Market position and strategy for KRAFT FOODS INC

Market spot and outline for KRAFT FOODS INC agree to Drucker, the vision answers to the question what do we indispensableness to let? kraft Foods direction Statement try to describe the trustys vision for the futureHelping People Around the World tire and Live Better.The blind drunk estimableifies the vision saying that this sentence captures the essence of who the libertine is.It shows trough this sentence that the secure c bes or so customers life and needs facilitating the cook in the daily life in order to stand much than cartridge holder to the customers to do what they want and also to help them to easily eat in a more healthy way.According to kraft paper mesh siteWere constantly looking for fresh ideas to mend our drillplace, our partnerships, our communities and our world.To tell on today delicious, we begin with our consumers.We listen, we watch and we learn.What we do.We make delicious foods you deal feel good about. delegacyAccording to Drucker, the mission answers to the question what is our business?The mission statement consists of three words fit in to the kraft Foods Inc. Web siteMake today delicious.Their mission reflects who they be, just uniform the vision. They refuse to limit the household to be just a business that sells food and try to meet consumers expectations and fashioning food an easier, healthier, more enjoyable part of life. kraft Foods underlines the importance of health and wellness and also embodies all the ways we domiciliate eat and live better, eating easily and quickly in an environment of safety thanks to the kraft services.Values and principlesAccording to kraft papers web site, the firm uses values and principles to communicate customers what they place expect of the pock and to border their leadership, because they want to be recognise as a atomic number 82 follow able to attract customers and workers d maven ideas handleInnovation Satisfying real-life needs with unique ideasQual ity Fulfilling a promise to deliver the best(p)Safety Ensuring high standards in e very thing we makeRespect Caring for people, communities and the environment haleness Doing the right thingOpenness Listening to the ideas of others and encouraging an open dialogueThey put consumers first because they want to military posture the trade name Value propositions and freshly product innovations to drive faster top line growth.They work simply, listening to the customers, yet act quickly to outgrowth the speed and flexibility in order to reduce cost for reinvesting in making historied the brand finding the right balance in the midst of the business and the employees needs to reassure that the work environment is flexible and supportive.StrategiesAccording to krafts Web site, the firm seeks to become a huge snacks power plantand unrivalled portfolio of brands people love, eat and buy.According to an article of News Bites US Markets, 2010The brands of the Company span five consu mer sectors snacks, beverages, cheese, grocery and convenient mealsAs advised by F. David, kraft paper focus ones its system on the complementary reputation the companys portfolio which is supposed to lead the brands growth Delight global snacks consumers.The worlds Consumers are looking for on-the-go options because they are always in late for something in work or just life. Theyre also looking for simple indulgences and healthier options, which is a paradox because people dont impart time to cook in a healthy manner exclusively they have to be healthy for the work and thin in the daily life.Thus, kraft paper provides delicious snacks to these consumers, likeLUbiscuits or wellness products in order to meet their expectations.These iconic heritage brands are love by consumers all around the world, according to a Nexis Source Roughly 80 percent of these heritage brands hold number one or number 2 positions in their think ofive categories and are base names.In a leadership st ate of mind, the firm considers that, to win the foodstuff, the brand has to win on every levels of the mountain chain from the consumers to the suppliers.So, according to Fred David example pg 104, to succeed, the firm counts on its values (explained in the mission statement) like safety, respect or bore and especially on the fact that the brand acts like an owner, open to the discussion still who decide at the end.Through this image, kraft paper also entrust the shareholders, and offers them interesting returns on their investment likeOrganic revenues growth of 5 percent or moreMid- to high-teens brinksAnd EPS growth of 9 to 11 percent, according to the Kraft Foods Web site.According to F. David, Krafts Current Strategy for 2009 planned to assume trough a turn-around serve well in order to fol blue the example of the sustainable growth. The result of the ope balancen was that a volume of nest egg had been do due to the simplification of organisational mental synthesis and some closing.The external and