Company Analysis: Dr. Pepper Snapple (DPS) Group Case Study

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Table of Contents

Introduction
Company’s Business-Level Strategy
Strategic Issues facing the Company
Recommendations
Works Cited

Introduction

With its headquarters in Plano, Texas, Dr Pepper Snapple Group (DPS) is a leading brand owner, manufacturer, and distributor of flavored carbonated soft drinks and non-carbonated beverages in the United States, Canada, Mexico and the Caribbean via a broad and flexible route to market (Roeder 1).

The present paper focuses on the firm’s business-level strategy, strategic issues facing the company, SWOT analysis, as well as some recommendations to address the strategic issues.

Company’s Business-Level Strategy

Owing to the fact that business-level strategy is basically “an integrated and coordinated set of commitments and actions that a firm uses to gain competitive advantage by exploiting core competencies in specific markets” (Hitt et al 100), it can be argued that the company’s business-level strategy is premised on being the leading flavored beverage business in the United States by

building and enhancing the firm’s leading brands,
pursuing profitable channels, packages and categories,
leveraging on the firm’s integrated business models,
strengthening the firm’s route to market,
improving the company’s operating efficiency (Dr Pepper Snapple Group para. 2).

Strategic Issues facing the Company

Although one of the tenets making up the firm’s business-level strategy is to build and enhance leading brands, the company is increasingly facing challenges in product proliferation occasioned by new line extensions, new packaging and sizes, as well as ongoing market segmentation in the soft drinks and beverages industry.

This strategic issue is proving a costly affair for the company bearing in mind its size in the market as well as its competitors (e.g., Coca-Cola and PepsiCo), who have the resources and leverage required to underwrite such proliferation (Roeder 8-9).

The company must also deal with the strategic issue of price erosion in the soft drinks and beverages industry. Although it is clear that this problem came into being long before DPS entered the market, the company must now face strategic issues that have continued to erode the prices of various products in the market.

These issues include

use of larger package sizes that have a lower price per ounce,
introduction of multi-packs, which provide a lower price per ounce,
increasing availability in superstores and mass merchandisers, including global leader Wal-Mart, which to a large extent operate with lower retail gross margins than convenience stores.
Additionally, the company must develop strategies to deal with plummeting profit margins due to rising and volatile commodity prices as well as unforeseen shifts in customer tastes and preferences (Roeder 7).

SWOT Analysis.

Strengths Over 50 soft drink brands in the market (strong portfolio of leading brands in their product category) Employment of an integrated business model that facilitates alignment of the firm’s objectives and business strategies at multiple levels of operations Strong customer relationships, especially with key customers “Broad geographic manufacturing and distribution coverage” Resilient operating margins and substantial, stable cash flows in its operations in the Americas “Separation from Cadbury Schweppes allows continued ability to focus resources on their beverage business” Strong and experienced management team and support staff	Weaknesses Lack of adequate exposure in the international business arena Company places much focus on carbonated soft drinks rather than strategize on how to introduce alternative and functional beverages into the market Firm is substantially small in size and market share when compared to leading competitors such as Coca-Cola and PepsiCo.
Opportunities The company has successfully positioned itself within a large, expanding, and profitable markets Market expansion opportunities due to increasing number of health conscious customers The economy in North America is recovering after the 2008 financial crisis, implying customers will now have more disposable income to spend on the beverages at convenience stores and grocery outlets Company has adequate room to undertake international expansion	Threats Stiff competition from other popular brands such as Red Bull and Rockstar Continued product proliferation and price erosion in the market Profit margins could be seriously hampered by increasing and unpredictable commodity prices “Unforeseen changes in consumer preferences”
Source: Roeder 7

Recommendations

The company needs to deal with the strategic issues mentioned in the paper if it expects to maintain competitiveness and profitability in an industry marked by cut-throat competition for market share.

Although it is expected that DPS will be in a strong position to benefit from the recovering economy witnessed in the Americas, it is recommended that the company invest heavily in marketing and advertising to generate powerful brand name for particular products so as to deal with the issue of product proliferation.

Additionally, to adequately deal with the trend of price erosion and shifting customer preferences witnessed in the market, it is imperative for the company to place more emphasis on alternative and functional beverages rather than continuing to focus primarily on drinks that are considered unhealthy by consumers.

It may be possible that price erosion in the carbonated soft drinks market is fueled by a perception by consumers that the drinks are indeed unhealthy. Lastly, the company needs to conduct a comprehensive research on the strategies used by its main competitors (Coca-Cola and PepsiCo) to hedge against rising and volatile commodity prices so as to leverage on its profit margins.

Works Cited

Dr Pepper Snapple Group. Our Mission. 2013. Web.

Hitt, Michael A., Duane Ireland and Robert E. Hoskisson. Strategic Management Concepts and cases: Competitiveness and Globalization. 9th ed. 2011. Mason, OH: South-Western Cengage Learning. Web.

Roeder, Jack. Dr Pepper Snapple Group. 2011. Web.

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