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Strategic Analysis Kraft Foods Company
Kraft Foods Company is the leading beverage and food company in America. The company has established footprints in more than 70 countries throughout the world selling its products to more than 200 countries via its subsidiary companies. Kraft Foods markets and manufactures packaged food products including confectionary, cookies, processed meats, convenient meals, deserts, cereals, juice, coffee and beverages. These products are major consumer products and lead the consumer markets such as cheese, beverages, and snacks under main product brands such as Maxwell house and Kraft. Kraft Foods has focused on provision of customer friendly food products by focusing on wellness and health, premium products, quick meals and snacks. The company's products are distributed via numerous channels such as satellite warehouse, distribution centers, depots, storage facilities and other facilities (Williams, 2006).
Which of the four generic (Porter) strategies does the Kraft Foods Company follow, and how do you know?
After visiting the Kraft Website, I learnt that the company is pursuing to become the first unrivalled powerhouse of snacks portfolio of an array of brands that are loved by customers. A news byte article on the U.S. market highlighted that the company's brands span to five distinct consumer segments: convenient meals, grocery, cheese, beverages, snacks and snacks. According to the company's website, Kraft has focused on their complementary nature of the portfolio of the company, which is expected to lead the growth of the company's brands. This seeks to delight global consumers of snacks. Consumers across the world are pursuing on-the-go alternatives because most of them are caught up in late for work or something else. In addition, global consumers are looking for healthier and simple indigenous alternatives that are paradoxical because most people lack time to prepare healthy meals but have to maintain healthy regular lifestyles (Daft & Marcic, 2006).
Therefore, the company is providing delicious snacks to all consumers like wellness products and LU biscuits in order to satisfy their expectations. All global consumers are in love with Kraft's iconic brand heritage. According to the company website, approximately 90% of Kraft's heritage brands are holding the leading positions in the main brand categories. In the leadership context, Kraft Foods expects to win the market; its brands must lead in all brand categories and levels of food chain in the market; from the suppliers to consumers (Grant, 2005).
In order for Kraft foods to become successful, it relies on their values such as quality, respect, safety and the brand identity, which acts like the owner of the company. Through the positive company image, the firm has entrusted the shareholders and provides them with fascinating investment returns such as 5% growth of organic revenue and much more. The current strategy used by Kraft Foods of evolving a turn-around procedure, will follow the mission of sustainable growth. This operation is expected to result in massive savings because of some closing and the simplified organizational structure (Grant & Neupert, 2003).
2) Integrate the strategy you've identified above with the strengths, weaknesses, opportunities, and threats you identified in modules 2 and 3.
Kraft Food has a diversity of product portfolio and a very strong image for their brand. Furthermore, it carries out operations in their home and international market. The well-known brands and operations combine five vital segments include 16% with convenient meals, 16.8% with cheese, 10.1% with grocery, 19.9% with beverages, and 37.2% with snacks of the total revenues that came about in the year 2009. Duplication of its brand is a very hard task and maybe a few firms have been able to copy these. For maintenance of market leadership, there is need to launching of new products that contain innovative and creative ingredients. Brand Alpen Gold is very well-known and in Russia, it is one of the leading chocolate brands (Williams, 2006).
Even with the increase in revenues from the year 2006, the operating margins for Kraft Foods, margin for net profit and margin for net, is continually decreasing. In addition to this, the operating profit for the company fell drastically to $3,817 million in the year FY2008 from $4,154 million in the year FY 2006. The reasons that are responsible for this outcome are the input cost being linked with higher costs for raw materials, hedging activities that hide losses, derivates of energy- heating oil and contracts of natural gas. A pressure from the future financial plans of the company might be the probable cause for decreasing margins that Kraft Foods is experiencing by cost structure being inefficient. Another problem can be cited from Cadbury acquisition and the debt burden for Kraft Foods has increased to $18,990 million from $5,556 million. This increasing of debt ratio will raise more concern when the company will need to go through solvency or liquidity.
The market position of the company was meant to be strengthened by the new brand of low-fat commodities for Kraft Foods. There has been a concern with health and wellness issue with the people of U.S. And this has increased the need for more fat free products, which is an advantage for Kraft Foods.
Datamonitor confirms that the economic downturn that was experienced in the U.S. had an impact on the demand for products of Kraft. Consumers opted for cheap products or merchandise that is own labeled and not branded goods, as they kept an eye on their expenses. Much of pressure that is experienced by Kraft Foods is directly coming from products of retail chain like Tesco that are only promoting their own label.
The company's net revenue ascended in the year 2009 as compared to the other years.
3) How can the Kraft Foods Company leverage its strengths and shore up its weaknesses by altering its strategic choices? How can the company take advantage of environmental opportunities and minimize environmental threats by altering its strategic choices? Be very specific!
From a general high point-of-view, Kraft Foods produce goods that are of high value (healthy organic and specified). The company has never been linked with strategies of low cost. All their brands are very popular and are among the top list in the market. In accordance with the clock of Browman, the corporate is based on differentiation and diversification. To put more focus on diversification, Irene Rosenfeld accepted to adjust the strategy of the firm by making the organizational structure simpler. In the year 2009, the firm realized some savings. However, this can also be accounted for by the closure of 36 plants and elimination of 19000 positions (Grant, 2005).
The recent acquisition of Cadbury has enabled Kraft Foods to gain recognition thus building up in management strength and market share to witness success in the international market. In the year 2006 a third of the revenues realized by Kraft were traced to have come from outside North America. If you combine the businesses, Cadbury advances the global market share more than half of the total. In other words, this strategy depicts that Kraft have opted to differentiate its market and product to sustain its market existence internationally. There is a strong belief that scale will rise to be a foundation of competitive advantage to the international food business and confectionary category. The merger will pave way for Kraft to rise to become the world's greatest and leading confectionary company owning a market share of 14.8% (Gitman & McDaniel, 2009).
The saying that goes you cannot improve what you cannot measure is one known to many people. Nevertheless, measurement may prove to be time consuming and complex, moreover when it reaches the stage of knowing how to make a reduction in the environmental impacts. This is the reason as to why Kraft is using lifecycle assessment (LCA) to assist it decide on the correct changes and ensure best results are achieved. LCA takes measure of the footprint of is taken into making a product, from ranch to diverge and beyond. Life cycle assessment is a significant part of their sustainability journey because it gave them a competitive advantage as they now have more insight on how to reduce their products' footprints, looking for efficiencies, validate, and explain the benefits to their customers and their consumers. They are working together, focusing, and communicating better that is perceived as good for the people, environment, and their business (Grant, 2005).
4) Complete the paper by commenting on how your view of the Kraft Foods Company's vision and mission has changed or has been reconfirmed by this process of strategic analysis. Would you make any suggestions to revise company's mission or vision statements, or any of its goals/objectives?
The mission statement of Kraft Foods Company has a goal, which can be measured; this is admirable. However, an external analysis of the mission statement reveals that the mission statement is unattainable. I could amend the mission by making it more focused on evoking the attainability feeling in all employees. It is too generic for the firm to say that it is the…[continue]
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