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Case Study Report Assignment # 1

“Storehouse Tea: Cultivating Options for Growth”

1) Executive Summary (provide an overall summary of the case, the background,


the problem(s)/question(s), etc.):

Paula Hershman is the owner and founder of Storehouse Tea where she specializes in
selling organic, fair trade, loose leaf tea. It was in 2006 when she found her love for
loose-leaf tea after finding out she was no longer able to feed her coffee addiction due to
a health condition. After experimenting and researching various types of teas, she started
creating her own homemade blends for her and her friends to drink and test together. In
2007, she founded her company Storehouse Tea and started out very minimally. Soon
after that, Whole Foods decided to carry her products and from there her business started
to take off. Her business quickly evolved in 2013 after getting a loan for a space in
Cleveland’s Hildebrandt Building, to eventually having a store front on the first floor
next to the kitchen where the teas were produced. After getting to this step in her business
career, she really started thinking of ways to grow her business even more. Hershman had
two main goals for her business. Her first goal was to provide an all organic loose-leaf
tea. Since organic products have to pass many guidelines and requirements, the quality of
the Hershman’s tea compared to others was greatly increased. She wanted to make sure
her customers were getting the highest quality tea and the only way to ensure that was to
make sure it was organic. Her second main goal was to be fair trade certified. She knew
the working conditions of conventional tea producers and decided that wasn’t something
she wanted her business to support. By being fair trade certified she knew that the farms
where her products were coming from had very fair working conditions for their workers.
Not only did she want her business to be ethical, she was also very willing to help out the
community. Cleveland had a large population of refugees that had many troubles finding
jobs due to various barriers. Hershman decided that because her company buys
ingredients from many parts of the world it was her job to provide jobs for the women
refugees to give them a fair chance. Looking ahead, she has had many different ideas for
ways to grow her company. She is unsure if her best route is to introduce new products,
expand to new territories, gain large accounts, change her product appearance such as tea
bags versus loose leaf tea, or creating a position for a customer service manager. She is at
a very crucial stage in her business and she is unknown of the next steps to take.

Case Study Questions:

2) Perform a SWOT analysis for Storehouse Tea.


Strengths
- Ethics: She supports fair trade farms and organically treated foods; therefore, she gains
respect from her customers that buy her products that also support those things. She takes
a lot of time to make sure she is doing the right thing for her business but for her
community as well and that stands out to people a lot.

- Products: Her range of products is very large so it is extremely accommodating to


many different tea drinkers. She has sold more than 50 different types of tea ranging in
many different flavors. She has also offered mini samples for customers to try her
products rather than them buying a bunch at once. This is attractive to customers because
it shows that she is really trying to accommodate to her customer base.

- Buyers: She has had many outside companies buy her products to sell in their stores or
to serve in their restaurants/cafes. This helps get her product more known especially if
customers see that other companies are investing in her products as well.

- Ingredients: She takes pride in the fact that all her products are all organically grown in
order to provide the best quality for her customers. Her tea is known to be a very high-
quality tea that many people love.

Weaknesses
- Sourcing: Hershman runs into a lot of issues when it comes to where she gets her
products from. She knows that there are only certain countries to buy certain teas from,
but then at the same time she runs into the issue of higher cost and compromised
freshness. She was looking to find a local farmer to buy from but many don’t want to take
the time to acquire a processing license. In the end, she knows that there are only certain
places where she will receive the best quality of products and that is across seas.

Opportunities
- New products: Hershman could introduce new product lines for her customers. She is
interested in creating a tea cookie that could potentially draw more people to her
business.

- Key accounts: She could work to gain key accounts with other companies to help grow
her business. By doing this it will help get her business out there more and better well
known.

Threats
- Other companies: There are many different other tea brands that are very popular and
well known already. If one of those companies creates something new, they could
potentially take customers from Storehouse Tea.

- Sourcing abroad: Since many products are bought from across seas, there are many
different factors that play a role in being able to buy and receive the products. If there is
ever a natural disaster where she buys her products exclusive to that area, this could
potentially be a big threat to her business.

3) Perform a Porter’s 5 forces analysis for Storehouse Tea’s industry.

- Threat of new entrants: I think the threat of new entrants is in the middle. In my
opinion, there are only a few main tea brands out there that I am personally familiar with
and those are Lipton, Teavana, Tazo, and Celestial. Many people stick with those brands
of tea because that is what they have always been familiar with. On the other hand, tea
has become a trendier thing that people are starting to follow so I can see people entering
into the competition but not being able to compete due to lack of knowledge and the
familiarity of other products.

