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Threat of New Entry

Despite entry to the beverage industry having no barriers, building a brand name for beverage concentrate is the biggest challenge for the new entrants. Therefore, the entry of new firms in the US beverage manufacture and bottling industry is not a threat to the prosperity of DPS. It is in fact an added advantage to the company since the only possible placement of the new firm is the bottling or distribution segment thus the DPS is assured of another buyer of its beverage concentrate (Porter, 2008). This maintains or further strengthens the market and industry position and power of the DPS.

Overall, from the porter’s analysis of the five forces; suppliers, buyers, competitive rivalry, threat of substitution and threat of new entrants, it is notable that the intensity of competition in the US beverage manufacture and bottling industry is attractive for the development of the DPS as a beverage concentrate manufacturer.

Question 2

Focus Competitive Strategy

It is important to note that the five generic competitive strategies are essential in the strategic planning of a firm the DPS included with the main focus being gaining a competitive advantage in the industry or market. The competitive strategy is crucial in the setting of the tone for the mission of the company. This is because the company’s departments must function harmoniously so as to provide the level of quality and performance required in the market place and that is consistent with the company’s overall business strategy (Hu, 2010). Therefore, the competitive strategies are employed in a company so as to offer both product and brand distinction evident in the prices, quality, value and performance. These factors emphasized in the competitive strategies not only positions company’s product uniquely but also the brand itself.

It is acknowledgeable that although the DPS has strong brands and distribution networks it has struggled to compete head-to-head with the industry leaders, Coke and PepsiCo. This struggle is not without a competitive strategy. The DPS has used both cost and differentiation focus to counter competition from both Coke and PepsiCo. This is a more narrow competitive scope within the beverage industry in the US if not globally.

The focus competitive strategy undertaken by the DPS has both the cost and differentiation variants. The cost focus competitive strategy used by the DPS seeks a cost advantage for its target segment taking care of the price conscious customers especially the bottler beverage concentrate buyers. Through the differentiation focus, the DPS is more focused on the existing products other than just adding and investing in new product lines. The DPS seeks differentiation in its target segment as seen in changing everything about the product especially in packaging, look and taste differentiation is also a focus in the marketing thrust associated with its brands. The marketing thrust is seen in the case where the DPS signed a $715 million deal with Coke to distribute its products within the US thus positioning it above its competitors (Harrison, 2011). The DPS focus on new formulations for its teas so as to increase consumer interest as well as focusing on the health benefits of its products.

Question 3

The Company’s Core Competencies

Companies ought to have something that their customers uniquely value if they are to make reasonable and good profits. Core competencies are the building blocks on which a company is able to strategize. It is therefore important to identify them by using a 4-criteria test. The criteria is built on whether the core competencies are able to provide significant value, increase the dominance for market share, make it difficult for competitors to imitate and provide competitive advantage to the company (Ormanidhi & Stringa, 2008). It is upon meeting all criteria that core competencies can be established.

DPS puts their core competencies on the development and research area. They focus on product development, microbiology, analytical chemistry, process engineering and sensory science. From 2008 to 2011, they invested development and research fee is $17 million, 16 million and 15 million. The company has 18 manufacturing facilities and 174 distribution centers in the US. In the Mexico, the company owns 3 manufacturing facilities and 23 distribution centers. It’s noting that DPS also has their own fleet of over 5000 delivering trucks that provide product transportation across the nation.

Four Criteria Test for Sustainable Competitive Advantage

Valuable capabilities allow the DPS improve its efficiency and effectiveness. One of the valuable resources of the DPS is the hub-and-spoke system that gives it manufacturing capabilities in all the five major US regions- northeast, southeast, mid-west, southwest, and western. This allows orders to be filled closer to its customers and control the transportation costs. The DPS has over 20,000 employees throughout North America and the Caribbean as well as 24 production plants and more than 200 beverage concentrate distribution centers. Further, the DPS operates a business model that includes both company-owned direct-store-delivery (DSD) distribution and a third-party distribution for its products (Harrison, 2011).

