Analysis of the Operations Management of Coca Cola Company - Case Study Example

Analysis of the operations management of Coca Cola Company Company Analysis The Coca Cola Company has its headquarters in Georgia and is an Americanmultinational corporation of beverages and is associated with retailing, manufacturing and marketing various non alcoholic beverages syrups and concentrates. The company is known for its flagship product that was invented by John Stith Pemberton in the year 1886 which is called Coca Cola. The formula for the product was invented by Asa Griggs Candler who was the person behind incorporation of the Coca Cola Company. The company not only manufactures concentrated syrups that it then distributes to various bottler but also has ownership of anchor bottler known as Coca Cola refreshments in North America. The current chairperson of the company is Muhtar Kent and the total revenue of the company as per the financial year 2013 is US$ 46.854 billion. The company currently operates in over 200 countries and offers 400 brands (Bell, 2003). The mission of the Coca Cola Company is to refresh the world, to make difference and create value, and to inspire optimism moments. The management further extends the mission stating that “The Coca Cola Company exists to refresh and benefit everyone whose lives are touched by our products and operations.” The vision of the company are to be a great working place to ensure that the people are inspired to be the best, to be a responsible citizen by helping others and giving support, to offer to the world a portfolio of supplier and customer and even to create enduring value, to be fast moving, highly effective and lean organization, to establish a winning network of supplier and customer, to maintain overall responsibility and even maximize returns (Daveni, 2010). The company has three major business regions and operates in over 22 locations in India. The company structure of can be well described through the diagram below with its major areas of the business model that is beverage, sales and distribution. (Source: Pendergrast, 2000) The company operates on the International Division Structure as the staffs that are located in international divisions operate independently compared to that of the operations of the head office. There are various divisions across continents and each such division has presidents that control individual continental division. Each of these continental divisions comprises of vice-presidents that controls various sub-divisions located in the countries. The structure is very efficient for the company because it is a large enterprise. The ethnocentric MNC has the same set of operations either on international platform or in domestic market. However the total control is exercised by the head office. The company has its business operates in five different continental divisions such as Africa and Eurasia group, Latin America group, Europe group, Pacific and North America group. Product Analysis The company is a multinational beverage corporation and is well known for its brand over the past years. The business model of the company is based on its product portfolio. The company has occupied the market leader position because of its portfolio brands. The company manufactures, markets and sells to its consumer base the most valuable brands in the world. The Coca Cola Company has divided its beverages range into three different portions one is the sparkling beverages such Coke, Fanta, Sprite, etc., second is the low calorie sparkling beverages, and third is water beverages. The sparkling beverages accounts for approximately 62% of the total sales of the company, the second category accounts for 6% of the total sales, and the third category of water beverages accounts for 32% of the overall sales (Ulwick, 2005). The company generates value through its product portfolio by focusing on immediate consumption. The product mix would comprise of not only the range of products offered by the other factors of marketing mix such as pricing, place ad promotion. The product mix of Coca Cola Company comprise of energy drinks, soft drinks, juice drinks, sports drinks, water, tea and coffee. A further brief illustration of its product portfolio is shown in the diagram below – (Source: Steers, 2006) The pricing policy that is followed by the company is more of aggressive pricing where the prices are changed according to the economic scenario and the competition. The international as well as national brands of the Coca Cola Company are set on competitive prices. There are various methods of promotions that is adopted by the company as in the case of advertising it utilizes the print media, point of sales materials such as posters, stickers, and even freezers, vizi coolers, display racks, TV and audio advertisements, outdoor advertisements such as hoardings, billboards. The company even utilizes direct marketing methods such as partnering with restaurants, hotels, theatres, etc., and even interactive marketing by making use of internet so as to promote their products. The company even encompasses sales promotions in two ways such as trade oriented sales promotion which includes discounts, free tours, merchandising assets, return back allowances, and the second approach is consumer oriented sales promotion such as under crown scheme, getting shelves, and eye catching position (Hastings, 2013). The distribution takes places through bottling plants that the companies has in different locations or through their bottling partners which are then transported to the distributors or retailers. The product phase of the Coca Cola Company passes through all the four phases of the product life cycle that are introduction, growth, maturity and decline. In the introduction phase the company sets high cost for its product as there is no competition and demand needs to be created. The sales volume is slow in the beginning and there is no such money made at this phase as the main aim is to prompt the customers to try the product. In the growth phase of the products of the Coca Cola Company the prices are reduced and there is an increase in sales volume and this triggers more profitability. The awareness amongst the customers begins to rise and due to increased competition