1. What is Kraft Foods Inc.’s corporate strategy? How has its corporate strategy evolved since its independence in 2007?
Kraft has a strong global strategy. They found themselves operating in more than 80 countries, which included 220 manufacturing and processing facilities and 228 distribution centers. Because of the different regulations in each country related to food, they found themselves in need of several different facilities for the manufacturing of their food products.
By 2007, Kraft was the 2nd largest processed-food company. The company continued to acquire and divest business units that were either extremely profitable or not profitable at all. They tended to divest the units that were essentially cannibalizing their profits. The company continued to address weaknesses in its business lineup. By 2009, the company replaced 80 percent of its management in leadership positions, changed its organizational structure to fix accountability at the business unit level, and boosted its advertising and promotions by $600 million. These changes were t=directed at improving the company’s geographic mix, sector mix, and channel ix to increase its number of products in attractive country markets, product sector categories, and distribution channels. The restructuring resulted in a rapid growth of sales in developing markets. After this restructuring, Kraft was left with more than 80 brands and annual revenues of over 4100 million each and 12 brands with more than $1 billion each in annual revenues.
2. What is your assessment of the long-term attractiveness of the industries represented in Kraft Foods’ business portfolio?
All of the industries Kraft participates in are characterized by strong competitive rivalry that required strong distribution and marketing skills to attract consumer demand and ensure product availability in supermarkets, discount clubs, mass merchandisers, convenience stores, drug stores, and retail food locations serviced by its food distribution operations. Brand building, consumer health and wellness, and advertising and promotions were all critical to success in the industry. Kraft’s ability to compete with lower priced snacks showed its ability to differentiate itself from other lower priced competitors.
It is clear that the industries Kraft participates in are ever growing, both as populations increase and Westernization increases in other countries.
3. What is your assessment of the competitive strength of Kraft Foods’ different business units?
Kraft is clearly a strong competitor, as they remain one of the top contenders in each of their industries. They are able to strongly differentiate their products from those of other companies to capture a large share of the markets they participate in. They have a wide array of products that can serve as subsituties for each other to keep consumers within their brands, but give them options on which products to consume.
4. What does a 9-cell industry attractiveness/business strength matrix displaying Kraft Foods’ business units look like?
Invest to Build
U.S. Conenient Meals
Manage for earnings
Limited expansion or harvest
Protect and refocus
Manage for earnings
5. Does Kraft Foods’ portfolio exhibit good strategic fit? What value-chain match-ups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see?
Yes, Kraft’s portfolio exhibits a good strategic fit, as it is unrivaled by its competitors. Kraft’s value-chain shares many different manufacturing and distributing facilities which helps cut costs. There is a huge opportunity to share branding and marketing across their different food categories and products.
6. What is your overall evaluation of Kraft Foods’ corporate strategy and planned restructuring in 2012? What evidence and/or reasons support a conclusion that Kraft Foods’ shareholders will or will not benefit from the spinoff of the company’s North American grocery business?
It is clear that Kraft plans to continue building its giant brands to create more market share for themselves. They also continue to emerge themselves in new markets by expanding their product lines. They also continue to raise prices in current markets to earn more revenue. Continually reinvesting in their brands and sub brands is a smart thing, as they continue to research and develop new products to increase market share.
7. What actions do you recommend that Kraft Foods management take to improve the company’s performance and boost shareholder value after the spinoff of its North American grocery business? Your recommended actions must be supported with convincing, analysis-based arguments.
1. Development of a healthy line of snacks in a convenient location and packaging 2. Use of a healthy role model / celebrity to create buy-in to these healthy snacks and foods 3. Creation and expansion of a healthy convenience meal for the whole family, not just something in a microwavable tin 4. Research and development into new consumer products that meet the increasing demands of busy American families