First Look

June 19, 2012

Rethinking Coca-cola's Bottling Strategy

In the new case "Coca-Cola in 2011: In Search of a New Model," authors David Yoffie and Renee Kim tune into the makings of one of the company's most significant strategic decisions: should it keep its bottling business? "For one of the most successful companies in the world over the last 100 years, (CEO Muthar) Kent's answers to these questions had the potential to redefine Coke's business model for the next century," write the authors. Students discussing the case will gain insights into vertical integration and the boundaries of a firm.

The Unconscious Decision Maker

Harvard Business School's Maarten Dos, a post-doctoral student, has done extensive research on how unconscious thought can at times lead to better decision making than deliberate thinking. In a paper published recently by Journal of Neuroscience, "Food for Thought? Trust Your Unconscious When Energy Is Low," Bos and colleagues buttress the argument by showing that low levels of glucose—low energy—impairs conscious thought but does not hinder unconscious thought.

Who Is On The Negotiating Team?

Negotiations can be held between sole principals, between agents representing the parties, or by teams. Each carry their own dynamics that can influence outcomes. For example, negotiating principals may experience less confusion than do teams but can be hamstrung by a limited ability to process information. In the paper Negotiation Process as Sources of (And Solutions To) Interorganizational Conflict, the authors detail how the "negotiators' efforts to manage the constraints and opportunities of their representation structure are reflected in the micro-interactions, the broad improvisations, and the resulting substantive and relational outcomes." Research by Elizabeth Long Lingo, Colin Fisher, and Kathleen L. McGinn.

— Sean Silverthorne


Food for Thought? Trust Your Unconscious When Energy Is Low


Recent studies show that a period of unconscious thought can help when making complex decisions. Under some circumstances, unconscious thought improves decisions even more than conscious thought. Executive functioning depends on energy provided by glucose, and we know from previous research that the performance of various conscious processes deteriorates when energy is low. Unconscious processes require less energy and may operate unhampered when energy is low. Therefore, we propose that whereas low blood glucose levels impair conscious thought, this is not the same for unconscious thought. An experiment, where we manipulated blood glucose levels, indicated that indeed, when making decisions, the unconscious can best be trusted when blood glucose levels are low, whereas conscious deliberation yields the best results when blood glucose levels are elevated.

The Rise of the Functional Manager: Changes Afoot in the C-Suite


An abstract is unavailable at this time.

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The Flattening Firm—Not As Advertised


For decades, management consultants and the popular business press have urged large firms to flatten their hierarchies. Flattening (or delayering, as it is also known) typically refers to the elimination of layers in a firm's organizational hierarchy and the broadening of managers' spans of control. The alleged benefits of flattening flow primarily from pushing decisions downward to enhance customer and market responsiveness and to improve accountability and morale. Has flattening delivered on its promise to push decisions downward? In this article, I present evidence suggesting that while firms have delayered, flattened firms can exhibit more control and decision making at the top. Managers take note. Flattening can lead to exactly the opposite effects from what it promises to do.

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Working Papers

Negotiation Processes As Sources of (and Solutions to) Interorganizational Conflict


We investigate how structural features of negotiations can affect interaction processes and how negotiations can be not only a solution to, but also a source of, inter-organizational conflict. Principals, agents, and teams face different sets of constraints and opportunities in negotiations. We develop grounded theory detailing how the micro-interactions comprising a negotiation are shaped by the representation structure (principals, agents, or teams) of the parties. In qualitative and quantitative analyses of negotiations carried out by principals, agents, and teams in a laboratory experiment, we find that negotiators' efforts to manage the constraints and opportunities of their representation structure are reflected in the micro-interactions, the broad improvisations, and the resulting substantive and relational outcomes.

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Leviathan in Business: Varieties of State Capitalism and Their Implications for Economic Performance


In this paper we document the extent and reach of state capitalism around the world and explore its economic implications. We focus on governmental provision of capital to corporations-either equity or debt-as a defining feature of state capitalism. We present a stylized distinction between two broad, general varieties of state capitalism: one through majority control of publicly traded companies (e.g., state-controlled SOEs) and a hybrid form that relies on minority investments in companies by development banks, pension funds, sovereign wealth funds, and the government itself. We label these two alternative modes Leviathan as a majority investor and Leviathan as a minority investor, respectively. Next we differentiate between these two modes by describing their key fundamental traits and the conditions that should make each mode more conducive to development and superior economic performance.

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Cases & Course Materials

Paul M. Healy, Karthik Ramanna, and Matthew Shaffer
Harvard Business School Case 112-033

What should business leaders do about corruption? In December 2011, four HBS alumni met to debate how to engage the unprecedented protests against Vladimir Putin's corrupt government, which had erupted in Russia in response to alleged fraud in the recent parliamentary elections. A notable figure in the protests was anti-corruption blogger Alexey Navalny. Navalny used publicly available requests for tender, "crowd-sourcing," and volunteer experts to discover, expose, and encourage prosecution of corrupt dealings by the Russian government. These efforts made Navalny a cause célèbre in Western media and a popular figure with Russia's tech-savvy population. But was Navalny the right figure for business leaders in Russia to organize around? What were the risks of getting involved with a politically volatile activist?

