Strategic Choices: Integrating SWOT Analysis to Generic Strategies

Low Cost Differentiation Focus Pre-emptive
Strength: A strong Brand reputed for high quality products. A Low cost strategy would help Kraft Foods Company enhance its reputation thus encouraging customers to establish long-term commitment to the entity’s products. Through the good reputation created by offering quality products and intensive corporate social responsibility engagement, a low cost strategy would enable the entity to continue offering quality products thus increase their satisfaction. Such customer satisfaction has been shown to enhance consumer commitment to a brand (Sung & Campbell, 2007). For instance, the entity can achieve such a low cost strategy by collaborating with suppliers to offer products at favorable rates, shielding it from constant price changes that would alter its costs of raw materials. A differentiation strategy would enhance the entity’s brand reputation by enabling it to meet the diverse needs of its customers. By availing products that cater for the needs of different customer segments, Kraft foods can achieve a competitive advantage where it compensates a poor performance in some segments with a strong performance in others. Such a differentiation strategy would also help the entity where, for instance, social trends and economic conditions affect the entity’s sales for a particular product. A focus strategy would enable Kraft foods maintain its brand reputation by consistently meeting the needs of the specific market segment that it focuses on. By focus on a specific segment, the entity would be in a better position to identify such segment’s needs and preference, thus remain proactive in meeting them. Such proactivity would present a higher barrier for competitors to meet the offerings of Kraft foods, for instance, requiring them to invest heavily on the segment. Conversely, by developing resources and technologies focused on such a segment, Kraft food would have lower barriers in adopting to changes in such a consumer segment. A pre-emptive strategy would help build the reputation of the entity by allowing it to occupy superior positions in aspects such as quality, supplier relationships and distribution competencies (MacMillan, 1983). Through such a strategy, the entity would build its brand for instance by increasing efficiency in its value chain. Additionally, the innovation culture and technological capabilities would enable the entity to remain relevant to dynamic consumer tastes. Such capabilities would present high challenges for competitors to cope with the products that Kraft foods provides.
Weakness: Substantial product recalls in the recent past. Kraft foods has had product recalls in such products as Planters Cocktail Peanuts in the recent past (MarketLine, 2012). A low cost strategy would aggravate such a weakness since it would imply that the entity is pursuing cost reduction at the expense of quality. Such a perception would hurt the entity’s brand image, thus eliminating one of the core strengths that has fostered its growth. A differentiation strategy helps Kraft foods navigate the undesirable effects of product recalls. Having diverse products would shield the entity from losses that arises from the recall of one of the products. A differentiation strategy in respect to brands would also reduce the chances of the other brands being adversely affected by recalls of one brand. Such would not be the case where the entity’s products are sold under one brand name, since a recall in one of the products could create a perspective of similar cases of lower quality in other products. A focus strategy aggravates the effect of product recalls on Kraft Foods’ profitability. This arises since, by focusing on a specific segment, recalls in that segment would lower the entity’s revenues while the entity does not recoup such losses from other segments. Accordingly, for success with a focus strategy, the entity needs to ensure that it consistently meets its promise to the consumers by offering the quality that such customers expect. A pre-emptive strategy would help Kraft foods to reduce the impact of product recalls. For instance, this would arise where the entity develops a superior collaboration position with suppliers. In this respect, even with the product recalls, consumers may fail to find fairer priced products thus allowing the entity the time needed to recapture its favorable image.
Opportunity: Expansion to emerging and developing nations A low cost strategy would enable the entity provide products at a price that can enable its penetration to emerging and developing economies. With increasingly saturation of the developed market, large emerging markets such as China, India and Brazil offer a chance for Kraft Food to enhance its revenue. Expanding to such markets would also offer the entity the potential to reduce effect of country-specific macroeconomic shocks. Through a lower cost strategy, the entity can, for example, establish partnerships with local food firms to enhance the success of its entry. A differentiation strategy helps Kraft Foods realize the opportunity to expand into new markets by offering products customized to such markets. An enabling strength for Kraft foods, in this respect, is its strategy to engage host country nationals (HCNs) in the areas that it does business. With the knowledge of the customs and preferences of the population in such markets HCNs can help the entity to provide products suited for these markets. A differentiation strategy would thus facilitate Kraft Foods’ realization of the expansion opportunity. A focus strategy would enable the entity realize the expansion opportunity by satisfying the needs of a specific segment in such new markets. For instance, the entity can focus on quality service focused on the high income-earners in such countries. In this respect, Kraft Foods would establish kitchens in areas where such a segment is located. For instance, through a focus strategy, the entity can establish equivalent standards for home and international kitchens, thus attracting customers desirous of such a quality. A pre-emptive strategy would ensure realization of the expansion opportunity by allowing Kraft foods to establish strategic partnership with local firms. For instance, through a superior brand recognition, the entity can enter into franchise agreements with local firms to market its products. In this respect, the entity can avoid the entry barriers that may arise were it to enter into the market on its own. Similarly, through such collaboration, the entity can use such local firms’ distribution channels, thus avoid the cost of building new channels.
Threat: High competitive Rivalry A low cost strategy helps Kraft Foods Company to develop a leading position via its ability to offer better prices than competitors. Following a low cost strategy ensures that the entity responds to competitors’ pricing strategy by offering the lowest prices in the industry (Porter, 1985, p. 11-12). Kraft Foods ability to offer such lower pricing arises from factors such as its technological prowess and innovation, which reduces its costs of doing business. A differentiation strategy would help Kraft Foods wade of the strong competition by enhancing consumer brand loyalty. This would arise since the entity would offer different choices for its customers, advised on the diverse customer needs. By following such a strategy, and ensuring that the resultant price premium exceeds the costs incurred in achieving such differentiation, Kraft Foods would develop a sustainable growth that ensures its competitive advantage is sustained (Porter, 1985, p. 14). Using a focus strategy, Kraft foods would identify a specific industry segment and focus on meeting the needs of that segment at the expense of the other segments (Porter, 1985, p. 15). The entity can achieve this by either adopting a differentiation strategy in the identified segment or pursuing a cost strategy in such a market. For a differentiation-focus strategy, the competitors who have not focused on such a segment would be unable to compete in the segment thus making Kraft Foods company the market leader in the segment. A cost-focus strategy would enable the entity to present high barriers for any competitor to do business in such a segment. This arises since competitors, especially new entrants, would lack the financial and resource control needed to maintain a long-term cost-leadership in the segment. A pre-emptive strategy would enable Kraft foods reduce the effect of competitive move by occupying superior positions in aspects such as quality, new product introduction, and dominant designs (i.e., products that consistently meet the dynamic customer tastes) (MacMillan, 1983). The ability of Kraft Foods to engage in such a strategy arises from its technological prowess and the innovation culture it has created. The extent to which the pre-emptive strategy provides a source of sustainable competitive advantage, would be determined by the ability of Kraft Foods to use the strategy in products where, by replicating the strategy, competitors would have to experience major disruptions in their existing lead products (MacMillan, 1983).

References

MacMillan, I. C. (1983). Preemptive strategies. Journal of Business Strategy, 4(2), 16-26, doi:10.1108/eb039016.

MarketLine. (2012). Company profile: Kraft Foods Inc. New York: MarketLine

Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York, NY: The Free Press.

Sung, Y., & Campbell, W. K. (2009). Brand commitment in consumer-brand relationships: An Investment model approach. Journal of Brand Management, 17, 97-113, doi:10.1057/palgrave.bm.2550119

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