internal auditThe PESTLE semipoliticalThe stability of the political environmentAccording to K. Blanchard, 2009, the decrease in companys results is due to foreign currencies, it could also be linked to the inflation and soaring of crude material and petroleum.Local taxationKraft in found in Switzerland, in Zoug, this area is appreciated for the low rate of taxation. For example the income tax fiddles less than 16% of the benefits of the company. (F. Therin, 2010)G everywherenment involvedIrene Rosenfeld declared in an interview of David Lieberman in 2010, I dont think theres any mark that having the administration involved will necessarily make that a more effective process or have the desired outcome. Theres ample evidence that we place in fact work together in a productive way, and thats a more effective way to address the issue. This answer illustrate that the government is neither apart from the policies of the company nor influencing str ategies.Social welfare policiesAccording to the Right vision news, 2010, People for the honorable Treatment of Animals has been get shares for seven geezerhood and now owns a piece of at least 80 companies, including McDonalds and Kraft Foods. It hopes to influence their animal welfare policies on such things as how chickens are slaughtered or buying pork from suppliers that keep pregnant sows in small crates. That means Kraft should take social policies into amity as it appears to be relevant in people mind and consumer behaviour. frugalInterest rateAccording to an article of the Business Wire, 2010, Food companies continue to seek acquisitions and complete growth, particularly in the BRIC countries (Brazil, Russia, India, and china), to boost their general growth rates. Proactive refinancing of upcoming debt maturities is likely to continue since companies are able to issue new debt at very low interest rates. Debt reduction is non likely except for Kraft and Ralcorp Holdin gs, Inc., since both companies budge magnitude leverage materially for acquisitions in 2010.Level of inflationNorthfield-establish Kraft and ConAgra, two big pork producers, have both raised their outlays in recent months because of the market increase. Janet Kidd Stewart explains this increase in 1996 by the inflation. As a food, bakeries, and biscuits producer Kraft is very sensible to the rate of raw material, corn, milk, flour, eggs.Employment levelsAccording to Ellen Simon, 2006, when Kraft Foods bought Nabisco, 25% department was laid off on the same day in 2004.Long term cycloramaIn a Just Food article, 2009, The Unite union, which represents Cadbury workers in the UK and Ireland, seems to be concerned that Kraft would not sufficiently invest in the long-term prospects of the business and its brands as it looks to reduce costs to service debt. put back rateAdapted from what Timothy McLevish (Chief Financial Officer) said in the Earning conference call in November 2010, Kr aft Foods has a very complex portfolio of currencies, which explains why they are less impacted by just a decline in the value of the dollar or an appreciation of the dollar because we have a lot of our input costs.SocioculturalLifestyle waysIn this part we have to take into account the issues of corpulency, lack of sport, health, organic products, and natural medicine. According to Kri stymieher J. Blanchard, 2009, the rate of obesity in Canadians boys increased from 11% in 1980s to over 30% in 1990s, and from 4 to 14 in Brazil. Those trends represent an opportunity for Kraft.DemographicsWith the current population ageing, seniors represent a huge share of the market, they consume healthy and diet products. Unfortunately children stay the target of Krafts bakeries and biscuits.Consumerism touristed attitudeKraft interest is following consumers habits and adapt their products e.g. to get concentrated on food conform the rules of religions.Work and leisureManagers target new segm ents like snacks, beverages, convenient meals. This strategy fits with the sociological trend that consists in mixing time for work or leisure with meal time. That allows Kraft Foods to get concentrated into quick and healthy food containing fewer calories or more vitamins to suits to any consumers needs. (K. Blanchard, 2009)TechnologicalLevel of researchIn 2007, Alexis Douglas deals with the new research readiness of Kraft Food based in Asia and the following strategies engendered.The research concentrate will serve as its regional hub for food product and ontogenesis service for its Asia unitsinclude a pilot plant and packaging laboratory for testing new products and packaging materialsaimed to make the research facility a center for excellence in maturation beveragesEnvironmentalEnvironmental issueJonathan Horrell, corporate affairs director put precedent Krafts implication in environmental issue across the cycle journey, which highlights the fact that we are taking a more a ctive attitude towards environmental issues.EcologicalThe sustainable strategy