DIRE DAWA UNIVERSITY

SCHOLL OF GRADUATE STUDIES

COLLEGE OF BUSSINESS AND ECONOICS

Operational Management
Mini Project Assignment

PREPARED BY: HANNA MILLION

EVENING SEC. 1
DDU1204738
SUBMITTED DATE: JULY 28/2020

SUBMITTED TO: Mesfin Mekonnin

C. Address: mesfin.mekonnin@gmail.com

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 COCA COLA COMPANY
HISTORY

The Coca-Cola Company, American corporation founded in 1892 and today engaged primarily
in the manufacture and sale of syrup and concentrate for Coca-Cola, a sweetened carbonated
beverage that is a cultural institution in the United States and a global symbol of American
tastes. The company also produces and sells other soft drinks and citrus beverages. With more
than 2,800 products available in more than 200 countries, Coca-Cola is the largest beverage
manufacturer and distributor in the world and one of the largest corporations in the United States.
Headquarters are in Atlanta, Georgia.

The drink Coca-Cola was originated in 1886 by an Atlanta pharmacist, John S. Pemberton
(1831–88), at his Pemberton Chemical Company. His bookkeeper, Frank Robinson, chose the
name for the drink and penned it in the flowing script that became the Coca-Cola trademark.
Pemberton originally touted his drink as a tonic for most common ailments, basing it
on cocaine from the coca leaf and caffeine-rich extracts of the kola nut; the cocaine was removed
from Coca-Cola’s formula in about 1903. Pemberton sold his syrup to local soda fountains, and,
with advertising, the drink became phenomenally successful. By 1891 another Atlanta
pharmacist, Asa Griggs Candler (1851–1929), had secured complete ownership of the business
(for a total cash outlay of $2,300 and the exchange of some proprietary rights), and he
incorporated the Coca-Cola Company the following year. The trademark “Coca-Cola” was
registered in the U.S. Patent Office in 1893.

Under Candler’s leadership, sales rose from about 9,000 gallons of syrup in 1890 to 370,877
gallons in 1900. Also during that decade, syrup-making plants were established in Dallas, Los
Angeles, and Philadelphia, and the product came to be sold in every U.S. state and territory as
well as in Canada. In 1899 the Coca-Cola Company signed its first agreement with an
independent bottling company, which was allowed to buy the syrup and produce, bottle, and
distribute the Coca-Cola drink. Such licensing agreements formed the basis of a unique
distribution system that now characterizes most of the American soft-drink industry. Capitalized
at $100,000 in 1892 upon incorporation, the Coca-Cola Company was sold in 1919 for $25
million to a group of investors led by Atlanta businessman Ernest Woodruff. His son, Robert
Winship Woodruff, guided the company as president and chairman for more than three decades
(1923–55).

The post-World War II years saw diversification in the packaging of Coca-Cola and the
development or acquisition of new products. The trademark “Coke,” first used in advertising in
1941, was registered in 1945. In 1946 the company purchased rights to Fanta, a soft
drink previously developed in Germany. The contoured Coca-Cola bottle, first introduced in
1916, was registered in 1960. The company also introduced the lemon-lime drink Sprite in 1961
and its first diet cola, sugar-free Tab, in 1963. With its purchase of Minute Maid Corporation in
1960, the company entered the citrus juice market. It added the brand Fresca in 1966.

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In 1978 Coca-Cola became the only company allowed to sell cold packaged beverages in
the People’s Republic of China. In 1982 the company introduced its low-calorie sugar-free soft
drink Diet Coke (originally named Diet Coca-Cola). In an effort to address its decline in market
share, the company adopted a new flavo4r of Coca-Cola in April 1985, using a formula it
developed through taste tests. New Coke was not well received, however. Owing to the public
outcry, Coca-Cola revived its original flavour in July, which was then marketed as Coca-Cola
Classic. From 1982 to 1989 the company held a controlling interest in Columbia Pictures
Industries, Inc., a motion-picture and entertainment company.

