Kraft Final Document Paper - Print This One!

Prepared By: Aaron Haberern Leonard Kendall Michael Linehan Eddie Malecki Toni Nowak Ethan Rand Lawrence
Wooten
Table of Contents
Introduction History Operating Segments Vision and Mission Statements Actual/Revised Input Stage External Factor Evaluation EFE Matrix Competitive Profile CPM Matrix Internal Factor Evaluation IFE Matrix Matching Stage Strengths-Weaknesses-Opportunities-Threats SWOT Matrix Strategic Position and Action Evaluation SPACE Matrix Boston Consulting Group BCG Matrix Domestic Market Share Global Market Share Internal-External I/E Matrix Grand Strategy GSM Matrix Data Collection Matrix Decision Stage Quantitative Strategic Planning QSPM Matrix Final Thoughts Recommendations Epilogue Citations
Kraft Foods Case Report
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History
Kraft Foods Incorporated is the largest brand food and beverage company in North America and the second largest in the world with operating in more than 150 countries from Mexico to Singapore. Kraft operates in two main segments; Kraft Foods North America (KFNA) and Kraft Foods International (KFI). Kraft, the holder of some of the worlds favorite food and beverage brands, markets in five product sectors named beverages, snacks, cheese, grocery and convenient meals. It was started by James L. Kraft in 1903 with a horse drawn wagon delivering wholesale cheese he manufactured in Chicago, Illinois. Through the years the company has been built on a strong sense of innovation and quality. You will find Krafts brands in a Parisian market in France, a vending machine in Japan and a grocery store in America. Kraft Foods is the number one food distributor in the United States and second only to Nestl worldwide. In 1909, J.L. Kraft & Brothers is incorporated and extensive public relations begin. Using innovative marketing, advertisements were placed on Chicagos elevated trains and on billboards en route to the city. Being one of the first to produce in color advertising, circulars were mailed to retail grocers and placed in the top national magazines of the time. In 1933, Mr. Kraft also sponsored a radio show Kraft Musical Review. By 1923, Kraft Cheese Company acquires its first company Fred Walker & Company, makers of vegemite, which is a yeast spread. Around 1937 in response to World War II where our young men were going off to war and women went to the factories to help with the war efforts, Kraft saw an
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opportunity to make the womens life a little easier. They came up with a new product based on the slogan A meal for four in nine minutes, and the Kraft macaroni and cheese dinner was born. Kraft was an innovator in responding to its consumer needs. In 1928, Kraft acquired Phenix Cheese Corporation (Philadelphia Cream Cheese) and changed its name to Kraft-Phenix Cheese Corporation. Many of Krafts well know products were started after this acquisition namely Velveeta (1928), Miracle Whip salad dressing (1933), and Cheez Whiz (1952). In 1930, after operating as a subsidiary to the National Dairy Company, the bulk of the products & brands owned by Kraft Foods Company came from a merge with Philip Morris Company. Philip Morris Co. Inc.s first step into the food industry came in 1985 when it had acquired General Foods Corporation. It next acquired Kraft General Foods, Inc. They operated separately until a merge in 1995 and became the company we know today as Kraft Foods. After Philip Morris purchased Nabisco Holdings Corporation for $14.9 billion in cash - plus an assumed debt of 4 billion in December 2000, it merged Nabisco with Kraft Foods. Nabisco Holdings Corporation contained well-known brands such as OREO, Ritz, Honeymaid and Triscuit and many others thus expanding Krafts product sectors and brands. The year 2001 was a year of firsts for the company. Kraft appointed its first women CEO, Betsy Holden to head up one of its two main business units from Kraft Foods at that time; Kraft Foods North America and Kraft Foods International. At that time there were 5 women CEOs running Fortune 500 companies. Also in 2001, Kraft began trading on the NYSE making it the biggest IPO (Initial Public Offering) at that time only to be surpassed by Google who is presently has the largest IPO in history. At $8.68 billion, it weighs as the 2nd-largest IPO in the United States history behind Google. Kraft sold 280 million shares @ $31.00 each on the day of its initial public offering.
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Operating Segments
Kraft Foods Inc. manages over 100 different brand-name food products and operates in five specific consumer segments. Those segments are snacks, beverages, cheese, grocery, and convenient meals. In the snacks segment, the products are primarily biscuits (cookies and crackers), salted snacks, and chocolate confectionery. Some examples of brands in this segment that Kraft manages are Oreo, Chips Ahoy!, and Planters nuts. The beverages segment consists of primarily coffee, packaged juice drinks, and powdered beverages. Examples of brands that Kraft owns in this segments include Maxwell House, Capri Sun, and Kool-Aid. Products in the cheese segment are primarily natural, processed, and cream cheeses. Some of Krafts cheese brands are Philadelphia cream cheese, Polly-O, and Cheez Whiz. Spoonable and pourable dressings, condiments, and desserts are what primarily make up the grocery segment. Brands such as Jell-O, Cool Whip, and A.1 steak sauce are some of Krafts owned brands in the grocery segment. The final segment that Kraft operates in is convenient meals, which are primarily frozen pizza, packaged dinners, lunch combinations, and processed meats. Such brands like Oscar Mayer, Lunchables, and DiGiorno microwave pizza can be found in this segment.
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Actual
Mission Statement
Make Today Delicious We inspire trust. We act like owners. We keep it simple. We are open and inclusive. We tell it like it is. We lead from the head and the heart. We discuss. We decide. We deliver.
Revised
Here at Kraft Foods we strive to produce superior products and services to our customers ranging from wholesalers to households. The 21 century is sure to bring more innovation, new products, and new food technology, thus enabling us to create and deliver better and healthier products. Kraft Foods continues to lead the food industry as the largest food supplier in North America with plans to continue expansion into new and existing global markets. We support the goals of the company by applying the highest ethical conduct within our corporate philosophy in all our business transactions, treatment of employees, and social and environmental policies. We at Kraft Foods focus highly on our consumers lifestyles and aim to grow profitable in the worlds food market and provide a higher than expected return to shareholders. Our company takes pride in making today and the futuredelicious.
st
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As a group we felt that Krafts mission statement was fun but lacked some of the components discussed in our study of strategic management. Their mission statement was inspiring but talked mainly about themselves. The We deliver; We inspire trust, We.. read as if Kraft was all about themselves with no mention of customers or shareholders in their mission. We covered that by stating the base of customers were from wholesalers to households with a sort of jingle tone to it. The products and services were not mentioned so a point was made to identify the superior Kraft brand. We had to emphasize the expansion into new and existing markets because the Kraft brand is already penetrated in North America and many countries across the globe such as China, Britain and France. Sustainability is characterized by social, economical and environmental responsibility and should be addressed globally through the corporate world. We carry the resources to make the world a better place and should strive to use those resources in that manner. The values from sustainability tie into a good public image. We feel as a group that the employees are a companys most valuable asset. Including the employees in the mission statement would inspire the trust needed within and we thought it was worth mentioning in the design of the statement. As a group we believe that Kraft could have been less vague and more forthcoming in their mission statement. They positioned themselves as very competitively advantaged and are a company that is socially, economically and environmentally responsible. It would erase the stigma that Kraft is just a junk food company.
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The External Factor Evaluation (EFE) Matrix

