Prepared By: Aaron Haberern Leonard Kendall Michael Linehan Eddie Malecki Toni Nowak Ethan Rand Lawrence Wooten
Oct 24, 2014
Prepared By:Aaron HaberernLeonard KendallMichael Linehan
Eddie MaleckiToni NowakEthan 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 Page 2
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 world’s 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 Kraft’s 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 Nestlé worldwide.
In 1909, J.L. Kraft & Brothers is incorporated and extensive public relations begin. Using
innovative marketing, advertisements were placed on Chicago’s 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
Kraft Foods Case Report Page 3
opportunity to make the women’s 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 Kraft’s 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.
Kraft Foods Case Report Page 4
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 Kraft’s 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 Kraft’s 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.
Kraft Foods Case Report Page 5
Mission StatementActual
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 21st 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 future-delicious.
As a group we felt that Kraft’s mission statement was fun but lacked some of the components
discussed in our study of strategic management. Their mission statement was inspiring but talked
Kraft Foods Case Report Page 6
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 company’s 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.
Kraft Foods Case Report Page 7
Kraft Foods Case Report Page 8
The External Factor Evaluation (EFE) Matrix
Key External FactorsWeight
Rating
Weighted Score
Opportunities
1. U.S. sales of organic food and beverage have increased from $1 billion (1990) to $26.7 billion (2009). 0.08 3 0.24
2. Food manufacturers have experienced increase sales due to a higher number of people dining out. 0.10 4 0.40
3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005). 0.06 4 0.244. Baked goods prices increased 10.7% compared to 2008. 0.03 1 0.035. Increased trends of flavor enhancer for bottled water. 0.13 4 0.526. Growing environmental consensus. 0.06 3 0.18
7. Increased demand for packaged and processed foods around the world due to change in lifestyles. 0.07 3 0.21
Threats 1. Increasing obesity rates in North America. 0.03 2 0.06
2. Due to a weak economy and increased competition, the food processing industry saw an employee reduction of7.5% in 2009. 0.04 1 0.04
3. Rising petroleum costs causing an increase in product and manufacturing costs for the food processing industry. 0.05 2 0.10
4. Difficult to differentiate product pricing between competitors in the food processing industry. 0.04 2 0.085. Customers switching to generic brands. 0.09 3 0.27
6. Increased intensity for market share in European as well as other markets. 0.07 3 0.21
7. Declining value of the dollar with increasing value of the Euro. 0.02 2 0.048. North American competition is now primarily focused on the food industry. 0.13 4 0.52
Total 1.00 3.14
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 Kraft’s 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 Kraft’s 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 wouldn’t have to make any major changes to product packaging or
manufacturing in order to change suppliers from wholesalers to restaurants. We rated this external
Kraft Foods Case Report Page 9
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 Kraft’s 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
Kraft Foods Case Report Page 10
factor for the food processing industry because of the high demand for convenience food. We rated
Kraft’s 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
Kraft Foods Case Report Page 11
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 Kraft’s 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 Kraft’s 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
you’re 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 Kraft’s 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
Kraft Foods Case Report Page 12
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.
Kraft Foods Case Report Page 13
Competitive Profile (CPM) Matrix
Critical Success Factor Weight
Rating Score Rating
Score Rating Score
1. Advertising 0.12 3 0.36 4 0.48 2 0.24
2. Financial Position0.10 3 0.30 4 0.40 2 0.20
3. Global Expansion0.09 3 0.27 4 0.36 2 0.18
4. Market Share0.10 3 0.30 3 0.30 2 0.20
5. Product Diversity 0.16 4 0.64 4 0.64 3 0.48
6. Consumer Demands 0.14 4 0.56 3 0.42 3 0.42
7. Customer Loyalty0.13 3 0.39 3 0.39 2 0.26
8. Product Safety0.16 2 0.32 3 0.48 3 0.48
Total 1 3.14 3.47 2.46
Kraft Foods Case Report Page 14
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 Nestlé who is considered the leader of the food processing industry.
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 Nestlé 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 Nestlé does a little more in their efforts. We see more diverse advertising by Nestlé, whether its
newspaper ads or commercials. Also their advertising is more eye catching and appealing to the public.
ConAgra received a 2 because they aren’t really on the same page regarding global aspect. Financial
position, we rated this based upon their net sales. Nestlé 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 wasn’t 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 don’t 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 aren’t focused on
going global at this time. Nestlé’s 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
Kraft Foods Case Report Page 15
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
doesn’t have any bottled water, but they have a flavor powder portfolio for water that leads the
industry. Nestlé 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. Nestlé 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 Nestlé a 3 and ConAgra a 2, reason being that everyone knows the
Kraft and Nestlé brands, everyone picks their favorite and they stick with those products. ConAgra on
the on the hand doesn’t 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 firm’s industry. The sum of all weighted score is equal to the total weighted score; final
Kraft Foods Case Report Page 16
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
company’s total weighted score higher than 2.5 is considered strong in competitive position. In this case
Kraft received a total weight of 3.14, Nestlé a weight of 3.47, and ConAgra a weight of 2.46. This
indicates that Nestlé is the premier company in this matrix, but Kraft still is a strong company in this
industry. With ConAgra’s weight being below the average 2.5 it is clear that they are considered weak in
this industry.
