Harvard Case - Seven-Up Division of Philip Morris
"Seven-Up Division of Philip Morris" Harvard business case study is written by Michael E. Porter, Edward J. Hoff. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Apr 16, 1985
At Fern Fort University, we recommend that the Seven-Up Division of Philip Morris adopt a multi-pronged strategy to revitalize the brand and achieve sustainable growth. This strategy will focus on repositioning Seven-Up as a healthier alternative within the non-alcoholic beverage market, leveraging digital transformation and strategic alliances to expand its reach and appeal to a wider audience.
2. Background
This case study focuses on the Seven-Up Division of Philip Morris in the late 1980s. The brand, once a strong competitor in the non-alcoholic beverage market, faced declining sales and market share. The case study explores the challenges the division faced, including intense competition from Coca-Cola and Pepsi, changing consumer preferences, and a lack of clear brand positioning.
The main protagonists are the Seven-Up Division management team, tasked with reviving the brand and finding a path to sustainable growth.
3. Analysis of the Case Study
To analyze the Seven-Up Division's situation, we employ a combination of frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the beverage industry.
- Bargaining Power of Buyers: Moderate, as consumers have many choices and can easily switch brands.
- Bargaining Power of Suppliers: Low, as ingredients are readily available from multiple suppliers.
- Threat of Substitute Products: High, with various alternative beverages like juice, tea, and water gaining popularity.
- Competitive Rivalry: Intense, with Coca-Cola and Pepsi dominating the market, creating a fierce battle for market share.
2. SWOT Analysis:
Strengths:
- Strong brand recognition and a loyal customer base.
- Established distribution channels and manufacturing capabilities.
- Potential for innovation and product differentiation.
Weaknesses:
- Declining market share and sales.
- Lack of clear brand positioning.
- Limited marketing and advertising budget.
Opportunities:
- Growing demand for healthier beverage options.
- Expanding international markets.
- Leveraging digital marketing and social media platforms.
Threats:
- Intense competition from established players.
- Changing consumer preferences towards natural and organic beverages.
- Increasing health concerns related to sugar consumption.
3. Value Chain Analysis:
The Seven-Up Division's value chain needs to be optimized to improve efficiency and create a more competitive advantage. This involves:
- Inbound Logistics: Streamlining sourcing and procurement processes to reduce costs.
- Operations: Optimizing manufacturing processes and exploring new technologies for efficiency.
- Outbound Logistics: Enhancing distribution networks and exploring partnerships for wider reach.
- Marketing and Sales: Repositioning the brand and investing in targeted marketing campaigns.
- Service: Providing excellent customer service and building brand loyalty.
4. Business Model Innovation:
The Seven-Up Division needs to adopt a business model innovation approach to differentiate itself from competitors and appeal to a wider audience. This could involve:
- Product Differentiation: Introducing healthier versions of Seven-Up with reduced sugar content or natural ingredients.
- Market Segmentation: Targeting specific consumer segments with customized product offerings and marketing campaigns.
- Pricing Strategy: Offering competitive pricing and value-added promotions to attract price-sensitive consumers.
- Distribution Channels: Expanding distribution networks to reach new markets and explore online sales platforms.
4. Recommendations
1. Reposition Seven-Up as a Healthier Alternative:
- Product Innovation: Introduce low-sugar or sugar-free versions of Seven-Up, leveraging natural sweeteners and healthier ingredients.
- Marketing Strategy: Emphasize the health benefits of the product and target health-conscious consumers through targeted advertising campaigns.
2. Leverage Digital Transformation:
- E-commerce: Establish a robust online presence and explore partnerships with online retailers to expand reach.
- Social Media Marketing: Utilize social media platforms to engage with consumers, build brand awareness, and drive sales.
- Data Analytics: Implement data analytics tools to track consumer behavior, understand market trends, and optimize marketing campaigns.
3. Strategic Alliances:
- Partnerships: Collaborate with food and beverage companies, retailers, and health organizations to promote Seven-Up as a healthier option.
- Joint Ventures: Explore joint ventures with other beverage companies to expand into new markets and leverage complementary strengths.
4. Enhance Brand Management:
- Brand Positioning: Develop a clear and consistent brand message that resonates with the target audience.
- Brand Storytelling: Create compelling brand narratives that connect with consumers on an emotional level.
- Brand Experience: Enhance the overall brand experience through packaging design, product innovation, and customer service.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of the Seven-Up Division's strengths, weaknesses, opportunities, and threats. They align with the following considerations:
- Core Competencies: The recommendations leverage the company's existing manufacturing capabilities and distribution networks, while also focusing on developing new core competencies in digital marketing, product innovation, and strategic partnerships.
- External Customers: The recommendations address changing consumer preferences by focusing on healthier options and engaging with consumers through digital platforms.
- Competitors: The recommendations aim to differentiate Seven-Up from competitors by focusing on health, innovation, and strategic alliances.
- Attractiveness: The recommendations are expected to increase market share, profitability, and brand value, ultimately contributing to the long-term sustainability of the Seven-Up Division.
6. Conclusion
By implementing these recommendations, the Seven-Up Division can successfully reposition itself in the non-alcoholic beverage market, appealing to health-conscious consumers and achieving sustainable growth. The combination of product innovation, digital transformation, strategic alliances, and brand management will enable the division to compete effectively in a dynamic and competitive market.
7. Discussion
Other alternatives not selected include:
- Mergers and Acquisitions: While this could be an option, it carries significant risks and requires careful consideration of integration challenges and potential cultural clashes.
- Cost Leadership: This strategy could be difficult to implement given the intense competition from Coca-Cola and Pepsi, who have significant economies of scale.
Key assumptions of the recommendations include:
- Consumers are increasingly interested in healthier beverage options.
- Digital marketing and social media platforms will continue to grow in importance.
- Strategic alliances can provide valuable resources and market access.
8. Next Steps
To implement these recommendations, the Seven-Up Division should:
- Phase 1 (Short-Term): Introduce low-sugar or sugar-free versions of Seven-Up, develop a digital marketing strategy, and explore strategic partnerships.
- Phase 2 (Mid-Term): Expand distribution networks, invest in data analytics, and further refine brand positioning.
- Phase 3 (Long-Term): Continue product innovation, monitor market trends, and adapt the strategy as needed.
By taking these steps, the Seven-Up Division can achieve its strategic goals and secure a strong position in the non-alcoholic beverage market.
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Case Description
In 1979, Philip Morris acquired the Seven-Up Co., the number three concentrate producer in the U.S. After four years of losses, Seven-Up had registered an operating profit in 1984. Industry analysts were debating the role that Seven-Up would play in Philip Morris's future.
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