Free «Kraft Foods Inc. Strategic Choices» UK Essay Paper
Table of Contents
The global food industry is facing enormous market competition. Not surprisingly, companies devise unbelievable strategies and recipes for success. For more than 100 years, Kraft Foods Inc. enjoyed a remarkably stable position in the world of food products. Today, the company needs to reconsider its historical commitments in the light of recent global market changes. It is clear that differentiation remains the company's chief strategic focus. It is one of Porter's generic strategies that emphasize the importance of being positively different from the competitors. Kraft Foods Inc. makes considerable investments in the development of innovative, differentiated products, which open the door to conquering new international markets. Unfortunately, differentiation does have its limits, and the risks of product oversaturation should not be ignored. With the company's striving to differentiate itself into emerging markets, its mission to become the best North American company loses its relevance. Today, it is high time for Kraft Foods Inc. to review its benefits and costs, and cost leadership should become the next step on the company's way to sustained competitive advantage.
Kraft Foods Inc.: Differentiation as a Factor of Success
For years, differentiation has been the cornerstone of Kraft Foods Inc.'s movement to developing a sustained competitive advantage. Differentiation is one of Porter's generic strategies, whose purpose is to "distinguish a company and its products from its competitors by establishing characteristics for the company and its products which are perceived as both unique and desirable by customers" (Stonehouse, Campbell, Hamill & Purdie, 2007, p.177). Companies can achieve their differentiation goals in various ways, but mostly by developing a distinct brand identity, creating a unique and recognizable brand name, emphasizing quality packaging and after-sales service, or innovating continually to persuade the customer that the product is technically unique (Stonehouse et al., 2007). This is, actually, what Kraft Foods Inc. has been doing to preserve its competitive position in the North American and, later, global foods market – making customers recognize the quality and superiority of its products through branding and advertising (Stonehouse et al., 2007). Today, the company has not betrayed its differentiation mission and continues to emphasize the importance of brand familiarity and product superiority at a global scale.
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One of the central elements of the company's differentiation strategy is innovation. According to Goudreau (2013), Kraft Foods Inc. has developed a new global strategy, which turns innovation into its biggest strategic strength. Instead of launching numerous new products, the company has decided to focus on fewer but more productive innovative projects (Goudreau, 2013). As a result, it is possible to assume that the customer will see new products offered by Kraft Foods Inc. or face renewed product options from the foods market giant.
At the same time, innovation at Kraft Foods Inc. works through the considerable investments made to sustain the popularity of its brand image, while being sensitive to the needs of local customers. The advertising and marketing experiences with the legendary Oreo reveal the company's historical loyalty to differentiation and novelty. It is a well-known fact that, for years, Oreo had been unsuccessful in the Chinese market (Clements, Jain, Jose & Koellman, 2013). For some reason, Kraft Foods Inc. assumed that what had been successful in the North American market would be equally successful in China (Clements et al., 2013). It took a long time for the company to realize the difference between North American and Chinese food tastes. In the case of Oreo, differentiation came through "catering to local tastes: Kraft Foods Inc. also made a radical move by launching new Oreo products like Oreo Wafer Sticks, Oreo Wafer Rolls, Oreo Soft Cakes and Oreo Strawberry Crème" (Kwok, 2009). Simply put, at Kraft Foods Inc., differentiation exemplifies a unique combination of the global brand identity and sensitivity to local food tastes. As a result, customers perceive the products developed by Kraft Foods Inc. as more valuable than the products offered by its competitors.
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Today, it is possible to say that Kraft Foods Inc. emphasizes both quality and branding. Millions of customers around the globe know Kraft Foods Inc. for its commitment to quality. Now, the Kraft Foods brand greatly contributes to the attractiveness of the company's new products. However, nothing is eternal, and the world of food manufacturing constantly changes. Consequently, Kraft Foods Inc. should reconsider the relevance of its mission in the context of such changes and redesign its approaches to doing business globally, if it wants to succeed in the long run.
Differentiation and SWOT
It is obvious that the company is committed to the principles of differentiation. A brief review of Kraft Foods Inc.'s strengths and weaknesses suggests that the company seeks to differentiate itself from its competitors through brand recognition and advertising. As mentioned earlier, Kraft Foods Inc. invests considerable resources in product development and implementation (Clements et al., 2013; Kwok, 2009). The company diversifies the range of its products to make them more responsive to the needs of local customers (Clements et al., 2013; Goudreau, 2013). This commitment to product differentiation is justified by the low opportunities in the US's market, as well as the low costs of switching to competitors' products. Moreover, it reflects the extensive opportunities for emerging markets growth, coupled with the company's decision to invest in the development of new functional and healthy products (PricewaterHouseCoopers, 2009). Unfortunately, gaps between the company's threats and its differentiation strategy should not be ignored.
