Tetra Pak Versus Greatview: Business Analysis

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Table of Contents

Executive Summary
Introduction and Background
Findings
Strategic Recommendations for Tetra Pak and Greatview
Implications for Non-Action
Conclusion
Reference List

Executive Summary

Over the last two decades, the international industry of aseptic packaging has witnessed an increasing competition between Tetra Pak, the market leader, and the companies emerging from new fast-growing markets. With Tetra Pak being accused of abusing its dominant position, and its competitors, such as the Chinese company Greatview, being able to offer attractive prices, the market environment has changed dramatically. This paper aims to suggest new business strategies for Tetra Pak and Greatview based on the analysis of Porter’s Five Forces Framework, McKinsey’s 7S Framework, and BCG matrix. Switching from an aggressive strategy to a more friendly approach, offering more flexible prices, developing new technologies, and acknowledging the interests of other market players can help Tetra Pak to maintain and reinforce its leading position. The company should embrace the competition rather than act defensively towards new market players and industry changes. Greatview is advised to carefully follow the international market trends and develop a strategy that would provide an adequate answer to the course of action taken by Tetra Pak.

Introduction and Background

Over the last two decades, the market for aseptic packaging has been shaped by the growing competition between Tetra Pak, the long-term industry leader, and Greatview that entered the market in 2003. With the introduction of new anti-monopoly laws, Greatview seized the opportunity to challenge Tetra Pak’s market dominance by providing a reasonably priced alternative. The case study “Tetra Pak versus Greatview: The Battle Beyond China” explores the recent developments in the Chinese and international markets for aseptic packaging and the strategies used by both companies to increase and maintain their market presence. The purpose of this paper is to analyse the case study, perform a detailed analysis of Tetra Pak’s current position on the market, and draw up recommendations for Tetra Pak and Greatview on how their business strategies can be adapted to the changing market environment.

Three methods were used to analyse Tetra Pak’s current position in the Chinese and international markets: Porter’s Five Forces Framework, McKinsey 7S Framework, and BCG matrix. These are the most popular tools used for putting together a company’s profile and evaluating its business strategy (Witcher and Chau, 2010). Porter’s Five Forces Framework allows us to analyse the level of competition within an industry. BSG matrix is used to facilitate decision-making, and McKinsey’s 7S Framework allows us to monitor changes in the internal structure of an organization (Tang, 2014). With Porter’s model being the most helpful in assessing the state of competition, all three methods combined together provide a complete picture of the market situation.

Findings

Porter’s Five Forces Framework

Porter’s Five Forces Framework is a business strategy tool for determining the company’s level of competitiveness and potential profitability. It was developed by Michael E. Porter in 1979 and has been extensively used to analyse the sources that shape competition within an industry (Schermerhorn, 2009). The framework identifies five forces that make up a competitive environment: competitive rivalry, buyer power, supplier power, threat of new entry, and threat of substitution (Dobbs, 2012). Using Porter’s Five Forces Framework to evaluate Tetra Pak’s current position on the market and establish its potential business development strategy, each of the five factors needs to be analysed.

Competitive rivalry. In China, Tetra Pak’s main competitor is Greatview Aseptic Packaging Company Limited with a market share of 9.5% as of 2009, compared to Tetra Pak’s 70.2% (Tao and Chung, 2014). Having battled its way through the initial challenges of entering a monopolistic market, it now offers high-quality packaging materials and services at attractive prices both to Chinese and international customers. The introduction of the Anti-Monopoly Law in 2007 changed the business environment and enabled Greatview to grow and come up with new strategies to increase its market presence, threatening Tetra Pak’s dominance.
Bargaining power of suppliers. Tetra Pak has exclusive agreements with key suppliers of raw materials. Because of the company’s dominant position on the market and its ability to offer high purchase prices, it greatly benefits from having a diverse supplier network, which provides a significant advantage over its competitors.
Bargaining power of buyers. The Anti-Monopoly Law changed the market environment in China, enabling buyers to switch between suppliers and allowing competitive products to enter the market. As was the case with Mengniu, the first Greatview’s large-scale customer, buyers leave Tetra Pak because of competitors’ attractive prices and the company’s inability to satisfy the Chinese market’s growing production needs.
Threat of new entrants. The international market for aseptic packaging has been dominated by Tetra Pak since 1961, when the company pioneered this technology. From its earliest days, it has taken a rigorous approach to protect its intellectual property rights, making it hard for potential competitors to enter the market. However, the alleviation of exclusivity restrictions changed the industry dynamics in China, opening the door for small-scale businesses, with Greatview being the first company to provide a competition to Tetra Pak.
Threat of substitute products. Tetra Pak’s business strategy has always been focused on the development and maintenance of the company’s dominant position based on exclusivity restrictions and thorough protection of intellectual property rights. In China, most small-scale companies within the industry offer packaging materials and spare parts that are compatible with Tetra Pak products (Tao and Chung, 2014). With the development and reinforcement of intellectual property regulations, it has become be more difficult for them to maintain their positions. Since the industry is dominated and shaped by Tetra Pak, the possibility of other companies coming up with a competitive substitution is highly unlikely.

