Research Articles Base: Softdrink Industry

How Coca-Cola Makes Sense of their Value Chain

How Coca-Cola Makes Sense of Their Value Chain   “We have delivered strong business results and increased value to our shareowners by expanding our consumer appeal across our beverage brands and connecting in very meaningful ways with the communities we serve.” —  (Chairman and Chief Executive Officer)   Executive Summary             As a primary advocate of value-building in beverage industry, Coke converged with different value-added activities. Within the Coca-Cola system that is consists of suppliers, bottling partners, customers and consumers, one of the primary value-added activities which is the Coca-Cola Retailing Research Councils, such contributes largely on the value chain of the company especially on the aspect of innovation and products. This paper includes Coke’s Porter’s five forces analysis and diverse value-chain activities in different areas. In addition, the document presented the interplay between the Research Councils and how it impacts Coke’s value chain as well as creating the absolute effective position. , Introduction A company that fully understands the importance of value chain in business is the Coca-Cola Company. A global leader in the beverage industry, the Coca-Cola Company further indulges in enhancing their value propositions as an instrument to create ‘virtuous cycles of geographic expansion’ and thus greater advantage. Coke, the term the paper will use to refer to the company, owns the most important elements of the value chain or the “globally leverageable intangibles” such as the brand, the technology, the management, the marketing expertise and the relationships (Bryan et al 1999, pp. 54-55). For this reason, Coke was chosen to be the subject of this value chain paper. Coke, in addition, addresses that value chain as drivers of increased profit, enhanced ability to invest more into gaining greater geographic access and penetrating existing markets more deeply as well as more confidence in investing on intangibles like intellectual property and talent, and increased sale and specialization advantages (Ibid, p. 54); making the company the most conceivable subject for the intents of this paper. Coke – Porter’s Five-Force Model             Soft drink industry is divided into two segments namely production of soft drink syrup and manufacturing and/or distribution of soft drinks in retail level. Coke chose to concentrate their operation on the first segment while intimately depending on independent bottlers companies. Basically, the company is engaged into blending raw material ingredients (product planning), packaging in plastic canisters (market research) and shipping to bottlers (advertising).             Rivalry condition is concentrated on two main actors – Coca-Cola and Pepsi Cola – thus, the emergence duopoly competition or the Cola wars. The term Cola wars was invented to describe the extent of campaigns of mutually-targeted advertisements between the two cola giants. Through these advertisements, the two companies attack each other and therefore a tough competition that strategically hampers the profitability of each other.               Existence of substitute products is wide and thick and substitute products for Coke reached the market where Coke has a strong presence. Apart from the primary rival (PepsiCo), the company finds intensified competitions on companies that produce, market and sell teas, beers, milk, coffee, wine, powered drinks, juice, bottled water, sport drink and other refreshments causing a significant decline in Coke prices. To reduce threats, Coke embraced the idea of bottling and concentrated on product diversification.             Penetrating the soft drink industry is hard because of the established name of Coke; hence, new entrants must first overcome the remarkable marketing muscle and marketing presence of Coke. Other barriers to new entrants are the: direct-store-delivery (DSD) strategies and the Soft Drink Inter-Brand Competition Act of 1980. Respectively, Coke has long-term relationships with their retailers and distributors making possible the defense of the position by means of discounts and other tactics, and regulation make it impossible for new bottlers to enter areas where an existing bottler operates.             Bargaining power of suppliers is low due to two reasons. First, the main inputs are sugar and packaging. Sources of sugar are on the open market which subsequently makes the creation power of suppliers at low levels. There are several suppliers for packaging as well as the abundance in supply of inexpensive aluminum. Second, direct negotiations from concentrate producers to suppliers are present; an initiative to encourage reliable supply, faster delivery and lower prices.             Bargaining power of buyers depends on the marketing channel used. For Coke, there are five core channels such as food stores, convenient stores, fountain, vending machine and mass merchandisers. The bargaining power of buyer is high for fountain supermarkets and mass merchandising because of the low profitability and strong negotiation power of retail channels but for vending bargaining power is non-existing caused by high profitability.   Coke – Value Chain             As one of the most exceptional business concepts that emerged, value chain refers to the series of activities firms and organizations converged into towards putting the goods or services in the marketplace, and wherein through all and each of the activities within the chain, the product or the service gains value. The premise is that the chain of activities provides the product more added value than the sum of added values of all activities. Michael Porter (1985) advocated that value chain analysis could be a strong tool to analyze the sources of competitive advantage, to discover new ways of creating and sustaining the competitive edge and to design for a more efficient organizational structure.              The commitment of the company to become a world class leader in customer and distribution services which are reflected in the continuum of building value chain excellence. The purpose of Coke’s value chain is divided into four areas namely shareholder, business operation and key processes (Diagram 1 in Appendices section). 1)    To deliver superior returns to its shareholders is the mission of the Coca-Cola value chain. The key elements to achieve this end are a strong brand equity and revenue management that is comprised of sales, volume, pricing and costs. 2)    Consumers and customers are the focal points of the value chain driven by brand preference, pervasive market penetration and superior price/value ratio. 3)    Operational drivers are identified as the strategic metrics, process excellence and organizational excellence. 4)    Key processes are further divided into five key functions: Consumer and Customer Service Systems, Demand and Operations Planning, Warehousing and Logistics, Manufacturing, and Infrastructure Planning and Development. There are four enablers in Coke’s value chain. These are the suppliers, the customers the Coca-Cola Retailing Research Councils and the Customer Development and Training (refer to Diagram 2). Coke’s suppliers include business partners that provide the company with raw materials such as ingredients, packaging, machinery and services. Authorized and direct suppliers are subjected to comply with all applicable laws and regulations specially which tackles just employment practices. In addition, these suppliers must comply with the company’s Supplier Guiding Principles. Coke’s customers range from far-reaching, international chains of retailers and restaurants to major corporations to small and independent businesses to corner markets down to local pushcart vendors. Coke works with these people for the purpose of creating mutual benefits alongside their bottling partners. To assist them in their initiative, serving the customers are assisted by account management teams that provides service and support tailored to the need of the customers. Coca-Cola Retailing Research Councils provide research concerning issues that have significant impacts on the food retailing industry. Within the company, there exists collaborative customer relationship process. The purpose of this collaboration is to improve shopper marketing and supply chain collaboration. Acceleration of innovation in order to provide superior beverage selections to every customer is another aim of the collaboration. To provide support to smaller customers in terms of making their business more efficient and profitable is the job of Customer Development and Training. In different areas of operation, Coke had established customer development training centers. Through this, the exchange of information about broadening the range of beverages offered, providing nutritional informations and ensuring beverages are marketed responsibly.   