MANAGING BUSINESS ACTIVITIES
TABLE OF CONTENTS
MANAGING BUSINESS ACTIVITIES
Coca cola is a household name worldwide. Together, the companies have taken over and control at least 75% of the global soft drink market. Their success can be partly attributed to the overall operational plans employed by the company to produce and market their products. The company has decided to build a global brand by manufacturing a unique soft drink that gives cola its flavoring and the concentrate in a syrup form to bottlers throughout the world. This unique aspect in the process of production has ensured that competitors and rivals have been unable to replicate the recipe. Coca cola makes it profits charge the bottlers a premium price for the syrup; they then invest part of the proceeds in advertising and marketing which has enabled the company to maintain brand awareness.
The bottlers are actually responsible for producing and distributing the actual cola. They add carbonated water to the syrup, package the resulting drink and distribute it to the vending machines, restaurants, supermarkets and other retail outlets. The bottlers leave all the advertising to the coca cola company thus ensuring that the brand maintains uniformity and uniquely appeals to the consumer market. In addition, the bottlers must sign an exclusive agreement that prohibits them from distributing competing cola brands. The operational plans set forth by the company to ensure that the process itself works, include selecting appropriate goals and courses of action, which is one of the main functions of management. The decisions about what goals to pursue, what actions to take and how to use resources to achieve the set goals is determined by the executive of the coca cola company then forward to the bottlers.
Production: unlike majority of the soft drink producers the coca cola company has maintained a hold on the syrup production. To cut costs, competitors have often opted to share the recipe for their drinks with the bottler. This process often reduces the cost of production and distribution of the same syrup. (Kahraman 2005) cites that this process often produces a problem that could cripple the company’s attempts to grow internationally. Sharing the recipe and allowing subsidiaries to engage in the entire process of production reduces costs but also encourages inconsistency as the bottlers can make changes. Despite the stiffer competition in the soft drink industry, the efficiency of the production process has allowed coca cola to not only survive rapid growth but also maintain a strong number one position. The process has ensured high quality products with lower costs of production.
Advertising: advertisement and marketing is centered on the executive company again. For the bottlers this is an easy and profitable process. For the company, this ensures branding where customers all over the world can easily identify with the brand. This is one aspect of the company that rivals have found hard to duplicate. (Rosenberg 2005) this strategy and process of advertisement and marketing for the company to strengthen the competitive position while still ensuring that the subsidiaries preserve their independence. By aligning and coordinating company activities in different activities in different countries, the company can build sustainable competitive advantage in several different ways. The knowledge gained in marketing a product in the European market for example can be used to introduce the market and introduce the same product in African and American markets.
Distribution: a coke distributor and bottler cannot bottle any other cola drink. The agreement with the company prohibits such action. If a bottler would like to diversify into the other cola drinks they must give up the advantage of being part of the coca cola brand. This process has two major advantages for the company. First, it forces the bottlers to enter into exclusive agreements which create a barrier to entry into the industry. Every potential competitor and rival that may want to produce and distribute a new cola product must create their own production network. This is the most difficult part in bringing their soft drink into the market. The highest cost and investment is in ensuring that the drink leaves the market and reaches the consumer easily and within good time. The process protects coca cola’s valuable asset, its distribution network. Second, the amount spent in advertising in the past decade (in 2011 the company spent more than $500 million) has helped company ensure that consumers are most likely to buy a coke rather than a less known cola.
Output processes at the beginning of the input process, the company managers establish the standards which should be adhered to. These targets they will use to evaluate future performance of the entire organization and sometimes part of the organization. The standards set by the coke managers often measure efficiency and quality of the final product. (Cantwell 2014) states that the output process cannot focus on one aspect only. The managers need to be aware of the efficiency of the process and stages that may require improvement and focus, while at the same time improving and maintaining the high quality of the products.
Once managers have established the standards, they move on to measuring the actual output. This is done in two stages that is, the actual outputs that result from the processes of the company. Secondly, the managers measure the process itself again to prove consistency and efficiency. Once the results have been established, they are compared with the standards that they had set previously. Outputs are often very easy to measure because they are tangible. The flow from the raw materials to the final product can easily be measured and compared to the expected output. If the output is much lower than what was set by the executives, it is possible to take corrective action. On the other hand if the outputs and efficiency are too high, it follows that the standards set for the process were much too low. Again the corrective action can be taken, where managers can consequently increase the expected standard to improve performance of the company. According to (Sen 2008) the main reason for poor performance in the company might be hard to quantify. Changes in the environment such as emergence of a new competitor for example in the case of the coke, Cotts in the early 1990’s might be the source of the problem.
