Managing a Value Chain of Coca-Cola - Essay Example

Managing a value Chain The value Chain: The cost of a product or service is a sum total of all expenditure incurred by its creator on that product orservice. This value is known as the cost price. That product or service is the result of the activities of the many departments in an organization. Any prudent businessman man will find it necessary to know as to which activity contributed the most in arriving at the value for which the purchaser would be willing to pay. This value is known as the selling price. It is simple logic to understand that selling price should be more than cost price to ensure profits for the organization. The concept of value chain was conceived by Michael Porter in his book 'Competitive Advantage: Creating and Sustaining Superior Advantage' "The value chain analysis describes the activities the organization performs and links them to the organizations competitive position." (Porter, 2001). A value chain consists of inbound logistics, operations, outbound logistics, marketing and sales and service. The support system consists of the infrastructure of the organization, HR management, level of technology and ability in procurement. The end result of all these factors is either profit or loss for the organization. Choice of a Company: Coca Cola: It is intended to take up the Case Study of US soft drink conglomerate Coca Cola, which are the largest soft beverage manufacturer and distributor. It had its humble beginning during the later half of the 19th Century with an initial investment of just US $ 70. This business enterprise has now risen into a giant empire with a capital base of US $ 50 billions. Coca Cola has made itself a popular name in more than 200 destinations in the world, with over 400 varieties of products, and is now a established market leader in the soft drinks scenario. Its other brands include Diet Cola, Fanta, and Sprite. The main marketing strategies being currently adopted by Coca Cola Company are through attractive functional bottling of different sizes and massive advertising coverage media. Inward and outward logistics and marketing: Coca-Cola plans to combine with SAP Technologies to create applications for enhanced and improved outboard logistics for its products. This would ensure a greater commitment and show of business competence on the part of its merchandizers, store managers and others responsible for distribution at its outlets. The Company has also spend nearly a year combining 3 North American business units- Coca Cola North America, Fountain and Minute Maid into an integrated unit in order to save costs and enhance efficiencies. It is widely believed by Coca Cola insiders that the combine of Coca Cola Enterprises with SAP is strategically designed to develop software programs which have the potential to control pricing, promotion of products and other marketing and merchandizer efforts to be integrated into SAP Applications (Foley and Kontzer, 2004). Other secondary activities: Sports sponsorships &cultural interactions: The Coca-Cola Group has felt it necessary to seek other brand building exercises to increase consumer awareness and promote healthy social and cultural interactions with the local communities as part of rendering social and cultural responsiblities . By combining brand building with sponsorship of world standard events, high degree of exposure to local markets, and by investing heavily in secondary activities, like Sports Meets, the brand image of Coca Cola is sought to be enhanced and the vibrant and ennervating aspects of this soft drink is shown to blend well with the passion and endurance needed for to participate and compete in global sports and cultural events. "By positioning Coca-Cola as an icon and leading brand that mentally and physically boost consumers", the aspects of associaton with major sporting events are reinforced. (Case Study: Coca-Cola: The Coca-Cola Brand and sponsorship). Coca Cola has been the official sponsors of the Olympic Games since the Sydney Olympics 2000.It have also contracted to sponsor Olympic Games, both Summer and Winter upto 2008. Since 1995, it has also been official sponsors of the Rugby World Cup and it symbolises the refreshment that stimulates and revitalises both Rugby players and cheering spectators. (Case Study: Coca-Cola: The Coca-Cola Brand and sponsorship). The main idea behind sponsoring and participating in high profile world sports meets is to associate the brand of Coca-Cola with high performance, high adrenalaine driving energy needed to succeed and the passion to achieve excellence in sports endeavors. Showcasing artistic talenst by middle and high School students in Ireland : The Coca-Cola group has also felt it important to actively involve itself with culture meets in terms of sponsoring "Coca-Cola Form & Fusion Design Awards."Under this meet, middle and high school students are motivated to design futuristic designs of fashion wear made of recycled materials. Upon completion of the fashion show, the final 6 approved designs are showcased in a Fashion Show and awards distributed. The idea is to stimulate and promote artistic activities in school children and draw forth dormant creative talents."The 'Coca-Cola' Form and Fusion design awards is a unique opportunity that allows 'Coca-Cola' to enhance and provide teens with an opportunity to express and learn about their own artistic skills." (Case Study: Coca-Cola: The Coca-Cola Brand and sponsorship). How the Company delivers the products/services to Customers: The ways in which Coca Cola delivers to its customers: Through a process of: Mass marketing. Concentrated