Coke’s value chain initiatives could be summed up in 11 areas: Supplies of Components and Materials  Coke has a relatively wide range of cooperation among its suppliers. The company has generally not experienced difficulties obtaining raw materials. Through the assistance of Coca-Cola Bottlers’ Sales and Service, Coke purchase materials like nutritive sweeteners and non-nutritive sweeteners and bottling requirements with different companies like The NutraSweet Company, Ajinomoto Co., Inc., Nutrinova Nutrition Specialties & Food Ingredients and Tate & Lyle.   Purchasing Order sizes depended on customers or sales volume per person, frequency of visit based history and order collection based on customer attributes, made possible through order collection personnel. Variables are geography, density and logistics.  Moreover, total value of purchase is highly-reliant on the purchase agreement between Coke and suppliers. In general, the total value of purchase over time per supplier is 43% in terms of value and 36 % by volume on just-in-time basis. Inventory Holding Coke has 68 days inventory on hand and has 5.7927 inventory turns. The figures mean that Coke sells its entire inventory 5.79 times each year.  R&D/Design/Engineering Coca-Cola has a patent portfolio inside and outside the US, 800 and 1800, respectively; relating to various beverages with related technologies. Apart from product formulation as the trade secret, technologies complementary to these are packaging, vending equipment, fountain equipment and water treatment. Driven by the consumer value proposition, R&D is the core commitment. Implementation of strategies has been modified in efforts to allow more freedom to local operating divisions. R&D is not outsourced but works jointly with development partners. Component Manufacture The three largest components within the system are manufacturing, fleet/transport and sales/marketing equipment. There are nearly 850 plants in the manufacturing process, with system’s fleet of approximately 200, 000 vehicles to transport ingredients, packaging and finished beverages. Beverage concentrate are shipped to bottling operations by sea while finished beverages are mostly transported by road into distributors and retail customers. There are 9 million vending machine and coolers that keep products cold. These components are placed in 200+ countries of operation Level of capacity utilization is maintained at 77.3% at an average. Coca-Cola realized that the very high degree of capacity utilization will be the key towards sustainable growth thus Coke accurately track and analyse such through company-wide leveraging. Examples of activities are standardization of asset infrastructure, simplifying support models and reducing maintenance cost, capital expenditures and consumable costs. Assembly   Testing/Quality Control Coke uses different technology to control product quality like the Chemunex. Coca-Cola invested in real-time microbiology analyzer or the D-count. Such technology is adapted because of: quantitative analysis with satisfying detection limit, automated analysis with reduction of the analytical time, reliability of the results and robustness of the system for an intensive routing use. Testing is done on three basic steps: 1) sample preparation – rinsing to transfer of sample to buffer solution, 2) analysis on D- count and 3) reading the results.   Inventories of Final Goods As claimed, the selling numbers of Coca-Cola ranges from 9 glasses per da to over six trillion from the period of 1886 to 2003. Getting from this, we can determine that the unpredictability of sales follow a logical pattern that serves as indicators of the amount Coke produced and sold. Given the lack of cyclicality in different segments, the company invested in raising advertising budget into 38%.   Sales and Marketing Coke is getting their products advertised more frequently by means of own advertising as well as through sponsorships and other organizations. For example, Coke products appear in McDonald’s advertisements, appearing on side boards of basketball arenas and other sporting events and also appearing on social events as sponsors in effort to be a household product and to demonstrate goodwill. Marketing also depended on the targeting of Coke products at individuals and groups of all ages and demographics. Marketing, in addition, comes in different styles and forms such as network television, radio and print media. To achieve brand visibility and become well-known to widest possible markets and most consumers reach, a number of new commercials are introduced each year. Distribution In the distribution of products, the wholesalers have no involvement; but rather conform to agent network. The company divides a country into various regions and established a franchisee within these regions. Franchisees have own bottling plants and has the autonomy to manage daily operations (Hughes, et al, 1998, p. 14). Service/Dealer Support Within each region are different dealers that orders through three primary categories: bulk, sideload and full service. Coca-Cola system ensures that dealerships are assisted upon. So the company opened their distribution system and embraced the DSD system or the direct-to-store concept. The movement is from wholesalers channels into DSD channels.    Coke – Value-Added Activities             Creating value at Coke simply purports three major factors. These are: (1) marketing ‘unique’ products (brand-building), (2) generating identity-preserved products and (3) combining familial activities (collective efforts). The company offers a hundred of brands including soft drinks, juice drinks, energy drinks, sports drinks and others for all types of consumers. In fact, the company had introduced at least 29 new lines of products from October 2004-August 2007 and is already offering more than 400 brands in over 200 countries which aimed at hydrating, energizing, nourishing and/or relaxation. Coke, as we all know, is continuously looking for new beverages that will bring enjoyment to their customers. In addition, Coke is being supported by the Beverage Science and Innovation.             Innovation was driven by the facilitation of the “three cola strategy” consisting of reinvigoration of the trademark Coca-Cola and Diet Coke and introduction of Coca-Cola Zero to increase the portfolio of the company. Since the Coke portfolio is driving the growth, and disparity, in the colas segment, the company had realized for deeper integration in marketing and merchandising specially the three brands. In 2007, the Coke Side of Life creative platform was used to make the people aware of the ‘specialness’ of the iconic Coke brands. Marketing strategies not only focus on the brands themselves but also on seasonal summer and Christmas peaks through global creative advert and extensive digital activities. There are also limited flavors that had been offered in the market following the success of Coca-Cola with lime and the fusion of two bets citrus flavors lemon and lime or the Diet Coke Citrus Zest. For this products and Coke Zero, the Coca-Cola system allotted sampling campaigns in different experiential locations like sporting events and train stations and investing on high-end advertising such as heavy-weight TV, cinema, billboards and prints (Trade Support, 2006).   Truth remains that despite the success, Coca-Cola Company “handles just part of the process”. Along with the 90, 500 associates are the 300 bottling partners and over 20 million customers that produce, deliver and sell more than 450 brands in the world. Known as the Coca-Cola system, this has been the key to operate in the global scale while maintaining the local approach. The Coca-Cola Company manufactures the concentrates, beverage bases and syrups that bring uniqueness in the products and sell them to bottling companies. Coke owns and licenses the brands and markets them through extensive advertising and promotion.   