Kraft Foods Case
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1.0 INTRODUCTION
1.1 Brief Background of Kraft Foods
The history of KRAFT goes back to 1903, when, the company started with US $65 in Capital. Founded by James L, Kraft an American food and Beverage conglomerate which Headquarters was based in Northfield, Illinois employing over 140,000 employees operating in over 70+countries. KRAFT has 180 manufacturing and Processing Facilities and developed 11 Research and Development Centers.
1.2 Brief Background of Cadbury
Cadbury British Beverage Company founded in 1824 by John Cadbury. The business Headquartered is in Bxbridge which is Birmingham UK the company has employed over 71,000 employees and interacting with 35,000 direct and indirect suppliers direct operations in over 60 countries.
2.0 ENTRY STRATEGY INTO FOREIGN MARKET AND REASONS
The method of entry used is Kraft purchasing Cadbury through the acquisition method of entry.
2.1 RATIONALE FOR EXPANDING
Kraft acquired Cadbury to diversify their business having an iconic portfolio of products and brands. Gaining an additional market share in chocolate confectionery industry.
To take advantage of the strong Cadbury distribution in immediate consumption channes ( E.g Gas Stations , Newsstands etc . Capitalizing on Cadburys market share in India, Brazil and Mexico to increase global presence and revenue. In addition to create a Performance – Driven, Value – Led Culture.
3.0 MACRO ENVIRONMENT ANALYSIS
Kraft Acquisition of Cadbury competitors were on the market for a longer period and would have already done market penetration and already acquired their market. However Kraft and Cadbury would have done market research and analysis before coming on the market to have ways for survival after acquisition. According to Johnson and schools (2006) the direction and scope of an organization over the long term which achieves advantages for the organization through its configuration of resources within a changing environment to meet the needs or markets and to fulfill shareholders expectations. (Griffith and Wall, p, 606.)
Several steps can be used to assess the strategic possibilities for Kraft and Cadbury; these are the SWOT, PESTLE, Porters Five Forces Analysis and Ansoff Matrix.
3.1 The SWOT Analysis for Kraft and Cadbury
Wheelan and Hunger (1998) used SWOT to look for gaps and matches between competences and resources and the business environment. (History of SWOT Analysis)
Strengths
Affordable Prices
Business Logo is very attractive which stand out from the rest of businesses
Friendly Staff , Neatly Attired in the company uniforms with logo
Advertisement is via the social networks, word of mouth, Emails and all available advertising tools available to the business such as flyers.
Kraft and Cadbury has Highly Trained and Qualified Staff to compete in this economy, Competitive Wages.
Weakness
The cost of advertising is a challenge
The ability to adjust to change as fast as the larger business that would have finances to do so.
The Business has some fine tuning to do with regard their Customer Service, Waiting Time, Queries.
Opportunities
Kraft and Cadbury has diversified Products. A major opportunity would be providing services to the corporate customers and to companies.
This business is easily accessible, because of the mediums used that are customer friendly. The target market are mainly young people but not limited to.
Threats
Due to the recession people are spending less. Therefore the need to convince people to purchase items is challenge.
Entrants of new competitors and the market create good revenue therefore encouraging competitors. Another factor that can affect Kraft and Cadbury are the Political influences this can cause a down fall in revenue, profits declared for the last financial this figure may have a significant drop for this company which would affect them economically. Not to mention the Sabotage by external forces.
(Created by Author, 2012)
3.2 PESTLE Analysis for Kraft and Cadbury
POLITICAL
The business would be required to comply with making statutory deductions and payments on behalf of all employees. They must pay taxes as required, such as Corporation Tax and Value Added Tax (VAT).
ECONOMIC
Rates of products are economically priced to benefit society. Provide employment. Due to high inflation rate and high foreign exchange rates could affect customers purchasing power. However with affordable prices Kraft and Cadbury would be able to generate substantial sales and thus contribute to the countrys Gross Domestic Production (GDP) through the payment of taxes.
SOCIO-CULTURAL
Small entity; Sponsor of children home. It is also reasonable to say that based on the culture, Therefore Kraft and Cadbury have all the required methods of communication to achieve this
TECHNOLOGY
The use of email as a marketing tool. State of the art; customers can place orders via email and telephone which would enhance delivery process and create more efficiency for the customers who opt to collect their orders personally
LEGAL –
The Company has new ventures that are available and that are yet to be made available Kraft and Cadbury is legally registered as a sole trader with the Ministry of Legal Affairs.
ENVIRONMENT
Kraft and Cadbury would have had an increase in the awareness of its products; this is evident by the increasing addition to subscription of its Business page on facebook.
(Created by Author, 2012)
According to (Porter, 1980) five forces have shaped a generation of academic research and business practice. Porters five forces analysis should be used in every business plan; this would help the business to distinctively identify where they stand in each category.