Executive summary
In the increasingly competitive food industry, it is imperative for companies to be alive to the changing markets. In order to meet this objective, it is important for companies to review their strategies regularly to align them with strategic choices.
In some cases, the companies need to review the strategic choices to leverage on strengths and take advantage of the environmental advantages to gain competitive advantage. This paper explores the case of Kraft Foods with regard to its strategies.
Introduction
In any competitive market, companies that are almost certainly to achieve organizational goals are the ones with the capability to lead as opposed to trailing vicissitudes within the market.
The managers of such companies require building an enterprise capable of reacting rapidly to variations in both customer needs and the enterprise environment.
This demands for constant development of innovations, possess the capacity to launch them and developing strategies that will enable the business to effectively meet its organizational objectives.
Businesses that succeed in the market are composed of different individuals united in a collective purpose through corporate vision, mission and goals. In any business organization, the essential component in ensuring that individuals are focused on the goal is an organizational strategy that develops the organization so that it adapts to changes and advance with time.
This case study examines the strategies employed by Kraft Foods Group. It will propose ways in which the company may leverage its strengths and reinforce its weaknesses to gain competitive advantage. In order to achieve this, the study explores the company’s generic strategies and strategic choices.
Main Body
Product variety
Kraft Foods engages in the development and selling of packed food and beverages. It operates in the increasingly competitive North American, European, Asian Pacific and Latin American markets. Over the years, it has managed to create a niche in the food and beverage industry thus ranking second in the world behind Nestle (Marketline, 2012).
The company has a wide range of products including opportune meals, coffee and grocery products. It has an assortment of globally recognized brands. The food and beverage classes include breakfast, lunch and dinner. The products can be consumed in the food service outlets or at home.
This caters for the wide range of customers with diverse preferences of consumption location. The brand portfolio includes nine strong brands ensuring that customers have a wide variety to choose from.
In the fast changing market, having varieties of products within the core brands ensure that the company enjoys a huge market share as all customers have their needs met. The number of products had initially reached twenty. An overhaul in strategy led to the reduction with the company adopting ‘fewer, bigger, and better’ approach (Watrous, 2013).
Kraft Corporate Strategies
In 2011, the company revealed organizational strategies aimed at driving the growth of the company during the yearly Consumer Analyst Group conference (Shah, 2014). The strategies include delighting its global consumers with unique snacks.
The company would also release the power of its iconic brands through vigorous marketing and promotions. The company planned to create a performance-focused and principle-led organizational environment. These strategies would result in organic revenue growth of 5 percent.
In devising these strategies, the company viewed itself in an apt position to achieve growth considering its worthy cycle. The main features of the worthy cycle were envisaged to accelerate growth at a higher rate than competitors and categories include renewing the power brands.
This is to be achieved through investment in research and development for innovation and advertising of the power brands. Additionally, the company would utilize its business management policies to enhance local brands.
Another feature is the increment in the sales and marketing brilliance. It would also develop end-to-end cost control to attain record savings. This will be achieved through streamlining the supply chain and endeavor negative overhead development.
The emphasis on the general organizational strategy is hence divided in two categories namely brand building (focus strategies) and cost reduction (cost leadership). The company is no longer developing new brands but is vigorously advertising and marketing the existing brands to create brand awareness among its customers.
Subsequently, it will create brand loyalty to its products. The cost reduction strategy will help the company to increase the profit margin. The company is making efforts to ensure that the supply chain is aligned to the mission and vision of the company.
By delivering the products to the consumer in a timely manner, the company will be viewed as the unquestionable leader in the food market. The customers will view the company as a requisite partner (Hill, 1988).
Generic Strategy
Kraft foods started with few product brands. As business increased due to vigorous marketing by the company staff, the number of products was increased. The company has developed sufficient brands and is no longer focused on developing beyond that. It is concentrating on ‘focus strategies’ to create strong position for the existing brands.
It has developed a set of ‘fundamental values’ that assist in guiding employees. Among them is promoting teamwork and creating room for innovation among employees. There is unrelenting emphasis on the need for the staff from all backgrounds and expertise levels to work in unison in supporting the company’s core brands.
In order to attain this goal and eventually the company’s mission, the company structures its business in ‘Category Teams’. This is focused on ensuring a cross-operational tactic to decision making.