The plan is a simple pre-emptive attack on the industry rivals. For the past decade, there has been an increase in soft drink producers who are successfully taking over portions of the coke market. The pre-emptive strategy involves moving first to secure an advantageous position. Rivals will then be foreclosed and discouraged from duplicating. There are several steps that will go into the plan and these are:
Step 1: expand production capacity ahead of the market demand. Majority of the coke rivals often expand production capacity when the demand increases. The expansion in anticipation of growing economies especially in Asian and African markets will discourage rivals from following suit. Rivals such as Cotts who may have taken over part of the market in Europe and especially American markets are unable to duplicate the same capacity of production. When the demand grows which is predicted to do so in the next five years with the economies of these continents showing significant growth, the coke company will be in place to take advantage of the same with its own plants filling in the capacity.
Step 2: ensure protection of the raw material sources for high quality products. The coke company has enjoyed exclusivity following the uniqueness of its recipe which has been difficult to duplicate despite several efforts by other companies. Rivals of the company have been relegated to struggling for second best positions. Protection of these raw materials is vital to ensure the number one position.
Step 3: build a strong brand through the psychological images in advertisements and marketing campaigns such as Fanta, bring out the fun and share a coke, the most successful of the campaigns by the company.
The idea is not to totally block rivals as that would be impossible but rather to ensure that the coke company enjoys a “prime” position.
In the current plan of the company, strategic and financial objectives carry top priority because they enhance key outcomes. The tradeoffs must be made between actions to boost short term financial performance and efforts to build a stronger business position for the long term. The company requires managers who have strong financial instincts to focus on financial performance without compromising the long term competitive payoff. The risks being taken are especially great because coke remains growth oriented which can also be said of its competitors. The objectives are as follows:
- To be a low cost producer of the highest quality products that provides the nest value to the customers.
- To continue the expansion of Coke linking key markets around the world by merging network, providing service to additional countries, increasing the number of distribution centers, expanding the diversity of products.
- To remain the most competitive enterprise in the refreshment industry with quality production of cola, outperforming the rivals in each aspect and remaining number one with the largest market share in the industry.
Lowering cost: with the global economy having undergone a drastic downturn, consumers are more and more concerned with the cost of everything they spend on. Items such as beverages and cola drinks are continuously being considered as a luxury. Based on this, the coke company has chosen to become the leading low cost producer. On the other hand, focus on low cost should not come at the detriment of the strongest advantage for coke that is quality beverages. The company hopes to establish a system of interrelationships with suppliers who will continue ensuring that the company receives high quality material at affordable costs. In this case, suppliers will be treated in much the same way as distributors, locking and contracting them to the coke company. This way they enjoy the benefit of a constant market while the company ensures that rivals do not attempt to increase the cost of raw materials.
Expansion: critics such as (Hoang 2007) have grown concerned with the coke company expansion in the past decade. However, each of the plants and distribution centers that have been opened has proven quite beneficial in maintaining the company’s top position in the market. New markets such as Asia and Africa are relatively unexplored. The company expects to open distribution channels and increase the distribution of cola in these markets. However, this will be done with great caution being directed to improving the efficiency of the machinery and equipment in the local bottling plants.
Competitive advantage: to maintain the topmost position in the industry and outperform rivals, focus will be given on developing friendly and easy to associate with campaigns. The company already maintains a strong brand name. One in every five households globally enjoys a cola drink from the coke company on a daily basis. This gives a strong advantage and ensures that strong relationships are maintained with consumers.
The company established and continues to maintain and measure performance at each stage during the input process. Feed forward control analyses each stage in the process of transforming inputs into finished goods and services. Through the feed forward control, the managers can anticipate the problems before they arise. This will be done by ensuring that suppliers maintain the strong and stringiest qualities set forth by the company. With these stringent measures, the company will control the quality of the inputs from the suppliers and thus avoid potential problems during the conversion process. (Burrow 2002) says that the feed forward system provides managers with timely information about changes in the tasks and general environments that may impact the organization later on.
At the conversion stage, concurrent control will be used to give immediate feedback on how efficiently the inputs are being transformed to outputs. Workers and employees will be expected to monitor closely the quality of products being produced in each step. Individual workers will be allowed to push a button stopping the process of conversion should they come across a quality problem. This ensures that the final product will be more reliable.
