Kraft Foods; SWOT and Competitive Strategies

Business Studies

Strategies for Kraft Foods

The use of the different analytical models on Kraft Foods may be brought together on a table, using a SWOT analysis as the basis, and identifying a major factor from one of the models that may be assessed within the context of the different competitive strategies that may be adopted.

Looking first at the strengths; the firs has many One which may be particularly valuable in terms of the development of competitive advantageous the research and development expertise that exists within the firm. This has been drawn from the Resource-Based View (RBV) of the firm, as one of the human resources that are available.

The weakness chosen for the analysis is the high level of substitutability, taken from the Porters five forces analysis. The goods that are sold by Kraft can be easily substituted with other goods, for example, the packet of Kraft macaroni cheese, which is an easy meal to cook could be substituted with a non-Kraft frozen TV diner, the Kraft Miracle Whip may be substituted with mayonnaise, thousand island dressing other dressings/sauces. For each product there are other products that will serve the same purpose, which are sold in the same shops, and easily accessible due to low switching barriers.

The opportunity selected is the economic influences from the PEST analysis. The current economic conditions show there is a recovery, which is increasing the potential level of disposable income in consumers. The interest rates are also remaining low, so this may also provide Kraft with opportunities for increased investment due to the low cost of capital in a marketplace that is showing an upturn.

The threat used is the high level of rivalry from Porters five forces model. The market is one that is highly competitive, with firms competing aggressively, and other major large firms also in the market, which also have significant financial resources to compete and may seek to gain better spaces on shop shelves.

Table 1; SWOT Analysis and competitive strategies

Lost cost

Differentiation

Focus

Pre-emptive

Strength; Human Resources, specifically R&D personnel (RBV)

Research into manufacturing process to reduce costs

Improve product ranges and create new marketing to emphasize the differences

Create brand extensions to specialist products

Develop new product categories to gain first mover advantage

Weakness; High substitutability (Porters 5 forces)

Decrease price on selected elastic goods to increase sales and revenue and gain, increase economies of scale

Implement a loyalty program to increase repeat purchases

Develop product for categories which are underserved

Pursue blue ocean strategy

Opportunity; Economic influences (PEST)

Investment in new process to reduce overhead costs

Investment in marketing and promotions

Expand into luxury market

Expansion into new markets

Threat; High level of rivalry (Porters 5 forces)

Aggressive with price penetration strategy to increase economies of scale

Develop product improvements and increase marketing emphasis on the uniqueness

Market expansion into underserved niche segments

Blue ocean strategy

3.

The Potential Strategies

Reading across the table, the different strategies which maybe used to address each SWOT factor for the different strategies may be briefly explained.

3.1

Strategies for Strengths

The different business strategies for each of the competitive strategies are all built on the strength of human resources, in the form of the research and development knowledge and expertise that is in the firm. For the low cost strategy the research and development resources will be used to develop new manufacturing processes which will help to reduce overhead costs (Mintzberg et al., 2011). A low cost strategy for the pursuance of cost advantage requires an organization to enhance operating efficiency, which will help to improve the underlying profits (Mintzberg et al., 2011). Increasing operating efficiency can new developments will not only improve cost efficiency, internally developed strategies will also be difficult for other firms to emulate in order to gain the same advantages. With low costs the improve profit may be used to support sales in other ways, for example increasing marketing.

The differentiation strategy may be supported through the core activities of the research and development department, increasing the level of differentiation by improving the existing product ranges, and developing new characteristics or features which appeal to the target market, which may be supported through additional marketing messages. Research and development capabilities may also support the focus strategy, with the creation of brand extensions creating specialist products that will appeal to small or niche markets, for example flavored lactose free macaroni cheese. The pre-emptive strategy may be facilitated through research and development to identify and create new product categories that will enable the organization to gain a first mover advantage (Kotler & Keller, 2011).

3.2

Strategies to Minimize Weakness

The main weakness identified with Kraft Foods was the high level of substitutability for the products. For the low cost strategy it was suggested that selected goods which have a high level of price elasticity are reduced in price, this may benefit the organization as a decrease in price for elastic products is likely to disproportionately increase sales (Kotler & Keller, 2011) Increasing market share in the short-term may also lead to long-term gains. Differentiation could be supported through the introduction of a loyalty program, such as collecting tokens of packaging to send off for complimentary products. This would encourage repeat purchases, and therefore reduce the potential for substitution. The recommendation for a focus strategy is the development of products which are targeting markets, or product categories, where there is currently only a low level of competition. These tend to be small or niche markets, and therefore there would be fewer potential acceptable substitutes, and it would be possible for this to be developed still based on the strength of the research and development department. A pre-emptive strategy with the entrance to a new market, where there is currently no existing competition for the products that are launched into that market (Mintzberg et al., 2011). This may have some risk, but could be an effective strategy is dealing with substitutability.

3.3

Strategies to Use Opportunities

The opportunity is stated as the economic condition. The growth in the economy, which may see increased demand, as well as low interest rates which makes raising capital relatively low cost may provide opportunities. For the local strategy taking advantage of low interest rates in order to make investments before new production facilities, or to support research into new processes, could be very productive in the long-term, to produce the organization's overheads. Increased differentiation could be facilitated by higher level of spending on marketing and promotions, which may also benefit from the higher level of disposable income due to the economic upturn. Increased disposable income may also facilitate expansion with the development of new brands into the niche luxury markets, supporting a focus strategy. The economic upturn is not seem just in the United States, but may be seen elsewhere, so expansion into new markets may also provide opportunities to increase sales.

3.4

Strategies for Threats