Coca Cola Value Chain analysis

Value-chain analysis is an analytical framework that assists in identifying

business activities that can create value and competitive advantage to the business. The
figure below illustrates the essence of value chain analysis.

Inbound logistics (Suppliers)

Water is the main ingredient for all products manufactured by Coca Cola
Company and the company occasionally faces significant challenges in accessing this
particular raw material. Coca Cola uses high fructose corn syrup (HFCS) extensively and
this raw material is purchased from US-based suppliers and delivered via trucks. There
are also some ingredients that have to be sourced internationally. For example, orange
juice and orange juice concentrate is sourced from Florida and Southern Hemisphere,
particularly Brazil. For international purchases inbound logistics are facilitated via ships
and trucks. Coca Cola values diversity among its suppliers.
Some of Coca Cola 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-colahas put certain standards in
place which these suppliers must adhere to (The Supplier GuidingPrinciples). 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 andbenefits, work hours and overtime, health and safety,
environment, and demonstration of compliance(Coca Cola 2006).See Appendix for
additional information:From time to time, Coca-Cola uses third parties to assess their
suppliers by having interviews withemployers and contract workers. If a supplier has
issues about the supplier guiding principles, they areusually given a certain amount of
time to take corrective measures; if not, Coca-Cola has the right toterminate their
contract with these suppliers.

Operations. Coca-Cola operating segments are divided into the following 7 groups:

 Eurasia and Africa

 Europe
 Latin America
 North America
 Asia Pacific
 Bottling Investments
 Corporate

The Coca Cola system is not a single entity from legal and managerial points of view.
Coca Cola manufactures and sells concentrates, beverage bases and syrups to its bottling
partners, maintains ownership of the brand and develops and applies marketing
strategy. Bottling partners, entities that do not belong to Coca Cola, do manufacturing,
packaging, merchandising and they distribute the final product to customers and
vending partners.
Coca Cola core operations consist of Company-owned concentrate and syrup
production (Coca Cola2006). 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)

Coca Cola Company sells its products in more than 200 countries and
understandably claims to operate the world’s largest beverage distribution system[1].
Distribution channels utilized by Coca-Cola consists of distribution operations operated
or controlled by the company, independent bottling partners, distributors, wholesalers
and retailers. The five major bottling partners listed below accounted for 33% of the
total unit case volume sales in 2014. Moreover, outbound logistics are organized via
manual distribution across Africa with more than 2500 independent manual
distribution businesses employing more than 11,000 people.

Major Independent bottling partners and areas they serve.

Independent bottling
Areas covered
partner

Coca-Cola FEMSA, S.A.B.

Northeast parts of Mexico, Brazil, Guatemala, Colombia, Costa Rica, Nicaragua,
de C.V. (“Coca-Cola
Panama, Venezuela, western Argentina and Philippines
FEMSA”)

Armenia, Austria, Belarus,

Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the

Former Yugoslav Republic of Macedonia,
Coca-Cola HBC AG (“Coca-
Cola Hellenic”)
Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern
Ireland, Poland, Republic of Ireland,

Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland and Ukraine

Arca Continental, S.A.B. de

Western Mexico, Ecuador and northern Argentina
C.V

Belgium, continental France, Great Britain, Luxembourg, Monaco,

New CCE
the Netherlands, Norway and Sweden

Hong Kong, Taiwan, seven provinces in mainland

Swire Beverages (“Swire”)
China and territories in 11 states in the western United States

Marketing and sales.

Sales of beverages belonging to Coca-Cola portfolio amounted to 28.6 billion,

28.2 billion and 27.7 billion unit cases in 2014, 2013 and 2012, respectively. The volume
of sales in the home country US accounted for 19% to the total volume of sales in
2014[4]. 31% of total sales outside of the US occurred in Mexico, China, Brazil and
Japan.
 Coca Cola applies integrated marketing strategy using advertising, sales
promotions, events and experiences and public relations elements of the marketing mix
in a combined manner. The brand marketing message is associated with being happy,
enjoying life and leading an active lifestyle. Coca Cola’s the latest marketing efforts have
been directed at combining four popular drinks – Coca Cola, Diet Coke, Coca Cola Zero
and Coca Cola Life into the concept of ‘One Brand’, thus providing wider choice to the
target customer segment.

