ARTICLE

(Coca Cola 2006)

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. In an attempt to paint a
current picture of the non-alcoholic beverage industry, 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).
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 ColaS 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)
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 by four-legged power. Across much of Africa, bottlers deliver to
thousands of family-run kiosks and home-based stores.
Out of approximately 2,400 products, Coca Cola markets four of the worlds top sales drink
brands. Although the industry is relatively small and they only directly compete with two
companies, creativity is a vital marketing strategy to Coca Cola.
Coca Colas ultimate goal is to deepen their brands connection with consumers. As a result, they
have to constantly reinvent their product (Coca Cola 2006). The marketing strategy they use is
directly linked to the consumer; from advertising, to point of sale, to ultimately opening and
consuming a Coca Cola beverage. Techniques which they have used to achieve this include
developing new products and brands, changing the design of their packaging, and designing
various new advertising campaigns (Coca Cola 2006).

On October 19th, Coca Cola reported their earnings for the third quarter. Earnings per share are
up which results in higher benefits for shareholders. According to Neville Isdell, CEO of Coca
Cola, they have experienced a growth in sales of five percent compared to the same quarter last
year. This is as a result of balancing performance across their global markets and their product
portfolio (Coca Cola 2006).Activities that maintain and enhance a products value include
customer support, repair services, installation and training. Coca Colas customers range from
large international retailers and restaurants to smaller independent businesses and vendors. As a
result, they provide services tailored to meet their customer’s needs. Coca Cola also supports
their customers by providing them with the training necessary to help their businesses become
more effective and profitable. They have established Customer Development and Training
Centers which are available to more then 21,000 independent retailers, which provide training at
no cost in areas such as general management, marketing, finance, inventory management and
customer services.
In order to grow profitably, minimize their costs, and to become the global market leader, Coca-
Cola has business partners all around the world. These business partners play a key role in
helping Coca Cola to achieve their strategic goals. Some examples of Coca Cola merging with
other companies include: Coca-Cola merged with Apple Computer to promote its iTunes digital
music service. With this approach, Coca-Colas aim was to create a new form of communication
among their younger customers (India Daily 2006). On September 26, 2006, Coca Cola
announced changes in the terms of their merge with Efes Sinai Yatirim Holding. In this merge,
Coca Cola has a shareholding investment interest of “87. 63%. The Company announced that
according to these changes, the merger and exchange ratios will be 97.7514% and 1.73839,
respectively. Coca-Cola Icecap A.S. will also increase its capital from TRY 249,589,770 to TRY
255,331,140” (Reuters 2006).
On September 26, 2006, Pepsi Co., a major competitor of Coca Cola, announced that they had
acquired IZZE Beverage Company, the maker of all-natural, sparkling fruit juices. Unfortunately
the announcement did not outline further details of the agreement (Reuters 2006). On September
25th Coca Cola announced its intent to take control of CCBPI from San Miguel Corp. According
to Reuters, Coca Cola Co. is set to take over management and control of the soft drinks arm of the
Philippines' San Miguel Corp., though a formal deal has yet be agreed on. San Miguel wants to
offload its 65% stake in Coca Cola Bottlers Philippines Inc. (CCBPI), the local unit of San
Miguel soft drinks firm, which has been suffering from weak sales and demand in recent years.
Coca Cola currently owns 35% of CCBPI. San Miguel also wants Coca Cola to remove a non-
competition clause; allowing San Miguel to sell beverage products that compete with CCBPI
(Reuters 2006)
Initial Public Offering (IPO) is the first sale of corporation’s common shares to public investors.
New IPO means that the industry is continuing to expand (Yahoo Finance (2006).
Although the most recent IPO in the nonalcoholic beverage industry occurred in 2002 the
industry is relatively stable. It is difficult for new competitors to enter the industry; if they are
successful, they will be faced with high competition because the industry is relatively full (Yahoo
Finance 2006).
Coca Cola has expended its operations over the past 120 years. They now operate in over two
hundred countries with nearly 2400 product offerings. Their global operation is divided into six
geographic locations- the Africa Group, East and South Asia and the Pacific Rim Group, the
European Union Group, the Latin American Group, the North Asia Eurasia and Middle East
Group, and the North American Group (Coca Cola 2006).
Coca Colas guiding principle is to ailed by example and learn form every experience (Coca Cola
2006). Coca Cola has established high standards at all levels which they strive to meet in order to
ensure that they achieve international best practices in terms of transparency and accountability
(Coca Cola 2006). They have developed control systems which are outlined in
Their Corporate Governance Guidelines, Codes for Business Conducts, and bylaws. In addition,
they have established seven committees which monitor and regulate performance at all levels of
operations. These include Audit, Compensation, Finance, Management Development, Public
Issue and Diversity Review, Executive and Directors and Corporate Governance committees
(Coca Cola 2006)
Coca Cola has a global citizenship which is dedicated to ensuring that their business operations
are conducted in a responsible manner. According to their website, the strength of their culture
derives from aœ the passion, leadership and integrity demonstrated by all employees world- wide
(Coca Cola 2006). Coca Cola is committed to ensuring that all company citizens are treated
fairly. They have adopted the practices of the United Nations Global Compact which is an
initiative guided by ten principles to encourage unity between UN agencies, labor and civil
society, and to support universal environmental and social principles (UN Global Conduct 2006).

