to leave and start afresh in another firm where the chances of promotion might be limited (Geoffrey 1997).

It is the organizational culture of Coca-Cola to value their employees and therefore show commitment towards achieving the best working conditions for them. The health of the employees is paramount to the management, as well as the change in lifestyle due to joining the workforce of Coca-Cola and all these are addressed amicably. On top of that, besides the employees having to individually strive to attain their laid down goals they are encouraged to work as a team for better results (Andrews, Chompusri & Baldwin 2003). They give suggestions to the management about what they feel should be done and this is taken into consideration whenever decisions are made. This helps in creating a sense of belonging among the employees which is an important factor in retaining employees.

Conclusion

At the time of entry into Vietnam, Coca-Cola has found other well-established brands like Pepsi already in place and it depended on their marketing strategy the company to capture the market. Coca-Cola has ensured that the management was not autocratic because they knew the value of feedback both from employees and customers. Any firm venturing into foreign markets especially that outside of the regions where they are used should consider both the effects of national culture and organizational culture on its operations, and Coca-Cola has successfully done that. Coca-Cola’s market share has been increasing tremendously and this has been attributed to the job satisfaction of employees, as well as the constant advancement in the kind of technology they used to increase customer satisfaction. The interrelationships between strategy, structure, and culture have been given enough consideration and thus there has been minimal conflict hence ensuring that operations are not interrupted.

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