of Kraft began with the raw material used, the methods use to produce, the transportation and ends with the packaging and rubbish recycling.LobbiesDanny Fortson, 2010, wrote that Greenpeaces war against Golden Agri has been fierce. () Kraft Foods also said that it will no longer buy its palm oil. This fag end put forward the influence of Greenpeace over firms.Waste disposalJordan Ammann, 2009, Fifteen months after its launch, Kraft Foods manufacturing plant in Bahrain is making substantial headway towards its sustainability goals. The plant has achieved reductions of 25% in capacity phthisis, 50% in water consumption and 16% in waste from 2008. In 2009 the plant has targeted a further 5% reduction based on its 2008 average.LegalLegal protectionsDue to an Equal Employment Opportunity Commissions affair in which Kraft was sued, the company has agreed to train managers on laws prohibiting age discriminati on. (Reuters, 2002)Consumer laws, right to consumers products, componentsAccording to Anna May Kinney, 2008, During September 2000, Kraft Foods Inc. scrambled to recall taco shells made from StarLink corn, a type of genetically modified corn unapproved for lister-hearted consumption. While its true that the EU has approved some GMO crops to be grown and sold, they have stood firm in giving their consumers the right to know what they are eating and the right to choose GMO food or non-GMO. cyberspaceExternal vendors (European), attracted because of the difference in rates between the dollar and the euroBarriers to entry, low or notThe sign investment necessary, entrance fees, patents already in place, standards, protectionist measures, the imageIndustry and established businesses, U.S are not famous for the wellness of the food, so foreign firms more famous for this type of market like Sweden or China can enter in the market.Cultural barriers, globalization help to erase barriers a s food tend to become a more foreign fashion / trend.Porters five forces modelThreat of entry likely ENTREY OF NEW COMPETITORSThreat of entry POTENTIAL ENTREY OF NEW COMPETITORSEnvironmental sustainability concernSocial responsibilityEconomic viabilityMany consumers are cutting back on their spending by switching to store-brand products.The power is knockout when The customers are concentrated a lot of consumers who want he same thingThe suppliers are legion(predicate) and dispersedThere are alternative sourcing (Conagra)The customer changes suppliers, the cost of transfer is low Conagra, same prices, closely same productsThere is a threat of upstream integration from the customer.Suppliers BARGAINING POWER OF SUPPLIERSRivalryamong competing firms first competitor Nestl with international sales whereas Kraft exactly sales in North America(CON AGRA in the U.S market)HEINZSARA LEERestaurant, vending machines, foodservice providers, are competitors too, even if the brand is no t strong/famous. (alternative competitors)Weakness Krafts dont produce cup of tea or others types of products like Nestl or Conagra, whose are diversified (beauty , petcare, ethanol)Changes appareas in the competitors strategy = Conagra focuses now on food, stop ethanol and fertilizer,this is a new threat because Conagra will be even more competitive in the exactly same market.New CEO since 2005 for Conagra, GARY RODKIN, new force =like a competitive favor as a rival to ROSENFELD.Foreign rivals monopoly con Conagra in the U.S but competitors also outside of the country ,moreover, the $ become increasingly high which is not good for the market because external products could be seen as cheaper .The high price of petrol which up the value of raw material, give strengh to the suppliers =bad thing for the industry which have to face a loss.A low number of suppliers a strong brandVery speficic / diferenciated products are facts that increases the price of the change of suppliers, so i ncreases the suppliers power too.Buyers BARGAINING POWER OF CONSUMERSSubstitutes POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTSWellnessand health / obesityGeneric producesRetailer brandsWholesalersCooperativesWhen the prices are increasing good for the subsitute because it will be more attactive.Porters value chainThe support activitiesProfit MarginAdministrationmeans infrastructure(leadership and management)and concerns the important persons of the structureHuman Re etymons managementconcerns the decisions made concerning employeesTechnology developmentconcerns the efforts and funds invested for the future of the firmResource procurementconcerns the manner to find a product and offer the firm.According to Fred David, this kind of organisation can be explained by the fact that it took time and efforts to follow the Phillip Morris plans, the firm had to know several changes, for example, the New CEO since June 2006 in Irene Rosenfeld which embodies the beginning of the chances in the firm and she is now the head of the Board. This change is relevant because she embodies the head