Key External Factors Opportunities 1. U.S. sales of organic food and beverage have increased from $1 billion (1990) to $26.7 billion (2009). 2. Food manufacturers have experienced increase sales due to a higher number of people dining out. 3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005). 4. Baked goods prices increased 10.7% compared to 2008. 5. Increased trends of flavor enhancer for bottled water. 6. Growing environmental consensus. 7. Increased demand for packaged and processed foods around the world due to change in lifestyles. Threats 1. Increasing obesity rates in North America. 2. Due to a weak economy and increased competition, the food processing industry saw an employee reduction of7.5% in 2009. 3. Rising petroleum costs causing an increase in product and manufacturing costs for the food processing industry. 4. Difficult to differentiate product pricing between competitors in the food processing industry. 5. Customers switching to generic brands. 6. Increased intensity for market share in European as well as other markets. 7. Declining value of the dollar with increasing value of the Euro. 8. North American competition is now primarily focused on the food industry. Total Weight Rating Weighted Score
0.08 0.10 0.06 0.03 0.13 0.06 0.07
3 4 4 1 4 3 3
0.24 0.40 0.24 0.03 0.52 0.18 0.21
0.03
0.06
0.04 0.05 0.04 0.09 0.07 0.02 0.13 1.00
1 2 2 3 3 2 4
0.04 0.10 0.08 0.27 0.21 0.04 0.52 3.14
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Our team conducted the External Factor Evaluation Matrix in order to evaluate the opportunities and threats affecting Kraft and the food processing industry. We gathered economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information to develop our key external factors. These factors include 7 key external opportunities and 8 key external threats, all of which were assigned a weight and rating in order to develop a weighted score which are accumulated to determine Krafts external position in the industry. A weight is given to indicate the relative importance of each factor to being successful in the food processing industry. A rate is assigned to each factor to indicate how effectively Krafts current strategies respond to the factor. The rates are evaluated on scale of 1 through 4, where 4 indicates their response is superior, 3 shows their response is above average, 2 means their response is average, 1 indicates their response is poor. The rates are based by the company whereas the weights are based on the industry. Starting with our key external opportunities, U.S sales of organic foods and beverages have increased from $1 billion in 1990 to $26.7 billion in 2009. This key external factor was given a weight of 0.08 to show that this is an important factor that the food processing industry can potentially take advantage of because organic food is a rapidly growing trend with areas to be capitalized. We rated this external factor a 3 because Kraft has developed organic product lines that target a more health conscious consumer group. However we feel that their response wasn't superior because there are many more products within all of their business segments that have the potential to be redesigned to fit the organic label. Another key external factor is the increasing trend of dining out resulting in food manufacturers experiencing increase sales from the restaurant industry. We weighted this factor a 0.10 to show that this is a major factor to being successful in the food processing industry. Companies in the food processing industry wouldnt have to make any major changes to product packaging or manufacturing in order to change suppliers from wholesalers to restaurants. We rated this external
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factor a 4 because Kraft has developed and redesigned some of their product lines to be sold to either consumers or distributors. We felt that Krafts response was superior due to the fact that they have created a new segment in their North American division called Canada & N.A. Foodservice which has a primary focus on distributing to restaurants. A key external opportunity in the food processing industry is the fact that women are becoming more common in upper management increasing by 5.2% from 1995 to 2005. Kraft had a superior response to this factor when they appointed Irene Rosenfeld in 2006. We weighted this factor a 0.06 because we felt that there is an increasing trend for women in upper management in many industries. One particular factor that we rated as a poor response by Kraft was the opportunities of baked goods prices increasing by 10.7% compared to 2008. However this is not a particularly crucial success factor resulting in a weight of only 0.03. The opportunity that we considered to be the highest importance to being successful within the food processing industry is the increasing trend of flavor enhancer for bottled water. There is a huge market for bottled water which Kraft saw an opportunity in when they designed their new innovative bottle water flavor enhancer MiO. We weighted and rated this opportunity 0.13 and 4, respectively. Another important external factor is the growing environmental awareness in the U.S and Europe. We weighted this factor a 0.06 because we feel that for food processing companies to go green they would have to allocate many resources in developing new ways to reduce waste. These changes would be expensive and long running so companies would find them overvalued and not profitable. We rated this 3 because Kraft has reduced the waste in 6 out 9 of their major manufacturing plants in the U.S. by 80% with plans to reduce waste disposal to zero by 2015. Our final key external factor under opportunities was the increased demand for packaged and processed foods around the world as a result of a change in lifestyles. These days it is more common to have double income families who are bound to have less time to cook and having extra cash for quicker meals. We felt that this was a fairly important success
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factor for the food processing industry because of the high demand for convenience food. We rated Krafts response to this as above average because they focus on developing quick meals that are easy to prepare. Under our threats section of the external factor evaluation displays our key external threats which start with increasing obesity rates in North America. We weighted this threat low because most of the products within the food processing industry are labeled junk food and cannot be the primary source of nutrition for kids and adults. We rated this factor a 2 because even though Kraft has developed healthy choice product lines, many of their best selling products still contain high levels of saturated fat, sodium and sugar. Kraft has responded to this by not advertising to children under 6, only promoting their Better-For-You products for children between the ages of 6-11 and absolutely no school advertising. Another key threat we observed was a workforce reduction in the food processing industry of 7.5% in 2009. This was due to a weak economy and increase competition which is affecting most companies within the industry evenly which is why we weighted this factor 0.04. Prior to 2008 companies where experiencing the peaks of a booming economy resulting in a bloated work force. These peaks were quickly diminished when the recession took effect resulting in many companies reducing their work force in order to remain operational. We rated this factor 1 because Kraft reduced its work force by 19,000 employees in 2009, which is way above the industry average. Petroleum is used for many operations within the food processing industry, from agricultural costs, to shipping and distributing. This is why we weighted the threat of rising petroleum cost a 0.05 because of the industries lack of control on the topic but also its importance. Kraft has long-term objectives to reduce their petroleum consumption by 15% by 2015. We feel this is a great start but that much more can be done which is why we rated this threat a 2. One external threat we dogged is the difficulty in differentiating product pricing between competitors in the food processing industry. We weighted this factor 0.04 because we felt that this is
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the result of free trade and as long as they have competitors in their industry then this threat will not change. We rated this threat a 2 because we feel that Krafts pricing policies are developed in order to receive the greatest profit margin. These prices are based on their competitors prices and therefore cannot be changed due to decreased profit margin. One of our most important key factors is the threat of customers switching to generic brands. Especially during a recession consumers for looking for more lower priced products rather than name brand products. As a result we weighted this threat a 0.09 to show it has high importance in the industry. We rated Krafts response to this threat a 3 because of their above average marketing efforts to show consumers their products have high value and to maintain their long lasting reputation of good food for lower prices. The intensity of competition in the food processing industry has been an increasing external threat that Kraft responded well to with the acquisition of Cadbury in England. This factor was weighted a 0.07 because of the need to globalize and expand into European and other markets. In the world today youre either growing or dying and the food processing industry is no exception, companies within the food processing industry know they must expand into new markets to retain market share and remain profitable. Another factor regarding competition in the food processing industry is the increased intensity of competition in North America. Kraft Foods is the number one food processor in North America which is why we regard this threat to be the most important to the success in the industry. ConAgra which is Krafts main competitor within the U.S. has recently sold off its beauty and health care divisions in order to focus primarily on food processing. Kraft has responded heavily to this threat with increased advertising in the U.S. to $50 million in 2009. The last external threat is also the least important to the success of the food processing industry. The declining value of the dollar and the increasing value of the euro has been an increasing threat over the past few years. We weighted this factor low at 0.02 because we feel the food processing industry has no control over inflation rates. We
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rated this factor a 2 because we feel that because Kraft operates in both the U.S. and Europe they will experience changes in monetary values no matter where they choose to operate.
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Competitive Profile (CPM) Matrix
Critical Success Factor
Weight Rating Score 0.36 0.30 0.27 0.30 0.64 0.56 0.39 0.32 3.14 Rating 4 4 4 3 4 3 3 3 Score 0.48 0.40 0.36 0.30 0.64 0.42 0.39 0.48 3.47 Rating 2 2 2 2 3 3 2 3 Score 0.24 0.20 0.18 0.20 0.48 0.42 0.26 0.48 2.46
1. Advertising 2. Financial Position 3. Global Expansion 4. Market Share 5. Product Diversity 6. Consumer Demands 7. Customer Loyalty 8. Product Safety Total
0.12 0.10 0.09 0.10 0.16 0.14 0.13 0.16 1
3 3 3 3 4 4 3 2
The Ratings values are as follows: 1= major weakness, 2= minor weakness, 3= minor strength, and 4= major strength. As indicated by the total weighted score of 2.46, ConAgra is the weakest, followed by a weighted score of 3.14 for Kraft and 3.47 for Nestl who is considered the leader of the food processing industry.
