Honest Tea Case Study Solution

Business is presently one of the most significant food chains worldwide. It was founded by Henri Honest Tea in 1866, a German Pharmacist who first released "FarineLactee"; a combination of flour and milk to feed infants and reduce death rate.
Business is now a global business. Unlike other international companies, it has senior executives from different nations and attempts to make decisions thinking about the entire world. Honest Tea currently has more than 500 factories around the world and a network spread across 86 countries.

Purpose

The function of Business Corporation is to enhance the quality of life of people by playing its part and supplying healthy food. While making sure that the business is prospering in the long run, that's how it plays its part for a better and healthy future

Vision

Honest Tea's vision is to offer its consumers with food that is healthy, high in quality and safe to consume. Business visualizes to develop a well-trained labor force which would help the business to grow
.

Mission

Honest Tea's objective is that as currently, it is the leading company in the food industry, it thinks in 'Excellent Food, Good Life". Its mission is to supply its customers with a range of choices that are healthy and finest in taste. It is concentrated on supplying the very best food to its consumers throughout the day and night.

Products.

Business has a wide variety of items that it provides to its customers. Its items include food for infants, cereals, dairy products, treats, chocolates, food for pet and mineral water. It has around four hundred and fifty (450) factories around the world and around 328,000 employees. In 2011, Business was listed as the most gainful company.

Goals and Objectives

• Keeping in mind the vision and objective of the corporation, the company has actually put down its goals and objectives. These objectives and objectives are noted below.
• One objective of the business is to reach no garbage dump status. It is working toward zero waste, where no waste of the factory is landfilled. It encourages its staff members to take the most out of the by-products. (Business, aboutus, 2017).
• Another goal of Honest Tea is to lose minimum food during production. Usually, the food produced is squandered even prior to it reaches the customers.
• Another thing that Business is working on is to enhance its packaging in such a way that it would help it to minimize the above-mentioned problems and would also ensure the delivery of high quality of its items to its clients.
• Meet global requirements of the environment.
• Build a relationship based on trust with its customers, business partners, staff members, and government.

Critical Issues

Recently, Business Company is focusing more towards the method of NHW and investing more of its earnings on the R&D innovation. The country is investing more on acquisitions and mergers to support its NHW strategy. Nevertheless, the target of the company is not accomplished as the sales were expected to grow higher at the rate of 10% each year and the operating margins to increase by 20%, given up Exhibition H. There is a need to focus more on the sales then the innovation technology. Otherwise, it might lead to the declined revenue rate. (Henderson, 2012).

Situational Analysis.

Analysis of Current Strategy, Vision and Goals

The present Business method is based upon the idea of Nutritious, Health and Wellness (NHW). This strategy deals with the concept to bringing modification in the client preferences about food and making the food stuff healthier concerning about the health concerns.
The vision of this strategy is based upon the key approach i.e. 60/40+ which just suggests that the products will have a rating of 60% on the basis of taste and 40% is based upon its dietary value. The products will be made with additional nutritional worth in contrast to all other products in market acquiring it a plus on its nutritional content.
This technique was embraced to bring more tasty plus nutritious foods and drinks in market than ever. In competition with other companies, with an objective of retaining its trust over clients as Business Company has actually gotten more trusted by clients.

Quantitative Analysis.

R&D Costs as a portion of sales are decreasing with increasing actual amount of spending shows that the sales are increasing at a greater rate than its R&D costs, and enable the company to more invest in R&D.
Net Profit Margin is increasing while R&D as a portion of sales is decreasing. This indication also reveals a green light to the R&D costs, mergers and acquisitions.
Financial obligation ratio of the business is increasing due to its spending on mergers, acquisitions and R&D advancement rather than payment of financial obligations. This increasing debt ratio position a hazard of default of Business to its financiers and could lead a decreasing share costs. In terms of increasing financial obligation ratio, the firm needs to not spend much on R&D and should pay its existing financial obligations to decrease the threat for financiers.
The increasing danger of financiers with increasing debt ratio and decreasing share rates can be observed by big decline of EPS of Honest Tea stocks.
The sales development of company is also low as compare to its mergers and acquisitions due to slow understanding building of consumers. This slow growth also hinder company to further invest in its mergers and acquisitions.( Business, Business Financial Reports, 2006-2010).
Note: All the above analysis is done on the basis of estimations and Graphs given up the Exhibitions D and E.

TWOS Analysis

2 analysis can be utilized to derive various methods based on the SWOT Analysis given above. A short summary of TWOS Analysis is given up Exhibition H.

Strategies to exploit Opportunities using Strengths

Business needs to introduce more ingenious items by large amount of R&D Spending and mergers and acquisitions. It could increase the market share of Business and increase the profit margins for the company. It could also supply Business a long term competitive advantage over its rivals.
The international growth of Business must be concentrated on market catching of establishing countries by expansion, bring in more clients through customer's commitment. As developing nations are more populated than developed nations, it might increase the customer circle of Business.

Strategies to Overcome Weaknesses to Exploit Opportunities

Honest Tea must do mindful acquisition and merger of organizations, as it might impact the consumer's and society's perceptions about Business. It should get and merge with those business which have a market track record of healthy and nutritious business. It would enhance the perceptions of consumers about Business.
Business must not only invest its R&D on development, rather than it must also concentrate on the R&D spending over assessment of cost of numerous healthy products. This would increase expense efficiency of its products, which will result in increasing its sales, due to declining costs, and margins.

