Marketing Plan for Kraft Foods

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Executive summary

The marketing plan relates to Kraft Foods Incorporation which is a firm that operates within the United States food processing industry. The firm deals with a wide variety of products which include food, confectionery, and beverages, and markets its products in 155 countries. Some of the beverage products that the firm deals with include powdered beverages and packed fruit juices. To increase the level of its profitability, the firm’s management team intends to extend its powdered soft drink. Product line extension will be conducted on its Crystal Light which is a water-soluble beverage. Kraft Foods Incorporation is committed to ensuring that it meets the consumers’ food requirements by making it to be healthier and more enjoyable. In addition, the firm ensures that all its products are fit for human consumption. The firm’s management team is focused on attaining its profit maximization objective. To attain this, the firm has integrated the concept of innovation. This enables the firm to conduct effective product line extensions on its various products. In addition, the firm is committed to ensuring that its products are of high quality. A situation analysis is conducted by evaluating the internal and internal environment. A marketing strategy, financial matters, and control strategy are illustrated.

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Situational analysis

STEEPLE analysis

Over the past two decades, the United States has undergone steady growth in all its economic sectors. This has culminated into an increment in the country’s Gross Domestic Product. According to focus on economic data (2009, Para. 10), the country’s GDP increased from the US $9,951.5 billion in 2005 to US$14,151. 2 billion during the 2nd quarter in 2009. This represents a high rate of economic growth. Growth in various economic sectors has culminated into an increment in the country’s income distribution. As a result, the consumers’ purchasing power has been greatly enhanced and hence their living standards.

The US has also witnessed an increment in the level of its population. According to Jennifer (2008, Para. 4), it is projected that the country’s population will reach 293 million by 2030 which will further increase to 392 million by 2050. This has resulted from an improvement in the country’s health facilities thus increasing the fertility rate. It is estimated that the country’s life expectancy will be 82.6 years during 2050. In addition, the high rate of immigration into the country has also contributed towards an increment in the country’s population. According to Jennifer (2008, Para. 4), the average annual rate of immigration into the US is 880,000 individuals. Currently, the country’s population structure consists of the youth. In the future, it is expected that the population structure will be composed of the elderly.

Currently, consumers are increasingly becoming health conscious in their consumption behavior. According to Fletcher (2007, Para. 2), this has resulted from knowledge explosion culminating in intensive consumer awareness. For instance, there has been the emergence of a trend where consumers are regularly searching for nutritional information regarding food and beverage products in their purchasing patterns.

The technological environment has also witnessed rampant change resulting from the high rate of technological innovation. This has resulted from increased investment in research and development by firms dealing with various technologies. These innovations have resulted in an improvement in the operation of firms within the food industry. For instance, innovation within the Information Communication Technology (ICT) industry has enabled firms to become efficient and effective in their operation.

To increase the rate of their economic growth, more countries are responding to the high rate of globalization by incorporating the concept of economic integration through the formation of regional trading blocs. For instance, the US has formed an economic integration with Canada (Globerman &Storer, 2004, p. 16). As result; domestic firms can increase their market through internationalization. Economic integration has resulted in favorable trading terms such as the rate of taxation between the member states.

Over the past years, there has been an increment in the rate of various forms of environmental pollution resulting from various agents such as manufacturing companies. This has resulted in environmental degradation and hence the high rate of global warming. To minimize environmental pollution, various governments have formulated rules aimed at protecting the environment. For instance, the US through the US Environmental Protection Agency (EPA), is committed to ensuring that all firms in various economic sectors desist from involving themselves in environmental pollution to minimize the rate of climate change (Lisa, 2010, para.1-5). The US political and legal environment supports the growth of firms by protecting new product innovation. The government has formulated effective laws aimed at protecting products through the issue of patents.

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Micro-environment

Five competitor forces

According to Porter (1998, p.21), the operation of a firm is influenced by the industry structure. Porter (1980, p.35) asserts that there are five competitive forces that determine a particular industry’s structure. These include entry of competitors, buyer and seller bargaining power, rivalry amongst firms and threat of substitute products.