Bottling partners serve as the producers and distributors of the brands and the main connectors between the customers and the company. Bottling partners range from international and publicly-traded business to small, family-owned operations. They are responsible for producing, packaging, distributing and merchandising the brands through localized marketing plans that are developed in partnership with Coke. Customers come is close contacts with the consumers. These are the grocery stores, restaurants, street vendors, mass merchandisers, convenient stores, drug stores, movie theaters and amusement parks. What they do is they sell the products to the consumers.   Coca-Cola Retailing Research Councils – Impact on Innovation and Products             Research Councils conduct different studies on issues that could possible assist retailers to respond to the ever-changing marketplace. According to the company, the unique value of these activities is vested on the fact that retailers define the objective, the scope of each project and own the process after it was released and disseminated to the broader retail community. Examples of the study conducted are food retailing formats in Asia, critical protocols towards food retailing endeavors, Latin American consumption and marketplace trends.             There are five council members: Asia, Europe, Latin and North America and National Association of Convenience Stores (NACS). Such councils are cashing in on research to innovations of product portfolio by means of introducing new concepts and ideas about merchandising and store formats as well as idea generation for connecting store performance and the actions of store management teams as examples of retail innovations. Other examples of consumer-centered innovations include most of “shopper perception is reality” that drives Coke company to effectively embrace pricing strategies based on consistent communication, promotions that are based on personalization and the concept of self-checkout on the basis of what shoppers want like the DIY.             Products-wise, the Council aimed at ensuring sustainable products and responsibly-sourced and traceable products as well as eco-friendly packaging, and this product must be accessible at reasonable prices. Ensuring product assortment is also under the Council’s scrutiny to further guarantee innovative health goods. Assortment for Coca-Cola means small/fractionable, to consume right after at affordable prices (Fernie and Sparks, 1999, p. 28). Coca-Cola Retailing Research Councils – Interconnection with the Value Chain             Wherever in the Coke community, the slower growth, the increased competition, the more differentiation concept and the growth of partnerships have been faced as challenged because of its impact on value creation at the retail level especially when the some stores create more value compared to others. To wit, the Research Council is the responsible entity which will define what retailers can do to improve the performance.             Notably, it is a matter of management styles especially when it comes to employees to create exceptional loyalty and get most out of the market potential. Retailers create greater value, aside from that, through positioning four conditions in place that are always associated with great performance and these are clarity and commitment to goals, focus on key drivers, simple mechanisms that propel achievement and cadence of accountability.             Strategically, Research Council removes unnecessary costs that could be incurred from distribution and supply systems; increase consumer choice and reduces overall costs of inventories and physical assets. Apart from this, the Research Councils are the key towards achieving Class A standards as part of the CPE program. CPE stands for Constant Pursuit of Excellence. Such program is initiated within the Coca-Cola system in order to support growth, to improve customer service and to increase market responsiveness. These are evidenced by the following: ·         Inventory levels are down Each of the facilities and components such as the concentrate manufacturing facilities and canning plant that received Class A rates obtained significant progress in inventory turnover, with specific facilities that accomplished the number of weeks of inventory on hand declined between 50 to 75%. ·         Improved productivity Level of quality targets within these facilities, whether for products, bottles or cans, coupled with high responsiveness to production experienced productivity gain of 85% to 100%. ·         Improved customer delivery performance In different facilities, order fulfillment and delivery are technically reported to be 100% on time. In fact, the time since the last missed shipment is measured in years, not days, weeks or months. For Coke, this is just a part of putting value not just to the products but on punctuality and customer responsiveness. ·         Better supplier delivery performance Prior to acquiring the Class A rate, the performance of the supplier is measured to be falling between 50 to 75%. But right after the complete integration of CPE, while taking into critical account of the Research Councils’ role, worldwide facilities had experienced supplier on-time delivery performance of higher than 95%. ·         Improved business processes For different processes like purchasing and customer order processing, there had been a large reduction in cycle times. ·         High data integrity Inside different Coke facilities, inventory record accuracy and bill of material accuracy is reported to be 99-100% and 100%, respectively. ·         Decline in cost of goods The reductions, as high as 20%, in each facility annually is viewed to be a significant improvement. ·         High team spirit Communications within and between marketing, finance, quality assurance and manufacturing are improved with respect to the global teams.             The focus of the company is on holistic improvement instead of systems replacement that centers on the development of the business operation in different levels but most significantly on the retailing. Implementations are the key towards proactive functionality within manageable and actionable initiatives. Coke’s plan is one facility at a time with decision-making that is based on anticipated benefits.     Coke – Creation of the Absolute Effective Position Through managing the subsistence of beverage leadership, Coke continued to deliver unit case volume growth. The sustainability of the business too is motivated by the expanded portfolio that makes way for the offerings to new customers and satisfying the evolving needs nutrition occasions of the current customers. These are proven by the ranking – 4 of the top 5 nonalcoholic sparkling beverage brands are owned by the Coca-Cola Company; number of associates – 90, 500 worldwide; operational reach – 200+ countries; consumer servings – 1.5 billion per day and beverage variety – more than 2, 800 products. Brand-wise, the original Coca-Cola is still the best known brand globally as it also offers the ultimate refreshment for young people. Diet Coke is the second biggest soft drink brand due to lighter taste that aimed for women in their twenties. Bloke Coke or Coke Zero is already a record-breaking success as it brings great Coke taste but with zero sugar for men aged between 20 and 29. Evidently, the beverage leadership position is delivered by how consumers can more around the Coke portfolio depending on their needs at different stages of their lives. Financially, the Coca-Cola Company reported in February that profit jumped of about 18% with net income nearly B – .98 billion on .9 billion in revenue. The fourth quarter earnings per share of .52 had increased with 79% compared to that of the previous year and .58 after considering items with impacting comparability which is of 12% increase. The overall earnings per share increased by 19% (.57) and .70 after considering items impacting comparability which increased by 14%. Further, Coke and its bottling partners delivered unit case volume growth of 6% for the year 2007 and four consecutive quarters of double-digit earnings per share growth. Worldwide, the sparkling beverage volume increased by 4% and the still beverages by 12%. In terms of systemic integration, adding value was more profitable for consumers. As the company focuses their attention in creating beverages and eventually marketing them, they were enabled to “understand and meet the diverse and ever-changing beverage needs and desires of the consumers globally”. With its bottling partners, there had been the existence of collaboration, support and shared values and goals and through its customers, Coke brands were made possible for the consumption in local communities. Driven by the Coca-Cola system, the company is now no. 1 in sales of sparkling beverages, juices and juice drinks, no. 2 in sales of sports drinks and no. 3 in sales of bottled water.     