Strategic Management Essay On Dr. Pepper Snapple Group Case Study.

Topics Covered in the Course

By the end of this course, you should be able to:

1. Explain the key concepts, elements, components and processes in strategic management;
2. Demonstrate how to set organisational vision, mission, goals and objectives;
3. Explain the behaviour of organisations in a specific environment;
4. Analyse strategic alternatives of an organisation;
5. Discuss how strategic alternatives are selected, implemented and evaluated to meet organisational goals;
6. Examine the gist of strategic management, develop an understanding of strategic thought in relation to competition, value-chain and environmental influence;
7. Evaluate strategic alternatives and formulate future strategies for a business.

This course is divided into 11 topics. The synopsis for each topic is presented below:

Topic l dezeribes the evolution and development of strategic management. It identifies the major factors contributing to changes in the current business scenarios. The topic ends with a discussion on the benefits and pitfalls of strategic management.

Topic 2 distinguishes the key components of strategic management and elaborates on the strategic management model. The process of strategic formulation, implementation, evaluation and control are outlined. The interrelationships of the strategic management process are also disarmed.

Topic 3 diiruers the roles of corporate planners in strategic management. The roles played by the board of directors and the chief executive officer are explained. The roles played by middle management in the strategic management process are outlined in the last section of the topic.

Topic 4 outlines the concept of strategy formulation with emphasis on the key element of the strategy formulation process. A comparison is made between org.utational vision and mission. This leads to a discussion of organisational goals and objectives and the characteristics of high quality objectives.

Topic 5 elaborates on the external environmental forces that have an impact of organisational performance. Learners are exposed to the opportunities and threats existing in the business environment.

Topic 6 This is followed by a discussion of tools that can be used for conducting environmental analysis. NAOS differentiates between the nature and structure of industry. It also elaborates on Porter's five forces model, which is used for analysing industry situations.

Topic 7 Tape discuses the key internal organisational factors that affect the operation of organisations. Organisational strengths and weaknesses are examined and the tools for analysing the internal organisational situation of an organisation are described.

Topic 8 describes the experience curve and its strategic implications. The three business portfolio matrices are differentiated and the steps to developing the Competitive Profile Matrix are discussed. The Strategic Position Action and Evaluation Matrix and its applications are also outlined.

Topic 9 outlines how corporate and business strategies are generated. The different types of corporate and busineut strategies are discussed along with the importance of these strategies to the business organisation.

Topic 10 discumes the issues affecting strategy implemenbtion. The topic also illustrates the need for integrating objectives policies and strategies in the organisation. The main features of different organisitional structures are described. The topic also describes the relationship between strategy and culture and outlines the various organisational systems and functional prixesses.

Topic 11 identifies the key elements foe assessing the strategy of an organisation. The topic also discusses the criteria for strategy  evaluation and ends with an explanation of how the strategy evaluation process and control mechanism can match the strategy and direction of the organisation.

The case of Dr. Pepper Snapple Group (DPS) is related to a comprehensive case of strategic management that comprises of organizational chart, year-end financial statements, competitor details, etc of the company. DPS is regarded as the emerging producer of flavored beverages in Caribbean and North America wherein more than fifty brands is offered. It is the third biggest producer of carbonated drinks pursuing a market share of five percent in aggregate. The major competitors of the company are Coca-Cola and PepsiCo that have expected market shares of 47% and 21% respectively. Further, the company specializes in flavored soft drinks like Clamato, &7up, etc. Besides, the company has 24 production plants that facilitates in enhancing its business model. Moreover, its business model comprise of third-party distribution, direct-store-delivery, and company-owned services (DPS, 2017). Soft drink companies encounter an ever-changing world market. Nonetheless, the question DPS attempts to answer is that whether it can cater to the requirements of its stakeholders, whether it can diversify into other product markets, etc.