Service.

Coca Cola maintains its customer service practices via online chat with a virtual
agent in official website of the company dedicated customer service phone. Coca Cola
website has a comprehensive FAQ that covers the most aspects of their products in a
detailed manner and the website also addresses a wide range of rumors related to the
brand direct and indirect ways.

Value Chain Analysis

A value chain is a model used to disaggregate a firm into its strategically relevant value
generatingactivities, 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 competitiveadvantage and shareholder value.The value
chain of the nonalcoholic beverage industry contains five main activities. These
includeinbound logistics (suppliers), operations, outbound logistics (buyers/ customers),
marketing and sales,and service.
Inbound Logistics (Suppliers)
Some of Coca Cola 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-colahas put certain standards in
place which these suppliers must adhere to (The Supplier GuidingPrinciples). 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 andbenefits, work hours and overtime, health and safety,
environment, and demonstration of compliance(Coca Cola 2006).See Appendix for
additional information:From time to time, Coca-Cola uses third parties to assess their
suppliers by having interviews withemployers and contract workers. If a supplier has
issues about the supplier guiding principles, they areusually given a certain amount of
time to take corrective measures; if not, Coca-Cola has the right toterminate their
contract with these suppliers.

Operations
Coca Cola core operations consist of Company-owned concentrate and syrup
production (Coca Cola2006). According to their website, some of the main
environmental impacts of their business occurfurther along the value chain through
system's bottling operations, distribution networks, and sales andmarketing activities
(Coca Cola 2006). Management of these operations across the business value
chaintends to be more challenging outside of the core operations. According to Coca
Cola, they continue toaddress this by working with their partners to reduce the effects at
every level of the manufacturingprocess by enlarging their comprehension of the
complete environmental impact of their businessthrough the entire lifecycle of their
products from ingredient procurement to production, delivery, salesand 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 largest
distribution system. Theyown, lease, and operate in over 800 plants around the world
(Coca Cola 2006). The 2,400 beverageproducts which they market reach consumers in
more than 200 different geographic locations (CocaCola 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 familyowned operations (Coca Cola 2006). They have implemented
the Coca Cola System in which they workcohesively with their partners in order to
develop strategies aimed to meet the needs of all theircustomers.Examples of their
commitment to these strategies are seen in their plant in Indonesia, where boats
areused to transport the products between hundreds of islands throughout the Amazon.
This is oftenbecause waterways are often the main way to access these remote islands.
In some of the higherelevations of in the Andes, Coca Cola products are sometimes
transported by four-legged power. Acrossmuch of Africa, bottlers deliver to thousands of
family-run kiosks and home-based stores.

Marketing and 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 Cola 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 andbrands, changing the design
of their packaging, and designing various new advertising campaigns (CocaCola
2006).On October 19th, Coca Cola reported their earnings for the third quarter.
Earnings per share are upwhich results in higher benefits for shareholders. According to
Neville Is dell, CEO of Coca Cola, theyhave experienced a growth in sales of five
percent compared to the same quarter last year. This is as aresult of balancing
performance across their global markets and their product portfolio (Coca Cola2006).

Service

Activities that maintain and enhance a product value include customer support, repair
services,installation and training.Coca Cola customers range from large international
retailers and restaurants to smaller independentbusinesses and vendors. As a result,
they provide services tailored to meet their customer s needs.Coca Cola also supports
their customer by providing them with the training necessary to help theirbusinesses
become more effective and profitable. They have established Customer Development
andTraining Centers which are available to more