SWOT ANALYSIS - Analysing the ECCO Case

SWOT analysis (strengths, weaknesses, opportunities, and threats analysis) is a framework for identifying and analyzing the internal and external factors that can have an impact on making a strategic decision for a firm. 

As its name states, a SWOT analysis examines four elements:

·         Strengths - internal attributes and resources that support a successful outcome.

·         Weaknesses - internal attributes resources that work against a successful outcome.

·         Opportunities - external factors the project can capitalize on or use to its advantage.

·         Threats - external factors that could jeopardize the project.

SWOT Analysis is done in order to exploit the Opportunities and neutralize the Threats with the help of Strengths.

Once the SWOT factors are identified, decision makers are able to ascertain if the project or goal is worth pursuing and what is required to make it successful. Often expressed in a two-by-two matrix, the analysis aims to help an organization match its resources to the competitive environment in which it operates.

SWOT Analysis for ECCO A/S:

Strengths ·         In-house Manufacturing ·         Vertically Integrated System ·         Centralized operation ·         Strategic Collaborations ·         Customized Products ·         Technology ·         Global Reach ·         Cow-Shoe Strategy ·         R&D and focus on Quality	Weakness ·         No promotions ·         Risk averse ·         Family Business- not answerable to anyone ·         Labor union issues- various operations in different parts of the world
Opportunities ·         Vast potential for Manufacturing in China Market ·         High Demand for customized shoes e.g. Golf shoes ·         Demand for new designs ·         Rigid Production Facilities ·         Being a family business, they can experiment more ·         They can exploit green revolution in shoes	Threats ·         Low brand loyalty ·         Intellectual property loss ·         Strong competitors ·         Cheap substitutes for leather can be threatening to brand ·         Slowdown in European markets affects profitability ·         Global operations, more foreign employees, leads to culture issues

 Contributed By:

Aparna Trivedi

Section A

Strategic Management

Class of 2013-15

Porter’s five forces analysis of the Metal Can Industry - A deeper understanding of the case of Crown Cork and Seal!

Threat of New Entrants

·         Initial investment required to be at least $20 million dollars, thus capital cost small relative to the size of the metal industry
·         There was a low product design cost
·         Efficient low cost plant was able to capture the industry
·         More than 100 local firms entered the industry

Threat of Substitutes

·         Many substitutes available for the metal containers (especially glass, plastic, fibre foils)
·         Limited prices and long term demand as new innovations (tetra packs, paper juice cartons) emerged.
·         The threat of substitutes grew from 9% to nearly 15% in late 1980s.

Bargaining power of Suppliers

·         Majorly dominated by three largest Aluminum Suppliers
·         Reynolds did a forward integration
·         Large breweries, soft drink giants, general food companies all buy in large volumes, setting the price and demanding quality and delivery.
·         Minor switching cost involved, thus can be backward integrated into manufacturing their own cans.

Bargaining power of Buyers

·         Many of the buyers are large, powerful companies – Coke, Pepsi etc.
·         Cans are bought in large volumes –almost a commodity
·         Buyers admonished poor quality by cutting order size
·         Some buyers show credible threat of backwards integration into container making, knowledge diffusion (both technical and commercial)
·         No brand identity
·         Can equalled about 45% of cost of soda, all savings in can costs go straight to profit – Buyer industries tend to be competitive

Intensity of Rivalry

·         Limited players
·         Market shares: American National 25%, Continental 18%, Reynolds 7%, Crown & Seal 7% and Ball Corp 4%
·         This is basically a low‐growth, moderately capital intensive, somewhat cyclical, commodity product industry.
·         Capital costs relative to variable costs mean you have to get high volume / market share which puts pressure on prices.

In conclusion:
This is not an attractive industry (as evidenced by the diversification of some of the major players).

Contributed By:

Bitan Banerjee
Section A
Strategic Management
Class of 2013-15

 

 

Should William J. Avery continue with the traditional strategy being followed at Crown? why? why not? - An insight into the Crown Cork and Seal Case!

Avery, the new CEO of Crown Cork & Seal had been the president of the company since 1981. While he was the President, he had spent his duration of his career in Connelly’s shadow. It was Connelly who structured the company to be successful by framing effective strategies like cost efficiency, quality and customer service.

