Keurig's Growth - Essay Sample

Introduction

Keurig's business-level strategies worked in many ways and fuelled its growth. Transitioning from a small proprietorship business to a wholly-owned public subsidiary business significantly exposed and marketed the business. The transition triggered financial support through which Keurig's would come up with eight different flavors. Coupled with Caribou Coffee partnership, Keurig developed a new production strategy and further presented a variety of options to coffee consumers. The Keurig-Caribou Coffee partnership brought competition to the business. When the two enterprises pull their resources together and invest in production, the cost of production significantly reduces, and this is a significant competitive advantage (Parniangtong, 2017).

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How Keurig's Strategies Outdo Rivals Internal and External Environments

Keurig exploits competitive advantage, alongside internal environments like financial changes, to outdo its rivals in the industry. Following GMCR and Caribou Coffee partnerships, Keurig received financial support, and this gave it an unbeatable competitive advantage. For instance, Keurig initiated a $3 million television advertisement program, alongside in-store corporate advertising and demonstrations for its support staff in retail stores in six cities, during the 2007 holidays. Keurig would expand the investment to$20 million, including national advertisement programs for the 2008 holiday season valued at $6 million. The massive financial transformation is an essential internal environment through which Keurig outperformed its rivals. When a business has access to unlimited funds, excellent marketing becomes an effective way of capturing the market (Parniangtong, 2017). The advertisements exposed and marketed the company to many people, and thus, it attracted a large number of consumers.

Keurig also exploited the external environment to outdo its rivals. Keurig focused and took advantage of market place evolution to capture the market. U.S.A's coffee marketplace stagnated and further experienced a 3% decline between 2004 and 2010. Even so, single-serve coffee suppliers like Keurig took 19% of total sales. The market displayed a preference for single-served coffee, and this was an opportunity for Keurig to beat its rivals who did not venture into the supply of the preferred goods. In this scenario, Keurig exploited to prevailing external environment forces to skyrocket, the demand for singly served coffee (Dagnino, 2012).

Important SWOT Factors

Strength: Analysis of Foreign Marketplace

Keurig's ability to analyze the foreign marketplace is a significant strength. Analysis of the foreign market identifies business opportunities (Kessler, 2013). Keurig based foreign market analysis on Nespresso's precedents in Europe. Nespresso, like Keurig, experienced a slow growth upon its introduction, until the mid-1990s when it rapidly grew. Scott Van Winkle forecasts 50% growth for Keurig.

Weakness: Costly Packaging

The packaging is an essential operation, and thus, management should consider recyclable packaging materials to cut down costs (Kessler, 2013). Keurig, however, has been unable to address packaging challenges. Keurig patented K-Cup the heat-sealing containers after ditching My K-Cup reusable filters in 2006. While My K-Cup is reusable, K-Cup cannot be recycled. Economically, the reusable packages cut down operational costs compared to the disposable K-Cup. The act of replacing reusable containers with disposable containers is the company's weakness. Also, introducing K-Cup did not address consumer needs, especially those who found My K-Cup convenient. The weakness indicated that Keurig's company transitioned from success to failure in packaging.

Opportunity: Market Dominance

Keurig is quickly dominating the market. Market dominance is an avenue to market monopoly, and hence, long-term success (Kessler, 2013). American market provides growth opportunity, and probably dominance. 71% of 115 million American households owned coffee makers by 2008. The number has significantly increased as of now, and this is an opportunity to penetrate the market. Also, 44% of American coffee consumers had 75% of their consumption at home. The latter makes home consumption an opportunity. Therefore, focusing on and tailoring operations to home coffee consumption is a significant opportunity for Keurig.

Threat: Environmental Pollution and Degradation

Consumers' complaints and concerns about the implication of business activities son the environment is an undeniable threat (Kessler, 2013). The New York Times and other websites have documented several consumer complaints and concerns regarding the accumulation of non-recyclable K-Cups in landfills. The cups pollute the environment, an aspect threatening Keurig's success in the industry.