Within Coca Colas human resource department, strategies are developed and implemented which
will ensure that the organization builds the capability to deliver desired business results (Coca
Cola 2006). With this being said, the human resource department is currently undergoing a
number of changes. Coretha Rushing, head of the department for the past four years is resigning
as a result of a discrimination case (New York Times 2006). Along with this, the department is
also in the midst of planning to downsize. Coca Cola has approximately 37,000 employees which
fall under their human resource department. Employees receive the best value and are provided
with diverse benefits and options. Some of these include health and life, retirement, tuition and
program, and additional benefits. As previously mentioned training programs made available to
independent retailers in general management, marketing, finance, inventory management, and
customer service to independent retailers also fall within this department.
Coca Cola recognizes that they must keep up with technology in order to maximize productivity.
In 2003 they formed a contract with Symbol Technologies, Inc. They provided more than $3
million in technological support. They built a system which combines the PDT 8100, data-
communication cradles and printers for pre-sales operations. According to Coca Cola, a future
growth will include wireless wide area network communications for anywhere, anytime
information and laser bar code scanning (Symbol Technologies 2006). As a result, Coca-Colas
sales representatives are now able to visit 30-40 outlets daily which are 25 percent higher than
before. Technology investment brings different benefits to Coca Cola. These include increased
productivity for sales representatives and increased number of sales visits by 25 percent. In the
future, technology will continue to provide the highest level of service to the Coca Cola Company
by improving efficiency, leveraging existing knowledge, and proactively mitigating legal issues
by educating clients on key issues affecting the company (Coca-Cola 2006).
Coca-Cola has plants, production sites and bottling facilities all around the world. This plays an
important role in their business since they are one of the global leaders of the non-alcoholic
beverage industry. According to the CIO of Coca-Cola, an outsourcing comes at the expense of
improving in-house skills, which will eventually lead to reduced costs. As a result, Coca-Cola
uses outsourcing to be a world leader by implementing control mechanisms to its contractors, as
is mentioned in appendix 1. In the mean time, they invest in and train their employees in order to
achieve their long-term strategic goals. They take corporate responsibility very seriously, and
make sure that all of their business partners comply with their Supplier Guiding Principles (Zdnet
2006).
 SUMMARY

Supplier Guiding Principles play a key role in maintaining Coca-Colas quality of standards.
Coca-Cola makes sure that their suppliers comply with these standards by using third parties to
assess them. However, there are still many issues with regards to water resources, and health
problems. For example, Coca-Cola drained so much water in India that at least five Indian
communities are now faced with water shortages in addition to other health problems. Another
example includes, Coca-Cola using expired materials for the production of soft drinks in
Vietnam. An inspection was made in July 2006 and inspectors discovered 7.5 tons of expired
material had been used to produce soft drinks. They also found that there was a large amount of
expired soft drinks which had already been sold into the market.

It is important to gain the support of the local community as it will effect the growth, and the
image of the company. As a result, Coca Cola has certain rules in place which they must also
comply with in order match their organizational responsibility guidelines. On the contrary,
examples previously mentioned display hypocrisy and damages their image.

Through the examination of the market activity of the non- alcoholic beverage industry they have
not found any significant changes within the industry. There were only two mergers and two
acquisitions with the most recent activity being in September of 2006. All of these transactions
were between unrelated parties which indicated a minimum growth in the industry. There most
recent activity pertaining to IPOs was in 2002. Again, this is an indicator of the marginal growth
of the industry. However, because Coca-cola is constantly expanding their operations all over the
world we can probably foresee that this may change in the near future. .

