Kraft Foods: Strategic Business Plan

1977 words (8 pages) Essay in Marketing

22/05/17 Marketing Reference this

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Introduction

This business report aims to discuss an example global organization, wherein the Kraft Foods Company (KFC) was used here. Topics were discussed on responses on the 2009 challenge of an external market assessment as an aspect of organization management and the evaluation of the SWOT analysis technique as an existing business strategy, consumer sector data and market share of revenues.

Its chairman and CEO, Irene Rosenfeld, said:

“We’ve had a very solid start to the year, and we’re on track to deliver our 2009 commitments. Our business momentum remains strong despite a challenging consumer environment. We are intensely focused on investing our cost savings to build our core brands, improve our product mix and drive superior retail execution. This will further enhance our profit margins and improve market shares as the year unfolds.”

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Being an already flourishing food maker of the industry, KFC still aims deliver its commitments in full blast, with a head strong business momentum, using business strategies on investing cost savings to be able to continue making its set of core brands, enhance its product mix and maintain a world wide reputation in excellence as a retail manufacturer. It also ensures that its investments adds profit margins and instigate productive market shares in the next years to come with a timely full-year tax rate. Lastly, KFC has confidence in achieving its goals with a very good net revenue growth of approximately. Such performance never fails to frustrate us and other competitors as well in the food industry.

Literature Review

1. Kraft Foods Company Background

Kraft Foods Company (KFC) currently produces delicious foods across 150 countries. It has 103,000 employees in hand. Product brands ranges from American brand icons like Kraft cheeses, dinners and dressings, Maxwell House coffees and Oscar Mayer meats, to global powerhouse brands like Oreo and LU biscuits, Philadelphia cream cheeses, Jacobs and Carte Noire coffees, Tang powdered beverages and Milka, Côte d’Or, Lacta and Toblerone chocolates. Now, it is the world’s second largest food company in generating annual revenues of $42 billion. Also, the company is an affiliation of the Dow Jones Industrial Average, Standard & Poor’s 500, the Dow Jones Sustainability Index and the Ethibel Sustainability Index (Kraft Foods Company, 2009.)

Kraft was founded in 1903 by James L. Kraft, with starting only as a cheese delivery service. It was transferred to Kraft’s brothers Charles, Fred, John, and Norman, during its down times. They named it incorporated as J.L. Kraft & Brothers in 1909. It then again changed the name to Kraft Cheese Co. back in 1924. With a follow suit trend in per se, there were turn abouts of Kraft Foods Co. in 1945, Kraftco Corporation in 1969, and Kraft Inc. in 1976. It also merged with Dart Industries in 1980 and again change the name to Dart & Kraft, but got forgotten in 1986, where it is again Kraft Inc. From then, it was bought by Philip Morris (now is Altria) in 1988. It also absorbed competitors General Foods and Nabisco. Finally in 2007, Altria managed Kraft Foods. During its long business run in the industry, a couple of celebrity endorsements were done to promote its products. There were Bill Cosby (a comedian), Michelle Kwan (a champion figure skater), Lindsay Lohan (Hollywood actress) and Joe Montana (a football star) (NNDB, 2009.)

2. The Business Vision and Mission

KFC slogan is “Make today delicious – That’s our higher purpose. At Kraft Foods, delicious is our difference.” Its products are trusted during “That first cup of coffee in the morning. A tasty low-fat snack. A nourishing meal on a budget. An indulgent treat.” These are KFC’s vision and mission (Kraft Foods Company, 2009.) Company objectives revolves around perspectives rewriting the organization for growth, reframe categories, exploit our sales capabilities, drive down costs without compromising quality and strategies growth. With goal of achieving the new Kraft = growth (KFC, 2009.)

It aims to meet responsibilities as a public company and promote that being a global citizen is the right thing to do and what is right for its business. They transforming the brands that consumers have lived with for years into new brands they will love.

Its corporate responsibility indexes are the Dow Jones Industrial Average, Dow Jones Sustainability Index and 2006-2008 Ethibel Sustainability Index. Last September 12, 2008, it started the mission program “The Lunchables Team and First Book Launch the Million Page Mission and Help Children Receive Much-Needed Books” (KFC, 2009.)

Discussion

The External Market Assessment

KFC runs under the food industry, with a stock market ticker of NYSE:KFT. Its headquarters is located at Northfield, IL (NNDB, 2009.) Finances of KFC, as of 2008, are (in millions, except per share data) Net revenues $37,241 8.4%, Operating income 4,331 (4.2%), Net earnings 2,590 (15.4%) and Diluted earnings per share 1.62 (12.4%) (KFC, 2009.)

Its external market share now is a percentage of more than 99% of U.S. households. The international market sells its leading brands, which are almost all of KFC products. It has 9 brands with revenues greater than $1 billion and 50+ additional brands garner revenues beyond $100 million. To this, about an exceeding number from 40 of KFC brands have an age life of 100+ years old. The billion dollar brands include: Kraft, Jacobs, LU, Maxwell House, Milka, Nabisco and its Oreo brand, Philadelphia, and Oscar Mayer With an estimate figure of 103,000 employees worldwide, it has 180+ manufacturing and processing facilities across countries. With the consumer statistics of millions times a day, computed in an account of 150+ countries, these persons eat their favorite Kraft brands. It is also a member of the Dow Jones Sustainability Index. The figure 1 below is the market share of revenues in each type of KFC Brands as of 2007 (KFC, 2009.)