there is a significant decrease in price. In the maturity phase of its products the costs are lowered and the market saturation point is reached. There is no such profit levels at this phase as the market is covered with competitive products. The strategy of brand differentiation and diversification is the only way for the company to sustain its products in the highly competitive market. In the declining phase of the products of the company the costs become optimal and profitability diminishes. The sales volume shows a decline and the major challenge for the company is to maintain the efficiency level of production and distribution. SWOT Analysis, Competitors and Company’s Competitive Advantage The SWOT analysis comprises of four factors such as strength, weakness, opportunities and threats that is used to analyze the internal and external factors of an organization. The strengths and weakness represents the internal factors of a company and the opportunities and threats correspond to the external factors of a company. The strength of the Coca Cola Company is that it is well known as the number one beverage brand both in terms of sales and reach. It encompasses some of the most popular subsidiary brands such as Fanta, Coca Cola, Kinley, Limca, Maaza, etc. The company has expanded globally and has also established its position in 200 countries. The company has employee strength of 1, 50,000 across the globe and offers more than 500 brands to the world. The company possesses a strong and efficient supply chain network which makes its products available even in the remote locations. The company has even a strong financial strength with a perfect brand recall through its marketing and advertisements which involves celebrity brand endorsements. The company even encompasses efficient and effective packaging techniques which focus more on reusability and recycling. The company has even long term association with many sports events and even gives sponsorship. The company even has strong CSR activities in the fields of health, education, water recycling and conservation. The weakness of the company is that the brand image has been greatly affected by the presence of pesticides traces in its cola beverages. The brand has no presence in the food and snacks industry. The company faces a tough competition from PepsiCo in the aerated drink sector and hence it needs to constantly struggle so as to maintain its market share. The opportunity that can be exploited by the company is in terms of increasing its reach to the untapped markets and countries. The company can even take initiatives towards acquisitions and market some of the less known products. The company can even opt for the strategy of diversification in its product line and capture market share in the snacks industry so as to give tough competition to its competitor PepsiCo. The threat that is faced by the company is of people becoming more health conscious and economic slowdown, inflation and instability has prevented the customers to spend money on such beverages. The company even faces difficulty to work according to the different countries norms where it operates and even comply with different regulations of governments. The company faces a lot of competition in the market. The major competitors of the Coca Cola Company are PepsiCo Inc, Dr Pepper Snapple Group Inc. The competitors occupy a major market share in the beverage industry. Competitive advantage helps a company to sustain in the competition and even generate profit margins through its business operations. The company has many competitive advantages and the major amongst them is of being a market leader in the industry it operates. The company maintains effective business partnerships for extending its product line, advertising and marketing. The company even offers incentives to all its partners so as to increase their efficiency of business operations. The Coca Cola Company has even a strong brand portfolio offering a wide portfolio of beverages to its consumers and even explores promising categories of beverages so as to capture growth in different market segments. The company has managerial expertise and even comprises of flexible distribution and sales channel. The company follows a pre sales system which aims at separating the delivery and sales functions. The company even incorporates conventional system of truck route through which the person in charge of delivery can make sales immediately through truck inventory. It follows a hybrid distribution system and makes product sales through third party wholesalers. The company has gained all its competitive advantages by create value in its supply chain. The company not only aims at increasing sales but also reduces the environmental damage if any caused by their operations and even takes active participation in supporting various communities. Production Process and flow The production process of the company starts from manufacturing which involves various aspects such as preparation of syrups, bottling, quality checks, packaging and then distribution. The production processes of all the beverages that are under the same brand follow the same production processes before being converted into finished products. The company uses the best possible technology in all of the process that is involved in the production process of all the beverages. The technology is incorporated in the following process such as preparation of syrup, cleaning empty bottles, filling the bottles, capping, labeling, quality checks, casing or packaging, and distribution. All of the process is integrated with automated machine that is based on software known as CAM or computer aided machine. The bottles are cleaned using various approaches such as ACF filtration, PSF filtration, chemical dosing, RO water treatment and micro treatment. In order to maintain air pressure in all of its bottles the company has incorporated the latest technology capping machine. Each of the bottling plants of Coca Cola Company has well maintained labs so as to check quality standard of each of the product being manufactured which is done through taking sample and testing each batch that is being processed (Stevenson, 2012). Before filling the liquid into the bottle the strength of the bottle