of the firm with her position.Thus, the management team is divided into 10 parts.The primary activities inbound logisticsOperationOutbound logisticsMarketing salesServices(Kraf Food Inc, 2009)The primary activities help the support activities to make their completion easier, like for exampleInbound logisticsThe Technology development managed by the segment of Jean Spence can help the Inbound Logistic by finding new raw material, or, according to the Kraft Munich website, rectify new products like in Munich, the responsible for Product and Process development where food, Refreshment Beverages, Salted Snacks, Confectionery, Biscuits are always improved or discovering an alternative to the problem of the rising price of petroleum which increases the cost of the raw materials and also the cost of transportation.OperationHuman Resources managed by Karen May can help the Operations establis hing a climate of trust and respect between employees in order not to slow down the occupation or avoiding the sicki effect of a bad climate at work.Outbound logisticsThe Resource procurement can helps the Outbound logistics negotiating new or more advantageous contracts, for example group rates can be an idea if several subsidiaries like oreo cookie, Lu etc will be delivered by the same transports firm.Marketing salesIn order to be proactive address the evolution of trends like the dining out trend or health food trend, vitamined drinks trend against the obesity, marketing can be supported by the engineering development to develop new products or to help selling these products with the internet, because attracting web sites with games for subsidiaries like Oreo and The normal Box for Kraft itself help the brand to be more human to sale more.Also, according to a News Bites US Markets document of 2010thanks to the companys annual week of community service (Delicious Difference Wee k) form by the Human Resource segment, Krafts employees were a record numbers to participate as volunteers to help the non remuneration project. This kind of action help the marketing and sale segment showing to the customers how social responsibly the firm is.ServicesThe Services segment Focus on the reputation and perceived value among the consumers, thus, the administration can be helpful taking the crucial decisions they have to be respectful, reasonable and ethic. According to F. David example pg 109, customers want the firm to understand them and accept the social responsibility, thus, when the board temporarily shut down because of a put on the line of contamination, this action reinsure the consumer, enhance the positive image of the brand and support the Service segment.Trough the web site, Kraft tries to come closer to the customers culture and social identity, to show that as the people, the brand is able to evolve and be concerned by the environmental problems.Interna l strengthsA developed Strategy followed and understood by the employee, whereas Conagra has a vision, but no strategy and depends on operating companies and functional silos which is really risked and it lacks of internal cohesion.So, more segmentation and prioritization than the competitors.A developed Human resource management segment which aloud trust between employees firm with some concepts likePolicy of non discrimination , responsibilityCommunity InvolvementCompliance and IntegrityPeople and DiversityWorkplace SafetyThis climate of respect and trust give to the employees the will to work well and to be the height of the firms expectations.A good and dynamic CEO /Chairman which has chosen a good organization and repartition of the support activities.According to elements of the Krafts web site, Mrs. Rosenfeld also helps to improve the corporate Reputation and right of the firm and thus aloud the firm to receive some prize likeWorlds Most esteem Companies, Reputation Instit ute 2009 (third full-strength year)Corporate Reputation Top 10 (Canada), Marketing magazine 2009 (second consecutive year)Ozone Layer Protection assign, US Environmental Protection Agency 2009Banksia Foundation Agriculture and Food Award for sustainability practices, (Australia) 2009The New York Academy of Medicine awarded Kraft Foods for our long-standing commitment to health and wellness(2009)Adapted from http//www.zonebourse.com/KRAFT-FOODS-A-13256/actualite-analyse/Un-spin-off-a-surveiller-18414/ International and Tough brands (Cte dOr, Toblerone, Milka, Maxwell, Carte Noire, Tang, Jacques Vabre)Strong advertisement trough years help Krafts food to concord the competitive advantage According to F. Davids historic introduction of the firm, A key to the success of Kraft Foods was James Krafts commitment to development innovative advertising methods. Now, this is steel an asset according to an article from the Lab Business Week, 2008The Krafts Director of world-wide Inte ractive Marketing has leaded some of the world most successful and awarded digital branding campaigns for the likes Altoids, Oreo or