Strategies and Value Chain Analysis of Coca Cola:
Coca Cola says that it takes into account every 200-plus nation that plays a vital role in their growth plans. The company has been using the segmented revenue growth approaches across their business in a way that is being varied by the type of market. In the markets that are emerging, the company’s main focus has been on improving the volume, keeping their beverages at the reasonable rate and intensification of the strong base of their future success (Zott and Amit 2013). In the markets that are developed, a balance has been smacked between the pricing and volume. The company relies more on price and developing the profitability factor through provision of the small packages and best packages like aluminum bottles and glass.
Generating value for Coca Cola and making the looks of customers vary in different countries; Coca Cola did an excellent job in segmenting the markets in driving the growth of revenue in 2015. In the global scenario, price/mix rose to around 2 per cent along with the volume, assisting the augmentation in the organic revenue y 4 per cent. Coca cola has also been able to gain global value share within the industry.
Coca Cola has invested heavily on the brands and the business. They made a choice of investing in better marketing for their brands, augmenting the factor of quality and quantity of the advertising. Coca Cola increased their spending on the media advertising by more than $250 million, and those funds were used in sharing of the more stronger and influential ads. During the same time, the company invested across their portfolio of expansive beverage. Coca cola improved its position in the grouping of energy with a calculated new partnership with Monster beverage Corporation. The company then tactically invested in brands like Suja, a line of quality organic juices that are cold-pressed, agreeing to purchase the China Green Culiangwang, a beverage brand that is protein based. Coca Cola also extended to the nationwide, the distribution across U.S. of fairlife ultra-filtered milk.
In the year 2015, the company improved on the first international campaign of marketing for supporting the overall Coca-Cola Trademark of Coke, Coke Zero, Diet Coke and Coca Cola Life. Launched in the year 2016, “Taste the Felling” highlights factors like taste, refreshment, support and personal associations that are an integral part of having the benefit of an ice-cold Coca Cola (Wang 2015).. This campaign along with the strategy of ‘one brand’, the company through this is letting the consumers know that they can get pleasure from Coca Cola with less calories or no calories, with or without the factor of caffeine. The choice depends on the individual; everytime they search for something delicious and stimulating Coca Cola.
The Coca Cola Company has generally been the originator of the invigorating beverage brands. In the present scenario, the company’s unrestrained portfolio takes into account the around 500 brands, taking in the beaming beverages, juice drinks, tea and sports drinks, value added dairy and improved hydration drinks. Among all these brands there are around 20 that produces more than billion dollars in the annual sales of retail. Another core proficiency of the company is its ability in leading the global most refined system of independent partners of bottling while generating value for the restaurant and other retail customers (Hassan, Amos and Abubakar 2014). Over the certain period of time, Coca Cola have been able to obtain and administer a certain number of the Coca Cola bottling partners with the intend of developing the performance, optimizing the process of manufacturing and systems of distribution. In North America, the company took certain destructive steps in 2015 for accelerating the refranchising of the company-owned bottling terrain with the goals of entirely refranchising the bottling system of North America by the end of 2017.
Value Chain of Coca Cola:
Value Chain analysis can be defined as the logical structure that helps in recognizing the activities of business that can generate value and the competitive advantage for the business.
Water has been the key ingredient for all the products that have been manufactured by Coca Cola with the company occasionally facing the important challenges in accessing this raw ingredient. Coca Cola makes use of the high fructose corn syrup (HFCS) exclusively and this raw material is being obtained from the suppliers that are mainly based in US, delivered via the trucks. There is existence of certain other ingredients that have to be based internationally. Coca Cola have been valuing diversity among its suppliers. In the year 2013, $952 million were exhausted on the assorted suppliers with an increase of 15 per cent as compared to the preceding year (Zott and Amit 2013).
Coca Cola have been selling in products in approximately 200 countries and claims for operating the world’s biggest system of beverage distribution. Distribution channels that are being exploited by Coca Cola that comprised of the distribution operations that is being controlled by the organization, independent partners of bottling along with wholesalers and retailers.