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Regina E. Herzlinger and Natalie Kindred
Harvard Business School Case 312-002

McKesson, a large, diversified drug distribution and health care IT company, is considering development of new business offerings to help private practice physicians remain independent. The company, with $122 billion in 2010 revenues, just made its first foray into health care services with the acquisition of U.S. Oncology, an integrated cancer care company, whose expertise it could leverage in offerings catered to other physician specialties. With a vast portfolio of products and services serving a wide spectrum of health care stakeholders, McKesson appears uniquely positioned to understand and capitalize on the needs of health care businesses. With the recent passage of health care reform adding to the pressures already squeezing the health care industry-including new payment models requiring significant coordination and IT capabilities-independent physicians are migrating in droves to large health care organizations, abandoning the private practice model. McKesson could potentially provide them with an alternative. McKesson is an exceedingly large company with somewhat autonomous business units, making the prospect of collaborating to create a "cross-disciplinary" offering for independent practices difficult. Moreover, doing so would potentially extend McKesson into the clinical health services (and potentially risk-sharing) business, the strategic merits of which can be debated. Given the uncertainty surrounding the physician practice environment, the ideal shape of a solution to help these customers remains unclear, and competitors with a different product mix could be better positioned than McKesson to provide it. Finally, it could be too late altogether to reverse the trends eroding the private practice model.

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EILEEN FISHER: Repositioning the Brand

Anat Keinan, Jill Avery, Fiona Wilson, and Michael I. Norton
Harvard Business School Case 512-085

Well-established fashion brand Eileen Fisher has traditionally appealed to older women. However, to drive growth, Eileen Fisher's management team wants to target a younger demographic and has revamped its fall product line to offer more fashionable styles to appeal to younger women. But, repositioning the brand has proven to be harder than expected. This case explores the challenges of appealing to new target markets, without alienating existing customers. The case follows Eileen Fisher's initial forays into social media as they chase a younger demographic and demonstrates the opportunities and pitfalls that await big brands when they enter the world of Web 2.0.

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Sarvajal: Water for All

John D. Macomber and Mona Sinha
Harvard Business School Case 211-028

Entrepreneur wrestles with business model using SMS and RFID technology, franchising, and leasing to rapidly grow off-the-grid water purification business without subsidies. The company seeks to provide potable water services to rural and urban India where the public infrastructure does not exist. Past efforts have been stymied by rural operations problems including expensive technologies, challenging maintenance issues, cash management problems, lack of capital, and lack of a business model that makes sense for retail operators without subsidy. Using a franchising model that relies on seasoned local entrepreneurs, communication technology that monitors flows and quality, payment technology that takes cash out of the equation, and a "capital light" leasing model, the company hopes to create and share a new business model. If successful, the model can be copied by other social entrepreneurs with a market-based pricing scheme to provide other forms of infrastructure in emerging markets.

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Against the Grain: Jim Teague in Tanzania

Karthik Ramanna
Harvard Business School Case 112-069

Loan officer Jim Teague discovers his agro-processor client has a serious health-code violation just days before a disbursement is due. Proceeding with the loan could jeopardize the health of thousands of customers and put his employer at serious risk. But withholding the loan will likely deprive hundreds of farmers affiliated with the agro-processor their livelihoods in this poor rural corner of Tanzania.

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Maersk Line and the Future of Container Shipping

Forest L. Reinhardt, Ramon Casadesus-Masanell, and Frederik Nellemann
Harvard Business School Case 712-449

An abstract is unavailable at this time.

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Roger Caracappa: Package Deals for the Estée Lauder Companies

James K. Sebenius
Harvard Business School Case 912-003

Roger Caracappa must negotiate a cost-saving, innovative proposal from a potential French supplier that could displace the otherwise satisfactory, long-time incumbent supplier. Shortly after being promoted to executive vice president of the Estée Lauder Companies with global packaging as a key responsibility, Caracappa had to assess a recent proposal he had received from a small French company that had patented a packaging innovation. The innovation could save the Estée Lauder Companies some $4 to $5 million per year if Caracappa championed it, negotiated a deal to use it, and if it were adopted by Lauder's key brands. If the new packaging functioned as promised, the consumer would not perceive any change in the high quality, stylish packaging that was essential to the luxury image of the firm's brands. But if the new packaging caused production, delivery, or quality problems, the supposed savings would be quickly forgotten and Caracappa would bear a heavy responsibility both for the problems and for disrupting an otherwise satisfactory relationship with the long-time incumbent supplier.

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Peace, Non-Aligned: The Pragmatic Optimism of Lakhdar Brahimi

James K. Sebenius and Laurence A. Green
Harvard Business School Case 912-028

Describes the background and career of Lakhdar Brahimi in numerous roles ranging from Algeria's ambassador to Indonesia and the Arab League, to serving as that country's foreign minister, and to his many years at the United Nations, with special emphasis on his actions as a mediator in Lebanese and Afghan conflicts.

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Coca-Cola in 2011: In Search of a New Model

David B. Yoffie and Renee Kim
Harvard Business School Case 711-504

Muhtar Kent, CEO of the Coca-Cola Company, faced a critical decision in 2011 after closing a $12 billion deal to buy its troubled North America bottling operations from its biggest bottler, Coca-Cola Enterprises. The decision was prompted by several changes in the U.S. market, including the bottler's inability to make crucial investments, the growth of alternative, non-sparkling drinks, and the growing power of national accounts, such as Wal-Mart. Now that Coke owned most of its North American bottling network, Kent had to decide whether keeping the labor and capital-intensive side of the bottling business was in Coke's long-term strategic interest. If not, should he re-franchise the bottling business, again, as Coke had done in the past? Or was there a third path? For one of the most successful companies in the world over the last 100 years, Kent's answers to these questions had the potential to redefine Coke's business model for the next century.

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