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Food industry is a continuously on demand industry that people are always need and want. Some economists and analysts claim that food industry is one of the most proof to economic slowdown. This makes this industry a resilient, reliable and profitable industry. The products and foods that are part of the booming industry includes, confectioneries, health products, biscuits, kids foods, animal foods, crackers, bakeries, cakes, vegetables etc. The wide range of products available offers ample of opportunities for business in this line, growth and progress in line with the advancement of technology and new channel of marketing.
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Definition of Strategic analysis
This includes an implementation of strategy and approaches after taking into consideration various factors i.e. internal and external that directly and indirectly affects the company. Strategic analysis will analyze and assess various forms of strategy after considering the threats potential opportunities etc that the company could exploit in order to succeed and remain relevant to customers. A proper action and steps towards strategic decision and analysis will enable the company view all the potentials and weaknesses within the company and therefore will ensure the positive move in the future.
The PEST analysis
A PEST analysis is a business measurement tool that assesses and analyzes the factors of. Political, Economic, Social and Technological which then translated to the proper implementation of strategic decisions prior the results of PEST analysis.
Factors affecting the Food Industry (PEST Analysis)
1) Political factors
Political factors are the factors that include government intervention and barriers in terms of tax/tariff that could benefits the citizen or the government. Apart form that, it also includes the policy and systems that government adopt in regards of business friendly particularly in food industry. The likes of importing policy, regulation and procedures, policy of taking over, merger and acquisition that could affect the constant supply of foods to the country etc are part of political factors.
2) Economic factors
Economic factors include stability, income parity, income status, purchasing powers, exchange rate, unemployment rates, interest rates etc. This will certainly affect the decision and actions taken by the company economically. As food is part of necessity and demand by people around the world, as every needs food to survive and living, we could say the industry is not much sensitive on the economic change and volatility.
3) Social factors
Social factors include the trends and patterns of demands which due to the cultures, nationality, religious etc. Brand awareness on a country might differ with each others, income distribution, age, demographic, preferences, local and global attitudes towards certain things are different. As for food industry, it’s known that local preferences will determine the acceptance of food products. The local taste and likes must be met and this will require the business and companies to understand the local market before embarking into the local ones.
4) Technological factors
Technological factors really affect the production and effectiveness of the plant and operation. As for the food industry we are seeing the advancement and improvement in terms of technology employed in food industry that as a result improve the yield, making it more efficient and reliable. Product innovation and improvement is also produced with the help of new technology, systems or techniques, This will then help the companies to produce high quality and better food products in terms of taste, health ingredients, safety etc.
SWOT is analysis of all the possible factors of strength, weaknesses, opportunities, and threats. As PEST are just a tool that addresses the external factors that potentially affect the business, the SWOT seems will give better result and pictures of how the company should react with the business environments and settings that include internal and external factors. The SWOT analysis of Kraft’s Food industry (the company under study) is performed after analyzing the factors both form external and internal.
1. Large Market Share
In terms of market share, Kraft’s Food has been in forefront leader in the cheese and biscuits segments. There are the world’s second largest food manufacturer behind nestle in the world but leader in certain part of the world including Northern America and Canada. The fact that have captured quite substantial portion of market share is because the aggressive mergers and acquisition that had taken place for many years since Kraft’s early inception years. The mergers and acquisition have made a bigger company and able to capture their rivals customer and market.
2. Brand loyalty
The current Kraft’s brands include: Balance Bar, Oreo, Jell-O, Maxwell House, Mikado, Nabisco, Tang, Oscar Mayer, Twist, Snack Wells etc.
3. New technology
As for Kraft’s Food, they have the new technology as they invented quite new products and taste with the help of technology. Plus they acquired many firms with already have technology in place. This could give them a competitive advantage over their competitors.
1. Lack of Marketing Strategy and Launching New Products
It is seen that Kraft’s Food is having difficulty in launching and producing new products and foods. Due to the fact that they have been expanding by the mode of acquiring and merging with other established companies, therefore their variety of new products are very limited.
2. Declining Sales and Demand from Europe and Western Part
Kraft’s Food is now experiencing a decline demand and sales in western part as well as European countries. The competition with other rivals and the leading food manufacturer Nestle is very stiff, as European are more opt to prefer Nestle rather than Kraft in that region. They also face heavy competition in chocolate and baking powder manufacturer, as many big companies in Europe such as chocolates manufacturer from Switzerland, premium brands from Belgium and United Kingdom are more established than Cadbury of Kraft’s Food.
