Definition of the Problem Kraft Foods Company
In the modern times with the evolution of technology, many businesses have ventured into unfamiliar territories with less knowledge of the conditions and high uncertainty regarding the reward for the money invested in marketing. As years pass, many companies find out that they have lost the huge advantage they had due to the conservative nature of the management. This crisis in the business sector faced Kraft Foods, where the management, before Rosenfeld came to power, was content with defending the corporation’s position as the leading market shareholder instead of investing in more marketing and research to identify avenues for improvement to be more dominant (Boyle, 2011).
To be prosperous in any business, one needs to learn the rules first to know the dos and the do nots in the industry. To address the issues, the corporation is having such tools as an advertisement, concerns with the government, which are ways to rescue the company image and not only to work and maintain the market share but improve and expand the production and supply into other areas by re-establishment of loyalty and trust of customers.
Different options are available for the company to be able to mitigate these problems. They include improvement of product quality, offering, and delivery. These activities would help the firm to have a competitive edge over the rivals since customers value convenience and quality in services.
The current problems were facilitated by the fact that the management grew complacent with the position the company took and never wanted to expand but only retain the market share the corporation had over other businesses (Boyle, 2011).
Analysis and Evaluation
The company had been stagnant regarding growth and innovation for a long time until a new CEO was appointed, who was determined to take the business entity to the next level. Its first major innovation was the trying out of different flavors after conducting the research until they got a breakthrough which was going to be used as the new game changer for the firm.
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The food industry in America and Europe is one of the most important and dynamic sectors. It is vast enough with about 310,000 companies in the industry making it extremely competitive, and produces healthy, safe and high-quality food. This segment forms the biggest manufacturing sector regarding jobs, value added and the amount of food produced. For the companies engaging in this business, it comes as an asset in trade due to the trade surplus experienced and their specialties which are accepted overseas making them large exporters of foodstuff (“Food industry in European Union”, n.d.).
The European Union has embraced a single market, which accounts for over 500 million consumers and 21 million both small and medium-sized enterprises. There is no internal boundaries or even regulatory barriers for the free movement of the goods and services which has helped increase competition and trade, raise quality due to greater efficiency, not forgetting cheap products. This kind of market has facilitated economic growth making the daily life of consumers and people in business easier (“The European single market”, n.d.).
In the European Union, consumer behavior is a result of complex exogenous and endogenous factors chosen by individuals themselves. Their perceptions towards foodstuffs are mostly influenced by the kind of lifestyle people live. As businesses evolve every single day, so are the customers. For instance, the process of purchasing goods is moving from offline to online where the consumer can sit in the comfort of his or her house and order any foodstuff he or she needs and get it delivered at his or her doorstep.
Customer shopping habits in Europe are becoming more polarized which forces the producers to make a decision on the type of clients they want to serve. Stagnating mass market is one of the consumer characteristics, according to which out of four people in Europe one of them will have attained retirement age. This will cause the reduction in purchasing power making people not willing to pay high prices, which will force the companies to make a different type of products to serve this customers.
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There is also the fragmented niches of growth which are lucrative and need personalization and convenience of their goods. This is shown by nearly a third of the consumers making it clear that they would be willing to pay more for foodstuffs with health benefits. This makes the producers change their perspective of their food production to meet these needs.
The consumers have also adopted cross-channel shopping due to rising number of discounters. Unlike old days, there are few customers left who shop at the same store regularly. Now they purchase food at multiple stores where they get discounts as compared to retail outlets (“Food industry in European Union”, n.d.).
Kraft Foods is a large investment company, a recognized food and beverages producer. It has operated in a number of countries in the world, but its primary market has been in Europe and the United States.
However, due to a combination of industries, the company is likely to experience struggles. With the improvement and manufacture of more influential products, it has been able to continue dominating the market.
SWOT analysis entails various criteria which allow to evaluate the strategies of the firm and circumstances in which the company operates. It involves assessing the weaknesses and strengths of the organization to establish the edge it has over other enterprises and places in which the business needs to improve to remain competitive in the market while enjoying profits.
Being a globally recognized producer of quality food brands and having confectionery market leadership comes as strengths on the side of the giant food company. It also has numerous subsidiaries which include, Cadbury, Jacobs, Tang, Maxwell House Oreo, Milka, and many others. Additionally, the company boasts an employee base of 126, 000 people who come in handy as they ensure the continuous production of the products of high quality which is meant to exceed the customers’ expectations (“Kraft Foods SWOT analysis”, n.d.).
