Course Number: MGT599
May 6, 2013
Kraft Foods Group, Inc. is the fourth largest consumer packaged food and beverage company with revenues of approximately $18 billion. Their mission is to be North America’s best food and beverage company. Kraft has a great heritage built upon 110 years of business operations that they are building into an even greater future. They have had success and will continue to have success as a result of analysis tools such as Porter’s Five Forces and Political, Economic, Sociocultural and Technological (PEST) study to determine threats and opportunities. There is a low threat of entry and substitutes within the packaged food industry. Startup and operational costs amongst such a populated industry is prohibitive for new entrants. The plausible substitutes are far outside the niche market Kraft resides. Inversely, rivalry is extreme and rated very high. There are numerous well established and supermarket brands they compete with. Both of the remaining two components, bargaining power of suppliers and buyers, are rated medium. Resource competition, weather & climate change, currency fluctuation, government regulation and economic challenges lead to concerns within the food industry. However, Kraft has successfully diversified their resources and financial portfolio to minimize these component ratings. Kraft Foods Group, Inc. conscientiously and aggressively tracks external factors to plan accordingly. Kraft has established a political action committee to support and influence policy. The economy is currently showing incremental improvements with increased household spending and continued stability. Social factors such as health conscientiousness and cost savings are being addressed by Kraft as well. Lastly, Kraft has 650 experts utilizing three technology centers conducting research and development with $178 million invested. They have identified and addressed each external factor completely. Kraft Foods Group, Inc. has identified threats and turned them into opportunities along with the other opportunities they initially identified. They have maintained a stable, profitable company over the past 110 years and the analysis results indicate they will continue well into the future.
Kraft Foods Group, Inc. Threats & Opportunities
Kraft Foods Group, Inc. has developed an effective business plan strategy that is based upon significant analyses. The original company was established over 100 years ago; however, it has undergone significant restructuring in October, 2012 by splitting into two separate companies (Forbes, 2013). The resultant Kraft Foods Group, Inc. manufactures and markets packaged food products, including beverages, cheeses, convenient meals and various grocery products primarily marketed within the North American markets with the majority of its sales coming from the U.S. and Canadian markets. This paper provides a critical analysis via Porter’s Five Forces and Political, Economic, Social and Technological (PEST) to ascertain the company’s threats and opportunities. Porter’s Five Forces
Porter’s Five Forces analysis is an excellent tool to determine the profitability and strategy formulation for the Kraft Foods Group, Inc. The most prominent force is not always obvious and may change dependent upon the circumstances of the time. The following sections provide a brief explanation of Kraft’s analysis at this time. Threat of Entry (low)
There is a low threat of entry for additional packaged food manufacturers within the industry. The combination of a large amount of established competitors and the cost associated with startup, marketing, advertising and building brand loyalty creates a significant entry barrier. The large number of current manufacturer price wars, the demand to keep up with health & wellness and the barrier to overcome established brand...