Case Analysis for KeurigKeurig overview

Keurig is a renowned company which operated in the coffee machine which operated mostly as a privately owned company between 2002 and 2011. The company started its operations with only $20.00 million revenue but later expanded with operation cost between $8.00 and $9.00 billion. The expansion of the company was due to its adoption innovative strategy. By the year 2003, the company had captured all the markets and customers in the United States (U.S) to the extent that all the products would be Keurig-branded. However, at the point of entrance in the market, the company also faced challenges. Nonetheless, it's patenting the technology, and positive environmental impacts facilitated the growth of the company.

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Problem statement

In 2003, Keurig had to introduce B100 brewing system for use in At home market. The introduction of the B100 system was in the process of conducting an evaluation for both 'one-cup system' and a 'two-cup system' and determining the best strategies appropriate for either case. As a young company in the coffee brewing sector, Keurig faced a challenge of getting into the market, but after the entrance, it also faced the challenge of maintaining a strong position in the market as the leading brewer. The fact that Keurig later became the leading company for brewing was not by chance but due to its innovative technology. The innovative technology made the products of Keurig became the leading brands in the entire U.S. Therefore, Keurig has to answer the following questions for the smooth introduction of the B100 model and for the determination of the correct strategy to gain entrance into the market and the same time maintain marketplace leadership.

What is the management strategy that will help Keurig maintain marketplace leadership?

What is the best pricing for Keurig in the market?

What were Keurig's U.S market entrance strategies and maintain marketplace leadership?

Case Analysis

Management team

Keurig has a well-established team operating in a hierarchy. The strong senior management team would be essential in ensuring that there is proper leadership. In a study, Abbas & Asghar (2010) found that leadership competence is vital for sustainable management of resources. Besides, there is prudent management of resources. Additionally, a strong management team keeps the rest of the team members motivated as well as flexible for proper management of an organization. For Keurig, there is senior management team which consists of a president and vice president (Exhibit 1).

Pricing Strategy

Customers' intimacy to a company and its products depends on the pricing strategy. It has been established that a rise in prices of products about the competitors' prices makes sales plummet and subsequently leading to the company's reduced contact with the customers. According to West, Kujawski & Schmitt (2016), pricing of the products is one of the essential decisions undertaken by a company in marketing to increase sales or cause a reduction in the demand of the products in a faster manner. Therefore, it is expected that the products of Keurig would match other retail' price points which often vary and offer the best attractive features. The finally brewing product must be categorized into multiple segments for the improvement of the cost structure. While deciding on the best pricing range the sales are taken into large consideration, it is equally important to design a price which would lead to more profits. For example, Keurig designed the B50 at a price of around $149.00. The suggested retail price of the brewer was $169.99, and this shows that the only way to maintain being ahead of others in the market is through capping the price at 169.99 with a maximum limit of $0.5. Therefore, in this case, the best for Keurig would be $169.99 and $170.49 at maximum to get profit as any value below would lead to losses and a value higher would lead to migration of customers to the cheaper retails.

Positioning statement

A positioning statement is essential as a driving force among the customers and the use of such statements make customers get attracted to the new products as well as the old products.

Product

It has been established even from the past brewing that Keurig's products have come unbeatable and are fully convenience to customers. They are fresh, deliciously simple; great taste used easily and quick to brew. Also, brewing requires minimal cleanup and ease of use. The best features of the products contributed to a lot of customers' love for the product and thus leading to easy retention in the market. Moreover, customers are allowed to choose the brand which meets their taste. Customers are free to choose a coffee brand which meets their taste preference (Exhibit 4).

Also, increasing the product's awareness in the minds of the customers require advertisement campaigns. The campaign is crucial because it increases its presence in the market. For example, Keurig conducted a $3.00 million advertising campaign in the national televisions coupled with store demonstrations. The resultant effect is that Keurig grew in revenue to $20.00 million. According to Hubbard, Garnett & Lewis (2012), consumers are often influenced by the marketing campaigns and thus enhancing a company's sales. Some of the advertisement platforms such as television make the customers buy the products at any price in the market. Therefore, a television advertising campaign is suitable for increasing the positioning in the market and increasing the Keurig brand in the market.

