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.