Strategic Choices Essay
Business planning refers to a procedure through which both small and large companies determine actions that lead to the growth of revenue and increase the profits. The two most essential aspects of business planning are; setting goals and making strategic choices to achieve the goals. Every firm has specific resources that are available to it. Such resources may include human resources, distribution channel, productive capacity and financial resources. Strategic choices are the steps that companies use to obtain these resources. Strategic choices involve a sequence of events such as defining what services and products to sell, how to sell them, where to sell them and the target market in which the products will be sold. Strategic choice could also include, achieving competitive advantage. The success of a company depends on the strategic choices that are made by the owners of a company (Algasae, 2012).
Strategic choices are mostly concerned with the manner in which company make decisions and the many factors that will influence these decisions. Strategic choices involve identification and evaluation of processes that lead to the final decisions for the company. The identification of the process is sometimes difficult to determine and requires that management determine the future focus for the organization. The managers are always required to determine the action plans that can facilitate the identification process. Porter’s generic strategies can be used to determine what direction the company would like to proceed in.
An effective and efficient strategic choice process helps organizations to make sustainable strategic decisions. While an effective business strategy makes an organization to cope with the available limited resources. The most successful companies are those that allocate the limited resources to projects that have a positive impact on the improvement and the growth of the revenue (Iansiti & Levien, 2004). In this paper we will discuss Porter’s generic strategy, which is used by the Kraft Foods Group (KFG). Secondly we will discuss the SWOT analysis of KFG. Lastly, we will look at how the company can take advantage of the environmental opportunities to gain a competitive advantage of their peer companies.
Kraft Foods Group
KFG Incorporated is an independent public grocery manufacturing and processing company, headquartered in Illinois. The company began its operation in 2012 with a de-merger from Kraft Food Incorporated. KFG is mainly focused on grocery products. It operates as a consumer beverage and packaged food firm in North America. Its products include but are not limited to cheese, beverages, meals, refrigerated meals, snacks nuts and desserts.
Porter’s Generic Strategies
Porter’s generic strategies illustrate how a firm pursues competitive advantage in the chosen market scope. Generic strategies show the choices that are made concerning both types of competitive advantage and the scope. There are three different types of generic strategies: cost leadership, differentiation and focus. The strategies are used to design the future strategy of a firm. Cost leadership strategy helps a company to sell its products cheaper than its competitors and differentiation helps a company to offer unique products (Hammonds, 2007). However, differentiation and cost leadership strategy are not always compatible.
Focus strategy helps a company to emphasize on a single market and can be combined with the other two strategies to form focused differentiation or a focused cost leadership. KFG uses focused differentiation to achieve competitive advantage by developing unique products within the market. KFG not only excel in producing a more quality product than their completion but furthermore they have exceeded in establishing their consumer base. They have developed a good rapport with lifelong customers who believe the products are both reasonably priced as well as a good quality. The uniqueness of their products keeps their consumers coming back for more and blows their sales out of the water when it comes to their competition.
SWOT analysis is the abbreviation of the strengths, weaknesses, external opportunities and threats from competition is an outline for strategic decision-making within companies everywhere. SWOT is a structured procedure that is used to determine and evaluate the strengths, weaknesses, opportunities and threats that are involved in the company. It involves determining both the external and the internal factors that are unfavorable and favorable to achieve the set objectives of the firm.
Strengths are the features of a firm that gives it an advantage over others. A company such as KFG uses focused strategy which has much internal strength. These including ensuring they have highly skilled production development team, a strong sales teams who have good communication skills and undoubtedly a great reputation for quality and innovation. These strengths are needed in order to bring the grocery on track. KFG has increased its focus on marketing investment and split its largest division into two, for improved focus on development and marketing of products. While these strengths are key to the company’s success one cannot overlook the weaknesses of KFG.
Weaknesses refer to features that put the company at a disadvantage relative to its competitors. The main weakness of KFG is the shortage of the raw materials. Since the company does use the differentiation strategy, it tends to produce a unique product. The materials that are needed to produce such products are always scarce which is problematic for production. The unavailability of the products causes the market share for the company to decline. This eventually leads to higher marketing costs to offset the overhead cost reduction plan. KFG seems to experience difficulty in launching new products as well. Lastly, the plant capacity has also declined due to the demand of the products by KFG consumers. Despite the weaknesses of KFG opportunities are always available for the company.
Opportunities are the characteristics that favor the company’s development. In the market segment, KFG has many opportunities that will help the company with its strategic choices. KFG has to produce differentiated products and concentrate on ideas for new food products within the markets. In producing new products KFG should concentrate on products that are unique and stand out above its competitors. Another area that is often overlooked is the ethnic food market. KFG needs to capitalize on an opportunity to enter into this market, especially with its brand already being a house hold name. Lastly, KFG cannot miss out on the opportunity to ensure that it does not consider the market for custom made food products. Despite the opportunities for growth for KFG the threats of other companies coming into the market cannot be overlooked.
There are various threats that affect the growth and the development of the company and they include; emergence of imitation companies and changes in tastes of the customers. Secondly, firms that use focus strategy can gain competitive advantage very easily. Thirdly, the production of unique food products require the use of advance technology hence the production of genetically engineered foods that are not very safe. KFG is facing strong competition from other food product companies such as ConAgra Foods and Nestle. KFG has to think of a way to bring healthier products to its consumers since the rate of obesity is increasing in American people (Liang, Czaplewski, Klein & Jiang, 2009).
KFG can attract consumers all over the world. Besides the high financial power and market, the company has also greater financial potential in exchanging the existing products in terms of packaging. In addition, the company has also upgraded the latest information system technology in manufacturing and processing. All these factors help Kraft to achieve competitive advantage over its main competitors (Kim & Mauborgne, 2009).
Vision & Mission of Company
KFG’s mission is clear according to the company’s website (2014) it is to be the greatest beverage and food servicing company in the northern hemisphere. KFG believes they can reach this point by ensuring they provide quality products to faithful consumers. KFG further understand their mission cannot be achieved without the help of its dedicated employees. While the mission of the company is vital in the company’s success the vision also plays a tremendous part in how KFG has been able to be so dominant in the food and beverage arena. The vision of KFG is to help people in the world to live healthier life-styles and in general have better lives. By satisfying the needs of its consumers and making healthy foods. The process of strategic analysis helps the company to constantly re-strategies the categories of the products to satisfy the consumers’ needs. This procedure helps the company to operate in the future. In addition, it also helps the company to exploit opportunities for sales.
With KFG encountering major issues with regards to ensuring they have enough raw materials to produce, the following recommendations would be made to the company to ensure its success. The first recommendation would be to increase the safety stock level of materials. By doing so the company would put itself in a better position of making sure if situations presented themselves. The goal of the safety stock is to prevent the shortage and inconsistency of the raw materials. The second recommendation would be for KFG to engage with multiple dealers and suppliers in a particular region. This will give KFG other outlets to obtain raw materials from and ultimately ensure the company has enough stock to meet the supply and demand of its customers. Strong relationship and mutual trust are also required to increase the supply of the raw materials. For the company to gain competitive advantage in the market segment, it should improve its focused differentiated strategy.
In conclusion, through the use of strategic choice, KFG can achieve its vision and mission. Strategic choices are likely to help the company study the needs of its customers and complete the steps needed to ensure they are delivering a satisfactory final product for them. Strengths such as strategic marketing capability and strong financial power help the company to gain competitive advantage. The focused differentiated strategy helps the company to gain competitive advantage over its main competitors such as such as ConAgra Foods and Nestle. Lastly, strategic choices allow the company to produce unique products that have high value among the targeted consumers.
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