Keurig's Strategies of Penetrating the International Market, and its Usefulness in Partnerships to Obtain Company Goals

The company's goal is to serve the needs of each segment of the international market. Serving the needs of each market segment enables the hassle-free penetration of foreign markets (Parniangtong, 2017). Keurig envisioned the production of "good, better, and best" suit of coffee brewers so that each segment of the market selects coffee packages within its financial ability. Initially, Keurig came up with the B50 category, with which $149. Keurig also focuses on an assortment of coffee products. Unlike Williams-Sonoma, high-end coffee retailers like Target sell an assortment of coffee, a phenomenon that enables penetration of foreign markets. In pursuit of company goals, Keurig partnered with global coffee outlet companies like Starbucks. Keurig-Starbuck's partnership has made up to $100 million in sales. In the process, Keurig has served over 50 million customers. The net effect of this phenomenon is business expansion and profitability.

Challenges Facing Keurig and Recommendations to Profitability and Growth

Expiry of Important Technological Patents

Keurig and Starbucks, through Ready Brew, struck a business deal that made up to $100 million sales in a year. Consequently, Keurig served about 50 million consumers in Starbucks' outlets. Even though this was a good business relationship, there was uncertainty regarding its future because Starbucks announced that it would also produce multiple coffee flavors independently. Keurig, as such, risks losing its business because Starbucks is established and has a ready market because it takes much of the credit (Kessler, 2013).

A recommendation to address the future of Keurig's uncertainty of the future, patenting the specific coffee flavors, is necessary. When Keurig patents the coffee flavors, Starbucks will have no legal grounds to produce similar flavors (Kessler, 2013). As such, Keurig will retain its market by retaining the prototype coffee flavors. It will have the chance to bounce back by opening its outlets and serving the original flavors.

The Headache of Multiband Strategy

The management of multiband strategy is a significant challenge because it has sparked tension between GMCR and other coffee roasters. GMCR is dedicated and committed to long-term roasting and production of multiple brands of coffee, an act that displeases other coffee roasters. In an attempt to address the tension, GMCR has acquired most coffee wholesale businesses, and this can overwhelm consumers, hence, price reduction (Kessler, 2013).

Keurig's greatest risk is losing its blueprint product to a multinational company like Starbucks. Normally, small businesses tend to lose their prototype and blueprint products to large companies with whom they partner (Kessler, 2013). In this case, Keurig risks losing business when Starbucks comes up with the exact coffee flavors and terminate their agreement. Keurig will be forced to develop another product and market.

A recommendation to address this challenge is the acquisition of these companies and assigning them different portfolios so that they can work towards achieving different goals (Kessler, 2013). The strategy already started yielding fruits following the acquisition of Diedrich's Coffee, Van Houtte, Tully, and Timothy in 2009. When the different coffee stakeholders perform different functions, they harmoniously achieve the common objective, and the converse is true as it is at the moment.

References

Dagnino, G. B. (2012). Handbook of research on competitive strategy. Cheltenham, U.K.: Edward Elgar, 2012. Retrieved from https://books.google.co.ke/books?id=7fH-7gkish8C&pg=PA29&dq=market+evolution+as+an+external+environment&hl=en&sa=X&ved=0ahUKEwjSg8bwyPvnAhXROcAKHYmyBQsQ6AEIJzAA#v=onepage&q=market%20evolution%20as%20an%20external%20environment&f=false

Kessler, E. H. (2013). Encyclopedia of management theory. Thousand Oaks, Calif: SAGE. Retrieved from https://books.google.co.ke/books?id=6fCyBwAAQBAJ&printsec=frontcover&dq=what+are+the+important+swot+factors&hl=en&sa=X&ved=0ahUKEwjqy8zqy_vnAhWCQkEAHTtSBfMQ6AEINjAC#v=onepage&q&f=false

Parniangtong, S. (2017). Competitive Advantage of Customer Centricity. Springer. Retrieved from https://books.google.co.ke/books?id=x8gmDwAAQBAJ&pg=PA131&dq=supplying+a+variety+of+options+for+consumers+attracts+a+large+consumer&hl=en&sa=X&ved=0ahUKEwjZgpHtwfvnAhUQYsAKHRiTCggQ6AEIJzAA#v=onepage&q=supplying%20a%20variety%20of%20options%20for%20consumers%20attracts%20a%20large%20consumer&f=false