To become the best choice for beverages in the entire world

At Dr. Pepper Snapple Group, it is their vision to become the best beverage business throughout America. For such purpose, the company’s brands have been synonymous with fun, flavor, and refreshment since many generations that signifies the ability to develop in the future. Furthermore, the ability of the company to offer its customers with better quality drinks products indicates that in today’s society, its quality is unparalleled that makes it an international market competitor (DPS, 2017). In addition, the company attempts in offering greater chances to its employees so that they can be successful in future. Moreover, in order to offer greater quality products, the company endeavors in utilizing latest technology products that can effectively satisfy the customers (Gibson, 2017). Lastly, the company believes that adequate ethical conduct is mandatory in its business environment because such mission can appropriately cater to the requirements of the entire community as a whole (Demil & Lecoq, 2010). The company also incorporates its business strategy by stating that it concentrates on enhancing and building leading brands, possessing profitable channels, leveraging an integrated framework of business, enhancing operating effectiveness, etc.

This is an effective approach to compare an organization with the major players in the industry so that a clearer picture associated with the strong and weak points can be provided to the company ( Moncrieff, 2014). PepsiCo and Coca-cola are the major players of DPS in the beverage industry. The competitive profile matrix of Dr. Pepper Snapple Group is as follows:

Synopsis of Each Topic

Particulars	Weight	DPS		PepsiCo		Coca-Cola
		Rating	Score	Rating	Score	Rating	Score
Share of market	0.10	1	0.10	4	0.40	4	0.40
International presence	0.10	1	0.10	4	0.40	4	0.40
Organization size	0.08	2	0.16	4	0.32	4	0.32
Advertising	0.08	2	0.16	4	0.32	3	0.24
Distribution	0.08	1	0.08	4	0.32	4	0.32
Loyalty of brand	0.07	3	0.21	3	0.21	4	0.28
Financial profit	0.12	1	0.12	4	0.48	4	0.48
Innovation	0.04	3	0.12	3	0.12	4	0.16
Healthy beverages	0.05	3	0.15	1	0.05	1	0.05
Shareholders’ equity	0.12	1	0.12	4	0.48	4	0.48
Price competitiveness	0.08	1	0.08	4	0.32	4	0.32
Investment	0.08	2	0.16	3	0.24	4	0.32
Total	1.00		1.56		3.77		3.66

The reason behind such a low score for Dr. Pepper Snapple Group can be attributed to the fact that Cadbury Schweppes undertook a demerger from the company in 2008. Furthermore, the company’s initial public offer in the year 2008-2009 is also another reason why a low score has been obtained. This is because a major financial crisis occurred in the period that caused huge turbulence in various countries and especially in America; it took a toll on the equity of the shareholders (Doz & Kosonen, 2010).

Opportunities	Weight	Rating	Weightage Score
Customization	0.03	3	0.09
Growth opportunity in global market	0.10	1	0.10
Growing energy drinks	0.05	1	0.05
Enhancement of revenue owing to alliances and acquisitions	0.06	2	0.12
Rapid global communication	0.05	1	0.05
Sale of products that assists in having a major discretionary income	0.04	2	0.08
Enhancement in production of bottled waters to address market needs	0.07	4	0.28
Developing healthy products that can assist in enhancing goodwill	0.08	4	0.32

Threats	Weight	Rating	Weightage Score
Slow growth owing to recession	0.03	2	0.06
Increasing fuel and commodity prices	0.06	1	0.06
Rivals (PepsiCo and Coca-Cola)	0.10	1	0.10
Socio-cultural trends towards beverages	0.05	4	0.20
Loss of distributors (partners)	0.10	2	0.20
Limited market opportunities	0.05	1	0.05
Lesser amount of revenue than its major competitors	0.08	1	0.08
Government regulations and policies that can affect business growth	0.05	3	0.15
Total	1.00		2.8

It can be seen from the above matrix computation that the company has attained an above average rating of 2.8 from a feasible 4.0. The reason behind this can be attributed to the fact that the company has maintained its quality of beverages and its upcoming line of health-conscious drinks like the Dr. Pepper Ten (10) has also played a major role in the derivation of such rating (Osterwalder & Pigneur, 2010).

Strengths

1. The company has strong relationship with its key customers
2. The company’s separation from Cadbury Schweppes assists it to effectively focus on their beverage business.
3. The company has a well-qualified number of professionals that assist it in enhancing the quality of its beverages (Phillips, 2005).
4. The company has a number of recognizable brands in the market that enhances its goodwill all over (Gibson, 2017).

