Competitive Strategies and Managerial Decision Making - Research Paper Example

Managerial Decision Making Research and Analysis Brief History Keurig Green Mountain is considered as a publicly traded organization located at Waterbury in the US state of Vermont. It is considered to be a wholly owned subsidiary of the organization Green Mountain Coffee Roasters, Inc. Green Mountain Coffee Roasters is said to be a coffee company based in Waterbury, Vermont. Keurig is considered to be the leader in single serve brewing and its brewing systems are present in more than 16 million households of the US. The company mainly sells Arabica bean coffees and Single Cup Brewers including certified organic blends in Vue packs and K-Cup. The company also sells ground coffee and whole bean in other types of package which includes cans, fractional packages, and bags. Moreover, the organization is also considered to produce and sell numerous specialty beverages in portion packs including hot cocoa, iced fruit brews, iced coffees, iced teas, and hot apple cider. The company is mainly said to operate in two segments such as Canadian segment and Domestic segment. The company is also considered to distribute its products in two channels such as away from home (AFH) and at home (AH). Sources of Risk The rising costs of raw materials and the actions that are taken with regard to pricing may have considerable influence on the gross margins and operational results of the company. Factors such as foreign exchange fluctuations and available sources of liquidity for the organization are considered as important sources of risk for the organization Keurig Green Mountain. The organization must have availability of bank financing and should have the potential to raise significant funds through issuing equity shares and debts. If the company does not have the ability to raise funds by issuing equities and debts, it can be considered as important risks for the organization. The financial position of the company should be sound such as it can raise funds in a very efficient manner to finance its growth projects. Foreign exchange exposures of the company are considered to be classified into mainly three types such as economic, translation, and transaction exposure. Transaction exposure is said to be concerned with the extent to which an organization’s future cash earnings have the potential to get affected by any changes in the exchange rate of currencies. Economic exposure is considered to measure the impacts of changes in exchange rates on an organization’s earnings and cash flows. Translation exposure is also known as accounting exposure. It is involved with the measurement of any impacts that changes in exchange rates is considered to have on the financial statements of organizations as a whole. Transaction exposure is also known as short run exposure while economic exposure is considered to deal with long run exposures of an organization. Such types of exposures are considered as important sources of risk for the organization. Keurig Green Mountain has to effectively manage such exposures in an efficient manner to remain globally competitive with regard to its competitors. Business model of Keurig Green Mountain (Source: Keurig Green Mountain Corporate Website, 2013). Government Regulations The company follows government rules and regulations in a very efficient manner. The organization generally does not display any information to third parties but chooses to do so if it thinks that it would be appropriate to comply with legal process, regulation, law, and government request. The company is said to provide assistance in investigation and fraud protection. The information that is collected by the company from cookies and such other similar technologies are considered not to be disclosed to any other party and is solely used to understand the behavior of consumers, track the effectiveness of advertisements, recognize repeat visitors, and to analyze user behavior (Douglas, 2012). Production Inputs The company assists in successful implementation of enhanced order management and also seeks to make changes with regard to business processes. This comprises ease of use, compatibility, and testing. Keurig is considered to be the leader in single serve brewing and its brewing systems are present in more than 16 million households of the US. The company mainly sells Arabica bean coffees and Single Cup Brewers including certified organic blends in Vue packs and K-Cup. The company also sells ground coffee and whole bean in other types of package which includes cans, fractional packages, and bags. Moreover, the organization is also considered to produce and sell numerous specialty beverages in portion packs including hot cocoa, iced fruit brews, iced coffees, iced teas, and hot apple cider. New Products The company is considered to sell Arabica bean coffees and Keurig single cup brewers including fair trade certified coffee products. Keurig Green Mountain is the leading company in the segment of hot coffee brewers to be used at home. The company is planning to sell cold beverages with the Keurig Water brewers and the Keurig Cold brewers in the future. Also, the company is planning to introduce new brewers especially designed for multiple functionalities for the household users. This would have various unique features like different inserts for cup holders and drawers of different colors. The company had been serving the household and commercial segments. But it plans to enter the premium market with its new category of brewing machines and cups. Price trends and price elasticity of demand Keurig Green Mountains follow a differential pricing based on value. The company has been focusing on the home markets and gourmet coffee markets and on implementing strategic pricing for the brewery machines. For the brewers, Keurig has adopted the market skimming strategy and focused on the premium segment of the consumers. The company has used the corporate strategy to penetrate this market through a medium level pricing. The basic models of the brewing machines are priced at around USD130 whereas the premium brewing machines are priced at USD 299 considering their high manufacturing cost of around USD200-USD220. The premium pricing is aimed at value proposition and profitability whereas the basic model pricing is aimed at market penetration. Value chain and price structure for keurig (Source: Keurig Green Mountain Corporate Website, 2013). Economic and industry influences on its costs, operations, and profitability. The coffee market was estimated to have a value of USD 34 billion in 2010. Specialty coffee has emerged as a mainstream product in the beverage industry. The beverage industry is