Kraft Foods Case Report Page 17
Kraft Foods Case Report Page 18
Major Weakness (rating =1)Minor Weakness (rating =2)Minor Strength (rating =3)Major Strength (rating =4)
The Internal Factor Evaluation (IFE) Matrix
Key Internal Factors Weight RatingWeighted Score
Strengths
1. Positive sales in all 5 operating segments; Snacks, Beverages, Cheese, Grocery, Convenient Meals. 0.06 4 0.242. High priority and standards on food safety. 0.06 3 0.183. Diverse range of brands and products. 0.08 4 0.324. Strong focus on R&D. 0.08 4 0.325. Sales increased by 2.9% in North American markets. 0.04 3 0.126. Strong reputation and perceived value among customers. 0.12 4 0.487. Organic food revenue increased by 2.3% in first quarter 2009 0.07 4 0.28
Weaknesses
1. Possibility of perceived weakness from female CEO in certain foreign markets. 0.02 2 0.042. Risk of contamination in agricultural products. 0.12 1 0.123. Sales drop 5.9% in second quarter 2009. 0.08 2 0.164. High amount of goodwill - over $27.5 billion. 0.07 1 0.07
5. $18.5 billion in long-term debt - increased 50% in 2008 from 2007. 0.07 1 0.076. Difficulty launching new brands. 0.09 1 0.097. Margins depend on commodity prices. 0.04 2 0.08
Total 1.00 2.57
Our team conducted an Internal Factor Evaluation Matrix in order to evaluate the major
strengths and weaknesses in Kraft’s 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 Kraft’s 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 Kraft’s
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 Kraft’s success.
The same weight was given to the next factor under strengths; Kraft’s 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 company’s success in this industry.
Kraft’s 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 Kraft’s strong focus on R&D as a major
strength and evaluated it as moderately high importance because of the company’s 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
company’s success because this sales increase was mostly due increased prices of 9.8% and money
saved from laying off 19,000 employees.
Kraft Foods Case Report Page 19
We determined Kraft’s strong reputation and perceived value among customers to be a major
strength and as one of the most important factors for Kraft’s 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 firm’s 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 Kraft’s
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 company’s success because contaminated products could hurt Kraft’s 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.
Kraft’s 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
Kraft Foods Case Report Page 20
new brands is an important factor to the success of Kraft because of who they are competing against;
ConAgra, Nestlé. 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. Kraft’s total weighted score
came out to be 2.57. This score tells us that Kraft’s internal position is not weak, but not strong either ,
just slightly above average.
Kraft Foods Case Report Page 21
Kraft Foods Case Report Page 22
Strengths-Weaknesses-Opportunities-Threats SWOT MatrixWeaknesses1. 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 WO Strategies1. U.S sales of organic food and beverages have increased from 1 billion (1990) to 26.7 billion (2009).
Use quality organic ingredients to reduce risk of contamination. (W2, O1) –Product Development & Related Diversification
2. Food manufacturers have experienced increased sales to restaurants due to a higher number of people dining out.
Target new brands to restaurants instead of households.(W6, O2) – Market Penetration
3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005).
Inform foreign markets of women in upper management positions. (W1, O3) – Market Development
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 WT Strategies1. High obesity rates in North America. Maintain advertising to remind our customers of our high quality
products (W6, T5)- Market Penetration2. Due to a weak economy and increased competition, the food processing industry saw an employee reduction of 7.5% in 2009.
Divest from high intensity European markets to focus more in North America. (W3, W5, T8, T6)- Retrenchment
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.
Strengths-Weaknesses-Opportunities-Threats SWOT Matrix
Strengths1.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 SO Strategies
1. U.S sales of organic food and beverages have increased from 1 billion (1990) to 26.7 billion (2009).
Create new organic products to add to existing product lines.(S7, O1)-Product Development
2. Food manufacturers have experienced increased sales to restaurants due to a higher number of people dining out.
Use customer loyalty and diverse range of products to increase sales in restaurant industry.(S6,S3,O2)- Market Penetration
3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005).
Use diverse brands to market processed food to global markets.
(S4,S3, O7) – Product Development ,Market penetration & Development
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. ST Strategies
Threats Use R&D capabilities to develop new healthier food options due to increasing obesity rates. (S4, T1) – Product Development
1. Increasing obesity rates in North America. 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 competition, the food processing industry saw an employee reduction of 7.5% in 2009.
