Strategic Management Essay on Dr. Pepper Snapple Group.

Dr. Pepper Snapple Group (DPS) is the case of strategic management that includes the financial statement of the company in the end of 2010. In addition to this, the case includes different information from the year end 2010, competitors’ information, organizational chart etc. Dr. Pepper Snapple Group is one of the leading producers of flavored beverages and drinks in Caribbean and North America, which is offering more than 50 brands. DPS is the third largest manufacturer of carbonated drinks with an expected market share of 5%. The company traces behind only PepsiCo and Coca-Cola, which have approximate market share of 21% and 47% respectively. It offered flavored drinks, under its popular brands, like; Canada Dry, 7up, Clamato and Schweppes. Headquartered in Plano, the common stock of DPS is publically traded under the symbol DPS (Harrison, 2011). Currently, it is running 24 productions and manufacturing plants, with all the soft drinks concentrates manufactured in a plant in St. Louis Missouri. It is implementing an effective business model that includes direct store delivery and third party distribution system.

The case includes sufficient data from its external and internal environment and evaluates the existing strategies and recommends some strategies for the timeframe of next three years.

Mission and Vision Statement

The proposed vision statement of Dr. Pepper Snapple Group (DPS) is to become the number one choice for the flavored soft drinks and beverages in the world. By looking at the given case study, it can be proposed that company should set a vision to become best beverage producer in the world (Abraham, 2012).

At Dr. Pepper Snapple Group, the vision statement is to become the best beverage provider in America and across the world. The brands of the company have been identical with the flavor and fund for different generations, refreshment and sales of the company are composed to keep growing in the coming future (Dr. Pepper Snapple Group, 2017). The mission statement of the company is to provide flavored soft drinks and beverages worldwide, fulfilling the wants and expectations of customers and distributing intensively and to maximize the profits for its external and internal stakeholders. Through its highly dedicated and motivated employees and utilization of unique packaging and labeling, the company intends to manufacture fun, refreshing and flavored drinks, so it can become the market leader in food and beverage industry. For influencing the environment and its components positively, DPS makes efforts to embark on recycling process, which via use of new and advanced technology and offers bio-degradable cans and bottles, in this way it is reducing the chemical pollution to the environment (Kipley, & Jewe, 2014). Thus, DPS is considering all the related parties under its mission statement.

The Competitive Profile Matrix (CPM) is a strategic analysis, which allows an organization to compare its performance with its leading competitors. It reveals different strengths and weaknesses of the company (Hitt, Ireland, & Hoskisson, 2009). After looking at the given case, the Competitive Profile Matrix for Dr. Pepper Snapple Group is created below by considering its two leading competitors, PepsiCo and Coca-Cola;

Success Factors	Weight	DPS	PepsiCo	Coca-Cola
		Rating Score	Rating Score	Rating Score
Promotion and Advertising Distribution Healthy beverages Size of Company Brand loyalty Innovation Vending Locations Price Competitiveness Market Share Financial Profit	0.08 0.08 0.06 0.10 0.08 0.05 0.09 0.07 0.11 0.14	3 0.24 1 0.08 2 0.12 2 0.20 2 0.16 3 0.15 2 0.18 2 0.14 2 0.22 1 0.14	4 0.32 3 0.24 1 0.06 4 0.40 4 0.32 2 0.10 4 0.36 4 0.28 3 0.33 4 0.56	2 0.16 4 0.32 1 0.06 4 0.40 4 0.32 4 0.20 3 0.27 4 0.28 4 0.44 4 0.56
Total		1.63	2.97	3.01

The above created Competitive Profile Matrix states the scores for DPS and its two leading competitors, Coca-Cola and PepsiCo. The score of DPS is 1.63 that shows a below the average competitiveness, when it is compared to the PepsiCo and Coca-Cola. The scores of Coca-Cola and PepsiCo are 3.01 and 2.97 respectively that shows that Coca-Cola is the strongest player in the food and beverages industry. The score of Dr. Pepper is very low because of the separation of Cadbury Schweppes from DPS in May 2008 (Lee, Kozlenkova, & Palmatier, 2015).