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Furthermore, Kraft Foods has a strong financial muscle indicated by a network income from 4% to a minimum of 5% and a commission of $2.20 to $2.25 earnings per share. Due to this strong financial muscle, the company, in turn, can develop an active research and development department which continuously creates new products to meet the rising customer demands (“Food industry in European Union”, n.d.).
The company has been able to establish a secure supply chain network all over Europe and the world in general to be able to distribute its diverse range of products which include dairy products, beverages, cheese and confectionary to all the branches established for the purpose of sale (“Kraft Foods SWOT analysis”, n.d.).
The corporation also has created brand loyalty in the region by being able to sponsor various sports events, where those who attend them get to know about the company’s products and even taste them for free, which attracts more customers to be loyal to the brand.
Nevertheless, Kraft Foods carries some weaknesses. Product recall, in some instances, due to unmet standards, confused packaging, and expired products have affected the brand’s image in some regions the business entity operates. It is also faced with stiff competition from Nestle, general mills, Mars among others which has resulted in a lot of brand switching which does not give the customer time to enjoy the product or even give feedback which would help in the improvement of the specific products (“Kraft Foods SWOT analysis”, n.d.).
The firm has not been able to diversify the market base using specialized products hence failed in some regions. This is because it is mainly focused on the main markets that are Europe and North America which has led to the loss of other potential market opportunities. High populated continents such as South America, Africa, and Asia have been recording a low turnover rate of the firm’s sales, revenues, and operations.
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The company should be able to utilize the populations in these markets through regional product specialization to promote its revenue, brand image, and overall global appeal. The above strategy will aid the business entity in establishment of manufacturing plants in the unexplored markets which will facilitate cost reduction that is used while distributing and transporting the products over long distances.
A couple of opportunities have also come in the way of Kraft Foods one of them being the acquisition of Cadbury which gives the company an avenue to increase its market share and reach other regions, especially the developing countries. Other competitors have been affected by the stiff rivalry in the industry which has led them into massive debts. As a result, it has allowed Kraft Foods to acquire them which has come as an advantage to the firm due to the decrease of the rate of competition faced in the industry.
A product line extension has also been seen by the research and development team as gold mine, which has led to the launch of pet food line due to the high number of people who have pets and would like to take good care of them.
The increased use of the Philly cheese has provided another way of improving the sales. After conducting the research where the team found out that it is being used in other ways such cooking and it can be applied in every other snack, it opened a new avenue to market the product to other markets, where it was not being sold.
Use of broadcasting and print media in marketing has offered a way for the company to reach the target audience. Some customers read different magazines which influence the choices they make regarding spending, habits, and consumption. For example, almost all women love magazines on decoration, lifestyle, and homemaking. The company should use this means to reach out to the customers who have specific preferences for their sauce products. Favorite shows in televisions have a wide viewer coverage, this method can be used, too.
There is also the issue of the rise in the costs of raw materials and high wage demands among workers due to the rising standards of living. This has led to a reduction of the company’s profits over time posing a threat to its long-term profitability.
Another threat comes in the stiff competition among the businesses that have not already been acquired. The crisis in Europe has also been a significant threat facing the company since it has resulted in a worldwide economic and financial slowdown.
As the customers get more educated and need better living and healthier eating, there has been a threat to the company’s confectionery market, as many clients who used to buy this kind of stuff are shying away from the firm. Use of sauce has been viewed as a major contributor to obesity and health issues in many countries. Due to this, a major worldwide concern has been raised regarding the regular consumption of this kind of food, where medical practitioners and scientists have objections towards the use of these products. This comes as a significant threat to operations and survival of the branch that deals with the production and sale of the mentioned goods.
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The viewpoint of the business venture depends on the top management. It is important for the top managers to try and keep up with the ever-changing business environment to maintain its competitiveness in the market to caution against long-term effects of losing market share which would lead to losses or fall out of business.
Since the management has not taken decisions for a long time to venture in other options like marketing to reach a broad range of business, it is the duty of the new chief executive officer Irene Rosenfeld to convince them otherwise.
Alternative Courses of Action
The best choices include a number of favorable options where the manager chooses to wait and see the results of the performance of the American market before entering other markets. This will give a reliable and very crucial information on the type of product people prefer more, the amount spent on the purchase of these goods and expected revenue.