Continue marketing efforts in North America with a heavy emphasis on retaining loyal customers. (S5, S6, T8) – Market Penetration
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.
Kraft Foods Case Report Page 23
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 weakness-
opportunity 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.
Kraft Foods Case Report Page 24
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 don’t
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.
Kraft Foods Case Report Page 25
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
Kraft Foods Case Report Page 26
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.
Kraft Foods Case Report Page 27
Strategic Position and Action Evaluation Space Matrix
FINANCIAL POSITION (FP)Factors Rating
Revenues increased 16.8% to $42.2 billion 4Earnings increased 12% to 2.9 billion 3Total L+SE+ Assets decreased 7.5% to $6.3 billion 3Gross profit margin of 34.1 compared to the industry average of 31.1 4Current ratio of 1.1 2 TOTALS 16
INDUSTRY POSITION (IP)Factors Rating
Growth potential 5Ease of market entry 4Profit potential 4Financial stability 3Resource utilization 3
TOTALS 19 STABILITY POSITION (SP)Factors Rating
Competitive pressure -4
Barriers to entry -4Unemployment -5Technology changes -2Price range of competitors products -4 TOTALS -19
COMPETETIVE POSITION (CP)Factors Rating
Customer loyalty -3Product quality -3Market share -2Technological knowledge -4Competition -5
TOTALS -17
Kraft Foods Case Report Page 28
ConclusionsSP Average: -19/5= -3.8 IP Average: 19/5= 3.8CP 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
Kraft Foods Case Report Page 29
AGGRESSIVECONSERVATIVE
DEFENSIVE COMPETITIVE-Backward, forward, horizontal
integration-Market penetration
-Market development-Product development
CP IP
SP
FP
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 organization’s 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 wasn’t
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 Kraft’s margin was larger than the industry average it still wasn’t
as good as it could be compared to its competitors like Nestlé. 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
Kraft Foods Case Report Page 30
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 isn’t very easy to get into,
and other than Nestlé, 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 Nestlé
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 aren’t 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 Kraft’s 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
Nestlé 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.
Kraft Foods Case Report Page 31
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, Nestlé, 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 Nestlé.
Kraft Foods Case Report Page 32
Boston Consulting Group BCG Matrix Domestic Market Share
Kraft Foods Case Report Page 33
+20
0
-20
1.0 .50 0.0
Backward Integration Forward Integration Horizontal Integration Market Penetration Market Development Product Development
Relative Market Share Position in the Industry
Indu
stry
Sal
es G
row
th R
ate
(Per
cent
age)
0.70, 6.41%
DivisionRevenue (millions)
Percent Revenues
Profit (millions)
Percent Profit
Relative Market Share
Industry Growth Rate (%)
Company $ 42,201 100% $ 2,901 100% 0.70 6.41%
Boston Consulting Group BCG Matrix Global Market Share
Kraft Foods Case Report Page 34
+20
0
-20
1.0 .50 0.0
Market Penetration Market Development Product Development Divestiture
Relative Market Share Position in the Industry
Indu
stry
Sal
es G
row
th R
ate
(Per
cent
age)
0.39, 6.41%
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 it’s 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 it’s less than
half. The other factor of the BCG; industry sales growth, is considered high when it’s 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.
Kraft Foods Case Report Page 35
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 doesn’t 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 Kraft’s 10-k annual statement for 2009, that they don’t 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 Kraft’s
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 Kraft’s relative market share.
This was done by comparing Kraft’s total revenue to the revenues of their largest competitor. This would
mean that we would be comparing Kraft’s revenue with Nestlé’s revenues, seeing as they are by sales
volume their largest competitor. To find Nestlé’s 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
Franc’s to U.S. dollars using 12/31/2009 conversion rates, Kraft’s relative market share compared to
Nestlé came to be 0.39. (($109,908 x .96586= $106,155) ($42,201/$106,155 = .39)) This put Kraft in the
Kraft Foods Case Report Page 36
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 Nestlé has large control on market share. This would
mean Kraft’s 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 Nestlé was unfair for their portrayal
in BCG matrix. That being said we decided to develop two BCG models, one for Kraft’s 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 Kraft’s 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 it’s a snapshot of an
organization a particular point in time. Finally, there are other important variable we found besides
Kraft Foods Case Report Page 37
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.
Kraft Foods Case Report Page 38
Internal-External I/E Matrix
Kraft Foods Case Report Page 39
4.0
3.0
2.0
1.0
4.0 3.0 2.0 1.0
IFE Total Weighted Scores
Grow and Build• Forward, Backward, or
Horizontal Integration• Market Penetration• Market Development• Product Development
2.57, 3.14
Strong3.0 to 4.0
Average2.0 to 2.99
Weak1.0 to 1.99
High3.0 to 4.0
Medium2.0 to 2.99
Low 1.0 to 1.99
EFE
Tota
l Wei
ghte
d Sc
ores
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 Oreo’s, 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
Kraft Foods Case Report Page 40
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.