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The Competitive Profile Matrix is a vital strategic management tool to compare the firm with the major competitors of the industry. The competitive profile matrix displays a well-defined picture to the firm about their strengths and weaknesses relative to their competitors. The primary competitors to Kraft are Nestl and ConAgra, so we used those two companies in this matrix. After an in depth analysis of the external and internal environment we came up with these critical success factors: Advertising, Financial Position, Global Expansion, Market Share, Product Diversity, Consumer Demands, Customer Loyalty, and Product Safety. After we came up with each factor, we must weight and rate each factor for each company. The rating in the CPM represents the response that the firm has towards the critical success factors. The response scale is from 1 to 4. A poor response is represented by 1, the response is average if it's represented by 2, the response is above average if it's represented by 3, and the response is superior if it's represented by 4. In this industry we felt that Kraft has an above average effort in their advertising field, but felt that Nestl does a little more in their efforts. We see more diverse advertising by Nestl, whether its newspaper ads or commercials. Also their advertising is more eye catching and appealing to the public. ConAgra received a 2 because they arent really on the same page regarding global aspect. Financial position, we rated this based upon their net sales. Nestl is the leader in the food processing industry so it is obvious that their response is a 4 because they are leading the pack. Kraft wasnt too far behind so they are above average because they are ahead of most food processing companies in this industry. ConAgra is lower in this field for the fact that they dont offer as much as these other two companies. The next factor we found important was global expansion. ConAgra received a low rating for this because they have decided to mainly focus on the North American markets, they arent focused on going global at this time. Nestls headquarters is in Switzerland; they are based off international and global expansion. Many of their products are in undeveloped countries. The next factor we focused on was market share. We found this important because companies need to be able convert sales targets
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into market share because this will show whether forecasts are to be attained by growing with the market or by capturing share from competitors. We felt, using that information, that all three companies displayed either average or slightly above average in this area. For product diversity Kraft does an exceptional job, they have over 100 brands that cover the a wide array of products. Kraft however doesnt have any bottled water, but they have a flavor powder portfolio for water that leads the industry. Nestl has a very diverse product line also, whereas ConAgra has a diverse product line but not as many brand names as these two companies. Another factor is consumer demand, which refers to how much of something a consumer desires. A company needs to know the consumer demand so they know how much of a product to make. Each of these companies, we feel are above average in this area. Kraft continues to expand and be innovative with their products. A current example is the launch of their new product MiO that is a water flavoring substance. Nestl is also great in this area, especially when it comes to their baby nutrition products. They continue to make these products that babies need to survive and bring them to developing countries. The last two success factors are customer loyalty and product safely. These two factors are so important that you can rate each company based on only these factors and you would still get a good view on who would be successful in this industry. Regarding customer loyalty we rated Kraft and Nestl a 3 and ConAgra a 2, reason being that everyone knows the Kraft and Nestl brands, everyone picks their favorite and they stick with those products. ConAgra on the on the hand doesnt have the same value with their company name and many consumers may not know the products they carry. As for product safely, this was a big concern for Kraft which will be explained later in our IFE and SWOT matrices, which is why Kraft was rated a 2. Kraft recently removed batches of fruits and nuts after one of their workers discovered they were contaminated with salmonella.
The weight attribute in the CPM indicates the relative importance of each of the factors to being successful in the firms industry. The sum of all weighted score is equal to the total weighted score; final
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value of total weighted score should be between ranges 1.0 (low) to 4.0(high). The average weighted score for CPM matrix is 2.5, any company's total weighted score falling below 2.5 is considered weak. A companys total weighted score higher than 2.5 is considered strong in competitive position. In this case Kraft received a total weight of 3.14, Nestl a weight of 3.47, and ConAgra a weight of 2.46. This indicates that Nestl is the premier company in this matrix, but Kraft still is a strong company in this industry. With ConAgras weight being below the average 2.5 it is clear that they are considered weak in this industry.
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The Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Strengths 1. Positive sales in all 5 operating segments; Snacks, Beverages, Cheese, Grocery, Convenient Meals. 2. High priority and standards on food safety. 3. Diverse range of brands and products. 4. Strong focus on R&D. 5. Sales increased by 2.9% in North American markets. 6. Strong reputation and perceived value among customers. 7. Organic food revenue increased by 2.3% in first quarter 2009 Weaknesses 1. Possibility of perceived weakness from female CEO in certain foreign markets. 2. Risk of contamination in agricultural products. 3. Sales drop 5.9% in second quarter 2009. 4. High amount of goodwill - over $27.5 billion. 5. $18.5 billion in long-term debt - increased 50% in 2008 from 2007. 6. Difficulty launching new brands. 7. Margins depend on commodity prices. Total 0.02 0.12 0.08 0.07 0.07 0.09 0.04 1.00 2 1 2 1 1 1 2 0.04 0.12 0.16 0.07 0.07 0.09 0.08 2.57 Weight Rating Weighted Score
0.06 0.06 0.08 0.08 0.04 0.12 0.07
4 3 4 4 3 4 4
0.24 0.18 0.32 0.32 0.12 0.48 0.28
Major Weakness (rating =1) Minor Weakness (rating =2) Minor Strength (rating =3) Major Strength (rating =4)
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Our team conducted an Internal Factor Evaluation Matrix in order to evaluate the major strengths and weaknesses in Krafts functional areas of business. We used our intuitive judgments to determine the factors and assign each with a weight and a rating. A weight is given to each factor to indicate the relative importance of it being successful in Krafts industry, then a rating is provided to indicate whether the factor is a major strength, minor strength, major weakness, or minor weakness. Then we calculated a weighted score for each factor and summed them together to determine Krafts internal position. Each factor under strengths received a rating of 3 or 4; 3 being a minor strength and 4 being a major strength. Kraft has shown positive sales growth and has been operating effectively in all five of its operating segments, which we considered to be a major strength of the company, so it received a rating of 4. We weighted this strength as a 0.06; we felt that this was of average importance to Krafts success. The same weight was given to the next factor under strengths; Krafts high priority and standards on food safety. It would be expected of any large company in the food industry to have a high priority and standards on food safety, so we determined this factor to be minor strength that is of average importance to the companys success in this industry. Krafts diverse range of brands and products as well as its strong focus on research and development were given a weight of 0.08 and a rating of 4. We consider the diverse brands and products to be a major strength and of fairly high importance because the company competes in such a wide market, so it is key to cover all grounds. We labeled Krafts strong focus on R&D as a major strength and evaluated it as moderately high importance because of the companys ability to be new and innovative has been a huge factor to their success. Sales increasing by 2.9% in the North American market were considered by us to be a minor strength with a below average importance to the companys success because this sales increase was mostly due increased prices of 9.8% and money saved from laying off 19,000 employees.
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We determined Krafts strong reputation and perceived value among customers to be a major strength and as one of the most important factors for Krafts success in its industry. The greatest asset of any retail and consumer product company is reputation. Kraft has built a strong reputation and perceived value among customers through a lot of marketing efforts and many years of being established. We weighted this factor as 0.12. The final strength factor was the 2.3% increase in organic revenue in the first quarter of 2009. We gave this factor a rating of 4 and a weight of 0.07. The increase in organic revenue is a major strength for Kraft and has somewhat high importance to the firms success in the industry because organic food is becoming more popular among consumers now with health concerns on the rise. The factors labeled as weaknesses are rated on a scale of 1 to 2; 1 being a major weakness and 2 being a minor weakness. The possibility that Kraft being perceived as weak as a result of having a female CEO is as only a minor weakness and resulted in a weight of 0.02, meaning it has low importance to the success of the company because this only applies to certain foreign markets. We considered the risk of contamination in source products to be another one of the most important factors for Krafts success in its industry. This factor received a weight of 0.12 and was rated a 1. This major weakness is an important factor in the companys success because contaminated products could hurt Krafts already strong reputation and perceived value among consumers. A minor weakness considered was the 5.9% drop in sales in the second quarter of 2009. We weighted this factor as 0.08, which is considered to be of fairly high importance. Krafts has over $27.5 billion in goodwill, and over $18.5 billion in long-term debt; a 50% increase in 2008 from 2007. Both of these factors have been given a weight of 0.07 and a rating of 1, making them major weaknesses that have a moderately high importance to the success of the firm. As a result, Kraft is going through a turn-around process designed to return the company to sustainable growth. In recent years, Kraft has experienced difficulty launching new brands. Being able to launch
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new brands is an important factor to the success of Kraft because of who they are competing against; ConAgra, Nestl. We considered this major weakness and gave it a weight of 0.09. Lastly, we determined that margins depending on commodity prices are a minor weakness and weighted it at 0.04. The price of commodities is something that is not controlled by Kraft, and this affects other companies in the industry all the same. We solved for each factors weighted score by multiplying each weight by its rating. From there, we added up each weighted scores to come up with a total weighted score. Krafts total weighted score came out to be 2.57. This score tells us that Krafts internal position is not weak, but not strong either , just slightly above average.
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Strengths-Weaknesses-OpportunitiesThreats SWOT Matrix