Finally at the output stage the managers will make use of feedback control to get information from customers. A system will be put in place to monitor the returns from various subsidiaries and also follow up of customer complaints. This system will measure and correlate the decrease in sales of various products and alert managers of any changes in the tastes of the markets they control so that they can increase or reduce the production of specific products. This is the corrective action expected from the information gathered in the market.
At the forefront of the drive to improve product quality is a technique known as total quality management. The following systems have been put in place to ensure high quality standards:
Breaking down barriers between functions: successful implementation of this requires substantial cooperation between the different functions of an organization. Marketing managers have to cooperate with manufacturing so that customer needs are acted upon.
Working closely with the suppliers: to decrease product defects, managers need to work closely with the suppliers to improve quality.
Identify defects and trace them to their source: a major source of product systems is the operating system. The TQM system will allow the managers to identify defects, find out why they occurred and make corrections so that they do not occur again.
Coke has established a goal of becoming the premier institution in the 21st century. To achieve this, the company has started to make use of the TQM to increase responsiveness to customers, recognizing that ultimately its customer base and customer loyalty determine the future success of the company. Coke has identified the factors that dissatisfy customers. This means that the company is taking customer complaints seriously at every step and finding ways to respond the same. (Kottler 2006 ) states that the former culture where customer complaints were generally ignored because the company enjoyed a strong monopoly are gone, managers have begun examining how they respond to each customer complaints and request.
Managers could be tasked with the responsibility of reducing the complexity of the work process. Employees are expected to find innovative ways to meet the customer needs in a much more speedily manner. This means that the company must also invested heavily in training and development of its own employees to ensure they have the confidence and skills they need to handle customers.
Hazard identification: the main hazards in the company are chemical exposure during the production of the syrup, accidents while operating heavy machinery within the plants. Exposure to broken bottles and glass.
Personnel at risk: majority of the personnel at risk include employees who world on the factory floor, supervisors and managers who are constantly establishing the
As with any manufacturing plant, coke is expected to run a completely safe environment for workers. The workers exposed to chemicals during the e process of manufacture are given suits that prevent exposure. They are further extensively trainee in the handling of the chemicals. Coke is also the one company that runs a full emergency unit including on site paramedics within the plant. For extreme cases, the workers have a plan that allows injured or exposed employees to be airlifted to the hospital.
Only qualified personnel are allowed to handle the heavy machinery and this is only after they have demonstrated skills that they are able to handle the same. Further, the manufacturing and bottling plants include emergency buttons in segments of the floor. In case of an emergency, the button is pressed and the assembly line stops completely allowing for workers to get to safety.
It is important to note that few if any injuries are recorded by coca cola. In fact, as (Frazelle 2002) shows the company enjoys a high ranking status as one of the safest. Regulations and risk assessments are taken quite seriously by management and executives. Whereas some companies may opt to cut corners to curb the costs of safety, coke goes far and beyond what is expected to secure its own workers within the factory and also without the factory.
Ensure safety of workers and visitors as well into the factory. Managers of plants are expected to ensure safety of all people within the plant. This means ensuring that each and every individual visiting any of the plants is treated to the same stringent safety measures. They must be properly attired, and properly trained or at least accompanied by an individual who is well trained to handle any emergency on the floor.
All workers are provided with the right information as pertains their work. The company does not just rely on their own training, employees are constantly taken for further training to give them the right skills which they can sue to handle unique situations within the company. These trainings are constantly refreshed with the help of skilled professionals to ensure maximum safety of the employees.
Majority of the companies today have excellent health and safety measures, however, they lack or do not have or allocate enough resources to safety. All coca cola plants are expected to have separate budgets catering to safety. These budgets cannot be compromised for any reason whatsoever. This ensures that the company and plants have enough resources directed towards safety.
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Frazelle, E. (2002). Supply Chain Strategy The Logistics Of Supply Chain Management. New York, Mcgraw-Hill.
Hoang, P. (2010). Business & Management. Ibid Press.
Kahraman, C. (2005). A Multi-Enterprise View Of Business Activities. Bradford, England, Emerald Group Pub.
Kotler, P., Pfoertsch, W., & Michi, I. (2006). B2b Brand Management. Berlin, Springer.
Rosenberg, M. (2005). In Business: Activities To Bring Business English To Life. Cambridge, Uk, Cambridge University Press.