Strategic Choices
For any company that seeks to integrate its innovations for growth, it must first plan on how it will integrate the innovations with the corporate vision and mission. Kraft’s mission is to gain recognition as the unquestionable leader in the world food market.
In order to attain this vision, the company needs to ensure that the quality of foods and beverages it offers are healthy for the consumers. In the contemporary market, consumers are increasingly becoming health-sensitive regarding what they consume. The company is financially endowed.
Its revenues exceed $1 billion (Noria, 2014). This is considered as the strength for this company. It is vigorously advertising and marketing its power brands globally particularly in highly competitive markets to gain competitive advantage over market rivals and increase its market share.
However, this does not completely align with the company’s generic strategy of cost leadership. The cost of advertising and marketing the brands are increasingly becoming higher. Additionally, the cost of supplying the products to markets outside the United States is higher.
This means that the price of the products is still high. Furthermore, the delivery of products to these locations is not timely. The company may require setting up plants in these markets to ensure timely delivery for customer convenience and reduction of supply costs.
Leveraging strengths
Kraft Foods has a unique combination of refreshments and legacy brands. The company is financially stable. It should use this strength to market the power brands in the emerging markets. In order to reduce the supply costs, it should set up manufacturing plants near these markets.
The marketing, advertising and promotions will help in creating the ‘perceived value’ by customers. It should endeavor to create a niche among consumers by selling directly to them as opposed to the current approach where it sells to retailers.
The elimination of distributors and retailers will help streamline the supply chain and effectively lower the costs (Meeta, 2012).
By entering new markets, the company will take advantage of the environmental opportunities. There are fewer competitors in the emerging markets.
This will allow the company to create customer loyalty for its unique products. In most of the emerging markets, there is relative political stability with less favorable conditions for foreign investors as the countries seek to globalize and attract investors.
The company should take advantage of incentives offered in such markets to grow its profitability. The company should alter its strategic choice of vigorously marketing in the existing competitive markets and concentrate on the emerging markets.
Reconfirmation of Kraft Foods vision and mission
Kraft Foods’ mission of gaining recognition as the unquestionable leader in the world food market is enhanced by the fact that it engages expertise from diverse professional fields. This ensures that the company offers its consumers high quality and healthy assortments of foods and beverages.
In pursuing this mission, the management creates an environment that enables a strong connection between the organizational strategies and the performance of its brands. The company builds its market performance through the engagement of competent managers and field personnel.
The employees function within vividly defined strategies that are carefully designed by professionals. By creating a performance-focused and principle-led organizational environment, the company is able to deliver to its customers the services and products envisaged in the company’s strategic plan.
The management structure of the company replicates the strong point of the management team. The team is able to positively influence the employees to devote to the achievement of the company objectives through meeting the expectations of the customers.
In order to achieve cost leadership in the food industry, the company encourages the employees to participate in decision making. It encourages innovation among the employees through shared expertise.
The creation of category teams enables the involvement of planning experts who take an active part in decision making. They help the employees to concentrate on adding value for the clients in an approach that progresses the competitiveness of the entire company.
Conversely, to achieve the vision and mission of the company, the management has divided the entire organization into three key teams namely business divisions, collective services and the corporate core. Nevertheless, the corporate core is responsible for deciding on the overall strategy of Kraft Foods.
It sets standards and manages talent as well as composing the business portfolio. This way, the company is able to remain focused on its mission. The corporate strategies and strategic choices require realigning instead of altering the mission statement.
Conclusion
Kraft Foods corporate strategy has been effective for years. However, the increasingly competitive food and beverage industry requires realignment of the company’s strategic choices to reflect on the delivery of the corporate mission. The company’s mission and objectives require no alteration.
Instead, there is need for reviewing the generic strategy to enable the company to adapt to the changing market and create a niche in the food industry. The company should leverage its financial endowment and strong brand to gain competitive advantage.
References
Hill, C. (1988). Differentiation versus low-cost leadership or differentiation and low-cost: A contingency framework. Academy of Management Review, 13(1), 401-412.
Meeta, I. (2012). Application of bowman’s clock to Kraft foods ltd. Web.
Noria, C. (2014). Kraft foods lay out new global growth strategy. Web.
Shah, V. (2014). Kraft foods. Web.
Watrous, M. (2013). Product development overhaul at heart of Kraft foods strategy. Web.