Opportunities and Threats for the Kraft Food Group in the Coming Years - Essay Example

MGT599 MoD 2 TD WEEK 2 Executive Summary This paper mainly tries to analyze the opportunities and threat for the Kraft Food Group in the coming years within the industry of food retail. However, in order to analyze the upcoming opportunities and risks, varied types of analytical tools are used such as PEST and Porter’s Five Forces so as to evaluate the macro environment of food industry. By analyzing it, the developments that the organization implemented are also focused in this paper so as to reduce the threats and amplify its position and dependency in this competitive market among many other rival players. Introduction This paper mainly tries to accomplish a brief analysis of the industry of food. However, in order to do so, PEST analysis and Porter’s Five Forces model are used. With the help of these analytical techniques, the recent opportunities and threats are evaluated about the food industry. After analyzing the opportunities and threats, the ways in which, these are effective for the Kraft Food Group is also evaluated within this paper. Moreover, in what ways, the Kraft Food Group might mitigate the risks and threats presented by the political, social or economic factors as well as threat of new entrants are also evaluated, so as to enhance its position and demand in the market among many other rival players. Porters Five Forces Threat of Entry: the threat of entrance of new players within the industry of food is quite tough due to excess capital requirements. In order to present differentiated products, high technology machineries are required that are generally out of the budget to the new entrants (Enz, 2009). Moreover, if the new entrants fail to offer, high quality products, then the customers may not prefer these products and their market share and profitability may not be increased (Ma, 2014). However, due to presence of these barriers, the rate of new entrance is low and this act as one of the strengths for the Kraft food group that offers a high impact on growing market share of the company. Rivalry: the extent of competitive rivalry among the existing players of food industry is extremely high (Kotler, 2008). However, in order to mitigate such rivalry, most of the existing players such as General Mills and Nestle always try to offer high attention over its research and development department to introduce new products frequently. This might prove effective for the existing players of food industry to amplify its demand and position in the market (Jones & George, 2004). However, because of high attention over research department, both of these organizations became successful in presented wide range of differentiated products as per customer preference and it acts as weakness for the Kraft Food Group in this age. Therefore, in order to mitigate such weakness, the Kraft Food Group reduced the use of artificial colors and flavors within its products so as to enhance its natural taste. This strategy helped the organization to improve the demand of its target customers (Hansen, 2013). Substitutes: the rate of substitute products within the industry of food is extremely high so as to improve the brand value and position in the market among others. However, this factor acts as one of the greatest weakness for the Kraft Food Group, as the rate of switch over costs of the customers towards other brands is extremely high (Ewing, 2003). Therefore, in order to resolve such a risk, the Kraft Food Group introduced numerous new products such as ritz, velveeta, oreo and many others. However, introduction of such new flavored products increased the demand and preference of the customers that helps the company to retain its existing customer base and attract potential new customers towards wide varieties of products (Kraft Food Group, 2014). Bargaining Power of Customers: the bargaining power of the customers is very high in the segment of food, as most of them desire to attain value-added products at competitive cost. Therefore, this factor acts as one of the highest weakness of the Kraft Food Group, as customer is the prime requisite for any concern (Draft, 2009). Thus, the Kraft Food Group tried to mitigate the above mentioned weakness by offering highly nutritious food products with low calorie and fat percentage. However, introduction of such type of food products offered positive impacts over the customers and increased their loyalty over the brand (Thompson & Fuller, 2010). Bargaining Power of suppliers: the bargaining power of the suppliers is also very high in the food industry. So, most of the organizations fail to reduce their price ranges among other rival players and so they present themselves as premium brands. This factor offers moderate weakness over the demand and competitiveness of the Kraft Food Group, as it