case analysis - 2009

CASE ANALYSIS - 2009NAMA NO MATRIKS

NORHAIRIZAM BIN ABDUL MANAP GA00685

AHMAD YUS SHAHRIL FEEZRIE BIN YAACOB

GA00447

SAHRA BINTI SANUSI GA00647

YULINDA BINTI YUSNEL GA00487

OUTLINE

CONCLUSION

STRATEGY IMPLEMENTATION

STRATEGY ANALYSIS AND CHOICE

INTERNAL ANALYSIS

EXTERNAL ANALYSIS

INTRODUCTION

INTRODUCTION

HISTORY

COMPANY BACKGROUND

MAIN ISSUE’S

1903: James

Kraft founder – sell cheese in

chicago

1914: available in town at US

1916: known as processed

cheese

1920: export product to Canada &

Europe

HISTORY

Largest food &

beverage company in North America

Mission : to be the best food & company

in North America

Product : beverage, cheese, refrigerated

meals & grocery categories

Well positioned in deliver steady, reliable growth

COMPANY BACKGROUND

MAIN ISSUE’S

Expected earning of

at least $1.93 per

share

Revenue declined 5.9%

KNAC sales were flat

International segment, net revenue in EU

decreased 17.4%

Financial – High Goodwill

and LTD

EXTERNAL ANALYSIS

PESTDEL ANALYSIS

PORTER’S FIVE FORCES

ANALYSIS

COMPETITIVE PROFILE

MATRIXEFE MATRIX

PESTDEL ANALYSIS

Political, Government, and Legal Forces• Food safety programs• Global warming

Economy Forces• Raising cost of petroleum• Consumer prices for baked food increased by 10.7%• Input cost of bakers have declined • US Market for packaged and processed food has seen

large profit in retail sales• Food cost climbing

Social, Cultural, Demographic, and Natural Environment Forces

• More people are dining out and food• Development of health food • Childhood obesity

Technological Forces

• Web site / Portal has undergone facelift

Competitors

• Competes with numbers of companies• Many consumer switching to store brand products

PESTDEL ANALYSIS – cont.

•Spending more researching consumer•Development of health food•Large profit in retail sales – U.S market

1. Barries to entry

•More people are dining out•Food safety program

2. Threat of substitutes

•Available in 150 countries•Jan 2009: consumer price for baked goods increased 10.7% due to rising costs of petroleum.•Demand in world wide increase due to lifestyle

3. Buyers

PORTER’S FIVE FORCES ANALYSIS

• Dec 2007 & 2008: workers at one’s Kraft

manufactures in Illinois turned up a batch fruits and nuts that were contaminated with salmonella

• The tainted nuts came from a California based supplier, more specifically from Setton Pitachio of Terra Bella,Inc

4. Bargaining power of suppliers

• 2nd largest food processing company behind Nestle (health , beauty and pet care products behind food)

• Kraft itself competing with generic product & retailer brands, wholesalers and cooperatives.

• Competitor : ConArga Food largest publicly in U.S

• Significant in commercial food products & nation’s leading specialty potato providers.

5. Rivalry among the

existing players

PORTER’S FIVE FORCES ANALYSIS-

cont

COMPETITORS PROFILE MATRIX

Kraft Foods Inc. ConAgra Foods

1. 2nd largest food processing company

1. Largest publicly held firm that Kraft Foods competes in the U.S. market.

2. Vision Statement “Helping people around the world eat and live better”.

2. Vision statement “ One company growing by nourishing lives and finding a better way today one bite at a time”.

3.Competing with generic products and retailer brands, wholesalers and cooperatives instead of packaged food companies.

3. Leading branded foods company and trusted name behind many leading brands such as Healthy Choice, Chef Boyardee etc.

4. Kraft Foods products more expensive due to U.S. dollar gains stregth overseas.

4.Their consumer brands are found in 97% of U.S. households and 26 ranked first or 2nd in their category.

COMPETITIVE PROFILE MATRIX – cont.

