Kraft: Resource-Based View Assessment of the Organization in 2014

Business

RBV Analysis of Kraft Foods

Kraft Foods is a large corporation with interests in many sectors of the food and beverage markets. The basis of the firms' success, and challenges, can be appreciated by looking at the firm from an internal perspective using the resource-based view (RBV). In a resource-based view analysis a firm can be seen as more than its output, instead it is viewed in the context of its combined assets and competences and the way in which they are configured, or can be reconfigured, in order to compete and create value.

The resources themselves may be considered in two main categories; the tangible and the intangible resources. The different asset types may be assessed individually, with consideration of the way they are configured.

Tangible resources

Physical assets

A major category of Kraft Food assets, and an asset group on which the firm is highly reliant on, are the physical assets. Physical assets are the tangible assets that include the real estate and property, machinery and equipment. The company has a major advantage compared to many other firms, with the number and type of facilities own. At the end of 2013 company operated a total of 36 different manufacturing facilities, 34 located in the United States, and to in Canada (Kraft, 2014). The company owns all of these facilities, rather than leasing, not only created a strong asset class, but also creating a strong asset foundation, giving the organization significant control over their supply chain. Some of the facilities are specialized production facilities, where only one product can be produced, but others provided provide a degree of flexibility, producing several products with in similar categories. Cheese can be made in 12 locations, beverages and 8 locations, meals and deserts in 10 locations, and refrigerated meals in nine locations. Snacks, nuts and enhancers can be manufactured in 8 locations (Kraft, 2014). In addition to these production facilities, the company also has access to resources that are not owned through third parties, using outsourcing agreements in order to increase overall levels of production (Kraft, 2014).

The production facilities are supported with a network of 39 distribution centers, 36 located in United States, and three located in Canada, of these 4 are owned, and 35 are released. The leasing of the distribution centers provides organization with a high degree of flexibility should distribution strategies change (Mintzberg et al., 2011).

Another major resource of the three researches and development centers which focuses on new developments, including improvements to existing lines, product extensions, as well as new products placed. The centers contain a significant level of up-to-date equipment, and support a higher level of research and development, the net expense of this in 2013 was $118 million (Kraft, 2014). The ability to develop new products and improve existing lines is enhanced with a company owning and production facilities, as is provide increased its ability, the organization may also work in a more integrated manner.

In total, the book value of the property, plant and equipment, which are the main categories of physical assets, were declared at $4,115 million in the 2013 annual accounts (Kraft, 2014).

Financial resources

The company has significant financial resources, which has been indicated with the $118 million spent in 2013 on research and development (Kraft, 2014). The organization is able to take advantage of economies of scope and scale, and the ability to benefit from efficient operations. The financial resources are aided by a superior profit margin compared to the industry, the pre-tax profit margin is 20.25%, compared to the industry average of 15.27%, and the net profit margin of 13.4% compared to an industry average of 10.25% (MSN Money, 2014). The organization has an increasing level of stockholders equity, which was $3,572 million in 2012, and the 2013 has increased to $5,170 million.

Human resources

Human resources are also important resources in the organization. The company employs approximately 22,500 workers, the majority located in the United States, where there are approximately 20,400 working, and 2100 are located in Canada (Kraft, 2014). The company has a large number of highly skilled, and/or qualified staff, who provides a significant level of intellectual capital as well as support operations. For example, there are 525 Davis specialist located within the research and development facilities, including chemists, engineers and food scientists, all of whom are working towards the development of new products, or make improvements to existing product lines (Kraft, 2014). It may also be argued that the leadership of the organization is also key assets commits they have evolved and develop the current strategies, which has seen the company gain and retain significant market share, such as the 39.68% share of the cheese market in North America (CSI Market, 2014).

Intangible resources

Intangible assets are assets and resources that cannot be physically held. These may also be considered as equally important is the physical assets, with a leg can be more difficult to assess.

Technical assets

The organization places a greater reliance on its internal technical systems. The company as a range of different IT systems, some of which operate internally, and some of which tie up with trading partners, for example the organization works with WalMart, within the WalMart inventory management system, allowing them to undertake forecasting, and to aid with production planning. This is particularly useful when it is considered that WalMart are the largest customer, accounting for approximately 26% of all Kraft's sales (Kraft, 2014).

The organization also has other technical assets. For example, one is the "big Fork Little Fork" app which has been released for iPad, is also available for personal computers, costing $1.99 when it was released, is a small program that provides users with information and recipe so they can use Kraft Foods in a nutritious manner (Kleinberg, 2011). Organizations that are able to gain access to social media, and engage with their customers are likely to enhance their brand values (Kotler & Keller, 2014).

Intellectual property

Intellectual property is a very broad category, and includes brands, the company reputation, patents and goodwill. The organization has a well-known, and well respected, brand image. In 2011 a brand survey undertaken by Harris interactive found that Kraft came in 7th place, demonstrating not only high level of awareness, but a significant level of trust within the brand (Alvarez, Gonzalez, & Daguerre, 2012). This is particularly notable result, as the server itself was undertaken with 30,000 people, and therefore highly likely to be representative of the overall brand reputation of the firm.