978-1259278211 Case 9 Solution Manual Part 1

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Teaching Note: Case 9 – Jamba Juice

Case Objectives

1. To investigate choice of competitive strategy in a crowded industry environment.

2. To examine how external and internal forces affect competitive strategy and options for

innovation and growth.

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The

Teaching Note gives guidance for the PRIMARY use chapters, and provides suggestions if the

Chapter Use Key Concepts Additional Reading and/or

Exercises

PRIMARY

Strategy

Competitive strategy; generic

NOTE additional reading

2: External

Industry competition five forces;

NOTE financial info

3: Internal Analysis Value-chain analysis; resource-

NOTE additional reading

4: Intellectual Assets Intellectual and human capital;

6: Corporate-Level

Diversification; synergy; core

SECONDARY

CONCEPTS:

11: Strategic

Leadership

12: Managing

Innovation

Innovation; scope of innovation

8: Entrepreneurial

Strategies

Opportunity recognition

Case Synopsis

Juice Club (which would eventually become Jamba Juice Company) was founded by Kirk Perron

and opened its first store in San Luis Obispo, California in April 1990. The company began with

a franchise strategy and opened its second and third stores in Northern and Southern California

Jamba’s core customers were health conscious consumers who led, or aspired to lead, a healthy

lifestyle. Therefore Jamba positioned its products as healthy alternatives to conventional

American fare, such as hamburgers, french fries, and ice cream. Due to vast options in size,

CEO White had instituted a new set of strategic priorities, following a business philosophy

focused on branding (attention to the product attributes, and company vision and values),

business planning (for long-term growth), culture (creating a team environment, passion for the

With competition highly fragmented in the specialty juice and smoothie industry, Jamba Juice

had a unique opportunity, but the expansion plan to evolve the business into an active lifestyle

company might have been too aggressive. With its new menu items, Jamba Juice would now be

Teaching Plan

The Jamba Juice case can be used to set the stage for a discussion of business policy and strategy

in a practical real-world environment. Most students can see themselves managing a juice bar, so

At the time of the case, Jamba Juice was at a critical juncture and uniquely positioned in the

specialty juice and smoothie industry. The competition was highly fragmented in the juice and

smoothie industry, with competitors including other juice and smoothie retailers (e.g. Juice It

NOTE – this case can also be used to illustrate marketing strategy, so could accompany a course

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

back to the Case Objectives Table to identify any additional readings and/or exercises so they can

be assigned in advance.

1. How should Jamba Juice compete?

2. What are key forces in the general and industry environments that affect Jamba Juice’s

choice of strategy?

3. What internal resources and assets does Jamba Juice have that may give it a competitive

advantage?

4. How should Jamba Juice manage growth?

5. OPTIONAL QUESTION: How should leadership manage innovation in this industry, and

is Jamba Juice still entrepreneurial?

Discussion Questions and Responses

1. How should Jamba Juice compete?

Referencing Chapter 5: Formulating Business-Level Strategies –

How firms compete with each other and how they attain and sustain competitive advantages go

to the heart of strategic management. In short, the key issue becomes: why do some firms

outperform others and enjoy such advantages over time? The viability of a firm’s success is

At this point, Jamba Juice appeared to be facing two critical decisions: what it could do to

maintain its lead in the juice and smoothie market; and how much it should broaden its menu

A business-level strategy is a strategy designed for firm or a division of the firm that competes

within a single business. Within the firm’s industry environment generic strategies include basic

types of business level strategies based on breadth of target market (industrywide versus narrow

market segment) and type of competitive advantage (low-cost versus uniqueness). Here are the

See the types of competitive strategies, including the three generic strategies that are used to

overcome the five forces and achieve a competitive advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Jamba Juice had followed a focused differentiation strategy: focused on the healthy consumer

segment; differentiated through its attention to quality products and creative store atmosphere.

Jamba Juice appeared to have been fairly successful with this strategy, in the juice and smoothie

industry. If Jamba Juice expanded its offerings to include more food, it would now compete with

firms in a slightly different yet still highly competitive environment. To what degree would its

assets and value-adding activities help it against the likes of Starbucks or McDonald’s? This

NOTE – ADDITIONAL READING, WEB LINKS AND VIDEO:

In a series of articles in late 2012, Motley Fool analysts discussed Jamba Juice’s situation:

Munarriz, R.A. 2012. Is a Smoothie War Breaking Out? MotleyFool. September 4.

http://www.fool.com/investing/general/2012/09/04/is-a-smoothie-war-breaking-out.aspx?

source=isesitlnk0000001&mrr=0.11

South, J. 2012 Why Jamba Juice Jumped. Motley Fool. October 2.

http://www.fool.com/investing/general/2012/10/02/why-jamba-juice-jumped.aspx?

source=isesitlnk0000001&mrr=0.14

Munarriz, R.A. 2012. Is Jamba the Next Teavana? Motley Fool. November 15.

http://www.fool.com/investing/general/2012/11/15/is-jamba-the-next-teavana.aspx

Caplinger, D. 2012. How Jamba Juiced Investors’ 2012 Returns. Motley Fool. December 21.

http://www.fool.com/investing/general/2012/12/21/how-jamba-juiced-investors-2012-

returns.aspx

In January 2013, CEO James White was interviewed on CNBC about the increasing competition

in the juice business. See the video here:

http://video.cnbc.com/gallery/?video=3000139247&__source=yahoo|headline|quote|video|

&par=yahoo

An investor presentation from June 2015 details some of the newer issues. Go to

http://ir.jambajuice.com/phoenix.zhtml?c=192409&p=irol-presentations and click to download

the presentation.