Marketing and Sales:
The sales of the beverages that has belonged to the Coca Cola assortment amounting to 29 billion, 28.5 billion and 27.8 billion unit cases in the year 2014, 2013 and 2012 respectively. The sales volume within the home country accounted for 19 per cent of the overall sales volume in the year 2014. 30 per cent of the overall sales outside US cropped up in places like China, Mexico and Brazi (Bian, Li and Guo 2016)l. Coca Cola has been applying for the incorporated marketing strategy using the sales promotion, events, advertising and elements of public relations of the marketing mix in a collective manner. The message of brand marketing is connected with staying happy, enjoying of life and leading an energetic lifestyle. The latest efforts in marketing of the Coca Cola products are being directed towards the four popular drinks that are Diet Coke, Coca Cola, Coca Cola Life and Coca Cola Zero.
Coca Cola sustains the practices of its customer services via online chat with one of the implicit agents in the official website of the organization dedicated phone of the customer service. The website of the Coca Cola has a complete FAQ covering the main aspects in the most detailed of manners addressing the broader range of the rumors that is being aimed at direct and indirect ways of brand (Wang 2015).
Suitability of Coca Cola’s current strategy and Factors affecting its Operations:
Some of the macro factors that have been affecting Coca Cola are:
The government is in the habit of regulating the manufacturing process of the non-alcoholic beverages. Companies that fail in meeting the standards of the government are subject to hefty fines and penalties. Coca Cola is also subject to Occupational Safety and Health Act and to the regulation of the federal and foreign environment. Certain following factors are influential to the operations of Coca Cola:
- Changes in law and regulation: Certain changes in the standards of accounting, requirements of taxation change in tax rates and new tax laws), and the environmental laws either in the foreign or domestic authorities.
- Political conditions, specifically in international markets: Changes within the government, civil conflicts and the restrictions regarding the aptitude for relocating the capital across the borders.
- Ability in penetrating the emerging and developing markets: Relying on the political and economical conditions like the civil conflict along with Coca Cola’s capability in forming efficiently the strategic business coalition with the domestic bottlers and enhancing the amenities in production, equipment of sales and technology (Barney and Hesterly 2015).
During the 2001 recession, the US government took antagonistic actions in turning the economy around by the year 2003. Coca Cola took notice of this and identified those rates of interest on loan that would in all probability rise with the return of the economy. Coca Cola made use of the loans for the purpose of research and development on the fresh products for capitalizing on in the economy that is strong. In the present scenario, with the slowing of the global growth, Coca Cola might be watching out for other similar sort of opportunities. The global economic and the financial crisis that took place in the period between 2007-2009 is a germane example of an economic factor impacting greatly on the preponderance of the business around the sphere.
Social factors affecting the sales of the Coca Cola products include the following:
- The mainstream of the people living in US have shown increase amount of interest in lifestyles of healthy nature. This has strongly been prejudiced by the sales within the sector of non-alcoholic beverage with customers switching to bottle water along with diet colas like Coca Cola Zero or Light.
- Time management has been a concern for the 43 per cent of all the households, a percentage that has gradually increased over the years.
In quest of the healthy lifestyle and augmenting level of the concern related to consumer health towards corpulence fuelled by sugar and effervescent drinks that can be precise as the significant social change that directly affects the performance of Coca Cola.
Some of the factors that causes the company’s actual results from the expected results:
- The efficiency of an organization’s marketing, advertising and the promotional programs- For instance, web, television and the advertising of the social media that is continuously embryonic. The company’s ability is to efficiently endorse their products through the channels that influence sales.
- Design of Packaging: In the past, the foreword of cans and plastic bottles augmented the volume of sales for the organization due to the easy ways these containers would be able to hold and organize.
- New Equipment: There is continuous advancement of technology with new technology constantly being established. For the evolvement of new technologies, production volume of Coca Cola has been increasingly being compared to that.
Key Initiatives by Coca Cola:
Coca Cola has been able to introduce the following initiatives in reinvigorating growth:
Abridging and reformation of its operating model are for speeding up the decision making process and enhancing the focus on the local market. As per Dess, Lumpkin and Eisner (2014), the changes within the organization along with the prior publicized changes that is being made for the long-term metrics of incentives that would be empowering the employees and associate line of sight responsibility to the results of the business.
