While it is true that every organization needs to have its own unique strategy, it is also a critical factor the nature and aim of the strategy. As such, strategic management has for along time remained on e of the ways of ensuring organizational growth through increased profitability. This paper critically analyses the strategic management issues affecting Kraft Foods, with a particular focus being placed on its acquisition of Cadburys. The paper further explores the current strategic position of the company, implications, and the future prospects regarding its operations and profitability.
Then the paper proposes a set of recommendation for the corporation, including exploring the possible, ideal goals that are deemed to be capable of enhancing the company’s strategic position. Finally, there are made action point recommendations for the organization to follow in order to implement its strategy. Introduction Every organization strives to have its operations streamlined because strategic management forms one of the most critical avenues through which organizations can develop and enhance their competitive edge in whatever industry they operate.
While it is true that every organization needs to have its own unique strategy, it is also a critical factor the nature and aim of the strategy. As such, strategic management has for along time remained on e of the ways of ensuring organizational growth through increased profitability (Chia & Holt 2006). Business organizations – corporations – are the ones that are in the direst need for strategic planning because unlike nonprofits which might be in operation for other reasons other than making a profit, they have to not only make profits but also ensure that their profitability is sustainable.
Stemming competition or seeking to manage to remain competitive in the face of stiff competition is one of the very important approaches that strategic managers have used in the past and still aspire and hope to apply. This is because competition is a leading avenue through which organizations lose their revenue when sales slump and/or there is an increase in the purchasing power of buyers (Lynch 2006). Literature Review Strategic management is today the key to success for corporations.
With the world economic changing and the economies of the nations struggling to sustain business ventures, organizations, particularly corporations, are finding lit tough to cope especially with regard to attaining and sustaining profitability. The intense competition and a host of many other factors have made corporations to have a hard time (Dutton & Jackson 1987). As the Fie Forces Model of Porter has it, corporations are struggling to deal with rivalry, the increased purchasing power of buyers and suppliers, and the threat of substitutes which are close enough to pose a significant challenge to current products.
The food processing and distribution sector in the United Kingdom in particular and Europe in general has been one of the most competitive in the recent past especially as many players have entered the market and posed a great changed existing ones. As such, it is only those corporations that have the muscle to compete effectively and efficiently that are able to cope with the new pressures (Dutton & Walton 1989). Kraft Foods has been facing stiff competition for a long time from leading world and European food processors like Cadbury and Nestle.
For a long time, there has been a need for the company to restructure and to deal with the increasingly mounting competition. Being the leading food processing and distribution company in the United States and the second largest in the world after Nestle, Kraft Foods has relied on its strategic management to remain at the top (Dutton 1983). And now that one of the leading challengers to its bid to advance and reach many other areas has been acquired, Kraft Foods is set to exert its power in the industry (Johnson & Scholes 2002). Strategy matters for the operations of any organization, regardless of its size and area of operation.
Strategy entails identifying the key measures that are deemed relevant, even indispensable, if an organization is to move anywhere in its operations. Organizational success is a direct function of careful strategic formulation and subsequent implementation; so that the organization is able to make use of its strong points and mitigate risks that lie ahead. Apart from coping with or managing stiff competition, another common strategic tool is the use of market expansion so that the customer base of the organization is greatly enlarged. History of Kraft Foods
Kraft Foods is a corporation with global headquarters in the city of Illinois in the United States; with its European operations headquartered near Zurich in Switzerland. The corporation deals specifically in the making and distribution of food items, confectionery, and beverages. Except for Nestle, Kraft Foods is the largest food and beverage Company in the world, with operations scattered over about 155 countries throughout the world. It was founded way back in 1923 and has ever since expanded and grown into the global entity that it is now.
Changing ownership many times, the corporation has been able to come to be what is largely because of the goodwill and financing from leading financial institutions like Goldman Sachs and Lehman Brothers. Although it has been historically known as a food company, Kraft Foods’ main source of revenue was for a long time from the sale of dairy products, at one time even the company being known as National Dairy. As earlier mentioned, the com-0any has been seeking to equal the great feat achieved by l Nestle, and probable overtake it.