Value creation in marketing unique brands require the production and product testing as well as meeting food and beverage safety regulations and labeling requirements. To ensure product quality, Coke must oblige with marketing and production requirements and also maintain safety and liability or processing obligations. Moreover, value is created by means of creating, establishing and stabilizing product demand. To wit, a unique brand differentiates itself from the others to create its own demand. Identity, in addition, limits competition from other beverage producers who might be willing to sell at low, low prices or try to produce and sell products of low quality. Coke brands from production to promotion have unique locations and geographic features that are not easily duplicated exactly by competitors. Creation of value pushes the company in accomplishing what they are now today – technically, financially and systemic-wise – or perhaps creating a win-win situation for the consumers. With all said, value creation at Coke is being reflected by the price consumers have to pay. The idea of value or what the consumers get with their money means more than just making food and drink affordable. For Coke, it meant increasing the variety and quality of goods or “affordability”. Notably, because of production and distribution technologies, affordability now comes with a new meaning. Affordability is nowadays characterised by availability, quality and choice. Since consumers always decide what value is, Coke decided to make value for them in three areas: choice, information and goodwill. Choice, according to Neville Isdell (2004), is any option that allows the consumers to act on a decision about his or her preferences especially if its concerns health and lifestyle. For Coke, this means products that provide beneficial impact on individual health on a much broader range of portion size options. Informations are the guiding force that helps consumers decide about the food and beverage that are right for them as well as basic facts about ingredients and nutritional content. This assures them of quality, safety and production. As Isdell puts it, “whether and how much value consumers are willing to confer on any information we provide is going to have everything to do with our credibility”. Meaning, how much trust does the consumers vested on the products and the company.  Provided that consumers also value goodwill, is it just right to create value for them through ethical shopping. For Coke, this has a lot to do with what is beyond consumer’s awareness or what they do outside manufacturing facilities and retail locations. Goodwill governs Coke to adhere and build through programs, policies, research, innovation and market persuasion. Programs for consumers aimed at making them move, in affirmative manner, linked with policies. Aside from the availability of programs, another way Coke builds value with consumers is by “policies that promote choice and availability of transparent, action-oriented information”. Doing the right thing does not necessarily mean to provide them with array of choice and information but a more pressing concern is how they can act to do such. In putting the greatest value to consumers, it is only righteous that brands, identity and collectivity must come together. How? At Coke, they do extensive research and design, they produce the goods and they bring them to the market. Through the informations, consumers make informed decisions from all the choices Coke made available.          Conclusion               At Coke, the creation of the absolute effective position is central on investing on Coca-Cola Retailing Research Councils. Along with its four key processes, Coke creates value through proactively engaging their retailers at technically every levels of the value chain from raw materials down to end-products. Conforming to holistic improvements, Coke strategically put value to store management, providing consumers with the right to choose while also enjoying the health benefits of its brands. More than complying to standards and acquiring first rates, Coke aimed at enhancing the shopping experience and enjoyment of refreshments which are reflected in the figures they accumulate coupled with ethical operation.     Appendices     Diagram 1 Four Areas of Coca-Cola Company’s Value Chain       Diagram 2 Value Chain Actors in Coca-Cola Company             Diagram 3 Drivers of Cost Advantages in Coca-Cola Company       Note   Majority of the informations are sourced from the official website of the The Coca-Cola Company, www.cocacolacompany.com.   http://www.coke.net/app/home/portal/!ut/p/.cmd/cs/.ce/7_0_A/.s/7_0_61P/_th/J_1_P7/_s.7_0_A/7_0_13T/_s.7_0_A/7_0_61P   http://www.csatopss.com/presentation/Bill_Bishop.ppt#257,1,Slide 1   References   Big suppliers reenergize marketing – Coca-Cola Co. and Pepsi-Cola Co. have debuted advertising blitzes, (2003 February), Chain Drug Review.   Bryan, L. L., Fraser, J., Oppenheim, J. & Rall, W. (1999), Race for the World: Strategies to Build a Greater Global Firm. Harvard Business School Press, US.   Classic packaging. The Coca-Cola bottle., retrieved on 19 March 2008 from http://www.design-technology.org/cola.htm.   Coca-Cola Enterprises, (1998 May), Beverage Industry,   Cola Wars Continue: Coke and Pepsi in the 21st Century, retrieved on 19 March 2008 from http://www.slideshare.net/adhirock/cola-wars-case/.   Coke Trilogy Set for Success in 2007, (2006), Trade Support, retrieved on 24 March 2008 from http://www.cokecce.co.uk/cce/news_art.jsp?aid=349.   Fernie, J. & Sparks, L. (1999). Logistics and Retail Management: Insights into Current Practice and Trends from Leading Experts. Kogan Page.   Ghemawat, P. (2003), Globalization: The Strategy of Differences, Working Knowledge for Business Leaders, Harvard Business School.   Gray, C. Coca-Cola: “Always” Class A MRP II.   Gould, W. (1995). Coca-Cola. Cherrytree.   Greek Coca-Cola HBC confident can manage input cost pressures in 2008, 2007, Forbes, retrieved on 19 March 2008 from http://www.forbes.com/markets/feeds/afx/2007/11/13/afx4333144.html.   Hays, C. L. (2005). The Real Thing: Truth and Power at the Coca-Cola Company, Random House.   Hughes, J., Ralf, M. & Michels, B. (1998). Transform Your Supply Chain: Releasing Value in Business. Thomson Learning EMEA.   Isdell, N. (2004), “Our Sector’s Responsibility for the Health and Nutrition of Society” – Speech, Rome Italy, retrieved on 24 March 2008 from http://www.thecocacolacompany.com/presscenter/viewpoints_isdell_cies.html.   Pendergrast, M. (1997). For God, Country and Coca-Cola: The Unauthorized History of the Great American Soft Drink and the Company that Makes It, Simon and Schuster.       Pennings, E. & Natter, M. (2001), Strategic Diversification and capacity utilization, International Journal of Production Economic, vol. 72, no. 3.   Porter, M. E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York.   Swicegood, S. (2001), The 24/7 learning environment: A thoughtfully designed work environment can foster creativity and the exchange of ideas – Innovation – Workspaces, Training and Development.   Credit:ivythesis.typepad.com

How Coca-Cola Makes Sense of their Value Chain

How Coca-Cola Makes Sense of Their Value Chain “We have delivered strong business results and increased value to our shareowners by e...