Critical Success Factor Weight Kraft ConAgra

Rating Score Rating Score

1. Advertising 0.25 3 0.75 2 0.5

2. Financial Position 0.1 3 0.3 2 0.2

3. Global Expansion 0.25 3 0.75 2 0.5

4. Market Share 0.1 3 0.3 2 0.2

5. Product Diversity 0.15 4 0.6 3 0.45

6. Consumer Demands 0.15 4 0.6 3 0.45

Total 1 3.3 2.3

KEY EXTERNAL FACTOR – EFE MATRIX

Key External Threats Weight Rating Weighted Score

Opportunities

1. US Market for packaged and processed food has seen large profit in retail sales 0.08 3 0.24

2. More people are dining out and food producers are devoting more attention to product designed for restaurants, vending machines and other foodservice provider

0.10 4 0.40

3. Development of health food 0.06 4 0.24

4. Web site / Portal as marketing medium 0.06 3 0.18

5. Input cost of bakers have declined 0.13 4 0.52

6. Food safety programs have been adopted recently as issues of chemical and bacterial contamination and new food-borne pathogens remain a public health concern

0.06 2 0.12

Total Opportunities 0.49 1.70

KEY EXTERNAL FACTOR – EFE MATRIX – cont.

Key External Threats Weight Rating Weighted Score

Threats 1. Competes with numbers of companies 0.13 4 0.52

2. Global warming 0.09 3 0.27

3. Raising cost of petroleum 0.07 3 0.21

4. Many consumer switching to store brand products 0.04 3 0.12

5. Consumer prices for baked food increased by 10.7% 0.05 2 0.10

6. Food cost climbing 0.06 2 0.12 7. Childhood obesity 0.05 2 0.10

Total Threats 0.51 1.44 Total 1 3.14

4 = the response is superior, 3 = the response is above average, 2 = the response is average, 1 = the response is poor

INTERNAL ANALYSIS

MISSION ANALYSIS

FUNCTIONAL ANALYSIS

IFE MATRIX

Vision Statement Helping people around the world eat and live better

Mission Statement Make Today Delicious

In order to fulfill this mission Kraft Foods Inc. focuses on consumers in everything that they do. The company also understands that actions speak louder than words, so at Kraft Foods: 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.

MISSION ANALYSIS

MISSION ANALYSIS – cont.

Mission Statement Make Today Delicious

In order to fulfill this mission Kraft Foods Inc. focuses on consumers in everything that they do(1). The company also understands that actions speak louder than words, so at Kraft Foods(2): We inspire trust(3). We keep it simple(3). We lead from the head and the heart(3). We are open and inclusive(4). We tell it like it is(4). We act like owners(5). We discuss. We decide. We deliver(6).

Components of a Mission Statement: 1.Customer2.Product of Service3.Philosophy4.Concern for Public Image5.Concern for Employees6.Concern of Survival, Growth & Profitability

1. Organizational Structure2. Operating Segments3. Financials4. Current Strategies

FUNCTIONAL ANALYSIS

Irene Rosenfeld Chaiman and CEODavid Brearton Exec. VP of Operations &

Business Services

Marc Firestone Exec. VP of Corp. & Legal Affairs

Michael Clarke Exec. VP and President Kraft Europe

Karen May Exec. VP of Global Human Resources

Sanjay Khosla Exec. VP of Global Human Resources

Richard Searer Exec. VP and President North America

Jean Spence Exec. VP of Research, Development & quality

Michael Osanloc Exec. VP of Strategy

Mary Best West Exec. VP and Chief Marketing Officer

FUNCTIONAL ANALYSIS – cont.

