External Analysis of Kraft Foods
Kraft Foods Group Inc. headquartered in Northfield, Illinois; in the United States is a grocery manufacturing and processing multinational. This paper will therefore focus at the external factors that affect the success of the company. It will employ PEST analysis as well as the Porter’s Five Forces model to analyze external factors affecting the organization.
Porter’s Five Forces Analysis
The Porter’s Five Forces analysis comprises analysis of the suppliers bargaining power. The organization deals in the beverage and food industry. This is an indication that it is in a highly competitive industry. It also means that many companies in food and beverage industry offer prices that are competitive to remain in the market. Market suppliers do not have a lot of power and as a result, they cannot hold the company hostage to make profits (Rothaermel, 2013).
It is also imperative to consider the buyers bargaining power. The industry is characterized with buyers who change their favorites regularly. This therefore forces them to change the organizations they make purchases from. It is imperative to note that pricing plays a crucial role in consumers’ decision making process. Market competitors have therefore been identified based on their low pricing mechanisms to attract more clients.
New entrants also pose another threat. Already, the industry has many competitors. This signifies limited opportunities for new competitors making entry to the market. Additionally, it is essential to note that existing organizations have invested a lot in the design and development of their products thus, discouraging new entrants. This is because new entrants need to be highly innovative in design and development of their products.
Similarly, existing players face rivalry. The industry is known for intense competition amongst rival market players. Organizations have to design the right strategies to remain operational. Many competitors also employ brand loyalty and diversification as a way of maintaining clients. The industry generally has companies dealing with products that are elastic with clients, assessing stability between price and quality.
Clients have therefore been seen to have few edging costs, thus building brand loyalty has become difficult in the country. All companies have been identified to engage in aggressive brand marketing. Even so, they are still seen to engage in cooperation against erosion in the market to private label goods (Closs, 2011).
Product or service substitutes, is also a threat in the industry. Consumers have been seen evaluating the quality of goods as well as their prices. It plays a significant role in their decision making. Threat of substitutes is minimal and even so, private label goods have been noted having a significant impact and pose a serious threat to profitability of a company.
Political factor is one of the factors assessed via PEST analysis. Kraft Foods is favored by the US political environment. It has been noted that the company engages in different political activities. For example, it is known for supporting political aspirants who display understanding of public policies that affect company brands, employees and operations significantly. It also formulated Kraftpac, enabling it to support political aspirants.
Economic factor is also notable. The country is presently battling harsh economic times. Even so, Kraft Foods is known to make decent profits from its activities. The company also delivers great earnings to its shareholders and is known for its unending investment in development of products. This has been quite significant in ascertaining that the company has a strong client base that surpasses other relevant competitors in the market including Wal-Mart and Cadbury (Llorente, 2013).
Social factor is also another issue of concern. The company is popular for its efforts continuously to provide or enhance its corporate social responsibility. The company since the year 2010, has been extremely engaging is activities related to corporate social responsibility. Its focus towards partnership, products and policies that ensure the health and wellbeing of the people is additionally very distinct (Dawar, 2012).
Additionally, Kraft Foods in relevance to technological factor is known to be very successful in institution and implementation of innovative processes, ideas and technology in its activities. Additionally, the business is known to have implemented advancements that heavily showcase its sustainability abilities. What’s more, it has been noted to consider the society and the environment in designing its products and technology utilized in its processes.
When it comes to the legal factor, the organization is renowned for its extraordinary global and local legal requirements compliance. Kraft Foods is well renowned for insisting on adherence to rules, laws and regulations of the land it operates in. the company has branches in many countries and it is well known for its compliance with set jurisdiction requirements or laws. Kraft Foods is also known to adhere to health standards set by FDA among related institutions (Sacks, 2012).
Closs, D. J., Speier, C., & Meacham, N. (2011). Sustainability to support end-to-end value chains: the role of supply chain management. Journal of the Academy of Marketing Science, 39(1), 101-116.
Dawar, N., & Marketing, M. S. (2012). What are brands good for? Image.
Llorente, A. A., Luchi, R., & Sioli, A. (2013). Kraft Foods’ 2009 Conflict in Argentina: Turning‐Point Analysis of a Labor–Management Negotiation. Negotiation and Conflict Management Research, 6(3), 214-237.
Rothaermel, F. T. (2013). Strategic Management: Concepts & Cases. McGraw-Hill Irwin.
Sacks, G., Swinburn, B., & Loff, B. (2012). The broad nature of multinational food company lobbying in the United States. Obesity Research & Clinical Practice, 6, 90.