Managing Capability of Coca-Cola Company

Managing Capability of Coca-Cola Company Introduction Coca-Cola Company is involved in the distribution, marketing and manufacture of the nonalcoholic syrups and beverage concentrates worldwide. Its primary product is the coca-cola which is a type of carbonated soft drink that had been sold in restaurant, to the stores and to the vending machine to more those 200 countries and it is commonly known as Coke. The company is commonly offering still and sparkling beverages. The sparkling beverage that the company is offering includes ready to drink and yet nonalcoholic beverages with carbonation as the carbonated water, flavored water, and the energy drink. There are still beverages that includes the nonalcoholic beverages and without the carbonation which includes the non-carbonated water, flavored water, teas, juice drinks, and the enhanced water. The company is also offering the fountain syrup, concentrates, and syrups which include the sweeteners and the ingredients. It also markets its nonalcoholic beverages under the Sprite, the Diet Coke, Fanta, and the Coca-Cola. The company usually sells its finished beverage products to the distributors and the canning and bottling operators, fountain wholesaler, and the distributors. The company had founded in 1886 and it is mainly base in Atlanta Georgia (Yahoo Finance, 2008). The company’s mission is for the refreshment of the world in not just the body but for the heart and spirit well. It also wants to inspire optimism with the aide of the actions and brands, and to create the value which can make difference in engaging everyone. The company’s vision is for the people to have the great work and to make a difference by being a responsible citizen. It also forecasted of anticipating and satisfying the beverage brand in the needs and desires of the people while winning and nurturing the mutual loyalty of the people. The company is also optimistic in maximizing its return to the shareowners while being aware to their entire responsibilities. In this regard, the company is aware of their values which are having the courage in shaping the future and being committed by the mind and the heart. There are also values of being real as their integrity and open for collaboration. The company is also aware of innovation and most importantly their main focus is the quality of the entire company (Coco-Cola Company Corporate Site, 2008).    Strategic Capability of Coca-Cola Company Strategic capability is being able to think imaginatively regarding the direction of the organization or the part of the organization might go. This is usually concerned in taking for the long term view of the organization or what will be the future of the organization for its continuing success. As defined by Rosemary Harrison, the strategic capability is involve in choosing for the most of the appropriate long run goals, vision, and the objectives for the enterprise. This is also involves in managing and determining the allocation and courses of action which are necessary in achieving the goals. This strategy also ensures and selects the strategic development assets for the assurance of the continued business profitability. In this manner, this organizational strategic capability mainly depends to the ability of the managers (Armstrong, 2004, p. 176). Going Global – this is the major strategic capability that Coca Cola Company had done in diversifying its business. In this regards, to be one of the multi-nationals company that operates globally, it means that the have the only real global players in the global level. The shift in the global power will be the adaptive capacity of the company which had offered. According to the CEO and Chairman of Coca-Coca Company, there are four forces that prevail in global into global move. These include the desire for the determination, the outstanding democratic capitalism, the success of the institution, and the influence of the regulation investment. These factors must meet the needs of the people. In this manner, the company manager believes that this shift can lead to the better future of the company (Rosenau, 1997, p. 444). In this global strategy, the company had face circumstances when bringing the American product to the world which can lead to the disaster for the company. This move can lead to the imperialism and colonialism for the other country that can wage for the American corporation in threatening the homogenous entity. In these scenarios, the company begun to think of the strategy that will support by most of the consumers around the globe and that was to localize the product. This going native move can tailored the drinks in every individual country. This had also been parted down by CEO Douglas Draft which can recognized the demand in breaking the traditional way of service and expand the product line of the company beyond the carbonated drinks. Draft had learned in shifting the line of products of the company as in the teas, juices and waters so that coca cola can be more responsive in the local markets. The “think local, act local” motivates Draft in diversifying the business and goes into the flow of innovation. The strategy also lead to the satisfying the consumer’s choice and wants in meeting the competition from the juices, sport drink and to the water. In the said move, for the year 2001 alone, the company made 15 new drinks for the entire 45 Asian markets and the localization can be the key for engaging into diversification and to the emergent marketplace. In this global invasion, the company had recognize its products not just for American product but for the localize product as well. This also led of having the higher income return and can make the business to be globally competitive for the long term manner. The other strategic capability of the company manger is innovation for the products, the acquisition and emerging, and better marketing (Amis and Cornwell, 2005, p. 73-75). The company’s benchmarks are to have the competition in the greater market and to have a market of globalization with the reduction of entry barriers. It has also benchmarks on labor productivity     The Resources of Coca-Cola Company             a. Value The company also owned 33 operated beverage concentrate and syrup manufacturing plants which are located in the entire world. It has also hold majority interests under the accounting rules of 34 operations and 80 primary beverage canning and bottling plants which are located outside the United States. The company has also 4 facilities of bottled water and leases also the same facility to United States. The company also owned the Fifth Avenue in New York which has approximately 315,000 square feet. The other additional leased and owned real estate in the whole world are using by the company in bottling operations, to office space, retail operations to the warehouse. The management is optimistic that the facilities are enough to the production and can utilize to the past experience. On the other hand, they are also open for the additional facilities and personnel as needed for the expansion. The company also generates income, revenues, and cash flow through selling and manufacturing the beverage syrups and concentrates and some of the finished goods (Coca-Cola Company Corporate Site, 2008).             b. Robustness Including in the tangible assets of the company are the authorized canners and bottlers that had been combined by the syrup and to the concentrated sweeteners so that it will have to produce soft drinks. The soft drink which had been finished are packaged to the authorized containers that had bears its trademarks as the cans and the refillable and nonrefillable plastic and glass bottles which followed in selling to the retailers. The major materials of the business of the company are non-nutritive and nutritive sweeteners. It has also no experience of any difficulties in acquiring the nutritive sweeteners. The high fructose corn syrup had purchase with the assistance of the Coca-Cola Bottler’s Sales & Services Company. In general, the raw materials are available readily from the numerous sources which is also the reason for the company of not to experience any trouble in obtaining the sweeteners. This will build the strong foundation of the company in achieving its goals and in competing globally.                        