Food processing industry has become very lucrative due to its profitability potential. As a result, investors are establishing new firms in this industry to share the market profits. In addition, the high rate of entry has been enhanced ease of entry due to minimal barriers to entry. The high number of investors venturing into this industry has culminated into an increment in the degree of rivalry amongst the firms.

Bargaining power of buyers refers to the amount of pressure that customer place on a particular business. In addition, consumers are considered to have a high amount of power if their actions affect the firm’s margins and volumes (Porter, 2010, para. 4). Buyer power in the food industry is relatively high due to the low switching costs involved. The industry has a relatively high number of suppliers which provides the customers with a wide range of choice from where to purchase their food and beverage products based on variables such as the price.

According to Porter (2010, Para. 5) supplier power refers to the amount of pressure that suppliers place on a business. Supplier power results from lack of substitutes, high switching cost and a few suppliers. Food processing industry has a wide number of suppliers from which the firms can source their suppliers. In addition, the large number of suppliers makes the switching cost to be minimal.

In addition, the industry is characterized by a wide range of substitute products. This has resulted into a decline in the switching cost thus increasing the probability with which customers can switch to competitive products.

SWOT Analysis

Strengths
-The firm is well positioned within the food and
beverage categories
-Product diversity. The firm has managed to develop and leading food and beverage brands
-Well developed financial stability which have been created over the years
Weaknesses
-Difficulty in implementing expansion strategy through acquisition or venturing into new markets.

.

Opportunities
-High probability of increasing the size of its market through internationalization.
-High growth rate through product innovation
-The firm operates growing product categories which enhances its growth rate.
Threats
-Intense competition from the already established firms and new firms venturing the industry.
-Industry consolidation presents a threat to the firm due to increase in the intensity of competition.-
-Change in consumer taste and preferences

The 7-S analysis

7S analysis is a model developed to enable firms gain a better understanding of the organization to determine how they can gain efficiency in its operation and maximize profitability (‘The 7S model’, 2009,p.1).Kraft Foods have incorporated a high degree of flexibility within its organization structure. This has been achieved by adopting a functional organization structure (Deromedi, 2004, p.1).The objective of integrating a high level of flexibility is to enable the firm strengthen its global operations. The high level of flexibility is also aimed at ensuring that the firm responds to market challenges more efficiently.

The firm’s strategy entails attaining a high level of profit through product innovation while at the same time minimizing the overall cost of operation by controlling the expenses incurred.

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The firm has also integrated efficient systems such as Information Technology (IT) which enables it to manage information effectively. Incorporation of IT systems enables the firm to maintain its intelligence even after staff leaves. In addition, the firm has incorporated Total Quality Management (TQM) to ensure its products meet the market standards.

To ensure effective production of the various product categories, the firm hires only the qualified staff about food processing. In addition, the firm has incorporated employee development through training. The training is aimed at ensuring that the employees acquire emerging the food processing skills. Training enables the employees to undertake product innovation more effectively.

The firm has also managed to develop an efficient style which ensures that the employees are motivated to conduct their duties effectively and efficiently. This is attained through incorporation of a comprehensive employee reward system.

To ensure effective and efficient customer service, Kraft Food Incorporation has a sufficient human resource which enables it to serve its customers in all its global markets. The firm sources its human resource from both the domestic and foreign market.

Kraft Food Incorporation also integrated effective values which include quality, product safety, respect, integrity, openness and innovation. Quality enables the firm to deliver food product which culminate into a high rate of customer satisfaction. On the other hand, respect enables the firm to operate social responsibly within the society. By being open, the firm accepts comments from the market through open dialogue. Integrating innovation contributes towards the firm meeting the market demands. Safety as a value is attained by integrating high standards in all its operation while integrity ensures that the employees execute their tasks effectively.

