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Can you do part II.Industry Environment  and part VI


Strategic Alternative Implementation/Action Plan

MBA 634 Strategic Management
Format for Written Case Analysis
(20 pages maximum)
General Environment (3 pages; outline format)
Since its inception Keurig has built a core competency around technology. In 2003
it launched its first home brew model, the B100 single cup brewer. Simultaneously, 3 other
brands launched their single cup brewers. All four brands attempted to differentiate
themselves through technology. For instance Keurig and proprietary portion packages to
house their coffee grounds, while Flavia used 44 mm pods. These subtle changes along with
other factors played a vital role in the shaping of the budding industry. Immediate feedback
for the industry was that customers enjoyed being able to make a single cup of coffee
without the hassle of scooping messy grounds and fiddling with filters. In less than 2
minutes they were able to have a quality cup of coffee with no mess.
Demographic Trends
Technology alone was not going to secure Keurig’s place as an industry leader. In order to
gain above average returns they would have to learn their demographic and uncover trends
in the external environment.
Economic Trends
During the 2003-2010 period the economy saw rapid expansion as well a historic recession.
CNN Money noted that in 2003 GDP in the U.S. grew at 5% percent YoY. During the same
period U.S. consumer spending saw a 6.6% growth, the fastest pace since 1997 up until that
point. It should also be noted that during this period imports only grew 1bps, while exports
soared to over 9%. Talk about timing.
But it wasn’t all rainbows and unicorns. The 2007-2009 recession was one of the worst
recession in U.S. history this side of WWII. As you undoubtedly know, the recession was
triggered by the housing and financial markets crash. The Great Recession lasted December
2007 through 2009. During this period the unemployment rate rose to a staggering 9.1%.
To make things worse, average household income dipped from just over $70,000 in 2007 to
$65,000 by 2010.
During the time period being discussed there were a slew of political/ legal changes. We
start our discussion with the 2003 tax relief bill. In 2003, President Bush signed the jobs and
growth tax relief bill. The bill reduced the top tax rate on dividends and capital gains to
15% which would spur corporate growth. The bill also increased the child tax credit and
quadrupled the small business expense limits from $25,00 to $100,000.
Also notable was the change in presidency from George Bush to Barack Obama in 2008.
One of the first acts of Obama’s presidency was the Bail Out. In 2008 congress enacted the
Emergency Economic Stabilization Act. The act allowed the U.S. department of treasury to
buy up to $700 billion in bad assets from companies, effectively bailing them out.
Simultaneously during this time Fannie and Freddie Mac, two mission based government
sponsored agencies, held obligations of $1.2 trillion in bonds and $3.7 trillion in mortgagebacked securities. In order to keep Fannie and Freddie afloat the Treasury department
provided $119.8 billion to Fannie and $71.7 billion to Freddie Mac in exchange for preferred
When looking at sociocultural trends during the time, at home single serve coffee was an
immediate success. One could certainly make the case that it was a fast cycle industry in its
early stages. Initial feedback from consumers found that one of the demand markers was
the varieties of coffees offered. Keurig differentiated itself by entering into licensing
agreements with existing brands to build up their customer base. This also allowed them to
offer a much wider variety of coffees compared to their rivals. Of Course the major risk
here was the risk of these partnering brands becoming vertically integrated. But, this was a
risk that Keurig prepared for and traded the profit margins that would come from
controlling the entire supply chain for market share in the brewer itself. The Keurig brand
quickly established itself as an industry leader and came to be interwoven into modern
A look at the global marketplace also provided a wealth of knowledge to the executives at
Keurig. The case points out that Nestle, a heavy weight conglomerate in their own right,
owned roughly 40% of the market share in Europe. Their single serve product was an even
earlier entrant than Keurig and was introduced in 1986. However, as the case points out,
they didn’t experience rapid growth until the mid 90’s.