The Crown’s traditional strategy focused on tin cans and crowns.  They also decided to be the second player in the market as research and development was not their strength and preferred to learn from other firm’s mistakes. Now, Avery has to decide whether to continue their traditional strategy of manufacturing metal cans or expand Crown’s product line to plastics since it is seen as a growth segment for containers since Crown’s rivals are merging or expanding their product lines. If Crown continues to manufacture metal cans, the growth of the company will diminish since there is little growth potential for metal cans. Moreover, low profit margins, rising material and labor cost makes diversification and consolidation crucial. Also the metal can industry is highly commoditized and leaves no scope for innovation in order to have a sustained growth in the industry.

Avery should continue with the traditional strategy in order to maintain their existing client base. Moreover, there is no surety of success in the new product line since there is tough competition in the market. If he decides to continue with the traditional strategy ignoring the opportunities of diversification and merger then Crown will continue to grow at a declining rate which will lead to the company’s extinction.

So, Avery can continue with the traditional strategy of manufacturing metal cans along with diversifying its product line to plastics or glass or merging with Continental Can or integrate itself with Pepsi or Coca Cola Company for its continuous existence in the market.

Contributed By:
Anjana Vishwanathan
Strategic Management
Class of 2013-15

If they had a chance to be the industry leader, what would have been Crown's strategy? - An insight into the Crown Cork and Seal Case!

Crown’s Strategy to be the industry leader could be to focus on its core competencies and adopt expansion policies in order to expand its operations and also diversify into new product lines. It should focus on customer needs and cater to them as quickly as possible. Sales forecasting will help the firm in responding quickly to the customer demands. It should also aim at taking quality control measures and perform R&D to increase efficiency in its operations. It should commit itself to building a strong leadership in the organisation as top management support is necessary in order to adopt long term strategies for growth and profitability. It should also plan to enter global markets. It could also enter into partnership with firms like coca cola and diversify into new sectors like the plastic industry.

 Contributed By:

Aashima Grover

Strategic Management

Class of 2013-15

Crown Cork and Seal Company - An Industry Analysis

Industry type - Packaging industry.

In order to make any strategic decision it is important that we first analyze the external and the internal environment of any firm. This gives us a direction to the decision which we have to make.

Thus in order to come to a conclusion a path needs to be followed which includes identifying the problem in the case, strategic analysis of the company which helps you solve the identified problem and also looking for any feasible alternative solution.

1) Problems – Newly appointed CEO, threats from changing environment, Expensive Metal, unwillingness to take risk.

2) Solution for any problem -- we externally analyze the company, which refers to industry analysis. This is done using the PORTER’S FIVE FORCES which analyses any industry on five factors

Porter’s 5 forces :

1) Barriers to Entry - Things that affect are Capital Requirements, Product Differentiation, access to distribution Channel, Switching Cost, Government subsidies. No effects.

2) Substitutes - By entering plastic and glass container industry, crown is getting a step ahead to "acquire" the substitutes. As business volume and demand increased, plastic were introduced. Also metals are expensive than plastic. This lesson the threats.

3) Bargaining power of Sellers - Suppliers have many customers (in other industries).There are fewer substitutes for that input (e.g. Oil vs Glass/Plastic).It is costly to switch suppliers (product differentiation between suppliers).The input is more important for buyers. The supplier is able to forward-integrate.

4) Bargaining power of Buyers - Buyer pose a threat of backward integration. Buyers (soft drink manufacturers) were not likely to do in-house bottling than metal canning. Lessen the threat.

5) Intensity of Rivalries – High competition. Competition depends on pricing, manufacturing, distribution, geography, etc. American National Can toped this industry.

This helps us understand the external conditions of the industry.

Contributed By:

Anjali Ojha

Section A

Strategic Management

Class of 2013-15

Who is the major part of the value chain in Coca-wars case? Why? - An insight into the cola wars case!

A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. Value chain for the Cola industry is largely producer dominated which gives them paramount importance.

The role of concentrate producers of the Carbonated Soft Drinks is discussed below.

Concentrate Producers: These producers would blend the raw material ingredients, package it in plastic canisters and ship it to the bottler. Their major costs would be for advertising, promotion, market research and bottler relations. They invest heavily in their trademarks over time, with innovative and sophisticated marketing campaigns. They negotiate with the bottler’s major suppliers to encourage reliable supply, faster delivery and lower prices.

