Building Blocks That Coca-Cola Company Has Adopted in Its Business Model - Essay Example

?Cover letter The purpose of this report is to identify the nine building blocks that Coca-Cola Company has adopted in its business model. Through the use of the nine factors that are covered by the Business Model Canvas, Coca-Cola has attained a competitive position in the soft drink industry. Through the analysis of the nine building blocks that includes value propositions, customer segments, customer relationships, key activities, key resources, key partners, revenue streams channels and cost structure, this report identifies how Coca-Cola has emerged as a leader in the industry. Another purpose of this report is to urge other companies to emulate the nine building blocks in their business model in order to ensure that they attain a competitive edge in the local and international markets. Business in Action (Student’s Name) (Instructor’s Name) (Course Name) (Date) Executive summary One of the major aspects that have made Coca-Cola a successful company is the use of value proposition that entails quality brands that meets the needs of is consumers. Through production of quality brands that are non-carbonated in nature such as Minute Maid, Dasani and Fruitopia, the company recognizes the needs of its market segments. In its customer segmentation, Coca-Cola adopts two major aspects that include mass marketing and niche marketing. Similarly, the company has embarked on creating a strong customer relationship through the use of personal assistance as well as communities. Key activities that are utilized by Coca-Cola in its business model include production and problem solving. To ensure continuity in its production, Coca-Cola has assets that were valued at 86.17 US$ as at 2012. Additionally, through its large number of employees, the company is in a position to effectively distribute its brands in the local and international markets. Major partnerships that are adopted by Coca-Cola in its operations include strategic alliances and coopetition. Key companies that Coca-Cola has formed partnership with include Minute Maid, Odwalla, Fuze beverage and Barq’s. To ensure effective distribution of its products, Coca-Cola has employed wholesalers and retailers as well as a strong sales team. In this way, the company is able to effectively penetrate new markets. Through transaction revenue as the major source of revenue streams, Coca-Cola has continued to increase its annual revenue an aspect is significant in its expansion strategies. In its cost structure, Coca-Cola adopts two techniques that includes cost-driven and outsourcing of its distribution system. Table of Contents Executive summary 3 Table of Contents 4 1. Introduction 5 1.1.The offer/ value propositions 5 1.2.Customer segments 6 1.3.Customer relationships 6 1.4.Key activities 7 1.5.Key resources 8 1.6.Key partners 8 1.7.Channels 9 1.8.Revenue streams 9 1.9.Cost structure 9 2. Conclusion 10 References 11 1. Introduction Based on the stiff competition in the current business atmosphere, local and international companies have adopted various strategies to face off their competitors. Besides putting in place appropriate marketing strategies, firms that are focused at retaining their customers and attracting new clients should emulate an effective business model. One of the major companies that have come up with appropriate business model is Coca-Cola Company. Coca-Cola Company is the world leader in the soft drink industry. Being headquartered in Atlanta US, Coca-Cola operates in more than 200 countries. With more than 500 brands, Coca-Cola has attained a competitive advantage over its rivals such as Pepsi and Starbucks. Some of the major brands that have made the company benefit from strong customer awareness and loyalty include Coke, Caffeine Free New Coke, Minute Maid Soft Drink, Alhambra, E2, Sprite, and Georgia among others. Through the diversified product line, the company has effectively met the needs of its consumers an aspect that has not only resulted to increased revenue for the company but also a strong positive customer-product relationship. 1.1. The offer/ value propositions One of the major aspects that have highly contributed to the success of Coca-Cola is the production of quality brands that meet the needs of its customers regardless of their ages. For example, Coke, one of the notable brands by Coca-Cola Company is focused at providing a refreshing mood that makes their consumers relaxed during the course of their duties. In its endeavors to make their consumers health and productive, Coca-Cola has established non-carbonated brands such as Minute Maid, Fruitopia and Dasani water. In this way, the company has recognized the diversified needs of its market segment. Another notable strategy that has made the company attract more customers is its simple and attractive packaging (Chesbrough and Rosenbloom, 2002). Through its unique design of its brands, customers can easily differentiate Coca-Cola brands from those of the competitors. To ensure that its brands are easily accessible by all the customers in the countries it operates, Coca-Cola employees franchisees who assist the company in the distribution of its brands. In the same way, the company ensures that all its major brands including Coke and Sprite are available in the retail outlets and supermarkets. 1.2. Customer segments In its effort to expand its customer base and effectively meet the needs of its consumers, Coca-Cola utilizes a business model that is focused at mass marketing. This implies that the company groups its customers with similar needs into groups and the offer value proposition and products that meet their needs. This technique of segmentation is based on the large number of customers that Coca-Cola enjoys in the international market. Likewise, Coca-Cola adopts a niche market in its customer segmentation (George and Bock, 2012). This is depicted by the company strategy to produce brands that meet the needs of old consumers and diabetic customers. For example, the company has three major brands that targets diabetic customers that includes diet coke with cherry, diet coke and caffeine free diet coke (Michael and George, 2006). Similarly, the company produces soft drinks that are less carbonated such as Fanta to meet the needs of the old consumers. 1.3. Customer relationships Maintenance of strong customer relationships is one of the major factors that have driven Coca-Cola towards its success. For example, through the aspect of personal assistance, Coca-Cola enhances human interaction that entails effective communication between its customers and the marketing representatives. Through the use of call centers and online communication, customers are in a position to give feedback on the implications of the company brands on their health. In this way, the company is able to provide products that meet the needs of its consumers. In addition, the company uses communities as a way of creating a positive image on the eyes of the public (Joshi, 2005). Besides the extensive corporate social responsibilities that Coca-Cola has initiated that includes sponsorship of FIFA world cup, the company embarks on advising communities on the brands that are appropriate for individual aiming at losing weight. 