Introduction
Operations of modern companies are becoming increasingly complex with the globalization, which brings internationalization of the business, increased information flow and knowledge innovation as well as raises individual consumer awareness about social and environmental issues that surround contemporary businesses. Moreover, the activities of the companies with their global supply chain create stronger connections and interdependencies between the business, political and social environments, fostering the need for cooperation and partnerships on all levels. The purpose of this essay is to look at the Mountain Coffee Roasters Company, analyze the challenges that the organizational management faces today and provide high-level recommendations for the medium and the long-term strategy focus.
Background
Founded in Vermont in 1981 by Robert Stiller, Keurig Green Mountain (KGM), formerly named, Green Mountain Coffee Roasters Company is led by its creator. The company specializes in sourcing, producers and distributes over 400 varieties of coffees, hot teas, and other beverages.Further diversification of the business is based not only on the product type but the customer experience offered through packaging types, such as fractioned packs, green coffee bags, and individual serving pods. The company operates in two geographical business segments, domestic, US market and Canada, delivering the product through different distribution modes, such as retail stores, Business-to-Business (B2B) model, restaurants and hospitality chains. KGM brand image and the long-term strategic differentiation is grounded upon strong Corporate Social Responsibility values, where innovation culture and social responsibility are as important as specific operational and financial goals, such as organic growth through international expansion, expansion of current sales channels, variety of products and development of brand recognition strategy globally (USSEC, 2015). The strategic approach to business has proven to be effective, based on the latest financial indicators. KGM declared a total revenue of 4.7 million in 2014, indicating an 8.5% annual growth. Importantly, the company improved its operating margin relative to the same period by 24%, which outlines the effectiveness of the internal cost strategy and adequate allocation of resources to prioritize more profitable segments (USSEC, 2015).
An insight into the liquidity of the company and its current financial position also demonstrates strong international position, aligned with the growth ambitions. The organization funds its expansion and innovation strategy to the equal split between internal and external financing, while its cash reserves significantly outweigh the outstanding debt and capital lease.
Business Issues
An analysis of the internal and internal and external environments, it is possible to drive conclusions with regards to the main challenges that the organization is facing today and will have to focus on in the middle and the long-term future. Given the size and scale of the company, these challenges are related o reducing the dependence on distribution partners and widening its growth opportunities through product diversification and incremental innovation.
It is evident that the coffee market has a great potential and the growth of sales across different segments in the industry outlines that most of the markets continue on the growth stage. At the same time, the United States market starting to show signs of stagnation, where large organizations depending on domestic sales face more and more challenges in the attempt to maintain the growth pace of the past decade. The first challenge, therefore, delivers continuous innovation. While traditional coffee packs continue as a profitable segment, the organization should seek the ways to maintain growth pattern through an introduction of innovative products. Given the increasing competition and difficulties in creating the product that would transform the market, it is expected that Green Mountain will face further challenges in their innovation strategy (Sadler, 2003).
Given the need for differentiation to support the growth ambitions, the company entered the high-potential single-serving pods market. "Green focus" in sub-segment has brought the significant positive return.To continue expanding the business, Green Mountain started to look at growing to office segment. While the opportunities, presented by the market are very promising, the company can face significant issues in aligning this business model with the CSR values, driving the organization. The challenge for the top and middle management, therefore, is to ensure that the expansion strategy through increasing product variety and distribution channels can support the “green” image of the company (Doole and Lowe, 2008). Taking into account the growing concern of the customers with the environment, the company will have to invest financial and human capital to drive incremental innovation and improve all the attributes of K-Cup brand.
Over the past years, Green Mountain has positioned itself as the brand, which brings innovative experience to the clients. One of the differentials in building customer loyalty and increasing sales is the constant introduction of new products to the market, such as Special Reserve Coffee.While this strategy has proven to be extremely effective and allowed further strengthening of competitive advantage, it will be difficult to maintain the growth pace in the future, especially under the conditions, where core distributors have so high bargaining power (Devenport et al, 2006).
The above three challenges constitute the complexity of the issues that the company will face in the middle and the long-term future and that should be immediately incorporated into the organizational strategy. It is important to mention that the complexity of the strategic approach to dealing with the current issues should also be addressed through comprehensive Human Resource Strategy that will ensure that the company maintains strong internal focus on innovation, but at the same time has complete control over the operations and productivity (Broekhuis and Vos, 2007). Additionally, such strategic options will demand to focus on technology and further investment in this sector. With that in mind, it is critical that the above-outlined issues are dealt with, taking into account the need to find a healthy balance between the allocation of investment resources and human capital and the relevance of the innovation. In other words, Green Mountain should enhance its strategy with risk management plan, which will ensure internal alignment of organizational culture with operational goals and will create and measurable evaluation tool to identify the optimal level of investment in knowledge and system innovation (Mullerat and Brennan, 2011). This multifaceted approach will ensure that Green Mountain has strong commercial focus and sustainable competitive advantage to address the external threats and build on barriers for competition as well as improve the company’s bargaining position with its downstream partners, such as supermarket and restaurant chains.
Conclusion
The analysis of the KGM illustrates the company has a strong internal expertise, which supports the outlined growth ambitions. The market presents a number of challenges, related to the general trends of the domestic market saturation and a discrepancy between the CSR focus and development of the single-serving pods market. KGM is highly aware of these threats and opportunities by effectively allocating its internal cash reserves to incremental and radical innovation strategies it will continue to grow. Additionally, it was identified that there are several considerations with regards to the business model alignment with Sustainability strategy, which company will have to address.
SWOT Analysis
In order to accurately access and evaluate the strategy of the company and its fit with the external environment, it is important to understand the internal strengths, weaknesses, which constitute the internal integrity and external opportunities and threats, which outline the focus of the future strategy and risk management policies. The below presented SWOT analysis allows driving conclusions about the challenges and potential options to address the external environment with the coherent business plan.
References
Sadler Ph (2003). Strategic Management. 2nd Edition. London: Kogan Page Limited
Mullerat R. and Brennan D. (2011). Corporate Social Responsibility. The Corporate Governance of the 21st Century. Alphen Aan den Rijn:Walters Kluwer. Print.
USSEC (2015). Keurig Coffee Roasters Annual Report 2015.Form 10 –K. The United States Securities and Exchange Commission. Retrieved 04 June 2016, http://www.sec.gov/Archives/edgar/data/909954/000104746914009384/a2222198z10-k.htm
Doole, I., and Lowe, R. (2008). International Marketing Strategy.Analysis, Development, and Implementation. 5th Edition. New York: South-Western Cengage Learning.
Davenport T.H., Leibold M., and Voelpel S.C. (2006). Strategic Management in the Innovation Economy. Strategy Approaches and Tools for Dynamic Innovation Capabilities. Berlin: Publicis Communications Agentur Gmbh.
Broekhuis M. and Vos J. F. (2007). Improving Organizational Sustainability Using a Quality Perspective. SoM Research Institute of Innovation and Research., p.27
