HR Restructuring - The Coca Cola & Dabur Way
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
"We had grown but we hadn't structured our growth."
- Dabur sources in 1998.
"Three major strands have emerged in Coke's mistakes. It never managed its infrastructure, it never managed its crate of 10 brands, and it never managed its people."
- Business World in 2000.
The Leader Humbled
Following the loss, Coca-Cola had to write off its assets
in India worth US $ 405 million in 2000. Apart from the mounting losses, the
write-off was necessitated by Coca-Cola's over-estimation of volumes in the
Indian market. This assumption was based on the expected reduction in excise
duties, which eventually did not happen, which further delayed the company's
break-even targets by some more years.
The Sleeping Giant Awakes
In 1998, the 114 year old ayurvedic and pharmaceutical products major Dabur found itself at the crossroads.
While Dabur's price-to-earnings (P/E) ratio1
was less than 24, for most of the others it was more than 40. The net working
capital of Dabur was a whopping Rs 2.2 billion whereas it was less than half of
1] The P/E ratio is calculated by dividing the market price of a share by the earnings per share (EPS). In other words, if a company is reporting a EPS of Rs 2, and the stock is selling for Rs 20 per share, the P/E ratio is 10 - because the buyer would be paying ten-times the earnings. [Rs 20 per share divided by Rs 2 per share earnings = 10 P/E].
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