External Factor Evaluation (EFE) Matrix is a strategic technique that is related to the SWOT analysis of the company. This matrix is created to evaluate the external factors, which may impact the growth and success of the organization (Moon, 2010). From the SWOT analysis, external matrix includes two external factors, like; Opportunities and Threats. External factors evaluation for the Dr. Pepper is stated below;

Competitive Profile Matrix

Opportunities

Weight

Rating

Score

· DPS has various opportunities for growth by expanding its business in international markets.

· Customers are becoming very concerned about health and prefer to drink the flavoured drinks

· Increase in the production of packaged water to fulfil the requirements of markets and customers

· Company can introduce its new products other than soft drinks and flavoured beverages by considering the needs and preferences of its potential customers (Johnson, 2017).

· Company should expand its business in Eastern Europe, Brazil and India that can offer long term opportunities to DPS.

· By the merger and acquisitions with other well-established players, the company can enhance its revenues.

0.09

0.06

0.08

0.04

0.07

0.08

0.09

0.12

0.32

0.12

0.14

0.24

Threats

Weight

Rating

Score

· Increased concern about health is reducing the sale of carbonated soft drinks.

· DPS is facing intense competition from two leading players in the industry, i.e. Coca Cola and PepsiCo.

· The use of carbonated drinks has been reduced, which can decrease the revenues and profits of the organization.

· Limited Marketing opportunities in North America can influence the sales of Dr. Pepper Company.

· Government rules and regulations are also affecting the business of company.

0.06

0.08

0.05

0.06

0.04

0.24

0.16

0.10

0.12

Total

1.77

From the above external factors matrix, it can be analyzed that Dr. Pepper Snapple Company got an average rating of 1.77 from the possible 4.0. It can be attributed to its upcoming product line of some healthy drinks, like; Dr. Pepper 10. The company needs to consider these external factors, opportunities and threats, so that it can enhance its position in the beverage market (Rothaermel, 2015).

Internal Audit is the process of analyzing the internal factors, which may impact or support the growth of organization in today’s competitive business environment. It considers the resources and capabilities of the company and assists the organization in attaining its goals and objectives. The strengths and weaknesses of Dr. Pepper Snapple are stated below;

Strengths

Dr. Pepper Snapple is one of the leading players in the beverages and flavored drinks industry. The organization has 6 of the top 10 non-cola soft drink brands. The CEO of the company was named as beverage executive of the year 2010 by a well-recognized magazine, i.e. Beverage Industry Magazine. In the year 2010, the sales have allowed the organization to increase its dividends by 28%, repay the debts and buyback the shares (Snowdon, & Stonehouse, 2006). The de-merger with Cadbury Schweppes allowed the company to emphasize more on their beverage operations. The management team of the DPS is very strong and experienced and they have established strong relationships with its customers and other key stakeholders. The company is distributing its juices by indicating their benefits to health. Moreover, company is engaged in producing various non-carbonated drinks.

Weaknesses

As of 2011, DPS does not have predetermined and specific mission and vision statements. It had comparatively lower profit in 2010 than 2009, whereas PepsiCo and Coca-Cola had more than 13% growth in revenues and profits. It just focused on the carbonated soft drinks than any other substitute and functional drinks. There were so many brands of the company, such as; A&W, Mott’s and Canada Dry, which were not advertised and promoted seriously (Thompson, & Martin, 2010). The sales of various brands, like; A&W, 7UP, Sunkist have decreased in the year 2010. DPS is smaller in size while compared with its leading competitors in the industry, i.e. Pepsi and Coca-Cola. In addition to this, one of the major weaknesses of DPS is the lack of global presence. Most of its revenues (85%) come from North America, which includes USA, Mexico and Canada (Dr. Pepper Snapple Group, 2017).

External Factor Evaluation Matrix

Financial ratio analysis is an important tool that is used to compare the financial information to analyze the performance of the company (Babalola, & Abiola, 2013). It assists the organization in comparing the current performance with the past performance. Here is the discussion about financial ratio analysis about DPS for the year end 2009 and 2010.