- Bargaining power of buyers: I think the bargaining power of buyers is high. Since
there are so many different brands of tea, customers have the option to compare based on
prices, quality, and taste. This gives buyers the power to stay loyal to one specific brand
once they find the one that they really like.

-Threat of substitute products: I think threat for substitute products is high due to many
other drinks people could choose to have over tea. Any type of cold or hot beverage
ranging from coffee, water, juice, people always have another option for something else
to drink. There is a company in Arizona called Dutch Bros that sells tea energy drinks
which is also a very common substitute in young adults.

-Bargaining power of suppliers: I think the bargaining power of suppliers is very high
because they can determine how high they want to make their prices. Especially in the
countries that specialize in one specific type of tea, a lot of times that is that only place
business owners can buy it so they are able to charge as much as they want because they
know they will buy it regardless.

- Rivalry among competitors: I think rivalry among competitors is also high because
there are only a few main really popular tea brands so I think they all try to come out with
new teas to try and compete with them. Whether it’s new flavors or new forms for
convenience, they are all trying to steal each other’s loyal customers.

4) Consider each quadrant of the Ansoff Matrix (product-market matrix for


strategic growth), and discuss each of Storehouse Tea’s potential options for
strategic growth. What are the potential advantages and disadvantages for each
option?

- Market penetration: I think if Storehouse Tea expanded to other areas of the US and
entered the existing market in different areas, they could be really successful. First they
need to do extensive research where they think the business would thrive because if they
don’t, one of the main disadvantages would be for the business not to work out and waste
a lot of money that could be spent elsewhere.

- Product development: I think if she were to develop new products and put them in
already existing markets she could have a lot of success. She could create even more
blends of tea, more tea utensil products, as well as the cookies she is interested in
making. She has many different options for growth with new products, but on the other
hand if the products aren’t successful, she risks losing a lot of money and time spent on
those products.

- Market development: Storehouse Tea could be really successful if they reached out to
new markets. She could reach out to different colleges and even target hospitals. College
students love drinking different kinds of tea, coffee, smoothies, etc. so I think bringing
her business to a college town could be beneficial for her. Also, many people who are
sick in the hospital would probably really enjoy drinking different types of tea because
it’s relaxing and often times provides health benefits. One of the biggest disadvantages
she risks is the product being too expensive for college students or hospital patients
having better alternatives that their doctor wants them to have.

- Diversification: Storehouse Tea could have a very hard time bringing a new product
into a new market. There could be a lot of room for growth in her company, but at the
same time she has to do a lot of market research to make sure she is creating the right
product for the right market which can be very expensive. I think if she created
something for her customers to use to make the brewing of her tea more convenient, she
could have a lot of success, but before she goes through with it there is lots of research to
be done first.
5) Based on all of these analyses, and your personal pondering of the case, what do you
recommend Storehouse Tea do? Why? (please justify your answers)
After reading and studying this case, if I owned Storehouse Tea I would create more product
extensions and revise my marketing materials. These both seem like safe routes for her to start
out at because she is just now really starting to grow her business. Once she generates revenue
from this, she can focus on the more expensive routes to grow her business. There are a lot of
different products that can be made that will draw the attention of buyers to make her company
look more attractive. People are always looking for new flavors, improved brewers, and maybe a
mug for on the go purposes. By revising her marketing materials, I think she could potentially
reach her market in a whole new way without even knowing it. This may help her reach current
customers better and even gain more customers she didn’t know she had. Social media is a very
powerful tool when it comes to growing a business. The amount of advertising and marketing
you can do for your business is endless and relatively free. If she spent time really promoting her
company and creating her brand on social media, she could have a lot of success for little to no
cost at all. Once she gets revenue generating, I think she should analyse her social media and see
where her online business is coming from. Then, she can start thinking about opening a new
storefront in those cities to bring the market to them rather than them only having an online
option. This technique pretty much does the market research for her and she doesn’t have to
worry about who will buy her product and who won’t because they’re already buying it online.
Once she expands to opening a new store front in a different region, then it would be necessary
for her to hire more additional staff to run her business. With the new business, she will have
more money to be able to pay her employees. I think by doing all of these steps in the right order,
she would set her business up for success.