New markets opened up for Coca-Cola in the early 1990s; the company began selling products
in East Germany in 1990 and in India in 1993. In 1992 the company introduced its first bottle
made partially from recycled plastic—a major innovation in the industry at the time. Coca-Cola
created many new beverages during the 1990s, including the Asia-marketed Qoo children’s fruit
drink, Powerade sports drink, and Dasani bottled water. Coca-Cola also acquired Barq’s root
beer in the United States; Inca Kola in Peru; Maaza, Thums Up, and Limca in India; and
Cadbury Schweppes beverages, which were sold in more than 120 countries across the globe.

In the early 2000s Coca-Cola faced allegations of illegal soil and water pollution, as well as
allegations of severe human rights violations. In 2001 the United Steelworkers of America and
the International Labor Rights Fund (ILRF) filed a lawsuit against Coca-Cola and Bebidas y
Alimentos and Panamerican Beverages, Inc. (also known as Panamco LLC; the primary bottlers
of Coca-Cola’s beverages in Latin America), claiming that the defendants had openly engaged
so-called “death squads” to intimidate, torture, kidnap, and even murder union officials in Latin
America. The controversy gained worldwide attention and led several American universities to
ban the sale of Coca-Cola products on their campuses. The lawsuit was eventually dismissed.

In 2005 the company introduced Coca-Cola Zero, a zero-calorie soft drink with the taste of
regular Coca-Cola. In 2007 the company acquired Energy Brands, Inc., along with its
variously enhanced waters. That same year Coca-Cola announced that it would join the Business
Leaders Initiative on Human Rights (BLIHR), a group of companies working together to develop
and implement corporate responses to human rights issues that affect the business world.

Goods and Services that Coca-Cola provides

For almost 70 years, the only beverage produced and sold by The Coca-Cola Company was the
flagship Coca-Cola invented in Atlanta in 1886. It wasn't until 1955 that Coca-Cola beverage
offerings started to expand when a bottler in Italy started selling Fanta Orange. From that point
on, the Company began adding a wider variety of beverage selections and portion sizes for
consumers. The Coca-Cola Company believes in offering an assortment of beverages for every
lifestyle, life stage and life occasion. Today, over 500 beverage brands are sold in more than 200
countries.

In Australia Coca-Cola Amatil Limited manufactures, sells and distributes beverages and food
products. The company divides its operations into two segments:

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Beverages: The beverage business operates the franchise for manufacturing and distributing
Coca-Cola trademarked products in Australia, New Zealand, Fiji, Indonesia and Papua New
Guinea. The product portfolio consists of:

• Carbonated Soft Drinks and Functional Beverages - CCA manufactures and distributes
carbonated soft drinks and other beverages. Brands include Coca-Cola, Lift, Sprite,
Fanta, Powerade, Kirks and Deep Spring.

• Health and Wellbeing - CCA manufactures and distributes a range of water, juice and
low calorie drinks. Brands include Pump, Mount Franklin, Neverfail, Nestea, Fruitbox
and Goulburn Valley.

• Alcoholic Beverages - The premium spirits portfolio of Beam Global Spirits & Wines
include Jim Beam, Canadian Club, Makers Mark and The Famous Grouse.

• Food & Services: The Food & Services division manufactures and distributes packaged
fruit and vegetables, jams and sauces throughout Australia and globally. Brands include
SPC, Goulburn Valley, IXL, Ardmona, and Taylor's. This division also distributes coffee
products under the Grinders brand and provides cold drink equipment.

OPERATION STRATEGY
CCBPL is currently working on shifting to Just-in-Time inventory system with days based stocks
to release cash flows freeze in warehousing. The input buying is based on annual bottles
produced. Co-ordination between different plants across Pakistan is necessary as they have to
provide production buffer to each other like presently Lahore Bottling plant is covering
Faisalabad’s production schedule too while the plant is undergoing renovation.

