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Distribution System Of Coca Cola Company Add in library

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Question:

Discuss about the Distribution System of Coca Cola Company.
 
 

Answer:

Introduction

In the recent times, simply producing products is not enough, the marketers have to ensure the fact that the products are delivered to the right market at the right time to the right people at the right cost (Aylott and Brindle-Wood-Williams, 2007). So this emphasizes upon the importance of distribution channels in the modern day business operations.

Thus taking into consideration the above aspects, the report emphasizes upon analyzing the products, the strategies and the practices of the Coca Cola Company that supplies its beverage bases and syrups to Coca-Cola Amatil (CCA) which is one of the largest bottlers of non-alcoholic beverages in the Aiasa-Pacific region. It is one of the world’s five major coca-cola bottlers and is headquartered at North Sydeny, New South Wales, Australia (Coca-cola, 2014). The report tends to identify the gaps in the current offerings of the company and provide suggestions in the context of the opportunities. It also analyzes the distribution channel and marketing topics that include the vertical and horizontal integration. It has analyzed the problems faced by the company in delivering its products and has provided suggestions for improvements. It also incorporates the use of technology in the distribution channels and improvements to be made. The role of innovation in future growth of business has been analyzed. The reports also incorporate the channel power and conflict and improvements made over the years, the SWOT analysis and competitor analysis. It also includes conclusion as a summary of the above findings.

Products, Strategies and Practices of Coca Cola

Coca-Cola was the only flagship brand that was sold by the Coca Cola Company for almost 70 years. However Since the year 1995, the company started expanding its offerings leading to the addition of a wide variety of beverage selections and portion sizes for the consumers. This reveals the company’s commitment towards offering an assortment of beverages for everyday lifestyle, life occasion and life stage. Thus, at present the company offers500 beverage brands that are sold in more than 200 countries across the globe (Coca-cola, 2014). So it leads to more than 3500 beverages in different categories like low and no-calorie sparkling beverages, regular beverages, fruit drinks, fruit juices, bottled water, energy drinks, sports drink, ready to drink teas and coffee.

The strategies that have been adopted by the company in order to market its presence in the market outpace the competitors can be illustrated as follows:

 

Positioning Strategy

Coca-Cola operates with the philosophy of “think global, act local” and thus even though the company keeps the same core product i.e. coke, it tries to adapt to the local needs. So it can be said the company uses strategic positioning to maintain its same image across the globe and this has been a great success since the brand is perceived by the consumers as a part of daily life everywhere in the world. This perception leads to high degree of loyalty and leads automatic purchase decisions. The brand is positioned as “Live the coke side of life” that exhibits that the company is dedicated to deliver joy and happiness (Yuvaraju, Subramanyam and Rao, 2014). Thus with the name of coke, the first thing that strikes the mind of the people is fun and entertainment.

Strategies

 

Positioning Strategy

Live the coke side of life

Differentiation Strategy

 

Product differentiation and image differentiation strategies.

Promotional Strategies

 

price strategy trade promotion, sales promotion, purchase shelves in departmental stores to display their products (Wang, 2015)

Distribution Strategies

 

direct and indirect selling (Aylott and Brindle-Wood-Williams, 2007).

Advertising Strategies

 

·         Print Media

·         TV commercial

·         Holdings and billboards

·         Social and digital media

Competitive Strategies

Marketing, innovation and globalization strategies

Best Practices adopted by Coca-Cola

Customer research

Identify the changing consumer tastes and preferences

Testing

To align the products with consumers’ wants

Entrepreneurship

To encourage innovation and introduce new products

Consumer driven practices

To make consumer feel valued (Benard, Oketch and Matu, 2015)

Value based management

To offer enhanced value to consumers through live positively approach

Gaps in Current Offerings and Recommendations

In the recent times, not only the aged consumers but also the young consumers have become more health conscious and thus are emphasizing upon consuming far less sugar. So this can be looked upon as a major concern for Coca-Cola Company since the consumers are switching to Red Bull and other energy drinks in order to get their caffeine boost (Pope, 2011).

So it can be recommended that the Coca-Cola Company should introduce health drinks in its product portfolio in addition to diet coke. Moreover it can also complement its beverage business though offerings it consumers some of its own branded snack foods.

 

Distribution Channel of Coca-Cola

The Coca-Cola Company can be looked upon as a global business that operates on a local scale and this has been possible because of the Coca-Cola system that includes the company itself and its more 250 bottling partners across the globe.

The Company produces and sells and the beverage bases, concentrates and the syrups to the bottling operators and they manufactures, packages and distribute the final beverages to the vending partners and customers who then again sell the products to the consumers (Coca-cola, 2014).

The bottling partners work in close relation with the customers i.e. the restaurants, grocery stores, the convenience stores, amusement parks and the movie theatres so that localized strategies that have been developed in partnership with the company can be executed efficiently (wordpress, 2015).

