Organizational structures have a direct impact on how effectively companies may operate within their industry. Kraft Heinz Company (KHC) operates under a divisional organizational structure, which is an organizational form where products, projects, or product markets are grouped internally. In KHC's case, product markets drive the divisional organizational structure.
The CEO oversees functional departments for domestic operations, some of which include Foodservice; Operations; HR, Performance & IT; Corporate & Government; and US Commercial. The CEO also oversees divisions for Latin America, Canada, Europe, and AMEA (Asia, the Middle East, and Africa). Each domestic department is broken down further into more specific areas. For example, the US Commercial department oversees Kraft Foods and Oscar Mayer, Beverages and Snack Nuts, US Meals and Sauces, US Sales, as well as US Meat and Dairy to name a few. By structuring the organization based on geographic location, Kraft Heinz Company may obtain competitive advantages through their in depth knowledge of each geographic business segment as they are better equipped to provide products tailored to cultural preferences. Kraft Heinz Company is also able to respond quickly to environmental changes.
Additional advantages the divisional structure provides KHC include the ability to increase/maintain strategic and operational control, allowing corporate-level executives to address strategic issues as they arise. With a central decision maker on the top, this serves as a competitive advantage in that there is no confusion on who has authority and decisions can be made in a more timely manner. Additionally, the divisional structure minimizes problems associated with sharing resources across functional areas and facilitates the development of general managers. For example, the divisional structure requires multiple controllers and corporate managers to oversee both functional areas and geographic reasons. As a result, there would be a broader pool of qualified applicants should an upper level executive position open up - a competitive advantage for the company.
In short, KHC is the fifth largest food and beverage company in the world and so it is no surprise the company is present in multiple geographic areas. Combined with a strong domestic presence, a divisional organizational structure is the most logical and efficient structure for operational and decision making purposes.
Monday, April 24, 2017
Wednesday, April 19, 2017
Ch. 9: Strategic Control and Corporate Governance
Chapter 9 covered two main concepts: strategic control and corporate governance. By analyzing Kraft Heinz Company (KHC), examples of how each were implemented and how the company obtained competitive advantages through them can be found.
Strategic control is the process of monitoring and correcting a firm's strategy and performance. One way to do this is to focus on organizational culture. Organizational culture is a system of shared values and beliefs that shape a company's people, organizational structure, and control systems to produce behavioral norms. A variety of studies have proven that culture has a powerful influence on how an organization performs. To capitalize on corporate culture's effectiveness, KHC emphasizes a 'culture of ownership.' According to the company's website, "Our values of Ownership and Meritocracy are two exciting elements of the Kraft Heinz culture. They create an environment of empowerment unique to our company and provide high-potential employees with unlimited growth opportunity." By following through with this shared ownership attitude, KHC will be able to retain employees who feel valued, which will ultimately prove to be a competitive advantage.
Corporate governance is the relationship among various participants in determining the direction and performance of corporations. The primary participants are the shareholders, management, and the board of directors. Having a CEO and a chairman of the board who are independent of each other can serve as a competitive advantage as they will both be able to positively serve the corporation and keep each other's actions in check. Having separate people in separate positions such as chairman and CEO is also a competitive advantage because all company stakeholders can be further assured no fraud or corruption is taking place. The current chairman, Mr. Alexandre Behring, was the previous chairman for Heinz company, prior to KHC's merger. KHC's current CEO is Bernardo Hees, prior to the merger of Kraft Foods Group and the H.J. Heinz Company in 2015, Mr. Hees occupied H.J. Heinz Company's CEO position since 2013. Although KHC may derive slight competitive advantages from having separate individuals in the CEO and board chairman positions, both Hees and Behring have similar work histories, and thus it is possible they are well known acquaintances, or even good friends. Although their expertise in the industry may also serve as a competitive advantage to the company, investors should also acknowledge their relationship may not be entirely independent.
Strategic control is the process of monitoring and correcting a firm's strategy and performance. One way to do this is to focus on organizational culture. Organizational culture is a system of shared values and beliefs that shape a company's people, organizational structure, and control systems to produce behavioral norms. A variety of studies have proven that culture has a powerful influence on how an organization performs. To capitalize on corporate culture's effectiveness, KHC emphasizes a 'culture of ownership.' According to the company's website, "Our values of Ownership and Meritocracy are two exciting elements of the Kraft Heinz culture. They create an environment of empowerment unique to our company and provide high-potential employees with unlimited growth opportunity." By following through with this shared ownership attitude, KHC will be able to retain employees who feel valued, which will ultimately prove to be a competitive advantage.
Corporate governance is the relationship among various participants in determining the direction and performance of corporations. The primary participants are the shareholders, management, and the board of directors. Having a CEO and a chairman of the board who are independent of each other can serve as a competitive advantage as they will both be able to positively serve the corporation and keep each other's actions in check. Having separate people in separate positions such as chairman and CEO is also a competitive advantage because all company stakeholders can be further assured no fraud or corruption is taking place. The current chairman, Mr. Alexandre Behring, was the previous chairman for Heinz company, prior to KHC's merger. KHC's current CEO is Bernardo Hees, prior to the merger of Kraft Foods Group and the H.J. Heinz Company in 2015, Mr. Hees occupied H.J. Heinz Company's CEO position since 2013. Although KHC may derive slight competitive advantages from having separate individuals in the CEO and board chairman positions, both Hees and Behring have similar work histories, and thus it is possible they are well known acquaintances, or even good friends. Although their expertise in the industry may also serve as a competitive advantage to the company, investors should also acknowledge their relationship may not be entirely independent.
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