INVENTORY MANAGEMENT
Coca-Cola Pakistan is one of those organizations that cannot Compromise on the essence of their
item. They do have a proper inventory system in the facility but they make sure when the bottle
is produced it is being dispatched to the respective retail outlets or to the distributors. 2 years
back Inventory management was different as they were buying Raw material in bulk but they are
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now shifting their production to Just in Time. Just in time, production makes inventory cost less
and demands significantly less space for inventory storage. They had reduced the number of
warehouses. The work is coordinated in such a manner that operations are not affected. Coca
cola only keeps reserve inventory of 2-3 day. Moreover, if they feel like that their plant is unable
to meet to the demand of the product in market, they can call for the finished goods from plants
located in other cities and fulfill the demand, Like Lahore Plant is currently fulfilling the demand
of Faisalabad Territory Also. The Production in Faisalabad has stopped due to the construction
of new plant.

SUPPLY CHAIN MANAGEMENT

Coca-Cola Pakistan focuses on this area, as they want their operation more efficient and
effective. In every process of production, the role of supply chain is very important. In each
assembly there is one supervisor and 6-7 workers working for 8 hours a day. From Perform of
bottle to the plastic sheet which is wrapped around the crates. Again, Coca-Cola management
team is responsible what amount of supply they should hold. According to Territory Operation
Manager, they only hold stock (raw materials) for 2-3 days. Inventory is restocked every day.
Coca cola does not hold large inventory of raw materials. If there is any type of problem, they
can easily run their lines for one extra day and can assign worker for lines and pay them the
double wages then normal work-hour. Their main raw material supply includes Sugar, Co2 gas,
plastic sheet, Resin, tags, crown, bottle cap (closure). Coca cola checks for quality of each supply
every day before passing it onto the manufacturing department. The plant has 2-3 suppliers of
every raw material they require. Other than supply of raw materials, Rani Juice is also being
supplied from abroad, along with the cans for other beverages. As TOM has told that Coca Cola
has OE (operational Excellence) program Strategy for different problems occur in Supply chain
management and Inventory management. OE is the combo of Mean, Six Sigma and Best
practices

What type of organizational structure does Coca-Cola have?

The Coca-Cola Company has a Separate International Division Structure because its
international staffs operate separately and in isolation from head office. It has various divisions
in all continents around the world with presidents that control each continental division. Coca-
Cola has 5 continental divisions.
• Eurasia & Africa Group
• Europe Group
• Latin America Group
• North America Group
• Pacific Group
Each Continental division has vice presidents that control sub-divisions based on regions or
countries. This structure is efficient for Coca-Cola since it is a very large company.

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How do they operate?
Coca-Cola is as an ethnocentric MNC because its domestic operations are very similar to its
international operations. Regardless of the country or region, Coca-Cola operates the same way
and sells the same brand and type of soft drink. The company has tight control over its operations
from head office.

Productivity goals
At the Morgan Stanley Global Consumer and Retail Conference held on November 17, Coca-
Cola’s (KO) chief financial officer (or CFO), Kathy Waller, discussed the company’s
productivity efforts. Coca-Cola has been aggressively implementing productivity initiatives to
offset the impact of sluggish soda volumes and macro challenges in key markets. The company’s
ongoing productivity program aims to generate annualized savings of $3 billion per year by
2019.

Margins in 3Q15
Coca-Cola’s 3Q15 operating margin declined to 20.8% from 22.6% in 3Q14, as the benefits of
the ongoing productivity program were offset by structural changes, currency headwinds, and
higher marketing investments. The operating margins for PepsiCo (PEP), Dr Pepper
Snapple (DPS), Cott Corporation (COT), and Monster Beverage (MSNT) were 8.7%, 20.7%,
3.8%, and 38.5%, respectively, in 3Q15.

