Global Strategy - Dr Pepper/Snapple Case Study Case Study Sample
Separating from Cadbury and becoming independent, Dr. Pepper Snapple (DPS) experiences significant challenges that stimulate its management’s innovative spirit and strategic thinking. Benefiting from Cadbury’s experience, DPS has gained in terms of market expertize, logistics or marketing that it had to control individually after the spun off. The company currently enjoys various advantages from being number 3 in the beverage industry such as having the opportunity of diversifying or creating new products that will enjoy popularity due to their association with DPS. Its resource, know-how and diversification are its main competitive advantages, but the companies will need to rethink its capabilities for enhanced competitiveness. As its products are varied, they require different approaches, but an integrated focus should exist on coordinating the brands’ dynamic. DPS would need somebody outside the industry for generating a new vision, enhancing its competitiveness and maximizing the major trends for the benefits of the company. A careful consideration should be given to cooperative alliances, which generate mixed outcomes and the company should consider diversifying into new products, such as coffee.
As a part of a multinational conglomerate like Cadbury, companies can benefit in terms of know – how, logistics, marketing strategies and distribution channels, as Cadbury shares “common resources, capabilities and competencies” (Chapter 9 278). These advantages could not be attained if, for instance, Dr. Pepper Snapple (DPS) would have remained an independent company. These advantage are reflected in the company’s business, market share and popularity all over North America and internationally. Some disadvantages for a company that is part of a multinational conglomerate like Cadbury include the possibility that the initial receipt of the product can be changed, losing cultural identity or facing the consequences of a hostile takeover.
Being number 3 in an industry means possessing the third largest market share in the market, with the potential of attracting new customers. In DPS’ case, being number 3 represents an advantage, as the company has the potential of attracting customers from the top two players, Coca Cola and Pepsi, with the right mix of products (focusing on the flavored drinks and healthier alternatives) and marketing. In addition, another advantage in being number 3 in the industry consists in the fact that DPS can distribute its products through Coca Cola and Pepsi Cola or other independent bottler systems (Harrison 6). Another advantage of being number 3 in an industry is that a new brand released, enhanced or extended can benefit of significant visibility and awareness, becoming easily popular, due to its association with the leading company that owns it.
DPS pursues a six steps strategy, which includes: building and enhancing top brands; focusing on maximizing the high growth and margin sections; boosting its presence in high margin channel and packaging; maximizing an integrated business model; developing distribution through acquisition and improve operations (Harrison 3). DPS develops leading brands such as Dr. Pepper, 7UP, Snapple Antioxidant water or Sunkist Soda, which generate high growths and high margin, while de-focalizing from unproductive products. The sole strategy that has not been pursued yet is the acquisition for increasing the distribution. Instead, the company opted for cooperative alliances with Coca Cola and PepsiCo for developing its distribution. Besides this aspect that needs to be further pursued, the company’s strategy is consistent with DPS’ actions and produces positive outcomes.
Although the beverage industry, wherein DPS activates, is highly competitive, the organization benefits, nevertheless, of specific competitive advantages. Its focus on the healthier products such as soft drinks with low or no calorie, noncarbonated drinks, teas or flavored water answer an ascendant trend of consumers’ decline in carbonated soft drinks, while focusing in healthier alternatives (Harrison 8). The differentiation and diversification of its products represent another competitive advantage area, and so does the distribution system, as the company partners with the business leaders for selling its products. In the future, the company should consider merging or acquiring, preferably through friendly acquisition (Chapter 9 278), a larger bottling manufacturer, in order to become independent on Coca Cola and Pepsi Cola distribution, avoiding further associations with its strongest rivals.
DPS contains brands that range from carbonated to noncarbonated soft drinks, to sport drinks or healthier alternatives, juices and lemonade (Harrison 4). Considering this variety of products, DPS’ brands address to different consumers. Therefore, a specific communication and approach to market is required for each brand. As for the synergies across its brands, DPS’ flavored soft drinks (Dr. Pepper, Sunkist, A&A) compensate for the low sales in cola products and for the slow non-cola carbonated and non-carbonated (Harrison 4). While losing ground on its Vitaminwater, the company focuses on the energy drinks to recover its market share or attract new customers (Harrison 4).
It is difficult to say whether Larry Young is the right person to be leading DPS or not. Young benefits of 25 years of experience in the industry, as he previously worked for PepsiCo, one of the main rivals of DPS. Previous experience within PepsiCo as the CEO of Pepsi Cola General Bottles represents an advantage for DPS, as Young brings know-how from the industry and business strategies from one of the company’s main rivals. In the same time, having spent so much time in the same industry might create the disadvantage of being redundant and shaping a certain vision, which could be repugnant on different approaches. In the current market, wherein DPS needs to reinvent itself and pursue new strategies, a person coming from another domain might bring enhanced value for the organization, just as Steve Jobs did with Pixar (Chapter 9 277).
A new trend that is shaping in the beverage industry is the consumers’ focus towards the healthy products and DPS is on this track, as it includes labels that enhance the health benefits of products such as Snapple teas, juices and lemonades (Harrison 4). Ready to drink teas, sport drinks, low or no calorie soft drinks and noncarbonated drinks are also among the new consumer trends. DPS has all these products, which indicate that the company is well positioned for maximizing these trends.
Coca Cola and PepsiCo are two of the strongest brands in the world, which easily produce mental associations for the values that they stand, each time their logo or commercials are seen. By developing cooperative alliances with these two main competitors, DPS is likely to benefit from their distribution channels, but lose on brand awareness in favor of Coca Cola and PepsiCo. Nevertheless, a direct confrontation with these two companies would mean for DPS losing an important part of its distribution and also its markets, which might generate significant losses. With significant losses and decreased market, it would be unlikely for the company to be able to stand against Coca Cola and PepsiCo and still be positioned as the number 3 company in the beverage industry. Hence, it would be best for DPS to continue forming more cooperative alliances with its competitors.
DPS produces, markets and distributes more various brands of carbonated soft drinks (Harrison 2), in the context wherein the carbonated drinks are on a descendent trend in the consumers’ preferences and this market is already dominated by Coca Cola and PepsiCo. In this context the company should consider divesting several of its carbonated brands. DPS could consider diversifying into a new product which is not currently among its brands. Such endeavor would imply an extension into the coffee market. Diversifying into ready to drink coffee and green coffee, focusing on promoting healthy products, the company could gain new market share and tackle the opportunities of a new market.