Coca-Cola has been a leader in non-alcoholic beverage industry and has dominated that market over the past century. But due to globalization, the beverage market has become more volatile, where fickle customers constantly switch drinks. Global beverage market is also getting fragmented at a faster pace with new products being introduced by the emerging companies. These companies are creating niche products and are chipping away Coke’s market share. To preserve its leadership position, Coke needs to constantly innovate and introduce new products at a faster rate than its competitors. It has to understand the emerging taste and adapt to that on a global scale. Most importantly, it has to do all this without tarnishing its brand.Obliviously, Coke is planning on using existing IT technology to collaborate–among employees, with bottlers, with consumers—and considers it as vital to remaking its business to chase fragmented and fast-moving global markets. IT initiatives is going to play a make-or-break role according to Information Week article “Coke Exploits Collaboration Technology To Keep Brand Relevant”
The article talks about Coke’s plan to tackle the collaboration strategy with a three pronged approach.
- For internal collaboration, Coke has implemented what it calls its Common Innovation Framework, a system that combines project management and business intelligence (BI) capabilities to give operating units in 50 countries the ability to search for and reapply concepts used in developing and marketing beverages produced by Coke. Common Innovation Framework provides a global view into the product pipeline, which lets, for example, one business unit mine for product ideas by searching beverage or brand concepts that worked well in other countries. The Innovation Framework also helps Coke recognize duplicate product ideas and helps the company to combine efforts.
- As for working with its extended family of bottlers, Coke is using SAP’s ERP software, delivered via Coke’s IBM hosted data centers to standardize business platform and streamline its supply chain. Improved communication and collaboration between Coke and its bottlers will enable Coke to smooth peaks and valleys in its demand forecasting. The rising costs of raw materials only make that close collaboration more important.
- Coke’s trying to cozy up to the kids through its www.mycokerewards.com Web site, which has 40 offshoot sites worldwide geared toward specific interests. The result is a social network built around Coke’s loyalty program that pulls people in by tapping their tastes in sports, music, and entertainment.
Market Dominance Strategy: With the first and third approach, Coke will be able to continue its Market Dominance Strategy. These approaches will enable and strengthen Coke’s as a leader in non-alcoholic product. By keeping track on its effort to bring out new innovative product, Coke can streamline innovation and keep its competitors at bay. Collaboration with the customers will also enable it to exploit creative skills of its ‘prosumers’ who are willing to provide ideas for its product innovation. It can deepen the relation with it ever growing global consumers and enable Coke to continue to strengthen its brand.One thing to watch for is that Coke’s product proliferation (introducing multiple SKUs to target every fragmentation in market segment share) may undercut the ‘Coco-Cola’ brand’s halo effect. Collaboration technology or Enterprise Application may not be able to solve that problem.
Defensive Strategy: With the second approach mentioned above Coke will be able to create a good defensive strategy. Streamlining Supply Chain should allow Coke to continue to invest and strengthen its wide global distribution network thus increasing its market penetration. That should enable Coke to protect it turf before any potential competitive threats.
Coca Cola’s Business Intelligence Strategy
June 8, 2009 by Raj Sheelvant
When a company like Coca Cola, which has several flavored drinks wants to know what its customers prefer, what does it do? Well, it intends to use IT to monitor the pulse of its customers. According to Information Week article titled “Coke’s RFID-Based Dispensers Redefine Business Intelligence”, Coke plans to roll out the Freestyle drink dispenser nationwide which is taking the concept of customer choice to new heights, the most interesting aspect is the technology it’s built on. Freestyle will become Coke’s front-line robotic army for business intelligence, sending massive amounts of consumption data back to the beverage company’s Atlanta headquarters. The dispensers collect data on what customers are drinking and how much, and transmit that information each night over a private Verizon wireless network to Coke’s SAP data warehouse system in Atlanta.Unique byproduct of this BI enabled dispenser is that Coke can try out new flavors and get back almost real time feedback on the viability of its success. It will no longer have to ensemble Customer focus group and try it out in a ‘lab’. The real world becomes the lab and the marketing department at Coke can watch consumers vote yea or nay on the viability of new product instantaneously. This not only improves the speed of feedback but also makes the entire test marketing process cheaper. The Information Week article notes that besides collecting data on what customers are drinking, Freestyle also lets Coke know what flavor cartridges each dispenser holds, so the company can advise outlets on when to order more. Coke also will use the wireless network to send out new drink formulas to the beverage machines with instructions on how to mix them up. And should the soda company ever need to recall a flavor cartridge, the network also lets it instantly disable dispensers across the nation. Coke research, product development, and marketing personnel worldwide can use that system to share information on successful regional product rollouts and marketing programs, so they can apply them in other regions. Globally, Coke offers about 3,000 beverages, and what works in one place is often tried in another with similar demographics.
Kudos to IT team at Coke setting this complex infrastructure so that marketing decisions can be based on analytical and statistical data. Not only that, this application streamlines distribution by automatically recognizing when to expect orders from the outlets. On top of that, global marketing departments can collaborate on their findings. This is a great example of how IT can recognize the company’s competitive advantage and automate the process to broaden the economic moat. Article also notes that Coke came up with the design themselves and are closely guarding the engineering details of the RFID based dispenser. With a competitive advantage like this, I think its a good idea Coke store its IT architecture details along with its recipe formula!