is tested using carbon dioxide and pressure. The company uses the best possible transport so as to deliver the products to the distribution centers on time from where the products are distributed across various wholesalers and retailers. The manufacturing process of the company can be well described through the diagram given below- (Source: Hill and Jones, 2012) The process starts from the syrup preparation and ends when the finished product is delivered to the end consumer. The flowchart for the aerated drink manufacturing process is given below- (Source: Pendergrast, 2000) The company consumes huge amounts of fuel in the production process as it is required in running generators and even in different machines used for production. The raw material and the chemicals that is used to manufacture the product is brought to the company site by the suppliers and then the products produced following the production process is transported using trucks that are generally hired from private parties. The company has third party logistics system in its supply chain. This is done to reduce the overall cost of production and even to gain the expertise of 3PL so that there is no delay in lead time. The company in its supply chain activities has also some fixed amount of cost that is maintains for repairs, depreciation, ash or moisture deduction, and selling and administrative cost. Coca Cola Company has been able to establish a technology based supply chain so that the consumer demand is met on time and hence it facilitates the company to replenish the stock as and when required. Existing Quality Management and Control The products are manufactured by the company on the basis of the strict policies, specifications and requirements that is provided through an integrate quality management program. The program encompasses high standards on product quality and safety, environmental and health standards, and even occupational safety. The company maintains quality standards through following the best policies and staying at par with the market place conditions and industry practices. The company measures the attributes of product and package quality through focusing on the materials and other requirements needed for the manufacturing process, and even on distribution and packaging. This is done to ensure that the company’s products meet the consumer expectations and quality requirements in the market. As the supplier base and the beverage portfolio is increased by the company so as to meet the surplus demand the regulatory scrutiny and even consumer expectations also rises. The reliability and consistency of the system is maintained through a new management system known as KORE that stands for Coca Cola Operating Requirements. This system helps to identify the changing business environment and supports the growth plans of the company and even directs the quality management program to ensure that quality standards are maintained in production as well as distribution of beverages. KORE integrates the various quality objectives and aligns them with the standardized metrics so as to monitor the overall performance and even enables the company to take preventive actions while introducing new products in the market at the time of rigorous demand. The system even incorporates HACCP which stands for Hazardous Analysis and Critical Control Points, and this helps to manage the different risk associated with the operations of the company such as supply chain activities and various bottling operations and even helps to derive quality standards for further improvement in the system. The quality control approach is undertaken by the company from the source water to the finished product. The water that is used by the company for the beverage manufacturing complies with the strict standards of drinking water so as to ensure that it is safe and even are passed across international quality standards of EU and BIS that is set for drinking water. The pesticide level is also tested by the company of parts per billion of ground water (Hays, 2000).The company ensures to its customer base that it takes every possible precaution possible so as to deliver safe and world class products to their consumer base. The pesticide testing in manufacturing soft drinks is a very tough process and often delivers unrepeatable and unreliable outcomes. The company tests and treats each of the ingredients that is required for the beverages before they are mixed together so as to form the final product. This procedure is the best quality mechanism to ensure that the beverages manufactured are safe. The company currently has collaborated with the renowned research center in UK known as Central Science Laboratories with the objective to develop robust protocols and best technology that will facilitate the company to check the pesticide content in the finished products in the nearby future. Quality Issues There are a lot of issues that is surrounding the company. The company had already been criticized for environmental issues, business practices and even health issues. Since the early 2000 the company has been criticized by watchdogs and even consumer groups for its products and subsidiaries. The common allegations against the company is that its beverages cause serious effects on health, a perception that the company is involved into various monopolistic practices, it has a poor record on environmental safety, questionable marketing and labor practices, and the company is even accused of violating some of the intellectual property rights. The company has the major issue of having high chlorine content in its beverages that greatly affects health and the company also does not take measures to bring back the contaminated products from the market. The soda drinks manufactured by the company has high levels of methylimidazole which is also known as animal carcinogen (Batey, 2012). The company though had promised to resolve the issue but it proved to b double standard as the company took initiatives with the local authority of only some selected locations. The company is associated with product quality scandals and the common PR problem that the organization does not take effective measures to rectify problematic drinks but only promotes its product to be safe. The