Weaknesses

1. The company only focuses on carbonated soft drinks instead of trying alternative drinks and beverages.
2. There is lack of international exposure in the company’s framework.
3. DPS highly relies on very few market players that are a negative indicator.
4. The company is comparatively smaller when compared to its major competitors like PepsiCo and Coca-Cola (Gibson, 2017).

Profitability ratios
Return on Assets [(Net Income/Average Assets)*100]	5.98809	6.32407
Net Profit Margin [(Net Profit after tax/Sales Revenue)*100]	9.36835	10.0344
Gross Profit Margin [(Gross Profit /Sales Revenue)*100]	60.2023	59.6095

The profitability ratio reveals the profit earning capability of the company and indicates the profit reaped by the company. Altogether, three ratios are computed to have an insight on the company (Lanen et. al, 2008). The Return on assets indicates the manner in which the assets of the company are used to generate profits.  As per the analysis and computation, it can be seen that the company witnessed a decline in the return on assets through being positive in the overall computation. A slight decline can be witnessed meaning that the optimum utilization of assets could not happen (Williams, 2012).

The Net profit margin underwent a marginal drop and this can be cited due to the decline in the net income of the company. The expenses of the company were more and the management failed to tame the expenses leading to a drop in the net profit margin (Marsh, 2009).

On the contrary, the gross profit margin underwent an increment and this can be cited due to the increase in the sales. The sales of the company were higher as compared to the year 2010 ultimately leading to a healthy gross profit margin (McLaney & Atrill, 2012).

Liquidity Ratio
	2010	2009
Current Ratio (Current Assets/Current Liabilities)	0.978325859	1.49765808
Acid Test [(Current Assets-Inventory)/Current Liabilities)]	0.795964126	1.190866511

The liquidity ratio of the company indicates the ability of the company to discharge the obligations. As per the computation, it can be commented that the current ratio is just adequate (Smith et. al, 2010). There is a marginal drop, however; being close to 1 indicates that the company has sufficient current assets to meet the current liabilities. On the other hand, the acid test ratio is a better indicator of liquidity as it excludes stock and indicates a better picture of liquidity. The acid test ratio of 0.80 projects that the company will be able to discharge the obligation with ease (Spiceland et. al, 2011).

About Dr. Pepper Snapple Group

Solvency ratio
	2010	2009
Debt Equity Ratio	2.602684018	1.753686853
Debt Ratio	0.722429168	0.636850501
Equity Ratio	27.75708319	36.31494986

Going by the computation of the solvency ratio, it can be seen that the debt-equity ratio of the company is high above 1 and hence, stress that a major reliance is present on the debt. The presence of more debt will burden the company with an interest payment. (Melville, 2013) Therefore, DPS debt-equity ratio is more in tune with the business and operations. On the other hand, the equity ratio of the company has seen a drop in the year 2010 indicating that the operations were not managed in an efficient manner (Leo, 2011). A dropping equity ratio sends a negative signal to the stakeholders.

Efficiency ratio
Total Asset Turnover [(Net sales/Average total assets) × 100]	63.9183	63.0242
Equity Turnover [(Net sales/Average total Equity) × 100]	199.65	173.55

When it comes to the total asset turnover and the equity turnover ratio, a general observation that can be made in this scenario is that the total assets were utilized in a favorable manner and that has helped the company is yielding better returns (Leo, 2011). As per the total asset turnover ratio, DPS has maintained a stable performance. On the other hand, equity turnover has shown an increment m signifying a strong performance of the company.

Strengths	Weight	Rating	Score
Stronger interconnections with key customers	0.04	4	0.16
Enhanced focus on research and development	0.06	4	0.24
Stronger position of market built on strong brand portfolio	0.10	4	0.40
Stronger operating margin and cash flows	0.08	4	0.32
Integrated model of business that can assist in attainment of key goals	0.08	3	0.24
Separation from Cadbury Schweppes	0.08	4	0.32
Stronger identifiable brands in the entire market	0.10	4	0.40
Management team with highly qualified professionals	0.04	4	0.16

Weaknesses	Weight	Rating	Score
Absence of international exposure	0.04	4	0.16
Enhanced focus on carbonated soft drinks instead of other alternatives	0.10	1	0.10
Immense reliance on very few players of market	0.08	1	0.08
Procurement of more than 85% revenues only from North America	0.10	1	0.10
Smaller in size in comparison to other major competitors	0.10	3	0.30
Total	1.00		2.98

SWOT strategies are various acronyms for several arrangements of words strengths, weaknesses, opportunities, and threats respectively. With the help of this strategy, the external and internal environment of a company can be easily evaluated and thereafter, the same can be used to determine the strategy of a company (Bieger & Beritelli, 2013). Besides, DPS can easily take into account such strategies in order to evaluate the best possible opportunities available to it, which can, in turn, allow the company to expand in the beverage industry by outperforming its major competitors like Coca-Cola (Freedman, 2013).

