coca cola supply chain management case study
Coca-Cola is through a set of strict supply chain management system and service specifications, implements the service and monitoring of bottlers, distributors, and retailers in each link, and collects relevant product information through regular reviews of distributors and retailers. The results of the review and feedback will guide dealers and retailers in their business services and realize the advantages of cooperation and competition.
After a hundred years of ups and downs, the Coca-Cola Company is still well-known for its well-known brand, ranking first in the carbonated beverage industry. A company that does not have many new ideas in terms of products and technology asks the market, why is it so compelling in terms of beverage business? In addition to the secret beverage formula, what secret competitive weapon does Coca-Cola have? From the growth process of Coca-Cola and the investigation of its supply chain management strategy, three mysteries of its development can be known.
Franchise contract management supply chain strategy
Until the early 1980s, Coca-Cola still managed the supply chain through a franchise contract. This supply chain was composed of concentrate manufacturers, bottlers, distributors, retailers and consumers, forming a concentrate controlled by Coca-Cola Manufacturing, other chain links are based on the supply chain management strategy of market regulation. Under this management strategy, the company's competitive strength has been perfectly combined with the market's competitive environment, creating the well-known brand of Coca-Cola.
At the beginning and growth stage of the company’s development, the general business practice is to open up product sales and expand market share through its own sales channels and marketing network, but the premise is that the company has strong capital and large capital investment. If the capital investment is insufficient, it will Affect the company's market competitiveness and the company's growth rate. After careful consideration, Coca-Cola did not adopt the number of business sets used by other companies. Instead, it positioned the company as advertisers and concentrate manufacturers. Through franchise contracts, fixed concentrate supply prices and regional exclusive operations, Authorize the sales authority to bottlers, with the help of bottlers’ entrepreneurial talents, establish sales channels and marketing networks, and deliver Coca-Cola beverages to thousands of households. This type of franchise contract operation is a strategic business choice for Coca-Cola. With this choice, Coca-Cola can use limited funds on the blade, become an excellent advertiser, and push Coca-Cola to the market. In fact, even today, Coca-Cola's advertising is still quite good.
With this strategic positioning, the Coca-Cola Company spared no effort to develop 1,200 bottlers. These bottlers occupied the market for Coca-Cola, made great contributions, and saved a lot of money for the construction of the Coca-Cola sales network. Coca-Cola has been able to take advantage of the close cooperation of its suppliers and grow rapidly to become a leader in the soft drink market.
Supply chain management strategy based on holding management
With the intensification of competition in the beverage market, subtle changes have taken place in the competitive landscape. Competitors represented by Pepsi-Cola have adopted aggressive competitive strategies. On the one hand, it has gained a competitive advantage in new beverage market segments, such as large chain stores and restaurants. On the other hand, it is trying to cannibalize Coca-Cola’s traditional market. The competitive situation is extremely unfavorable to the development of Coca-Cola. In this case, Coca-Cola Only by fighting back can we regain lost market share and reverse the slow growth of sales.
In the face of unfavorable competition, Coca-Cola’s strategy is to put pressure on bottlers to speed up their investment in modern production processes in order to strengthen Coke’s market competitive position. But bottlers also have their own wishful thinking. They believe that the beverage market has become saturated and it is the time to recover funds rather than increase investment. As the bottler is backed by long-term contracts, controls the Coke marketing network, and locks in the cost of Coke purchases, any measures to change the status quo are either rejected or doubted without actively cooperating. In this way, Coke’s strategic intentions were severely set back, and the management of the supply chain faced severe challenges.
In order to change this passive situation, Coca-Cola took advantage of its new variety, high-sugar corn concentrate, to launch a difficult negotiation with bottlers. On the one hand, if the new variety can successfully replace the original concentrate, it can save 20% of the production cost of Coke, but Coke is not exclusive to its achievements, but to share profit opportunities with the bottler. The condition is that the bottler Agree to modify the terms of the contract, and make concessions on some of the terms, so that Coca-Cola has more room for maneuver in adjusting supply chain management. On the other hand, Coca-Cola exerts influence on the business activities of bottlers through franchise repurchase, purchase holding methods and intermediary and financing strategies, so that bottlers can accept Coke's management philosophy and support Coke's supply chain management strategy . And those bottlers who are unwilling to accept the terms of Coke, because they do not get the support of Coke in financing and management resources, with the intensified market competition, they are in decline.
However, the strategy of absolute control over the bottler has enabled Coca-Cola to increase the company’s capital intensity, expand the company’s asset scale, and increase the company’s operating risks. In this way, the strategy of changing the company's capital structure and being able to control the supply chain management is again in front of the company.
