MGNT314 ASSESSMENT - 1

KRAFT ACQUISITION OF
CADBURY

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 EXECUTIVE SUMMARY

The report consists of the analysis of the case study: The Acquisition of Cadbury PLC by
Kraft Foods, 2010. It discusses the bidding war and the benefits of the acquisition that
was supposed to sustain growth and foster profitability, the resulting disadvantages and
the public response to the acquisition followed by examining the lessons learnt in the
process. Various strategic models such as SWOT, PESTLE, VRIO, Porter’s 5 forces and
Value Chain analysis have been used to discuss the issues and outcomes of the
acquisition. Additionally, an evaluation of Kraft’s business strategy, competitive assets
and the acquisition is done with reference to the analysis to review the impacts that led to
the demerger of Cadbury-Kraft in 2012 into two separate corporations which eventually
resulted in the establishment of global snacks business, Mondelez International.

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 TABLE OF CONTENTS

1. CASE SUMMARY 5

2. THE ACQUISITION 6

 Bidding War 6
Kraft’s Long-term Strategy 6
The Bid 6
 Pros 7
Benefits, Profits & CSF 7
 Cons 8
Merger Response 8
Acquisition Impact 8

3. CONCLUSION 9

4. REFERENCES 9

5. APPENDIX 12
 SWOT Analysis of Cadbury 12
 SWOT Analysis of Kraft 13
 PESTLE Analysis of Cadbury - Kraft 14
 VRIO Analysis 15
 Value Chain analysis of Kraft 18
 Porter’s 5 Forces 19
 Kraft Resources, Capabilities & Competitive Assets 21

CASE SUMMARY
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A merger between two prominent companies boasting long, rich histories was bound to
capture media and public attention. The case study examines Kraft’s 2009-2010
acquisition of UK based chocolatier, Cadbury. Events preceding the merger and its
transition from a friendly takeover to a hostile one are also outlined. An unfavorable
response surfaced from trade unions, governments and the general public who believed
Kraft and Cadbury both possessed vastly differing corporate cultures. It was surmised
that Kraft lacked the capabilities required to uphold Cadbury’s distinguished reputation as
a century-old icon of British culture and confectionery. After extensive negotiation and
evaluation, both the brands came to an agreement, with Cadbury settling for £11.9 billion
in exchange for its brand takeover (Beaudin, 2010). The case study also describes the
hardships Kraft and its CEO, Ms. Irene Rosenfeld faced post-acquisition to prove the
envisioned merits of the Kraft and Cadbury merger.

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 THE ACQUISITION

BIDDING WAR

It all started with a bid initiated by Kraft to acquire Cadbury on 28 th August 2010. A bid
that would lead to become one of the most sought after acquisition stories of the century.
Before understanding the intricate details of the acquisition, it is important to know the
goals and mission of Kraft that led them to settle for such a costly arrangement to acquire
Cadbury.

KRAFT’S LONG-TERM STRATEGY

Kraft had four main priorities during the Cadbury acquisition:

1. Kraft sought expansion and growth in new market categories it did not yet participate
in (e.g. confectionery and snacks - considered higher growth categories).
2. Stronger participation in fast-growing ‘instant consumption’ trade channels.
3. Expansion of scale and geographical footprint in developing markets.
4. Diversifying product portfolio to lower costs and improve margin growth through
quality investing.

THE BID

● Initial bid offered on 28th August valuing each Cadbury share at 7.55 Euros. Cadbury,
and others, were unsatisfied with the low value. Low bid price early on had negative
influence on future bids. Kraft stated it will attempt to retain the 500 jobs in
Somerdale plant which Cadbury considered a loss.
● On 7th September, Kraft alerted the public about its offer of 7.45 Euro per share. The
Takeover Panel asked Kraft to submit their final proposal by 9th November.
● Meeting the deadline, Kraft offered 3 Euros in cash and 0.2589 shares per Cadbury
share. A decline in Kraft’s share price reduced the total value of the bid to 7.17 Euros,
and was thus rejected.
● To appeal to Cadbury, Kraft offered an extra 0.6 Euros in cash on 5th January and
withdrew the equivalent amount of Kraft shares.
● Cadbury finally accepted the bid on 18th January, valued at just under 12 billion
Euros. The bid offered 8.4 Euros per share, including 5 Euros in cash and 0.184 new
Kraft shares alongside a 0.10 Euro dividend.

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PROS

BENEFITS, PROFITS & CSF

Kraft and Cadbury is certainly one of the biggest cross-border acquisitions in history and
the benefits were unparalleled to any other. One of the biggest advantages for Kraft, was
that the merger would create a unique complementary portfolio mix which included over
40 brands and would result in annual sales of over $100 million (Blackaby, 2010),
leading to a higher margin growth with quality products. This unique fit between
Cadbury and Kraft would encourage an extensive distribution channel and network in
traditional and emerging markets for instant consumption, strengthening market position
presence in Brazil, China, Russia, India, Mexico & South Africa as a result of Cadbury’s
effective market presence in Asia (appendix 2). This would lead to Kraft expanding on a
global scale in developing markets. Kraft also established a stronghold they could use
through their grown competencies and capabilities (appendix 7) with annual revenue of
$49.2 billion (Rodrigo, 2012) to maximize profits from the merger with Cadbury and
thus, gain competitive advantage to lead in the confectionary industry as indicated in
appendix 4. All this created a strong image of advantage over their rivals, especially
Nestle as their market share would increase substantially (appendix 6).