Strategies to use strengths to overcome threats

Business needs to relocate to not just developing however also to developed countries. It needs to broadens its geographical expansion. This broad geographical expansion towards developing and developed countries would lower the risk of potential losses in times of instability in various countries. It must expand its circle to numerous nations like Unilever which runs in about 170 plus nations.

Strategies to overcome weaknesses to avoid threats

Honest Tea ought to carefully manage its acquisitions to prevent the risk of misconception from the customers about Business. It should obtain and merge with those countries having a goodwill of being a healthy company in the market. This would not only improve the perception of customers about Business but would also increase the sales, profit margins and market share of Business. It would also allow the business to utilize its prospective resources efficiently on its other operations rather than acquisitions of those companies slowing the NHW technique growth.

Segmentation Analysis

Demographic Segmentation

The group segmentation of Business is based upon four elements; age, gender, income and profession. Business produces a number of products related to babies i.e. Cerelac, Nido, etc. and related to grownups i.e. confectionary items. Honest Tea items are rather budget-friendly by practically all levels, but its significant targeted customers, in terms of income level are middle and upper middle level clients.

Geographical Segmentation

Geographical division of Business is composed of its presence in practically 86 nations. Its geographical segmentation is based upon two main aspects i.e. typical earnings level of the consumer in addition to the climate of the region. Singapore Business Company's segmentation is done on the basis of the weather of the area i.e. hot, warm or cold.

Psychographic Segmentation

Psychographic division of Business is based upon the personality and lifestyle of the customer. Business 3 in 1 Coffee target those clients whose life style is quite hectic and do not have much time.

Behavioral Segmentation

Honest Tea behavioral segmentation is based upon the mindset understanding and awareness of the consumer. Its extremely nutritious products target those clients who have a health conscious attitude towards their consumptions.

Honest Tea Alternatives

In order to sustain the brand in the market and keep the client undamaged with the brand name, there are two options:
Option: 1
The Business should spend more on acquisitions than on the R&D.
Pros:
1. Acquisitions would increase overall assets of the company, increasing the wealth of the business. However, spending on R&D would be sunk cost.
2. The business can resell the acquired units in the market, if it stops working to execute its technique. Amount invest on the R&D could not be revived, and it will be thought about entirely sunk cost, if it do not offer potential results.
3. Investing in R&D provide slow development in sales, as it takes long period of time to introduce a product. Acquisitions provide fast results, as it offer the company currently established item, which can be marketed soon after the acquisition.
Cons:
1. Acquisition of company's which do not fit with the business's worths like Kraftz foods can lead the company to deal with misunderstanding of customers about Business core worths of healthy and nutritious items.
2 Big spending on acquisitions than R&D would send out a signal of company's inadequacy of establishing innovative items, and would outcomes in customer's discontentment.
3. Large acquisitions than R&D would extend the line of product of the business by the items which are already present in the market, making company unable to present new innovative products.
Alternative: 2.
The Business should spend more on its R&D rather than acquisitions.
Pros:
1. It would make it possible for the company to produce more innovative items.
2. It would offer the company a strong competitive position in the market.
3. It would allow the business to increase its targeted consumers by presenting those items which can be provided to an entirely new market segment.
4. Ingenious products will provide long term advantages and high market share in long run.
Cons:
1. It would reduce the earnings margins of the business.
2. In case of failure, the entire spending on R&D would be thought about as sunk expense, and would impact the business at large. The threat is not in the case of acquisitions.
3. It would not increase the wealth of company, which could offer an unfavorable signal to the financiers, and could result I decreasing stock prices.
Alternative 3:
Continue its acquisitions and mergers with considerable costs on in R&D Program.
Pros:
1. It would enable the company to introduce brand-new innovative products with less threat of converting the spending on R&D into sunk cost.
2. It would provide a favorable signal to the investors, as the overall assets of the business would increase with its considerable R&D spending.
3. It would not affect the profit margins of the business at a big rate as compare to alternative 2.
4. It would provide the company a strong long term market position in terms of the company's general wealth in addition to in terms of innovative items.
Cons:
1. Danger of conversion of R&D spending into sunk expense, higher than alternative 1 lower than alternative 2.
2. Danger of misconception about the acquisitions, higher than alternative 2 and lower than alternative 1.
3. Introduction of less number of ingenious items than alternative 2 and high variety of innovative items than alternative 1.

Honest Tea Conclusion

Business has remained the leading market player for more than a decade. It has actually institutionalised its methods and culture to align itself with the market modifications and customer habits, which has actually ultimately enabled it to sustain its market share. Though, Business has developed considerable market share and brand identity in the city markets, it is recommended that the business should focus on the rural areas in regards to establishing brand loyalty, awareness, and equity, such can be done by producing a particular brand name allocation technique through trade marketing techniques, that draw clear distinction in between Honest Tea products and other rival items. Additionally, Business ought to leverage its brand image of safe and healthy food in catering the rural markets and also to upscale the offerings in other classifications such as nutrition. This will enable the company to develop brand equity for recently introduced and already produced products on a higher platform, making the effective use of resources and brand image in the market.

Honest Tea Exhibits