c. Parity Coca-cola is an active member of business community which works personally to the local individuals, governments, and merchants in order to improve the prosperity and health of the local environment and economy. The company also has the responsible marketing that can recognize about the concern of the nutrition of the child which is a global policy. The company also supports the schools in the communities which can help in encouraging the students to have healthy lifestyle. d. Non- Substitutability The company’s intangibles are the trademarks which are being annually tested and determined so that it can have the indefinite useful. The trademark is also unique for the company and can also serve as one of its key competencies. The goodwill and impairment value are measured which includes the analysis of cash flow, independent appraisal and the estimation of the sales of proceeds where  the company had been recorded million of intangible assets in the year 2005 and are being related to the trademarks sold in the Philippines. In 2004 the company charges of related intangible assets of 4 million that relates to the franchise of CCEAG of the operating segment of European Union (Ibid).     The Threshold Capabilities of Coca-Cola From the start the Coca-Cola Company had been planted its brand name in its own field and built its brand image with dignity and integrity. From the history, it rebound the greatest racial discrimination in the U.S. law suit and had reinvented it image to become the leader of national diversity. It had also built its certain and sustainable commitment for the people, to the countries and to the world. The Coca-Cola Company also has the unbiased retention of in both the management and to the work force. This means that the retention is across to all level of races and there is no discrimination occurs and simply the leader of Human Capital. Traditionally, the company has the anchor bottlers that are efficiently well-capitalized and large firm to the committed growth of Coca-Cola. These are also been demonstrated to the Coca-Cola by having the team of strong management with the capability of managing the operations of bottling to one or more countries. These are also been provided benefits financing growth of the company which takes the equity of the firm (Rothacher, 2004, p. 77). The creation of the limited liability company with partner to P&G can have the state-of the art capabilities for the company’s international merchandising, distribution, and customer marketing. The innovation of the new products and nutritional beverages can strengthen the creation of creation better products to the company (Mourdoukoutas and Papadimitriou, 2002, p. 144). This only shows that the company is not afraid in trying to diversify and innovate its products to meet the international standard.     The Core Competencies of Coca-Cola Company The company had recorded it brand for continuous diversification and enriching its products in the international market. In this case the company has the certain key competencies over which are the primary factors in it continuing to compete in the global market. First and foremost, it has excellent promotional strategy as creating many souvenirs for its customers and very appealing advertisement. Regarding the taste, it is widely accepted by customers because of its uniqueness. The secret formula for production is the asset of the company but most of its imitators failed to in providing the same taste as of Coca-Cola. The company usually has the contracts with the big restaurant as McDonald and it has also broad coverage. It has also the diversified production line of products for the customers’ wide options. As compared to its major competitor Pepsi, the market share of Coca-Cola is much higher that implies that most of the customers prefer Coke as their drinks. The company also itself to the partnership with the meaningful organizations as the UNAIDS, or the United Nations agency that fighting against AIDS and HIV that gave much impressions from the public wherein most of the consumers are purchasing the products. The Coca-Cola products has reasonable prices which can accepted by most of the lower and middle class people and easily purchase in many place as in the schools and in the supermarket (Essay Info, n.d.).   The Value Chain Analysis for Coca-Cola Company The suppliers are the partners of the company that supplies the system with the materials which includes the packaging, the ingredients, goods and services and machinery. All of the direct and authorized suppliers need to comply with all of the respected regulations and laws which include the forced labor, the child labor, freedom of association, abuse of labor, and the collective bargaining. This means that all of the agreements with the suppliers are required to comply with the Supplier Guiding Principles. The customer of the company includes the large international chains of restaurants and retailers which includes the independent businesses. Some of the customers are the major corporation which has the name as familiar to Coca-Cola and others are the local pushcart vendor and the corner market. The company is open for all types of customers which can help them n growing the customer’s business and in return the company’s growth. The company serves its customers trough the aid of the team of account management that can provide them tailored and services their needs. In the Europe, Africa, and North America, there are Coca-Cola Retailing Councils that provides the research regarding the issues that affects the retail of the industry. Through the increase complication of the retail environment, the company works to the customers for the improvement of the marketing shopper and to the collaboration of the supply chain which needs for the requirements in the acceleration of the innovation so that it can provide highly selected options on the line of beverages for every customer and to every shopping trip. The company provides the support for the smaller customer in helping them to grow its business more profitable and efficient. The company also works with the customers so that they can broaden the range of the beverages they are offering and can ensure the beverage responsible market (Ibid).   Assessing the Performance of Coca-Cola Through the use of the balance scorecard, the performance of Coca-Cola can be measured as:                     In this regard, through the managing capability of the board of managers, their financial perspectives are measured through the aide of its operating income, economic value, added and the return of capital employed. The customer perspective is measured with the retention of the customer and their satisfaction as well as the market share to the segment which is being targeted. The business process can measure through the quality, cost, and throughput. The growth and learning are assessed with the satisfaction of the employees of Coca-Coca Company, their skill sets and others.   