Table of Contents
This paper is a report of a case study, which was conducted within the Coca-Cola HBC in order to understand a couple of things concerning CCHBC. Consequently, the report was written in such a manner that it covered several important items pertaining the CCHBC. One of these items is the operations management practices of CCHBC. Regarding this item, the report has tried to highlight the way the operations management practices in CCHBC make it possible for CCHBC to accomplish its outlined strategic aims.
The second item that the report focused on is that of making a critical assessment of the approach of CCHBC to capacity management. The capacity management in this case entails the production control and planning. In the same note, the report pinpointed the most important challenges that were affecting the company because of this approach.
The third item to be focused on in this report is that of bringing out the nature of the relationship existing between the suppliers and CCHBC. In the same note, the report will try to clarify the reason why CCHBC manage its relationship with the suppliers in the manner it does. The fourth item that this report will focus on is the way CCHBC can get help from MIS in the area of monitoring the accomplishment of Availability, one of it’s A credo. Specific examples will be used in supporting the answer so as to demonstrate the quality of my chosen information and hence quality report (Krajewski, et al. 2007).
The need for effective customer service by the Acceptability factor of CCHBC is also going to be expounded in this report. In the same note, the report is going to discuss, using examples on the way related search and data-mining tools is going to make it possible for the CCHBC to examine performance. Lastly, the importance of knowledge and not information is also going to be assessed and the main recommendations and conclusions of the report.
In Europe, Coca-Cola HBC is one of the leading non-alcoholic beverages bottlers. Its operations are stretching to 28 countries (from the eastern parts of Russia to the Republic of Ireland and from Nigeria to Estonia). The Coca-Cola HBC it serving about 1.5 billion unit cases to clients every year. These unit cases consist of over 500 flavor and package combinations of non-carbonated (non-CSD) and carbonated (CSD) and energy drinks, sports, water, juices, soft drinks, and ready-to-drink beverages like coffees and tea (Laudon, & Laudon, 2011).
This product variety is aimed at making it possible for CCHBC to give each customer the best refreshment, in the right place, and at the right price. In addition, CCHBC is one of key worldwide bottlers of The Coca-Cola Company. The company was formed in 2000 with the amalgamation of the Coca-Cola Beverages plc with Athens-based Hellenic Bottling Company SA. The company’s strategy is based on a Four A’s philosophy in order to uphold its constant and rising demand in its markets:
• Availability – CCHBC’s products get to customers not just within the desire of arm-extension, but also by through the provision of the right package, at the right time, in the right location.
• Affordability – provision of reasonably priced choice to consumers though an extensive variety of attractive, quality goods, in an suitable package for each customer, for each event, and for the right value
• Acceptability - Relentless control, efficient customer service, exceptional efficiency, and the unsurpassed route-to-market, pooled with a thorough knowledge of customer needs, assures that CCHBC goods are acceptable to customers across every market.
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• Activation - Consumer motivation for choosing CCHBC products comes through providing them at the right price for the right brand, in the right location. By placing them in interesting and enticing point-of-purchase displays, by making them available via precisely placed coolers, or vendors, or racks, or fountains, and by making them relevant to the lives of purchasers, CCHBC activates consumer demand (Hawryszkiewycz, 2010).
Operations management practices of CCHBC
Supply Chain Management (SCM), successful supply chain pattern and management are very vital for accomplishing the aforementioned four goals and satisfying the varying demands of the consumers and the market. Supply chain labors are centered on offering the required manufacturing suppleness to support expansion of product range while going after the most cost efficient route-to-market for delivery to customers and order taking (Heizer & Render, 2010).
Technology investments and use are nowadays vital enablers of resourceful Supply Chain Management, and in 2005, CCHBC was compelled to introduce the single biggest and the most unbeaten rollout of Advanced Planning Optimizer (APO) that was SAP-based in sixteen businesses situated in seven different countries in Central Europe.