Marketing Entrance Strategy

As indicated earlier, Keurig's products had penetrated the U'S market to the point that every product would be brand the Keurig machine. Keurig used partnership strategy to enter the U.S market. In this strategy, business partners with a company in a foreign country to invest help in the investment of the business. The partners can either be individual companies or the hosting countries. In the case study, Kraft partnered with a company known as Braun, and this helped it introduce a beverage system called Tassimo Hot in the U.S in 2005. Braun was Kraft's competitor. According to Dev, Brown & Zhou (2007), the only way to reduce the risks in the market as a result of the internationalization of a brand is to permit the local operators through partnership to charge. Most of the partners include competitors in the same market. The benefit of using competitors to expand into other markets is because they already have expanded customers. Finally, Keurig can also use retail partnership to expand its presence. For example, by December 2010, there were around 14,400 retails in various markets and thus partnering with them would increase Keurig's presence greatly (Exhibit 7).

SWOT Analysis

The SWOT analysis of Keurig machine has more weight for the comprehensive understanding of the two-cup and one-cup approaches. For Keurig, there are strengths, weaknesses, opportunities, and threats which either support or lower the performance of Keurig in the market. A SWOT analysis can be categorized into external or internal factors.

The strengths and opportunities form the internal factors. The first strength is the fact that the pricing of the Keurig-Cup is controlled. As noted earlier, Keurig has proper management and this makes the managers have enough room for participation and promotion of the new brewing system known as an at-home system.

There are also a lot of opportunities present for the Keurig machine. One of the opportunities is the existing market in other countries. There is the growth of the OCS market, and also there are available resources for the expansion of the at-home market. The fact is that Keurig's competitors' failures are an opportunity as well. For example, Bunn My Cafe introduced a brand new brewer in December 2010 which could not function well and therefore; such incidences become the opportunity of Keurig to capture.

Keurig's competitors were facing the same challenge. In December 2010 Bunn My Cafe had introduced a new brewer that used pods that could be composted. In Europe, Nespresso had introduced dedicated portion-pack collection points to facilitate capsule recycling, and in 2009 is committed to tripling its recycling capacity by 2013. On the other hand, there are external factors which consist of weaknesses and threats. One of the weaknesses is that the pricing of the Keurig's products might be out of control. In case there is a failure in the decrease of the price value of the brewer, new entrants offering the brewing at a low cost might quickly enter the market.

Conclusion

Reduction of the KAD's strategy for pricing the products remains the biggest concern since low pricing automatically provides a favorable environment for conducting businesses. Effectiveness in gaining entrance into the market and maintaining a strong market based through marketing positioning, producing better products, friendly pricing strategy, and elaborate distribution channels is helping in maintaining marketplace leadership. Optimal pricing of $169.99 for the brewer and K-cups of $0.5 would potentially strengthen Keurig's B100 market leadership.

References

Abbas, W., & Asghar, I. (2010). The role of leadership in organizatinal change: relating the successful organizational change with visionary and innovative leadership.

Dev, C. S., Brown, J. R., & Zhou, K. Z. (2007). Global brand expansion: how to select a market entry strategy. Cornell Hotel and Restaurant Administration Quarterly, 48(1), 13-27.

Hubbard, G., Garnett, A., & Lewis, P. (2012). Essentials of economics. Pearson Higher Education AU.West, S., Kujawski, D., & Schmitt, P. (2016). Service pricing strategies in maintenance services. In Proceedings of the 23rd EurOMA conference.

Appendix

SWOT ANALYSIS

Strengths

-Established brand among customers

-Less confusion of the customers

-Controlled pricing

-Increased customer base in U.S Weaknesses

- Keurig's products might be out of control

-Cannibalization threats

Opportunities

-New markets globally

-Innovation

-Brand equity

-Retail partnerships

Threats

-New entrants with low cost coffee

-Less resources for demonstration

-Possibility of theft

Table 1: SWOT Analysis