It is undeniable that for a sustained competitive advantage, valuable capabilities and resources must also be rare. The formula for manufacturing beverage concentrates for the products of DPS is patented and thus being rare for new entrants or competitors to easily get. It is also worth noting that all the beverage concentrates for the DPS are produced in St. Louis, Missouri. Making it difficult to duplicate. The Dr. Pepper brand has made the company to form productive relationships with bottlers that are owned by or affiliated to both Coke and PepsiCo

Finally, the DPS beverage concentrates are rare and imperfectly imitable resources. There are no other beverage concentrate resources that can replace them to produce similar value or competitive advantage. Therefore, valuable resources that are rare, imperfectly imitable and non-substitutable give the DPS a distinctive competitive advantage over its competitors (Ormanidhi & Stringa, 2008).

Question 4

Overall Appraisal of Dr. Pepper’s Financial Performance Over A 3-Year Period

Although the net sales for DPS in the year bracket 2008-2010 have slightly increased, the gross profit has significantly declined due to the increase in costs of operations within the company. Profits have declined by 5 percent despite sales increase about 2 percent ($5.6 billion) and the measures put in place by the DPS to increase its efficiency. This owes to the economic challenge after 2008 making the company use the additional cash revenues in paying down debt, increasing dividends and buying back common stock (Harrison, 2011). From the company’s financial data, most of the DPS’ brands experienced moderate-to-high growth especially in the year 2010 and this trend is expected to continue.

According to the consolidated balance sheets from 2009 to 2010, the current assets, total assets increased but not in a large number, only around 150 million. As for such a big company, the number is small in a certain degree. However, the current liability has grown almost half of the 2010. This number means that the company has more debts in 2010, although the current liabilities would pay back within a year. Another important data is the stockholders’ equity is decreased around 1 million, this may show that the stakeholders didn’t satisfied with interests of distribution. As a result, they didn’t invest more capital to the company.

The decreasing stakeholders’ equity will put the company in a risk of lacking of cash flow, which will make the company difficult to invest more cash to their daily productivity. In the future, company should pay more attention to the current liability, and to maintain the good relationship with the stakeholders.

Question 5

The DPS Balanced Scorecard

A balanced scorecard reinforces good behaviors in a company by isolating four separate areas also called legs that need to be analyzed. The four areas are finance, learning and growth, customers and business processes (Kaplan & Norton, 1996). It is worth noting that the balanced scorecard is used to attain the objectives, measurements, initiatives and goals of a company as a result of the four primary functions of a business. Therefore, a scorecard is a blueprint that identifies the factors hindering the company’s growth and performance and outlines the strategic changes that are to be tracked by future scorecards. The DPS is not an exception and may use a balanced scorecard to implement strategies as well as identify where value is to be added within the company. The scorecard will also be used in the development of strategic initiatives and objectives (Lipe & Salterio, 2000).

References

Beal, R. M. (2000). Competing effectively: environmental scanning, competitive strategy, and organizational performance in small manufacturing firms. Journal of small business management, 38(1), 27.

David, F., & David, F. R. (2016). Strategic Management: A Competitive Advantage Approach, Concepts and Cases.

Harrison, J. S. (2011). Dr Pepper Snapple Group: Fighting to Prosper In a Highly Competitive Market.

Hu, M. L. M. (2010). Developing a core competency model of innovative culinary development. International journal of hospitality management, 29(4), 582-590.

Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: translating strategy into action. Harvard Business Press.

Lipe, M. G., & Salterio, S. E. (2000). The balanced scorecard: Judgmental effects of common and unique performance measures. The Accounting Review, 75(3), 283-298.

Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.

Ormanidhi, O., & Stringa, O. (2008). Porter’s model of generic competitive strategies. Business Economics, 43(3), 55-64.

Year, F. (2016). DR PEPPER SNAPPLE GROUP, INC.