1. New categories, products (i.e., organic, health-focused)
People are more concern on the health- focused products including foods. This is a very good opportunity for Kraft’s to embark in this lucrative segment as the potential fro growth is so huge. They could leverage on the existing plant that they have and enhance their R n D in that particular segment or even joint venture with other related health focused products.
2. International markets
Kraft’s Food involved in international business and they have many plants that operates in various parts of the worlds. They could use this opportunity to expand in that particular region and surround to increase market share and capture the new untapped market surround the region.
3. Operates in many fast growing categories
The company (Kraft’s Food) is offering various products of foods from many categories such ranging from biscuits, health focus products, animal foods, cheesy based foods, crackers, bread and cakes, floor, chocolates , drinks, etc. That will enable them to compete in diverse categories apart from lowering the risk of concentrating in just few products of foods.
Stiff competition in food industry in global scale since they are operating in international arena. They operates in many parts of the world and have to compete with the local manufacturers as well. Some of them are really capable of offering products that meet local taste and preference. Example such as in Malaysia perspective where we see Jacobs of Malaysia or Julies Sdn Bhd competing with global brand of Kraft’s Food. They seem to understand more on the local preference than the global player in biscuits and cookies line of products.
2. Industry consolidation
With the consolidation and mergers as well as acquisition exercised by other firms globally, Kraft’s Food is also feel the pressure to compete with such firms. The industry now becomes more constraint and tight in terms of number of players in the industry as well as market share among companies.
3. Volatile COGS over short run
With the increasing cost of goods, every industry will be impacted and this will reflect the growth of the companies in the sector. In some ways, this could also resist and restraint the strategies and products differentiation, sales and marketing etc, of the companies in food industry.
Definition of strategy formulation
It is very crucial and essential for Kraft’s Managers and to form appropriate and effective strategies in order to sustain and survive in the long run. Especially in the global issues that impacting companies in the world, management team of Kraft’s should think of strategies and approach to tackle those issues as well as external and internal factors of Kraft’s companies.
1) Kraft’s Marketing Strategy
Some of the very strategic decision in their marketing strategies, is that the company sponsored the Kraft Musical Revue, a two-hour musical variety show. Their international operation is supported by a policy that focuses on local tastes of foreign consumers. Kraft was a major supplier during World War II. They also enhanced the collaboration and joint efforts with government of US. This somehow create and indirect promotion and establishing their name in domestic as well as international arena.
2) Differentiation strategy
Emerging markets: Growth in the confectionary market will largely take place in emerging markets.
â€¢ Natural: Consumer demand for products that are free from artificial colors, flavors and additives and concern over the long term effects of artificial ingredients has driven growth in the confectionary industry.
â€¢ Heritage and provenance: For chocolate manufacturers a key growth opportunity is for premiumization through either high quality country of origin (or even single estate) ingredients or by focusing on the quality of production methods.
â€¢ Healthy and functional confectionery: Health continues to be a key innovation opportunity for confectionery managers in line with an ageing population and an obesity epidemic.
Even if retailers develop the operational capabilities to manufacture and sell chocolate and gum based on these issues, they may not be perceived to have the brand credibility that are owned by more established confectionary manufacturers. A potential acquisition of this magnitude during a sluggish economic recovery implies Kraft’s commitment to grow its extend its brand in growing global markets while evaluating other products in its brand architecture. They also increased their investments into key consumer trends in quick meals, health and wellness, snacking and premium products. These has reinforced the brand and presence of Kraft’s Food in the market they are operating in.
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With the Kraft innovation and new technology they have been successfully implementing an invention or creative idea that creates value to consumers. Kraft’s have been able to constantly adapt and anticipate their needs. With the help of innovation, they create new product platform as well as improving their product features. This applies to products, processes, packaging, ingredients, and more. It is well supported by various Kraft business units such as R&D, consumer comments and feedback and public relations, etc. Kraft has its own strong Research, Development & Quality team of who all have a important role in innovating and producing the new Kraft. They are continuously develops new products that broaden range of products and compete in new categories. For example, Bagel fuls, the first all in one bagel and Philadelphia cream cheese.
3) Focus strategy
Kraft also introduced many of its products in foreign markets. The company name changed in 1976 to Kraft Inc. to enhance the company’s focus on food processing and to more emphasizing with the internationally known Kraft trademark. Reorganization accompanied the name change the move toward a more centralized structure was formed by dividing the company into divisions according to specific markets or products.
