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.
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.