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 - – talent flight as more people leaving formal jobs, wage bills are increasing, increasing household debt because of falling income levels, there is backlash against globalization, challanges to central banks by blockchain based private currencies, geopolitical disruptions, cloud computing is disrupting traditional business models,
competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, 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 -
Sustainable margins compare to other players in Global Business industry
– Danone & Wahaha: A Bittersweet Partnership firm has clearly differentiated products in the market place. This has enabled Wahaha Danone to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Wahaha Danone to invest into research and development (R&D) and innovation.
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.
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.
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.
Low bargaining power of suppliers
– Suppliers of Wahaha Danone in the sector have low bargaining power. Danone & Wahaha: A Bittersweet Partnership has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wahaha Danone to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Wahaha Danone digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wahaha Danone 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 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.
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.
Learning organization
- Wahaha 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 Wahaha Danone is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Danone & Wahaha: A Bittersweet Partnership Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Effective Research and Development (R&D)
– Wahaha Danone 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 Danone & Wahaha: A Bittersweet Partnership - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Wahaha Danone is one of the leading recruiters in the industry. Managers in the Danone & Wahaha: A Bittersweet Partnership are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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 -
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.
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.
Increasing silos among functional specialists
– The organizational structure of Wahaha Danone is dominated by functional specialists. It is not different from other players in the Global Business segment. Wahaha Danone needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wahaha Danone to focus more on services rather than just following the product oriented approach.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Danone & Wahaha: A Bittersweet Partnership 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 Wahaha Danone has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Danone & Wahaha: A Bittersweet Partnership HBR case study mentions - Wahaha 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Danone & Wahaha: A Bittersweet Partnership, in the dynamic environment Wahaha Danone has struggled to respond to the nimble upstart competition. Wahaha Danone has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Danone & Wahaha: A Bittersweet Partnership 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 Wahaha Danone 's lucrative customers.
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.
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 -
Learning at scale
– Online learning technologies has now opened space for Wahaha Danone 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.
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. Wahaha Danone can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Using analytics as competitive advantage
– Wahaha 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 Danone & Wahaha: A Bittersweet Partnership - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wahaha Danone to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Wahaha Danone in the consumer business. Now Wahaha Danone can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wahaha 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. Wahaha 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 Wahaha Danone to increase its market reach. Wahaha 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Wahaha Danone can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Wahaha Danone 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.
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.
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.
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.
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 -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Regulatory challenges
– Wahaha Danone 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 Global Business industry regulations.
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 Wahaha Danone.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wahaha Danone with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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.
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.
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.
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.