What is Corporate Level Strategy?
Corporate strategy is a strategy that determines what businesses a company is in, should be in, or wants to be in, and what it wants to do with those businesses. It’s based on the mission and goals of the organization and the roles that each business unit of the organization will play. The acquisition of Cadbury has significantly enhanced the strength of Kraft Foods’ in the confectionery sector enables Kraft Foods to take advantage of Cadbury’s product development capabilities. They believe that confectionery markets are consolidating and it is very important for Kraft’s to control of the supply chain and growing portfolio of their own retailer brands. In addition, they could also experience the increasing expansion of markets such as Brazil, China, and Russia as well as other parts of the new emerging markets such as India and Mexico.
Global collaboration of Kraft’s Food
In line with its sustainability strategy, Kraft Foods has selected six key areas in which it feels it can have the greatest impact. These are transportation/distribution, agricultural commodities, energy, water, waste, and packaging. They have formed various collaboration and joint ventures with their distributors, retailers, packagers, outsourcers and business partners to improve the efficiencies and effectiveness of these areas. In line with this effort, Kraft had reached an agreement to acquire Groupe Danone’s global biscuit business, snacks, cookies and crackers manufacturers. In competing at European biscuits portfolio, they (Kraft) had gone through the acquisition of brands like LU, Tuc, and Prince. As a result, Kraft also expanding and strengthening their footholds in China and other emerging markets as Malaysia and Indonesia They also hire the capable and good managers and directors in the emerging markets to oversee the operation and management. They are able to react faster to market changes and improving the revenues, operating income and cash flow.
Brand Strategy of Kraft’s Food
In today’s very dynamics and complex business environment, the importance of brand and its reinforcement is one of the key areas of focus. The much bigger North Asian markets such as Japan also shows that long term significant further growth is potentially high. One example is to take a global concept and adapt it locally with consumers. For example, Oreo Kraft’s hot selling cookie in the US, and being produced less sweet to match consumers in China. Transform it into wafers and rolls to further connect with the way they eat their snacks. Oreo is now the no.1 biscuit brand in China and China is the no.2 Oreo market in the world after the US. Customers and stakeholders have evolved in respective to their needs and demands. In Asia, consumers are inclined towards having enough vitamins and minerals, and Kraft’s answers that by offering products that meet these needs. Tang Fruitrition is full with vitamins A, B, C and calcium. While in the US, where there is a high concern on obesity, Kraft’s offers and selling Sensible Solution products that features 100 calorie snacks (such as cookies and bars, puddings and crackers) to help people eat less with smaller portions, LiveActive cheese which popular of its s digestive health, and South Beach Living meals and snacks that are more like balanced diet meals with very great taste.
Kraft wants to survive and expanding their presence in a positive way. With Kraft Foods being one of the largest food and beverage companies in the world, they need to understand such varied consumer preferences. Their portfolio is established to meet those needs, from snacks and premium foods, to convenience and health and wellness. As for countries like China, Russia, Brazil and ASEAN countries being biggest international markets for Kraft. They have created many products that are tailored to the needs of locals in order to please the customers and able to sustain successfully until today. As part of branding strategy of Kraft’s they will continue enhancing and strengthening the products line, quality and high taste of Kraft’s Food products that differentiate them with their rivals and competitors.
Kraft vision is always to make today delicious. They make some of the best-known brands around the globe. Brands like Kraft cheeses, dinners and dressings; Oscar Mayer meats; Philadelphia cream cheese; Maxwell House coffee; Nabisco cookies and crackers and it’s Oreo brand; Jacobs coffees; Milka chocolates; and LU biscuits. They managed to creating reliable, consistent growth. That’s what they’re doing at Kraft, and their strategies are focusing efforts on build a high-performing organization, reframe segment/ categories, exploit sales capabilities (by merging or acquisition etc) and drive down costs without compromising quality. As they have sustained for many years and continued progress and growth, it is an icon of strategic management organization. They have made wise decision in their sales and marketing strategies, policy on globalization, organization structure, channel distribution, strategic management, human resources etc that enable to gain competitive advantages over their rivals. They are well ahead over their competitors in terms of market share, acceptance, product innovation, revenue, etc due to the fact that Kraft Food really understand factors and matters to sustain and excel in food industry and supported by strong business acumen and entrepreneurial spirit of Kraft organization.
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