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Table of content
Coca-Cola’s (soft drink products) supply chain strategic fit 2
1. Company and product background 2
2. Product life cycle 3
2.1 Theoretical review 3
2.2 Case analysis 4
2.2.1 Competition level 4
2.2.2 Product 5
2.2.3 Price 6
2.2.4 Promotion 6
2.2.5 Place 6
3. Coca-Cola’s supply chain strategic fit 7
3.1 Customer priority and demand analysis 7
3.2 Supply chain capabilities 8
4. Conclusions 8
Coca-Cola’s (soft drink products) supply chain strategic fit
1. Company and product background
As a world leader in the beverage industry, Coca-Cola offers hundreds of brands such as soft drinks, juices, functional sport drinks and a lot of other products, and among these brands the most famous product that it operates is the Coca-Cola soft drink which is one of its traditional brands but still contributing significantly to the company avenue and profit generation, with the strategic believe that “Consumer demand drives everything Coca Cola do”, the company has used a mass marketing strategy together with an efficient supply chain deliver this strategic promise. This assignment paper will review the product life cycle of the Coca-Cola soft drinks and analyze the strategic fit to see whether the supply chain strategies are in line with the overall business strategies and customer demand features.
2. Product life cycle
2.1 Theoretical review
Figure 1 Product life cycle curve and each stage’s marketing objectives
Source: rohan.sdsu.edu 2009
The product life cycle (PLC) was first put forward by Raymond Vernon in 1966 relating to a typical product’s material life and the PLC was later classified by Philip Kotler (2003) into four stages in sequence of a cycle: introduction stage, growth stage, maturity stage and decline stage. As we can observe from the figure above that in each stage of the product life cycle, there will be different characteristics in term of sale volume and profit generation and there will implications to the marketing objectives setting a common product could have. For example the dimension of market competition starts from “zero to few” in the introduction stage and continues to grow and reaches the most fierce competition when the product industry become matured and it declines when the products enter into the decline stage. There are also implications to the marketing mix which will be discussed and used later in the case study.
2.2 Case analysis
The soft drink products provided by Coca-Cola in the market are in a typical maturity stage of the product life cycle. As pointed out by Andrew Ward Andrew Ward (2003, p.124) that with an achieved worldwide dominance in the industry of soft drink, the company (Coca-Cola) had met with inevitably slow in growth and thus entered into the maturity stage of the product life cycle. As in the following, we will check the characteristics of Coca-Cola soft drink in different dimensions to support this judgment.
2.2.1 Competition level
As proposed by earlier by Ronald D. Michman and Edward M. Mazze (1998, p.235) that the competition level in the soft drink industry was already fierce more than 10 years ago while the global market was and is still dominated by Coca-Cola and Pesi-Cola and also the market size of the global soft drink market is slow forcing many small players out of the industry because of the fierce competition and low profit rate in the maturity market. Here we only talk about direct competition; there is also indirect competition such as the competition from 7UP which is not designed to compete directly with the Cola style traditional drink.
And about the product strategy in the 4Ps marketing mix, it is said that the product line of cola drinks have reached full product line status and as we can perceived in the past few years that the product line of Coca-Cola has not changed too much with basically a traditional Coca-Cola formula and a vanilla taste in the marketing meeting the large demand in the market. And the less diversified product lines of Coca-Cola soft drink could be seen from the 1985 new product failure in which the company tried to replace the traditional soft drink with the new formula product, known as the New Coke, but it turned out to be a new product disaster (Woodger & Burg 2005, p.209). This in some point demonstrates that the product lines of the soft drink have been quite matured and hence innovation is not demanded like other growing products.
Discount pricing is a dominant strategy for both competing companies, Coca-Cola and Pesi-Cola, this is said to be due to the fact that each company can increase expected profits by offering discount prices (Hirschey 2009, p.554). The feature of fierce price competition corresponds with the description of products in maturity stage of the product life cycle.