1.4. Key activities Production is a notable activity that Coca-Cola adopts in its business model. With a large number of loyal customers, Coca-Cola objective is to produce large amount of concentrates that are distributed to various bottlers in the international market (Sullivan and Steven, 2003). In the same way, the company produces high quality brands that have enabled the Coca-Cola to acquire a competitive position in the soft drink industry. Problem solving is another activity that the company emulates (Chen, 2009). For example in 2003, Centre for Science and Environment, a non governmental organization based in India argued that it has detected cancer causing chemicals in the coca-Cola brands. However, to solve this problem, Coca-Cola undertook extensive study on its brands in a UK based laboratory leading to a conclusion that the company brands are safe for consumption. In this way, the relationship between the company and the customers was highly enhanced. 1.5. Key resources In its efforts to reach markets and maintain a strong connection with customer segments, Coca-Cola has various key resources. For instance, the company has established various physical assets including buildings and machines that were valued at 86.17 US$ as at 2012. Through the establishment of warehouses in the company headquarters, Coca-Cola has been able to ensure continuity production thus meeting the high demand of its brands in the international market. Another notable resource is the workforce (Elwood et al, 1996). Based on the expansive market share, the company has employed more than 150,000 employees globally. In this way, matters relating to customer service, quality of brands, marketing among others are effectively addressed. To enhance the productivity of the employees, the company adopts various motivation factors such as part-time courses offered by Coca-Cola University, holidays, gifts and working in shifts. Use of intellectual resources is another strategy adopted by Coca-Cola in its business model. Through patents and copyrights the company has ensured that it has legal support thus avoiding any imitation of its brands by the competitors. 1.6. Key partners Coca-Cola achievements are significantly as a result of adopting strong partnership that includes coopetition and strategic alliances in its business model. Some of the notable companies that the company has formed partnership with includes Minute Maid, Odwalla, Fuze beverage and Barq’s. In this way, the company has effectively reduced its risk as well as uncertainty (Alexander and Yves, 2009). Similarly, through formation of partnership with its franchisees, Coca-Cola is able to effectively distribute its brands thus reducing the costs of distribution leading to economy of scale. 1.7. Channels Effective distribution of products and raising strong customer awareness are two major objectives that trigger Coca-Cola to adopt various channels. By initiating a strong sales team in the domestic and foreign market, the company has been able to reach large number of consumers. Additionally, the company has established wholesalers who sells its products to retailers and then to consumers. In this way, delays in the distribution of the company brands are highly avoided. Through the use of partner stores, Coca-Cola has also effectively distributed its products thus ensuring that customers can easily access their favorite brands without travelling for long distances. 1.8. Revenue streams In its business model, Coca-Cola emulates transaction revenue as the major source of revenue streams. This is based on the fact that in most cases, customers purchase the company brands in cash bases (Stephen and Stuart, 2007). As a result, the company has continued to enjoy high revenue. For example, in 2012, Coca-Cola registered total revenue of 48.01 US$. This has resulted to the expansion of the company operations in the international market thus effectively meeting the increasing demand for its products. 1.9. Cost structure One of the notable cost reduction techniques adopted by Coca-Cola is outsourcing its services. For example, by use a cost-driven model, the company employs third parties in the distribution of its products especially in the developing countries (Linder and Cantrell, 2000). As mentioned earlier, Coca-Cola fixed assets stands at approximately 86.17 US$ as at 2012. This is based on its high investment in machines and production premises. One of the major advantages that Coca-Cola benefits from is economies of scope. This is due to its large scope of operations in addition to adoption of an effective distribution channel 2. Conclusion Based on the above discussion, it is clear that for a company to remain competitive an appropriate business model cannot be overlooked. An effective business model should guide a company in realizing its objectives. In this regard, management should ensure that all the aspects of a business model are covered. These includes offering value propositions, effective segmentation of customers, maintaining strong relationships, maintaining appropriate and profitable activities, ensuring adequacy and effectiveness of key resources, forming strong partnerships, adopting various channels, diversifying sources of revenue and maintaining an appropriate cost structure. Though the application of the 9 aspects as depicted by the Business Model Canvas, Coca-Cola has not only emerged as the world leader in the production and marketing of soft drinks, but also it has effectively faced off its competitors locally and globally. References Alexander, O and Yves, P. 2009. Business Model Generation. Available from http://www.businessmodelgeneration.com/downloads/businessmodelgeneration_preview.pdf. Retrieved on March 3, 2012. Chen, F. 2009. Building a platform of Business Model 2.0 to creating real business value with Web 2.0 for web information services industry. International Journal of Electronic Business Management 7 (3) 168-180. Chesbrough, H and Rosenbloom, S.2002. The Role of the Business Model in capturing value from Innovation: Evidence from XEROX Corporation’s Technology Spinoff Companies. Boston: Harvard Business School. Elwood, F. et al. 1996. Trends Toward a Closer Integration of Vocational Education and Human Resources Development. Journal of Vocational and Technical Education, Vol. 12, No. 2, p7. George, G and Bock, J.2012. Models of opportunity: How entrepreneurs design firms to achieve the unexpected. Cambridge: Cambridge University Press. Joshi, M. 2005. International Marketing. New York: Oxford University Press. Linder, J and Cantrell, S.2000. Changing Business Models: Surveying the Landscape. London: Sage. Michael, B and George, B.2006. Advertising and Promotion: An Integrated Marketing Communications Perspective. New York: McGraw-Hill. Stephen, I and Stuart, W. 2007. Economics. New York: Prentice Hall. Sullivan, A and Steven, S.2003. Economics: Principles in action. New Jersey: Prentice Hall. Read More