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Name Habiburachman
Student ID 29111388

Mobile phone 081321850144

Course code and title Businees Strategy


Course time and place Thursday/ 08.00 13.30/ R1
Lecturer

Program Young Professional

Harimukti Wandebori

Assignment number
Assignment title/topic/case

Due date March 6th 2013


Dr Pepper Snapple Group 2011: Fighting to Prosper in Highly Competitive Market

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Dr Pepper Snapple Group 2011: Fighting to Prosper in Highly Competitive Market

To achieve their objective company used their own strategy that should be hard to imitate by
competitors. Based on reference book by Ireland The Management of Strategy strategy is
an integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage. Company used strategic management
process as a tool to achieve competitive advantage and know core competencies as we can
see on figure 1.

Since DPS spun off with Cadbury, DPS focused on their own strategic development.
Management has sought to establish the firm as leader in the higher margin segments of the
non alcoholic beverage industry. There are six specific strategies that established by
company: build and enhance leading brands, focus on opportunities in high-growth highmargin categories, increase presence in high-margin channels and packages, leverage the
firms integrated business model, strengthen the firms distribution channels through
acquisition and improve operating efficiency. In arrange their strategies DPS are focused on
internal development and broaden their market share by acquisition and contractual
agreement.

The first step in strategic management process is strategic input that consists of external
analysis and internal analysis. A firm strategic actions are influenced by the conditions in the
three parts (general, industry, and competitor) of its external environment as we can see on
figure 2. General environment composed of dimensions in the broader society that influence
an industry and firms within it. The general environment segments are includes:
demographic, economic, political, socio cultural, technological, global and physical
environment. In beverage manufacturing and bottling industry economic and other market
condition are really influenced their business. Like on crisis between 2008 and 2010, total
consumer spending in United States decreased until 16% it makes consumers turned from
flavored drinks and colas to less expensive alternative.

Besides influenced consumer spending budget, recession significantly increase commodity


prices its press the company margin. The others general environment segment also influenced
the beverage industry like: changing demographic; beverage sales are higher during summer
months and holiday and become slower during winter. Changes in socio cultural trends are
one of the most affecting beverage industries. As consumers continue to reduce caloric intake
and look for products richer vitamins, the less-healthy sectors of the beverage are expected to
shrink. Soft drink sales will be decline however demand for healthier beverage is projected to
grow.

Industry environment has more direct effect on firms strategic actions. Company can use five
Porter forces model as a tool. By studying these forces, the firm finds a position in an
industry where it can influenced the forces in its favor or where it buffer itself from the power
of the forces in order to achieve strategic competitiveness and earn above-average return. I
try to make the porter five forces analysis of beverage industry like on table 1.

Threat of new
entrants
High entry costs

High risk for


entrants due to
diversified
nature of Coke
and Pepsi.

Existing Loyal
customer base.

Threat of
substitutes
Non-CSD drinks like
milk, alcoholic
beverages, juices,
sports drinks, teabased, dairy-based
drinks
Threat of saturation
of consumption in
US market thereby
leading to increase
in the consumption
of on-Cola
beverages.

Bargaining
power of supplier
Low switching
costs.

Huge number of
suppliers.

Bargaining power
of buyer
Higher buying power
large grocers,
discount stores and
restaurants buy large
volumes demanding
a lower price.
Choice of customers
is high due to
competition and
variety in the market.

Rivalry among
competing firms
Highly competitive
and constantly
shifting to respond
to changes in
consumer tastes
and preferences

Maintaining the
quality and
flexibility of
supply chain
through backward
integration i.e.
acquiring bottling
plants.

Acquisition of
major bottling
units by
existing firms
increases the
entry barriers.

After scanning the external environment we can move to strategic input by internal
environment. Internal environment is analyzing firm internal organization, in analyzing
process we should use global mid set. Global mind set is the ability to analyze, understand
and manage an internal organization in ways that are not dependent on the assumption of a
single country, culture or context. Components of internal analysis we can see on figure 3
below

Resources are consisting of tangible and intangible. We start to analyze tangible resources of
DPS: Overall DPS financial performance since spin off in 2008 are outside the expectations,
DPS sales increase and measures the company took increase efficiency, profits were down
approximately 5% from previous year. DPS is major beverage company that was spin off
from Cadbury and in time DPS do agreement with Pepsi bottling group in Minnesota. DPS
management seasoned professionals with decades experienced in food and beverages. DPS
always innovate their product followed the costumer trends. DPS also has a creative
marketing and operation team. DPS has their own factory and applied Direct-Store-Delivery
(DSD) distribution networks and third party distribution. DSD distribution is carried out by
railroad and truck.

Based on strategic input data we can formulate strategic business level strategy. Business
level strategy is an integrated and coordinated set of commitments and actions the firm uses
to gain a competitive advantage by exploiting core competencies in specific markets. The
purpose of business level strategy is to create differences between the firms position and
those of its competitors. To establish and defend their desired strategic position against
competitors firms choose five business level strategies (figure 4)

Cost leadership, differentiation, focused cost leadership, focused on differentiation and


integrated cost leadership/differentiation are five desired strategic position againts
competitor. Cost leadership is an integrated set of actions taken to produce goods or services
with features that are acceptable to customer at the lower cost, relative to its competitors.
Effective use of cost leadership strategy allows a firm to earn above-average returns in spite
of strong competitive forces. Differentiation strategy is an integrated set of actions taken to
produce goods or services at an acceptable cost that costumers perceive as being different in
that are important for them.

In terms of business level strategy DPS use differentiation strategy. DPS always made an
innovation in their products followed customer trends. DPS make healthier beverages to
faced customer needs. Besides healthier beverages DPS also make differentiation in their
products like new green tea ginger ale in Canada Dry Line.

The last chapter is Strategic Acquisition and restructuring. Acquisition and restructuring is
alliance strategy to increase their market share and hopefully above average returns. Merger
is strategy through which two firms agree to integrate their operations on relatively coequal
basis. An acquisition is a strategy through which one firm buys a controlling or 100 percent,
interest in another firm with the intent of making the acquired firm subsidiary business within
its portfolio.
DPS right now is the result of spin off between Dr Pepper Snapple Group, Inc and Cadbury in
2008. Cadbury Schweppes emerged in 1969 from the merger of Cadbury Plc, a British
confectionary and Soft Drink Company and Schweppes, an international beverage brand. In

time Cadbury Schweppes become third largest share of the beverage market in North
America by its strategic acquisition like: Duffy-Mot, Canada Dry, Sunkist, Crush, A&W and
Sun Drop. In 1995 Cadbury buy Dr Pepper/Seven UP and in 2000 Cadbury Schweppes
acquired Snapple Beverage Group. Three years after acquiring Snapple Cadbury Schweppes
combined its four North America beverage companies into Cadbury Schweppes Americas
Beverages (CSAB). In May 2008, CSAB officially spun off from Cadburys confectionary
manufacturing division and became known as Dr Pepper/Snapple Group, Inc.
Based on Dr Pepper Snapple Group 2011: Fighting to Prosper in Highly Competitive
Market case we can learn that a company should has a Strategic Competitiveness that makes
them different with their Competitor. One of Strategic Competitiveness of DPS is DPS are
focused in their internal development to increase their high profit margin and strengthen their
market by Acquisition. Focus on internal development and acquisition DPS success to
survive in beverage industry. I think acquisition and merger is one of the best strategic
formulations that can take by company to increase their market share.

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