Coca-Cola, Value Chain
By: Kevin • 2,705 Words • February 23, 2010 • 25,996 Views
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Coca Cola markets nearly 2,400 beverages products in over 200 geographic locations. As a result development of a superior value system is imperative to their operations. Throughout this paper we will analyze their value system by using Michael Porter’s value chain analysis model. In an attempt to paint a current picture of the non-alcoholic beverage industry we will assess the market activity by using mergers, acquisitions and IPO’S as our benchmarks to determine if the market is growing or contracting.
Value Chain Analysis
A value chain is a model used to disaggregate a firm into its strategically relevant value generating activities, in order to evaluate each activity's contribution to the firm's performance (Terms V 2006). Through the analysis of this model we can gain insight as to how a firm creates their competitive advantage and shareholder value.
The value chain of the nonalcoholic beverage industry contains five main activities. These include inbound logistics (suppliers), operations, outbound logistics (buyers/ customers), marketing and sales, and service.
Inbound Logistics (Suppliers)
Some of Coca Cola’s most notable suppliers include Spherion, Jones Lang LaSalle, IBM, Ogilvy and Mather, IMI Cornelius, and Prudential. These companies provide Coca Cola with materials such as ingredients, packaging and machinery. In order to ensure that these materials are in satisfactory condition, Coca-cola has put certain standards in place which these suppliers must adhere to (The Supplier Guiding Principles). These include: compliance with laws and standards, laws and regulations, freedom of association and collective bargaining, forced and child labor, abuse of labor, discrimination, wages and benefits, work hours and overtime, health and safety, environment, and demonstration of compliance (Coca Cola 2006).
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From time to time, Coca-Cola uses third parties to assess their suppliers by having interviews with employers and contract workers. If a supplier has issues about the supplier guiding principles, they are usually given a certain amount of time to take corrective measures; if not, Coca-Cola has the right to terminate their contract with these suppliers.
Coca Cola’s core operations consist of Company-owned concentrate and syrup production (Coca Cola 2006). According to their website, some of the main environmental impacts of their business occur further along the value chain through system's bottling operations, distribution networks, and sales and marketing activities (Coca Cola 2006). Management of these operations across the business value chain tends to be more challenging outside of the core operations. According to Coca Cola, they continue to address this by working with their partners to reduce the effects at every level of the manufacturing process by enlarging their comprehension of the complete environmental impact of their business through the entire lifecycle of their products from ingredient procurement to production, delivery, sales and marketing, and post-consumer recycling (Coca Cola 2006).
Please see Appendix for additional information.
Outbound Logistics (Buyers/ Customers)
The activities required to get finished products to customers include warehousing, order fulfillment, transportation, and distribution management. Coca Cola has the world’s largest distribution system. They own, lease, and operate in over 800 plants around the world (Coca Cola 2006). The 2,400 beverage products which they market reach consumers in more than 200 different geographic locations (Coca Cola 2006). Grocery stores such as Sobeys, fast food restaurants such as McDonalds (fountain sodas), and vending machines are just a few of the distribution units used to ultimately reach consumers.
Coca Cola has over 300 bottling partners which range from publicly traded businesses to small family owned operations (Coca Cola 2006). They have implemented the “Coca Cola System” in which they work cohesively with their partners in order to develop strategies aimed to meet the needs of all their customers.
Examples of their commitment to these strategies are seen in their plant in Indonesia, where boats are used to transport the products between hundreds of islands throughout the Amazon. This is often because waterways are often the main way to access these remote islands. In some of the higher elevations of in the Andes, Coca Cola products are sometimes transported