Business

Company Introduction
Kraft Foods is one of the worlds leading brands in the food business. The premier American firm for leading brands like Lu, Oreo, Nabisco, Alpen Gold, Jacobs and several others, the company is a house of brands that boasts of the most delicious and indulging foods marketed in more than 160 countries across the world. With over 40 Kraft brands being at least a hundred years experienced and annual revenues exceeding 1 billion Kraft Foods is the premier brands in the food business (About Kraft, 2010).

Quality and consistency have been two key characteristics of Kraft Foods over the years  this has made it stand out against its competitors in local markets distinctively. The company believes in diversification and maintains a healthy portfolio of people from all across the globe. The organizational culture at Kraft Foods is employee centric, promotes tolerance and provides ample opportunities for minorities and women to work at Kraft Foods (About Kraft, 2010). This paper will be exploring the internal and external factors that affect the business of the company and force the management at Kraft Foods to reconsider business strategies in order to overcome the market obstacles and maintain its lead in the food business.

Porters Five Forces Analysis
Threat of New Entrants
Kraft Foods houses at least 40 brands that have a history of more than a hundred years. There are few reasons to fear new entrants because the size of the company is massive  it can easily overshadow any competition from new entrants because of its global presence (QuickMBA, 2010). However, not all new entrants will be easy to overcome and few will, in the long-run, put up a strong resistance to Kraft Foods. These are the ones to watch out and Kraft Foods regularly evaluates all entrants in the market and plan ahead to ensure that it can use the best strategies on time to compete with them.

Degree of Rivalry
The intense competition between Kraft Foods and Cadbury has been a major source of stifling in the food business. Though the nature of competition is highly quality-driven and affected by marketing forces, it has been at its peak in the last two years. As a consequence of the intensity of the rivalry, Kraft Foods made an offer to acquire Cadbury for 16.8 billion in September 2009 to extend its presence in Asian markets (About Kraft, 2010).

Threat of Substitutes
There are few substitutes to the products of Kraft Foods having the same level of quality and consumer appeal. For example, there are hardly any direct substitutes for Oreo cookies while the chocolates of Kraft Foods are targeted towards a niche that will not consider any substitute to be worthy enough to replace Krafts products (Irfan, 2009).

Bargaining Power of Suppliers
The company has a well-optimized network of suppliers and retailers that assist Kraft Foods in manufacturing some of the best quality products in the world at a premium cost. Suppliers form an integral part of the supply chain at Kraft Foods and hold a distinctive bargaining power from the companys perspective. They regulate the quality whose standards are set by Kraft Foods management. However, more importantly suppliers are able to negotiate their costs with the company because of few alternative suppliers being present in the market able to deliver high quality (Nishimura, 2001).

Bargaining Power of Customers
Customers of Kraft Foods are generally unaffected by the price of the products and are willing to pay premiums for the quality that Kraft Foods consistently possess and market. Though consumers do not have a significant bargaining power, there is a marginal room for manipulation by customers with respect to quality and taste. These are the two aspects of Kraft Foods products which have been bargained i.e. developed by customers over time leading to the present level of high quality (Keller, 2000).

External Factor Analysis
OpportunitiesWeightRatingWeighted ScoreEmerging markets for many convenient foods and snacks remain untapped0.2541Global economic recovery, in particular, the rise of Asia points to sustained growth opportunities.0.1530.45Higher market maturity as a result of health and fitness awareness.0.1530.45Increasing social changes0.1520.30ThreatsWeightRatingWeighted ScoreRegulatory Requirements for health and safety are getting stringent the world over as markets mature.0.1020.20Western brands are seen with hostility in parts of the world due to the political associations of the country of origin.0.1020.20Global recession means people have less money to spend on expensive food items forcing them to switch to cheaper alternatives.0.1010.10Total1.002.70

Weighting Justification
Emerging markets for many convenient foods and snacks remain untapped
One of the fastest growing markets in the world is Asia. While Kraft Foods has built an empire in American and European nations, it has been Cadbury that has stolen the show with expansion strategies in China and India. The growth of food and confectionery sales is directly linked to population growth. Kraft Foods needs to tap markets with high population growth rates such as India and where the average number of people per unit area is relatively large. There is a high tendency (probability) for food purchases in areas where more people reside this fact should be exploited by Kraft Foods by expanding into untapped markets.

Global economic recovery, in particular, the rise of Asia points to sustained growth opportunities.
The recent two years have been subject to abnormal market conditions in which public spending has been directed at necessities. Since Kraft Foods products are primarily positioned as luxury items in the food segment, a significant proportion of the upper middle class was unable to maintain their liking for Kraft Foods (Gottfredson, Puryear  Phillip, 2005). This has however, changed in the past one year owing to rising economic sustainability. Kraft Foods needs to market its products to the upper middle class in order to benefit from sales in that segment.

