COCA COLA HBC AND ITS COMPETITIVENESS IN THE MARKET

Coca Cola HBC and its Competiveness

Introduction base

The success of a company is determined by how much it can optimally allocate resources to achieve the set objectives. The allocation and uses of resources in the companies is a determinant of how much the company can gain in terms of profit and output. The marketing arena usually has many players who are competing to meet the established demand in the market, which is usually not enough for each company. A resource is any input that a company has control over and which can be used in an effective way to propel the cause of the organization. Ideally, the resources by themselves do not bring any unique value to the organization. However, the way that they are used determines the value addition to the company (Erchul & Martens, 2010). Coca Cola HBC has massive resources at its disposal and thus is in a position to use the resources optimally to create new markets.

The resources available to the Coca Cola HBC are massive due to the large structure of the company. The resources include financial, human and physical resources. Managing the available resources ensures that the company from the inputs that are used in the company especially in financial inputs. The Coca Cola HBC has been successful in the bottling business, which means the company has optimally employed it resources. The resource-based view allows a competitive use of the resources available to the company in a way that offers an advantage over the competitors (Erchul & Martens, 2010). The tapping of unknown markets entails the use of the blue ocean strategy while tapping known markets entails the red ocean strategy. In the blue ocean strategy, markets are created while in the red oceans industries market is already there. The former has no competition or is yet to have competition while the latter experiences much competition. The Coca Cola HBC is the second largest bottle producer implying that it has massive resources at its disposal. Therefore, tapping unknown markets in other countries that do not have bottling companies will give it a competitive advantage over related industries.

Coca Cola HBC, in terms of physical resources, has large plants, which enable it to produce large quantities of products for its main customer Coca Cola. Owning the plants proves to be a major boost to its success since it does not incur expenses of rent and space due to large production. Any increase in demand from the customer can easily be offset by adding more equipment instead of renting other buildings and putting equipment in them. The Coca Cola HBC has been producing bottles for the Coca Cola Company for a long time though it has had major competitors in the market. In some countries, the Coca Cola HBC engages in the red oceans where there is much competition. Therefore, creating new oceans, that is blue oceans, requires the company to focus on potential innovative products and new markets where other industries do not exist. The company needs to carry out market research that will help it to find out untapped areas in the bottling industry and their profitability.

The resource-based views developed by Barney and Grant focuses on assisting firms achieve competitive advantage in the market (Salonen 2010). The focus of the resource-based view is on discovering the strengths and weaknesses of the company and then finds out how to deal with them to increase its performance in the market. This will increase performance of the employees, which in turn increases output of a company.

The blue oceans model introduces a very seldom-used strategy in strategic management that can be used by companies to obtain competitive advantage. Different companies to eliminate any competition that can arise in the market from other competitors have effectively used the strategy. Companies create a market space that has not been in existence to enable them have their own share of the market with very little or no competition. Coca cola HBC has been successful in using the blue ocean strategy to gain a market that has less or no competition. Creating unknown market spaces requires a broad mindset of the market to determine how some products can be introduced that is unique, and that company can only produce that.

Many companies in the market have used the red ocean strategy. The red ocean strategy involves finding known market spaces where the competition is already established. The red ocean market strategy is competitive in nature and businesses have to fight with other competitors to gain the market. Therefore, it is more expedient for companies to focus on market spaces that scarcely exist or do not exist at all. Coca Cola Hellenic is a multinational that has vast resources. It has used the resources to set up premises in countries that the Coca cola Beverage Company operates.

The Coca Cola Hellenic Company needs to utilize the blue ocean strategy in setting up industries where there has been none. The creation of unknown market spaces may occur where there are no bottling industries in the country, and where the company has to import raw materials. It has streamlined its activities to involve bottling among other operations in meeting the ever-increasing demand of the Coca Cola beverage company. Tapping unknown markets proves to be a very successful venture since the company has no competition unless another company steps to take part in the market share. The cheap labor in developing countries allows the company to minimize on costs and other expenses. The company should explore unknown markets that have not been tapped, and that need the products of Coca Cola HBC. Coca Cola being in many countries will provide a ready market for Coca Cola HBC.

The greatest resource apart from money is the workforce. The workforce determines how the company will fare in the market. Applying the blue ocean strategy to the employees will help the company boost its perfomance in the end. The workforce in any organization may be disgruntled or motivated to perform better to enhance the success of the company. The company can thus motivate the people to work harder to maximize time and resources.

Another model that will be useful for the company is value chain analysis. The value’s chain analysis will be used to identify Coca Cola HBC’s operations segments that create value and those, which do not (Erchul & Martens, 2010). It is of paramount importance to comprehend the critical business activities that add value to the company because the company will only have good returns when the value so created is greater than the associated costs (Salonen 2010). On the other hand, second activities are those that support Coca Cola HBC’s infrastructure such as human resource management, service, technological support, and procurement. Value creation activities can be outsourced to save the company avoidable expenses (Botten 2007).

