External Analysis of Kraft Foods using Porter’s 5-Forces Model and PEST
MGT 599 Module 2 CASE
Kraft is the number one manufacturer of snacks in the U. S. and the world’s number two food company (Kraft Foods SWOT analysis, n.d.). Our goal is to maintain and improve those statistics.
Results of the Porter’s 5-Forces
There is a low threat of entry of new manufacturers. The food industry is already glutted with companies who rival Kraft. ConAgra ($11.62B revenues in 2012), and Nestle ($93.06B) represent the top across-the-board rivals. The Kellogg Company (13.65B) also holds 34.2% of the cereal market (Kraft Annual Report, 12/31/2011). There is a low availability of substitutes. The devastating drought in the U. S. has caused enormous drops in the supply of crops and animals. With diminished supplies when demand is high, suppliers bargaining power is also medium to high. Poor economic conditions coupled with heightened sensitivity to nutritional values have given customers a medium bargaining power (Lempert, P., 12/21/12).
Results of the PEST analysis
Political unrest in Egypt forced Kraft to suspend operations there (IUF newsier 2012). Likewise, the takeover of the Cadbury company and subsequent closing of the major plan in England have spawned much negativity toward Kraft (Chellel, Kit 5/23/2011). America’s middle class has shrunk by ten percent in the last 40 years and unemployment means consumers are being very cautious with how they spend their money (Lempert, P., 12/21/12). Shopping trends are focusing on health concerns and especially obesity (Kraft Foods SWOT analysis, n.d.). Over the net grocery shopping is becoming more popular (Lempert, P., 12/21/2012). With the advent of Facebook and Twitter, jilted employees, their families, and others who perceive unfairness dramatically weaken a company’s revenues with a few keystrokes. (Kraft Annual Report 10K 12/31/2011). Opportunities and Recommendations Kraft has the opportunity to re-configure marketing and packaging to tap further into the huge health and wellness market. They can educate the public about the advantages of healthy snacks. Kraft should promote the use of different individual pre-packaged and/or frozen items to make or supplement meals as opposed to buying a whole dinner. The consumer can be educated about the nutrition and time savings associated with a-la-carte items which can be used in conjunction with or in addition to a main dish. Kraft has the opportunity to re-examine the proteins in their products. Because of diminished supply of meat, alternate protein sources should be investigated. I feel the greatest concern right now is regaining and maintaining the Kraft name and reputation. It is imperative to keep the Kraft brand associated with good foods and healthy snacks. By implementing these changes, the company can go forward with even better bottom line results.
In this report, I have analyzed the effects of Porter’s 5 forces upon Kraft Foods Industry. I have documented sources to validate those effects. The information presented is the latest available. I have also done a PEST analysis using the information gleaned from the previous sources as well as other references. I have given impressions concerning Kraft Foods Company from both an internal and external viewpoint. In conclusion, the recommendations for the company should result in better overall performance. Porter's Five Forces
Threat of Entry (low) There is a limited threat that more manufacturers will start up in the food industry. It is cost prohibitive pursuant to start up, marketing, advertising, and building brand loyalty. There are a sufficient number of competitors for Kraft Foods already. Especially at this economical slow down, no formidable threats seem likely (Food Retailing Industry, 2012). Rivalry (high) Kraft Foods...
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