marketing. Differentiated marketing. Niche marketing. (Marketing Plan: Coca Cola, 2006). Segmentation of marketing is on the basis of geographical /environmental factors, population, etc. In addition to this, the cultural aspects of buyers, their income, economy level, legal factors of the country etc. are phenomenon. While making the segmentation of marketing, it is important to taken in to fact that the overall size of the market, the impact of its sales growth and financial potentiality. Coca Cola, world's one of the leading brand of soft drinks, is applying standardized tools for its segmentation. One of the significant reasons behind Coca Cola's branding strategy is that of its well-structured customer based implementation measures relying on marketing tools and strategies. Moreover, Coca Cola introduced technological measures for improving its brand loyalty. The market so segmented should be within the capability and reach ability of the enterprise's production capacity. The competitive advantage of Coca Cola helps them to formulate several measures for moving further. Quality and brand image are also helping them to retain their market position. Innovation is playing a huge role in the corporate branding of Coca Cola. Now, Coca Cola has an outstanding marketing mix strategy, rather than that of its sales promotional techniques. Moreover, Coca Cola also developed the concept of Corporate Social Responsibility (CSR) for improving its market growth and potentiality. The marketing and promotional strategies of Coca Cola, helps them to rectify the deviations and problems they faced, in respect of its cultural, geographical and demographical factors in the market places all over the world. As per the attractive and systematic measures developed so far, among the other categories of non-alcoholic beverage, Coca Cola is holding an enormous position in world market. Due to the effective implementation of its market strategies and policies, it is possible to improve its market share to an extensive manner. One of the most successful marketing strategies developed by Coca Cola is that of its advertising and sales promotional measures. "The company has followed a standardized path in entering new markets and marketing its products across different national markets and the extent to which the company has adopted different strategies for different markets. Strategic variations in distribution, advertising, product mix, product development and product positioning are considered. The strategy and/or strategies that Coca-Cola has adopted are evaluated in terms of criteria such as product transportability, the transferability of competitive advantage, inter-firm transferability of resources and the need to adapt to local market conditions." (Coca Cola's International Marketing Strategy, 2002). What is the product and how it is marketed: Coca Cola, one of the strong brand among the non-alcoholic beverages, is functioning and performing its manufacturing and marketing functions in the context of strategies and policies of marketing. For keeping up the brand loyalty, certain products are following positioning or differentiation strategy. So, Coca Cola, due to the benefit of their competitive advantage, is in a position to giving more stress on the strategy of positioning and differentiation. Marketing is giving stress for its customers, and it aims to provide satisfaction to its relevant customers. "Coca-Cola Company has been very successful in international marketing effort. Aggressive advertising, branding and market segmentation have played an important part in the success. It has portrayed itself as fun, playfulness, freedom, lifestyle and the international appeal of Coca-Cola was embodied by a 1971 commercial, where a group of young people from all over the world to a hilltop in Italy to sing "I'll like to buy the world a Coke." (Everything related to the Coca Cola Company, 2005). Mainly, the brand of Coca Cola differentiates from its competitors due to its corporate brand image and marketing strategy. The direct competitors of Coca Cola is Pepsi Cola, which is affecting the growth in the level of marketing and the development of implementation measures. Suitable market positioning helps to overcome this difficulty of direct competition to a certain extent. But there is a high degree of entry obstacle is faced by Coca Cola brand. Due to the expanded growth of this non-alcoholic beverage soft drink among the global market, it is holding an outstanding position for a long period. "Coca-Cola is a good example of a company that has successfully cultivated its international business, with more than 70 percent of its income originating from non-U.S. sources. The various tactics that Coca-Coca uses to achieve this end includes developing a global consumer market, establishing transnational corporations to reduce production costs, product branding and positioning, competition-based pricing, and more." (The Impact of Globalization on How Businesses are Managed). Who are its customers and strategies to create and retain markets Moreover, modern markets are highly relying on the customer trends and attitudes. It is important to make a positive approach towards the difficulties faced by the industry, and also necessary to compete with the rivalry firms in a healthy manner. The Coca Cola's market is focusing on its strategically implementation during its ensuing future. The brand of Coca Cola is enjoying competitive advantage in the market areas. Competitive differentiation means, when a firm is differentiated from the strategic tools and techniques so implemented rather than the tools adopted by the rivalry firms. The position of a