Intervenant/ Lecturer : Michael PAYTE
MSc Audit & Management Control
Academic Year 2012-2013
Gaelle VANHERPE Maxime ROZIER Yao LIU Marion DOMANSKI
TABLE OF CONTENTS
PORTER’S 5 + 1 FORCES
Competitive Rivalry within an Industry Very high – Kraft Foods has to face a lot of competition
International: Nestlé and Danone are the two main competitors. There are present worldwide and exploit the same segments as Kraft Foods.
National: Companies which are present in only one country but which propose products such as biscuits, dairy products… Example: Michel & Augustin, St Michel, la Mère Poulard (France) Regional: Smaller companies which are present in only few regions and propose traditional products. Most of the time, these companies are familial businesses.
Threat of Subsitute Products Very high – The threat of substitute products is high because customers can choose between several products for the same purpose. Therefore Kraft Foods has to make a lot of efforts regarding the taste, the quality, the packaging, the price of its products in order to attract the customer and encourage him to choose a Kraft Foods’ product instead of one which belongs to competitors. Moreover, the main threat for Kraft Foods also remains in the fact that a lot of supermarkets such as Auchan, Carrefour, Leclerc or Casino are producing their own brands of biscuits, chocolates etc. With the financial crisis and the decrease in the purchasing power, customers might prefer a non-branded product because of low prices.
Bargaining Power of Suppliers High – Kraft Foods purchases large quantities of commodities, including dairy, coffee, cocoa, wheat, corn products, soybean and vegetable oils, nuts, meat products, and sugar and other sweeteners. In addition, the company uses significant quantities of plastic, glass and cardboard to package our products, and natural gas for our factories and warehouses. The bargaining power of suppliers is high because prices for raw materials and agricultural materials used in Kraft Foods’ products are affected by environmental and external factors such as weather conditions, commodity market conditions, currency fluctuations and effects of governmental programs. For example, prices of cocoa and sugar, which constitute two of the main raw materials of Kraft Foods, are largely affected by the quality and availability of supply and changes in the value of the pound sterling and the U.S. dollar relative to certain other currencies. Other example: prices for milk and other dairy products are substantially influenced by market supply and demand, as well as by government programs. On average, costs for all these raw materials were higher in 2011 than in 2010. Because of all these factors, Kraft Food is dependent regarding its suppliers’ prices. In fact, the company has not a large flexibility to negotiate because suppliers need to maintain certain price level in order to offset external factors which influence raw materials’ prices.
Bargaining Power of Customers High/ Medium – The first customers of Kraft Foods are distributors such as Carrefour, Auchan, Casino, Leclerc, Walmart etc. On one hand, these companies have a large capacity for negotiation because of the highly competitive market. In fact, they can decide how much Kraft Foods’ products they want to put in their shelves. In exchange of lower prices, distributors can buy large quantities of products and guarantee a good visibility in their shelves in order to attract distributors’ customers.
On the other hand, Kraft Foods has a favorable position for negotiation because the company knows that distributors cannot have shelves with no Kraft Foods’ product. In fact, Kraft Foods is a very well-known brand and distributors’ customers are expecting to find these kinds of products in their supermarket.
Because Kraft Foods needs distributors and distributors need Kraft Foods, the power of negotiation...
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