Weaknesses 1. Possibility of perceived weakness from female CEO in certain foreign markets. 2. High risk of contamination in agricultural products. 3. Sales drop 5.9% in second quarter 2009. 4. High amount of goodwill - over $27.5 billion. 5. $18.5 billion in long-term debt - increased 50% in 2008 from 2007. 6. Difficulty launching new brands 7. Margins depend on commodity prices. Opportunities 1. U.S sales of organic food and beverages have increased from 1 billion (1990) to 26.7 billion (2009). 2. Food manufacturers have experienced increased sales to restaurants due to a higher number of people dining out. 3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005). 4. Bakes goods prices increased 10.7% compared to 2008. 5. Increased trends of bottle water and flavoring consumption 6. Increased trends of flavor enhancer for bottled water. 7. Increased demand for packaged and processed foods around the world due to change in lifestyles Threats 1. High obesity rates in North America. 2. Due to a weak economy and increased competition, the food processing industry saw an employee reduction of 7.5% in 2009. 3. Rising petroleum costs causing an increase in product and manufacturing costs for the food processing industry. 4. Difficult to differentiate product pricing between competitors in the food processing industry. 5. Customers switching to generic brands. 6. Increased intensity for market share in European as well as other global markets. 7. Declining value of the dollar with increasing value of the Euro. 8. North American food processing companies are now primarily focused on food related consumer products. WT Strategies Maintain advertising to remind our customers of our high quality products (W6, T5)- Market Penetration Divest from high intensity European markets to focus more in North America. (W3, W5, T8, T6)- Retrenchment WO Strategies Use quality organic ingredients to reduce risk of contamination. (W2, O1) Product Development & Related Diversification Target new brands to restaurants instead of households. (W6, O2) Market Penetration Inform foreign markets of women in upper management positions. (W1, O3) Market Development
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Strengths-Weaknesses-Opportunities-Threats SWOT Matrix Strengths 1.Positive sales in all 5 operating segments; Snacks, Beverages, Cheese, Grocery, Convenient Meals. 2. High priority and standards on food safety. 3. Diverse range of brands and products. 4. Strong focus on R&D. 5. Sales increase by 2.9% in North American markets. 6. Strong reputation and perceived value among customers. 7. Organic food revenue increased by 2.3% in 2009. Opportunities 1. U.S sales of organic food and beverages have increased from 1 billion (1990) to 26.7 billion (2009). 2. Food manufacturers have experienced increased sales to restaurants due to a higher number of people dining out. 3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005). 4. Baked goods prices increased 10.7% compared to 2008. 5. Increased trends of bottle water and flavoring consumption. 6. Growing environmental consensus. 7. Increased demand for packaged and processed foods around the world due to change in lifestyle. Threats 1. Increasing obesity rates in North America. SO Strategies Create new organic products to add to existing product lines. (S7, O1)-Product Development Use customer loyalty and diverse range of products to increase sales in restaurant industry.(S6,S3,O2)- Market Penetration Use diverse brands to market processed food to global markets. (S4,S3, O7) Product Development ,Market penetration & Development
ST Strategies Use R&D capabilities to develop new healthier food options due to increasing obesity rates. (S4, T1) Product Development Use reputation to increase market share in current markets to decrease switching to generic products. (S6, T5) Market Penetration
2. Due to a weak economy and increased Continue marketing efforts in North America with a heavy emphasis on competition, the food processing industry retaining loyal customers. (S5, S6, T8) Market Penetration saw an employee reduction of 7.5% in 2009. 3. Rising petroleum costs causing an increase in product and manufacturing costs for the food processing industry. 4. Difficult to differentiate product pricing between competitors in the food processing industry. 5. Customers switching to generic brands. 6. Increased intensity for market share in European as well as other global markets. 7. Declining value of the dollar with increasing value of the Euro. 8. North American food processing companies are now primarily focused on food related consumer products.
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While our team was creating the SWOT matrix we looked through both the EFE and the IFE matrices to check back on what the key external and internal factors were for Kraft Foods. While thinking of ways to match strengths and weaknesses to opportunities and threats for this matrix we came up with 11 strategies that we derived from the input stage. There were three weaknessopportunity strategies, two weakness-threat strategies, three strength-opportunity strategies, and three strength-threat strategies. Our first weakness-opportunity strategy uses our number two weakness (high risk of contamination in agricultural products) and our number one opportunity (U.S. sales of organic food and beverage have increased from $1 billion in 1990 to $26.7 billion in 2009) in order to develop this strategy. Use quality organic ingredients to reduce risk of contamination which we said would be product development and related diversification. If Kraft would use a high quality organic product from a group of trusted farms across the world then the contamination factor could almost be taken out of the equation entirely. This would help Kraft develop its product because all customers would rather have a good quality organic product to feed to their families instead of foods that have been produced in places where contamination may occur. This strategy could also be related diversification because Kraft could come out with a brand new line of organic foods that could boost revenues in that area. This could possibly turn into a new product line for Kraft that could turn out to be a major success. Our second weakness-opportunity strategy would use our sixth weakness (difficulty launching new brands) and our second opportunity (food manufacturers have experienced increased sales due to a higher number of people dining out) to develop this strategy which would target new brands to restaurants instead of households which would be considered a market penetration strategy. This would fall into that strategy because Kraft would market new products and brands to restaurants to gain further market share within that segment.
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Our third and last weakness-opportunity strategy would combine weakness one (possibility of a perceived weakness from female CEO in certain foreign markets) and opportunity three (women are becoming more popular in upper management, 11.2 % in 1995 to 16.4 % in 2005). By matching these two elements our strategy would be to inform and educate foreign markets about women in upper management positions. This would be market development because if Kraft informs people in other nations of their female CEO they may gain the customers in that area. Cultures where females dont really get a chance to do different jobs may be inspired by Irene Rosenfeld and may become a loyal customer to Kraft. On to our weakness-strength strategies our first strategy will use weakness six (difficulty launching new brands) and threat number five (customers switching to generic brands). The strategy will be to maintain advertising to remind our customers of our high quality products which will considered market penetration. People are switching to more generic brands these days due to the high cost of some other brands and economic downturn. Kraft should realize this and remind their customers that spending a little bit more money will really make the difference in having a good, quality meal rather than having an average Joe meal. This brings us to our last weakness-threat strategy. This strategy will use weaknesses three (sales drop 5.9% in second quarter 2009) and five ($18.5 billion in long-term debt increased 50% in 2008 from 2007) and match them with threats eight (North American food processing companies are now primarily focused on food related consumer products) and six (increased intensity for market share in European as well as other global markets). Our Strategy for this would be to divest from high intensity European markets to focus more in North America. This would be retrenchment because we would stop competing in Europe to raise our sales and numbers in North America.
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After looking at the weakness orientated strategies we will now look at the strength strategies and our first one included our seventh strength (organic revenue increased by 2.3 % in 2009) and our first opportunity (U.S. sales of organic food and beverages have increased from $1 billion in 1990 to $26.7 billion in 2009). Our strategy would go as follows, create new organic products to add to existing product lines which would be classified as a product development strategy. As the organic sales continue to go up within the industry and the organic revenue continues to go up for Kraft they should develop more organic based foods to put on the shelves so that people can have a verity. The second strength-opportunity strategy looked at strength six and three (strong reputation and perceived value among customers and diverse range of brands and products) and opportunity two (food manufacturers have experienced increased sales due to a higher number of people dining out). Our strategy for this is to use customer loyalty and diverse range of brands to increase market share in the restaurant industry. This falls into the market penetration strategy because once again we will be focused on getting a larger part of market share within the restaurant field. Next we will match strengths four (strong focus on R & D) and strength three (diverse range of brands and products) with opportunity seven (increased demand for packaged and processed foods around the world due to change in lifestyle). Given these circumstances Kraft should use diverse brands to market processed food to global markets. This would be product development because they can use their R&D functional area to do extensive research on packaged and processed foods to make their products healthier. This would be classified as a market development strategy because of the way that they are introducing their products to more global markets. It would also be market penetration because they can try to get more market share within the countries that they are already doing business within. Now we will look at the possible strength- threat strategies which to start them off included strength four (strong focus on R&D) and threat one (increasing obesity rates in North America). Kraft
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could use R&D capabilities to develop healthier food options due to increasing obesity rates. This would be product development because by researching and developing new healthier foods they are making their product better and as a result parents will want to buy the healthier food so that they can either battle obesity or prevent it from occurring. Our next possible strategy will match strength six (strong reputation and perceived value among customers) and threat five (customers switching to generic brands). Given this situation Kraft could use their reputation to increase market share in current markets to decrease switching to generic products. This would be market penetration because the goal of this is to increase their market share within current markets. With their well-known brand name they could persuade customers that their products are better and worth a little extra money. Lastly our final possible strategy looked into strengths five (sales increase by 2.9% in North American Markets) and six (strong reputation and perceived value among customers) matching them with threat eight (North American food processing companies are now primarily focused on food related consumer products). For this situation they should continue marketing efforts in North America with a heavy emphasis on retaining loyal customers. This would be penetrating the market because they will be trying to gain new customers within the market and trying to get them to become loyal customers and buy only Kraft products.
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Strategic Position and Action Evaluation Space Matrix