What does this say about Jamba Juice’s strategy going forward?

2. What are key forces in the general and industry environments that affect Jamba

Juice’s choice of strategy?

Referencing Chapter 2: Analyzing the External Environment –

Organizational leaders must become aware of factors in the overall environment that might affect

their ability to create a competitive advantage. So how do managers become environmentally

Environmental scanning involves surveillance of a firm’s external environment to predict

environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint

Environmental monitoring is a firm’s analysis of the external environment that tracks the

evolution of environmental trends, sequences of events, or streams of activities. Leaders need to

The challenges for Jamba Juice include increased competition in the juice and smoothie industry,

how to appeal to a wider range of consumers from differing demographics, and how to reposition

What factors or trends might be most important to Jamba Juice? To assess how the external

environment might affect the firm’s strategy, it’s necessary to take a look at the factors in the

Political-Legal: given the franchise model used by many fast food restaurants, companies have

Economic: economic uncertainty was still affecting all fast food traffic – cheap alternatives such

Demographic: weather played a role, so expansion of the smoothie market tended to follow

customer relocations – if population increases occurred in the south, then fairly steady sales

Sociocultural: consumer demand had shifted from fast food, regardless of nutritional content, to

a preference for quick but healthy alternatives, especially those that provided extra benefits such

Technological: any improvements of technology used in design of store ambiance, equipment

It’s also necessary to assess the segments of the external competitive environment that include

One important question is “what business is Jamba Juice in?” Until students are sure about the

boundaries of the business, it is impossible to do an industry analysis – what is the “industry” to

be analyzed? Given Jamba Juice’s current push to enlarge the menu to include more non-juice

The juice and smoothie industry is a relatively young industry with few strong direct

competitors. In contrast, the fast food industry is an old and pervasive competitor. Jamba’s

Porter’s five forces model allows strategists to anticipate where the industry might be most

vulnerable. See Exhibit 2.7. The industry chosen in this example is the juice and smoothie

industry.

Based on the external environmental factor analysis, the specialty juice business has many

competitors trying to carve out a piece of the “profit” pie. There are differences between the

Rivalry

High

Substitutes

Threat

Buyers’

Suppliers’

Power

Med-High

Suggested: many rivals

compete for market share in the

southern-California-style juice

power negotiating for

seasonable, perishable commodity.

Suggested: substitutes

for the store smoothie

are easy – customers

just need a recipe and a

Threat of

NOTE – ADDITIONAL WEB LINKS TO FINANCIAL DATA AND COMPETITORS:

Find information about Jamba Juice’s current stock position and its competitors available at:

http://finance.yahoo.com/q?s=JMBA&ql=0

The broader refranchising strategy was one of the initiatives proposed in Jamba Juice’s

“BLEND” program in January 2009. According to President and CEO James White, “Today we

wanted to formally reiterate our strategic priorities to allow all of our core constituencies the

ability to understand our actions to revitalize Jamba in light of continuing weaknesses in the

And in January 2013 CEO White announced strategic priorities to focus on brand building,

product innovation, growth and store refresh programs under BLEND Plan 3.0. See

http://ir.jambajuice.com/phoenix.zhtml?c=192409&p=irol-newsArticle&ID=1775032 for details.

And here is the Jamba Juice website. See the Franchise Opportunities at the top right of the page.

Jamba does not allow single store franchises, only multi-unit agreements that require the area

In the smoothie category, Jamba Juice competes against several well-established players such as

Froots, Tropical Smoothie Cafe, Smoothie Factory, Booster Juice, and Smoothie King. Visit the

How does Jamba Juice appear to compete, and in what categories?

3. What internal resources and assets does Jamba Juice have that may give it a

competitive advantage?

Referencing Chapter 3: Analyzing the Internal Environment –

A competitive strategy is linked to the value chain, and supported by intangible assets. As can be

When one firm outperforms others by a wide margin over a long period of time, it’s important to

figure out how this could be. The answer may lie in how that firm arranges its activities and

A sample value chain analysis follows:

Value chain activity How does Jamba Juice create value for the

customer?

Primary:

Inbound logistics (distribution

facilities, material control

Emphasis on high quality ingredients. Conducted

quality assurance testing at supplier locations to ensure

Operations (efficient work flow

Emphasis on consistent product quality and attention to

Outbound logistics

(consolidation of goods, efficient

Stores were bright, clean, had a theatrical atmosphere so

customers could be entertained during food preparation.

Marketing and Sales (motivated

sales people, innovative

advertising & promotion,

Jamba Juice promoted its healthy products by stressing

healthy benefits, keeping the menu appealing,

introducing new exciting products, creating an

Service (ability to solicit

Given Jamba Juice’s emphasis on its culture, this could

Secondary (or support):

Procurement (win-win

relationships with suppliers,

reduced dependence on single

Purchased all projected product requirements at the

height of the season for each type of produce in order to

assure the highest quality and reduce product costs.

Technology development (state

of the art hardware & software,

Formal training of franchisees fostered a common

culture, focus on healthy living. Use of new point-of-

Human resource management

Franchisees were carefully screened; employees were

General Administration

access to capital, effective top

management communication,

relationships with diverse

stakeholders)

Change of strategy regarding franchisees could help get

In addition, see the concept of the resource-based view of the firm, and the three key types of

resources: tangible resources, intangible resources, and organizational capabilities. Determining

An important issue to focus on here is the importance of intangible resources like innovation and

reputation. In this consumer-based business, sustaining brand reputation is essential. Look at