The decision of how to handle the dilemma with the production line was difficult as it was not only a business problem, but an ethical concern as well. MTS attempted to strong-arm Keurig by presenting the ultimatum; provide additional funds for the manufacturing of the K-cups packaging or the first K-cup shipment would not be delivered. This was a big problem for Keurig. On one hand, delaying the product launch of the K-cups would have hampered the company’s goal of securing the “next round of equity financing”.
The company would have been portrayed as vulnerable and unable to meet its goals. However on the other hand, how can the company succumb to extortion? Kuerig had a contract in place with the manufacturer for a fixed cost and MTS attempt to put pressure on the company for additional funds were unethical and downright sneaky. Though it is against my nature to yield to blackmail, I would have to a reach a middle ground with MTS. It was far too important for the company’s growth to further delay the shipment of the packaging line.
I would also begin the process of moving forward with the contract with Amalgamated Technologies to beginning replacing MTS. I like the decision pick to select Pilla Manufacturing as the supplier to construct the brewers. The company was flexible in their bid price and had financial difficulty. This would translate to Pilla dedicating most of their resources towards ensuring the manufacturing of the Keurig brewers meet high quality standards.
I believe the key to future success for Keurig is differentiating their product; promoting the concept that no other coffee is as fresh. This is essential as other companies begin to tap into this market. For example, Starbucks has an agreement with Green Mountain Coffee Roasters to sell their coffee in the K-cups; however Starbucks has also recently released the Verismo Single-Cup Home Brewer. This is a high pressure system that provides the Starbucks quality coffee in a single cup format.
Though Starbucks states that this product will not compete with the low pressure Keurig system, I beg to differ. If sales for this product take off, then what’s to stop Starbucks from ending their agreement with Green Mountain? Starbucks ended their agreement with Kraft to stop selling coffee discs to the Tassimo system in order to move forward with the K-cup deal. I can see the same trend happening with the K-cup agreement.