Marketing strategy

According to Ward, Smith and McDonald (p.6), firms in different economic sectors are faced with several challenges which include market maturity, globalization and increase in customer power. To deal with market maturity, it is paramount for management teams to conduct product improvement through innovation. In undertaking product innovation, the element of integrity marketing should be incorporated. Linda (2004, p.3), defines integrity in marketing to include strict compliance with the set standards and code of values about the relevant parties such as the shareholders and customers. Linda (2004, p. 4) asserts that integrity marketing helps in improving the firms competitiveness, productivity and hence profitability.

Ansoff Matrix

Because product line is a growth strategy, the management team of Kraft Foods will use Ansoff Matrix in implementing the strategy.

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Product development

Through ansoff matrix, it will be possible for the firm to conduct effective product development by integrating product innovation. Product development enables the firm to market the product in its existing market. Product development will be conducted by fortifying the energy drink by incorporating nutritional, energy and hydration requirement of the consumers. This will contribute towards the product appealing a wide range of customers. To penetrate the existing market, the product will be marketed using the current distributional channels.

Product diversification

To ensure that product-line extension culminates into an increment in the firm’s profitability, the firm’s management team will integrate the concept of diversification. This will be attained by marketing the new Crystal Light soft drink in new markets. The table below gives an illustration of ansoff matrix.

Existing Markets Existing products New Products
Market penetration Product development
New markets Market development Diversification

Marketing segmentation

Before introducing a product or service in the market, the management team should segment the market. Market segmentation entails targeting a particular customer group (Market segmentation’ 2010, para.1). For the marketing process to be successful, Kraft Foods management team will divide its market using several demographic variables. One of the demographic variables to be considered in conducting product line extension is age. The new Crystal Light soft drink will be aimed at meeting the consumers’ functional demands about hydration and energy requirements. By meeting the customers’ nutritional, energy and hydration requirements, the new Crystal Light soft drink will appeal both the elderly and young customers. For instance, the product will appeal the sportsmen and women due to its hydration and energy characteristics. Different flavors will be incorporated in producing the new Crystal Light to meet diverse customer requirements.

In addition, the consumers’ income level will be considered in targeting the market. This arises from the realization of the fact that consumers have got different income levels which has a direct impact on their purchasing behavior. Because the new Crystal Light soft drink is targeted to a wide category of customers, the price will be set at a relatively low point compared with the competitors. This will contribute towards the product appealing individual consumers with different income levels.

Competitive strategy

Cost leadership

The management of the firm is committed at ensuring that the firm attains a high competitive edge. In the process of undertaking product line extension, the firm’s management team will incorporate cost leadership strategy. This will be easily attained because the firm has managed to develop economies of scale in its operation. The firm will procure the raw materials necessary for production of the new Crystal Light soft drink in bulk. As a result, it will be possible for the firm to receive quantity discounts from its suppliers. These benefits will be passed on to the consumers through a relatively low price.

Differentiation strategy

As a competitive strategy, the firm will ensure that the new Crystal Light soft drink is well differentiated from the competing products. In its production process, organic raw materials such as fresh fruits will be used. As a result, consumers will attain a high nutritional value from its consumption. Differentiation of the new product will also be enhanced by its high energy and hydration characteristics.

Financial overview

Sales forecast

The management of team of Kraft Food intends to attain a significant proportion of revenue from marketing the new Crystal Light soft drink. This results from an increment in the consumption of soft drinks both in US and foreign market. According to Dagliden (2009, para. 4), it is expected that US will have the largest proportion of soft drink consumers accounting for 45% of the total global market. Due to increased incorporation of soft drinks in their consumption patterns, the management team of Kraft Foods has forecasted a potential increment in its sales revenue. The table below illustrates the firm’s sales forecast for Crystal Light for the next four years.