Planters. Because of this success the advertising industry has recognized Krafts accomplishment prestigious awards like Gold and tan Clio Awards(C), a Webby Award, property and Bronze One Show Pencils(R), a Gold EFFIE(R), a Silver ADDY(R), an ANDY Award, and a Cannes Lions.Internal weaknessesA low growth market and the impact of the commodity prices (milk, coffee, cocoa) which made the firm less competitive according to Fred David.The fact that Kraft is a young firm in equality with the main competitors like ConAgra which was built over several decades and which had made numerous acquisitions.Kraft on the international as a negligible impact in comparison with world competitors like Nestl. More, according to F. David, Kraft is just a food company which is not a competitive advantage in the world market.Strategic capabilityBecause of the current econ omic conditions, F. David said that some analysts criticized Rosenfeld managerial approach because of the 2008 compensation, however, 2009 results show that she made the good choice.In 2009 the net revenues of the company has soared compared with previous years. Despite the increase of the cost of sales that can be due to the inflation rates, the gross profit is better.To keep and maintain the competitive advantage and woful forward, the firm has tofocus on the coordination.The problem here is that we can notice a lack of conjunctive between Kraft Foods Europe, Kraft International and Kraft North America. Even if the fact that the support activities are all bounded together is positive, this kind of grouping seems irrelevant if the company is regarded like two disassociate entities like North America Versus International and not like a single entity.The objectivesThe generic strategy and competitive advantageBowmans clockDenise Dollimore, 2010, Slide Business StrategyGenerally sp eaking Kraft Foods is a producer of high value products (organic, healthy and specified). The company is not involved in any low cost strategy. All the brands are well-known and considered as the top of the product on the market. According to Browmans clock the firm is focused on diversification and differentiation.To get concentrated on this diversification Irene Rosenfeld agreed to interpolate firms strategy, by simplifying the organizational structure. In 2009, savings have been realized, nevertheless it can also be explained by the closing of 36 plants and 19000 positions have been eliminated.Adapted from Kraft Foods Inc., K. Blanchard, 2009.Michael Czinkota, 2010, One can look at Kraft Foods Inc.s recent acquisition of Cadbury PLC as evidence of a U.S. companys recognition that it needs to build both market share and management strength to be successful in global markets. In 2006, approximately triad of Krafts revenues came from outside North America. Cadbury boosts the inter national share of the combined companys business more than 50 percent. Otherwise, this strategy illustrates that Kraft intend to differentiate its products and markets to maintain its international presence.We believe scale will be an increasing source of competitive advantage in both the confectionery category and the global food business as a whole, said Rosenfeld, in 2010, who pointed out that the tie-up will allow Kraft to become the worlds leading confectionery company with a market share of 14.8%. (Andrew Clark, 2010)The assess of the strategyAs advised by Fred David (108-109), referring to the customer issue, more people are dining out which may adversely affect Kraft Foods as a grocery retailer. Further caused by mobile customers there is less time for set of food and therefore declining customer get. Also the development of health foods e.g. products containing less trans fat or only organic ingredients could be a challenge for the company although Kraft Foods touched on this area in recent years. Whereas there is a paradox between the steady growths of packaged and processed foods because of less time and high demand for healthy foods which is mostly to class with homemade foods.Customers today view food as an expression of their cultural and social identity and therefore asking a lot more from producers than just good quality.David is still talking about that this attitude causes to pay more attention to branding than quality because it can transfer a more emotional positioning, understand your environment and customers unique needs and taste, depending on their culture.Moreover, challenger is increasing because the market is attractive and has potential such as the increase of bargain stores or trademarks (Aldi). Therefore it is difficult for Kraft Foods to raise their prices.Further there are strategic issues in the show chain such as cost efficiency matter. When the costs of petroleum are rising it causes an increase in raw material costs and hence rising production and transportation costs. Furthermore, corporate and brand reputation of a company are gaining more and more in importance which causes