Executive summery
This formal report presents the result of a study on Kraft Foods Group used to recommend strategic decisions. The study focuses more on thorough analysis of the internal environment.
The body of the report includes how both PERT and SWORT analysis were used to analyze the company’s external and internal environment. The information discovered from the assessment lead to recommendations and conclusions which forms the last part of the report.
Introduction
The demand in the food industry has created competition because consumers continually need and want to feed. The main purpose of this study is to analyze this life preserving habit of human beings and how it has made Kraft Foods recession-proof. The study focuses on strengths, weaknesses, opportunities and threats that helps the company go through the economic downturns making it resilient and profitable.
The wide range of opportunities brought about by different products in the market together with improved technology has created more channels of marketing. This report clearly shows the analysis of the internal environment at Kraft foods. Evaluation of strengths and weaknesses of the company using SWOT analysis also formed part of the collective assessment.
The external environment
It is the external environment that creates problems within the organization proving that without the external environment, it is hard to know how strengths and weaknesses affect the organization. Strategic analysis involves assessing both the general and internal environment (Ireland, Hoskisson and Hitt, 2008). It also deals with the internal environment and the factors that affect the internal environment.
Political factors such as government policies and systems influences tax and tariffs and as a result affect food industries. Such includes regulations and importing policies and procedures. These government interventions also affect the demand and supply of foods.
Kraft Foods is among the companies affected by political decisions and instability because it takes its products all across the world even to the Middle East. Egypt for instance has experienced war for a very long time due to transitional groups. The same happened in Libya and Syria.
Stability, purchasing powers, economic recession and inflation rate certainly affect the internal environment though they originate from the external environment. All the decisions and actions taken by the managers of the company in all the areas of the organization are affected by the economic factors.
The technology used at Kraft affects the environment and ecological aspects of the business. The technological changes affect quality standards of a product and affect the price of the product. The ingredients at Kraft Foods are developed through bio technology. Genetically modification of food products have received mixed reaction from scholars who believe that nanotechnology can be used to replace such products.
Religious beliefs, nationality and culture also affect consumption hence influencing demand of food products. The demographics clearly state that brand awareness differs depending on factors such as income distribution. Kraft Foods sells pork free products to the Middle East and Arab countries.
Internal environment
PERT analysis is helpful in preparing for a SWOT analysis which involves the internal assessment of the weaknesses, strength, opportunities and threats within the internal environment of a business (Pahl, Richter and University of Applied Science Berlin, 2007). We can now see how SWOT analysis was is used analyze the internal environment of the company.
Strength
When analyzing the strength, the study showed that Kraft Foods is currently at the top of all the companies in the food industry. It is the best company in the United States that deals with food products however, it is challenged globally by Nestle making it second best in the world.
This improved revenue gives the company a competitive advantage over the other closer companies who belong to the same industry. The position that the company enjoys also helps it maintain its customer base because human beings like associating with successful entities
A financial report in 2009 shows that Kraft Foods’ revenue grew by 4.30 % room the previous year. Another strength that this organization has is that it has various leading brands of food and beverages. It produces snacks, beverages, cheese and dairy milk. It also provides grocery and convenient meals loved by most consumers.
A strong research and development centre has contributed to the high reign of the company in the food industry. The company has established 11 research and development centers where experienced food scientists all over the world connect through the internet as they track each other’s activities and progress.
Weakness
Despite all these strengths, the company has limited variety of products as compared to its competitors. It also lacks a marketing strategy that can help it compete with Nestle and CognAgra Foods. Kraft food has tried so many times to launch new products but they have not come up with new products not just enough for competition.
For purposes of expansion, the company can dwell more on the new products but still gives its consumer the previous products with a view of changing their consuming habit. The company creates opportunities when it the products available in the market
In Europe, the company experiences low demand because it is busy expanding new markets. It generates most of its profit in North America. The leading food manufacturer, Nestle, is stiff because Europeans do not use Kraft. Such stiff competition causes customers to try other brands because they do not see any difference in their preferred choice.
