Healthy Potion Case Study Solution

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As a goods-producing business, its flagship beverage called healthy potion is generating considerable income, and expanding continuously. However, in the long term, the business with a single product, may not earn constant revenues to cover its expenses, due to the changeable demand affected by consumer preferences. Hence, diversification strategies could be applied to the business. This case study also evaluates debt and equity financing, followed by a fund raising scheme. It suggests that a combination of debt and equity funding is acceptable, and the level of equity financing may be greater than debt financing.
Strategic Analysis
The coexistence of the rewards and the risks in diversification may maximise business value or depreciate it
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In terms of the strengths, healthy portion business has achieved product differentiation, since it sells an exclusive beverage, requiring plant extracts from north-western China. The raw materials are unique and the production technology is confidential that cultivated the core competence (Needle 2010 cited in Ji 2015, p. 6). Moreover, compared to soft drinks that are popular in the market, plant concentrate tends to be healthier. Additionally, the business has operated for a few years and become profitable. It has built a customer base, for the reason that the demand of healthy portion increases in the warmer seasons, and remain stable in the colder seasons. Consequently, the consumer loyalty generated by healthy portion is beneficial to the further development of the …show more content…
In terms of the opportunities, in recent years, consumers have raised their awareness of the health issue, especially for females, family with children, and customers with a high level of health consciousness (Cavaliere, Ricci and Banterle 2015). Specifically, healthy portion beverage is made of water and plant extracts, that is low-calorie and sugar-free. As a result, healthy portion business could expand the sales based on the target consumers. Moreover, overweight and obesity have become one of the public issues in modern society. As a result, a wide range of policies and regulation are implemented to reduce the market shares of sugary drinks. In the United States, the government, who imposed taxes on sugary drinks, is a case in point. Some studies simulated the influence of this tax, indicating a 14%-20% decline in the demand of taxed drinks. Thus, sugary-free beverages like healthy portion are likely to obtain larger market share (Novak and Brownell

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