In the framework of Porter’s Five Forces method, the Tetra Pak’s current position on the market has both strong and weak points. In terms of supplier power and threat of substitution, the company’s positions are strong, because, being a market leader, it has an extensive pool of suppliers and offers unique high-quality products. However, its positions on the Chinese market are threatened by recent trends: the changes in anti-monopoly legislation that allow small-scale companies to enter the market, and the market’s rate of growth. The company’s business strategy should take into consideration the industry’s recent developments and changes in the market’s environment.

McKinsey’s 7S Framework

McKinsey’s 7S Framework was developed in the late 1970s by business consultants Tom Peters and Robert Waterman, former employees of McKinsey & Company. The model is used as an organizational analysis tool to monitor changes in the internal structure of an organization (Plant, 2000). It identifies seven key elements that need to be addressed in order to develop a successful business strategy. The 7S are structure, strategy, systems, skills, style, staff, and shared values (Singh, 2013). When using McKinsey’s 7s method to evaluate Tetra Pak’s market position, it seems logical to focus on three main elements: structure, strategy, and systems, with the other four playing a less important role.

Strategy. Tetra Pak’s strategy is aimed to maintain its dominant position by implementing a range of both aggressive and positive measures. On the one hand, the company attempts to create a positive image by means of advertising and a brand strategy aimed to place emphasis on the environmental value of its products. On the other hand, it employs an aggressive strategy to defend its intellectual property rights and reinforce its market position.
Structure. Tetra Pak’s headquarters are based in Lund, Sweden, and Pully, Switzerland, and its offices and production facilities are located all over the world. As of 2012, it has 11 research and development centres that create new technologies in close collaboration with universities and research groups (Tao and Chung, 2014). In China, Tetra Pak owns 11 production facilities, and a product development centre in Shanghai focused on the development of new products for increasingly demanding Chinese consumers.
Systems. Within the case study, less attention is given to the analysis of systems and processes within the company. However, it should be noted that the company is managed and organized effectively, with all its departments working collaboratively to address international and local market challenges.

The analysis based on McKinsey’s 7s model shows that Tetra Pak’s brand strategy to some extent disagrees with its business patterns. While promoting a friendly and positive approach, the company acts aggressively towards other market players, being often accused of abusing its dominant position to eliminate competition (Jia et al., 2019). Perhaps, this contradiction should be taken into consideration when developing the company’s future business strategy.

BCG Matrix

The Boston Consulting Group’s product portfolio matrix is aimed to facilitate the company’s long-term strategic planning by reviewing its portfolio of products. The matrix is divided into four quadrants based on the products’ relative market share and their potential for growth (Armstrong, 2006). There are four categories of products: ‘cash cows’ that generate the main flow of money, ‘dogs’, units with a low market share in a slow-growing industry, ‘question marks’, and ‘stars’ (Fleischer and Bensoussan, 2015). ‘Question marks’ are units with a low market share in a high-growth market, while ‘stars’ are products with a high market share in a fast-growing industry.

By using the BCG matrix to analyse Tetra Pak’s current position on the global market, it can be concluded that the company specializes in products that fall into ‘cash cows’ and ‘stars’ categories. It dominates the international market of aseptic packaging, offering unique products based on technologies protected by intellectual property rights (Olsmats and Kaivo-oja, 2014). However, the situation is different with the Chinese market that develops rapidly and is open to new entries and ideas.