SO strategy

1. Procurement of suppliers in other parts of the world (S5, O4)
2. Increasing costs of advertising to attain international presence (S4, O2)
3. Investment in innovating products to address customer preferences (S1, S3, S7) (Freedman, 2013)

WO strategy

1. Prevalence into bottled water markets (W2,O7)
2. Concentration on opportunities in high margin and growth (W2, O1,O7, O8) (Zhang & Queto, 2015)
3. Improvement in the distribution network by actively engaging with domestic distributors (Freedman, 2013)

ST strategy

1. Utilization of management expertise (S8, T2)
2. Owing to healthier products, market-to-consumer can be easily facilitated (S1, S3, T2, T6) (Needles & Powers, 2013)

WT strategy

1. Creative and market variety of various functional items (W5, T1)
2. Excessive advertisement in order to compete with competitors (W4, T6, T7)

Financial position	Score	Competitive position	score
EPS	3	Technology know-how	-4
Liquidity	2	Utilization of capacity	-4
Cash flow	4	Loyalty of customer	-3
Leverage	3	Quality of product	-1
Inventory turnover	7	Share of market	-4
Working capital	2	Lifecycle of product	-2
	3.5		-3

Stagnancy position	Score	Industry position	score
Variability of demand	-4	Potential of profit	3
Entry restrictions	-6	Financial stagnancy	4
Rate of inflation	-3	Utilization of resources	3
Variations in technology	-3	Entry ease into the market	5
Price elasticity of demand	-5	Growth capability	3
Competitive pressures	-3	Extent leverage	4
	-4		3.67

Opportunities	Weight	AS	TAS	AS	TAS
Sale of products that assists in having a major discretionary income	0.04	4	0.16	2	0.08
Growth opportunity in global market	0.10	4	0.40	1	0.10
Growing energy drinks	0.05	1	0.05	4	0.20
Enhancement of revenue owing to alliances and acquisitions	0.06	4	0.24	2	0.12
Rapid global communication	0.05	4	0.20	1	0.05
Enhancement in production of bottled waters to address market needs	0.07	1	0.07	4	0.28
Developing healthy products that can assist in enhancing goodwill	0.08	1	0.08	4	0.32
Customization	0.03	1	0.03	3	0.09

Threats	Weight	AS	TAS	AS	TAS
Slow growth owing to recession	0.03	1	0.03	2	0.06
Increasing fuel and commodity prices	0.06	0	0	0	0
Rivals (PepsiCo and Coca-Cola)	0.10	3	0.30	1	0.10
Socio-cultural trends towards beverages	0.05	2	0.10	4	0.20
Loss of distributors (partners)	0.10	1	0.10	1	0.10
Limited market opportunities	0.05	0	0	0	0
Lesser amount of revenue than its major competitors	0.08	4	0.32	1	0.08
Government regulations and policies that can affect business growth	0.05	2	0.10	3	0.15

Strengths	Weight	AS	TAS	AS	TAS
Stronger interconnections with key customers	0.04	4	0.16	3	0.12
Enhanced focus on research and development	0.06	2	0.12	4	0.24
Stronger position of market built on strong brand portfolio	0.10	4	0.40	1	0.10
Stronger operating margin and cash flows	0.08	3	0.24	1	0.08
Integrated model of business that can assist in attainment of key goals	0.08	3	0.24	2	0.16
Separation from Cadbury Schweppes	0.08	2	0.16	3	0.24
Stronger identifiable brands in the entire market	0.10	4	0.40	1	0.10
Management team with highly qualified professionals	0.04	4	0.16	2	0.08