The powers of input suppliers which supply the main ingredients in cola concentrate are weak. The bargaining position of the concentrate producer is extremely strong since most of the inputs required to manufacture concentrate is relatively easy to purchase and the concentrate industry has abundant suppliers to offer the inputs. The producers are the price – takers here, as they dictate the prices to which the bottlers should succumb and the decision regarding what items the bottlers can bottle and distribute is also taken by the producer. Between the cola concentrate producers and the bottlers, the bottlers have little to no option in switching concentrate because of contractual agreements. Therefore, this makes the threat of substituting concentrate producers impossible. Entering this industry would be extremely difficult because of the high cost of marketing the new product, creating a brand image, getting slotting place etc. High competition between the industry leaders brings benefit to the customers in terms of quality, taste and economical prices.

Contributed By:
R. Sandhya
Section A
Strategic Management
Class of 2013-15 

Why are the bottlers at the mercy of concentrate producers - An insight into the cola wars case!

Carbonated Soft Drinks (CSD) was preferred to any other beverage in America. The consumption grew from 23 gallons in 1970 to 53 gallons in 2000(growing at a rate of 3% every year).Although many substitutes existed in the market, Americans preferred CSD’s to any other beverage.
CSD typically consisted of a flavour base and artificial sweetener provided by Concentrate Producers, carbonated water and sugar syrup added by the bottlers. Retail channels and suppliers were also part of production and distribution activities.

The Concentrate Providers had a secret formula each for Pepsi and Coke (CSD). The concentrate produced by them served as an input for bottlers who added carbonated water and sugar syrup into the final product. Thus, the bottlers are dependent on the Concentrate producers to complete their drink.

Since CSD is the most preferred beverage, bottlers have no choice but to cater to concentrate producers’ needs, else they would lose out on their clients (the concentrate producers for CSD).This would increase their costs (because of loss in business) especially their fixed costs.

Bottling is capital Intensive unlike Concentrate Production. They cannot afford to displease the concentrate producers who provide them business. Apart from the concentrate that was obtained from the concentrate producers, bottlers needed other raw materials like carbonated water and sugar. It is the concentrate producers who negotiate with the suppliers of these raw materials to encourage reliable supply, faster delivery and lower prices. This played a major role in increasing the revenues of the bottlers.

Moreover, concentrate producers are actively involved in product planning, market research and advertising. This helps in estimation of demand for existing product and possible creation of demand, which meant more business for CSD manufacturers including bottlers.
Bottlers for CSD were the major clients for either Pepsi or Coke. They followed a franchised bottling network system. Coca Cola and Pepsi priced their concentrates (an input for the bottlers) almost equal. Thus any change in the prices would affect the cost structure of the bottlers and hence their profits.

The concentrate producers have an option of forward integration; they can foray into bottling business as well. Thus in order to keep themselves up and running, bottlers had to work in line with the concentrate producers’ demands.

Based on the above mentioned facts, we can conclude that the bottlers were at the mercy of concentrate producers so as to maintain their business.

Contributed By:

Aparna Shankar

How and on what basis do carbonated soft drink producers differentiate themselves from their competitors? - An insight into the cola wars case!

Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the willingness of customers to pay for the products or services they sell. They do this by altering the objective properties of those products or services they sell each and every day. However, product differentiation is not a strategy in the case if the carbonated soft drink, as it is very difficult to differentiate the core product in context. For example, when blind tests were being conducted for the two brands, consumers could not make out the difference between the two products. The carbonated soft drink producers have competed across every possible means of distribution such as food stores, fountain outlets, vending machines, convenience stores and other outlets such as the mass merchandisers, warehouse clubs, drug stores etc. to emerge as the market leaders.

Another strategy adopted by the two carbonated soft drink producers was to move away from their single product strategy (selling only their flagship brands) and experimenting with new cola and non-cola flavours and offering a variety of packaging options.  Such as Coke introduced Fanta, Sprite and Diet Coke, purchased minute maid and Duncan foods, whereas, Pepsi introduced Mountain dew, Teem, Diet Pepsi and acquired Tropicana.

Moreover, these differentiate from each other by means such as different promotional & advertising strategies or collaboration with fast food restaurant outlets which would in turn help them build brand loyalty. For example, Coke dominates the McDonalds fast food restaurants, whereas Pepsi co products dominate KFC.