Strategic Recommendations for Tetra Pak and Greatview

In order for Tetra Pak to face the growing competition in the Chinese and international markets, several possible strategies can be developed. The main issues that need to be addressed are legislation changes, customers’ motivations to switch suppliers, the critique of the company’s aggressive business tactics, and the threat of growing competition. With potential competitors coming from new fast-developing markets, the company needs to come up with a well-thought-out strategy to maintain and reinforce its position.

First of all, the changes in the regulatory environment and anti-monopoly legislation need to be observed. Instead of holding on to the aggressive strategy, it is advisable to come up with a more careful and considerate approach, acknowledging the company’s mistakes and admitting that it had really been abusing its dominant position. By implementing a more friendly approach, a lot of potential conflicts can be prevented. Second, an answer to the growing market competition should be provided. More flexible product prices can be introduced in order to respond to competitors’ attractive offerings. The possible decrease in prices can also be prevented by collaboration with other market players. Third, new technologies should be developed to provide new answers to customers’ increasing demands.

Being a relatively new player on the market, Greatview is advised to carefully follow the international market trends and develop a strategy that would provide an adequate answer to the course of action taken by Tetra Pak. It should carefully consider the risks of luring away Tetra Pak’s clients and be careful as to not to violate intellectual property protection laws. The company should also focus on developing its own products and technologies, and on creating its own distinctive image and brand strategy.

Implications for Non-Action

The ‘no-action’ scenario for Tetra Pak implies not taking a passive position when its property rights are violated, acting without consideration of the specifics of industry changes, and avoiding any communication with its competitors. If no actions are taken by Tetra Pak, its position on the market will be weakened by the deterioration of the company’s image, and the increase in its competitors’ market share. Taking no action for Greatview means to stop searching for new customers and market opportunities. If no actions are taken, the company will not be able to increase its market share and will soon be absorbed by Tetra Pak.

Conclusion

Over the last two decades, the international aseptic packaging industry has been shaped by several major trends. Tetra Pak, being a long-term market leader, has been accused of abusing its dominant position, and new competitors, such as Greatview has entered local markets and expanded its businesses to provide a global challenge to the industry giant. Having analysed Tetra Pak’s current market position within Porter’s Five Forces Framework, McKinsey’s 7S Framework, and BCG matrix, several possible business strategies can be suggested. Switching from an aggressive strategy to a more friendly approach, offering more flexible prices, developing new technologies, and acknowledging the interests of other market players can help Tetra Pak to maintain and reinforce its leading position. The company should embrace the competition rather than act defensively towards new market players and industry changes.

Reference List

Armstrong, S. (2006) ‘Competitor-oriented objectives: the myth of market share’, International Journal of Business. Web.
Dobbs, M. (2012) ‘Porter’s Five Forces in practice: templates for firm and case analysis’, Competition Forum, 10(1), pp. 22–33. Web.
Fleischer, C., and Bensoussan, B. (2015) Business and competitive analysis: application of new and classic methods. FT Press.
Jia, F., Wu, Z., and Gosling, J. (2019) ‘Tetra Pak: sustainable initiatives in China’, Managing Sustainable Business, pp. 53–72. Web.
Olsmats, C., and Kaivo-oja, J. (2014) ‘European packaging industry foresight study—identifying global drivers and driven packaging industry implications of the global megatrends,’ European Journal of Futures Research, 39. Web.
Plant, R. (2000) Ecommerce: formulation of strategy. Upper Saddle River: Prentice Hall Professional.
Schermerhorn, J. (2009) Exploring management. Hoboken: John Wiley & Sons.
Singh, A. (2013) ‘A study of role of McKinsey’s 7S Framework in achieving organizational excellence’, Organization Development Journal, 31(3), pp. 39–50.
Tang, D. (2014) Introduction to strategy development and strategy execution. Flevyblog. Web.
Tao, Z., and Chung, R. (2014) Tetra Pak versus Greatview: the battle beyond China. Hong Kong: Asia Care Research Centre, The University of Hong Kong.
Witcher, B., and Chau, V. (2010) Strategic management: principles and practice. Andover: Cengage Learning EMEA.

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