The acquisiton of Dr Pepper/Seven-Up company inc A Cadbury Schweppes case study
Page 5: Alternative strategies
Although the intention to purchase Dr Pepper/Seven-Up fitted in with the overall strategy of the company, there is always the need to look at alternatives. One clear option would be to go for organic growth, i.e. the gradual build-up of market share by using existing brands and operating competitively in the market. This was a serious option as the company had been trading in the USA for some time.
However, trading in such a large market, both in geographic size and by volume, presents problems in terms of bottling and distribution. Likewise, brand recognition takes time and money to build especially in a country which virtually created the idea of the soft drink. It would raise questions as to whether the time and effort required to build up the brands would help to achieve the company's objectives within a reasonable length of time.
Another alternative would have been to look at other partnerships, alliances and acquisitions. Given that the company had acquired a significant stake in Dr Pepper some years ago, it would be sensible to look at this investment against other possible targets to make sure that the acquisition would provide the best possible investment.
The performance of Dr Pepper/Seven-Up suggested that this was a company whose trading performance was improving and would be further enhanced by the merger. Also, Cadbury Schweppes had recognised the attraction of Dr Pepper. It had held an interest in Dr Pepper since l986 and, prior to the acquisition, held 25.3 per cent of Dr Pepper/Seven-Up.
Corporate strategy entails taking risks. Research into the options open to the company is a way of seeking to reduce the risk, but cannot eradicate it completely.
It would always have been possible to 'do nothing' i.e. to stay with the existing brands and approach, a strategy which may appear to be the least risky. However, the move towards globalisation, which means that markets show similar consumer behaviour, whether the consumer lives in North America, Europe or in Asia, has been a trend for some time and particularly in the beverages market.
A 'do nothing' strategy could leave the company vulnerable to pressure from the bigger companies which could squeeze the smaller players by aggressive pricing and promotional strategies - an approach which a smaller regional company would not have the financial muscle to counter. Customer loyalty could collapse in the face of such an aggressive approach.
Cadbury Schweppes | The acquisiton of Dr Pepper/Seven-Up company inc