The current thriving productivity program is to be expanded by targeting the annualized savings of $3 billion per year by the year 2019. The program of productivity would be focusing on the four important areas:
- Reformation of the company’s global chain of supply, taking into account the manufacturing in North America.
- Executing budgeting that is zero-based across the organizational departments
- Reshuffling and simplification of the operating model; and
- Dynamic augmented discipline and effectiveness in direct marketing investments.
As result of these initiatives in productivity, Coca Cola would be expecting to fund in the initiatives related to marketing and the innovation needed for delivering the sustainable expansion in net revenue (Hassan, Amos and Abubakar 2014). These savings would be supporting the expansion of margin and the augmented returns on the capital invested over a period of time.
Distribution in Coca Cola:
Coca Cola boasts of the specific method of distribution for the components of the Coca Cola re being kept a secret. Thus, the manufacturer, Coca Cola distributes the bases of the beverage and syrups into the operations of bottling. Then, the retailer sells or distributes the final beverage to the customer. Coca Cola has been facing the issue of distribution in its non-alcoholic beverage section. For instance, Coca Cola has been facing certain inconceivable problems in distribution, lack of inner communication, high cost in the process of distribution and problems related to customer loyalty (Barney and Hesterly 2015).
Areas for Improvement:
Coca Cola should be able to ascertain a complicated system of distribution. The system might take into account various important functions. For instance, the management of inventory, shipment order, status of the order, management of customers and collection of accounts. The functions might assist the Coca Cola Company according to the location of the orders for designing the undeviating route in delivering their productions. Furthermore, the systems should have the functions of real-time upgradation as it is significant for the organization’s manager to control and communication.
For issues related to customer loyalty, Coca Cola should adopt the strategy of intensive distribution which means the organization requires setting their retail stores at places which are densely populated like the convenience stores and shopping centre stores. The positioning of the retail shop should be such which would be helping the customers in purchasing the company productions. The company should also focus on providing some loyalty points or other schemes that would be beneficial for the customers.
Implementation Strategy with Hubbard Model:
Business Strategy: Coca Cola makes use of several strategies for better positioning of its products and attracting more consumers towards them. Through the proper implementation of positioning, promotional and competitive strategies the company tries being competitive in the market.
It implies that the organization tries generating an image to its product in the consumer’s mind. The product positioning is the best way in offering a positive image of the product. The company should be able to promote the good values and points that it has over its competitors.
There are certain bases on which the product would be discriminated though Coke over the years has differentiated its products based on the following factors:
-Product Differentiation: Coke has been differentiating its products from its competitors, especially Pepsi on the basis of its quality, taste and brand.
Image Differentiation: Coca Cola’s logo has been used for the purpose of image differentiation. It works as the identification and image of the brand.
Price Strategy Trade Promotion:
Coca Cola has been offering incentives to the middle men or retailers in such ways that makes them provide free samples and free unfilled bottles (Mohamed and Omwenga 2015). Through this the retailers are able to push their products into the market. Their good relation with the suppliers has enables a free flow of their products into the market.
Coca Cola has also been doing sponsorships with various colleges and cafes positioned in schools and sponsoring of the sports events along with the other extra prospectus activities for getting the share of the market.
Coca Cola has been a dominating force within the beverage industry with research showing this brand is being recognized by 95 per cent of the population of the world. There are certain factors that contribute to the success of Coca Cola:
Coca Cola has been a pioneer in the use of the techniques of advertising and the styles for capturing the audience. Coca Cola’s innovative advertising along with those ads that brought them into a direct war with Pepsi have always been fresh in the minds of the people. (Sheth 2017)
Coca Cola has been able to endure in a market that is changing everyday for its capability in systematically innovating and delivering the fresh products. It became evident that market was changing and for keeping pace with the changes, Coca Cola moved from single core product to an overall beverage company. The company began working in an environment that is decentralized that was unfeasible in the preceding years.
All these strategies related to business helps Coca Cola in improving the factors of operations and channelize every aspect of its business towards revenue growth and productivity that generates enough profitability for improving the company operations.