Thus the points of sales the products of Coca-Cola are cauterized into:

  • Distributors or wholesalers
  • Corner stores, super markets or retailers
  • Cafes, night clubs and restaurants
  • Petrol stations

In the context of its operations in Australia, the Coca-Cola Amatil is the bottling partner pf the company and it is the largest bottling partners in the Asia-pacific region.

The distribution system can be represented as follows:

wordpress, 2015

[Source: wordpress, 2015]

The Distribution Strategy of Company can be represented as follows:

Christopher, 2006

[Source: Christopher, 2006]

Thus the Company uses both direct and indirect selling. In case of direct selling the products are supplied in the shops through their own transport and in case of indirect selling, the company maintains whole sellers and agencies that cover different regions.

Horizontal and Vertical Integration of Coca-Cola

Vertical integration can be defined as a competitive strategy that is adopted by the firms in order to take complete control over one or more stages in the production or distribution of its products. It is generally adopted to take full control over the supply chain.

On the other hand horizontal integration drives the firm towards the acquisition of a related business.

Thus in the context of vertical integration, Coca-Cola Company tends to own and manage a large portion of its manufacturing. Around 20% of the products of the company is produced by Coca-Cola Enterprises and this is the largest percentage (The Coca-Cola Company, 2014).

In the context of horizontal integration, the Coca-Cola Company tends to dominate the beverage market and this is done by buying out and owning various brands that provides an opportunity to the company to expand and branch out within the market.

Thus from the above discussions it can be said that Coca-Cola Company is more horizontally integrated rather than vertically integrated.

 

Issues in Delivering Products and Offerings and Suggestions

Since the ingredients of Coca-Cola is a trade secret, the company delivers the syrups and beverage bases to the bottling plant of Australia and then the final products are sold to the customers. Thus it can be called as a franchising distribution method. So where this method of delivery proves to be beneficial for the company in terms of no transportation fee, it also suffers from certain specific issues. The issues include lack of internal communication, high cost involved in internal distribution process and customer loyalty problems (wordpress, 2015).

Suggestions

It is suggested that the company should strive towards establishing a sophisticated distribution system that should include key functions like inventory management, orders for shipment, order status, account selection, electronic map and customer management. This would facilitate the company to identify and design the shortest route to deliver the products. The system should also be characterized with the real time update functions which would enhance its control and communication.

In order to enhance the loyalty of the customers, the company should adopt intensive distribution strategy i.e. retail stores should be set by the company at some dense populated areas, leisure centre, convenience stores and shopping center. Moreover the company should also adopt the pull strategy for the promotion of their products. The company can accredit the retail stores by offering discounts and providing them free samples and loyalty points. The company can also use red billboards in the retail stores and supermarket stores which would appear attractive for the consumers which would stimulate the purchase activities. So the pull strategy would be beneficial in enhancing the customer relationship and loyalty.

Use of technology in Distribution Channel

The beverage companies like Coca-Cola want their distributors to add product to their portfolio while keeping the costs neutral or achieving reduced operating costs. So in this context, the company makes an effective use of storage technology that enhances the useful life of warehouses at minimal cost. The storage technologies used include the double deep racking, keg flow racking and mobile racking and these technologies facilitates in efficiently handling the fast growing inventories (Landi, 2015).

Again it is also suggested that the company can use automated case handling system since it would facilitate the distributors in increasing and managing warehouse throughput and thus enhance order accuracy.    

The company can also use technologies like SmartTrak since it would enhance its visibilityin the industry pool (Landi, 2015). The company can easily view where the demand is and then move the inventory at the right time and at the right place and this would facilitate in enhancing the efficiency of the supply chain.

Role of Innovation in Growth

Innovation at present can be looked upon as a magic key to unlock the great competitive advantage and disrupting the entire market. In this context, Coca-Cola is observed to be leading the beverage industry. Coca-Cola even though being 129 year old mega corporation characterized with 500 brands, always strive for ways in which innovation can be achieved in all sphere of its operation and identifying ways to do things in a different manner (Demirel and Mazzucato, 2012). This can be illustrated with the examples like the eco-friendly beverage containers that are made of ice and these containers simply melt ways after use, the smart vending machines that facilitate the customers to mix and match the flavors (Communications, 2016).     

On the other hand the innovation has facilitated the company to come up with different brands and products that liked by the consumers and has stimulated the growth of the company.

Channel Power and Conflict

Channel Power

In this context it is observed that some channel members require others more than others require them and thus there arise different sources of power (Consumerpsychologist, 2016). For example, Coca Cola Company generally strives towards adopting reward power since it is capable of reinforcing the channel member’s performance. As for example, Coca-Cola can offer price break or pay additional fees for additional shelf space. Moreover if a retailer meets certain goals for example sale of 50,000 cases per month is offered a bonus.

Channel Conflict

 It is the conflict between the channel members. As for example, Coca-Cola might be interested in increasing its sales by offering certain level of discount on its cans. The retailers on the other hand, might be aware of the fact that overall soda sales would not go up much if the coke is put on sale since the consumers who usually prefer other brands would switch to Coca-Cola due to the discounts being offered (Consumerpsychologist, 2016). So in such cases, the retailers tend to pocket the discounts offered by the company.

