Honest Tea: Sell Up or Sell Out? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Honest Tea: Sell Up or Sell Out?
Are "wide-scale distribution" and "sustainability" mutually exclusive? This case explores this question through the examples of Honest Tea, one of the fast growing companies in the Ready-To-Drink market, and Coca-Cola. Honest Tea faces a challenging decision: whether or not to sell part of its business to Coca-Cola. Honest Tea desires to stay committed to CSR goals and maintain its niche market appeal; however, it needs to expand its distribution network to make a large impact in the mainstream market, grow profitability, and affect positive change by introducing healthy, sustainable products to the beverage industry. This case asks whether it makes sense for Honest Tea to scale up its organic and fair trade beverages, and if the partnership with Coca-Cola is the best move. The case focuses on business strategy, and promotes understanding of the complexities of a sustainable business and the challenges that arise while trying to maintain growth.
Swot Analysis of "Honest Tea: Sell Up or Sell Out?" written by Andrew Hoffman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Honest Tea facing as an external strategic factors. Some of the topics covered in Honest Tea: Sell Up or Sell Out? case study are - Strategic Management Strategies, Social responsibility, Sustainability and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Honest Tea: Sell Up or Sell Out? casestudy better are - – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, increasing transportation and logistics costs, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic ,
cloud computing is disrupting traditional business models, geopolitical disruptions, etc
Introduction to SWOT Analysis of Honest Tea: Sell Up or Sell Out?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Honest Tea: Sell Up or Sell Out? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Honest Tea, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Honest Tea 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 Honest Tea: Sell Up or Sell Out? can be done for the following purposes –
1. Strategic planning using facts provided in Honest Tea: Sell Up or Sell Out? case study
2. Improving business portfolio management of Honest Tea
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Honest Tea
Strengths Honest Tea: Sell Up or Sell Out? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Honest Tea in Honest Tea: Sell Up or Sell Out? Harvard Business Review case study are -
Diverse revenue streams
– Honest Tea is present in almost all the verticals within the industry. This has provided firm in Honest Tea: Sell Up or Sell Out? 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.
Cross disciplinary teams
– Horizontal connected teams at the Honest Tea are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– Honest Tea 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 Honest Tea: Sell Up or Sell Out? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Honest Tea is one of the most innovative firm in sector. Manager in Honest Tea: Sell Up or Sell Out? Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Honest Tea
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Honest Tea does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Strategy & Execution field
– Honest Tea 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 Honest Tea in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Strategy & Execution industry
– Honest Tea: Sell Up or Sell Out? firm has clearly differentiated products in the market place. This has enabled Honest Tea to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Honest Tea to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Honest Tea has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Honest Tea: Sell Up or Sell Out? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Honest Tea in the sector have low bargaining power. Honest Tea: Sell Up or Sell Out? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Honest Tea to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Honest Tea 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.
High brand equity
– Honest Tea has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Honest Tea to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Honest Tea in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Honest Tea: Sell Up or Sell Out? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honest Tea: Sell Up or Sell Out? are -
Need for greater diversity
– Honest Tea has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Honest Tea: Sell Up or Sell Out? HBR case study mentions - Honest Tea 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.
Aligning sales with marketing
– It come across in the case study Honest Tea: Sell Up or Sell Out? 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 Honest Tea: Sell Up or Sell Out? can leverage the sales team experience to cultivate customer relationships as Honest Tea is planning to shift buying processes online.
High cash cycle compare to competitors
Honest Tea has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners
– Because of the regulatory requirements, Andrew Hoffman suggests that, Honest Tea 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.
Lack of clear differentiation of Honest Tea products
– To increase the profitability and margins on the products, Honest Tea needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Honest Tea has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Honest Tea is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Honest Tea needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Honest Tea to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Honest Tea: Sell Up or Sell Out?, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Honest Tea, firm in the HBR case study Honest Tea: Sell Up or Sell Out? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Honest Tea: Sell Up or Sell Out? has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Honest Tea 's lucrative customers.
Opportunities Honest Tea: Sell Up or Sell Out? | 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 Honest Tea: Sell Up or Sell Out? are -
Loyalty marketing
– Honest Tea 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Honest Tea can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Honest Tea is facing challenges because of the dominance of functional experts in the organization. Honest Tea: Sell Up or Sell Out? 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.
Developing new processes and practices
– Honest Tea can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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 Honest Tea 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.
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. Honest Tea can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Honest Tea can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Honest Tea can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for Honest Tea to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Honest Tea to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Honest Tea to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Honest Tea 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, Honest Tea: Sell Up or Sell Out?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Honest Tea has opened avenues for new revenue streams for the organization in the industry. This can help Honest Tea to build a more holistic ecosystem as suggested in the Honest Tea: Sell Up or Sell Out? case study. Honest Tea can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Honest Tea 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 Strategy & Execution segment.
Threats Honest Tea: Sell Up or Sell Out? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Honest Tea: Sell Up or Sell Out? are -
Environmental challenges
– Honest Tea needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Honest Tea can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of Honest Tea
– 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 Honest Tea.
Stagnating economy with rate increase
– Honest Tea 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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Honest Tea.
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 Honest Tea in the Strategy & Execution sector and impact the bottomline of the organization.
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.
High dependence on third party suppliers
– Honest Tea 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.
Technology acceleration in Forth Industrial Revolution
– Honest Tea has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Honest Tea needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Honest Tea 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 Honest Tea: Sell Up or Sell Out? .
Regulatory challenges
– Honest Tea needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
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. Honest Tea 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Honest Tea in the Strategy & Execution industry. The Strategy & Execution 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.
Shortening product life cycle
– it is one of the major threat that Honest Tea is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Honest Tea: Sell Up or Sell Out? 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 Honest Tea: Sell Up or Sell Out? 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 Honest Tea: Sell Up or Sell Out? 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 Honest Tea: Sell Up or Sell Out? 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 Honest Tea: Sell Up or Sell Out? 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 Honest Tea needs to make to build a sustainable competitive advantage.
