Kraft Foods 2009 QSPM

PHILIPPINE CHRISTIAN UNIVERSITY GRADUATE SCHOOL STRATEGIC MANAGEMENT

PART 2 - CASE ANALYSIS FORMAT FOR STRATEGIC MANAGEMENT I.

CASE BACKGROUND

Give a summary of the salient case facts that indicate the firm’s mission, past and current objectives, strategies, as well as its historical growth in terms of financial performance and condition. Discuss the current issues and concerns of the company’s top management. II.

ENVIRONMENTAL ANALYSIS

A. External Environment Analysis 1. General Environment Opportunities

Threats

Socio-Cultural Env Political/Legal Env Technological Env Economic Env Opportunities are those favorable conditions that could affect the strategic decisions of the company. Threats are those unwanted conditions that could affect the business environment.

2. Industry Environment Industry Environment Rivalry Bargaining Power of Consumer Bargaining Power of Customer New Entrants & Entry Barriers Threats from Product Substitution

Opportunities

Threats

Identify the opportunities and threats in the industry where the company operates and competes and those affecting the competitive forces.

3. External Factors Evaluation Matrix (EFE) Opportunities:

Weight

Rating

Weighted Score

Threats: Total Weighted Score Conclusion: Evaluate the general environment and industry environments using the EFE. A Total Weighted Score of 2.5 and above means favorable opportunities for the company. Otherwise, threat outweighs opportunities.

B. Internal Environment Analysis Internal environment are those functional areas where the company operates. Company’s position is evaluated with their strengths and weaknesses. Strengths are those capabilities that enhance the competitive position and weaknesses are the unwanted conditions that weaken its competitive position. Assess the strengths and weaknesses using the Internal Factors Evaluation Matrix (IFE).

Functional Areas Finance Marketing Org & Mgt Prod MIS

Strengths

Weaknesses

Internal Factor Evaluation Matrix (IFE) Strengths:

Weight

Rating

Weighted Score

Weaknesses: Total Weighted Score Conclusion: C. Competitive Position Competitive Positions: Capitalization Employees Advertising Market Reach Gross Revenue Net Income

Company A

Company B

Company C

Provide table comparison and scores among major competitors. D. Competitive Profile Matrix (CPM) Critical Success Factors

Capitalization Employees Brand reputation Successful new introductions Market Share Total Conclusion:

Company A Weight Rating Score

Company B Rating Score

Company C Rating Score

E. Assumptions 1. 2. 3. 4. III.

General Environment Stability Industry Growth Prospects Financial Strength and competitive position Show relevant ratios PROBLEM STATEMENT

1. Support information why this is a problem 2. Time Context 3. View Point IV.

ALTERNATIVE COURSES OF ACTIONS 1. TOWS / SWOT Matrix Strength

Weaknesses

Opportunities Threats 2. IFE/EFE Matrix

EFE

High (3.0 -4.0) Medium(2.0 – 2.0) Low (1.0 – 1.99)

3. SPACE Matrix

Strong (3.0 – 4.0) I IV VII

IFE Average (2.0 – 2.9) II V VIII

Weak (1.0 – 1.99) III VI IX

4. GRAND Strategy Matrix RMG Q1

Q2

WCP

SCP Q3

Q4 SMG

5. SUMMARY OF STRATEGY STRATEGY OPTIONS

TOWS

IFE/EFE

SPACE

GSM

TOTAL

6. Quantitative Strategic Planning Matrix (QSPM) - The Best ACA Key Factors

Opportunities 1.More people are dining out, and food producers are devoting more attention to products designed for restaurants, vending machines, and other foodservice providers. 2.Worldwide, demand is also on the rise for packaged type of food as more people adopt a lifestyle that includes less time for the preparation of food. 3. World population is growing at 2.6% 4. Expiration and renegotiation of commodity prices in mid-2008 will expect to lower the production cost of baked products relying on wheat, eggs and natural gas. 5. Enhance waters containing vitamins or supplements are gaining popularity Threats 1.Public health concern of chemical and bacterial contamination. 2. Rising cost of petroleum affects cost of production and logistics 3. Rising rate of obesity. People are more health conscious 4. U.S. dollar gains making export less competitive 5. ConAgra Foods – primary competitor domestically (North America) together with other domestic stores such as Heinz Company and Sara Lee. Strengths 1.Highly leveraged with 84% debtto-equity ratio for 2008 which means making profit out of others money. Financially capable for acquisition. 2. Early user of all communications media (outdoor billboards, journals,