These introductions have made it possible for CCHBC to co-ordinate and optimize the businesses within its entire network as well as across borders. It has done this by bringing together the best practices on a solitary, standard enterprise policy. There are additional plans to put together 8 more businesses in this platform. The platform facilitates alliance of demand planning and supply chain to achieve operations and sales planning efficiencies. It can come up with cost saving chances and bring CCHBC one-step extra towards category headship in the Fast Moving Consumer Goods (FMCG) industry (Reid, 2010).
However, the accomplishment and achievement of a SCM that is demand driven is not exclusively based on the technological infrastructure, but also on the practices of the organization, that CCHBC came up with having the aim of bringing together consumer and sales information into the CCHBC businesses planning. Analytically, information collected from CCHBC’s SAP platform makes it possible for the APO development to occur. CCHBC has the belief that the age whereby production scheduling was done based on long-standing forecasting has been overtaken. Instead, CCHBC conducts its operations on a continuous scheduling process that is based on arriving at a consensus plan with all pertinent senior managers (Krajewski, et al. 2007).
In fact, a committed Forecasting Manager position has been formed, whose duty is to use historical consumer data and sales information to come up with a demand map on a weekly basis. This demand planning analysis is based on the utilization of scientific methods and information mining tools. Subsequently, the task of the Forecasting Manager is to coordinate and converse his/her results with the Commercial Manager, in this case the Marketing Manager.
The rationale of this procedure is to crosscheck if in case the scientific demand plans agree with or not with the sales targets of the Commercial Manager, and if not, to settle on corrective measures at a tactical level, in particular the sales promotions, and more/less advertising. The last step is about the SNOP (Sales and Operations) conference that is conducted once per month involving the SCM Manager, the Commercial Manager and Chief Financial Officer (CFO). The endeavor of all managers drawn in the meeting is to reach an agreement on sales and production targets and then to come up with an agreed arrangement that satisfies the limits and the targets of everyone involved (O'Brien & Marakas, 2008).
Targets must not go beyond the production ability of the SCM Manager, even as he or she is still achieving the profitability goals established by the CFO and fulfilling the sales targets of the Commercial Manager. Reaching a compromise plan and a solitary set of numbers satisfying everyone is not an easy task. Internally, it is required that all the managers set their own individual goals, targets and bases against which their achievement is evaluated, and externally, the consensus arrangement and number setting task also needs to assure the stakeholders of CCHBC.
Overall, the achievement of the constant planning process profoundly depends on the efficiency, communication, and collaboration of the team members. Furthermore, it is not only Information Technology but also the cultivation of good associations and partnering with consumers, retailers, suppliers and other members making up the supply chain that makes it possible for CCHBC to cut down the logistics costs even as it address and influence the preferences of the consumers at the point of transaction (Pearlson & Saunders, 2009).
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A number of consumer-specific incorporated programs brought in board in 2005 demonstrate this. For instance, in Italy a joint venture with the supermarket chain, called COOP Italia, was formed to pilot a method aimed at attaining a fully incorporated business plan. This initiative is backed by Efficient Customer Response, a business organization that enhances the alignment of retailers and manufacturers across areas of similar business interest like product traceability, identification, and promotional/demand planning (Pearlson & Saunders, 2009).
In Switzerland, new terms and conditions of trading that address the requests of the consumers for business-supported, fair, simple, and clear trade agreements were brought into action. Because of these establishments, consumers benefit from a more efficient and transparent system. In the Czech Republic, CCHBC worked together with several retailers for mutually enabling understanding of customer shopping behavior and transforming this into several profitable common projects in the stores.
Overall, CCHBC appreciates that “better and faster” supply chain implementation relies on collaborating successfully with its intermediate and final consumers in order to recognize opportunities for cutting down costs along the whole value chain in addition to offering the correct product variety through tailored packaging improvement (Meredith & Schafer, 2010).
