The purpose of this research is to determine current advantages of the system of corporate governance, decision-making process and their compliance to the corporate culture and goals of further strategic development, as well as assess the possible areas of improvement.
Recent changes within Kraft Foods, Inc. which resulted in the separation of the company into Kraft Foods Group, Inc. and Mondelez International, reflect the change of the corporate development strategy. Specialization of the former on the North American market of groceries and the latter on the global market of snacks is the result of an attempt to diversify financial risks, penetrate the markets with a greater extent of specialization and reach the necessary level of sustainability.
The areas of concern include the extent of organizational cooperation between the two newly established companies, the impact of the existing internal and external paradigms on the decision-making process, and the possible changes that may occur in the corporate culture and respective behavioral patterns of the employees.
- Maintenance of cross-corporate contacts is crucial for the survival of both companies, although the mechanism and the nature of information exchanged may vary depending on current necessity.
- Despite the fact that a certain degree of stability and financial sustainability has been reached under the present model of the corporate structure, intensive modifications need to be made in order to increase competitiveness on the domestic and international markets and reach the projected strategic goals.
- The corporate culture should not only reflect traditional values and the current system of hierarchy, but also be based on an efficient feedback mechanism between employees and management.
The way of achieving these goals is partially based on borrowing and localization of the existing successful patterns, especially, among transnational corporations, and partially derives from the original and innovative ideas that the staff has to offer.
Kraft Foods Inc. has indeed found itself in a challenging situation. The split of the company, which took place in 2012, has been a test for the corporate integrity, market identity and future growth strategy. Positions of the both emerged companies, Kraft Foods Group, Inc. and Mondelez International, have their advantages and disadvantages. Kraft Foods Group, for instance, is well-established, well-known and well-recognized by customers and commercial partners worldwide, yet it is now concentrating on the North American market, and the area of interest is groceries instead of a previously greater range of food and snacks. The other company, on the other hand, is globally-oriented, however it may take years till the new name is properly received by the global community. The separation of the companies is a clear signal that both of them are preparing for new strategic challenges, and such challenges may only be overcome if the power of positive transformations comes from within.
Kraft Foods Group, as the primary target of this research, has inherited many of the management guidelines and techniques of its predecessor. It follows a strict Code of Conduct and proclaims a commitment to operate in a legal compliance and with integrity. Company’s respect for human rights and sustainable development is reflected in such documents as Kraft Statement on Human Rights and Kraft Corporate Responsibility Guidelines (Compliance and Integrity, 2014). Although being very open-minded, democratic, and flexible by nature, these documents are not concrete enough to provide guidance for the corporate practices of decision-making process and adaptation to the new market challenges.
One of the distinctive features of the company is a formal hierarchical structure, accompanied with a unified decision-making process. The tasks are being distributed by the CEO to work teams, both within the same department and across them. This unification is helpful if the final goal is to solidify the market position of the company and avoid unnecessary risk (ICMR, 2012). The present performance of the company is reflected on the stock market. Stock price of Kraft Foods Group remained very stable over the past 18 months, and it may be considered a good conservative investment (Daily Stock Rates, 2014). For the future growth, however, the present structure has little to offer.
It is also understandable that a consolidated market portfolio, especially with recognizable brands, may secure the present condition of the company. On the other hand, it is also clear that in order to generate additional value, the company has to enter new strategic niches, and it is not possible to gather respective market knowledge and understanding of customers’ behavioral patterns without increasing financial risks.
The existing methods of evaluation of performance output, formal and straightforward implementation of strategic corporate decisions together with the existing respectful attitude to the employees are indeed valuable assets , which may serve as a backbone of the new corporate paradigm. Certain significant amendments, nevertheless, also need to be made.
The first area that needs to be taken into account is the interaction between the two companies. Effective mechanisms of transfer of data and human resources would allow to avoid possible loopholes in strategic development and such an unfavorable outcome as massive layoffs. It may be reasonable to establish a permanent supervising body, which would possess all the current information concerning possible problems of either of the companies and manage transfer of resources, accordingly. It may be accompanied by temporary structures such as cross-corporate task forces in case of necessity.
Secondly, although the defined market for Kraft Foods Group is smaller than that of the preceding company, both in terms of geography and a range of products, the challenge of growth in a highly competitive environment still preserve. The existing system may not be flexible enough to adjust to the fast-paced changes, therefore there is a need for delegation. In this regard the concept of servant and transformational leadership has to be developed further. The Board and the CEO may not need to make decisions of local and functionally narrow nature. If more authority is given to the functional departments and territorial subsidiaries, they will be able to answer the market urges in a proper timely manner. Such areas as development of new products and brands may be localized and even outsourced, while top management would keep some general control over the situation.
Finally, despite the fact that the current corporate culture of the company is generally supportive to the employees, they should take a greater part in the corporate governance. Successful companies, be it in the field of fast food of high technologies, normally have an effective internal feedback mechanism that allows staff not only inform of the possible concerns, but also make valuable and constructive suggestions regarding both daily operations and strategic issues. The voice of the employees needs to be heard, evaluated and appraised.
It can be seen quite clearly that Kraft Foods Group has many factors of success. The brand, which is currently over 100 years old, is well-known on the target market. Supply chains, manufacturing facilities and downstream activities are properly established and fully functional. From the point of view of corporate mechanisms, decision-making process and evaluation techniques the company is a rightful heir of Kraft Foods, Inc. The changing economic reality, nevertheless, is dictating its own requirements. In order to maintain the existing level of well-being and expand within the defined limits and beyond, the company has to utilize the heritage of its predecessor in the most effective and efficient manner as well as develop new internal and external mechanisms. It is not enough to rest on the achieved levels of integrity and cooperation. The new elements of the functional and organizational structure of the company have to include elements of cross-corporate communication, effective delegation and decentralization, and efficient mechanisms of internal support of innovation. The latter does not necessarily take forms of new technologies or designs. Proper understanding of the company by employees from below may result in proposals which are destined to change for good not only the existing operations and products, but open a new era in the world of strategic development of groceries market in North America and even worldwide.
Irene Rosenfeld: Setting New Directions for Kraft Foods (2012). ICMR Case Study. Web. Retrieved 20 January 2014 from http://www.icmrindia.org/casestudies/catalogue/Leadership%20and%20Entrepreneurship/LDEN079.htm
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