FINANCIAL POSITION (FP) Factors Revenues increased 16.8% to $42.2 billion Earnings increased 12% to 2.9 billion Total L+SE+ Assets decreased 7.5% to $6.3 billion Gross profit margin of 34.1 compared to the industry average of 31.1 Current ratio of 1.1 TOTALS INDUSTRY POSITION (IP) Factors Growth potential Ease of market entry Profit potential Financial stability Resource utilization TOTALS STABILITY POSITION (SP) Factors Competitive pressure Barriers to entry Unemployment Technology changes Price range of competitors products TOTALS COMPETETIVE POSITION (CP) Factors Customer loyalty Product quality Market share Technological knowledge Competition TOTALS
Rating 4 3 3 4 2 16 Rating 5 4 4 3 3 19 Rating -4 -4 -5 -2 -4 -19 Rating -3 -3 -2 -4 -5 -17
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Conclusions SP Average: -19/5= -3.8 IP Average: 19/5= 3.8 CP Average: -17/5= -3.4 FP Average: 16/5= 3.2 Directional Vector Coordinates: X-axis: -3.4 + (3.8) = .4 Y-axis: -3.8 + (3.2) = -.6 FP
CONSERVATIVE
AGGRESSIVE
CP
IP
DEFENSIVE
COMPETITIVE -Backward, forward, horizontal integration -Market penetration -Market development -Product development
SP
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The Strategic Position and Action Evaluation Matrix, also known as the SPACE Matrix is an important matching stage tool used to match different variables along two axis. With the two axis intersecting in the middle then creating a four quadrant matrix which are labeled going top-right to bottom-right is aggressive, conservative, defensive and competitive. The Y-axis includes two dimensions; one internal which is the financial position (FP) and one is external, which is the stability position (SP). The X-axis includes the other two dimensions the competitive position (CP) which is internal and the industry position (IP) which is external. These factors are possibly the most important determinants of an organizations strategic position. To begin the SPACE Matrix we first selected a set of variables to define the four positions on the graph. After this we assigned a numerical value to each of the factors ranging from +1 (worst) to +7 (best) for the FP and IP dimensions, and a -1 (best) to -7 (worst) for the SP and CP dimensions. The financial position factors are as follows, revenues increased 16.8 % to $42 billion which we rated as a 4 because it was good when compared to competitors and the industry. The next factor was that earnings which increased 12% to $2.9 billion which we rated a 3. Next we have the fact that the total liabilities +stockholders equity + assets decreased 7.5% to $6.3 billion which we also rated as a 3 because it wasnt quite as bad as our competitors. Gross profit margin of 34.1 compared to the industry average of 31.1 was rated as a 4 because even though Krafts margin was larger than the industry average it still wasnt as good as it could be compared to its competitors like Nestl. The last factor in the Financial position was the fact that the current ratio was 1.1 which we rated as a 2 because the ratio is just barely above 1 which means that Kraft's current liabilities are barely covered by their current assets and therefore it could use improvement. The Industry Position is located on the X-axis and we decided to rate those next. First we had growth potential which we rated as a 5 because although Kraft has a lot of market share in North
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America they can grow even more compared to their competitors in Europe and other global areas. Next was the ease of market entry which we rated as a 4 because this industry isnt very easy to get into, and other than Nestl, Kraft is the largest company so we believed that they were above average. The barriers to enter the food processing industry are quite high, with conglomerates like Kraft and Nestl dominating all markets. Profit potential was rated a 4 because they're making a profit compared to many other industries where most companies are struggling just to stay out of negatives, and if they are receiving profit, they most likely arent doing as good as Kraft. Another factor of the IP was financial stability which we rated as a 3 because although there is stability in Krafts financials other industries are more stable and there is a lot that can go wrong in the food industry. Stable industries include the medical industry, and the insurance industry where most companies are recession proof. Last in the IP factors we have resource utilization which we rated as a 3 because we feel that Kraft could utilize other areas better than they are, examples would include their European and developing markets divisions that are only allocated 15% of resources. After the Industry Position we rated the stability position which started with competitive pressure. We rated this as a -4 because within that industry Kraft has some major competitors and we think that the pressure could be handled better in European markets. When it comes to barriers to entry we rated Kraft as a -4 because it is difficult to enter this industry. Large companies like Kraft and Nestl have extensive customer loyalty which is something new companies won't be able to rely on and will have to fight to gain. Our next factor is unemployment and we rated this as a -5 because Kraft shut down 36 plants at the end of 2009, which eliminated 19,000 jobs. The next factor to consider is technology changes, and we rated this a -2. We rated this as good because although Kraft shut down 36 plants, they streamlined their manufacturing and simplified their organizational structure which led them to save $1.1 billion in 2008. Also with new organic products being developed Kraft is always on the edge of innovation, always ready to capitalize on the latest trend or market switch.
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The final position of the SPACE matrix is competitive position. Here we look at Kraft's external competitive position compared to not their other competitors like the CPM matrix but compared to how they respond to each factor. We start with customer loyalty which is no problem for Kraft, with products like Mac N' Cheese, Velveeta, and Miracle Whip that have all been on the shelves for over 50 years it's easy to say that Kraft has a good customer loyalty position, which is why we rated them a -3. The next factor on our list is product quality, which was rated a -3. We and Kraft wants it to be known that Kraft strives to put the best ingredients to develop the best product that they possibly can, but with contamination in a few of their plants becoming a problem we had to stay away from giving them top marks. Also market share was a tricky factor to rate for Kraft because even though they dominate the North American markets especially the U.S. market, they still are lacking in the large European markets, which is why they received -2 instead of a -1. The final competitive position factor is competition itself and here we rated Kraft a -5 because we feel they still remain focused on North American markets when their biggest competitor, Nestl, dominates global markets without anyone to slow them down. We feel that Kraft needs to focus more on global markets in order to become a bigger contender against the food giant that is known as Nestl.
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Boston Consulting Group BCG Matrix