Kraft Foods Case Report Page 41
Grand Strategy GSM Matrix
Kraft Foods Case Report Page 42
Rapid Market Growth
Strong Competitive
Position
Slow Market Growth
Weak Competitive
Position
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 Kraft’s 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.
Kraft Foods Case Report Page 43
Data Collection Matrix
Kraft Foods Case Report Page 44
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 Nestlé, 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.
Kraft Foods Case Report Page 45
Quantitative Strategic Planning QSPM Matrix STRATEGIC ALTERNATIVES
1 2
Market Penetration Product DevelopmentUse customer loyalty and diverse range of products
to increase sales to restaurants.Create new organic products to add
to existing product lines.
Key Factors Weight AS TAS AS TAS
Opportunities 1. U.S. sales of organic food and beverage have increased from $1 billion (1990) to $26.7 billion (2009). 0.08 1 0.08 4 0.322. Food manufactures have experienced an increase in sales due to a higher number of people dining out. 0.10 4 0.4 2 0.2
3. Women are becoming more common in upper management (11.2% in 1995 to 16.4% in 2005). 0.06 ― ―
4. Baked goods prices increased 10.7% compared to 2008. 0.03 ― ―
5. Increased trends of flavor enhancer for bottled water . 0.13 ― ― 6. Growing environmental consensus. 0.06 1 0.06 4 0.247. Increased demand for packaged and processed foods around the world due to change in lifestyles . 0.07 1 0.07 4 0.28
Threats 1. Increasing obesity rates in North America. 0.03 1 0.03 4 0.122. Due to a weak economy and increased competition, the food processing industry saw a work force reduction on average of 7.5% in 2009. 0.04 ― ― 3. Rising costs of petroleum cause an increase in cost for food companies. 0.05 2 0.1 1 0.054. Difficult to differentiate product pricing between competitors in the food processing industry. 0.04 ― ― 5. Customers switching to generic brands. 0.09 2 0.18 1 0.09
6. Increased intensity between competitors in European as well as other Markets. 0.07 ― ― 7. North American competition is now primarily focused on the food Industry. 0.13 3 0.39 4 0.52
8. Declining value of the dollar with an increasing value of the Euro. 0.02 ― ―
Strengths 1. Positive sales growth and operating effectively in all 5 operating segments; Snacks, Beverages, Cheese, Grocery, Convenient Meals. 0.06 2 0.12 3 0.18
2. High priority and standards on food safety. 0.06 ― ― 3. Diverse range of brands and products. 0.08 2 0.16 4 0.32
4. Strong focus on R&D. 0.08 ― ― 5. Sales increased by 2.9% in North American markets. 0.04 2 0.08 4 0.166. Strong reputation and perceived value among customers. 0.12 2 0.24 3 0.367. Organic revenue increased by 2.3% in first quarter 2009. 0.07 1 0.07 4 0.28
Weaknesses
1. Possibility of perceived weakness from female CEO in certain foreign markets. 0.02 ― ―
2. Risk of contamination in source products. 0.12 ― ― 3. Sales drop 5.9% in second quarter 2009. 0.08 2 0.16 3 0.24
4. High amount of goodwill - over $27.5 billion. 0.07 ― ― 5. $18.5 billion in long-term debt - increased about 50% in 2008 from 2007. 0.07 ― ― 6. Difficulty launching new brands. 0.09 1 0.09 4 0.36
7. Margins depend on commodity prices. 0.04 ― ―
Kraft Foods Case Report Page 46
Total 2.23 3.72
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 factor’s 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 Kraft’s 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.
Kraft Foods Case Report Page 47
A major threat in Kraft’s 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 Kraft’s internal strengths that can be capitalized on by creating new organic products is
the company’s 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 Kraft’s 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 Kraft’s organic foods.
Creating new organic products to add to the product line would be the best strategy to implement to
improve on Kraft’s internal weaknesses. One of the company’s 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.
Kraft Foods Case Report Page 48
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 company’s 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 weren’t, 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.
Kraft Foods Case Report Page 49
Epilogue
Community Involvement
An ongoing commitment of Kraft’s 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 world’s 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.
Kraft Foods Case Report Page 50
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 wasn’t 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, Kraft’s 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
wasn’t 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 Kraft’s new European Biscuit Research and Development Centre. This is a year after Kraft
had acquired the British company Cadbury. Kraft’s 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.
Kraft Foods Case Report Page 51
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 | Nestlé 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.
Kraft Foods Case Report Page 52