An international strategy is a strategy that involves business operations within multiple countries. Kraft-Heinz company's international strategies tend to center around mergers (historically, and today). Kraft and Heinz recently underwent a merger, with the primary reason being both companies wanted to expand into international territory.
Prior to the merger, Heinz had a global platform with 61% of the total sales coming
from international markets. Meanwhile, Kraft Foods generated
98% of its sales domestically. By merging, the two companies combined could sell their products in both international and domestic markets. By having a global presence and internationally expanding, both companies have thus also been able to be more competitive in regards to pricing and product offerings as well as lessen the risk they may face if the United States or another major country's economy went south (risk reduction).
Although the merger between Kraft and Heinz allowed both companies to expand their consumer base, the food conglomerate recently tried to acquire Unilever, which is a Dutch-British transnational consumer goods company that produces food, beverages, cleaning agents and personal care
products. Unilever denied KHC's initial offer, but an acceptance would have added Hellmann's mayonnaise and Ben &
Jerry's ice cream to their already strong product profile. Kraft-Heinz's goal is to become a global powerhouse in the food and beverage industry and it is evident the company's international strategy is to acquire other companies with product lines that could be incorporated into their own and who also already have a strong international presence.
Thursday, March 30, 2017
Friday, March 24, 2017
Ch. 6: Corporate-Level Strategies
Corporate-level strategies are strategies that focus on gaining long-term revenue, profits, and market value through managing operations in multiple businesses (diversification). Both Kraft Foods and Heinz made a smart move in diversifying their businesses in July of 2015 by merging. In the fiscal year prior to the merger, 61% of Heinz's total sales came from their international market, while Kraft Foods generated 98% of total sales domestically. The strategic decision to merge horizontally allowed for both companies to expand their market share simply through association with the other company. While both are in the packaged food industry, the two companies' primary markets differed and thus synergies and competitive advantages for both companies have been generated.
The Kraft-Heinz Company (KHC) merger also led to competitive advantages through corporate-level strategy by taking advantage of economies of scope. Economies of scope are cost savings from leveraging core competencies or sharing related activities among businesses in a corporation. According to an analysis of the merger completed and published by marketrealist.com, the company is consolidating their North American supply chain network, and also announced a cost-saving initiative in the form of the reduction in corporate headcount. By integrating their domestic supply chains and reducing general and administration expenses, significant cost savings will occur. Cost savings will also occur from shared manufacturing facilities, ingredients, and customer/retailer relationships. Revenue enhancement through increased sales will likely occur as customers recognize that both brands have solid and trustworthy reputations.
The Kraft-Heinz Company (KHC) merger also led to competitive advantages through corporate-level strategy by taking advantage of economies of scope. Economies of scope are cost savings from leveraging core competencies or sharing related activities among businesses in a corporation. According to an analysis of the merger completed and published by marketrealist.com, the company is consolidating their North American supply chain network, and also announced a cost-saving initiative in the form of the reduction in corporate headcount. By integrating their domestic supply chains and reducing general and administration expenses, significant cost savings will occur. Cost savings will also occur from shared manufacturing facilities, ingredients, and customer/retailer relationships. Revenue enhancement through increased sales will likely occur as customers recognize that both brands have solid and trustworthy reputations.
Saturday, March 11, 2017
Ch. 5: Business-Level Strategies
The Kraft-Heinz Company's business-level strategy is a hybrid, consisting of both cost-cutting and differentiation tactics. Within the food product industry there is a significant amount of competition, however Kraft Heinz Company (KHC) strives to provide customers with the best product and value for their dollar as well as with new and innovative flavors/varieties of products that can already be found on store shelves.
