Harvard Case - Storehouse Tea: Cultivating Options for Growth
"Storehouse Tea: Cultivating Options for Growth" Harvard business case study is written by Chris Laszlo, Katherine Gullett, Stephanie Hagen. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Jan 11, 2019
At Fern Fort University, we recommend Storehouse Tea pursue a multi-pronged growth strategy focused on product innovation, strategic partnerships, and targeted market expansion. This approach leverages the company's core competencies in tea blending, ethical sourcing, and customer service while capitalizing on emerging trends in the beverage industry.
2. Background
Storehouse Tea is a successful specialty tea company founded by two friends, Sarah and Ben. They have built a strong reputation for high-quality, ethically sourced tea blends, attracting a loyal customer base. However, they face increasing competition and a need to expand their reach to sustain growth. The case study explores their options for achieving this, considering factors like market trends, financial resources, and their commitment to ethical sourcing.
3. Analysis of the Case Study
To analyze Storehouse Tea's situation, we utilize several frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: Moderate - The tea industry is relatively easy to enter, but establishing a strong brand and supply chain is challenging.
- Bargaining Power of Buyers: Moderate - Consumers have many tea options, but Storehouse Tea's focus on quality and ethics provides a differentiation point.
- Bargaining Power of Suppliers: Low - Storehouse Tea sources directly from farmers, giving them leverage in negotiations.
- Threat of Substitutes: Moderate - Other beverages like coffee, herbal infusions, and fruit juices compete for consumer attention.
- Competitive Rivalry: High - The tea market is fragmented, with many established brands and emerging players.
b) SWOT Analysis:
- Strengths: Strong brand, ethical sourcing, high-quality products, loyal customer base, experienced founders.
- Weaknesses: Limited marketing budget, reliance on online sales, lack of international presence, potential for supply chain disruptions.
- Opportunities: Growing demand for specialty tea, increasing interest in health and wellness, potential for new product lines, expansion into emerging markets.
- Threats: Intense competition, fluctuating tea prices, changing consumer preferences, potential for economic downturns.
c) Value Chain Analysis:
Storehouse Tea's value chain is characterized by:
- Inbound Logistics: Strong relationships with ethical tea farmers, ensuring high-quality sourcing.
- Operations: Efficient blending processes, quality control measures, and packaging.
- Outbound Logistics: Online sales platform, partnerships with retailers, and direct-to-consumer shipments.
- Marketing & Sales: Content marketing, social media engagement, and building brand loyalty.
- Service: Excellent customer service, personalized recommendations, and community building.
4. Recommendations
Storehouse Tea should pursue the following growth strategies:
a) Product Innovation:
- Develop new tea blends: Introduce innovative flavor combinations, incorporating seasonal ingredients and emerging trends like functional teas (e.g., adaptogenic blends, herbal infusions with health benefits).
- Expand product lines: Introduce tea accessories like teapots, mugs, and infusers. Consider offering gift sets and subscription boxes.
- Invest in R&D: Research new tea varieties, explore sustainable packaging options, and investigate potential for tea-based food products.
b) Strategic Partnerships:
- Collaborate with retailers: Partner with specialty food stores, cafes, and online marketplaces to expand distribution channels.
- Form strategic alliances: Partner with complementary businesses in the wellness and lifestyle sectors (e.g., yoga studios, health food stores).
- Explore co-branding opportunities: Collaborate with other brands to create limited-edition tea blends or product bundles.
c) Targeted Market Expansion:
- Focus on emerging markets: Explore opportunities in countries with growing tea consumption and a preference for specialty products.
- Develop a robust online presence: Optimize website for international customers, offer multi-language support, and explore online marketplaces.
- Leverage social media: Engage with international audiences, build online communities, and utilize influencer marketing.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations leverage Storehouse Tea's strengths in tea blending, ethical sourcing, and customer service. They align with the company's mission to provide high-quality, ethically sourced tea while promoting sustainability and wellness.
- External customers and internal clients: The recommendations cater to the evolving needs of tea consumers, including those seeking innovative flavors, health benefits, and ethical sourcing. They also consider the needs of internal stakeholders, such as employees and farmers.
- Competitors: The recommendations aim to differentiate Storehouse Tea from competitors by focusing on product innovation, strategic partnerships, and market expansion into underserved segments.
- Attractiveness: The recommendations have the potential to increase revenue, expand market share, and enhance brand value. They are supported by market research and industry trends, indicating a strong potential for growth.
6. Conclusion
Storehouse Tea is well-positioned for growth by leveraging its core competencies and adapting to evolving market trends. By pursuing a multi-pronged strategy focused on product innovation, strategic partnerships, and targeted market expansion, Storehouse Tea can achieve sustainable growth while maintaining its commitment to ethical sourcing and customer satisfaction.
7. Discussion
Alternatives:
- Mergers and acquisitions: Acquiring a competitor or a complementary business could provide access to new markets, products, or distribution channels. However, this approach requires significant financial resources and carries integration risks.
- Vertical integration: Expanding into tea farming or manufacturing could provide greater control over the supply chain, but it would require significant investment and expertise.
- Focus on cost leadership: Lowering prices to compete on cost could attract price-sensitive customers, but it could erode brand value and profitability.
Risks and Key Assumptions:
- Competition: The tea market is highly competitive, and new entrants could pose a threat.
- Consumer preferences: Changing consumer tastes could impact demand for specialty tea.
- Supply chain disruptions: Global events or natural disasters could affect tea sourcing and pricing.
- Financial resources: Expanding operations requires significant investment, which may need to be secured through external funding.
- Market acceptance: New products and market expansion strategies may not be successful.
8. Next Steps
To implement these recommendations, Storehouse Tea should:
- Develop a detailed strategic plan: Outline specific goals, timelines, and resource allocation for each growth strategy.
- Conduct market research: Identify target markets, analyze competitor offerings, and assess market potential.
- Develop a product innovation roadmap: Prioritize new product development, conduct market testing, and secure necessary resources.
- Establish partnerships: Identify potential partners, negotiate agreements, and implement joint marketing initiatives.
- Invest in technology and infrastructure: Upgrade website and online platforms, implement CRM systems, and improve supply chain management.
- Monitor progress and adapt: Regularly track key performance indicators, evaluate the effectiveness of strategies, and make adjustments as needed.
By following these steps, Storehouse Tea can navigate the competitive tea market, achieve sustainable growth, and solidify its position as a leading ethical and innovative tea brand.
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Case Description
In January 2017, the owner and founder of Storehouse Tea based in Cleveland, Ohio, was considering the company's next move. Storehouse Tea focused on providing organic, fair trade certified teas, and the founder was committed to operating her business in a way that would have a positive impact in the world by providing work to local refugees. However, she wondered how she could scale this impact. Among her options, she could introduce product extensions, pursue geographic expansion, target larger accounts, or hire additional employees. But which avenue for growth would best allow Storehouse Tea to further its core mission?
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