Supply chain management strategy based on shareholding
The company’s business goal is to maximize shareholder wealth, but different links in the supply chain have different profitability. A large amount of money invested in links with weak profitability will result in a decline in shareholder income. Improving the company's capital structure and asset structure has become a decision that Coca-Cola must make.
In the supply chain management, Coca-Cola can be said to be at ease. In order to deal with many small bottlers who have established meritorious services for Coke's market development, the company, after adopting the acquisition strategy of franchise repurchase, is faced with how to transfer the "hot potato" out. After careful planning and full preparation, the Coca-Cola Company established a bottler holding company. The bottler holding company controls the business activities of the bottler. Through the bottler holding company, Coke can realize the strategy of the entire supply chain. Regulation, this is just the first strategic plan for Coke to divest absolute controlling shares.
After the establishment of the bottler holding company, Coke reviewed the current situation in accordance with the development of the capital market, seized the favorable opportunity to let the bottler holding company go public for trading, and used the capital market to transfer 51% of the controlling rights for shipment and retain 49% of the holding company. Relative controlling rights. Through this series of strategic choices, the company's capital structure will eventually be improved and capital intensity will decrease.
After having successful experience in domestic supply chain management and becoming a leader in the domestic beverage market, Coca-Cola revised its strategic goal and became a world-renowned multinational company. As early as during the Second World War, Coca-Cola accompanied the US military across the ocean and landed in Europe. The huge potential of the international beverage market attracts Coca-Cola. In these unfamiliar and fresh markets, Coca-Cola has a long history, but the company's sales channels are not smooth, and there is no relatively complete business network, so it has been unable to attack.
The construction of sales channels and outlets is the same as domestic, requiring a lot of funds. The international marketing environment is different from the domestic marketing environment. Coca-Cola realized that only by integrating Coke into the local culture and environment and integrating with the local culture can it reduce operating risks. Wearing old shoes and taking a new path is an excellent offensive strategy. In this way, Coke has resorted to the usual tactics used in China, closely cooperating with large foreign key bottlers. Coke controls advertising and the production of concentrates, and bottlers provide Coke drinks for their regions or countries. Over time, in the global beverage market, Coca-Cola has reproduced the surprisingly similar scene of supply chain management in the domestic market by carefully planning, controlling or holding stocks to acquire bottlers.
The management enlightenment of Coca-Cola
Companies that manage the supply chain must have core competitiveness and secret weapons, otherwise the management and impact on the supply chain will appear pale and weak, and there will be no strategic ideas and adjustments. The core competitiveness of Coca-Cola lies in its secret formula, well-known brand and management resources.
It is impossible for a company to have a competitive advantage in all chain links. Only when it complements other companies' advantages can it achieve results in efficiency and scale operations. When Coke was still in its infancy and growth stage, with the help of bottlers, the establishment of marketing channels saved a lot of money for Coke. Coke controls advertising and achieves economies of scale. The effective combination of these two aspects enables Coke to run its marketing network at a lower cost.
Supply chain management must have interface management technology, and the management of the interface is directly related to whether the company's business strategy vision and implementation can be effectively realized. For different marketing environments, Coca-Cola adopts different interface management strategies. In the initial and growth stages, the company manages interfaces in the form of long-term contracts. In the mature stage, it manages interfaces through the acquisition of bottlers. According to changes in the business environment, Then spin off the bottler to realize the company's strategic intent.
Supply chain management adjustments should always be carried out around "user-centric". When the market leadership began to be threatened, Coca-Cola keenly sensed the quiet changes in the beverage market. The user-centered management philosophy requires Coca-Cola to shift its sales channels from traditional family retail stores to large regional supermarket chains. But this requires a large amount of capital investment, and bottlers are unwilling to do so. Coca-Cola has adopted the strategy of acquiring bottlers and made effective adjustments to the supply chain.
Cooperation and competition is the main theme of supply chain management, cooperation is the essence of supply chain management, and is the basis for achieving a win-win situation. In the supply chain, different companies have to play different roles and establish long-term partnerships with each other.
Coca-Cola manages the supply chain in the form of long-term contracts, holdings, or holdings. It is committed to establishing long-term partnerships. With this long-term partnership, the productivity and added value of the supply chain can be improved, and the profitability of the supply chain can be improved. . Coca-Cola is through a set of strict supply chain management system and service specifications, implements the service and monitoring of bottlers, distributors, and retailers in each link, and collects relevant product information through regular reviews of distributors and retailers. The results of the review and feedback will guide dealers and retailers in their business services and realize the advantages of cooperation and competition.