1. Organisational Structure


Biscuits, salted snacks

and chocolat

e confectionery

Coffee, packaged juice drinks,

and powdere

d beverag

es

Natural, process,

and cream

cheeses

Spoon able and pourable dressing

s, condiments, and desserts

Frozen pizza,

packaged

dinners, lunch

combinations, and

processed

meats

2. Operating Segments


Kraft Foods Inc. and SubsidiariesSummary of Financial Analysis

Financial Ratio 2008 2007 2006 Comment

Current Ratio 1.03 0.63 0.79 Satisfied

Quick Ratio 0.69 0.39 0.45 Satisfied

Cash Ratio 0.11 0.03 0.02 Satisfied

Debt Ratio 0.97 1.59 1.27 Satisfied

Inventory Turnover Ratio 7.56 5.87 6.09 Unsatisfied

Day's Sales in Inventory 40.69 52.50 42.46 Satisfied

Total Asset Turnover (x) 0.67 0.53 0.60 Satisfied

Fixed Asset Turnover (x) 4.26 3.35 3.43 Satisfied

Profit Margin (%) 6.87 7.17 9.20 Unsatisfied

Return on asset (ROA) (%) 4.60 3.81 5.51 Satisfied

Return on equity (ROE) (%) 13.07 9.49 10.72 Satisfied

Basic Earning per share (EPS) 1.95 1.64 1.86 Satisfied

4. Current Strategies


Had saved a total of $1.1 billion through

streamlined manufacturing and a

simplified organizational structure

The elimination of 19,000 positions

36 plants

KEY INTERNAL FACTOR – IFE MATRIX

Key Internal Threats Weight Rating Weighted Score

Strength 1. Organic revenue increased 2.3 percent 0.07 3 0.21

2. North American sales growth 2.9% - higher demand for its cereal 0.07 3 0.21

3. Commitment to develop new products (R&D) 0.08 4 0.32

4. Innovative advertising method 0.09 4 0.36

5. Kraft Foods Inc. manages over 100 different brand-name food products and tracks operating income to five specific consumer segments.

0.13 4 0.52

6. Company’s revenue increased to $42.2 billion 2008, while earnings increased to $2.9 billion 0.13 4 0.52

Total Strength 0.62 2.144 = major strength, 3 = minor strength

KEY INTERNAL FACTOR – IFE MATRIX – cont.

Key Internal Threats Weight Rating Weighted Score

Weakness 1. Risk of contamination in source products 0.03 2 0.06

2. High amounts of goodwill ($27.5 billion) 0.08 1 0.08

3. $18.5 billion in long term debt (increased by 50% during 2009) 0.07 2 0.14

4. Margins depend on commodity prices 0.04 2 0.08

5. Drop in sales in Quarter 2 in 2009 (5.9%) 0.09 1 0.09

Total Weakness 0.38 0.43 Total 1 2.57

2 = minor weakness, 1 = major weakness

STRATEGY ANALYSIS AND CHOICE

SWOT MATRIX

BCG MATRIX

SPACE MATRIX

GRAND STRATE

GY MATRIX

IE MATRIX

STRENGTH WEAKNESS

TABLE SWOT

MATRIX

1 Organic revenue increased 2.3 percent 1 Risk of contamination in source products

2 North American sales growth 2.9% - higher demand for its cereal

2 High amounts of goodwill ($27.5 billion)

3 Commitment to develop new products (R&D)

3 $18.5 billion in long term debt (increased by 50% during 2009)

4 Innovative advertising method 4 Margins depend on commodity prices

5 Kraft Foods Inc. manages over 100 different brand-name food products and tracks operating income to five specific consumer segments.

5 Drop in sales in Quarter 2 in 2009 (5.9%)

6 Company’s revenue increased to $42.2 billion 2008, while earnings increased to $2.9 billion

OPPORTUNITIES SO STRATEGIES WO STRATEGIES1 US Market for packaged

and processed food has large profit in retail sales

S1O3

Create new organic food products to accommodate the trend of healthy food. (Product Development)

W1O1

Use quality organic ingredients to reduce risk of contamination. (Product Development & Related Diversification)

2 More people are dining out and product designed for restaurants, and other foodservice provider increasing

S3O2

R & D to be focus on product design for restaurants, vending machines and other food service provider. (Product Development)

W5O1

Focusing on retails sales. (Market Penetration)

3 Development of health food S3O4

Using interactive method in portal to promote ideas from customer for new products. (Product Development)

W4O5

Renegotiated current contract for commodity. (Related diversification)

4 Web site / Portal as marketing medium

S4O4

Using games or any interactive method to promote about products. (Market Penetration)

5 Input cost of bakers have declined

S4O3

Using more interactive method such as application for smartphone to promote about healthy food. (Market Penetration)

6 Food safety programs S5O1

Promoted in convenient meals segment in Retail (Market Penetration)

STRENGTH WEAKNESS

TABLE SWOT

MATRIX – cont.