 

Contributed By:

Sindhura Akella

Section A

Strategic Management

Class of 2013-15

 

What is Strategy?

The term Strategy was introduced into the business paradigm after 1960. Primarily it dealt with military strategy only. The four decades initiating from 1960 marked a distinctive evolution of “strategy” across the globe. It all started with the Sloan School of Thought affirming the philosophy of profit maximization, Alfred Chandler’s perspective of organization structure and Ansoff’s planning framework. The 1970s and early 1980s experienced two major oil shocks and de-industrialization in major economies, making the future look too bleak. However, in this decade the Boston Consulting Group (BCG) lead the way with strategic optimism with a notion to shape the future at times of crisis. Michael Porter during the 80s opined on external environment of a business, but the major failures in businesses during this period led to the perusal of the internal environment of a business in the 1990s and the resource based views of competitive advantages became omnipresent. The period after Y2K dealt with chaos approach that outlined a strategic and holistic approach to crisis management.

Strategy is being circumscribed by two boundary marks: What to do? & What not to do? The strategy formulation is based on Where do we compete? & How do we compete? Finally the mode of How do we execute form the fundamental questions in strategy.

Talking about strategy leads to market opportunities. Some principles of market opportunity are:

·         It is the opportunity for any particular firm, but not for others

·         It is not a differentiator

·         Newly identified need or a demand trend that can be exploited by a firm

·         Not always dealing with competitors and the market competition

It can happen sometimes that one individual wants to revive a dead opportunity. To excel in this scenario one must focus on turning the non-buyers to buyers or identify the segment of citizenry who are willing to pay. However, thinking about an opportunity should not be linked with the constraints that can arise while creating the opportunity. Here one might inject in the concept of resource, which is nothing but the constraint based on market opportunity.

In conclusion, Strategy can be defined by the following loop:

Market Opportunity -----> Resources -----> Execution (Role)

Contributed By:
Bitan Banerjee

Section A
Strategic Management
Class of 2013-15

 

 

The Cola Wars Continue: Coke and Pepsi in the Twenty First Century - Industry Analysis

Market structure (Industry): Duopoly

Purpose: Beverages (Carbonated soft drinks)

Problems:

·         Flattening .falling Domestic sales

·         Revenue streams

·         External Environment (competition)

Competition: Milk, Coffee, Bottled water, Juices, Tea, Powdered drinks, Sports Drinks

To understand the problem in an industry, we first need to understand the value chain of this industry, which is as given below:

Concentrate producersàBottlersàRetail ChannelsàSuppliers (Restaurant, Offices, Fountain-machines)àConsumers

We then use The Porter's Five Forces tool for understanding where power lies in this value chain in the industry.Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. They are:

1.      Barrier to entries

2.      Substitutes

3.      Bargaining power of buyer

4.      Bargaining power  of suppliers

5.      Rivalry

We will now analyze each element in the value chain of this industry through Porters Five Forces.

With respect to Concentrated producers(CP):

1.      Barriers to entry: Very high, as these players are deeply rooted, difficult to start a new cola company and high on investment.

2.      Substitutes: Substitutability in terms of economics and use is almost perfect.

3.      Bargaining Power of supplier: Very high, as they are the producers of major ingredients , directly deals with Bottlers and control the supply chain. They also carry out major chunk of advertising , promotion and market research

4.      Bargaining power of buyer: Low because Tied closely to CP’s, Consolidation of bottlers.

5.      Rivalry: Low as there is no scope for REAL differentiation. Only Fancy/apparent differentiation happens.

With respect to Bottlers:

1.      Barriers to entry: High, as high investment is involved(specialized plants for specific CP, Major CP being COKE), only few independent bottlers left.

2.      Substitutes: Moderate, Direct concentrate delivery, fountain sales don’t influence bottlers sales

3.      Bargaining Power of supplier: Low, as the bottlers are geographically scattered and pressure from CP’s forced them to cater only to the respective surrounding

4.      Bargaining power of buyer: Low as Coke bound them with long term contracts and gave better technology, which didn’t allow bottlers to cater to competition

5.      Rivalry: Among bottlers competition was high.

Contributed by:

Ayushi Thakur

Section A

Strategic Management

Class of 2013-15