Profit Margin

2009

2010

Net Profit Margin

Gross Profit Margin

Pre-Tax Margin

10.03

59.61

15.69

9.37

60.20

14.57

Profitability Ratio

Return on Assets

Return on equity

Return on Invested capital

6.37

19.16

12.94

5.99

18.70

11.76

Liquidity Ratio

Current Ratio

Debt/Equity Ratio

1.50

0.92

0.97

0.84

Efficiency ratio

Days Inventory

Days Sales Outstanding

Inventory turnover

Receivables Turnover

Asset Turnover

42.89

35.37

8.51

10.32

0.64

41.17

34.84

8.87

10.48

0.64

Financial ratio of the company states that it had a healthy position at the end of 2009 and 2010, but the profitability of company is lower than its competitors, i.e. PepsiCo and Coca-Cola. During this period, it maybe because of the fact that organization was currently listed as public company and it is not very much experienced in the capital market (Babalola, & Abiola, 2013). In the year 2010, the current ratio of the company was decreased; it shows that company has lost its ability to pay its liabilities. Asset turnover for DPS is same in both years; it shows that organization generated more profits and revenues of investment on assets. Gross profit margin of thee ratio has increased in 2010, i.e. 60.20 that company has the ability to produce the products at low costs on high sales (Dr. Pepper Snapple Group, 2017).

Internal Factor Evaluation Matrix is a strategic technique that is used by an organization to analyze its internal environment and to show its strengths and weaknesses. It is the best tool to conduct internal audit (Warner, 2010). On the basis of above internal audit, this matrix will provide scoring to the organization by evaluating its strengths and weaknesses. Internal Factor Evaluation Matrix for Dr. Pepper Snapple Group is created below;

Strengths

Weight

Rating

Score

· Dr. Pepper Snapple is one of the leading players in the beverages and flavoured drinks industry. The organization has 6 of the top 10 non-cola soft drink brands.

· Expert and experienced management team of the company and strong customer relationships

· Separation from Cadbury Schweppes enabled the firm to focus more on their beverage and soft drink operations

· Strong Focus on the research and development aspects

0.12

0.04

0.08

0.07

0.48

0.16

0.24

0.28

Weaknesses

Weight

Rating

Score

· DPS does not have specific mission and vision statements in the year 2011.

· It had comparatively lower profit in 2010 than 2009, whereas PepsiCo and Coca-Cola had more than 13% growth in revenues and profits (Renz, & Vogel, 2016).

· Lack of global presence

· It just focused on the carbonated soft drinks than any other substitute and functional drinks.

· Most of its revenues (85%) come from North America, which includes USA, Mexico and Canada (Vartanian, Schwartz & Brownell, 2007).

0.04

0.09

0.03

0.12

0.11

0.08

0.36

0.09

0.24

0.11

Total

2.04

After analyzing internal and external analysis for the company, it is very important to formulate effective strategies to deal with these factors. So, here is the discussion about the SWOT strategies, which are categorized in four types (Guthrie, Cuganesan, & Ward, 2008). The SWOT strategies for Dr. Pepper Snapple are stated below;

Enhance the advertising and promotional costs by offering and marketing the health benefits of its health drinks and Snapple teas. (S1, O5)
The company should make investment on increasing the research and development to produce and introduce an energy and health drink. (S4, O2)
It should build and improve the leading brand by making investment in innovation and introducing new brands to fulfil the preferences and needs of customers. (S2, O4)

Under its WO strategies, DPS should focus on the opportunities in higher growth and success in other alternative drinks, like; energy drinks and flavoured water (Koplan, & Brownell, 2010). These drinks are considered to be very healthy than other soft drinks. (W4, O4)
DPS should increase the advertising investment for the A&W, Canada Dry and other flavoured soft drinks. (W3, O1)
In the BRIC countries, it should enhance its distribution network by signing agreements with their domestic distributors. (W5, O5)

The company should introduce its new segment of healthier products and drinks. (S1, T1)
It should conduct a market research to analyse the competitors and their strategies that will assist the organization in gaining more competitive advantage over leading competitors, i.e. Coca-Cola and PepsiCo. (S1, T2)
It can use management expertise at the disposal for optimizing the operation costs and fix the competitive prices. (S2, T3)
In addition to this, it can increase the advertising and promotion of Snapple Tea and other juice products (Andreyeva, Kelly & Harris, 2011). (S4, T1, T3)

DPS should execute aggressive advertisement to deal with the intense competition from PepsiCo and Coca-Cola in international market. (W2, W3, T2)
By introducing a flavoured water product line, DPS can diversify its product range. (W4, T3)
There should be a creative and innovative range of functional products, like; coffee, energy beverages, tea etc. (W4, T3)

SPACE (Strategic Position and Active Evaluation) Matrix is the management technique that is used to analyze an organization. It is used to decide that what type of strategy an organization should implement. Companies implement this tool for formulating the strategy, especially related to the competitive position of organization (Dubé, 2005). The below-given diagram shows the SPACE matrix of DPS, which shows that DPS falls under the aggressive quadrant of SPACE matrix.