In addition, CCHBC is coming up with customized internal systems aimed at further improving SCM competence and customer service. A centralized database having visual marketing requirements for triggering promotions, which are channel specific or consumption incidents, was brought forward in 2005. This database enhances the analysis, exploitation and sharing of the best practices in marketing across the whole group and enhances the success of upcoming marketing campaigns.
The suppliers and CCHBC Relationship
Operating with Suppliers to CCHBC collection from large worldwide companies to the many thousand local business organizations that provide services, equipment, packaging, and ingredients has also been a huge milestone in CCHBC. Following the expansion of the company into Eastern Europe, many of its worldwide suppliers have also come up with local invention in these countries, giving the opportunity to CCHBC to obtain partners in those countries.
For example, the Asian resin supplier of the company has come up with a PET (used in making plastic bottles) plant in Poland. At the same time an important cold drink equipment maker runs production plants in Russia, Poland and Romania from which CCHBC get the supply of vending machines and coolers. CCHBC procurement experts strive to come up with fair and equally favorable relationships with contractors to bring the best value in terms of innovation, service, cost, and quality (Davies, 2009).
As market, competition builds up among retail consumers and the price of raw materials rise up continually, joint venture with suppliers is very important since CCHBC has the obligation of collaborating with them to improve their processes mutually, deliver efficiencies and innovations, and reduce costs. For instance, CCHBC has collaborated with packaging suppliers in utilizing less PET glass and resin in the designs of the lighter weight bottle and to employ one-piece closures bearing less material and having easy recycling process (Slack, et al. 2009).
The new bottling blueprint is 30% lighter, 50% stronger, and 30% less expensive in comparison with conventional bottles. This not only leads to lower packaging and logistics costs and waste, but also gives room for more effective use of cooler space. This is significant for improving the efficiency of frontward SCM by making it possible for an increased product variety to be offered at the consumption channel.
Associations with suppliers are controlled at both country and Group (i.e. CCHBC) level, with multi-tasking teams operating with suppliers to guarantee quality and enhance efficiency. Ultimate answerability for supplier association management rests with the Chief Procurement Officer of the Group. With certain important commodities, CCHBC has a joint venture with The Coca-Cola Company. All suppliers of primary packaging materials and ingredients (i.e. packaging in contact with beverages or items that bear the trademark) are permitted by The Coca-Cola Company (Coakes , 2003).
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This endorsement practice, in which CCHBC participates, involves verification of capability, quality, and processes. In addition to prospect of efficiency and quality, CCHBC also wants its suppliers to adhere to strict principles for labor practices, human rights, and business ethics, as well as proper environmental management. These requirements are stipulated by CCHBC in the Guiding Principles that it has outlined for Suppliers (@ www.coca-colahbc.com). These Guiding principles form part of all of CCHBC contracts with suppliers. These principles are strongly aligned with those stipulated by The Coca-Cola Company. Independent audit of suppliers for conformity with these principles is carried out by autonomous third party organizations on the capacity of The Coca-Cola Company, and a adherence of suppliers is required to be established at least one time every two years.
MMI monitoring the accomplishment of Availability
In order to monitor the aspect of availability, MMI has worked with CCHBC in setting up the strategic formulation for the Coca Cola Company. Several things have come because of this.
Strategy formulation refers to the specific planning that a business performance in order to ensure the wellbeing of the company or organization. Strategy formulation can either be
Business/competitive strategy, which involves setting the framework for achieving a particular goal in the business or it, can be a corporate strategy where the company decides which line of business to operate in. Both of these forms of strategic formulation involves the company setting good plans, committing resources and ensuring a good monitoring plan is done so that the overall goal of the business is achieved (Gaither, 2002).
A strategic formulation process is important in a business for several reasons. Management argues that a good strategic formulation when communicated to all the members of the organization will make the employees learn about the clear vision about the objectives and goals of the firm thus making them put their efforts and make the company be in a position to meet its goal of profit making. An organization with good strategic formulation techniques makes the decision makers to have a direction and furthermore the status quo of the firm is maintained. In a competitive market, a firm without a good strategic formulation is likely to fail because of a strong competition from its rivals (Lehaney et al. 2003).
