Aligning Andina's Operations Management in Chile, Brazil and Argentina
https://ilokabenneth.blogspot.com/2014/09/aligning-andinas-operations-management.html
Author: Iloka Benneth Chiemelie
Published: 21-September-2014
Three areas that needs to be
focused in order to align operations management of Andina in Chile, Brazil, and
Argentina
Operations
management has increasingly become the norm of the day and this is influenced
by the increase in internationalization of firms and globalization of brands.
Companies are no longer focused on just their local market shares, instead they
now understand the importance of internationalizing in order to boost sales.
Thus, global marketing and competition has risen, forcing numerous companies to
strategies their brand design and standardize operations in order to take
advantages of economies of scale.
Figure
1: operations management process
Source
as adapted from: Prahalad and Hamel (1999
From
the above figure, the overall essence of operations management can be
visualized and it is all about transforming raw materials into finished
products. However, it is important to understanding that in the economic sense,
production is not considered complete else the finished goods have reached the
final consumers. Thus, it can be stated that operations management extends into
after sales services. In the case of Andina, effective operation management is
necessary because Prahalad and Hamel (1999)
noted that the formation of competence and capabilities for competitive
advantage is achieved by combining different resources. Although there are
different aspects of operations management that must be aligned if businesses
are to become more competitive (Anderson et al., 1989;
Leong et al., 1990; Stalk et al., 1992; Menda and Dilts, 1997). Andina
has three major weaknesses as identified in the case study above and such areas
include:
Cultural convergence -
differences in culture is affecting the relationship between managements from
the different countries. For instance, Brazilians don’t like sharing
information or being watched in the course of undertaking their job designation.
Thus, it is necessary that Andina converges the three different cultures in
line with corporate culture and communicate their overall essence in order to
ensure that Brazilians don’t feel watched and encourage information sharing.
Understand market needs
– this is another area that the company needs to significantly understand. For
instance, the case noted that the brand started losing market shares in Chile
because they were numerous cheaper alternatives to the Coca-Cola brands and the
market was after these cheaper alternatives. Thus, it is necessary that Andina
become very conscious of market needs in terms of quality and pricing as such
will have a significant influence on their profitability as noted in Chile.
Government policies
– for any business, the policy adopted by government can draw a thin line
between success and failure. This was noticed in the case of Argentina where
the government of President Fernando de la Rua, which took office in 1999,
increased the tax for goods and cut spending in order to reduce deficit.
Additionally, the government was in huge debt, and it deterred investors
because they were worried about the government’s ability to repair such debts.
Thus, it is necessary that Andina look into the political setting of new markets
as such will influence overall profitability of the brand.
In
essence, the above focus can also be summarized into PESTLE analysis, as it is
based on understanding cultural differences (socio-cultural and environmental
factors), understanding customers’ needs (economic, socio-cultural and
technological factors), and understanding the sustainability of the foreign
government (political and legal factors).
How Andina can achieve success as a
bottle with Coca-Cola’s model
As
businesses continue to grow around the world, there is a common view that
success in international business can be achieved by modeling business
strategies in line with companies that have achieved success in such business
areas (Drilhon and Estime, 1993; Aharoni, 1994; Hill and
Jones, 1998). The reason is because the companies must have faced and
solved a number of issues in the course of their existence and way to success.
Thus, Andina can adopt the following Coca-Cola models in order to establish
themselves as a successful bottling company and achieve better operational
success.
Partnership
– Coca-Cola partnered with different companies ranging from bottle production,
concentrates production, marketing and distribution in the course of their
existence. This allowed them to focus more on the business operations process
and management, which eventually resulted in higher level of expansion and
internationalizing of its business. By partnering with foreign brands,
Coca-Cola is able to understand the market better because these local brands
have been working with their local markets for a long time. Thus, it is
recommended that Andina should go into partnership with local brands in their
intended international market in order to understand the local market better.
Global value
– another factor that has influenced the success of Coca-Cola is that they have
a centralized corporate goal that governs their operations across the globe.
The importance of having a centralized corporate value is based on the idea of
“thinking global, while acting locally,” or glocalization as it is famously
known. By having a centralized corporate value that is independent of the local
cultures of the market, the brand will easily align its objectives with the
needs of the local market and ensure sustainability as a result of subsequent
increase in brand loyalty.
Subsidiaries
– just like Coca-Cola, Andina doesn’t necessary need to go into international
markets as Andina. Instead, they can establish subsidiaries (such as the
Coca-Cola TLCC) in order to enter foreign markets. The benefit of such is
reflected on the understanding that it will allow them to better protect the
brand image because any damage to the subsidiaries image cannot be used as a
reflection of the main brand.
Overall,
if Andina wants to be a successful bottling company, they must reshape their
corporate policy in line with Coca-Cola’s values of “think global and act
local” – glocalization. As researches have it (Hale and
Cragg, 1996), internationalization is not just about going abroad, it is
about meeting the needs of customers in these foreign markets. The case also
supported this by highlighting cultural differences in the management setting
as experienced in Brazil, as well as differences in customer’s price perception
as noticed in Chile. If all these factors are put into considerations, it is
expected that Andina wil eventually becomes a successful bottling brand just
like Coca-Cola.