raising competition as well.One more strategic issue could be the economic crisis which affects the consumer to spend less money than usually.The issues of rising prices, increasing competition and customers are willing to spend less but want more in health, cultural and social identity cases are difficult to solve.The solution could be to use synergies and find cost drivers for higher cost efficiency. While offering diverse products, with strong branding fulfilling customer demand and differentiate from competition. Also keeping the brand reputation high by ensuring food safety programs are applied could be a possible approach.The SWOT Matrix of KRAFT FOODS INC.StrengthsAccording to Datamonitor (2010) Kraft Foods has a strong brand image and diversified product portfolio. Additionally, it operates in domestic and internati onal markets. His well recognized brands with operations encompassing five core divisions include snacks with 37.2% of the total revenues during 2009, beverages with 19.9%, grocery with 10.1%, cheese with 16.8% and convenient meals with 16%. Replication of its brands is very difficult and only a few firms are able to imitate these. To maintain market leadership position needs launching new products with innovative ingredients. The brand Alpen Gold is very popular and leading chocolate brands in Russia.Kraft Foods pays a great importance to research and development (RD). The RD is rising year after year and reached in FY2009 an expense of $499 million. In addition the company has about 2400 food scientists, chemists and engineers. Therefore RD supports to maintain a strong market position.According to Datamonitor (2009) Kraft Foods has 316 distribution centers and depots worldwide, 303 in North America and 13 outside America in eight countries. Thereby companys multi-category distrib ution and consumer awareness are its major strengths. This boosts the selling efforts through three principal sets of activities consumer advertising in broadcast, prints, outdoor and on-line media consumer incentives such as coupons and contests and trade promotions for supporting price features, displays and other merchandising. Kraft Foods has two distinct distribution operations as follows warehouse delivery and direct store delivery. This important strength qualifies the company to manage its inventory in a powerful manner.WeaknessesRefer Datamonitor (2009) Product recalling could be one of Krafts weaknesses which were noticed particularly in march 2009. The voluntary recall in the get together States of Planters and Back to Nature products containing pistachio nuts is the latest one. The reason was the potential to be contaminated with the Salmonella existence which can cause serious infections.Kraft Foods operating margins, net margin and net profit margin is decreasing in spite of an increase in revenues since FY2006. Further companys operating profit fell from $4,154 million in FY2006 to $3,817 million in FY2008. The reasons for the declining include increase in input costs primarily related to higher raw material cost, unrealized losses in hedging activities, to energy derivates heating oil and natural gas contracts. Kraft Foods decreasing margins caused by inefficient cost structure could be a pressure on the companys future financial plans.Refer Datamonitor (2010) additionally unfunded post retirement benefits would cause making periodic cash contributions which would reduce cash on tap(predicate) for growth plans.Also because of the Cadbury acquisition Kraft Foods debt burden has increased from $5,556 million to $18, 990 million EBITDA. The increasing debt ratio will be a concern for the companys solvency and liquidity position.OpportunitiesRefer Datamonitor (2010) Kraft Foods new line of low-fat products causes to strengthen the market posit ion of the company. The increased preference for fat-free and healthy food products in the United States drive Kraft Foods tapping into peoples growing health and wellness concerns by its developing the nutritional profile of its snacks portfolio. For instance, introducing whole-grain versions of snacks, eliminating trans-fat in most of its products, reformulating fat-free cookies (e.g. launching low-fat Oreo) are remarkable opportunities. Moreover the company has four key opportunity areas that meet consumer needs such as weight management, nutrient delivery, deed nutrition, and natural and organic Reducing the sodium in many of his products, launching the South Beach lifespan line in the US.According to Datamonitor (2010) Kraft Foods tries to strengthen its portfolio recently through acquisitions and divestitures such as the flavored water and juice brand assets and similar trademarks. Furthermore, the company decided to sell the Artiach biscuits business in Spain to Panrico whi ch caused an ongoing focus in Spain to grow its portfolio. (Source 1 Datamonitor)Moreover the US coffee sector grew in the recent years and accounts for 70.8% of the total US drinks. K