1 Organic revenue increased 2.3 percent 1 Risk of contamination in source products

2 North American sales growth 2.9% - higher demand for its cereal

2 High amounts of goodwill ($27.5 billion)

3 Commitment to develop new products (R&D)

3 $18.5 billion in long term debt (increased by 50% during 2009)

4 Innovative advertising method 4 Margins depend on commodity prices

5 Kraft Foods Inc. manages over 100 different brand-name food products and tracks operating income to five specific consumer segments.

5 Drop in sales in Quarter 2 in 2009 (5.9%)


THREAT ST STRATEGIES WT STRATEGIES1 Competes with

numbers of companiesS4T1

Using interactive advertising to promote brand. (Market Penetration)

W4T1

Agreement with supplier to reduce price and got competitive pricing

2 Global warming S5T4

Coleberate with store to supply products. W1T2

Promote organic food that healthy and environmental friendly

3 Raising cost of petroleum

S1T7

Use R&D capabilities to develop new healthier food options due to increasing obesity rates. ( Product Development)

W2T3

Using Fleet Management System to control cost of petrol

4 Many consumer switching to store brand products

5 Consumer prices for baked food increased by 10.7%

6 Food cost climbing

7 Childhood obesity

GRAND STRATEGY MATRIX

Quadrant II Quadrant I1.Market Development2.Market Penetration3.Product Development4.Forward Integration5.Backward Integration6.Horizontal Integration7.Related Diversification

Quadrant III Quadrant IV

Rapid Market Growth

Strong Competitive

Position

Slow Market Growth

Weak Competitive

Position

BCG MATRIX

BCG MATRIX – cont.

304050607080901001100

10

20

30

40

50

60

70

80

90

100

BCG Matrix

Relative Market Share

Mar

ket

Gro

wth

Division Revenue (millions)

Percent Revenues

Profit (millions)

Percent Profit

Relative Market Share

Industry Growth

Rate (%) Company $42,201 100% $2,901 100% - -

SPACE MATRIX – Factors & Conclusions

FINANCIAL POSITION (FP) Factors Rating

Revenues increased 16.8% to $42.2 billion 4Earnings increased 12% to 2.9 billion 3

Total L+SE+ Assets decreased 7.5% to $6.3 billion 3Gross profit margin of 33.2 compared to the industry average of 33.7 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

SPACE MATRIX – Factors & Conclusions – cont.

STABILITY POSITION (SP) Factors Rating

Competitive pressure -4Barriers 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

Conclusions

SP 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

SPACE MATRIX – cont.

Internal-External (I/E) Matrix

I II III

IV

V VI

VII VIII IX

4.0

3.0

2.0

1.0

3.0 2.0 1.0

EFE

Tota

l Wei

ghte

d Sc

ores

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

DivisionRevenues (millions)

Percent Revenues

Profit (millions)

Percent Profit

IFE Scores

EFE Scores

Company $42,201 100% $2,901 100% 2.57 3.14

STRATEGY IMPLEMENTATION

QSPM MATRIX

STRATEGY RECOMMAN

DATION

POLICY SUGGESTIO

N

ACTION EXECUTED

QUANTITATIVE STRATEGIC PLANING (QSPM)

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

STRATEGIC ALTERNATIVES1 2

Market Penetration

Product Development

Promoted in convenient

meals segment in Retail

Create new organic food products to

accommodate the trend of healthy food

Key Factors Weight AS TAS AS TASOpportunities

1 US Market for packaged and processed food has seen large profit in retail sales

0.08 4 0.32 1 0.08

2 More people are dining out and food producers are devoting more attention to product designed for restaurants, vending machines and other foodservice provider

0.10 - -

3 Development of health food 0.06 2 0.12 4 0.244 Web site / Portal as marketing medium 0.06 - -5 Input cost of bakers have declined 0.13 2 0.26 2 0.266 Food safety programs have been adopted recently as issues of

chemical and bacterial contamination and new food-borne pathogens remain a public health concern

0.06 2 0.12 3 0.18

Threats1 Competes with numbers of companies 0.13 1 0.13 1 0.132 Global warming 0.09 1 0.09 3 0.273 Raising cost of petroleum 0.07 3 0.21 2 0.144 Many consumer switching to store brand products 0.04 - -5 Consumer prices for baked food increased by 10.7% 0.05 2 0.1 2 0.16 Food cost climbing 0.06 3 0.18 3 0.187 Childhood obesity 0.05 2 0.1 4 0.2

QUANTITATIVE STRATEGIC PLANING (QSPM) – cont.

