Do you support the branding drive of Kraft “to gradually weight the businesses mix toward branded, value-added products and away from commodities?” Justify your answer
Even as Kraft has changed, so has the food processing industry. In the 1980s, Kraft and its competitors have realized that the recent and projected slow population growth in the United States means that most future gains in the market share must come at the expense of one another. As a result, the industry is being restructured through mergers and acquisitions as the major firms seek to strengthen their competitive positions. In order to remain at the top of the industry, Kraft’s top managers must make correct strategic decisions regarding the company’s product mix and the manner in which to structure the organization in order to best compete in the changing industry environment. Michael a. Miles was President and Chief Operating Officer of Kraft, Inc. in 1985. Kraft’s mission statement from that year is presented in Exhibit 2. Mr. Miles had publicly identified five strengths and three weaknesses of Kraft. The Five strengths and supporting reasons for them were as follows:
- Huge mass and resources -Kraft is one of the four largest food business in the world, and second only to General Foods in the United States.
- Growth markets and growth categories - from 1979 to 1983, per capita consumption of cheese in the United States increased 23 percent, pourable dressings 14 percent, and premium ice cream 18 percent.
- Extremely strong brand names and market share positions - Kraft is either the leader or a strong contender in virtually all of the major categories in which it operates.
- Excellent customer relations - research indicates Kraft has the best reputation for quality in the food industry and that only Procter and Gamble compares with Kraft in sales-force skill and effectiveness.
- Worldwide infrastructure - the human and financial resources are in place to support new business initiatives anywhere in the world.
Competition
- Kraft has mass and resources that enable it to compete with any company in the world, and will utilize these resources to the fullest legal, ethical, and moral extent.
- Kraft will engage any competitor in any geographical market, category, or channel of distribution of interest, where the combination of product quality, management quality, and innovation provides us with a sustainable competitive advantage
- Kraft will defend its established business ferociously
Customers
Kraft’s businesses will be built on the fundamental concept of achieving superiority versus competition in:
- Identifying the needs of customers, both end-consumers and trade
- Providing high-quality products and / or services to meet those needs in unique or advantages ways
- Marketing those products/services to reinforce their appeal and achieve superior acceptance.
People/organization
- Kraft recognizes that the quality of its people is the critical element in achieving the success of its mission
- Kraft’s human resources policies and practices will be built on a standard of excellence and a total commitment to equal opportunity and fair treatment.
- Kraft will promote based on merit and from within wherever possible
Industries/
Kraft will compete in any segment of the food business, in any geographic market, and in any channel of distribution, where:
- Participation can make a material long term contribution to sales and income, while generating returns at or above corporate targets
- The combination of product quality, management quality, and innovation provides us with a sustainable competitive advantage-or the prospect of same in a reasonable time frame.
Business Style
Kraft’s business style is characterized by:
- Overarching commitment to quality · Openness, honesty · Initiative · Innovation · Aggressiveness · Action orientation · Competition · Efficiency · Risk acceptance · Superior analysis and planning · A standard of excellence in people
In addition, Mr. Miles outlined five broad strategies Kraft was currently pursuing:
- To protect and build the existing business - for branded products, increased spending on advertising - competitive pricing and more emphasis on advertisable product improvement -for commodity products, being the lowest-cost producer
- To gradually weight the businesses mix toward branded, value-added products and away from commodities
- To augment the growth of existing branded positions by a more active new business development effort
- To continue to pursue expenses and asset minimization in all areas
- To increases organization vitality
Required:
- Do you support the branding drive of Kraft “to gradually weight the businesses mix toward branded, value-added products and away from commodities?” Justify your answer
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