Higher market maturity as a result of health and fitness awareness.
Aging population in Western countries and increased awareness on health and welfare have reduced the frequency of purchases made by Kraft Foods consumers. While Kraft Foods cannot market its products as healthy and having low calorie content, the company can use social marketing and focus on consumer insights to generate enough positive vibes and counter negative sales caused by health awareness (Gombeski, 2008).

Increasing social changes
The future lies in consistent social marketing  Kraft Foods has an ongoing corporate social responsibility program that suits the company image well. This factor is important in the long-term development of sales and revenues, not only in European markets, but also in Asia (Grayson  Hodges, 2004).

Regulatory Requirements for health and safety are getting stringent the world over as markets mature.
It has been observed that as markets mature and the concept of consumer welfare gains root, regulatory requirements for health and safety are increasing as seen in India where Pepsi and Coca Cola have had to witness a ban on commercial production (Ahuja, 27). The cost of future possible compliances to other policies could prove to be expensive to Kraft Foods however, there are few possibilities of this happening in the near future.

Western brands are seen with hostility in parts of the world due to the political associations of the country of origin.

It has been observed that generally, people have less tendencies to profess their political beliefs outside their drawing rooms and hence political beliefs do not interfere most of the time with the shopping list. Krafts response has been average with the overall risk inherent also being low in this regard (Grayson  Hodges, 2004).

Global recession means people have less money to spend on expensive food items forcing them to switch to cheaper alternatives.

The sales volume of Kraft Foods has decreased considerably in the last quarter (Chicago Tribune, 2009). The resulting decrease has however, not been significant enough to cause Kraft Foods to declare a loss  its net income rose by 6. However, continued trends are likely to cause more long-term damage.

Internal Factors Analysis
StrengthsWeightRatingWeighted ScoreQuality of products0.3041.20Customer perception of the company0.2541.00Work culture and diversity0.1030.30WeaknessesWeightRatingWeighted ScoreSupplier bargaining power  ability to regulate prices and quality0.1020.20Product Innovation  not many new brands in the past decade0.0520.10Strategy formulation for short-term (Kraft focuses on long-term strategies)0.2010.20Total1.003.20

Weighting Justification
Quality is one of the main unique selling points (USP) of Kraft Foods products
The rich history and tradition of producing fine quality foods is an image that the firms consumers relate to and consistently expect it to deliver. It is one of the major strengths of the company and continues to attract more people moving into the upper middle class segment of the society (About Kraft, 2010). It also is the driving force that retains customer loyalty because their expectations of taste and the same quality are met always.

Customer perception of the company has an important positive role in building brand equity
In Asian markets, Kraft Foods products are recognized as halal. This is a significant attribute that enables Kraft Foods to have a presence in the Middle East and other Asian nations  which have a significant contribution to the 1 billion annual revenues of the company (Irfan, 2009). Furthermore, the loyal consumers of Kraft Foods believe its products to be delightful and indulging and often are not interested with the health implications of consuming these products in large quantities.

Workplace diversity programs lead to organizational balance and boosts corporate social responsibility image

The modern society is more aware of the impact of bias and impartiality towards socio-economic imbalance. The sentiment in the minds of an average citizen is that there should be no discrimination on the basis of age, gender and ethnicity. Kraft Foods has a rich workforce with people from diverse backgrounds comprising of women, blacks and other minorities so that it is able to promote a socio-friendly image (About Kudler, 2010). This assists the firm in shaping up its corporate social responsibility claims and complements sales (Kotler  Lee, 2005).

Supplier bargaining power  ability to regulate prices and quality
It is not possible for Kraft Foods to ignore the demands of its suppliers in order to maintain the same level of quality and output. An internal weakness, yet, Kraft Foods has to ensure that the demands of its suppliers are fulfilled  there is little negotiation power that Kraft Foods holds, but the general dealing with suppliers if often neither published nor required to be disclosed to the general public (Nishimura, 2001).

Product Innovation  not many new brands in the past decade
There have not been as many new products from Kraft Foods in the past decade as there were two or three decades ago. In spite of more talented people working at the organization, there is a clear lack of new idea generation and dearth of innovative food products to cater to food segments currently not exploited to the maximum (Stimpson, 2009).

Strategy formulation for short-term (Kraft focuses on long-term strategies)
A majority of the strategies employed and devised by Kraft Foods are oblivious of the short-term realities in the market and look at a broader horizon of events. The acquisition offer Kraft Foods was a long-term strategy to compete (or rather consume) Cadbury in order to reap the benefits of a highly liquid Indian market (Shafi, 2010). Though the acquisition has not materialized yet, there was no counter strategy to vigorously expand its market share in the Asian markets. This slow and indifferent short-term planning culture at Kraft Foods is a critical internal weakness that has a lot of negative weight on the companys ROI.