Figure 1.

KFC Market Share of Revenues 2007

(KFC, 2009)

Existing Business Strategy

KFC’s follows SWOT analysis technique for its existing business strategy. To start with Strategy is the practice of settling on placing the organization in its competitive environment righty, with the goal to achieve and sustain competitive advantage as well as profitably. It is the “onion skin” approach in business, wherein each layer of skin must be “peeled off” and studied on prior to the core Strategic Business Unit (SBU) element is arrived at (Elkin, 1998.)

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The SWOT analysis is an extensively used philosophy framework for classifying an organizations strengths, weaknesses, opportunities and threats. SWOT entitles key factors to be apparently documented as a high level summary of a business (or personal) circumstance. Defining it is a summary which is simple but powerful; its system is generally used by consultants to certificate the key factors that should derived from the examination of a particular project or business. Moreover, SWOT allows an investigation to be conducted on the whole perspective view of internal as well as external conditions of a business and the plans in which it is surging on, from the means of knowing its current Strengths and Weaknesses. An added aspect is the allowed ability of a judgment on external business environment, which can greatly influence the performance. SWOT technique aids in putting in to comprehensible explanations of strategic choices, in order to have clear executive decisions that are to be assessed and identified. Lastly, it compares existing and potential future traits of the organization and supports evaluation of the consequences from alternative actions (Elkin, 1998.)

Recommendations

Expert’s Advise

During the press release of Kraft Foods Q1 2009 Earnings Report in May 5, 2009. Irene Rosenfeld, its chairman and CEO, said:

“We’ve had a very solid start to the year, and we’re on track to deliver our 2009 commitments. Our business momentum remains strong despite a challenging consumer environment. We are intensely focused on investing our cost savings to build our core brands, improve our product mix and drive superior retail execution. This will further enhance our profit margins and improve market shares as the year unfolds” (KFC, 2009.)

She further advised the KFC group on a solid drive in gaining heightened profits from operations. In the previous year, there was a drive for cost-driven pricing actions, which yielded organic net revenue growth and an exceeding expectation of a better-than-expected volume/mix number of sales. She also advised that the business segment’s drive for operating gains across the globe should be focused on operating income growth, margin expansion and higher earnings per share (KFC, 2009.)

This years forward-looking statements are reaffirmed 2009 GAAP EPS guidance; that KFC is on track to deliver 2009 commitments; that business momentum will be strong; that it is greatly focused on investing cost savings to formulate core brands, enhance product mix and execute excellent retail execution; that the investments adds profit margins and induce fruitful market shares as the year unfolds; timely full-year tax rate; and gain confidence in achieving 2009 organic net revenue growth of approximately 3 percent (KFC, 2009.)

Implications

It is advisable to used the environmental mapping as a new business strategic plan as an improvement from KFC’s current SWOT analysis technique. It is a kind of technique which is aimed to define the key characteristics of the environment in relation from where the business operates. It presents the `backcloth’ formula that will make visible the future strategies and plans. Its model consists of four areas of focus. Advised action under this kind of strategy is to separately map the varied environments where the diverse countries of the company operate.

How should KFC apply environmental mapping into their company business process? Necessary information and records should be based from the senior management of the business from their own accounts knowledge and experience. During cases this is not possible, external knowledge should be consulted from sources to supplement the present management needs. The mapping defines general pressures and conflicts which encircle the industry wherein the business operates, main conditions of environmental group, and matters that are prevailing and are plausible to bring to bear the most difficulty or authority on the upcoming direction and prospects of KFC. This is normally accomplished by using H/M/L (High/Medium/Low) tagging of every factor (Elkin, 1998). In writing and formulating an environmental mapping for KFC, these questions should be asked and answered: “What are the characteristics of the environment(s) in which the business operates?, How are the key factors changing? and What will be the impact on future strategic choices?”

Conclusion

In conclusion, Kraft Foods Company (KFC) has shown exemplary performance in the year 2009 being an example global organization. Its external market assessment has a gradual uprising line, which basing from the theories of organization management and the evaluation of its SWOT analysis technique proves that KFC uses an effective existing business strategy, generates high consumer sector data and earns more market share of revenues than any brands in the market.

Basing on the consumer sector data and market share of revenues feedback on the current performances indicators of KFC, there is a definite positive satisfaction gained from its range of products. With patterns from a strategic business plan, it is able to handle functions to promote their views, handle communications and even handle a global environmental concern.

It is very sensible to use the environmental mapping as a business growth from KFC’s usual technique of using a SWOT analysis. Not only does it endow consumers with healthy products, it is also a new strategic business plan that shows mature key characteristics of an organizational awareness for the environment for the present and future. This way in improving business performance can also determine general pressures and conflicts to deal with aside from catering to a global concern that allows main conditions of environmental group to work together with the present matters on the continued success of KFC.

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