Domestic Market Share
Relative Market Share Position in the Industry
1.0 +20
Industry Sales Growth Rate (Percentage)
.50
0.0
0.70, 6.41%
-20
Backward Integration Forward Integration Horizontal Integration Market Penetration Market Development Product Development
Revenue Percent Profit Division (millions) Revenues (millions) Company $ 42,201 100% $ 2,901
Percent Profit 100%
Relative Industry Growth Market Share Rate (%) 0.70 6.41%
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Boston Consulting Group BCG Matrix

Global Market Share
Relative Market Share Position in the Industry
1.0 +20
Industry Sales Growth Rate (Percentage)
.50
0.0
0.39, 6.41%
-20
Market Penetration Market Development Product Development Divestiture
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The Boston Consulting Group (BCG) matrix is intended to help with multidivisional firm efforts to formulate strategies. The BCG matrix was founded by the a consulting firm based out Boston, MA, which is why its called the Boston Consulting Group Matrix. The BCG matrix will graphically show the differences among operating segments in terms of relative market share and industry growth rate. Relative market share is defined as the ratio of the divisions own market share or revenues compared to the market share or revenues held by the largest rival in the industry. Relative market share is measured high when a division has over 0.50 or half of the market share of the industry and low when its less than half. The other factor of the BCG; industry sales growth, is considered high when its a positive industry sales growth and therefore is considered weak if there is no industry sales growth. These factors will become useful later in our evaluation. The relative market share is located on the X-axis of the matrix whereas the industry growth rate is displayed as a percent on the Y-axis. As you can see in our BCG matrix the quadrants are broken down into four categories and there are from top-right to bottom-right, question marks, stars, cash cows, and dogs. Question marks are described to have low relative market share and compete in a high growth industry. They are called question marks because the companies must decide whether to continue with operations by pursuing an intensive strategy to gain market share or divest in the current markets and get out while they still can. The next quadrant is the stars category; stars represent the organizations best divisions regarding growth and profitability. These operating segments have high relative market share accompanied with a high industry growth rate. Intensive and integration strategies would be the best for course of action for divisions that end up in this quadrant. The next quadrant in the BCG is the cash cow, here divisions have high relative market share but have low growth in there industry. Most of the time former star divisions are eventually turned into cash cows where they are milked of cash. Divisions or companies can stay as a cash cow for a very long time, for example, Tabasco sauce has been a cash cow for over 100 years! Cash cow divisions need to be closely observed in order maintain their status and make necessary changes with the industry needs.
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The best strategies for cash cows are intensive and diversification, but if they become weak they may need to be retrenched or liquidated. The final quadrants is the dog category and trust me, this is an area that no division wants to be located within. A dog is classified as having low relative market share along with competing in a low or no market growth industry. The best strategy for dog divisions would be through retrenchment, many dogs can be reorganized into better divisions. If this doesnt work dogs should be liquidated or divested. Remember that these categories are not set in stone; most divisions will change quadrants many times throughout their economic life span. In our particular case with Kraft we had a hard time putting the BCG matrix together due to lack of information from our case and lack of information from external resources. We determined after scanning through the case and Krafts 10-k annual statement for 2009, that they dont report earnings, percent profit, or market share for any of their divisions. There are a few reasons Kraft many choose to not disclose this information. First the can become easily accessible competitive information for rival firms, also it can hide performance failures, and lastly is can reduce rivalry among segments. Whatever their reasons may have been we needed to do the BCG matrix anyway so instead of using Krafts divisions we used Kraft as a whole company. We started by finding the industry sales growth rate in our case which we determined was 6.41%, which would mean Kraft operates in a high sales growth industry. This means that Kraft would be classified as either a star, or a question mark depending on relative market share. The next crucial piece of information we need to obtain was Krafts relative market share. This was done by comparing Krafts total revenue to the revenues of their largest competitor. This would mean that we would be comparing Krafts revenue with Nestls revenues, seeing as they are by sales volume their largest competitor. To find Nestls total revenue we looked at their financial statements for 2009 and found they had revenues of $109,908 billion. After converting the amount from Swiss Francs to U.S. dollars using 12/31/2009 conversion rates, Krafts relative market share compared to Nestl came to be 0.39. (($109,908 x .96586= $106,155) ($42,201/$106,155 = .39)) This put Kraft in the
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question mark quadrant, we which we thought was accurate because it states in our case that Kraft is unsure of their access to European markets where Nestl has large control on market share. This would mean Krafts recommending strategies for their Global position would be to either strengthen their business by pursing strategies such as market development or product development or sell off and divest from these markets. Also in our case it mentions that Kraft is the market share leader in the United States and North America but they lack in market share in Europe and other foreign markets from being rather new to penetrate these areas. This led us to believe that comparing Kraft to Nestl was unfair for their portrayal in BCG matrix. That being said we decided to develop two BCG models, one for Krafts global position, and one their domestic position. In calculating Kraft position for their domestic model we compared revenues of Kraft to their biggest competitor in North America, ConAgra. Using revenues we found in our case we were able to determine that Kraft has a .70 relative market share in North America compared to ConAgra. (1-($12,731/$42,201)) Add this is a high industry sales growth percentage and Kraft is now located as a star for our BCG domestic matrix model. This is quite a change and a good example of how just one change of the equation can give you a whole new perspective on Krafts market share position. We again thought this information was accurate because Kraft is the leading food processor in North America and the BCG displays this very well. In this situation Kraft has the best long run opportunities for growth and profitability. We recommend that they implement integration and intensive strategies to take advantage of their high relative market share position in North America. The BCG, like all matrices has a few limitations. Most of the time companies cannot be labeled in one particular category because they fall right in the middle of the BCG matrix. Therefore the BCG matrix does show whether divisions or companies are growing over time, rather its a snapshot of an organization a particular point in time. Finally, there are other important variable we found besides
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relative market share and industry sale growth that are important in making strategic decisions. Therefore the BCG should, like all of the matrices we calculated for this project be accompanied with other matrices in order to be compared and to looks for outliers or incorrectly calculated models.
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Internal-External I/E Matrix

IFE Total Weighted Scores 4.0 4.0
High 3.0 to 4.0 2.57, 3.14 Strong 3.0 to 4.0
3.0
Average 2.0 to 2.99
2.0
Weak 1.0 to 1.99
1.0
EFE Total Weighted Scores
3.0
Medium 2.0 to 2.99
2.0
Low 1.0 to 1.99
1.0 Grow and Build Forward, Backward, or Horizontal Integration Market Penetration Market Development Product Development
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The I/E matrix, by definition, is a strategic management tool that is used to evaluate the current position of a company and to suggest strategies to improve in the future. The I/E matrix is formed by nine quadrants in a three by three chart. To find the point on the matrix where the company stands, the total weighted score of the IFE is plotted on the X-axis and the total weighed score from the EFE is plotted on the Y-axis. Where the two points intersect reveals what strategies should be used by the company. Quadrants 1, 2, 4 represent a grow and build strategy, quadrants 3, 5, 7 represent a hold and maintain strategy, and quadrants 6, 8, 9 represent a harvest or divest strategy. If a company lands in a grow and build quadrant, then product development, market penetration, and market development should be utilized. Also, backward, forward, and horizontal integration should be focused on within operations. Landing in a hold and maintain quadrants suggests strategies of market penetration and product development. Finally falling into a harvest or divest quadrant suggests that retrenchment or divestiture strategies should be exercised. To create an I/E matrix for Kraft required getting the weighted average scores for both the EFE and the IFE matrices. The EFE had a total weighed score of 3.14 and the IFE had a total weighted score of 2.57. These numbers were placed on their respective axis on the I/E matrix and the intersection was found within quadrant two. Quadrant two suggests a grow and build strategy, encompassing the integration and intensive strategies. Using this information, Kraft could use market penetration to gain competitive position. This would include using products they already have and are well known, such as Easy-Mac and Oreos, to build new or more advertising in order to increase sales. It would require allocating more funds towards existing items, but would add new elements such as logos and or slogans to rejuvenate the products image among consumers. Kraft could also try new ventures through product and market development. Product development would add new products to differentiate from competitors, which has already begun through the creation of the water enhancer MiO. Kraft can and has used market development by expanding where they sell their products, moving more towards
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restaurant services and even European markets. Integration strategies can be used to take control over major distributors, retailers, or competitors. During the current time period, it appears the Kraft is accustomed to using horizontal integration, taking control of its competitors. In the past they have taken control of companies such as Nabisco and Tombstone pizza. The I/E matrix is a good tool to show what a company like Kraft should do to remain a key player in a respective industry.
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Grand Strategy GSM Matrix