But until now this has failed to materialize. Instead, there has remained a stiff and competitive environment between the two companies, each seeking to assert its dominance in the worldwide food and beverage market. Kraft Foods has used different strategies, including innovation and product differentiation, to seek to manage the stiff competition. The beverages sector has especially been full of intense competition with many global players concentrating in the manufacture of beverages.
The main business strategy for the company has been acquiring lucrative and competitive firms in the sector and selling off those divisions or operation lines deemed to be less profitable. For instance, Kraft Foods recently sold some of its US divisions to it chief competitor Nestle. History of Cadbury As the United Kingdom’s most established confectionery company, Cadbury was until its takeover a vibrant company with a huge global presence. Based in the United Kingdom, the company has a many overseas subsidiaries.
It has also grown from a humble start in 1924 when its founder started off as a tea vendor. Over the years, the confectionery business had to be upgraded in order to compete effectively with what the market was offering. Through various other strategic plans, the company managed to grow to become a global outfit. The Cadbury rand become a common household name in many homes around Europe, including areas where the company had been known to be less competitive and where the market was ruled by Nestle and other beverage and confectionery firms.
At one time, in order to enhance its present in the market and increase its market share, the company had to merge with the drinks company Schweppes to become globally known as Cadbury Schweppes. The enlarged outfit went ahead and made some really significant acquisitions of other smaller companies, making it one of the largest food and beverage forms in the world. However, it later split its operations so that each division could deal with its own lines of production.
The demerger led to the formation of Cadbury and Dr. Pepper Snapple Group Inc. hich dealt in confectionary and drink businesses respectively. Like Kraft Foods, Cadbury has for a long time been thriving a lot on disposing of divisions deemed unviable; and by acquiring other, more profitable ventures. Strategic Issues Facing Kraft Foods In order to demonstrate the real value of strategic planning and management to tan organization, it is critical that a review of successful firms is done in comparison with those that are less successful and/or struggling to cope as far as operations are concerned (De Wit & Meyer 2004).
Kraft Foods has been an epitome of a successful corporation in the food and beverage industry, although this does not in any way mean that it has been free of challenges. Although it is currently strategically positioned to exert a formidable and significant competition in the industry, it strategic challenges are not few (Dutton & Duncan 1987). Among the most critical issue facing the organization is the failure by the management team to have their takeover of Cadbury sanctioned by the staff of the company.
There has been a lot of opposition to the employees of Cadbury who have for a long time been opposed to the takeover by Kraft Foods and who continue to feel that their continued tenures at the company is at stake (Christensen 2001). There has remained a problem of seeking to have all the stakeholders coming on board because the company believes some management team members of Cadburys are still uneasy and are fearful of their future positions at the company. That aside, it has been noted that even the unionisable employees at Cadbury and the u ion is opposed to the takeover.
This has meant that although the company has successful managed to take over Cadbury; it is faced with a backlash from employees and a lot of legal challenges regarding the authenticity of the takeover (Cummings & Doh 2000). There has tended to be a fairly low motivation among the staff members, and people who are increasingly feeling that the new management team will get rid of them in their continued restructuring efforts. This backlash from staff, although not so much visible, has caused the company t have a slow realization of its goals as far as restructuring is concerned.
Given that the company had sought tom use this strategy to reduce the immense competition that was inherent in the industry, this strategic seems not to be working because it is nor being followed by the expected returns. The use of the theory of management by objectives seems to be falling out of place for the company (Dutton & Ashford 1993). Given that it was legally to become the inheritor of all the assets of Cadburys upon is buyout means that whatever happens remain s to be a very critical issue requiring quick addressing.