Productivity initiatives

The company plans for productivity savings from its cost of goods sold by reducing 15% to 20%
of its non-input costs. Coca-Cola’s CFO mentioned the following initiatives in 2015 to reduce
the cost of goods sold:

• added in-line blow molding equipment to ten PET bottling lines, which eliminates the
requirement to transport bottles to manufacturing plants
• closed or converted seven distribution facilities
• closed four plants

The company expects productivity savings to represent 15% to 20% of its operating expenses. In
2015, Coca-Cola undertook the following initiatives to reduce its operating expenses:

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 • implemented zero-based budgeting
• reduced headcount by over 1,600, representing ~10% of non-bottling personnel

Coca-Cola is also increasing the productivity of its marketing through reductions in marketing
agency costs and other non-media costs. For instance, the company applied procurement best
practices in sourcing its marketing materials and services. Marketing productivity savings are
expected to represent ~10% of the company’s current direct marketing expense.

Coca-Cola’s CFO stated that the company is striving for margin expansion through a
combination of better price realization and productivity initiatives helped by lower commodity
costs. The Consumer Staples Select Sector SPDR Fund (XLP) and is hares Dow Jones U.S.
ETF (IYY) have 9.5% and 0.8% exposure to Coca-Cola, respectively.

PERFORMANCE MANAGEMENT TOOLS

Coca Cola Company measures their employee performance twice in a year. Every employee
has to first pass the six months of a training session in which they assess the employee on
a different basis like personality, attitude, knowledge, skill, and expertise. After that the
employee becomes regular now for the regular employee the performance criteria are very
different because now they are making an impact while working in the organization so
they are now assessed more broadly. The performance measurement tools which coca cola
company use are listed below:
•Improvement in Knowledge
•Analytical test
•Attitude and Behavior of employee
•Leaves per year
•Performance in various department of company
•Overall reputation of employee
•Internal relation of an employee with the company.

Vision statement
“Our vision serves as the framework for our Roadmap and guides every aspect of our business
by describing what we need to accomplish in order to continue achieving sustainable, quality
growth.”
• People: Be a great place to work where people are inspired to be the best they can be.
• Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy
people's desires and needs.

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 • Partners: Nurture a winning network of customers and suppliers, together we create mutual,
enduring value.
• Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
• Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
• Productivity: Be a highly effective, lean and fast-moving organization.

Mission statement

Mission statement is developed by a company which states to share managers, workers, and
customers. A clear and obviously thoughtful mission statement gives the worker with a shared
sense of reason, course and prospect(Kotler & Keller, 2009).

Coca Cola’s mission is to declare the purpose of Coca Cola. Coca Cola want to refresh the world
and inspire the moment of happiness and cheerfulness. Coca Cola want to create its value and
make a difference in the world.

Competitive advantage

Competitive advantage, an advantage over the competitor which is gained by offering consumer
the greater value, by either lower price or by providing more benefit that justify higher
price(Kotler & Armstrong, 2008).

Competitive advantage is an ability of a company to perform in one or more ways that the
competitors cannot or will not match. A company must have a sustainable competitive advantage
because it benefits the company in longer runs. Competitive advantage gives customer advantage
for example if Coca Cola deliver its product better than any other competitors then customers
will choose Coca Cola over other companies.

SWOT ANALYSIS

Coca Cola’s internal strengths

Strength of the Coca Cola is that it is widely recognized company and its popularity is strength
itself. Coca Cola brand is easily recognized for instant its logos, color, promotions, t-shirts… etc.
no other soft drink company compare to Coca Cola’s popularity status and for this reason people
buy Coke not because of taste but they feel it is accepted and they feel they are part of something
big or unifying. People are extremely loyal to Coca Cola and 80 percent of Coca Cola revenues
come from 20 percent of their loyal customers. Coca Cola has ability to sell the product all over
the world and they will continue to buy what they like (Coca Cola).