WEIG HT

MARK ET PENE TRATI ON Rati ng

INTEGRATI ON STRATEGIE S Weig Rati ht ng

MARKET DEVELOPMEN T

Weigh Rati t ng

Weig ht

0.2

4

0.8

2

0.2

3

0.6

0.2 0.1

4 2

0.8 0.2

2 3

0.4 0.3

3 2

0.6 0.2

0.1

2

0.2

2

0.2

2

0.2

0.1

3

0.3

1

0.1

2

0.2

0.1

2

0.2

2

0.2

2

0.2

0.1

1

0.1

1

0.1

2

0.2

0.05

2

0.1

2

0.1

2

0.1

0.025

1

0.02 5

4

0.1

1

0.025

0.025

3

2

0.05

2

0.05

0.07 5 0.2

2

0.4

4

0.8

2

0.4

0.05

3

0.15

1

0.05

3

0.15

magazines, radio) Good product recall 3.Effective launch of several 0.05 websites for advertising and publicity (Oreo Double Stuf Racing League (DSRL)eague (DSRL) 4. Food safety program has been 0.2 adopted as issues of chemical as issues of chemical and bacterial contamination and new food-borne 0.2 pathogens remain a public health concern. 5. . Actively researching consumers’ eating habits and preferences at home and at Restaurants. Good marketing research program. Weaknesses 1.Weak liquidity ratios of 1.03x and 0.63x current ratio for 2008 and 2007 respectively also 0.54x and 0.34x acid-test ratio for 2008 and 2009 respectively. 2. Negative revenue growth rate for US Cheese (9%), Canada & North American Foodservice (10%) and European Union (17%) 3. Divisions are determined by geographical area and not by product 4.Geographic concentration on North America 5.Kraft Foods has low market share but enjoys high margin in grocery business. Total

V.

4

0.2

1

0.05

3

0.15

2

0.4

2

0.4

2

0.4

3

0.6

2

0.4

3

0.6

0.1

1

0.1

2

0.2

1

0.1

0.05

1

0.05

1

0.05

1

0.05

0.05 0.04

3 3

0.15 0.12

2 2

0.1 0.08

4 4

0.2 0.16

0.06

4

0.24

2

0.12

2

0.12

4.77 35

4.05

4.525

RECOMMENDATION: ACA No . 1 Market Penetration. Expand geographical concentration to the various other markets especially the developing markets 1. Actions Plans

Function al areas Marketing

Objective

To expand the geographical concentration to other markets especially the developing markets

Strategy

1. Apply marketing research as to what products are more sellable in the various areas in the developing world. 2. Create an extensive Brand management techniques to allow

Tim e Fra me 2 mos. 6 mos.

Budg et

Productio n

To penetrate new markets by establishing new plants and

Organizati on

Finance

Added markets will help earn more profits to meet its debt management

HRD

Familiarize company’s standards in a different cultural environment.

Informatio To help manage key areas of n System risk and reduce its impact and provide an informed view of information system risk across the organization.

VI. 1. 2. 3. 4.

market penetration in regard to pricing and affordability 3. Introduce locally made ads created by local advertising firms. 1. Establish a factory in Southeast Asia, India and in other continents especially in developing areas. This will further improve profitability by using economies of scale and easier product distribution. 2. Increase budget with regard to developing healthy processed foods that can be sold to health conscious individuals. 3. Decentralization of production plants including personnel. 4. Technological innovations, advances in computerization and quality management characterize production capabilities and processes. 1. Create local production organizational .structure in the different factories that will be established in the different areas. 2. Employ local personnel for different positions in the plants 3. Determine if a friendly trade relation with a host country can be established. 1.Maintain and monitor profitability and leverage of the company vis-a-vis the expansion of markets 2. 1.Establish local training as to the company’s standards in production, finance ,marketing and administrative functions. 1.The company must provide automated risk-management tools that can be implemented in public and private sectors. 2. The company must be able to measure and manage the risk posed by the entire range of assets, entities, due to market penetration

FINANCIAL PROJECTIONS (5 Years) Projected Income Statement Projected Balance Sheet Projected Statement of Cash Flow Projected Ratio Analysis

3 mos. 2 yrs

3 mos. 2 yrs. 1 yr.

2 yrs

2 yrs. 3 mos. 1 mo. 2 yrs

1 mo. 1 mo.

----------------END---------------