 

Channel SWOT Analysis of Coca Cola

Strengths

Coca-Cola has its presence in 200 countries across the globe and this has contributed towards the development of a mammoth brand name (Hartogh, 2014). This has been possible due to its largest distribution network and its franchising distribution system that facilitates in carrying out its philosophy of “think global, act local”.

Weaknesses

The issues like lack of internal communication, high cost involved in internal distribution process and customer loyalty problems can be looked upon as weaknesses in the distribution channel of Coca-Cola Company.

Opportunities

The supply chain is looked upon as major cost sink hole characterized with rising transportation costs. Moreover the business of Coca-Cola is dependant mainly upon transportation and distribution (Hartogh, 2014). So the company can use technological advancements to reduce the operational costs.

Threats

Sourcing of the raw material i.e. water is the major threat. This is due to rising scarcity of water since sooner or later someone might raise finger on the beverage companies and thus if water is limited or rationed then the company would experience a major fall in capacity of distribution.

Competitor analysis

The competitor analysis of Coca-Cola Company can be illustrated with the help of the following figure:

Hoovers, 2016

[Source: Hoovers, 2016]

Conclusion

Thus from the above discussions, it can be inferred that even though Coca- Cola faces tough competition in the market from competitors like PepsiCo and others, the company has been successful in maintaining its market positioning and is continuously growing mainly because of its efficient distribution system and innovations that it emphasizes upon to as per the changing tastes and preferences of the consumers.

 

References

Aylott, D. and Brindle-Wood-Williams, D. (2007). Physical distribution in industrial and consumer marketing. 2nd ed. London: Hutchinson.

Benard, K., Oketch, O. and Matu, P. (2015). Innovation in the Language of Coca Cola Television Advertisements. MJSS.

Channel-cable order. (1979). Electronics and Power, 25(11), p.763.

Christopher, M. (2006). The strategy of distribution management. Westport, Conn.: Quorum Books.

Coca-cola. (2014). Coca-Cola Global: Soft Drinks & Beverage Products: Company and its Operations Across the Globe. [online] Available at: https://www.coca-cola.com [Accessed 16 Aug. 2016].

Communications, E. (2016). Coca-Cola Innovation Sparks Supply Chain Revolution. [online] Consumergoods.edgl.com. Available at: https://consumergoods.edgl.com/news/Coca-Cola-Innovation-Sparks-Supply-Chain-Revolution82057 [Accessed 16 Aug. 2016].

Consumerpsychologist. (2016). Channel Management and Conflict: Aspects in Distribution and Supply Chain Management. [online] Available at: https://www.consumerpsychologist.com/dist_Channel_Management.html [Accessed 16 Aug. 2016].

Demirel, P. and Mazzucato, M. (2012). Innovation and Firm Growth: Is R&D Worth It?. Industry & Innovation, 19(1), pp.45-62.

Hartogh, M. (2014). It's Still the Real Thing: A Profile of the Coca Cola Company. SSRN Electronic Journal.

Hoovers. (2016). Top Competitors for THE COCA-COLA COMPANY. [online] Available at: https://www.hoovers.com/company-information/cs/competition.the_coca-cola_company.3f8a006eaf87d773.html [Accessed 16 Aug. 2016].

Landi, H. (2015). Technology is transforming every part of the beverage business, from the plant, to the warehouse, to the marketplace. [online] Beverageworld.com. Available at: https://www.beverageworld.com/articles/full/17144/2015-beverage-technology-report-its-all-connected [Accessed 16 Aug. 2016].

Pope, D. (2011). The Cola Wars: The Story of the Global Corporate Battle Between the Coca-Cola Company and Pepsico, Inc. By J. C. Louis and Harvey Z. Yazijian. New York, Everest House, 1980. Pp. 386. $15.95. Business History Review, 55(04), pp.588-590.

The Coca-Cola Company. (2014). Coca-Cola Journey Homepage: Marketing and Distribution Strategies. [online] Available at: https://www.coca-colacompany.com [Accessed 16 Aug. 2016].

Wang, M. (2015). Brief Analysis of Sports Marketing Strategy Adopted by Coca Cola Company. Asian Social Science, 11(23).

wordpress. (2015). Problems in Coca-Cola Company’s distribution strategy and suggestion. [online] Available at: https://mpk732t12016clusterb.wordpress.com/2016/05/16/coca-cola-companys-distribution-strategy-and-suggestion/ [Accessed 16 Aug. 2016].

wordpress. (2015). The Coca-Cola Company’s distribution strategy. [online] Available at: https://mpk732.wordpress.com/2015/05/17/the-coca-cola-companys-distribution-strategy/ [Accessed 16 Aug. 2016].

Yuvaraju, D., Subramanyam, D. and Rao, P. (2014). Advertising Strategy of Coca-Cola at Coca-Cola Beverages Pvt.Ltd. IOSR Journal of Business and Management, 16(6), pp.122-131.

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