A failure to involve everyone – at least every stakeholder – in the main decision making processes of organizations means that the organization is opening itself to kickbacks closely related issue has to do with financing its takeover of Cadbury. Kraft Foods did not really use its own resources when it took over Cadbury. Instead, it borrowed the bulk of the amount, which it has to pay back as soon as possible (Collins 1996). This is a challenging issue because the strategic plan it employed is seemingly not working for its benefit –not until the moral of staff is up once again.
There have been a lot of negative publicity campaigns going on which have made the employees of Cadburys to feel de-motivated. Of key and movable intersect is the projection that with the takeover of Cadbury was likely to come the loss of at least 30, 000 jobs. Given that the entire United Kingdom fraternity, including the political class, were opposed to the takeover has meant that Kraft Foods has not really won the war on seeking to include all players in the strategic decision making process.
It has challenges in applying the management by objectives theory as it was presented by Drucker. The other challenge faced by the corporation is the failure to meet its targets as expected. So far, although it has been successfully having a lot of plans to be followed, these plans have hardly ever been decisively implemented owing to the failure by the leadership and management to put in place clearly defined approaches and means to be followed to achieve the goals. Instead, every activity and projects have been delaying so much so that it has been difficult to implement them.
It has been a notable factor that motivation at the company is not only low due to feelings of being left out but also because there is no way that the staff can successfully communicate their grievances (Mintzberg & Lampel 1998). Sourcing its raw materials has also presented a great challenge to the company because it failed to meet the expectations of the public. There have been issues of salmonella poisoning in some samples of its produce, making it to recall some of its already manufactured items.
As expected, such massive recalls have had far-reaching implications on the company. Strategically, the company’s rivals have grasped the opportunity t use negative and even malicious advertising to portray that supposed health risks that the company’s products pose to the public. It has been known that although there was some level of poisoning and the American market and the company recalled the affected supplies, negative publicity has continued to affect its operations.
Rivals just won’t let the matter go but are using it as a way to get customers and potential customers to think again about buying Kraft Foods’ products (Campbell & Yeung 1991). Given the health-conscious public of the United States, it has been difficult for the company to make headway in the market even though it has one of the highest market potential in the industry. Then there is the issue of cost leadership. For a long time, Cadburys thrived on the strategy of seeking to offer both quality products as well as those that could be afforded by the majority of the people.
The company so much valued human ethics that it could not let the profit motive get in its way of meeting the needs of the people. However, although Kraft Foods is trying really hard, it has been grappling with issues of highly pricing its products in an attempt to get back what it invested in the Cadbury Company. Cost leadership is a state y which when well applied can greatly enhance the market share of the com0any, a trend which will help the company to have higher sales volumes and so meet the cost of doing business and investment much faster.
Finally, there has been a marketing problem because the marketing strategies of the company have been decried from time and again as being ineffective. So far, the company has not been successful in acquiring and maintaining a large market share that can be compared to that of competitors like Nestle. Poor marketing strategies have been cited in areas like understanding its global market trends so that it can, market its products with a unique taste for every customer (Whittington 2001).
Of the causes of this has been the failure by Kraft Foods to invest a significant amount of finances in research ad development. A notable area of research that is deemed relevant for enhanced marketing is in creation of market segments which can help the organization to have access to information regarding the exact nature of the needs of specific customers as opposed to tendencies to generalize. For instance, those customers who prefer drinking chocolate to soft drinks can be understood.
The role that is played by strategic management is a very significant one, calling for organizations the world over to ensure that they formulate and implement strategies that are not only deemed sound but also worth executing. Strategic planning, among other issues, serves as the roadmap to high levels of organization performance and is a mark of the competitive edge of the organization. While Kraft Foods has been very successful in its operations, there mare areas in which it has been failing to pay attention to as far as strategy is concerned.
Kraft Foods is in need of a review of its strategies in order to be more capable of dealing with the challenges that it is currently facing. It is imperative that the company does a lot more than just acquiring new outfits which it believes are a threat to its survival in the market. As peter Drucker would have put it, it is necessary that the company does its marketing without seeking to sell. It is on this basis tat the following recommendations are made to help the company come out of its current strategic management challenges.