Coca Cola’s internal weakness

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Coca Cola has limited number of weakness and they need to correct the weakness if they want to
achieve the excellent or next level of achievements. Strength and weakness are part of any
company because people like to say different things about the company and it creates an image
of the company. Coca Cola has produce excellent or popular product such as Coke and Sprite but
it has approximately four hundred types of drinks which are unknown to many
people. There is also some issues about health aspect of products of Coca Cola.

Coca Cola’s external opportunities

Coca Cola has few opportunities in its business but it has many successful brands which it should
continue to exploit. Coca Cola has opportunity to advertise less popular products because it has
large income .Coca Cola is known to 90 percent population of the world and it has opportunity to
make it closer to 100 percent. Coca Cola has opportunity to increase the gap between them and
their competitors.

Coca Cola’s external Threats

Despite the success of Coca Cola and its dominance in market it has yet to deal with threats. Coca Cola
has to deal with the threat of attitude towards the drink as changing health consciousness of people.
Drinking habits can damage the sales of Coca Cola and decrease its popularity. Coca Cola also need to be
careful about the law suit it faces.

Critical Success Factors (CSF)

Coca Cola’s brand is successful and renowned all over the world. The company is
dominant and focuses on the needs and demands of customers, which is the reason that
their business is worldwide successful. Coca Cola has strong competitive strategies and
with stood against its greatest competitors globally. Critical success factors of Coca Cola in its
various operations are the effective customer awareness, capacity of introducing
competitive prices, extensive distribution at global level, variety of products and
services available for customers. Other factors are the timely and effective distribution
channels and global system of operation [Cha14] .The Company is operating under tough
competition in domestic markets of UK. However, in other markets of developing countries the
company established zones of duopoly and remains the dominant brand. The efforts of
company to go in China and Middle East are also worth mentioning where it continues to
dominate in market.

Task B- Resource and Capability Analysis Value Chain Analysis

The internal environment of the Coca Cola is analyzed using value chain analysis that is
developed by Porter. This value chain model of non-alcoholic soft drink industries in which
Coca-Cola lies comprises of five major activities. These are inbound logistics, outbound
logistics, operations, service, and marketing and sales.

Inbound logistics

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Inbound logistics include the suppliers, the standards, and the assessment of Coca Cola. The
company’s major suppliers are IBM, Spherion, Jones Lang LaSalle, and Prudential. These
companies supply materials to Coca Cola like ingredients, machinery, and packaging.
The suppliers adhere to specific standards and regulations of the company [Nit11]. The
company has strong assessment plan. It assesses their supplier using third parties by
arranging interviews with employers and workers. Coca Cola has the right of terminating
the supplier’s contract with the company if they fail to follow supplier-guiding principles

Outbound Logistics

Outbound logistics include the distribution system and bottling partners of the Coca Cola. With
the world’s largest distribution system, the company is operating in more than 800 plants and
200 different geographic locations. It has launched over 2,500 of its products in market. Coca
Cola comes up with more than 400 bottling partners. The company’s partners arr anging
from publicly traded business to small operation owned by families. In order to meet the
requirements of the customers and work together, Coca Cola implemented such a system
where it work cohesively with their partners to develop certain strategies for the company.

Operations

The operations of Coca Cola can be best described by the Secret Formula. The company ‘score
operation is syrup production and concentrate. The concentrate is supplied by the company to
the bottlers and then production of cola takes place. The company addressed all problems by
working together wit h the part ners .

Summarize

Coca-Cola has been able to utilize various corporate and business strategies to align each
business unit’s objective, goals and act as one whole company. By doing so, the company is able
to combine and employ their resource in a more efficient manner. It is not due to serendipity that
Coca-Cola has become the world’s largest producer and manufacturer with in the beverage
market. It is obvious that the management of the company has articulately positioned the
company within the beverage industry. This can only be done through extensive market research
on its customers, its supply chain as well as the company itself.

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