The business environment of any company is distributed through the analysis of the micro and macro environment in which the factors have been directly associated to the performance of the business.
The design of Coca Cola is for developing and expanding their brand status in the international market. For doing this they have been applying all the techniques of marketing and promotion in the business for forming the strategy of growth in the business. Coca Cola have been catering a huge customer base and they have been deserving admiration of the development of customer at a rapid rate.
They are basically the owners of the company who has the power of controlling and managing the global business. They are another group of significant people other than the customers who directs the decision making of the business.
These are the factors that relates to the altering demand and supply conditions in business of the amendments in factors like likes, preferences and habits of the people that influences through modifications in the fashion and style of people. These are the factors that have direct contact on the on the business scope as the growth of the business is depended on the environmental factors. It is the management’s responsibility in preferring an ideal policy of the development of business.
These are the factors that lead to strategizing the business in better way keeping into account the environmental factors in which the business operates. The business operates in various new environments where culture, people and the natural environment plays a role in influencing the strategies of the business.
This takes into account the issues that occur in the climatic conditions, conditions of the temperature in the external environment. The natural calamities have been affecting the level of performance of business like the riots, floods that destroy and jeopardize the life of the people. Tsunami had a severe impact on the Coca Cola business.
Business culture is another important aspect in the operations of Coca Cola. Diversity has been a fundamental part in the way they operate and see the future. The culture of Coca cola depends on factors like integrity, diversity, collaboration, passion and leadership. Coca Cola has been able to inspire moments of optimism, for generating value and making a difference. Coca Cola believes in having two main assets that gives them the opportunity in keeping their promise- their people and brand. The Coca Cola company has been leveraging a global team that is highly rich in diversified people, ideas and talent. Their strategy of diversity workplace takes in programs like retaining, attracting and developing the diverse talent, offering support for the groups having diversified backgrounds. The work environment is such in Coca Cola that it helps in preparing the middle level managers and employees in being the leaders of tomorrow. Coca Cola has the policy of creating a fair work environment that leads to better understanding among the workforce, customers, suppliers and their success at marketplace.
Through this Hubbard model it can be stated that all these factors like environment, business strategy and capabilities are interlinked and depends on each other. It takes into various factors like leadership, culture, people and structure of the company. All these factors helps in the best possible way for the company to implement the strategies in the different market it operated across the globe.
Key Issues and Recommendations:
The major markets of Coca Cola have seen the sales volume of the carbonated soft drinks dropping more than 9 per cent in the last five years. The health and taste preferences of the consumers are rapidly changing and they are inclining more towards the energy health drink segment.
If Coca Cola only focuses on the carbonated segmented it would be weakening the company. It needs to focus on other segments more so because of the changing tastes and preferences of the customers. Energy drinks and the healthy drinks would be the key needs for beverages as the requirement for new generation of the younger consumers. It needs to invest more on the R&D front for avoiding the bad physical effects of the carbonated drinks.
Health and wellness has continued to be a major trend in the market of global beverage industry. Coca Cola needs to offer industry leadership in the area of health and wellness. It should be able to offer various sorts of products for different sections of the market. In the market of baby boomers, Coca Cola would be focusing on the marketing of water beverage along with tea that contains less of sugar and sodium. Coca Cola can also generate organic beverages for the younger generation.
Coca Cola should also do well if they start manufacturing new products rather than only being in the beverage section like Pepsi, its strongest competitor. The retail channels of Coca Cola are mainly through the retail outlets whereas its competitors mainly rely on coffee shops and restaurants. Thus, Coca cola should try and augment their distribution in those areas.
It can thus be concluded that Coca Cola, despite encountering certain issues and stiff competition have been able to hold on to the position of the leader in the non-alcoholic beverage industry. It has been able to create an environment and strategies that has enabled it to maintain the core competency in the business. Being a global brand has its own responsibilities and issues and with the change in the taste and preferences of the customers Coca Cola faces more issues is sustaining with its carbonated drinks segment. It need to focus on the health and wellness issue along with the distribution channel for smooth flow of the products.
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