Case Study Description of Product Innovation at Aguas Danone
Aguas Danone de Argentina (ADA) faced an adverse scenario. Argentina was undergoing its worst economic crisis in history, and bottled water sales were dwindling (replaced by utility network running water). The company needed to boost its revenues through new, innovative, more value-added product development. Argentina displayed a significant interest in fitness. By means of several market research studies, ADA managed to identify a segment whose needs were unmet by existing products and brands. New product launches were planned to target that segment. This case describes the dilemmas faced by ADA and the decisions required to formulate and pursue a strategy for new product launching and brand extension in adverse scenarios. More specifically, this case provides an opportunity to discuss how a new product category can be created to address market downturns. This case describes events that took place in 2002. Research interviews were started in 2004, but the case was published in 2009-12, because Danone delayed its disclosure permission for strategic and competitive reasons. On account of its richness and original contents, the authors decided to write the case despite this delay. This case is also available in Portuguese and Spanish
Authors :: Javier Jorge Silva, Femando Zerboni, Andres Chehtman, Maria Alonso
Swot Analysis of "Product Innovation at Aguas Danone" written by Javier Jorge Silva, Femando Zerboni, Andres Chehtman, Maria Alonso includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ada Danone facing as an external strategic factors. Some of the topics covered in Product Innovation at Aguas Danone case study are - Strategic Management Strategies, Emerging markets, Market research, Product development, Strategic planning and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Product Innovation at Aguas Danone casestudy better are - – increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, there is backlash against globalization, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies,
cloud computing is disrupting traditional business models, increasing commodity prices, etc
Introduction to SWOT Analysis of Product Innovation at Aguas Danone
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Product Innovation at Aguas Danone case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ada Danone, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ada Danone operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Product Innovation at Aguas Danone can be done for the following purposes –
1. Strategic planning using facts provided in Product Innovation at Aguas Danone case study
2. Improving business portfolio management of Ada Danone
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ada Danone
Strengths Product Innovation at Aguas Danone | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ada Danone in Product Innovation at Aguas Danone Harvard Business Review case study are -
Strong track record of project management
– Ada Danone is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Sales & Marketing field
– Ada Danone is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ada Danone in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Ada Danone has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Product Innovation at Aguas Danone HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Ada Danone has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Ada Danone in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Ada Danone is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Ada Danone is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Product Innovation at Aguas Danone Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Product Innovation at Aguas Danone Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Ada Danone is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Javier Jorge Silva, Femando Zerboni, Andres Chehtman, Maria Alonso can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Ada Danone in the sector have low bargaining power. Product Innovation at Aguas Danone has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ada Danone to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Sales & Marketing industry
– Product Innovation at Aguas Danone firm has clearly differentiated products in the market place. This has enabled Ada Danone to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Ada Danone to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Ada Danone has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ada Danone has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Ada Danone is present in almost all the verticals within the industry. This has provided firm in Product Innovation at Aguas Danone case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Product Innovation at Aguas Danone | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Product Innovation at Aguas Danone are -
Slow decision making process
– As mentioned earlier in the report, Ada Danone has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Ada Danone even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Ada Danone has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of Ada Danone, firm in the HBR case study Product Innovation at Aguas Danone needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Product Innovation at Aguas Danone, it seems that the employees of Ada Danone don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Product Innovation at Aguas Danone HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Ada Danone has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Javier Jorge Silva, Femando Zerboni, Andres Chehtman, Maria Alonso suggests that, Ada Danone is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to strategic competitive environment developments
– As Product Innovation at Aguas Danone HBR case study mentions - Ada Danone takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Products dominated business model
– Even though Ada Danone has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Product Innovation at Aguas Danone should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Product Innovation at Aguas Danone that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Product Innovation at Aguas Danone can leverage the sales team experience to cultivate customer relationships as Ada Danone is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Product Innovation at Aguas Danone, in the dynamic environment Ada Danone has struggled to respond to the nimble upstart competition. Ada Danone has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Ada Danone is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Ada Danone needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ada Danone to focus more on services rather than just following the product oriented approach.
Opportunities Product Innovation at Aguas Danone | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Product Innovation at Aguas Danone are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Ada Danone can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Ada Danone has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Ada Danone can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ada Danone to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ada Danone is facing challenges because of the dominance of functional experts in the organization. Product Innovation at Aguas Danone case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Ada Danone has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Product Innovation at Aguas Danone - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ada Danone to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Ada Danone can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Buying journey improvements
– Ada Danone can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Product Innovation at Aguas Danone suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Creating value in data economy
– The success of analytics program of Ada Danone has opened avenues for new revenue streams for the organization in the industry. This can help Ada Danone to build a more holistic ecosystem as suggested in the Product Innovation at Aguas Danone case study. Ada Danone can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ada Danone can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ada Danone can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Ada Danone to increase its market reach. Ada Danone will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ada Danone can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Product Innovation at Aguas Danone, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Ada Danone can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Product Innovation at Aguas Danone External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Product Innovation at Aguas Danone are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Ada Danone business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ada Danone with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Ada Danone demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Ada Danone can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Ada Danone will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ada Danone can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ada Danone in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Ada Danone high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Shortening product life cycle
– it is one of the major threat that Ada Danone is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Ada Danone
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ada Danone.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ada Danone in the Sales & Marketing sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ada Danone can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Product Innovation at Aguas Danone .
Weighted SWOT Analysis of Product Innovation at Aguas Danone Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Product Innovation at Aguas Danone needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Product Innovation at Aguas Danone is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Product Innovation at Aguas Danone is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Product Innovation at Aguas Danone is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Ada Danone needs to make to build a sustainable competitive advantage.
