Kraft Foods Case

1. What is Kraft Foods Inc.’s corporate strategy? How has its corporate strategy evolved since its independence in 2007?

Kraft Foods’ corporate strategy as an independent company involved addressing weaknesses in its core businesses and building a globally dominant snacks business, leveraging its heritage foods brands, and creating a performance-driven corporate culture that would bring about profitable growth capable of generating attractive returns for shareholders.

Kraft Food had replaced 80 percent of its management in leadership positions by 2009. It also changed its organizational structure at the business level, and boosted advertising and promotions by 600 millions. The company also focuses on cost saving strategy via achieving synergies existing between its business units that integrate business operations.

2. What is your assessment of the long-term attractiveness of the industries represented in Kraft Foods’ business portfolio?

Kraft Foods has a clear core strategy, building globally dominant snacks business, which has been done a good job since 2007. The series of divestitures and acquisitions boosted profit earning and market share occupancy. Kraft Food North American grocery division spins off can also create large profitability potential to its shareholder. Since the Kraft Foods is the second largest food company in the North America, the spin-off transaction has long-term attractiveness to the shareholders.

3. What is your assessment of the competitive strength of Kraft Foods’ different business units?

For the three top business units, the market share and brand image reputation are the most important competitive strength for the North America business unit. For the Europe and developing market business units, the various product lines and new product development ability are powerful competitive strength to compete with its rivals. Kraft Foods North America unit has larger market share and supply chain relationship compare to Europe and Developing market countries that give them greater strength to gain higher profit margin and revenue growth.

4. What does a 9-cell industry attractiveness/business strength matrix displaying Kraft Foods’ business units look like?

	North America	Europe	Developing Market
Competitiveness Strength	6.75	5.05	5.25
Industry Attractiveness	6.75	5.85	6.55
Revenue	46.30%	24.60%	29.10%

	U.S. Beverage	U.S. Cheese	U.S. Convenient Meals	U.S. Grocery	U.S. Snacks
Competitiveness Strength	4.85	5.9	6.25	6.85	7.05
Industry Attractiveness	4.5	5.8	5.7	7.05	7.15
Revenue	5.50%	7%	6.10%	6.60%	11%

5. Does Kraft Foods’ portfolio exhibit good strategic fit? What value-chain match-ups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see?

·      Purchases from suppliers: All business units share the purchasing power from suppliers.

·      Technology: All business units share some kinds of food processing technology to each other.

·      Operation: All business units collaborate to enhance operation performance

·      Sales and marketing, Distribution, Service: All business units share marketing power, distribution channels to create strong selling capacity. All business units share direct or indirect customer service with the Kraft brand name.

6. What is your overall evaluation of Kraft Foods’ corporate strategy and planned restructuring in 2012? What evidence and/or reasons support a conclusion that Kraft Foods’ shareholders will or will not benefit from the spinoff of the company’s North American grocery business?

The overall strategy for Kraft Foods is divestitures and acquisitions. Kraft Foods has done a good job expanding its market share and improving its profit margin. Kraft had become a giant food company that had slowed down their total growth rate. Moreover, layers and layers management overhead cost had nibbling its profit margin on those mature businesses fields. To spin off its slow growing business would benefit its shareholder from higher business units’ ROE. The spin-off business unit could have more freedom on operation strategy and have better operating efficiency performance.

7. What actions do you recommend that Kraft Foods management take to improve the company’s performance and boost shareholder value after the spinoff of its North American grocery business? Your recommended actions must be supported with convincing, analysis-based arguments.

After spun-off grocery business unit on 2012, Kraft Foods had renamed to Mondelez international that maintain high growth snacks business unit and two international market units. First action, try to eliminate operational management positions that were used to collaborate with grocery business unit. Second, invest on new products development for local market in the international business units. The diversity cultures and living styles lead to different favor of taste on the product. It is important to keep testing and developing new products to match the desires of the new local market.