Coca Cola HBC is credited with competencies in its product offering (Erchul & Martens, 2010). The brand name and popularity of the company resonates well across the world since the company can produce products that have good taste in the eyes of customers. According to the RBV, individual unique competencies arise when customers or the company become development conscious (Erchul & Martens, 2010).

One key resource of the company is its employees. The company ensures that employees are doing well and are in good health (Tosi and Pliati 2011). Employees have different expectations in the workplace. Honoring and appreciating workers boosts their moral at work. Coca Cola HBC does exactly that, which has transformed their behavior at work. The company has specialized in making bottles for different beverage-producing companies. One of its customers is the Coca cola Company that bottles soft drinks (Botten 2007). Since Coca Cola is a large multinational, it requires enormous quantities of bottles, which gives the Coca Cola HBC an avenue of increasing in its revenues (Hax 2010). It concentrates on products that range from juices, coffee and tea beverages, and water. The products have led to its success with the various brands that the company provides (Nilsson & Rap 2004).

Competitive advantage gives a business an advantage over others (Erchul & Martens, 2010). Every company strives to achieve a competitive edge over the competitors by offering products that exceed the expectations of the customers. According to Philip Kotler (2008), a product can be perceived on three dimensions. These include the core product, the actual product, and the augmented product. A customer not only buys a product, but also expects other non-tangible benefits. Competitive advantage falls into two categories; cost advantage and differentiation advantage (Erchul & Martens, 2010). A company that pursues a cost advantage offers products at a lower price as opposed to competitors (Siedel and Haapio 2012).

Coca Cola HBC has many factories that produce its products and this helps it save on costs. It has engaged in international business and set up units for production of the packing materials for Coca Cola. Since some units are in developing countries, it takes advantage of the available low cost labor to provide services in its companies (Hax 2010). The low labor cost contributes to efficient production and profitability of the company.

A strategy that is important to the company is differentiation. The company is unique in its operations as it provides quality products to the Coca Cola Company. Its uniqueness has enabled it to be one of its sole distributors in the business. Thus, in the soft drink industry, it is to be looked upon as the most viable option in choosing of companies to work with. Thus, the company has to obtain an efficient pricing that will not temper with its cost management, as this will affect the business negatively. The company can look for an appealing thing that attracts customers and use it to obtain market power (Maritan, 2010).

Focus

Coca HBC has focused on producing products for Coca Cola solely. Both companies have a wider capital base which aids in their business with Coca Cola HBC benefitting from its long time customer Coca Cola. Thus, both companies benefit and the supplying company maintain its customers (Walker, 2003). The company has concetrated in the target segment of providing high quality bottles in bulk to its customers. The profitability is great since it goes in tandem to the good packaging that Coca Cola needs for its products. The

Cost leadership

The company has strategized to work on a tight capital and reduce costs in its labor force and working environment. This proved effective as the company managed to reduce operation costs in its operations. This helps the company be profitable while producing many products. Therefore, the company takes advantage of economies of scale at the same time meeting the high demand for its products by Coca Cola (Hill & Jones 2010).

The company ensures that the workforce is in good condition in terms of health as discussed above. The employees are more motivated and are able to focus on doing their work without distractions. This enables the company’s production process to go on without any anomalies or strikes that may arise due to poorly motivated individuals. Hence, having dealt with the possibility of internal conflicts with the employees, the company is in a good position to deal with the outside pressures that surround the business (Sign, 2008).

The results from the company’s website indicate a significant decline in company’s sales volume in the last nine months because of hard economic conditions in most markets. Volumes in established markets plummeted by 3% (Cola Hellenic Bottling Company 2013). However, in some emerging market segments such as Nigeria and Russia, the company reported positive results (Cola Hellenic Bottling Company 2013). In spite of these results, the company continued to gain market share in several markets including Austria, Ukraine, Russia, Greece, and the Czech Republic among others. In addition, the company continues to generate free cash flow. In the last nine months, Coca Cola HBC generated free cash flow of €345 million Coca (Cola Hellenic Bottling Company 2013).

Conclusion

Coca Cola HBC has been successful in the use of focus, differentiation, and cost leadership strategies. This has enabled it to have a competitive advantage in the market and, in effect, its subsequent success. The company has not been ‘stuck in the middle’ as it has been successive in most of the strategies in the market. Since its main customer is Coca Cola, it has been able to maintain its focus in producing for Coca Cola and gaining greatly from the large demand from Coca Cola Beverage Company. Coca Cola HBC has a lot of market advantage due to the massive resources, which it can use to create unknown markets spaces that have not been discovered and take advantage of them.

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