Rapid Market Growth
Weak Competitive Position
Strong Competitive Position
Slow Market Growth
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The Grand Strategy Matrix is based on two evaluative measures, competitive position and market growth. Kraft Foods is the leader in North America when it comes to the food industry, and the food processing industry is growing both domestically and internationally. There are new technologies coming around that the industry needs to look into so that they can continue to expand and keep their products at the top of their potential. When we were making the Grand Strategy Matrix we found that because of the market growth and Krafts strong competitive position they belong in quadrant one. The strategies that suggest they use from being in that quadrant are market development, market penetration, product development, forward integration, backward integration, horizontal integration, and related diversification. As a result of this matrix we can conclude that the company is in great strategic position and can even take on some aggressive risks if necessary. Kraft can continue to concentrate their efforts within the food processing industry by working on their market or on their products. They are in excellent strategic position and because of that they have a great chance to continue being successful in the future.
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Data Collection Matrix
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The data collection matrix is the culmination of all previous matrices created throughout the examination of Kraft Food. Its purpose is to review the strategies and find which ones repeatedly appear. It can be a helpful tool in deciding what is being done within a company and what should be continued in the future. In the case of Kraft, all of the integration strategies appear consistently along with all of the intensive strategies. The defensive strategies do rarely occur in the BCG matrix and the SWOT, but otherwise do not appear anywhere else. This is the same for diversification strategies only appearing in the SWOT and the GSM matrices. All of that being said, what we have taken from the interpretation of the decision matrix is that we are suggesting that Kraft use the intensive strategies to formulate and implement new strategies, which appear in every matrix. This means that Kraft should heavily focus on market development, product development, and market penetration. They have and still push to release products in new markets in North America, but more recently globally. To compete with global companies such as Nestl, this is essential. It could help to increase profits, as well as an enhanced public image. Kraft also is constantly making new products, along with making current products better. This is a way to stand out and say that they have the best and most innovative food products in the industry. It is important to Kraft to remain strong and show that they will continue the push to continue to grow. All of these efforts require intensive efforts by a company to increase competitive position within an industry. The data collection matrix reaffirms that this is what Kraft is doing and what works for the company. It ties up all of the loose ends and draws a viable conclusion quickly and fairly easily with accurate data.
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Quantitative Strategic Planning QSPM Matrix

