Kraft Foods Group Applying Porter’s Strategies

Executive Summary

Kraft Foods Company has developed plans of action that have put it above other companies within the food industry. The management of the company strategically applies some of the generic competitive strategies to build a sustainable competitive advantage over competitors within the industry. The company utilizes the low-cost strategy to make sure that its products are the cheapest in the market.

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It offers premium prices for its high quality unique biscuits. The company’s fixed costs are spread over a large economic base. This increases the company profits as some of the branches do not account for such costs. Kraft Foods also uses product differentiation in offering high quality goods and services to the customers. The strategy has led to increased brand loyalty. The focus strategy used by the company reinforces the two other strategies of differentiation and low-cost thus ensuring that the company centres on producing specific products for particular markets.

The company can also focus on building upon the three of the four porter’s corporate strategies to sustain the competitive advantage enjoyed by the company in future. Recommendations are made to the company to avoid changing its vision, as it has been crucial in lifting the company to the present place in the market. However, changing of the same to improve effectiveness is advised.

Introduction

Kraft Foods Inc Company is the second largest company running business in the food industry globally. The company products trade under the brand name of delight global snacks. The products are simple to identify, healthier and delicious. They include Planters nuts, Cadbury chocolates, LU biscuits and Trident gums. The company has flavoured the products to suit various tastes around the globe.

Over the last business period, the company has posed improved business returns in Europe based on its diversified corporate strategy. The strategy is centred on making the company dominant in the snacks global market (Eldring 2009). It also strives to make the Kraft brand the most accepted by clients, which also gives the company a competitive advantage over rivals within the industry. The corporate strategy has helped the company to succeed in other markets such as North America.

Kraft Foods supplies its products into global and regional markets depending on the different tastes and preferences. The markets include Europe, North America, Africa and Asia. The segmentation of products based on regions has led to the development of regional products such as A-1 sauces, beverages that are flavoured with Tang powder, Vegemite products in Australia, and Philadelphia cream (Pearce 2009).

To succeed, the corporate strategy employed by the company combines factors that drive the performance up the ladder while at the same time developing products that are of value to suit the customer preferences. The company broadly describes stakeholders to include suppliers, consumers, employees, clients, shareholders and communities. The company management enables the employees to work as though they own the company, which translates to good service that creates trust in the company among the clients (Hitt, Ireland and Hoskisson 2007). This paper seeks to explore the various generic strategies used by Kraft Foods Inc Company to succeed.

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The paper further integrates the strategies with the company’s opportunities, strengths, weaknesses and threats. The meeting point between the company SWOT and Porter’s strategies are analyzed as well. The paper finally explores the ways through which the company can use the generic strategies to improve on its weaknesses and counter the threats along with using the environmental opportunities to its benefit.

Kraft Foods Porter Strategies

Kraft Foods Inc Company uses various strategic options in its business operations. The company has selected its strategies cautiously making it obtain sustainable competitive advantage over the rivals within the industry. To achieve the four strategies, Kraft Foods group employs different approaches (Pearce 2009). The company utilizes the mechanisms of differentiation, low-cost strategy and focus strategy.

Low-Cost Strategy

Kraft Foods Company has cut its niche of the market share in the food industry as the second largest global company by having its products as the most affordable in the market. The company has chosen to be deliberately cheap. Kraft Foods is mature and by setting its products low, it locks some of the competitors out of the market. The prices set by Kraft Foods do not allow other competitors within the industry especially those that are young to match the same pricing and still make profits (Pearce 2009).

The company uses its cost leadership strategy to levels beyond companies that are either regional or local. The company pursues various sources while implementing these strategies. Economies of scale are one of the sources. In pursuit of this, Kraft Foods does not allow frills. Here, the company has penetrated into areas that would be considered remote and small for instance Africa and Asia. This is in addition to established markets such as the US, North America, and Europe. Kraft Foods refers to the former as emerging markets.

Under the utilization of the economies of scale, the company also designs its products in a pleasing way. Delight biscuits are delicious, easy to identify and the brands such as the Philadelphia cream are a household name. It is easy to identify Kraft Foods generic strategy of cost leadership based on the way it runs its operational economies (Pearce 2009). The company has a short chain of distribution that cuts the high costs that would result from bureaucracies.

Kraft Foods has fixed research and development costs that explore into areas that the management has identified. The company benefits from these fixed costs as well as enjoying higher sales returns compared to competitors within the industry (Mun 2010). It also has centralized advertising and the legal process that affect the company from any of the branches. This allows the costs that arise from such processes to be spread over a wide revenue base.