Internal Audit

SPACE matrix includes different variables to define the internal and external dimensions, such as; industry strength, environmental stability, financial strength and competitive advantage. These dimensions are shown on the x and y axis (Johnson, 2017). All the related dimensions and scores are demonstrated in below matrix;

Internal Analysis	External Analysis
Financial Position Sales 6 Current Ratio 3 Debt/equity 3 Return on Equity 4 ROA 3 Average of Financial Position 3.8	Stability Position Inflation rate -3 Changes in technology -2 Competition -5 Entry Barriers in market -3 Environmental stability Average -3.25
Internal Analysis	External analysis
Competitive advantage Quality of products -2 Market Share -2 Customer loyalty -2 Variety of products -2 Monitoring and control over distributors and suppliers -3 Average 2.2	Industry Strength Utilization of resources 5 Profit earning capacity 4 Growth potential 5 Entry in the market 4 Financial stability 5 Average 4.6

ES Average Score: -3.25 + average FS score (+3.8) = +0.55

From the above matrix, it can be stated that company have a good position in the market. It can use it’s IS to take the benefits of external opportunities and overcome the threats and weaknesses. So, DPS needs to set various effective strategies, like; market development, product development, penetration etc. These strategies will be implemented according to the circumstances, which are faced by the organization (White, & Bruton, 2010).

QSPM is an approach of strategic management for analyzing the possible strategies of an organization (Harris, et al, 2011). The below-created table shows the QSPM for the DPS that includes two strategies, which will be implemented by the company, i.e. Market penetration and production development.

Opportunities

Market Penetration (Increase market share by existing products)

Product Development (Introducing healthy drinks)

Weight

TAS

· Expansion of business in BRIC countries

· Introduction of more innovative products other than flavoured drinks and beverages

· Increase in the bottled water production

· Increase in global presence

· Merger and acquisition with other well-established players to increase the revenues

0.06

0.04

0.05

0.07

0.24

0.08

0.10

0.28

0.12

0.16

0.20

0.10

0.07

Threats

Market Penetration

Product Development

Weight

TAS

· Government policies and regulations for carbonated drinks

· Intense Competition from Coca-Cola and PepsiCo

· Limited Market opportunities in North American market

· Healthier lifestyle of people

0.04

0.07

0.06

0.04

0.21

0.24

0.12

0.07

0.12

0.24

Strengths

Market Penetration

Product Development

Weight

TAS

· One of the leading player in beverage industry

· Strong and experienced management team

· Innovative business model

· Strong Market position

· Effective relationships with customers

0.09

0.04

0.08

0.10

0.04

0.27

0.16

0.24

0.40

0.16

0.09

0.08

0.16

0.10

0.12

Weaknesses		Market Penetration		Product Development
	Weight	AS	TAS	AS	TAS
· Only focus on carbonated drinks rather than any other beverages · Lack of global presence · Intense competition · Most of the revenue generation form North America	0.12 0.09 0.12 0.11	1 4 3 4	0.12 0.36 0.36 0.44	4 1 1 2	0.48 0.09 0.12 0.22
Total			3.92	>	2.66

From the above matrix, it can be evaluated that Total Attractive Score (TAS) under market penetration strategy is more than TAS under product development strategy. The company can work for its existing products (Aithal, 2016). It should focus on increasing its advertising and promotion process, so that it can increase its international exposure.

After analyzing the given case study and above tools, it can be recommended to DPS that it should increase its advertising and promotion by investing $300 M and it should also invest in the research and development process. In addition to this, it should introduce a new product line with different products than drinks and beverages. By doing this, it can diversify its product range. The company can make focus on advertising of two brands, Canada Dry and A&W. Introducing healthy and energy drinks will assist the organization in attractive a large customer base all over the world. Furthermore, it should start a forward integration process by buying the suppliers in domestic markets. Thus, these recommendations will help DPS in attaining top position in the international market.

References

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