Other multinational companies that produce chocolate also create a stiff competition to this company especially in the United Kingdom. The varieties of products give the companies an added advantage in the market.
Opportunities
Apart from reducing the risk of concentrating on few products, creating various category of food enables Kraft’s Food to survive in the competitive environment. It provides the company with an opportunity to compete in various categories. International markets also provide opportunities for Kraft Food to increase its customer base. The company operates in oevr 150 states but has its main target in the United States of America.
Recently, Cadbury Shareholders allowed Kraft foods to acquire it in a $19 billion deal giving the company an opportunity to take control of food industry in the United Kingdom (Great Britain, 2011).
By formulating “better-for-you” options, the company shows that they are concerned with people’s health. Consumers need products with less sodium, fat and calories giving Kraft Food an opportunity to impress the consumers and give them what they want. Kraft currently markets world’s most trusted brands.
Threats
Competition in the food industry is itself a threat to Kraft Foods. Sara Lee North American Retail, CognAgra Foods and Nestle provide stiff competition to the organization. Currently, there is a struggle for market penetration in China and India in the food industries. Kraft feels under pressure because of industry consolidation that happens across the globe.
Companies that consolidate have a large customer base and higher market share creating a challenge to Kraft Foods. Once the market share has been hindered from expanding, the purpose of a business looses meaning. This is the main reason why the managers are unable to outdo Nescafe which is the currently best food products.
The weakening of US dollars also contributes to the slow growth of the company. When the dollar weakens against a country’s currency, importing raw materials becomes difficult and expensive. All These results to the increased cost of goods and revenue shrink. The volatile cost of goods and services resist the company’s efforts to implement marketing strategies.
Recommendation
It is crucial for the company’s management team to implement strategies that help survive in a business environment. The company needs to adopt a Competitive price strategy to outdo competitors such as Nestle.
The competitive strategy gives the company a chance to penetrate its competition. In order to improve the public relations of the company, managers can sponsor music shows and event as they have already done with Kraft Music Revenue.
The recommendations were mostly done by considering the weakness and threats this organization faces. The study therefore leads to discovery of missing key elements in implementation process of the organization. Through a differential strategy, the company can catch up with the emerging markets.
Natural products free from chemicals can be produced more by adopting nanotechnology instead of producing genetically modified products. This differential strategy enhances customer loyalty to their brand hence the company will increase its customer base. The company should also provide quality standard products that are attract more consumers in order to manage its competitors especially in Europe.
The company should implement focus strategy where most of its activities are based on food products. The structure of the organization should be market specific to allow the consumers recognize with the trade mark (Ireland, Hoskisson and Hitt, 2008). The business should focus on corporate level strategy where all its roles are linked to the goals and objectives.
The company should also have full control of the activities within the supply chain in order to track whate happens at every step of operation. This move can help the company have a large market share in countries such as China, Russia and Brazil.
The company should consider participating in global collaboration of its food products. Apart from sustainability strategy, the company needs to collaborate with the consumers, distributers and partners In order to know the sectors that need improvement.
Conclusion
Kraft vision works on becoming the best in the whole world. Their brands are present everywhere giving them a chance to reign in the market in the United States of America (Warren, 2008). By creating a consistent growth, the company has an exploitable consistence growth. Wise decisions made by the management team such as sponsoring music concerts have improved the public relations.
The company has more strengths and weaknesses which can be combined with all the opportunities in order to fight the emerging threats such as stiff competition. Kraft foods can do better than they are currently once the recommended strategies are implemented.
References
Great Britain. (2011). Is Kraft working for Cadbury?: Report, together with formal minutes, oral and written evidence. London: Stationery Office.
Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: Concepts and cases. Mason, OH: South-Western Cengage Learning.
Pahl, N., Richter, A., & University of Applied Science Berlin. (2007). SWOT analysis: Idea, methodology and a practical approach. Munchen: GRIN Verlag.
Warren, K. (2008). Strategic management dynamics. Chichester, West Sussex, England: J. Wiley & Sons.