caffeine content of the beverages manufactured by the Coca Cola Company is very high which can cause various health effects. The beverages manufactured are also prone to cause tooth decay and acidity, and has high level of fructose corn syrup which generally comes from genetically altered plants and can cause diabetes and obesity. The health effects are not the only matter of concern for the company but there are also issues regarding the procedure in which products are manufactured by company. The company does not maintain quality standards in its supply chain as a result of which it faces major issues in terms of the water that the company utilizes for its production process which consists of unhealthy levels of chemicals and even pesticides. The company even faces allegations for using excess of water in the production process which has created excessive pressure on the farmers to relocate and even has caused aquifers to dry up. The packaging that is used by the company poses serious threat on environment and the company has not taken any attempt to incorporate any mechanism as container deposit legislation. Recommendations The company only focuses on carbonated soft drink sector that would make the company to lose on share as a market leader in the beverage sector. The company is recommended to opt for energy drinks, bottled water and more of non carbonated drink. The energy drinks occupies a decent market share which is expected to grow in the future. The health drinks and energy drinks are predicted to be the major demand of the new generation consisting of health conscious and young consumers. The company is even recommended to acquire leadership in industry areas of health and wellness. This sector of the industry has a great scope in the future as per the changing consumer demand in the market. The company should restructure its business strategies and focus on delivering products for different market segments. The company can even incorporate certain changes in its marketing strategies by promoting products that water and tea beverages that contains less amount of sugar and sodium content. The major portion of attraction in the market for any beverage company is the younger generation. This portion occupies a decent market share and if Coca Cola Company redefines its product line as per the demand of the younger generation then it would be able to generate high profit margins and even achieve sustainability in the market place. The company apart from manufacturing energy drinks and sports drinks can even invent a new product range of organic beverages for the younger generation. The company in the present scenario of the market faces a tough competition from PepsiCo. Both the companies offer the same type of beverages to the market and there is not much that the company can do towards making some unique changes or even opting for product differentiation. PepsiCo has adopted the strategy of horizontal expansion so it is highly recommended that Coca Cola Company should opt for vertical expansion. The product range of PepsiCo comprises only 37% of beverages that it offers to the market. The Coca Cola Company is highly recommended to be focused towards business strategy related to beverage industry and even some of the related business operations such as sugar plantation, glass and tin can recycling, and bottling business. In the present decade there is a rapid change in the environmental factors. The company needs to be very sensitive before implementing any new trend in the system. The company needs to resolve any issue associated with the business operations of the company and even take effective quality measures so as to reduce the environmental damage caused by the operations and even maintain quality standards to eliminate the use of any such chemical that causes health hazards. The company needs to focus on developing unique brand image and position itself such that it can attain sustainability in the highly competitive market. Executive summary Coca Cola Company operates in over 200 countries and has been able to maintain the market leader position over the years. The company operates in 200 countries with approximately 400 brands. The company maintains high quality standards throughout its supply chain activities which start from the procurement of raw materials to the syrup preparation and then to bottling activity, labeling, and finally distribution through third party logistics. The company has different continental divisions and operations takes place independently which has no relation with the head office. However the strategic decision making is done through the headquarters in coordination with all divisional heads which is then incorporated throughout the business operations of the company in all divisions. The company faces a tough competition from PepsiCo and some other players in the industry. There are a lot of allegations that has come up in the recent decade against the Coca Cola Company. The company has not been able to take effective measures to eliminate problems that occurred in its beverages. The company is further recommended in this report to be cautious about the environmental damage caused by its operations and extend its product line so as to capture a different market segment. References Batey, M. (2012). Brand Meaning. USA: Psychology Press. Bell, L. (2003). The Story of Coca-Cola. USA: Black Rabbit Books. Daveni, R. A. (2010). Hypercompetition. USA: Simon and Schuster. Hastings, G. (2013). The Marketing Matrix: How the Corporation Gets Its Power – And How We Can Reclaim It. New York: Routledge Hays, C. L. (2000). The Real Thing: Truth and Power at the Coca-Cola Company. New York: Random House. Hill, C., and Jones, G. (2012). Strategic Management: An Integrated Approach. Canada: Cengage Learning Pendergrast, M. (2000). For God, Country, and Coca-Cola: The Unauthorized History of the Great American Soft Drink And the Company That Makes It. New York: Basic Books. Steers, R. M. (2006). Managing in the Global Economy. Canada: M.E. Sharpe. Stevenson, W.J. (2012). Operations Management: Theory and Practice. New Delhi: McGraw-Hill Higher Education. Ulwick, A. W. (2005). Business Strategy Formulation: Theory, Process and the Intellectual Revolution. USA: IAP. Read More