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In order for us to understand the strategic formulation the Coca cola Company has adopted we need to analyze the external business environment. Business environment refers to the external or internal factors, which control the general behaviour of the company, and leads to a change in the profit level. There is a need for a business to identify its business environmental factors so that it can make the right choices in the running of the business. The external business factors, which control the business, are normally categorized into PEST. These factors are political, economic, sociological, and technological factors.
Coca cola Company is not an exception in terms of being affected by the external business environment. Political factors for example of the countries which coca cola company serve have had an influence on the structure of this Company in these countries. The decisions like pricing of its products and the type of Coca Cola Company products to be distributed have been so much influenced by the type of governments with which in most cases the Company has no sufficient power to control (Lehaney et al. 2003).
The state of the economy also determines the structure of the Company in a particular company. In the developed countries where the economy is doing well, Coca cola Company has a good base, the percentage of its contribution to the government revenue moderate. In the developing countries and the less developed countries, which are still fighting to stabilize their economies, they have no strong base of this Company making it to have no penetration into its market.
Technology and sociological factors also influence the business environment of Coca Cola Company. The advent of technology, which does multi, tasks like in advertising, packaging and redesigning is a very important step in achieving high level of profits of the company. The internet is a fundamental tool, which is being used to advertise in today world. The company needs to be aware of the use of such techniques by its competitors and therefore be in a position to compete effectively also. Coca cola Company has an upper hand in meeting the sociological needs of the society. These include factors like demographic factors, the social status and the cultural levels which may hinder the marketing of the products of Coca Cola Company.
Michael Porter in his model posing the five forces of analysis indicated that there are some requirements which are important for a company to formulate its policies strategically. He said that a combination of these forces will make the Company achieve its goals while a company which does not adopt all the forces may not do well. These forces are controlled by the micro and macro environmental factors which determine the business environment of a business.
The first force, which influences the company’s goals according to Porter, is the existence of substitute products. The availability of substitute products causes people to switch to the alternatives in response to factors like increase in price of the other product. Coca Cola Company needs to be careful in the market because the rise of rival Companies like Pepsi Cola can be a very big threat because it provides substitute products. The Company over the years has been doing research about the propensity of substitutes, the buying switching costs and the perceived levels of product differentiation thus making it outstand in the market (Barnes, 2008).
Porter considered the threat of entry of new competitors as a force which influences the company in achieving its goal. There exists perfect competition in the soft drink producing companies including Pepsi Cola and Coca Cola Companies. This is important because without the entry of firms in the market there will not exist competition which is very health. Factors, which Coca Cola Company has put into consideration, include the economies of product differences, brand equity and absolute cost advantages (Boddy, et al. 2005).
The intensity of competitive rivalry is also an important force to be considered in the Company so that it achieves its profit levels. Coca cola Company for example needs to consider issues like the number of competitors in the market, the level of advertising it has done, the adversity of its competitors and the sustainable competitive advantage it has gained through improvisation. Through this the company has been able to meet the rivalry levels of its competitors.
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The bargaining powers of the customer are very essential in a market. Coca Cola Company for example recognizes customers as sovereign in the business and therefore their bargaining powers need to be considered. Issues such as buyer concentration to the firm’s ability to serve them, buyer price sensitivity, buyer volume and buyer information availability are some of the key issues the company has put into consideration for it to succeed (Coakes & Clarke, 2005).
The suppliers bargaining power also is a very important force which contributes to the formulation of strategy in a business. Coca Cola Company has put in place several strategies which have improved the differentiation of inputs, caused employee solidarity and the cost of inputs as compared to the selling price of the product.