Two Recessions, Two Recoveries

Industry Environment (3 pages; outline format)
Industry Definition
Dominant Economic Characteristics
Five Forces of Competition
Forces of Change
Key Survival Factors
Industry Attractiveness
Competitor Environment (2 pages; identify top two; outline format)
Competitor #1

Tassimo Hot beverage System
Future Objectives

Current Strategies

The Tassimo Hot Beverage System looked to play directly into the experienced
coffee drinker. Their cutting edge technology on their first product included the
proprietary T-Disc portion pack which included a barcode that would relay the
appropriate information directly to the machine. This would increase the quality of
each individual beverage and ensure that each variety of coffee was brewed
appropriately by the machine. In addition to the proprietary portion packs, the
Tassimo Hot Beverage System offered several options in addition to just coffee,
including cappuccino, espresso, cafe crema, tea, and hot chocolate for a total of
about 15 varieties. Given that many of the first generation at home single serve
brewers did not offer many options at all, Kraft was looking to separate itself from
the pack to appeal to more and more at home brewing customers. Due to a
revamped business plan and a long term relationship with Starbucks, Braun and
Kraft partnered with Starbucks to release a whole new line up of single serve
variety options that would increase their total beverage options to over 60
worldwide. Kraft and Braun believed that increasing options for the consumer and
enhancing the product output to offer a premium beverage experience would propel
growth into the future.
The Tassimo hot beverage system was a single serve coffee maker and strong
competitor to the Keurig products that launched in the USA in 2005. The Tassimo
hot beverage system was a product birthed out of a partnership between Kraft and
Braun. The partnership between Braun and Kraft made sense to introduce into the
marketplace due to the strong line up of coffee brands that Kraft had in their
portfolio, these brands include Gevalia, Maxwell House, and Twinings Tea. With
the monster financial backing of the Kraft and Braun brands, the marketing push
for the Tassimo hot beverage system cost roughly $75 million dollars and landed it a
spot as a feature in an episode of “The Apprentice, Martha Stewart”.

The biggest assumption that the Kraft and Braun team had was that the consumer
would want the at-home brewing machine to be able to handle many different kinds
of products. This included the ability for the machine to handle brewing functions
such as espresso and cappuccino. This required the Tassimo Hot Beverage System
Machines to be equipped to handle many different brewing functionalities.

Kraft and Braun together formed a well backed team both operationally and
financially. Together with the Starbucks partnership Kraft brought to the table a
brand of products that have been staples in people’s homes for many decades. The
partnerships with the outside brands as well as the internal brand capabilities
would enable supply chain synergies from manufacturing the product to securing
premium product and pricing for retail distribution.
Competitor # 2

Bunn My Cafe
Future Objectives

Current Strategies

The Bunn My Cafe came on the market in 2004 and officially entered the at-home
single serve market category. Bunn was not a new player in at home coffee by any
means, in fact Bunn was a staple in coffee brewing having been around since the late
1950’s. Bunn hoped their brand recognition and customer base would support their
move into the single serve market and continue trusting the brand for their coffee
needs. The Bunn My Cafe offered a patented jet action sprayhead which the
company believed would help in releasing flavor and aroma. The Bunn product was
not cheap, entering the market at almost $200 Bunn was targeting a consumer who
valued a premium at-home coffee experience.

The Bunn team saw the market opportunity in creating a machine that could handle
all different types and sizes of pods available to the consumer. To date, much of the
at-home single serve competition was making machines that tailored to their own
line of products, this enables certain brands to tout their own lines of coffee and
product multiple revenue streams. Bunn, with no real tie to a coffee brand created a
machine that could handle a range of coffee pod sizes which unleashed much more
variety for its consumers than did other brands.
The Bunn team assumed that the consumer would value the ability to have
seemingly endless options over machine functionality and quality of brew. In the
end this could have been what really hurt them when compared with companies that
spent more time crafting coffee designed specifically for each machine. The Bunn
team also assumed consumers would not mind pouring in the designated amount of
water with each cup they brewed.

The Bunn capabilities were large but their sales did not match their coffee expertise.
Bunn lagged behind the competitors in both dollar volume and number of units and
ultimately their product for at home brewers did not prevail. At the end of the day
their commitment to the “pour over” method of brewing and casting a wide net in
terms of variety could have been significant influencing factors in their success in athome brewing.
Internal Organization (4 pages; outline format)
Core Competencies
Value Chain
Strategic Vision
Strategic Mission
h. Key Result Areas
SWOT Summary (2 pages; list)
Synthesis (6 pages; written format)
Strategy Formulation/Strategic Alternatives (pick two)
Alternative Evaluations/Alternative Choice
Strategic Alternative Implementation/Action Plan
*The written case analysis will be accomplished by selected teams of students. The cases will be assigned from the
course textbook.
**Refer to the text (Part 4: Cases; Preparing an Effective Case Analysis) for guidance in preparing the written
case analysis.

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