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

STRATEGIC ALTERNATIVES1 2

Market Penetration Product DevelopmentPromoted in

convenient meals segment in Retail

Create new organic food products to

accommodate the trend of healthy food

Key Factors Weight AS TAS AS TASStrengths

1 Organic revenue increased 2.3 percent 0.07 1 0.07 4 0.282 North American sales growth 2.9% - higher demand for its

cereal 0.07 1 0.07 1 0.07

3 Commitment to develop new products (R&D) 0.08 1 0.08 2 0.164 Innovative advertising method 0.09 - -5 Kraft Foods Inc. manages over 100 different brand-name

food products and tracks operating income to five specific consumer segments.

0.13 3 0.39 3 0.39


0.13 - -

Weaknesses1 Risk of contamination in source products 0.03 2 0.06 4 0.12

2 High amounts of goodwill ($27.5 billion) 0.08 - -3 $18.5 billion in long term debt (increased by 50% during

2009)0.07 - -

4 Margins depend on commodity prices 0.04 3 0.12 3 0.125 Drop in sales in Quarter 2 in 2009 (5.9%) 0.09 - -

2.42 2.92

Create new organic food products to accommodate the trend of

healthy food

KRAFT commitment to develop

new product (Strength)

Organic revenue

increase by 2.3%

(Strength)

Development of Health Food (Opportunities

)

Obesity (Threats)

STRATEGY RECOMMENDATION

POLICY SUGGESTION

Company Strategy

• Create new organic food products to accommodate the trend of healthy food.

Supporting Policies

• Each product segment will be “oriented” by organic foods• Marketing and R & D focus on new organic products.• Sales strategy - US focus in retail and in International, establish brand as organic producer.

ACTION EXECUTED

EPS

• Expected to increase $ 1.93 / unit (increase by 2.66%)

Organic Revenue

• Increase from 2.3% to at least 2.66%.

• Sales expected to increase 30%

• COGS increase 25%

• Marketing costs increase 15%

ACTION EXECUTED – cont.Kraft Foods Inc. and Subsidiaries

Consolidated Statements of EarningsFor the Year Ended 31st December (in million of dollars, except per share data)

2009 (expected) 2008 2007Net Revenues 54,861 100.0% 42,201 100.0% 36,134 100.0%Cost of Goods Sold 35,233 64.2% 28,186 66.8% 24,057 57.0%

Gross Profit 19,629 35.8% 14,015 33.2% 12,077 43.0%Marketing, admin and research costs 10,418 19.0% 9,059 16.5% 7,673 18.2%

Asset Impairment and exit costs 1,024 1.9% 1,024 1.9% 440 1.0%

Gain on redemption of United Biscuits investment - 0.0% - 0.0% - 0.0%

Loses / (gains) on divestitures, net 92 0.2% 92 0.2% (15) 0.0%

Amortization of Intangibles 23 0.0% 23 0.0% 13 0.0%

Operating Income 8,072 14.7% 3,817 14.6% 3,966 23.8%

Interest Expenses 1,240 2.3% 1,240 2.3% 604 1.4%

EBT 6,832 12.5% 2,577 12.4% 3,362 22.3%Provision for Income Taxes 728 1.3% 728 1.7% 1,002 2.4%

Earnings from continuing operations 6,104 13.4% 1,849 12.9% 2,360 21.4%

Earnings and gain from discontinued operations, net of 1,052 1.9% 1,052 2.5% 230 0.5%

Net Earnings 7,156 15.3% 2,901 15.4% 2,590 21.9%Per share data:

Basic EPS 1.93 1.95 1.64 * Unit share - 6.72 millions

CONCLUSION

New organic products

Commitment to R&D

Raising awareness of healthy food

Organic revenue increase to 2.66%

Expected EPS $1.93

44

TQ

case analysis - 2009

Documents