particular product within the market place is determined by its branding strategy. Even though Coca Cola is holding a numero uno position in the global market, it is facing the difficulty of penetrating newer markets. Earlier, Coca Cola focused on the strategy of availability, acceptability and affordability. But now it is giving stress towards preference, pervasive, penetration and price related value. (The Power of Brand Accessibility, 2006). Business Strategies: The marketing strategy employed by Coca Cola distinguishes its brand image from those of other non-alcoholic soft drinks in terms of market penetration and quality. But the concept of branding strategy and marketing strategy are not same. The brand image of a product helps to retain in the market over a long period, because nowadays customers are highly influencing the corporate branding of products. Moreover, Coca Cola is providing their products to its ultimate consumers at an affordable price. "The central role of branding in defining the firm's identity and its position in international markets means that it is critical to develop explicit international brand architecture. This implies identifying the different levels of branding within the firm, the number of brands at each level as well as their geographic and product market scope. The most critical element in this structure is the number of levels, i.e. corporate, house/product business and product and how these are used in conjunction with each other." (Douglas et al, 1999). We find all the following: Market Place: The place refers to where the buyers and product meets. In the context of Coca Cola, they sell their products through retail outlets and supermarkets. They also distribute products through vending machines strategically positioned at busy shopping locations and public places, like cinema halls, exhibitions and other recreational zones. 5. Marketing Implementation: Success of an organization is relating with Proper implementation of branding activities. All marketing activities are related to strategic timing. Right time implementation of advertisement and promotion are very important. In a competitive market environment since all manufactures are competing for greater market, share. Timely implementation of branding efforts activities are very important for achieving good market performance. (A) Marketing Organization: A marketing organizations' main activities are to market to customers and generate revenues for organization. Marketing organizations activities are Sales, Promotion, Customers care etc. The marketing activities of a firm are coordinated and well managed, the chief marketing executive plays an important role in this activities. The management concentrates on the exchange process of marketing. The main job of a marketing management is to analyze the market and plan about the marketing and implement the branding strategy. (B) Activities, Responsibilities and Time table for Completion: The main function of marketing is transaction and exchange of product and services intended to human needs and wants. The main activities of marketing department are follows. Analyze the brand, its merits, and demerits. Analyze the market and customers regarding brand preferences Setting a brand target market Analyze the competitors' brands and compare with own brands Setting a strategy on brand pricing and distribution etc. Distribute the product to market Collect customer reaction Evaluation of brand's market share Setting of future branding strategies. Responsibility: The main responsibility of marketing is to deliver favorite brands to customers and satisfy their needs. All customers expect benefits from their brand purchase in terms of quality satisfaction at a good price. Customers are spending money for getting utility from products. In this context, the ultimate responsibility of a marketing firm is to satisfy the customers by providing quality products. 6. Evaluation and Control. Performance Standards and Financial Control: The performance of marketing is measured through the growth in the market share and revenue. A Market survey is very effective tool for analyzing the market and customers reaction about a product. Coca Cola maintain their product quality and they implement systematic marketing strategy for achieving growth. Reverse Engineering: Reverse engineering is a process to find out how a product or service works. This operation is usually performed on hardware or software. It is often used in case the when the original documentation for the product has been lost or the documentation and the original creators are not available. The steps would involve taking apart the product and recreating it on a computer using software like CAD, and then make as close to an exact copy as possible. It is also done to illegally copy a popular product or service to market it for profit. Militaries around the world do this to copy aircraft or weapon systems when given a chance. For example, the Soviets copied a B-29 bomber which was forced to land in that country and made the Tupolev aircraft which came quite near to being an exact copy of the original.. But in many counties this would be considered to be a violation of intellectual property. Reengineering of operation in this case would include the retail outlet, other dealers in its supply chain, transportation manufacturing process, formulas and procurement of raw materials. In the case of Coco cola, their business partners supply them resources, and packing materials, other machineries, goods and services etc. helping them manufacture the products. "The least requirement of the company is that all the authorized and direct suppliers