The following paper is an evaluated analysis of Kraft Foods Inc which will be examined from an internal and external angle with the utilization of fundamental and technical analysis. Kraft Foods Inc is a global food company with is operations focusing on the packed foods industry. Its annual revenue figures are in the excess of $49 billion which makes it the second largest food company in the industry with an overall control of 8 percent of the total market share.
Market analysis based on fundamental concepts shows a revelation of the organization as a healthy company with revenue growth and increased margins with a technical perspective showing an expansion of the firm facing heavy debt financing while operating at risky levels of liquidity. As such we see that this could lead to challenges in the foreseeable future, as the company continually pursues a strategy based on aggressive growth through acquisition.
Kraft Foods Inc is a company in the food industry whose operations are mainly in the grocery industry, as an industry leader the company has a keen anticipation of the tastes of its clients and preferences alike. In addition the company has segmented is business objectives into six consumer driven sectors which include biscuits, confectionary, beverages, cheese groceries and convenience meals. In order to strengthen its market presence the company has shown care as shown its acquisitions such as its split from food company Post Cereal and its acquisition of notable company Cadbury, which has allowed the company to diversify its portfolio investments to include over 70 brands that individually generate over $100 million each.
Porter's five forces are known industry model for analyzing and industry (Wang & Andrea, 2011). Pure competition as a model is based on the implication of adjustment of risk rates as returns remain constant across companies and industries alike. This industry analysis model was developed by Michael Porter who presented the framework in the form of an industry model with the influence of five forces by which strategic business managers seek in development of a competitive edge over rival companies (Banham, 2010). This model provides for a better understanding of the context of the industry in which the company operates; these five forces are known as power of the supplier, threats posed by new entrants, the threat of substitutes, power of the buyer and the degree or measure of rivalry.
Kraft Foods Inc’s bargaining power as a supplier
Supplier power is based on several factors such as the concentration of the supplier, the relevance of volume in relation to the supplier, input differentiation, input impact on cost, costs of firm switching within the industry, substitute inputs availability, the threat of forward integration, relative cost to overall industry purchases (Raimonda & Seimiene, 2009). Kraft Foods Inc has an increased exposure to certain commodities such as sugar, cheese coffee and cocoa which are its more valued input commodities. This allows the firm to have a dominant force in terms of access to these commodities, hence allowing it to remain as a major supplier in the industry.
Kraft Food Inc’s customers bargaining power
Current industry conditions show significant opportunities for consumers to extract profits from companies and the industry alike, although we see a rise in the prices by 3.1% of Kraft Foods Inc for 25 of their top products due increase in its input prices. Competition in the industry has made it difficult to increase prices which have been a main aspect that has been attributed to profit loss of notable companies in the grocery industry such as Wal-Mart. As such Kraft Foods Inc has identified this trend and reacted to reduced local consumer levels in its food products and coffee. The company has therefore begun to increase its sell volumes to restaurants and other institutions such as schools so as to compensate for are lost home consumer levels. Some of its products such as coffee have been reduced so as to offer competition with rival companies such as Starbucks. As such one can see that if its consumers are able to perceive such weakness, they should possess greater power in price negotiation.
PEST Analysis of Kraft Foods Inc
In the PEST analysis of Kraft Foods Inc we examine the political, economic, social and technological factors that provide us with a means of examining the external macro environment that the company operates in. These factors are important in the creation of value and overall strategy opportunities, although they remain beyond the control of companies and are normally considered as threats or opportunities (Kloviene & Edita, 2009)..
Kraft Foods Inc is known to have a substantial historical involvement with several political entities and community initiatives such as offering support for political candidates who perceive and show appreciation of the policies in public realm that affect the business operations, brands and employee status of companies. For instance the company initiated a political based committee known as Kraftpac which funds U.S Federal state political organizations as well as candidates while taking reasonable action in form of corporate contributions to political organizations and committees. The company's political involvement is driven by its position on public policy matters that are important to the company, the presence of the company's employees in the district or state as well as its membership in major political or leadership positions.
Inspire of unfavorable economic conditions around the world, Kraft Foods continues to make positive revenue earnings from its involvement in the market through its products and brand alike. Through high revenue earning delivery to the company's shareholders in spite of the difficult economic conditions, the company is continually making investments in its brand and business operations as it strives to provide quality products to its customers. As such through its investment strategies the company has positioned its self in a good position, for providing excellent sustainable top performance without basing on the performance of some of its notable acquisitions such as Cadbury. For instance in 2008 the firm was named in recognition for the second time on the Dow Jones Sustainability World Index and Dow Jones Sustainability North America Index, for its economic, social and environmental performance.
Kraft Foods Inc continues to pursue its corporate social responsibilities through its activities of creating a delicious world while it focuses on its products and policy it also creates partnerships driven by meaningful purpose so as to create changes that last. This enshrined in the company's vision to provide all round health and a state of well being in its products through sustainability and food safety measures in addition to other social concerns and interests. For instance the company embarked on an initiative with farmers through effective partnership to increase purchases of cocoa and coffee as a benefit to them. Furthermore, the company continues to strive to reduce greenhouse based emissions to 18% and consumption of water by 30% in measurement of its overall production.
Technologically Kraft Foods Inc has shown success in implementation of innovation in its ideas and processes of value creation to its customers and consumers alike. The focus remains to embed innovation in all areas of production and operation in its new products and services. Consumer needs are kept in mind before the company designs its strategies as adaptation and anticipation is shown in needs so as to attain them efficiently. The company for instance has employed the SAP Netweaver technology platform as a measure of ensuring effective transformation of its entire business units, this has followed establishment of a hub spoke model with central leadership under a team that shows emphasis on general strategies and systems.
Overall impressions concerning Kraft Food Inc's opportunity and threat environment
The road is long for Kraft Foods Inc as it strives to attain its objective. Several alternatives can be utilized so as to eliminate any debt requirements and other factors causing reduced market share to the company. In the first place the company can get involved in the process of market expansion, which can be attained through development of its overseas markets in Asia as they show promising potential in its business operations. Kraft Foods Inc also needs to reposition itself within existing markets with increased uniqueness and provision of healthy products. This will establish the company as a farm produce provider of fresh produce so as to gain consumer attention.
The company's threat stems from issues relate to its purchase of notable rival Cadbury. It was after the purchase of this company that substantial protest was met more so among British nationals. This resulted in drop of the company's profit margin as its customers stopped purchasing its products which affected its market position; the acquisition also came with changes to the company as shown in failure to effectively utilize Cadbury resources to effectively position its self in the market structure. Another area of threat is the considerable competition the company is facing from rivals such as Nestle and Harshey.
In conclusion of the industry analysis of Kraft Foods Inc we can come up with some recommendations, which can be implemented so as to succeed in its business operations and overall global social image. This can be achieved through expansion of its geographical concentration to varied markets more so in developing markets; utilization Cadbury’s brand equity so as to reintroduce is products in markets with focus on developing markets and expansion as a way to assist the company to earn increased profits so meet its debt needs.
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