Weaknesses	Weight	AS	TAS	AS	TAS
Absence of international exposure	0.04	4	0.16	2	0.08
Enhanced focus on carbonated soft drinks instead of other alternatives	0.10	1	0.10	4	0.40
Immense reliance on very few players of market	0.08	0	0	0	0
Procurement of more than 85% revenues only from North America	0.10	4	0.40	2	0.20
Smaller in size in comparison to other major competitors	0.10	3	0.30	1	0.10

In relation to the product, the company must offer its items within the energy beverage market so that it can not only cater to the requirements of its present target market but also possess the ability to address the opportunities of its target market. The company can offer a simple energy drink as an option for the enhancing health conscious group of people. This can assist the company in penetrating a target market that is presently not catered to through this industry. In relation to pricing, the price of the company’s product must be its cost in addition to the channels markup and the intended amount of profits the company wishes to attain (Freedman, 2013). Besides, for such purpose, the company must not start at a higher phase because their energy drink is newer in the market and that can possess a high brand loyalty to the competitors. Besides, the company has full authority to adjust the prices when it sees that the brand gains loyalty and awareness with due course of time (Grant, 2010). In relation to promotion, since the company is already encountering major issues while attempting to sustain in such competitive beverage market, it must initiate promotional pricing with its present items so that it can influence customers to purchase its new products that have been recently launched. In relation to place, the same may be advantageous for the company because it already pursues long-term consumers who already possess the company products on their cupboards in retail supply chains and convenience stores (Itami & Nishino, 2010). Hence, asking such consumers to shelf space in order to advertise the company’s new product would prove extremely beneficial for the company. In addition, the company can also utilize its present chain of distribution to get the new item to the customers as and when there is an enhancement in demand (Matt & Simon, 2014).

References

Bieger, T. & Beritelli, P. (2013). Management v. Destination. München: Oldenburg Verlag.

Demil, B & Lecoq, X. (2010). Business model evolution: In the search for dynamic consistency. Long range planning 43, 227-246

Doz, Y.L & Kosonen, M. (2010). Embedding strategic agility. Long range planning 43,  370-382DPS. (2017). Dr. Pepper Snapple Group Inc Overview. Accessed October 15, 2017, from https://www.marketwatch.com/investing/stock/dps

Freedman, L. (2013). Strategy. Oxford University Press

Gibson, J. (2017).  The Case for and Against Dr. Pepper Snapple Group, Inc. (DPS). Accessed October 15, 2017, from https://stocknewsjournal.com/2017/04/11/the-case-for-and-against-dr-pepper-snapple-group-inc-dps/

Grant, R.M. (2010). Contemporary Strategy Analysis. Chichester, UK: John Wiley & Sons.

Itami, H & Nishino, K. (2010). Killing two birds with one stone: Profit for now and learning for the future. Long range planning 43, 364-369

Lanen, W. N,  Anderson, S & Maher, M. W. (2008).  Fundamentals of cost accounting. NY: Hang Loose press.

Leo, K. J. (2011). Company Accounting, Boston:McGraw Hill

Marsh, C. (2009). Mastering financial management.  Harlow: Financial Times Prentice Hall. McLaney, E. & Atrill, P. (2012). Accounting.  Harlow: Financial Times/Prentice Hall.

Matt B & Simon P. (2014). Accounting and Finance for Managers, Kogan Page Limited

Melville, A. (2013).  International Financial Reporting – A Practical Guide. Pearson, Education Limited, UK

Moncrieff, J. (2014). Is strategy making a difference?. Long Range Planning Review 32(2), 273–276.

Needles, B.E & Powers, M. (2013). Principles of Financial Accounting. Financial Accounting Series, Cengage Learning.

Osterwalder, A. & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons.

Phillips, R.L. (2005). Pricing and Revenue Optimization. Stanford Business Books.

Smith, W.K., Binns, A & Tushman, M.L. (2010). Complex business models: Managing strategic paradoxes simultaneously. Long range planning 43, 448-461

Spiceland, J., Thomas, W & Herrmann, D. (2011).  Financial accounting, New York: McGraw-Hill/Irwin University Press

Williams, J. (2012). Financial accounting. New York: McGraw-Hill/Irwin.

Zhang, S.X. & Cueto, J. (2015). The Study of Bias in Entrepreneurship. Entrepreneurship Theory and Practice.