Coca Cola is doing an increasing amount of outsourcing in order to minimize their costs,
maximize their profit, gain more market share, and to protect their competitive advantage. They
have mechanisms in place that control and assess their business partners in order to ensure the
quality of their products and their image; however, their practices in some parts of the world do
not act in accordance with their corporate responsibility guidelines. This results in bad publicity
and negative brand image. The company is trying to circumvent these negative effects by
instituting training programs which promotes equilibrium of the company’s value system.
 VALUE CHAIN MODEL

The value chain, is a concept from business management that was first described and popularized
by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining
Superior Performance

USAGE:

The goal of these activities is to offer the customer a level of value that exceeds the cost of the
activities, thereby resulting in a profit margin. The value chain model is a useful analysis tool for
defining a firm’s core competencies and the activities in which it can pursue a competitive
advantage.
The value chain categorizes the generic value-adding activities of an organization. The "primary
activities" include: inbound logistics, operations (production), outbound logistics, marketing and
sales (demand), and services (maintenance). The "support activities" include: administrative
infrastructure management, human resource management, technology and procurement.
 APPLYING
VALUE CHAIN MODEL

PRIMARY ACTIVITIES
INBOUND LOGISTICS:

Some of Coca Colas 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.

OPERATION:

Their core operation is the production of company owned concentrate and syrup.

OUTBOUND LOGISTICS:

This activity includes buyers and consumers as they get the finished product by the company. 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.

MARKETING & SALES:

Out of approximately 2,400 products, Coca Cola markets four of the worlds top sales drink
brands. Although the industry is relatively small and they only directly compete with two
companies, creativity is a vital marketing strategy to Coca Cola.
Coca Colas ultimate goal is to deepen their brands connection with consumers. As a result, they
have to constantly reinvent their product. The marketing strategy they use is directly linked to the
consumer; from advertising, to point of sale, to ultimately opening and consuming a Coca Cola
beverage. Techniques which they have used to achieve this include developing new products and
brands, changing the design of their packaging, and designing various new advertising
campaigns.

SERVICE:

Coca Colas customers range from large international retailers and restaurants to smaller
independent businesses and vendors. As a result, they provide services tailored to meet their
customer’s needs.
Coca Cola also supports their customers by providing them with the training at no cost, necessary
to help their businesses become more effective and profitable.
 SUPPORT ACTIVITIES

INFRASTRUCTURE:

The infrastructure includes coco cola’s organization structure, control systems and company
culture. Coca Cola has expended its operations over the past 120 years. They now operate in over
two hundred countries with nearly 2400 product offerings. Their global operation is divided into
six geographic locations- the Africa Group, East and South Asia and the Pacific Rim Group, the
European Union Group, the Latin American Group, the North Asia Eurasia and Middle East
Group, and the North American Group. Coca Colas guiding principle is to lead by example and
learn form every experience. They have developed control systems which are outlined in their
Corporate Governance Guidelines, Codes for Business Conducts, and bylaws. In addition, they
have established seven committees which monitor and regulate performance at all levels of
operations. Coca Cola has a global citizenship which is dedicated to ensuring that their business
operations are conducted in a responsible manner. According to their website, the strength of
their culture derives from the passion, leadership and integrity demonstrated by all employees
world- wide. Coca Cola is committed to ensuring that all company citizens are treated fairly.

HUMAN RESOURCE MANAGEMENT:

Coca Cola has approximately 37,000 employees which fall under their human resource
department. Employees receive the best value and are provided with diverse benefits and options.
Some of these include health and life, retirement, tuition and program, and additional benefits

TECHNOLOGY:

Coca Cola recognizes that they must keep up with technology in order to maximize productivity.
They formed a contract with Symbol Technologies, Inc. They provided more than $3 million in
technological support. They built a system which combines the PDT 8100, data-communication
cradles and printers for pre-sales operations. According to Coca Cola, future growth will include
wireless wide area network communications for anywhere, anytime information and laser bar
code scanning.

PROCUREMENT:

Coca-Cola has plants, production sites and bottling facilities all around the world. This plays an
important role in their business since they are one of the global leaders of the non-alcoholic
beverage industry. Coca-Cola uses outsourcing to be a world leader by implementing control
mechanisms to its contractors. They invest in and train their employees in order to achieve their
long-term strategic goals.