The Contribution of the Manager in the Company In any business, the manager is the one that controls the movement of the business and its foundation. For the Coca-Cola Company, the manger made possible is managing the investment and the flow of the budget as well as the product proper selection of the strategic movement that had done in the diversification process. It is also the one that had responsible in oversaw the entire operations of the company around the globe. The board of management or most specially the managers are the people who oversaw the interest for the long-term health as well as the overall success of the financial strength and financial business of Coca-Coca Company. The board of managers also served for the major decision making body of the company. Behind the success of the company are the board of directors and their management capabilities in order for the company to have the sustainable growth. This new milestone growth had led by the managers’ idea on the revitalization of the trademark of Coca-Cola. There are also exciting joint ventures and acquisitions which led to the betterment of the string financial status of the company. The group of the managers also made moves to their product innovations which can lead to marketing initiative that resulted to the increase number of sales for the past years. The new partnership is also one of the reasons that advance the global citizenship of the company. The increase earnings of the Coca-Cola Company to .57 per share or 19 percent for 2007 and .9 billion or grew of 20 percent of its revenues was made by the strengthening of the sparkling portfolio of the company in its new brands while expanding the still portfolio with the innovation and acquisition made by the board. Aside from those cited above, the company managers are also the one who thought for the improvement of the consumer marketing capabilities, the franchise leadership and the commercial leadership. The creation of the more sustainable future with the aide of the effective energy, operational practices and water are also the key factors from the managers’ effort to the company’s success. Regarding the future plans of the company, the board executed five major strategies as the growth for the sparkling beverage leadership, the leverage balances geographical portfolio, the rapid growth of still beverage, the strengthening of the capabilities of Coca-Cola System, and the acceleration of the global innovation pipeline (Coca-Cola Company Corporate Site, 2008).   Conclusion The management capabilities of the managers of Coca-Cola Company are the key competencies of the company in going to the peak of their success. In line with this, these abilities of the management led to the long term effect of the company that had put it on the top. These holds true for the greatest asset of the company which are the experienced and talented people all over the world. This also indicates that the ultimate goal of the company is to create lasting and stronger performance. Due to these management capabilities, the company is expected to have a long term success by have the immense opportunities. The company is expected to have the growth in the economy and it can be 0 billion in it total revenue. This means that the company is aware that there are many opportunities existing and awaiting for them. The management capability is the foundation of all of the success of the Coca-Cola Company which brought the company to diversify globally and to be internationally which until know has experiencing by the company. Bibliography Amis, J and Cornwell, B 2005, Global Sport Sponsorship, Berg Publisher, United Kingdom. Armstrong , M 2004, How to be an Even Better Manager, Kogan Page, United Kingdom. Coca-Cola Company 2008, Yahoo Finance, viewed 23 April, 2008, http://finance.yahoo.com/q/pr?s=KO. Coca-Cola SWOT n.d., Essay Info, viewed 23 April, 2008, http://essayinfo.com/sample/essay/914/2/ Coca-Cola Company 2008, Coca-Cola Company Corporate Site, viewed 23 April, 2008, http://www.thecoca-colacompany.com/. Mourdoukoutas, P and Papadimitriou, S 2002, Nurturing Entrepreneurship: Institution and Policies, Greenwood Publishing Group, USA. Rosenau, J 1997, Along the Domestic-foreign Frontier: Exploring Governance in a Turbulent World, Cambridge University Press, United Kingdom. Rothacher, A 2004, Corporate Cultures and Global Brands, World, Scientific, New York.     Credit:ivythesis.typepad.com

Managing Capability of Coca-Cola Company

Managing Capability of Coca-Cola Company Introduction Coca-Cola Company is involved in the distribution, marketing and manufacture of th...

Research Paper on Financial Management of Coca Cola

Financial Management of Coca Cola Introduction The Coca Cola Company is involved in the distribution, manufacture, and marketing of the non-alcoholic concentrates of beverages and syrups worldwide. It is also offering the still and sparkling beverages. Its sparkling beverages include the ready-to-drink beverages with the carbonation of the carbonated waters and energy drinks with the flavored waters also. For its still beverages, its covers the non-alcoholic beverages without the carbonation, the flavored waters, the enhanced waters, and the non-carbonated beverages. The Coca-Cola Company also offers the different fountain syrups and concentrates syrups. It brand names marketing includes the Coca-Cola, Diet Coke, Sprite and Fanta. The company was founded in the year 1886 which had headquartered on Atlanta Georgia (Coca Cola Company Corporate Website, 2008). The company’s finished beverages products that bear its trademark can be sold into more than 200 countries with the eight segments in the whole world. The company had also been completed the acquisition of the Energy Brands, Inc., and the numerous range of water products. For the past performance of the Coke, it can be determined that it is indeed an excellent firm for having the outstanding products, management, earning, and marketing. In order to have the better overview on this company, it is important to determine and analyze its financial management to see its development (Modern Graham, 2008).   Aims and Purpose Understanding the financial management of Coca Cola Company can give the overview for the processes and component that had been involved in the financial administration of the company. This has also the aims of determining the process of managing the money and the income of he flows that are associated with the side of business. This can also justified the assurance for the company and its sufficient funds that are availably needed, used in acquisition for resources, and its maintenance. This can also have to determine the Coca Cola Company and its economic productivity and efficiency. This can also be sued by the investors by the investors as a guide for the possible investment in the company and for the future reference for the financial aspect of Coca Cola Company.   Literature Review Since the company is considered to be one of the Multi National Companies, then its financial resources and management are widely used. The first is the cost of goods that covers the amount of money for Coca Cola in making the syrups and concentrates for the soft drinks. For the second quarter of 2002 it recorded to have .9 billion which rose for almost 0 million for the previous year. This only shows that the cost of the soft drinks rose faster as compared to sales due to charging of the supplies for the cost ingredients in making soft drinks. For the gross profit of the company which is one of the financial management methods, it is only measured by the sales minus the cost of production of the product. For the Coca Cola Company in the 2nd quarter of the Selling, general and administrative expenses or (SG&A) has the amount of .8 billion as 14.6% up from the past 1 year. The company has also the revenues which rose that are faster than its SG&A expenses. This only indicates that the company is tightening its belt in the entire expenses that he control which includes the pay and travel. This can also signifies that the cost produce by all of the soft drinks is fast as compared to the increase sales of the company and means that the company is receiving the price hikes from the suppliers. Through taking the sales, the revenue and less cost of the SG&A and goods expenses, the operating income can be calculated. This can give the business reporter the indication for the performance of the company’s core business. For the case of the operating of Coca-Cola, it increased 9.2% for the second quarter of 2002 as it compared for the past year. This is also less than the sales, the growth, and the increase of the sold goods. The earnings before taxes can be determined by adding as well as subtracting the expense and income and the income losses for the investment. The Coca-Cola Company had recorded the net income of only .3billion which is a gain of 15.4% above the figure of net income that reported in the past year. This can also break down to arrived at the net per share or EPS in order to show every outstanding stock with the company’s recorded EPS of 52 cents per share figure. The company also rose for about 15 percent in the second –quarter of 2002 due to the strong and new products sales in Asia and North America that had overcame the decrease economies in the other markets. According to the brand analysts, the stock of the company fell for about 37 cents with the per share whereas the investors questioned for the many volumes of the Coke that came from the juice brand’s lower margin. The asset less their depreciation can be totaled for .3 billion in the said quarter which is an increase of billion in the assets for the company. This can be seen as impressive, it is also smart in finding for the falling and rising of the assets. The Coca-Cola Company also made the increase in the long-term debt due to the acquisition of bottler (Roush, 2004).    