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 - – increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%,
there is backlash against globalization, technology disruption, 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 -
Operational resilience
– The operational resilience strategy in the Honest Tea: Sell Up or Sell Out? 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.
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.
Training and development
– Honest Tea has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Honest Tea: Sell Up or Sell Out? Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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 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.
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.
Learning organization
- Honest Tea 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 Honest Tea is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Honest Tea: Sell Up or Sell Out? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Honest Tea digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Honest Tea has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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 -
Workers concerns about automation
– As automation is fast increasing in the segment, Honest Tea needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
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.
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.
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.
Products dominated business model
– Even though Honest Tea 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 - Honest Tea: Sell Up or Sell Out? should strive to include more intangible value offerings along with its core products and services.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Honest Tea 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. Honest Tea 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.
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.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Honest Tea in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Honest Tea can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Honest Tea 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 Honest Tea: Sell Up or Sell Out? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Honest Tea to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Honest Tea in the consumer business. Now Honest Tea can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Honest Tea can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
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.
Better consumer reach
– The expansion of the 5G network will help Honest Tea to increase its market reach. Honest Tea 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.
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.
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.
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 -
Consumer confidence and its impact on Honest Tea 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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Honest Tea needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Honest Tea: Sell Up or Sell Out?, Honest Tea may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Honest Tea can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Honest Tea with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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.
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 Honest Tea business can come under increasing regulations regarding data privacy, data security, 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.