Introduction
The Kraft Foods Group is one of the leading North American food and beverage companies. It is incorporated in the United States with its headquarters in Chicago, Illinois. At the international level, the Kraft Foods Group operates like Mondelez International Inc. It operates in more than 170 countries worldwide through partnerships (Kraft Foods Group, 2013).
The company deals in a wide range of unrivaled product portfolio. These include beverages, refrigerated meals, cheese, and a wide range of grocery categories. This case study provides an internal analysis of the Kraft Foods Group with a view of determining its major resources, and factors behind its market leadership and excellent performance.
Tangible resources
A resource refers to an input that a business uses to perform its business processes. These resources are classified as either tangible resources or intangible resources. Tangible resources are physically visible and measurable. They include physical resources, financial resources, information technology resources, and human resources (Longenecker, 2012).
Physical resources
The Kraft Foods Group focuses on streamlining its physical resources as a way of enhancing its future growth. Its strategic physical resources include manufacturing plants, equipment, and buildings. These resources are used in the production and supply of its products and services.
In addition, they enable the company to carry out its administrative functions. The plants for production are designed to enable the company meet its manufacturing requirements. Through co-manufacturing arrangements, the company is able to access third party physical resources (Kraft Foods Group, 2013).
Financial resources
The Kraft Foods Group is undoubtedly a strong financial performer. In the last five years, it has recorded outstanding financial performances. In addition, its current financial position is a good indicator of its future prospects. The company’s excellent business success is also anchored on its strong consumer and supplier relationships. Although the company recorded a 1.7 % drop in net revenues in 2012, its financial performance is still sound (SEC, 2013).
In 2011, it reported a 4.8 % increase in profits. It recorded net revenue of $18.1 billion. A large proportion of this revenue is generated from its global business operations in China, Brazil, India, and Mexico. As of February 2013, Kraft had 73,071 common stockholders who contributed immensely to its equity position. In 2011, the company had an asset portfolio of $93.837 billion, with a total equity of $35.328 (SEC, 2013).
Human resources
The company has approximately 21,000 employees in the U.S and the remaining 2,100 employees are located in Canada (Kraft Foods Group, 2013). The Kraft Foods Group acknowledges that people are sources of strategic advantages, and hence it invests intensively in employee development.
It achieves this through effective recruitment, selection, training, and retention processes. The company also acknowledges that people are critical to the achievement of a competitive advantage. It has developed incentive plans to reinforce and aligns employees’ interests in its organizational performance. In order to achieve this, the company has stepped-up plans to invest in talent acquisition and development, through “Kraft University” initiative (Schroeder, 2012). This is aimed at creating its future leaders.
Marketing resources
The company has established third-party vendors for its products. In addition, it has 42 owned and leased distribution centers in Canada and in the U.S (SEC, 2013). These distribution facilities accommodate and allow its products to be delivered to markets on time.
Intangible resources
A company’s intangible resources are invisible or difficult to see (Longenecker, 2012). These resources are sources of competitive advantages. Some of the examples of intangible resources include intellectual property (patents, trademarks, and copyrights), brands, reputation, technical resources, firm’s networks, goodwill, and organizational culture (Longenecker, 2012).
Technical resources
The Kraft Foods Group has excellent IT resources that play a critical role in value delivery to the end user. The IT systems enable the company to track its operational activities from manufacturing to the supply and distribution of the products. In addition, the IT systems help in inventory, sales, and change management (SEC, 2013).
Intellectual property
Trademarks are Kraft’s most important intellectual property resources. They include Cracker, Crystal Light, Jell-O, Cool Whip, Cheez Whiz, Bakers, Kool-Aid, MiO, and Lunchables (Kraft Foods Group, 2013. These trademarks are protected through registration. In some circumstances, the company grants licenses to third parties to utilize trademarks.
In addition, the company owns a huge patent portfolio. It considers patent applications, third party patent ownership, patent licenses, technology, proprietary, and trade secrets as important resources to its operations. These patents relate to the current or potential product portfolio. The Kraft Foods Group uses these patents to cover its production technologies and other product related processes.
Goodwill
Goodwill is one of the most valuable intangible assets of the Kraft Foods Group. The company tests its goodwill at least once per annum. It calculates its goodwill by comparing its fair value and carrying value. The company reported goodwill value of $325m in 2012 compared to $43m in 2011 in its balance sheet (SEC, 2013).
Strategic alliances
The company recognizes that establishing strategic alliances and partnership is important for sustainable growth. It has established strategic partnerships with suppliers and retailers at local and international levels. Retail partners enable the company to market its products. On the other hand, strategic supply partnerships enable it to access strategic raw materials.
Capabilities
It is important to acknowledge that integration of tangible and intangible resources can enhance a company’s competitiveness (Longenecker, 2012). This practice creates capabilities that provide key competencies to companies. These competencies are hard to copy because of their distinctiveness. The examples of company capabilities are architecture, innovation, and reputation (Longenecker, 2012).
Architecture
The Kraft Foods Group has extensive communication architecture in North America and other countries across the world. The company depends on this extensive information technology infrastructure to manage its business processes and functions. The communication architecture is critical to this organization because it serves as a source of knowledge. Some of the communication infrastructures used by the company include digital platforms, databases, and other electronic communication platforms.
Reputation
The company acknowledges that a good reputation is essential to its business success. It has a long-standing reputation in the U.S and Canada. In 2008, the Reputation Institute ranked the Kraft Foods Group as a food company with the highest corporate reputation score (Reputation Institute, 2008). Consumers pointed out that it has high quality products, governance and corporate citizenship, and performance.
Innovation
After realizing that it lagged behind in terms of innovation, the R&D department has been able to create superior products across different geographical regions such as China, Brazil, France, United States, Mexico, and some countries in Europe (Kraft Foods Group, 2012). For instance, the “big bet” innovations such as MiO created by Kraft have strengthened its competitiveness in the market (Schroeder, 2012).
It has also been a major source of the company’s core competencies. This innovation addresses health and consumer willingness needs. The company spent approximately $185m, $198m, and $178m on innovation activities in 2010, 2011, and 2012 respectively (SEC, 2013).
Conclusion
Resources are very important for strategic performance of business functions. Tangible and intangible resources provide strategic advantages to a company enabling it to achieve market competitiveness. The Kraft Foods Group has strategically utilized these resources and capabilities in its growth and competitive strategies. In addition, these resources explain the excellent financial and strategic performance of the company.
References
Kraft Foods Group. (2013). About Kraft Foods Group. Web.
Kraft Foods Group. (2012). Kraft Foods research, development and Quality innovation investment fact sheet. Web.
Longenecker, J., G. (2012). Small business management: Launching and growing entrepreneurial ventures. Mason, OH: South-Western Cengage Learning.
Schroeder, E. (2012). Kraft looks to deliver top- and bottom-line growth. Food Business News. Web.
SEC. (2013). Kraft Foods Group, Inc. Web.
Reputation Institute. (2008). The most respected food companies in the United States. Web.