Research Investigations The analysis for the financial statement of Coca Cola had been starting the year 2000. Based on the financial analysis made, it showed that that there is a declination for the total asset for the year 2000 which is 3.65% as compared in the year 1999. The asset structure and the governing segment has only decreased by 1.69% in the in the investment as well the in the tangible and intangible assets. The current ratio has the increase for about the six percent starting and currently contributing for the extension in the 30 percent of the total assets. The receivables and inventories declines for having the non-significant fraction while the equivalent and cash rise for 2.2 percent. Due to the stated dilemmas in the declination of the asset, there were adjustments that can cause the diminutive effects of the company’s structure. In the same year, the increase in the ratio had also increase fro about 0.7 percent because of the equity reduction o r the income loss. The long term debt and the total capital have also improved 0.5 percent due to the impact of high increase in the short-term liabilities. For the company’s liquidity, the current ratio that measures he ability of the company has the increased of 4.3% n the year 2000. There is also the other important factor to consider as the decrease in the dynamic liquidity of 1.2. For its profitability and efficiency, the sales revenues also increased by 3.3 percent which is moderate decrease in operating profit and to the profit before tax which is 1.1%. The inventory turnover increase for 4.3% while the ROA and ROE had decrease for 7.9 and 9 percent for the order within the inventory efficiency. For its EPS, it fell for 10.2 percent in the same year and suggesting the likelihood for the gaining profit by the shares of investment and most likely will increase in the short-term liabilities with the slow growth pace. With regards to the cash flow of the company, it can be known that during this year, have no experience in the restructuring for the past year. This only shows that it has the stable figures and is presented in the cash flow chart. Although the figures are having almost the same, they still have the tendencies that it was most likely the interest and intentions of the company. In general, for the year 2000, the Coca Cola Company has no experience of extreme changes apart from short-term liabilities which has considerable increase. To be on market for the past decades, these changes cannot affect for the short-term run due to the fact that it already built the good reputation. Additionally, it also lived up to the expectations on showing off for the good results every year. Nevertheless, it is also obvious these are for the time of changes whereas the different strategies need to consider and implemented. Currently, the company is looking for the right direction by improving the different segments (ECheat, 2007). After 8 years of business production, the first quarter of the report of Coca Cola Company can be analyzed. For the first quarter of the year 2008, EPS had increased of 20 percent or .64 as compared to the previous year right after the consideration of the impact of the comparability. For the worldwide volume of the case had reach for 6 percent for this first quarter and into the international unit case volume which had reached fro about 7 percent. There had also recorded the strong cash generation with the operational increase of 18 percent. The company had begun the year with success which has the solid quarter for the consistent and overriding objective for the creation of long-term sustainable growth. The success of the system of company is the execution of the strategies from the beverage innovation for the effective execution for the sale point and to continue growth drive. Additionally, there is also a balance growth that proves the ability in managing the time and geographies for delivering the results (Coca Cola Company Corporate Website, 2008). The net operating revenue of the Coca Cola for the forts quarter of this year had increase by 21 percent. The company’s revenue growth only reflects for the 5 percent in the increase for the concentrate sales and the 5 percent for the increase in the structural change due to the relations of bottlers’ acquisition as well as the 9 percent and 2 percent of the currency and pricing mix, respectively. There was also 18 percent in the increase for cash for operation as compared to the previous year which records .1 billion. The company also repurchased its stocks for 9 million in the said quarter and expected to repurchase it for .5 to .0 billion in the stocks for the full year for about .5 and up to .0 billion. There are also the approved annual increased of the dividends that can risen for 12 percent starting 2007.   Conclusion Based on the aforementioned finding and figure, it cannot be denied that Coca Cola Company is considered to be one of the strongest multinational companies worldwide. It also determined that the international business had been once again led the way with the sparkling and still beverage which contributes in the ample results. This only recognized that there are still more workings that need to be done for the continuing success of the company which is the North America as special mention for its challenging economic environment. This only proves that the company is still optimistic regarding its progress and it can continue to remain to be committed for the development and improvement of the execution of the strategies.     Recommendation For recommendations to the Coca Cola Company, albeit the facing of the difficult macroeconomic circumstances, the success can be continually gain and achieved if there is a continuous collaboration with the bottling partners. Aside from that, it can also maintain if there is maintenance for the unrelenting focus in the integrated consumer marketing, franchise and commercial leadership. It is also important to leverage the strategic acquisition and leading brands for building the innovation for its pipeline through the productivity driving. There should also be more excellent management financially for the company with existing cultures of the foods.   Bibliography The Coca-Cola Company Reports First Quarter 2008 Results 2008, Market Watch, viewed 12 June, 2008, http://www.marketwatch.com/news/story/coca-cola-company-reports-first-quarter/story.aspx?guid={610BBF9F-F5E6-4426-B277-DA46C392E419}&dist=TQP_Mod_pressN. Financial Statement Analysis of Coca-Cola 2002, Echeat, viewed 12 June, 2008, http://www.echeat.com/essay.php?t=29450. Roush, C 2004, Show Me the Money: Writing Business and Economics Stories For Mass Communication, Routledge, United Kingdom.  Valuation: Coca-Cola Company 2007, Modern Graham, viewed 12 June, 2008, http://www.moderngraham.com/?p=238. Coca Cola Company Corporate Website 2008, Coca Cola Company, viewed 12 June, 2008, http://www.thecoca-colacompany.com/.       Credit:ivythesis.typepad.com

Research Paper on Financial Management of Coca Cola

Financial Management of Coca Cola Introduction The Coca Cola Company is involved in the distribution, manufacture, and marketing of the...