2010
Amount in $
2011
Amount in $
2013
Amount in $
2014
Amount in $
Sales forecast according to customer category
-Youth and college age
students
-Sports clubs
-Educational institutions
1,000,000

1,500,000
500,000

1,200,000

2,000,000
900,000

1,500,000

2,400,000
1,200,000

1,800,000

2, 700,000
1, 500,000

Total sales 3,000,000 4, 100,000 5, 100,000 6,000,000
Direct cost of sale 1, 200,000 1,700,000 2,000,000 2,500,000

Break even analysis

Description
Monthly units sold to break even 500,000
Break-even revenue $995,000
Assumptions made
Average revenue per unit $1.99
Average variable cost per unit $0.99
Estimation of monthly fixed cost $300,000

Expense forecast

The firm’s management team has forecasted that the firm will incur significant marketing cost in its marketing process. It is expected that the marketing cost will increase across the years as the firm intensifies its marketing process. To cater for the marketing expense, the management team has allocated $1,500,000 in its marketing budget. The table below illustrates a breakdown of the various expenditure items that firm will incur in its marketing process.

Item 2010
Amount in $
2011
Amount in $
2013
Amount in $
2013
Amount in $
Cost of promotion
Advertising cost (TV, print media, radio television, social networking tools) 120, 000 100,000 150,000 120,000
Sales promotion 80,000 85,000 90,000 30,000
Cost of consumer market research 40,000 44,000 50,000 50,000
Cost of competitor market research 20,000 25,000 30,000 30,000
Total expected marketing and sales cost 260,000 254,000 320,000 230,000

Control

A comprehensive control program in marketing the new Crystal Light will be integrated. According to marketing teacher (Anon., 2010), control entails several activities which includes evaluation, measurement and monitoring. In marketing product, the firm’s management team has realized that a considerable amount of resources are utilized hence the importance of ensuring effective utilization of the resources.

In marketing the new Crystal Light soft drink, the firm’s marketing department has set several control standards to ensure that the marketing process is successful. These are set by integrating several perspectives by developing a balanced score card. The approaches considered include financial, internal business, learning and growth and the customer. These approaches will be used in analyzing the success of the soft drink both in its domestic and foreign market. The balanced score card to be used in controlling marketing of new Crystal Light is illustrated below.

Customer perspective Financial and business perspective Learning and growth
Objective Does the new Crystal Light conform to market requirements To determine sales trend of the new product line. To determine the avenues through which the new Crystal Light be improved.
Measure Percentage of market share acquired. Change in sales volume of Crystal Light. Extent of knowledge acquired by the firm’s employees about soft drink market
Targets Increase market share of Crystal Light with 15% within the first year. Sales volume of the new Crystal Light soft drink should increase with a margin of 20% annually. The firm’s marketing personnel should be conversant with the current market trends.
Initiative Conducting periodical consumer market research to changes in consumer tastes and preferences. Sales analysis will be conducted quarterly to identify sales trend. Employee training will be conducted from time to time.

Conclusion

Product line extension can result into the firm’s performance being enhanced. To ensure effective analysis, it is importance for the management to conduct a macro-environment analysis. This will aid in identifying the factors that will affect the success of the product. The external environment should consider the social, technological, economic, environmental, political, legal and ethical factors. A micro-environment analysis should be aimed at evaluating the firm’s internal strength. This can be conducted by utilizing the SWOT analysis and the 7s model.

To attain growth through product line extension, the firm’s management should develop an effective marketing strategy. The strategy should guide the firm in undertaking the extension. By incorporating integrity marketing, the firm can maintain its core values and also create value to both its customers and shareholders. The marketing strategy should be comprehensive to ensure that it the product succeeds upon being launched in the market. In addition, the firm should conduct a financial forecast to ensure that the product contributes towards the firm attaining its profit maximization objective. An effective control mechanism should also be considered. This will serve in limiting the probability of the plan deviating from the intended objective.

Reference

Business Resource Software Incorporation. 2010. Market segmentation. Web.

Dagliden, J., 2009, US overtakes Thailand in energy drinks consumption says new report. London: PR Free Press Release.

Deromedi, R. 2004. Kraft Foods announces new global organizational structure. Northfield, Illinois: Business Wire. Web.