must comply with all applicable laws and regulations, which include laws covering child labor, forced labor, labor abasement, freedom of association and collective bargaining, discrimination, wages & benefits, working hours and overtime benefits, health and safety and environmental practices." (Value Chain, 2007). Customers: Coco-cola customers include a wide range of national and international chain of retailers, restaurants, hotels, as also small and independent businesses. Some of their customers are major corporations as globally familiar as the name Coca-Cola, others are the corner market or the local pushcart vendor. Coco-cola insists that no matter whether the customer is a big firm or a small retailer firm, they work with them in full cooperation for mutual benefits. As per Coco cola, helping the small firms to grow also contributes for the growth of Coco-cola too. Coco-cola serves their customers through account management teams also together with their partners, and provide services and support helping reach their needs. "For example, the Coca-Cola Retailing Research Councils in Africa, Europe, Latin America and North America provide research into issues affecting the food retail industry." Councils under Africa, Europe, Latin America and North America, provide research and explanation for issues effecting food retail industry. Coco cola customer relationship process has been developed in 3 of the leading markets under Japan, Mexico and Switzerland, and now also is being implemented with key customers in different markets under other parts of the world. Coco-cola has vision of improving its shopper market & supply chain collaboration as well as aims to speedup innovations providing superior beverage options to each customer at almost all shopping centers purchasing beverages. Under the companies excellent guidance, customer development & training is taken care of, where support to small customers helping them growing their business in a more efficient & profitable manner is main criteria. In Latin Ameri8ca, they have established Customer development training centers, the largest ones in Argentina, Brazil, Chile, Mexico and Peru. Coco-cola also helps the customers for providing nutritional information and ensure that their products are marketed responsibly. The product: The flagship brand of the coca cola company is coke and its formula is a well kept secret. The fierceness by which the company guards this is legendary. With current technology, it would be possible to find out what the ingredients are. The 'exact formula' has been published with variations, but the Company has gone on record to say that none of them is the original one. The basic ingredients and process, found in one publication are included below. " 1 oz caffeine citrate 3 oz citric acid 1 fl oz extract vanilla 1 qt lime juice 2 oz flavoring 30 lb (14 kg) sugar 4 fl oz fluid extract of coca (decocainized flavor essence of the coca leaf) 2 gal water Caramel sufficient 80 Oil orange 40 Oil cinnamon 120 Oil lemon 20 Oil coriander 40 Oil nutmeg 40 Oil neroli 1 qt alcohol "Mix caffeine acid and lime juice in 1 quart boiling water add vanilla and flavoring when cool. Let stand for 24 hours. Flavoring is likely a mixture orange oil, lemon, nutmeg oil, cinnamon oil, coriander oil, neroli oil and 1 quart of alcohol." This recipe does not specify when sugar, coca, caramel or the rest of the water are added." (Coca Cola Formula). This formula might give a flavor very near to the original coke. Conclusion: At present, Coca Cola is holding the first position in the international beverage industry, only with the help of its well-developed managerial policies and marketing strategies. The marketing strategies and the brand image pursued by Coca Cola products reinforces its position in the global market. Moreover, economic policies and systematic marketing plans are very crucial for the everlasting success of this industry. Likewise, there should be a well balance between the production, marketing and branding strategy; it is significant for the overall development of products. The Coca Cola industry is in a position to keep up its market domain during the coming future also. For this, it requires a well positioning to retain its customers, because retention of existing customers is the key successive measure for any industry. Moreover, the Coca Cola's advertisement and other promotional measure helps to improve its name in the market places. In order to survive in the modern market, it is necessary to adopt certain innovative measures. Works Cited Case Study: Coca-Cola: The Coca-Cola Brand and sponsorship. Business 2000. 2007. 11 Mar. 2008. . Foley, John., and Kontzer, Tony. (2004). Coca Cola plans to refresh Supply Chain: SAP will help Close Gap between Sales and Delivery Operations. Information Week. 16 Feb. 2004. 10 Mar.2008 . Porter, Michael. The Value Chain. Dagmar Recklles. 2001. 9 Mar. 2008. . Marketing Plan Coco Cola. eCheat.com. 1999-2007. 12 Jun. 2006. 9 Mar. 2008. . Coca Cola's International Marketing Strategy. Academic Research Papers. 2002. 9 Mar. 2008. . Everything related to the Coca Cola Company. eCheat.com. 1999-2007. 23 Jul. 2005. 9 Mar. 2008. . The Impact of Globalization on How Businesses are Managed. Bookrags. 9 Mar. 2008. . The Power of Brand Accessibility. BrandingStrategy. Black Project. 22 Oct. 2006. 9 Mar. 2008. . Douglas, Susan P., Craig, C. Samuel., and Nijssen, Edwin J. International Brand Architecture: Development, Drivers and Design. Aug. 1999. 9 Mar. 2008. . Value Chain. The CocoCola Company. 2007. 9 Mar. 2008. . Coca Cola Formula. Coca-Cola formula - Recipe 1. The Global Oneness Commitment. 9 Mar. 2008. . Read More