The company has embraced modern technology that has helped to cut paper work making it easier for both the suppliers and clients to get necessary information. Adopting the digital technology has made the company to get raw materials with ease, improved the rate of production as the efficiency of machines is high and this has cut the costs of other factors of production. By effectively implementing the cost leadership strategy, the performance of the company is above the average performance of the industry. This has raised it to become the second largest company in the world.

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Differentiation

In implementing the idea of differentiation, Kraft Foods produces unique products to the market. Products such as LU biscuits, Trident chewing gums and Cadbury chocolates are delicious and have special flavours that suit the different tastes for diverse global markets (Hitt, Ireland and Hoskisson 2007). The company’s research and development unit studies the different markets and advises the company on the best ways to satisfy customer preferences.

This has created trust among the customers making them to be blind on the prices of some products because they place tastes above price when making choices. The research and development constantly drives the company to be creative and thus gives high quality products to the customers beyond the reach of competitors. This is in addition to the quality service offered to customers by the employees of Kraft Foods Inc Company.

The increasing number of customer base and the way new products by the company are received on the market measures the trust created by customers in the products of the company (Pearce 2009). Through this, the value that customers attach to the company products can be felt. Delight biscuits have ingredients whose flavour is appreciated across the global market. The chocolate biscuits made of milk and Cadbury are other products that are unrivalled in the market.

The quality of the products by Kraft Foods is superior and has been very difficult for competitors in the industry to emulate. This strategy is above pricing when it comes to attracting and retaining customers (Eldring 2009). The management of Kraft Foods understands that the consumers put more value o their health on food products than the price. Most of them would rather pay more for quality foods than pay less for foods that threaten their health. The sustained competitive advantage by the company is held by its brand. Delight biscuit products are a household names in the different markets and the brand is highly appreciated.

The Focus Strategy

Kraft Foods Inc Company applies the focus strategy as a support to both the differentiation and cost leadership policy. The strategy helps the company to centre on products that are specific to the markets (Pearce 2009). The strategy trims the focus to concentrate the quality of the broad array of products that the company produces. The aim of this strategy is to make sure that the company produces goods that suit particular markets bearing in mind that Kraft Foods is a global company.

Leveraging the company strengths

Kraft Foods Inc Company can keep-up a sustained competitive advantage that will make it the market leader in the food industry by taking advantage of various factors. The company should build on the laid down strategies to sustain its growth (Mun 2010). If the plans are expanded, the growth of the company in future is guaranteed and as such, it will increase its value and defeat the rivals within the industry.

The company’s human resources department will be central to the realization of the above advantage. The human resources management has great operational effects if the company has to continue being competitive within the global market. The important functions of HRM include job analysis, job description, employee development, training, recruitment, and the compensation schemes (Hitt, Ireland and Hoskisson 2007).

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Through the human resources management, the company understands the right technology that the company ought to adopt, as it must fit job specifications. Implementing this will make Kraft Foods Company the preferred choice for snacks and other food products by the consumers globally. This will only be realized if Kraft Foods becomes the loyal brand globally. A well build brand leads to increased profits as production increases.

Conclusion

Kraft Foods Inc Company uses three of porter’s four generic strategies in its corporate strategy to obtain competitive advantage over the rivals within the industry. The low-cost leadership strategy makes it more efficient and as such, it outperforms others companies. In differentiation, the company produces goods and services of the highest quality for its customers (Mun 2010). The chocolate flavoured biscuits and the LU biscuits are products that resulted from the implementation of this strategy.

The company has also focused on the producing goods that are specific to the preferences of the particular markets. Kraft Foods Company that produces goods for the global market and it has customers with very different tastes (Eldring 2009). The company has to take care of the different preferences for different markets. The company also needs to devise strategies to help it sustain its competitive advantage over rivals by building on the three of porter’s strategies that the company ready implements.

It is recommended that the company should find a balance between producing high quality goods and making the same goods affordable. It would not be necessary to change the company mission and vision as it has been aligned to the employee needs. The vision has raised the company to its current place as the second largest food company in the world. The best strategy would be to expand the vision by building on what the company runs by making more effective. The company should make its research and development unit more dynamic. Presently, the costs of research and development are fixed. Therefore, they limit the ability of the department to function freely and widely.

References

Eldring, J. (2009). Porter’s (1980) generic strategies, performance and risk: An empirical investigation with German data. Hamburg: Diplomica-Verl.

Hitt, A., Ireland, D., & Hoskisson, E. (2007). Strategic management: Competitiveness and globalization. Ohio: Thompson South-western.

Mun, H. (2010). Global business strategy: Asian perspective. Singapore: World Scientific.

Pearce, A. (2009). Strategic Management. Boston: McGraw-Hill/Irwin.

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