For example, at a major retailer such as Walmart, multiple brands of ketchup can be found. A 32 ounce bottle of Heinz Ketchup would cost a consumer around $2.88 (9 cents per ounce), whereas a bottle of Walmart's generic Great Value brand ketchup would cost a mere $2.92 for 64 ounces (4.6 cents per ounce). It is clear that even at a mass retailer such as Walmart, Kraft Heinz Company's products are not the cheapest option. Aligning with their company goal of providing customers with the best value for their dollar, Heinz ketchup is arguably tastier than its cheaper alternatives and also comes packaged in a bottle that is more user friendly. Complete with the 'upside down lid' to help consumers use every last drop, and a no drip valve to prevent messes, it is evident consumers are willing to pay a little more for convenient ketchup. Although Heinz Ketchup may be a few cents more expensive per ounce, their products are still reasonably priced and the average consumer can afford to purchase them, keeping them in the low-cost category. In addition, KHC offers more variety (differentiation) in their ketchups than their contenders. For example, KHC has recently introduced Heinz Organic, No Salt, and Reduced Sugar ketchups to appeal to health-conscious consumers as well as Jalepeno and Sriracha flavors to appeal to those who may be more adventurous.
A similar story can be told with Kraft Mac & Cheese. Consumers can purchase a 4 pack of Kraft Mac & Cheese personal cups for $3.50 (87.5 cents each), whereas a 6 pack of Great Value's version would cost consumers just $3.24 (54 cents each). Again, KHC is not the cheapest option on the shelves, but the company is able to justify the price increase by having a reliable brand name that is known for quality. To differentiate their product from the competition, KHC has also rolled out a variety of Mac & Cheese options, including Kraft Velveeta Shells & Cheese (KHC also owns the Velveeta brand), Kraft Velveeta Shells & Cheese with Bacon, and the traditional Kraft Mac & Cheese with troll noodles or spiral noodles, just to name a few.
Overall, Kraft Heinz Company's business level strategies are clearly a combination of cost-cutting and differentiation tactics. The merger between Kraft and Heinz generated synergies that allowed the company to produce products at cheaper prices, have more bargaining power with retailers, and also allowed for growth/differentiation in product varieties to appeal to a broader range of consumers. Going forward, KHC is striving for profitable sales growth and to achieve and maintain best-in-class margins. I believe continuing to adhere to a low-cost and differentiation business level strategy will help KHC reach their goals.
For example, at a major retailer such as Walmart, multiple brands of ketchup can be found. A 32 ounce bottle of Heinz Ketchup would cost a consumer around $2.88 (9 cents per ounce), whereas a bottle of Walmart's generic Great Value brand ketchup would cost a mere $2.92 for 64 ounces (4.6 cents per ounce). It is clear that even at a mass retailer such as Walmart, Kraft Heinz Company's products are not the cheapest option. Aligning with their company goal of providing customers with the best value for their dollar, Heinz ketchup is arguably tastier than its cheaper alternatives and also comes packaged in a bottle that is more user friendly. Complete with the 'upside down lid' to help consumers use every last drop, and a no drip valve to prevent messes, it is evident consumers are willing to pay a little more for convenient ketchup. Although Heinz Ketchup may be a few cents more expensive per ounce, their products are still reasonably priced and the average consumer can afford to purchase them, keeping them in the low-cost category. In addition, KHC offers more variety (differentiation) in their ketchups than their contenders. For example, KHC has recently introduced Heinz Organic, No Salt, and Reduced Sugar ketchups to appeal to health-conscious consumers as well as Jalepeno and Sriracha flavors to appeal to those who may be more adventurous.
A similar story can be told with Kraft Mac & Cheese. Consumers can purchase a 4 pack of Kraft Mac & Cheese personal cups for $3.50 (87.5 cents each), whereas a 6 pack of Great Value's version would cost consumers just $3.24 (54 cents each). Again, KHC is not the cheapest option on the shelves, but the company is able to justify the price increase by having a reliable brand name that is known for quality. To differentiate their product from the competition, KHC has also rolled out a variety of Mac & Cheese options, including Kraft Velveeta Shells & Cheese (KHC also owns the Velveeta brand), Kraft Velveeta Shells & Cheese with Bacon, and the traditional Kraft Mac & Cheese with troll noodles or spiral noodles, just to name a few.
Overall, Kraft Heinz Company's business level strategies are clearly a combination of cost-cutting and differentiation tactics. The merger between Kraft and Heinz generated synergies that allowed the company to produce products at cheaper prices, have more bargaining power with retailers, and also allowed for growth/differentiation in product varieties to appeal to a broader range of consumers. Going forward, KHC is striving for profitable sales growth and to achieve and maintain best-in-class margins. I believe continuing to adhere to a low-cost and differentiation business level strategy will help KHC reach their goals.
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