* Bargaining Power of suppliers – Medium The switching cost to find other suppliers of commodities to produce beverage is not high, and those suppliers are not concentrated or differentiated. However, the recession significantly increased commodity prices, and DPS has very little power in affecting the prices they pay for these commodities. * Bargaining Power of buyers – Medium Individual buyers do not put high pressure on DPS, but large buyers like Wal-Mart or Targets have greater buyer powers because of the large order quantity. * Rivalry Threat – High
The beverage manufacturing and bottling industry is highly competitive, major competitors including the Coca-Cola, Pepsi. DPS and its competitors all offer products in every major nonalcoholic beverage category that directly compete with one another. * Potential Entrants – Low Brand recognition is incredibly important for the beverage industry, which set up a high entry barrier for new entrants. Large companies including DPS have very high operational efficiency, and it’s hard for new entrants to compete in this industry. * Substitute Products – High The threat of substitutes is high.
Due to the recession, consumers turned from flavored drinks and colas to less expensive alternatives, like water. An increased concern about health and wellness resulted in the increased sale of products richer in vitamins. Current Business and Strategies DPS is composed of more than 40 different businesses to make up a unified and independent organization, manufacturing soft drink concentrates and finished beverages. The company management has established six specific strategies to compete in the market: * Build and enhance leading brands. * Focus on opportunities in high-growth and high-margin categories. Increase presence in high-margin channels and packages.
* Leverage the firm’s integrated business model. * Strengthen the firm’s distribution channels through acquisitions. * Improve operating efficiency. Financial Results Challenges A Recommendations * Differentiate into the premium market with much healthier drinks to meet the increasing needs for such kinds of products. There is a higher margin in this market because people are willing to pay more and receive a better, healthier product. * Due to the growing Hispanic and African American markets, targeting those consumers can be a potential market.
DPS should consider changing from decreasing market to the new one. * Reference * Jack Roeder, “Dr Pepper Snapple Group, Inc. ” Jun, 2011. < http://uoinvestmentgroup. org/wp-content/uploads/2011/05/DPS-Update-Report-FINAL. pdf> * “Porter’s Five Forces In Action: Sample Analysis of Coca-Cola” < http://valuationacademy. com/porters-five-forces-in-action-sample-analysis-of-coca-cola/> * “DR Pepper Snapple 2012 Corporate Sustainability Report” <http://www. dpsgsustainability. com/page/overview> * Joseph S. Harrison, “Dr Pepper Snapple Group 2011: Fighting to Prosper In a Highly Competitive Market” University of Richmond, 2011. *