seeing new trends and is characterized by increasing number of alliances and mergers in order to improve the capabilities of businesses operating in this industry. The acquisition of patent rights is another key factor in the industry that affects the profitability, competitiveness and operations of a business. Keurig has several key patents under the brand which has helped the company to have a competitive edge over its competitors in the industry. This has influenced the sale of low priced imitating product s. Also, the share prices of Keurig Green Mountain Inc. have been increasing at a high rate. This has created speculations that the company can be heading towards a fall. Competitive environment The major competitors for Keurig Green Mountains Inc. are Starbucks Corporation, Nestle S.A., Dunkin’s Brands Group Inc., Pete’s Coffee and Tea Inc. and International Coffee and Tea Inc. Starbucks is the number one coffee retailer in the world and gives tough competition to Keurig Green Mountains in the specialty coffee segment. The home brewing system of Nestle S.A. known as Nespresso is a tough competitor for the brewery systems of Keurig Green Mountains Inc. Peet’s Coffee and Tea Inc. markets and sells coffee and brewing machines through famous retail chains like Whole Foods and Safeway (Forbes Magazine, 2014). The coffee products and coffee brewing machines manufactured and sold by Peet’s create much competition for the products of Keurig Green Mountains Inc. Non-price competitive strategies The company has started using different competitive strategies aimed at improving the visibility of the business and increasing the sales and customers base. Keurig focuses in building brand awareness through word of mouth publicity. The company has introduced the free trial activities for their products. The company has started implementing strategies like online advertising in order to capitalize on the boom of internet marketing. Keurig has built on robust e commerce functionalities for the business by partnering with popular e commerce websites like EBay and Amazon. This has helped to improve the brand awareness by creating more visibility for Keurig ion the internet and has also increased the sales of the products of Keurig. In the current market, people from all across the world prefer to buy online. Therefore, the sales of Keurig products have been highly boosted by their collaboration with the electronic commerce sites. Keurig has also planned to enter into partnerships and collaborations with the retail grocery chains in order to sell their products in popular retail stores. Company decision-making The decision making process in Keurig follows a top down approach. The company focuses on making use of the inherent powers in the business for making the world a better place to live in. The culture and business performance of the company is strongly guided by sustainability practices. The decision making process of the company is based on the comprehensive and robust strategic planning called ‘Brewing a Bold Vision’. The management system and strong governance of Keurig Green Mountain is based on high integrity and ethical practices. The company ensures that the management is responsible towards the society, community and environment in which they operate and is accountable for the way they conduct their business. The accountability and farsightedness in the business starts from the Board of Directors of the company. The Board of Directors includes eleven members of which ten are independent members. . The accountability factors and decision making are followed from the top level of management to the basic level of employees. The managerial aspects of the company are guided by the corporate governance policies and principles (Shaphira, 2002). The whole managerial and decision making system is reliant on four committees including audit and finance committee, organization development and compensation committee, sustainability committee and nominating and governance committee. The major objectives followed in the managerial system of Keurig are achieving operational excellence, developing culture and talent and earning sustained growth by ensuring continuous innovation, delight of the customers and advocacy for the business. The business has also implemented a strategy realignment process in order to bring the major brands together and consolidate the various business units under the corporation. The strategy realignment was devised to improve communication, teamwork, goal achievement, competitiveness and most importantly, customer satisfaction. Governance Model of Keurig Green Mountain (Source: Keurig Green Mountain Corporate Website, 2013) Conclusions Keurig has huge potential for expanding and strengthening the business. The expansion of the business in the emerging markets, collaborating with hotels and companies and expanding the supplier base are some major opportunities for the company. Keurig should focus on maintaining product differentiation, responding adequately to the changing consumer preferences, creating a stronger brand identity, marinating its patents and ensure customer loyalty to make the business sustainable in future. The company seems capable to expand and grow the business due to major internal capabilities like expertise in designing of brewery products, having a wide variety of products under the product offerings, high investment in research and development and innovation and a strong base of loyal customers. Keurig should focus on improving the supplier and distributors base, on competing effectively with the other major players in the market and tap in the evolving trends of electronic commerce by increasing their selling activities on the internet through partnering e-commerce websites as well as the corporate website for the business. Keurig should therefore, focus on strengthening the business in the two major consumer areas for beverages which are the Office Coffees Systems and the home consumption and on entering new market areas like brewing machines for hotels etc. in order to expand their business and increase their competitiveness. References Douglas, E. J. (2012). Managerial economics. San Diego: Bridge point Education. Forbes Magazine. (2014). Green Mountains Upcoming Brewers Face Competition from Bevyz. Retrieved from: http://www.forbes.com/sites/greatspeculations/2014/03/24/green-mountains-upcoming-brewers-face-competition-from-bevyz/. Keurig Green Mountain Corporate Website. (2013). Our Strategy. Retrieved from: http://www.keuriggreenmountain.com/en/Sustainability/SustainabilityReport/OurStrategy.aspx. Shaphira, Z. (2002). Organizational Decision making. Cambridge: Cambridge University Press. Read More