The internal capabilities of Kraft Food define its competitive advantage and the current paper reflects on the Resource Based View (RBV) theory for identifying Kraft Food’s strengths and weaknesses. The company benefits of 10 brands that produce $500+ million in annual sales, and other 27 brands with revenues of more than $100 million per year, having a household penetration of 98% in United States and 99% in China and registering annual revenues of more than $18 billion in North America only (“Building North America’s”). Moreover, Kraft Food has 3 R&D development centers, it has 39 manufacturing facilities and it employs 23.000 people (“Building North America’s”).
According to the company’s Annual Report (2012), its activities also incorporate sales, marketing and manufacturing activities, in addition to the three Research & Development centers. The sales component also coordinates the customer relations activities, having available various customer teams for all the product lines, providing also support to regional retailers (Kraft Foods Inc. Annual Report 2012). Marketing and advertising activities include promotions, consumer analyzes for generating consumer knowledge and producing marketing products and merchandising activities related to the identified consumer preferences and trends (Kraft Foods Inc. Annual Report 2012).
Kraft Foods has 40 manufacturing and processing facilities, out of which three are located in Canada and the rest in North America and in some of these facilities there are only produced specific brands, while others are used for producing multiple product lines, but the competitive element here is that the company utilizes natural raw materials for manufacturing its products, having specific operations for the packaging of several of its products/brands (Kraft Foods Inc. Annual Report 2012).
The support activities in Kraft Food include human resources, information technology, legal and financial services, having a transparent financial plan that includes strategies regarding foreign currency, cash and cash equivalents, inventories, long-lived, goodwill and intangible assets and software costs, as well as marketing and R&D costs or environmental costs, among others (Kraft Foods Inc. Annual Report 2012). Postemployment benefit costs is another cost, which is included in the HR strategy, which also includes employee development plans through trainings, attracting and retaining talents, being aware, however, that because of the competition, talented staff can be lost to competing companies, which can impact the company’s operations (Kraft Foods Inc. Annual Report 2012).
The internal capabilities represent a resource based view, which formulates an organization’s strategies to achieving sustainable competitive advantage in the market in which it operates, defining the organization’s strategic choices for competing in its external environment (henry, 2007).
According to this internal analysis of the company’s resources, there can be evaluated its strengths and weaknesses, factors that currently exist in the company’s operations and that describe the actual internal situation within the company (“SWOT Analysis Method and Examples”). As such, while the company registers strong points in research and development, manufacturing, sales and marketing (the main activities), it registers weak points regarding its employees, who are willing to migrate through the companies activating in the same industry, going with Kraft Foods Group’s training, knowledge and know-how gained, which can jeopardize the company’s operations and negatively impact its performances.
The fact that the organization has three research and development facilities indicates that it is open to applying organizational and business changes, according to the results of its R&D activities, implying that it is a continuous learning organization, which places great significance to innovation (Hitt, Ireland & Hoskisson, 2012). This is a competitive advantage that Kraft Foods Group benefits of, but in fact is not really a competitive advantage until an external analysis reveals that this is the only company in the industry which employs R&D in its operations, or which gives the greatest significance of R&D activities compared to its competitors. Therefore, rather than saying that this is a company’s strength it would be better said that R&D represents an opportunity that the company can optimize in its external business environment to achieve competitive advantage, driving the growth strategies.
Second, as the internal analysis reveals, the company conducts various studies for assessing the clients’ preferences in order to come up with a customized plan for marketing and merchandising activities, in accordance with the customers’ needs and wants. This is a strength, as it positions the company’s brands in direct relation with their customers, communicating understanding of their needs and appreciation for choosing Kraft brands.
Moreover, the fact that Kraft Foods Group has 40 manufacturing and processing facilities, out of which some facilities are dedicated to specific brands, indicates its concern for quality and for the technological processes required for delivering competitive products, appreciated throughout the world. In addition, 40 manufacturing and processing facilities indicates a large production line, which reflects the high request, therefore, apriori a competitive advantage, assured by the company’s brands equity and brands awareness, as an experienced, existing competitive force (Porter, 2008). Moreover, the fact that three of Kraft Foods Group’s 40 manufacturing and processing facilities are located in Canada, suggests the company’s interest for adjusting its manufacturing and processing operations to various markets, which is a market adaptation strategy that represents a competitive strength.
Referring to the company’s weaknesses, employees represent indeed a significant aspect that threatens the company’s operations. This aspect is currently a weakness, as it indicates that the company has not the available resources for retaining talents, as it lacks the employee engagement and the feeling of belonging. This can develop into a threat, as former Kraft Foods Group employees can use the know-how learned from Kraft for increasing the business performances of its competitors. Therefore, the company needs to develop a consistent and sustainable employee engagement strategy, which to include organizational values, but also a clear benefit package linked to the employees’ performances, while investing in their professional development and assuring a friendly working environment, reducing the stress as much as possible.
Discussing about company’s opportunities in the external environment, it should maximize its household penetration that currently reached 98% in North America and 99% in China by increasing the household penetration in other areas of the world, becoming a global leader in its industry. Moreover, the company should take the opportunity to place the products that are not in the $100 million and over sales per year into new markets, experiencing how other consumers perceive them, of course, previously developing a market research for predicting the success rates of the specific products.
The company should also optimize its R&D activities, by directing them towards reaching innovation in the industry, with the purpose of gaining more market share. This aspect implies knowing who are the competitive forces (existing competitors, new entries, substitutes, suppliers and customers) and addressing each of these categories through R&D activities.
Henry, A. (2007). The Internal Environment: A Resource Based View of Strategy. Understanding Strategic Management. Oxford University Press. Retrieved on November 6, 2012, from http://www.oup.com/uk/orc/bin/9780199288304/henry_ch05.pdf.
Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2012) "Strategic Management - Competitiveness and Globalization", Mason, South Western Cengage Learning.
Building North America’s best food & beverage company (n.d.). Kraft Foods Group., Inc. Retrieved from http://www.kraftfoodsgroup.com/SiteCollectionDocuments/pdf/kfg_fact_sheet.pdf.
Kraft Foods Group, Inc. (2013) Annual Report 2012. Edgar Online, Inc.
Porter, M. (2008) Competitive strategy: techniques for analyzing industries and competitors. New York: The Free Press.