Economic Education Link. 2009. Focus on economic data: US real GDP growth. Web.

Fletcher, A.2007. Are UK consumers becoming more health conscious? Web.

Francis, M. R. 2010. YouTube – A Powerful Marketing Tool. Web.

Globerman, S. & Storer, P.2004. Canada-US economic integration following NAFTA. Research in global strategic management. Vol. 10, pp. 17-45. New York: Emerald Group Publishing Limited. Web.

Jennifer, C.2008. Population profile of the United States. Washington, DC: US Census Bureau. Web.

Khera Communication Incorporation. 2009. The 7s model: organizational analysis and assessment. Web.

Linda , F.2004. Integrity marketing. (On-line). Tampa: University of Tampa. Web.

Lisa, J.2010. Speech-byte. New York: National Press Club. Web.

McDonald, M.2007. Marketing plans: how to prepare them, how to use them. New York: Butterworth-Heinemann. Web.

Marketing Teacher. 2010. Marketing control: measuring and monitoring the marketing planning process. Web.

Porter, Michael. 1980. Industry structure and competitive strategy: keys to profitability. (On-line). New York: The Free Press. Web.

Porter, M.1998. Competitive strategy: technique for analyzing industries and competitors: with a new introduction. New York: Free Press. Web.

Porter, M.2010. Competitive forces model. Web. 

Syspro. 2003. Sales analysis. Web.

Vadim, K. 2010. Marketing strategy in the rapidly changing market place. Web. 

Ward, K., Smith, B. & McDonald, M. 2006.Marketing due diligence: reconnecting strategy to share price. (On-line). New York: Butterworth-Heinemann. Web.

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Whitney, S.2009. What is brand identity? (On-line). Web.

Appendix

Source of value for Kraft Foods

Product innovation

Kraft food has been successful over the years it has been in operation. The firm’s source of value is integrated in its mission statement which is based on being customer centric. As a result, all the firm’s departments are focused at ensuring that their operations contribute into a high level of customer satisfaction. The firm’s management team has realized the importance of value addition in all its products. To attain this, the firm has integrated the concept of product innovation which is attained by conducting a comprehensive market research. The research is aimed at identifying the changes in consumer tastes and preferences about their food product requirements. This enables the firm to integrate these changes in its products.

Product safety

Product safety is ensured through integration of Total Quality Management (TQM). This enables the firm to meet the standards set by the government in regulating the food industry. In addition, adherence to the set standards enables the firm to produce food product that are safe for human consumption. As a result, the level of confidence in consuming the firm’s product is increased.

Effective customer service

In the course of its operation, the firm has integrated a high level of customer service. This has been attained by the firm being open to the customers. As a result, Kraft Foods can receive market feedback about its products. A high level of openness has been attained by incorporating the concept of Customer Relationship Management (CRM). Through CRM, open dialogue is attained between the firm and the customers.

The firm has also created high value to its customers by ensuring effective market communication through advertising. Advertising enables the customers to attain product information more efficiently. This greatly makes the consumers decision making process to be easy.

Learning outcomes

Through the marketing management module, I have managed to acquire extensive knowledge on how an entrepreneur can maximize returns through marketing products and services. The module has imparted extensive knowledge on the marketing strategies to consider in the event of the market becoming saturated. For instance, I have acquired knowledge on how an entrepreneur can improve on his or her competitiveness through product line extension. Through this strategy, the entrepreneur can be able to cope with market change. During the learning process, there was a strong passion to gain more knowledge about marketing management.

To ensure effective product line extension, a comprehensive marketing research has to be conducted. This will serve in ensuring that the product is meets the market demands. At the beginning of the module, I expected to gain extensive knowledge on how entrepreneur can cope with market changes. To ensure effective acquisition of knowledge through the module, I had managed to acquire intensive knowledge on how to conduct feasibility study by scanning the environment. As a result, I have been acquainted with skills on scanning the environment. By gaining knowledge on product line extension, I will be able to offer expert advice on marketing management to both individual and institutional investors.

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