Case Study Description of Danone & Wahaha: A Bittersweet Partnership
For most of 2007, a public dispute was going on between Danone and Wahaha over their joint venture in China. The "antagonism" had even led to the Chinese and French presidents calling on both companies to resume "peace talks" and find an amicable solution. The Danone & Wahaha case looks into how this ten year plus and once "sweet" partnership turned sour. It serves as a basis to further explore what could have been considered as a "win-win" partnership; how it was formed, further developed and how to anticipate and mitigate certain risks when doing business in China or other emerging markets, for example, how to define growth and the share of risks and rewards. It then examines what will happen next and the future outlook or likely scenario for Danone's businesses in China. Learning objectives: The key learnings in this case will apply to how to make all partnerships work, whether with Chinese partners or not, those based on principles of equality and mutual benefits, tolerating minor differences and reach mutual understandings.
Swot Analysis of "Danone & Wahaha: A Bittersweet Partnership" written by Stewart Hamilton, Jinxuan (Ann) Zhang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wahaha Danone facing as an external strategic factors. Some of the topics covered in Danone & Wahaha: A Bittersweet Partnership case study are - Strategic Management Strategies, Emerging markets, Growth strategy, Joint ventures, Negotiations, Performance measurement, Risk management and Global Business.
Some of the macro environment factors that can be used to understand the Danone & Wahaha: A Bittersweet Partnership casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , there is backlash against globalization, etc
Introduction to SWOT Analysis of Danone & Wahaha: A Bittersweet Partnership
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Danone & Wahaha: A Bittersweet Partnership case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wahaha Danone, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wahaha 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 Danone & Wahaha: A Bittersweet Partnership can be done for the following purposes –
1. Strategic planning using facts provided in Danone & Wahaha: A Bittersweet Partnership case study
2. Improving business portfolio management of Wahaha Danone
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wahaha Danone
Strengths Danone & Wahaha: A Bittersweet Partnership | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wahaha Danone in Danone & Wahaha: A Bittersweet Partnership Harvard Business Review case study are -
Organizational Resilience of Wahaha Danone
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Wahaha Danone does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Wahaha Danone has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Danone & Wahaha: A Bittersweet Partnership 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.
Highly skilled collaborators
– Wahaha 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 Danone & Wahaha: A Bittersweet Partnership HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Global Business field
– Wahaha 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 Wahaha Danone in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Wahaha 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 Stewart Hamilton, Jinxuan (Ann) Zhang 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.
Superior customer experience
– The customer experience strategy of Wahaha Danone in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Wahaha 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.
Operational resilience
– The operational resilience strategy in the Danone & Wahaha: A Bittersweet Partnership 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.
High brand equity
– Wahaha Danone has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wahaha Danone to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Wahaha Danone is one of the most innovative firm in sector. Manager in Danone & Wahaha: A Bittersweet Partnership Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Wahaha Danone is present in almost all the verticals within the industry. This has provided firm in Danone & Wahaha: A Bittersweet Partnership 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.
High switching costs
– The high switching costs that Wahaha 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.
Weaknesses Danone & Wahaha: A Bittersweet Partnership | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Danone & Wahaha: A Bittersweet Partnership are -
No frontier risks strategy
– After analyzing the HBR case study Danone & Wahaha: A Bittersweet Partnership, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Products dominated business model
– Even though Wahaha 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 - Danone & Wahaha: A Bittersweet Partnership should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Wahaha Danone has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Need for greater diversity
– Wahaha Danone 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.
Interest costs
– Compare to the competition, Wahaha 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.
High cash cycle compare to competitors
Wahaha Danone 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wahaha Danone is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Danone & Wahaha: A Bittersweet Partnership can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Wahaha Danone products
– To increase the profitability and margins on the products, Wahaha Danone needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Danone & Wahaha: A Bittersweet Partnership, it seems that the employees of Wahaha 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 bargaining power of channel partners
– Because of the regulatory requirements, Stewart Hamilton, Jinxuan (Ann) Zhang suggests that, Wahaha 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.
Aligning sales with marketing
– It come across in the case study Danone & Wahaha: A Bittersweet Partnership 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 Danone & Wahaha: A Bittersweet Partnership can leverage the sales team experience to cultivate customer relationships as Wahaha Danone is planning to shift buying processes online.
Opportunities Danone & Wahaha: A Bittersweet Partnership | 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 Danone & Wahaha: A Bittersweet Partnership are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wahaha Danone in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business 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 Wahaha 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.
Loyalty marketing
– Wahaha 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.
Building a culture of innovation
– managers at Wahaha 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 Global Business segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wahaha Danone can use these opportunities to build new business models that can help the communities that Wahaha Danone operates in. Secondly it can use opportunities from government spending in Global Business sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wahaha Danone is facing challenges because of the dominance of functional experts in the organization. Danone & Wahaha: A Bittersweet Partnership 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.
Creating value in data economy
– The success of analytics program of Wahaha Danone has opened avenues for new revenue streams for the organization in the industry. This can help Wahaha Danone to build a more holistic ecosystem as suggested in the Danone & Wahaha: A Bittersweet Partnership case study. Wahaha Danone can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Wahaha Danone can develop new processes and procedures in Global Business 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.
Manufacturing automation
– Wahaha Danone can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wahaha Danone 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 Wahaha Danone to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wahaha Danone can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wahaha Danone 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.
Buying journey improvements
– Wahaha Danone can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Danone & Wahaha: A Bittersweet Partnership 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.
Threats Danone & Wahaha: A Bittersweet Partnership External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Danone & Wahaha: A Bittersweet Partnership are -
High dependence on third party suppliers
– Wahaha 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.
Environmental challenges
– Wahaha Danone 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. Wahaha Danone can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wahaha Danone can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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. Wahaha 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.
Increasing wage structure of Wahaha 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 Wahaha Danone.
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 Wahaha Danone business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Wahaha Danone is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Wahaha Danone has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Wahaha Danone needs to keep up with the evolution of technology in the Global Business 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, Wahaha 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 Danone & Wahaha: A Bittersweet Partnership .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wahaha Danone in the Global Business industry. The Global Business 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.
Stagnating economy with rate increase
– Wahaha 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.
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. Wahaha Danone needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Danone & Wahaha: A Bittersweet Partnership 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 Danone & Wahaha: A Bittersweet Partnership 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 Danone & Wahaha: A Bittersweet Partnership 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 Danone & Wahaha: A Bittersweet Partnership 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 Danone & Wahaha: A Bittersweet Partnership 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 Wahaha Danone needs to make to build a sustainable competitive advantage.