While Chile brought more success to
Andina than Brazil and Argentina
Although
Andina experienced success in all the three countries, Chile brought about more
success than the other two countries because it has a market0orinted economy
that is characterized by high level of foreign trade. In the early 1990s, the
reputation of Chile as a role model for economic transformation increased
following the democratic government of Patricio Aylwin, which deepened the
economic reform already established by the military government. Additionally,
Chile launched trade negotiation with the United States, which meant that US
brad such as Coca-Cola became an instant hit in the country.
Government
policy is an integral aspect of any corporate growth because the government
determines who will sell and how they will sell as well as what they are
allowed to sell. Additionally, economic conditions can also influence purchase
as experienced in the case of Chile where positive economic conditions favoring
international brands allowed Andina to experience huge sales. For success to be
made effective, the government also needs to be focused in its policy and
committed towards ensuring that the objectives of the policy are meet. The case
of Chile also demonstrated the importance of such because even when the country
faced huge financial crisis, the government was able to enact a number of
policies that helped businesses to maintain sustainability while also focusing
on promoting international investments in the country. Still on the same line,
international partnerships and trade negotiations between countries also
influences success of companies because such policies can eliminate barriers to
internationalization and free trade between different markets. The case of
trade agreement between the USA and Chile is a good example because it brought
about sustainability for the company’s operations in the country while also
helping the country reduce its level of unemployment. Thus, it can be concluded
that success in Chile was due to favorable market conditions and government
policies.
Andina should adopt decentralized
operations management
It
is well known that the operations management strategy of any given company has
a direct relationship with the success of such company. This is because
operations management is concerned with setting broad plans and policies that
are used for resourcing the organization and also for supporting the
organization in its long-term competitive strategy. Slack
and Lewis (2002) presented the definition of operations management as
the sum of patterns of decisions that shape long-term capabilities of an
operations and also contribute to the overall corporate strategy of the company.
The pattern of decisions is used to make reference to the medium-to-long-term
nature and also used as a reflection of both the main competencies and
capabilities of the company and how the company makes use of resources and
technologies in order to provide sustainable means of competitive advantage. In
the broad sense, the priorities of operations can be expressed in terms of
delivery, flexibility, cost and quality, and dependability (Ferdows and De Meyer, 1990; Kathuria, 2000; Leong et al.,
1990; Vickery, 1991; Vickery, et al., 1993; Ward et al., 1998) of both
the business process and products manufactured.
Slack (1991) made the suggestion that the notion of
“doctrine of competitiveness” as far as an operation strategy is concerned is
based on making things better (exact products and services needed by the local
market), right (in the way they needs it), fast (at the time the need it), on
time (when they need it), cheap (at their best preferred price value), and
flexibility (providing substitute or alternatives when needed products are not
available). If this is the case, it is now clear what the decision should be in
terms of whether Andina should adopt centralized business or decentralized
business.
Based
on the above discussions, it is recommended that Andina should adopt
decentralized form of decision making process for its operations management.
The reason behind such is based on the idea of thinking global while acting
local. Although the company is focused on expanding its market throughout the South
American continent, it is important to understand that differences exist in
terms of social and business cultures of people across the continent. Thus, it
is important that these national differences are addressed individually and the
solution to that is decentralized operations management.
By
decentralizing its operations management, Andina will be able to maintain the
corporate goal of increased profitability while also meeting the individual
needs of markets across the continent. Decentralized operations management will
also allow the company to understanding factors influencing sales in each
market through quality customer relationship management and sales monitoring
networks, while also helping to identify potential sources of raw materials that
a centralized system of operations management will find difficult to identify.
Decentralization will also broaden customer-company relationship because they
customers will feel that the company is more of a local brand than a foreign
brand, and they will be more open to voicing their opinions. Decentralization
also allows for cost leveraging as the company will be able to cover up
underperforming markets with the benefits generated from well-performing
markets. Decentralized operations management also induces some sense of
responsibility to the local management as they become very cautions of their
decision and more committed to growth because they know that they will be held
responsible for the performance of their local markets. Finally,
decentralization will allow for effective and efficient delivery of customers’
needs because the local management will understand the needs of local customers
better and they will deliver such needs within required time frame.
It is the implementation of the
strategy that is inappropriate
From
the case study, a number of prominent and previously successful strategies have
been identified with reference to Andina. For instance, the company was
involved in a number of merger and acquisition, partnership,
internationalization, business expansion, new product development, and
strategic information management. However, these policies and features where
not successfully implemented.
The
implementation of a business strategy is as important as the actual development
of such strategy. This is because the strategy will be ineffective and overall
useless is it is not well implemented as it won’t be able to meet the set
corporate goals. For instance, Andina has a corporate strategy of continue
improvement and profitability through internationalization, but they neglected
differences in culture and it resulted to eventual failure of the business
strategy. Thus, it can be said that the issue is not the business strategy but
the implementation process.
In
the view of such understanding, it is recommended that the company should adopt
a decentralized system when it comes to implementing business strategies. While
the corporate value is to continuously grow its market share around the South
American region and the world at large, Andina should employ local managements
at their intended international markets, understand the needs of the market,
align such needs with national and corporate cultures, and implement final
strategies in line with such local views. In essence, they will be “thinking
global”, while “acting local” and this will deliver more success to the
company.
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