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Kraft Foods Inc.'s commitment to differentiation through brand loyalty and advertising is a matter of primary concern. On one hand, the growing costs of advertising and marketing make the company much more vulnerable to various sorts of external threats, including the emergence of new food manufacturers. On the other hand, Kraft Foods Inc. should realize that even the best brands require changes (Kumar, 2009). Successful brands usually start with a core proposition, which makes them positively distinct from competitors; with time, consumers’ tastes change, and the company must adjust its brand identity to the new market realities (Kumar, 2009). Companies that focus too much on their brands and fail to redefine their purpose will soon face an existentialist dilemma, when their identity no longer responds to the needs of market modernity. Such companies will have to invest more resources in brand choice and recognition. In addition, the fact that Kraft Foods Inc. keeps acquiring new companies leads to the loss of brand focus, and customers may feel confused about the availability of new products that are delivered under the Kraft Foods brand.
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Leveraging the Existing and Future Market Opportunities
In the current market conditions, Kraft Foods Inc. can pursue two distinct strategic ways. First, it can keep using the emerging market growth opportunities, by developing new products and rebranding the existing ones. The example of Oreo in the Chinese market confirms the effectiveness of differentiation strategies, when the most successful international products are redesigned to meet the specific needs of local consumers (Kwok, 2009). Such differentiation is possible through the development of productive relationships with local management teams and by localizing decision-making (Kwok, 2009). Additionally, the company can switch to developing new, functional and "green" products, as more consumers make healthy product choices and seek to improve and maintain their health (PricewaterHouseCoopers, 2009).
Second, given the cost implications of differentiation and the threat of product oversaturation in the market, Kraft Foods Inc. can leverage the existing market opportunities by focusing on cost leadership and cost containment. The negative experiences with marketing Oreo in China suggest that consumers in Asia and other emerging markets are particularly sensitive to the company's price strategies (Clements et al., 2013). This does not mean that Kraft Foods Inc. must become the lowest cost producer in the global food manufacturing industry (Stonehouse et al., 2007). Rather, the company should achieve a reasonable balance of affordable price and high brand recognition, which will enable it to compete with the existing and new competitors. As the number and variety of the company brands continue to grow, Kraft Foods Inc. may fail to achieve great economy of scales; therefore, and given the company's emphasis on innovations, it can invest in the latest production technologies to lower its operational costs and increase its productivity, thus lowering the costs of labor (Goudreau, 2013; Stonehouse et al., 2007).
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Kraft Foods Inc., Mission and the Global Market
In light of everything discovered in this paper, it is clear that the company's mission to be Number One in the American food market has already lost its relevance. The strength of the company's leadership and its sustained success in the United States and other North American countries cannot be denied. However, Kraft Foods Inc. has ceased being a purely North American company. It is a global foods market player with an ambition to conquer the emerging markets and food product niches. Kraft Foods Inc. enjoys steady growth in the Asian markets, increasing its global brand awareness and expanding its global distribution network (Clements et al., 2013). Therefore, the company must review its mission and values to make them suitable in the conditions of global competition. Its mission and vision statement should be universal and understandable for all customer groups, because brand awareness will continue to predetermine the company's sustained competitive advantage.
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Kraft Foods Inc. has always been devoted to its differentiation strategy. Based on Porter's generic strategies, differentiation emphasizes companies' and products' distinctiveness, mainly through the distinct and recognizable brand identity. For decades, Kraft Foods Inc. invested considerable resources in making its brand familiar around the world. However, nothing is eternal, and even the most recognizable brand is no exception to this rule. The analysis of the company's weaknesses and strengths suggests that the differentiation strategy does not always respond to the existing market realities. Maintaining brand identity is a costly endeavor, while the emerging markets require careful consideration of the company's price strategies. At present, Kraft Foods Inc. must switch to cost leadership, which is possible through investments in new production technologies and increased productivity. The company's mission to be the best North American company is no longer relevant, and Kraft Foods Inc. must devise a new slogan to meet the diverse needs of its consumers globally.
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