STRATEGIC ALTERNATIVES 1 2 Market Penetration Product Development Use customer loyalty and diverse range of products Create new organic products to add to increase sales to restaurants. to existing product lines.
Key Factors Opportunities 1. U.S. sales of organic food and beverage have increased from $1 billion (1990) to $26.7 billion (2009). 2. Food manufactures have experienced an increase in sales due to a higher number of people dining out. 3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005). 4. Baked goods prices increased 10.7% compared to 2008. 5. Increased trends of flavor enhancer for bottled water . 6. Growing environmental consensus. 7. Increased demand for packaged and processed foods around the world due to change in lifestyles . Threats 1. Increasing obesity rates in North America. 2. Due to a weak economy and increased competition, the food processing industry saw a work force reduction on average of 7.5% in 2009. 3. Rising costs of petroleum cause an increase in cost for food companies. 4. Difficult to differentiate product pricing between competitors in the food processing industry. 5. Customers switching to generic brands. 6. Increased intensity between competitors in European as well as other Markets. 7. North American competition is now primarily focused on the food Industry. 8. Declining value of the dollar with an increasing value of the Euro. Strengths 1. Positive sales growth and operating effectively in all 5 operating segments; Snacks, Beverages, Cheese, Grocery, Convenient Meals. 2. High priority and standards on food safety. 3. Diverse range of brands and products. 4. Strong focus on R&D. 5. Sales increased by 2.9% in North American markets. 6. Strong reputation and perceived value among customers. 7. Organic revenue increased by 2.3% in first quarter 2009. Weaknesses 1. Possibility of perceived weakness from female CEO in certain foreign markets. 2. Risk of contamination in source products. 3. Sales drop 5.9% in second quarter 2009. 4. High amount of goodwill - over $27.5 billion. 5. $18.5 billion in long-term debt - increased about 50% in 2008 from 2007. 6. Difficulty launching new brands. 7. Margins depend on commodity prices. Total
Weight
AS
TAS
AS
TAS
0.08 0.10 0.06 0.03 0.13 0.06 0.07 0.03
1 4 1 1 1
0.08 0.4
4 2 4 4 4
0.32 0.2
0.06 0.07 0.03
0.24 0.28 0.12
0.04 0.05 0.04 0.09 0.07 0.13 0.02
2 2 3
0.1
1 1
0.05
0.18
0.09
0.39
0.52
0.06 0.06 0.08 0.08 0.04 0.12 0.07
2 2 2 2 1
0.12 0.16 0.08 0.24 0.07
3 4 4 3 4
0.18 0.32 0.16 0.36 0.28
0.02 0.12 0.08 0.07 0.07 0.09 0.04
2 1
0.16
3 4
0.24
0.09 2.23
0.36 3.72
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Our team developed a Quantitative Strategic Planning Matrix (QSPM) to determine the most effective alternative strategy for Kraft Foods. To develop this matrix, we selected two strategies taken directly from the SWOT Matrix that we felt Kraft should consider implementing and listed the key external and internal factors taken directly from the EFE and IFE that related to both of those strategies. The strategies that we selected were to create new organic products to add to the product line, and to use customer loyalty to increase market share in the restaurant industry. After examining each factor, we were able to determine which ones would affect the choice of the strategies being made, and from there we determined the Attractiveness Score to indicate the relative attractiveness of each strategy in the set of alternatives. Scores ranged from 1 through 4; 1 meaning not attractive, 2 showing there were somewhat attractive, 3 meaning reasonably attractive, and 4 indicating there were highly attractive. Each factors weight was multiplied by the Attractiveness Score to come up with the Total Attractiveness Scores. By summing the Total Attractiveness Scores in each strategy column of the QSPM, we were able to determine which alternative strategy would be best for Kraft to implement. The U.S sales of organic food and beverage have increased from $1 billion in 1990 to $26.7 billion in 2009. There is much opportunity in the rapid growing organic food market that Kraft can exploit by creating new organic products. More opportunities that would best be taken advantage of by this strategy would be the growing environmental consensus and the increased demand for packaged and processed foods around the world due to a change in lifestyle. People are purchasing packaged foods more often now and are taking environmental factors in to consideration that affects their purchasing decision. However, using Krafts customer loyalty to increase their market share in the restaurant industry is the strategy that would be most attractive for exploiting the opportunity in food manufactures experiencing an increase in sales due to more people going out to eat.
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A major threat in Krafts industry is the increasing obesity rates in North America. The strategy that is most attractive to avoiding this threat is to create new organic products to add to the product line. By redesigning current products to be more organic and healthy, Kraft can avoid the accusation of contributing to these growing obesity rates. Implementing this strategy can also avoid the threat of North American competition primarily focusing on the food industry. With competition putting more emphasis on food, it is important that Kraft stays ahead of them by continually developing the latest and trendiest products. Organic and healthy foods are a current and growing trend. One of Krafts internal strengths that can be capitalized on by creating new organic products is the companys diverse range of brands and products. An organic line of the pre-existing products as well as new products would be a great way to diversify their brands and products even further. Another one of Krafts internal strengths that is relevant to this strategy is the 2.3% increase of organic revenue in the first quarter of 2009. This shows that people are taking a higher interest in Krafts organic foods. Creating new organic products to add to the product line would be the best strategy to implement to improve on Krafts internal weaknesses. One of the companys weaknesses includes their difficulty of launching new brands. It would be easier for Kraft to market a new brand if it was healthy and organic because of an increase of health conscious consumers. We summed the strategies Total Attractiveness Scores to determine the best strategy that Kraft should execute. Out of the two strategic alternatives, creating new organic products to add to the product line received a higher Total Attractiveness Score of 3.68. This product development strategy would be the best choice for Kraft to implement and we agree with this decision.
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Recommendations
As noted earlier in the external factor evaluation matrix, one of the opportunities was U.S sales of organic food and beverages have increased from $1 billion (1990) to $26.7 billion (2009). We believe that Kraft should focus on this portion of the industry and develop products that cater to the organic market. Taking out all of the preservatives, taking down the high salt levels and saturated fat would be ideal for their companys sales as well as their consumers hearts. Another recommendation that we felt dealt with the same thing, but felt the way that the organic line is introduced is key. Kraft has many brands that stand alone. Before conducting this case, we werent, as knowledgeable to how many brands were actually owned by Kraft, so a recommendation would be to introduce the organic line of foods actually under the Kraft name. Another recommendation would be to decrease salt levels in the food. Salt and sodium are not the same. Often, we use the terms interchangeably, but only 40% of salt is made up of sodium. The other 60% is chloride. Salt (sodium chloride) is the major contributor of sodium in our diets (Kraft.com). Sodium is essential for good health and life itself. We need to eat a small amount of sodium because the body cannot manufacture this mineral.
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Epilogue
Community Involvement An ongoing commitment of Krafts is to fight hunger and encourage a healthy lifestyle. Volunteers from 56 different countries came together for a week in October of 2010 called Delicious Difference Week to plant gardens in the communities, build playgrounds, serve meals to the hungry and help at the local food banks. In June 2011, in partnership with Feeding America, Kraft Food Foundation pledged 180 million dollars over three years to get more food- and better nutrition to children and families through the Kraft Foods Mobile Pantry. This is a fleet of 25 refrigerated trucks they call farmers market on wheels that brings dairy products, fresh produce like lettuce and greens. They also provided their world famous Kraft Macaroni and Cheese and Oscar Meyer meats. Fifty million pounds of food will be delivered in the three years. Sustainability Sustainability is about conducting business in a way that is environmentally, socially and economically responsible. The worlds population is putting a strain on the population. Starting in 2010 as a 5 year plan, Kraft Foods is revising its environmental management system to consistent standards in all its facilities. They are also working with farmers that are certified, producing sustainably grown ingredients. Certification addresses the social, economic and environmental standards that farmers must meet. Examples include reductions in water pollution, soil erosion and excessive pesticide use. In finding ways to meet the need to use less water, carbon and land, Kraft Foods is partnering with World Wildlife Fund, US and other peers.
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Acquisitions In January 2010 Kraft acquired the British chocolate making company Cadbury for $19 billion. Cadbury at first did not want a takeover from anyone because of its 186 year old history as a British company. The thought of an American multinational company wasnt received well by the people in Britain. The good news for Kraft in this deal was Cadbury has such a good brand name they could now further their reach in the gum and candy markets. Irene Rosenfeld, Krafts CEO said It transforms the portfolio, accelerates long-term growth and delivers highly attractive returns (www.nytimes.com). While Kraft was thinking that it had a good deal going forward, a British newspaper ran a campaign to keep Cadbury a British company. The idea that Cadbury was going to be taken over by an American company still wasnt sticking too well in Britain. Kraft said they were going to keep a strong presence in Britain to keep the company affiliation within the country. Although Kraft did end up spending around $19 billion on this acquisition they would end up paying 500 pence cash and offer 1874 new Kraft shares to existing Cadbury shareholders, which amounts to approximately $13.80 for each Cadbury share. On October 20, 2011, Kraft CEO Irene Rosenfeld was at a ribbon cutting ceremony in Saclay, France for the opening of Krafts new European Biscuit Research and Development Centre. This is a year after Kraft had acquired the British company Cadbury. Krafts Biscuit Research and Development Centre will develop products such as LU, belVita, Oreo, Mikado, Prince, Saiwa, and TUC. In Europe a biscuit is what Americans would call a cookie or cracker. This new R&D center represents the final movement of a two year project that is worth $20 million. This investment in Biscuit Research and Development shows that Kraft is looking at snack related innovations towards a healthier lifestyle for people around the world.
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Citations
Food Tech. "IFT." IFT.org. Institute of Food Technologists, 19 July 2008. Web. 07 Dec. 2011. <http://www.ift.org/food-technology/daily-news/2011/october/24/kraft-foods-opens-new->. Merced, Michael J. "NY Times Advertisement." The New York Times - Breaking News, World News & Multimedia. Chris V. Ncholson, 19 Jan. 2010. Web. 07 Dec. 2011. <http://www.nytimes.com/2010/01/20/business/global/20kraft.html>. Kraft Foods Inc. "Delicious World." Welcome. Kraft Foods Inc., 01 Jan. 2008. Web. 01 Dec. 2011. <http://www.kraftfoodscompany.com/DeliciousWorld/index.aspx>. Kraft Foods Inc. "Corporate Information." Welcome. Kraft Foods Inc., 25 July 2011. Web. 07 Dec. 2011. <http://www.kraftfoodscompany.com/welcome.aspx>. Nestle Corp. "2009 Annual Statement." Home | Nestl Global. Nestle Corp., 31 Dec. 2009. Web. 07 Dec. 2011. <http://www.nestle.com/Pages/Nestle.aspx>. David, Fred R. Strategic Management: Concepts. Upper Saddle River, NJ: Pearson Prentice Hall, 2007. Print.
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Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

The External Factor Evaluation (EFE) Matrix

0.08 0.10 0.06 0.03 0.13 0.06 0.07

0.24 0.40 0.24 0.03 0.52 0.18 0.21

0.04 0.05 0.04 0.09 0.07 0.02 0.13 1.00

0.04 0.10 0.08 0.27 0.21 0.04 0.52 3.14

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Competitive Profile (CPM) Matrix

Critical Success Factor

0.12 0.10 0.09 0.10 0.16 0.14 0.13 0.16 1

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

The Internal Factor Evaluation (IFE) Matrix

0.06 0.06 0.08 0.08 0.04 0.12 0.07

0.24 0.18 0.32 0.32 0.12 0.48 0.28

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Strengths-Weaknesses-OpportunitiesThreats SWOT Matrix

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Strategic Position and Action Evaluation Space Matrix

Rating 4 3 3 4 2 16 Rating 5 4 4 3 3 19 Rating -4 -4 -5 -2 -4 -19 Rating -3 -3 -2 -4 -5 -17

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Boston Consulting Group BCG Matrix

Relative Market Share Position in the Industry

Percent Profit 100%

Relative Industry Growth Market Share Rate (%) 0.70 6.41%

Kraft Foods Case Report

Boston Consulting Group BCG Matrix

Market Penetration Market Development Product Development Divestiture

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Kraft Foods Case Report

Internal-External I/E Matrix

Average 2.0 to 2.99

Weak 1.0 to 1.99

EFE Total Weighted Scores

Kraft Foods Case Report