Promotion activities establish and enhance the communication link between the companies and the consumers. And in term of the promotion mix of Coca-Cola, according to S. Goodman, W. Ladzani, B. Bates and C. de Vries, S. Botha (2005, p.270) Coca-Cola has been using a promotion mix to keep on reminding the customers regarding the products as the brand has long established in the global market.
The place strategies or distribution strategies of Coca-Cola which help ensure the smooth delivery from Coca-Cola to the customers include four major distribution strategies: intensive distribution, selective distribution, exclusive distribution and direct distribution. The intensive distribution as a key distribution strategy ensures that the Coca-Cola soft drink products would be available in every possible shops and super markets.
3. Coca-Cola’s supply chain strategic fit
A strategic fit majorly deals with the coordination between a company’s matching its resources and capabilities with the opportunities and conditions externally. In the supply chain management, it is necessary for any company to match the supply chain capabilities with the customer demand characteristics. In below we will see into the strategic fit in supply chain in Coca-Cola with reference to the above conclusions we have above regarding the impact of the product life cycle of Coca-Cola soft drinks on the strategic fit.
3.1 Customer priority and demand analysis
It is important to learn the demand of the customers in term of whether their demand is certain or flexible as judge whether the supply chain designs could fit into the customer demand conditions. As suggested by Paolo Brandimarte and Giulio Zotteri (2007, p.191) demand certainty or uncertainty depends on the extent to which the companies can predict the future level of the customer demand, and the demand for the Coca-Cola through changes with time and seasons, but by comparing the historical data and various methods of demand analysis and forecast the company manage to control the demand uncertainty to a low level.
3.2 Supply chain capabilities
As mentioned above, the Coca-Cola has adopted a mix of distribution channel to expand the availability of the products to more customers, according to John Gattorna (2003, p.298) Coca-Cola is using a mass-market and brand focused corporate strategy which is known as omnipresent strategy to make sure that there is high availability of the products. The application of these supply chain strategies in the case of Coca-Cola will require the supply chain to be designed to run in high efficiency and effectiveness. And regarding the physical distribution problems, there are five major part of the distribution system: order processing, warehousing management, material flow, inventory control and transportation. The company has invested in the physical distribution system and software control system to ensure the efficiency and cost control of the supply chain.
With the analysis, we can come to the conclusion that in term of competitive strategy, the Coca-Cola has used a strategy that is closed to the price leadership and also its branding to enhance its core competitiveness, this strategy is in line with the cola soft drinks’ maturity stage in the product life cycle which is marked high competition and market share maximization, the this strategy is also in line with the company’s efficiency supply chain and low uncertainty customer demand. The supply chain design and strategy will in return help control the supply chain cost and increase the supply chain efficiency.
Brandimarte, P. & Zotteri, G. 2007, Introduction to distribution logistics. New Jersey: Wiley & Sons, Inc. p.191
Gattorna, J. 2003, Gower handbook of supply chain management. Hants: Gower Publishing. p.298
Goodman, S., Ladzani, W., Bates, B., Vries, C. D & Botha, S. 2005, Business management: fresh perspectives. Cape Town: Charlotte Imani.p.270
Hirschey, M. 2009, Managerial economics. Mason, OH: South-Western Cengage Learning. p.554
Kotler, P. 2003. Marketing management. Vol. 10. The peoples press of Shanhai.
Michman, R. D. & Mazze, E. M. 1998, The food industry wars: marketing triumphs and blunders. Westport, CT: Greenwood Publishing Group, Inc. p.235
Rohan.sdsu.edu 2009. Chapter 11: Managing Products And Brands. Accessed on 15th Nov 2011 [online]: http://www-rohan.sdsu.edu/~renglish/370/notes/chapt11/index.htm
Ward, A. 2003, The leadership lifecycle: matching leaders to evolving organizations. New York: Palgrave Macmillan. p.124
Woodger, E. & Burg, D. F. 2005, The 1980s. New York: Fact On File, Inc. p.209