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Aligning Andina's Operations Management in Chile, Brazil and Argentina

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.
References
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Ferdows, K. and De Meyer, A. (1990), “Lasting improvements in manufacturing performance: in search of a new theory”, Journal of Operations Management, Vol. 9 No. 2, pp. 168-84.
Hill, W.L.C. and Jones, R.G. (1998), Strategic Management: An Integrated Approach, Houghton Mifflin, Boston, MA.
Kathuria, R. (2000), “Competitive priorities and managerial performance: a taxonomy of small manufacturers”, Journal of Operations Management, Vol. 18, pp. 627-41.
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Menda, R. and Dilts, D. (1997), “The manufacturing strategy formulation process: linking multifunctional viewpoints”, Journal of Operation Management, Vol. 15 No. 4, pp. 223-35.
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Ward, P.T., McCreery, J.K., Ritzman, L.P. and Sharma, D. (1998), “Competitive priorities in operations management”, Decision Sciences, Vol. 29 No. 4, pp. 1035-46.
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