We, Tiger Consulting, critically analyzed the available information from Green Mountain Coffee Roaster, Inc. (GMCR) to attempt to determine their strategic direction. First, we closely reviewed their current mission statement which relates to the brewer and the beverage. Through the SWOT analysis, we discovered a lack of diversification and therefore suggest a modification to their current mission. It is our recommendation that GMCR focus on the opportunity to enter into a brand new market. This can be achieved through the use of the already available resources and by establishing an alliance with a spice manufacturer, thereby, offering coffee flavored spices.
In September, the company will be ending its patent and copyrights period with China- based Keurig Coffee Maker on single cups (Kim, 2008). This fallout will significantly affect GMCR since there is a lot that the company gains from the relation. Last year alone, 84% if the total revenue that GMCR got was attributed to the products they obtain from Keurig Coffee Makers. It is therefore important that they have a careful and near-perfect way that they will withdraw their relationship without whisking away their customers or their profits. The geographical distance from China to the US is a cause to worry about and this would hurt the trade between the two companies. Further, there would be dire consequences to GMCR if there was a change in trade policies in China which would affect the company in its quest to increase revenues (Katy, 2008). At the same time, if a catastrophe struck China, there would be many losses to GMCR. It is therefore important that the company would withdraw their relationship with Keurig Coffee Maker to reduce the effects of aforementioned occurrences in case they ever happened.
Before the fallout however, the company should seek for a partner (s) who will be more strategically geographically positioned. This way, the company will be able to reduce the risks of the shortages that would occur if any calamity was experienced in the distant country.
According to GMCR mission statement, “To become a brewer on every counter and a beverage for every occasion”, they desire to hold the largest base of customers to an extent of having their products enjoyed in almost all households.
- Innovative single cup coffee brewing system
- Strong partnerships with other successful companies
- Large variety of choices
- Only one manufacturer of the Keurig single-cup brewers
- 84% of consolidated net sales attributed to Keurig brewers and accessories
- Negative outcome of SEC investigation
- New innovative product line through coffee flavored spices
- New Espresso machine partnered with Lavassa
- Acquisition of 3 licensed roasters
- Competition from coffee competitors
- Variable Inventory levels
- Interruption of manufacturing facilities
The biggest problem is the company overreliance on a single supplier who is situated in China. This is an unsafe situation that could hurt the company if a catastrophe struck the relationship or the supplying company.
The other problem is the volume of revenue that Keurig brewers bring to the company. If the same thing continued, the company strength would be weakened in the market and this would translate into a slump in confidence from its customers and any other interested investor.
Finally, the corporate governance of the company is troubled. Former board members refused to disclose the company agreements to other members of the board. This is a blow to the customer and investor confidence on the administration.
In order to mitigate the effects of the above problems, the company needs to develop several strategies. Some of the strategies would include diversification of their products as well as utilization of the VRIO framework in a bid to evaluate the viability of introduction of coffee spice in the company products. This would be done through a well calculated assessment and survey across the target population.
The question of rarity and inimitability should also be addressed in order to ensure that there is minimal occurrence of copying, thus reduced chances of competition. Further, the implementation of the new coffee spice should be evaluated and well assessed before the actual production is made.
The biggest strategy would be to ensure that there is a new company to deal with. This new company should be located within USA and there should be a new product introduced. Coffee-spice products would be a good idea to work with and GMCR needs to come up wit a partnership that they can use to produce coffee spices with. A highly ranked company is needed to ensure that they will easily brand their products to the population. The best company would be the spice making McCormick.
The biggest problem during the fallout is that the company they intend to partner with, McCormick, does not want to form a strategic alliance with GMCR. GMCR should therefore find another company that they could form an alliance with. They should ensure that they find a company that will give them the best deal as far as there is the best profit realized (Bates, 2005). This way, they will have a good time dealing with their company in terms of profit regulation.
Adams Extract & Spice LLC Company is a good company that they could get into partnership with. It is among the oldest and most continually performing spice industries in the United States. Since the company is situated in Texas, which is not very far away from GMCR, the two companies can easily form a good partnership with regard to the distance travelled during the monitoring process. It is therefore a good match between the two companies to work together in terms of proximity to each other, especially as compared to the China- basedKeurig Coffee Maker. And at the same time the compatibility of the goods that they produce with what GMCR wishes to produce: coffee spice.
The spice line that the company is willing to take to diversify their products is not as profitable as it appears on paper and in imagination. Since the company is willing to produce a brand new product, there is a problem that will occur in marketing of the new products. Coffee in spices might not auger well with the staunch coffee customers and this might impact the products sales negatively. In any case, familiarizing the public with the new product will lead to increased marketing costs which might end up increasing the cost of the new products rather than providing a better way to access them. For instance, the aforementioned free samples might result into increased sales, trying to popularize the new product to new customers who in the first place might not be coffee takers. Therefore, the profits will get lower.
The two companies therefore need to carry out an intensive marketing that will look into diversifying their market to as largest proportion of the population of the public as possible to increase sales, thus cater for the profits. Marketing strategies would include offering free samples to their already existing customers (Singla, 1993). Adams Extract & Spice LLC Company would as well attempt to increase their sales by ensuring that they sell the new product. Therefore, they will as well be involved in marketing of the coffee spice and could be used to offer the free samples to their customers. If this is followed, the new product will reach a bigger population since it will reach out to both Adams Extract & Spice LLC Company and GMCR customers. At the same time, the two companies will be able to determine which of the new brands is more popular than the rest. They might get more suggestions from the customers in order to come up with the best brand both for the customers and themselves.
Once the new brand has been adopted by a large population, the companies can boast of a large catchment of consumers. However, there is still lack of a National Brand recognition which would ultimately reduce its sales. There is therefore supposed to be a way that the company will popularize their products. The two companies should therefore enter into ventures with the major restaurants to ensure that the new products are taken up by the major restaurants. This way, the problem of brand recognition would not be a problem since it will have been accepted by the larger population of consumers and target population. The two companies can as well open up a new restaurant in honor of the new partnership between the two companies, and probably named after one of the coffee spice. If this is done vigorously, the problem of success, profitability and sales of the new products would be reduced.
As the company patent and copyright with the k-cup manufacturers and Keurig Coffee Maker approaches their end in September, GMCR need to have strategies in place to ensure that there is no gap created in the process (Kim, 2008). They therefore need to come up with strategies to ensure that the company performance does not go down in the process. In this case, they need to come up with strategies that will ensure that they do not go down. There is dire need to leave the Chinese company but at the same time an equal importance to ensure that a competent company that will help them get into the market quickly is identified.