EXECUTIVE SUMMARY: DR PEPPER SNAPPLE
Following analysis performed for the external and internal environment, we have identified various important aspects that need to be considered while shaping the overall strategy for DPS. First of all, our internal analysis surfaced an important weakness of DPS; 40% of DPS’s distribution strat egy depends on its competitors. This creates strong dependence on the competitors for the company to prosper, which limits their competitive capacity, especially when low cost leadership strategies are concerned. These strategies are not via ble for DPS and present a retaliation risk. Also, considering the threats and opportunities of the industry, we believe that a differentiation strategy would be the most suitable.
We observed changes in the lifestyle of consumers and rise in interest for healthier products, as well as for those that reinforce well-being. There are also changes in the regulations concerning health laws. While these are threats for the high calorie drinks within the DPS portfolio, it also presents an important opportunity for the industry, as the market for healthy and low calorie products have not been completely exploited yet. For examp le, in 2013, flavored and functional waters are estimated to grow by 71%. We believe that the company is in a strong position to take advantage of this opportunity, given its strength in developing new products and versatile production line. Furthermore, the Corporate Social Responsibility report that was published, as well as the road map designed for the company are also aligned with health and well-being values, creating a consistent approach. More concretely, as an action point, we recommend DPS to differentiate its product portfolio by incr easing the focus on development and marketing soft drinks with low or no calories, as well as flavored or funct ional waters. As it will be discussed later on, marketing and brand image will be very important factors for the s uccess of this differentiation strategy.
One other outcome of the external analysis of the environment and the industry was the identificatio n of a substitute threat. While consumer behavior especially during economic recessions, i.e decreases in demand and spending, as people turn to the cheapest substitute, tap water creates a high risk of substitutes, p resence of over 3000 beverage companies and low switching costs make this threat even more considerable. In order to minimize the threat of substitute, we believe the best strategy is to reinforce brand image, create consumer loyalty and engagement. One of the opportunities present in the economy is the rise of technology, social and mobile medias. It creates great opportunities to marketers to engage with their customers, create and build a relationship. While many are afraid of social media, because they do not understand it, it is clear that social media is here to stay and it must be included the overall strategy.
Concretely, we recommend DPS to focus on marketing, especially social and mobile and increase its efforts to create a brand that consumers are attached to. Intensifying marketing efforts is important not only to differentiate the brand from its competitors but also to defend and reinforce DPS’s earlier proposed positioning w ith health and well-being products.
Throughout our external analysis, we have identified important aspects about the industry and the economic environment. However, we have focused on the weaknesses and opportunities that would be the most inf luential overall i.e. the threat of substitutes and the opportunity of a healthy product category. While usin g DPS’s strengths to take advantage of the opportunities and to avoid threats, we chose a strategy of differentiation. While the first recommendation proposes a differentiation offer wise, the second recommendation concentrates on differentiating by customer experience and the brand image. We believe that these...