comprised of high brand equity in the market. Therefore in order to retain the agreements with such branded organization, maximum extent of the suppliers try to offer the products at moderate price that proved extremely effective for the organization (Trienekens & Omta, 2002). PEST Analysis Political Environment: Craft Food needs to offer high attention over the rules and guidelines introduced by Food Standard Agency. If the guidelines are not followed by the organizations, then it cannot continue business operation. However, such factors acts as offers lowest weakness business operations of the Kraft Food Group, as it always tried to offer high quality of ingredients within its products. This enhanced the demand and attractiveness of the product lines of the organization in this aggressive market among many other existing contenders (Food Standard Agency, 2011). Economic Environment: due to economic crisis, the rate of per capita income has decreased. Therefore, the rate of consumption power and disposable income of the customers have also declined. This offers greatest threat over the brand that reduced its demand and market share significantly (Clarke & Chen, 2009). Therefore, in order to mitigate such risks, the organization tried to reduce the prices of its products so as to attract the customers. Socio-cultural Environment: due to change of taste and preferences of the customers of different cultures, the customers desire to purchase the products from online sites. This factor acts as one of the moderate weakness for the Kraft Food Group as it introduced online sites. This helped the Kraft Food Group to enhance its demand and profitability in the market among many other existing players such as Nestle and General Mills (Baines & Fill, 2014). Technological Environment: the introduction of electronic commerce offered lowest weakness over the productivity and profitability of the Kraft Food Group, as it implemented online selling of products. However, due to the implementation of e-commerce, customers from far regions might easily access the site at the time of purchasing their preferred products and this has retain its increasing revenue trend and increasing market share to a significant extent over the last few years (Boone & Kurtz, 2012). Overall Impressions Concerning the Companys Environment After analyzing all the above mentioned factors of PEST and Porter’s five forces, it might be evaluated that the environment of the Kraft Food Group is extremely competitive. Therefore, the organization need to offer high attention over the preferences and tastes of the customers and invent varied types of new product ranges (Mclvor, 2005). Then, it might improve its position and brand value in the market that may amplify its reliability and loyalty among many other rival players. Conclusion From the above analysis of impact of business environmental factors and extent of market competitiveness it can be concluded that, introduction of wide ranges of value added quality food products might prove worthy for the Kraft Food Group to amplify its brand value and reliability in the market. Moreover, the company needs to focus on its current pricing strategies which might needs to be revised based on current competitive market and focus on discounted pricing to compete with the new and small firms. This might prove effective for the organization to increase its customer base and revenue. References Baines, P. & Fill, C. (2014). Marketing 3E P. Oxford: OUP. Boone, L. & Kurtz, D. (2013). Contemporary Marketing. London: Springer. Clarke, A. & Chen, W. (2009). International Hospitality Management. New York: Cengage Learning. Draft, R. (2011). Management, 2011. USA: Tata Mcgraw-hill education. Enz, Cathy, A. (2009). Hospitality Strategic Management: Concepts and Cases. London: Sage. Ewing, P, K. (2003). Competition Rules for the 21st Century: Principles from Americas Experience. London: Sage. Food Standard Agency. (2014). Food Guidance Regulations. Retrieved from . Hansen, O. H. (2013). Food Economics: Industry and Markets. USA: Tata Mcgraw-hill education. Jones, R, G. & George, M. J. (2004). Contemporary Management, 2004. USA: Tata Mcgraw-hill education. Kotler, P. (2008). Principles of Marketing, 2008. London: Oxford. Kraft Food Group. (2014). Products and Brands. Retrieved from . Ma, T. (2014). Professional Marketing and Advertising Essays and Assignments. London: Sage. Mclvor, R. (2005). The Outsourcing Process: Strategies for Evaluation and Management. USA: Cambridge University Press. Thompson, N. & Fuller, C. B. (2010). Basic Strategy in Context: European text and cases, 2010. London: Sage. Trienekens, J. H. & Omta, F. W. S. (2002). Paradoxes in Food Chains and Networks: Proceedings of the Fifth International Conference on Chain and Network Management in Agribusiness and the Food Industry. New York: Cengage Learning. Read More