Coca Cola Company SWOT analysis involves analyzing the strengths, weaknesses, opportunities and threats that the Company faces in its day-to-day operations. The Company portrays several strengths, which are so distinct. These strengths have made it outstand in the market. The reputation, which the Company has, is a unique one. The experience, which the human resource management portrays, is also an added advantage. There is a worldwide recognition of this company in terms of the human resource department it is composed of. One other strength that the Company portrays is its strong brand names, Coke being the top brand internationally. The favorable access to a strong distribution network is a strength that has enabled Coca Cola Company to compete favorably with its competitors (Coakes & Clarke, 2005).
There are several weaknesses also that the Coca Cola Company has identified and is trying to work with it so that it can control the market internationally. Because of the vast nature of the Company it faces a high cost of structuring. It also still faces lack of access to the best natural resources and lack of access to key distribution channels. The lack of quality customer service still faces this renowned company; there also has been lack of differentiation of its products over the years.
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Coca cola Company despite the weakness has so many opportunities, the fundamental one being its location in Atlanta, USA. The location is a very good source of raw materials to the company. It’s also a very good source of technology and power which is needed by the Company in a massive volume. The market trends of this company also has given it an upper hand in that the past records has shown a progressive trend in their operations thus giving a name to the company. The company is in a position to utilize the new technologies which are very much of need in the current world; this is an opportunity because the company is located in a developed country which has a good and reliable source of power.
Some of the threats which the Coca Cola Company face are the competitions from the new upcoming companies, the political changes especially in the countries where the governments are not developed and taxation issues. Some developing countries also lack the available resources which are required to host the Coca Cola Company therefore this issue becomes a threat to the market of Coca Cola Company (Coakes , 2004).
Coca Cola Company has a competitive advantage in the market in that it ha penetrated to most countries and competes with only a few companies thus the competition is so low. The existence of the market for along time and the stability in the market trends has also made the country so popular in distribution of its products.
Managerial economics is the theory of utilizing scarce resources in order to manage a firm efficiently. The study of managerial economics comprise of issues such as pricing, competition in the market and the market power. Coca Cola Company is not an exception in adopting some of the managerial economies that are necessary to boost its market. Pepsi Company has the freedom to choose its suppliers, set the appropriate advertising standards and set the desirable prices for its products. It recognizes that an imperfect market is created when one of the parties directly shows a benefit or profit to others especially when it has more information than other companies (Coakes , 2004).Coca Cola Company has decided on its horizontal and vertical boundaries. The marginal and average values are distinguished from the stocks and flows. Coca Cola Company applies models that are necessary and not completely realistic because what matters is how the necessity of the model and not the realistic value. A model posed by Coca Cola Company complies with managerial economy in that it focuses on one issue, holding others to be equal.
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Though Coca Cola Company limited is able to compete effectively in the market with strong competitors like Pepsi and R.C. Cola Companies, it has not achieved in meeting the right managerial economic practice, which is desirable for achieving maximum profits in the company. One such area is advertising and promotion of its products across the world, which is the potential market. Promotion is a very important factor in managerial economical which has to be organized and financed well (Coakes et al. 2008). A well-organized promotional strategy will make the company sell more of its products and thus achieve the set goal of getting profits. It’s a strong recommendation that Coca Cola Company should review its promotional strategies and adopt the best which will make it outstand in the market. Such strategy should not be biased to a few countries only but should cut across all the nations.
Another recommendation that will allow it to create more profits is doing a thorough research in the market. Research will help to find out what the consumer requires and at what time. It will therefore make the company provide all the products that are demanded by the consumers without bias or favour. The several growing needs of people and knowledge demands that the company needs to do a research that bases on the customer needs and not what the stakeholders or the management says (Barnes, 2008).There is a great need for the company to be able to embrace the use of various technologies in development of its products and in promotion strategies. Advertising today in the media takes several forms, the advent of Computer networking making it even easier for promotion of products to occur. The use of internet sites can be utilized by Coca Cola Company so that those who visit several sites can look at it creating a need in them.