Customer-centric business design principles and implementation

Customer Centric Business Design

The Coca Cola Company

The purpose of this work is to describe how an organization can attempt to provide and control customer value through its value chain using Coca Cola Company as an example. Further this work will discuss the relationship between a value proposition and an organization's core competencies as well as discuss the relationship between customer satisfaction and customer loyalty. Finally methods of measuring customer loyalty will be discussed and the reason why customer loyalty is an important concept.

Coca Cola Company is structured on the framework of a "Customer-Centric" business design. A business that is "Customer-Centric" is one that revolves its' business around the customer's needs, wants and demands. Four strategic elements compose the business design of a company. Those four elements are as follows:

Customer selection

Value capture

Strategic control

Scope

The Business Environment in Today's World:

According to the work entitled "A Blueprint for Shareholder Growth" Wise (2001) a business that follows the "old" business strategies will not fare well in today's business environment. Wise (2001) states that:

Most conventional strategy frameworks provide little insight into these unlikely successes and failures. Clearly, dominant market share isn't the determining factor. Consider GE, which boosted its market position as a necessary, but only intermediate, step on the way to superior shareholder value creation."

II. The Original Business Design of Coca Cola:

Coca Cola is touted to be "one of the great corporate success stories of the past 20 years." During the decade of the 1970's the Coca Cola Company was one with a brand name that was integrally strong and one that held a strong share of the market. However problems existed due to the vast network of independent bottler and distributor companies that caused minimal and sluggish growth through innovation. The bottlers share in the success of the brand. The Coca Cola business structure was still operating in the fashion it had 60 years prior and didn't have the capital or know-how to invest efficiently in the new technological advances and as well smooth launch of new products was not in the companies skill set.

III. Revamping of Business Design:

Further, the Pepsi and Coke war began to take its toll while simultaneously the bottling companies were not exhibiting any team effort which further burdened the Coca Cola Company. The fight between Coke and Pepsi heated up further and Coke targeted the grocery store consumer, which are considered higher value customer as well as exerted efforts to:

Rationalize its antiquated distribution system, and better coordinate its sales and pricing strategies with the chain stores, Coke also adjusted the scope of its business. It "forward integrated" into soft drink bottling, taking controlling positions in the majority of its independent bottlers. In doing this, it provided the bottlers with the capital and direction to invest in vending machines, the scale to efficiently manage a more complex distribution network, and the guidance to serve large national accounts." Wise (2001)

Through these strategic management positions in altering its business design the Coca Cola Company was able to make a choice in the "value capture" mechanism based on "managing the value chain. Wise (2001) The Company focused the bottlers toward higher-profit market segments which made them more efficient in their operation. Further the Coca Cola Company generated higher profits throughout its system that allowed recapturing by the company in the form of higher syrup prices as well as duplication in overseas operations by deploying the new improved system on a global basis. Wise p.51 (2001) The real key to strategy is the constantly evolving business design which Coca Cola has adopted which will serve well in the constantly shifting and changing business environment of today.

The establishment of "strategic control" was accomplished through:

1. Domination of the high-profit vending segment.

2. Low-cost distribution system.

3. Revamping of its organization system.

Through consolidation of control over the network of bottlers the low-cost distribution system became a reality. The skills that were vital to management of the bottling end of the business were addressed through plants operations, regional marketing and distribution. Wise (2001) According to the AMR Research Supply Chain Top 25: "The basis of competition for winning companies in today's economy is supply chain superiority." The AMR report further states that Demand-driven supply networks (DDSN) have replaced the traditional push model that worked so well in the 20th century. The customer-centric model is what is termed a "pull-model" that, according to the AMR report does the following:

Embeds product innovation

Manages demand proactively

Utilizes stochastic optimization methods to deal with variability.

The result is: "A nimbler business that leverages intellectual assets and more quickly seizes fleeting business opportunity." AMR Research Report (2004)

IV. Value Proposition and Core Competencies: The Difference

Core competencies can be defined as those things which the company focuses upon in development and achieves performance of better than any of its' competitors. Value proposition is when the company asks of itself the question: Where is the greatest market opportunity in terms of profit through long-term growth

V. Customer Satisfaction - Customer Loyalty:

customer may be satisfied without necessarily holding loyalty toward the product of a company. For example, when someone enters a store to purchase a soft drink and that individual prefers Coca Cola to Pepsi but the store is out of the Coca-Cola product the individual who then purchases a Pepsi instead of going to another store to procure a Coca Cola product is satisfied with the Coca Cola product but not loyal in purchasing habits. The loyal customer will go to another store to procure the desired and loyally chosen Coca Cola product. The loyal customer is the higher valued customer by the company.