The alternative course of actions includes investing more in research to find out how the consumers are using the company’s brands. In doing this, there will be some pros in that the firm will be able to know the various uses of its products by the customers which will help it to strengthen its marketing and preserve the heritage of the organization locally and internationally.
Another advantage will be higher moral and performance of the company’s workers and management. Moreover, it was established by the research and develop team that the users of the cheese cream used it even for cooking not only as a spread for bagels. This helped the firm to launch a worldwide campaign on how this specific brand could be added to all kinds of food.
In the distribution of the Kraft’s Foods Company, the delivery was through the warehouse to the retailers. It was the firm’s responsibility to deliver all the products to the warehouses. After that, it was up to the retailers to distribute the goods to individual stores from the warehouse, filling the shelves, equipping and maintaining displays.
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The firm should use a different method of delivery such as direct-to-store delivery which will significantly minimize distribution costs while, at the same time, reducing costs associated with holding inventory in the supply chain. It will also come as an advantage, since the company will be able to monitor, stock, distribute its inventory while, at the same time, tracking these items with minimal involvement of outside sources.
Selection of appropriate flavor for the product was a massive challenge to the manager in charge of promotion. The company should decide on the flavor for its cream cheese. This will guarantee there is the advancement of market share through diversity as well as category growth. The consumers will be able to have a variety of high-quality brands and flavors to make a choice, which will increase the company’s volume of sales. By the use of resealable bags with zipping closure, the firm will be able to maintain the freshness of the product which will be a means of attracting more customers in the long run.
One of the extreme unpredictabilities facing Kraft Foods is customer behavior. From the European scenario, the customers tend to buy their coffee pods which were from the similar brand as the machine. The sauce market also posed a challenge, because people were more inclined to purchase the type of sauce they were used to and rarely experimented with new flavors. Nevertheless, few customers are flexible in trying out different flavors and what mattered was the quality, aroma, freshness and peak flavor.
In undertaking venture, it would require the company to invest more funds in investment which is a risky plan, since the firm has no idea about people’s preferences in other parts of the world.
The company has to put into place strategies which will drive it forward. It is the responsibility of the CEO to ensure that the set policies are of success to the enterprise. More strategic analysis should be carried out to determine further strengths, weaknesses, and new opportunities that the firm can exploit in its operations to overcome the problems it faces.
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Based on the vision of the enterprise, it will be an additional boost to develop the social responsibility, which will create a positive image of the company to the outside environment which will improve the firm’s reputation and customer loyalty.
The corporation should also organize weight loss and health seminars, where it can educate the people on various effects of its goods and the differences of the products the company is offering. This will help to attract customers who, in turn, will be brand loyal to the enterprise.
It is highly recommended that the firm should focus its effort and attention on the leading brand Nutella owned by Italy’s Ferro, which is the leading brand in Europe. It should seek to promote its brands by providing samples of the Milka chocolate and Philly to customers and stores all over the branches, distributor and the events they sponsor.
Due to the nature of the choice of the client towards savings, the company should establish a way to offer exclusive coupons, discounts and loyalty cards and awards to other brands it offers when one purchases Milka chocolate Philly.
Kraft Foods should also exploit the advantage it has on strong and highly regarded past by building on that foundation the promotion of nine flavors of the Philly cooking cream including savory garlic to promote its sauce brands. Furthermore, the firm should make an effort and capitalize, match or even surpass the distribution and promotion of its competitors, especially Nutella, which is the market leader in Europe.
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The company should also use the strong market segments to appeal to weaker sectors in the market through inducements. As the firm focuses on the future, it is very crucial for it to strengthen its consumer supply chains, the new possibilities of acquisition and merger and also expand the distribution through stores and restaurant chains to increase the customer reach.
In conclusion, from the analysis of the company’s new product line, it is evident that Kraft Foods and its new product Milka chocolate Philly makes it a worthy competitor to other brands and enterprises. An expansive marketing strategy marketing should be planned by the promotional manager with very intensive promotion, advertisement, and sponsorship of media to make the consumer be aware of the firm’s products in the market.
The company holds a unique position in the market and is represented as the leading firm in the food industry. It has dedicated workforce and organizational structure that support the objectives. The new top manager’s strategies have proven to be efficient and fruitful which are lined up with the company’s vision and mission with some of the future approaches having a chance for improvement which will continue to create a positive image in the market.
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