Cadbury on the other hand was provided with a list of benefits too, which included an
attractive premium between 26 - 39% over their freestanding share price and a multiple
of 13.9 times Cadbury’s EBITDA. Kraft wanted to use their grown resources to provide a
sustainable business model that would appeal to Cadbury’s shareholders. The plan to
create operation efficiency would also lead to cost saving due to expansion in the supplier
base globally, resulting in more focus on economies of scale (Tsagas, 2014). This led to
the bid involving cost reduction of up to $625 million which were to be saved from
various departmental levels such as R&D, production, marketing, manufacturing,
logistics, customer service, administrative costs, etc. (appendix 5) to increase overall
benefits. Kraft's implementation of a synergy management approach further was justified
in their bid that would create value for Cadbury through strong synergies across both
platforms to manage costs (Rodrigo, 2012). Kraft’s dedicated efforts to acquire Cadbury
attracted competitors such as Hershey and Ferrero for a rival bid along with shareholder
interests in hedge funds and increased market value leading to an enormous bid of $11.5
billion for 8.40 per Cadbury share. Overall, this created critical points for both companies
that would set the acquisition to be resourceful.

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CONS

MERGER RESPONSE

Even with the enormous benefits, the response was negative, as trade unions predicted a
7000-job loss if Kraft chose to recover acquisition costs by reducing expenses and
increasing efficiency, as had historically been seen with the “Terry’s of York” merger.
Failure to uphold past promises raised doubts over the Somerdale plant situation as well
(Hsia et al., 2010). Misgivings were rampant about Kraft having self-serving motivations
such as portfolio expansion, strengthening brand value and gaining access to UK markets
(appendix 1 & 2).

Operation changes could harm Cadbury’s brand value as employees’ workflow gets
disrupted due to repositioning (Beaudin, 2010). A negative public reaction followed
Kraft’s first formal offer due to skepticism regarding their intent and capability to uphold
Cadbury’s historical British status. Doubts rose over Kraft’s capability to retain
Cadbury’s paternalistic style of reigning over the community and uphold fair trade
arrangements (appendix 3) (Lopes, 2016).

Despite initiating the merger, Kraft faced criticism after its initial bid regarding (appendix
5) its procurement, economies of scale predictions, logistics, R&D and operations. This
would further create challenges for Kraft as streamlining their inventory will be a
complex process (Appendix 7). Following Cadbury’s defense document issuance, Kraft
was obliged to increase its bid value to succeed. Kraft investors did not appreciate this
move, especially Warren Buffet, who believed Irene Rosenfeld overpaid for Cadbury
(£11.5 billion). Kraft had to sell its US-pizza division to raise capital.

ACQUISITION IMPACT

Despite both Kraft and Cadbury being prominent entities, the merger’s impact was not a
positive one. In any merger, financial and operational issues aside, employees are affected
too. Similarly, Cadbury employees were not pleased as the entire process was seen to
benefit Kraft. The effect on them was negative and demoralizing. Moreover, culture
clashes arose due to Kraft and Cadbury being USA and UK based. Unlike Kraft, Cadbury
focused on ethics (e.g. fair trading sources, sustainable measures, high employee
satisfaction) while Kraft’s style was rather bureaucratic, which further spread unease
(Lopes, 2016). Many believed once Kraft acquired Cadbury, the ethical concerns would
be discarded. This takeover also compelled the government to rethink policies regarding
acquisitions and mergers (appendix 3).

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 CONCLUSION

To summarize, the infamous Kraft-Cadbury merger did not yield the positive outcome
Irene Rosenfeld had envisioned. Numerous challenges arose both during and post-merger
with the overall results not necessarily being in Kraft and Cadbury’s favor. Indeed, the
media and public reaction were extremely vocal in their dissent, with some being openly
hostile. Post-acquisition, shareholders questioned whether the merger had been a
worthwhile endeavor, especially for Ms. Irene Rosenfeld who had staked her reputation
on it.

In retrospect, the firms may have experienced a smoother merger had Kraft conducted
more extensive research beforehand and understood Cadbury’s corporate culture and its
significance in the UK. Moreover, Ms. Rosenfeld could have avoided bad press attention
had she shown more understanding and responded to as well as reassured the media and
disciplinary committee that Kraft would uphold Cadbury’s reputation as Britain’s
confectionery icon (Lucas & Rappeport, 2011).

With that being said, the entire process had a negative impact on Kraft, but Cadbury was
able to overcome the effects of the merger and even succeeded in increasing their share
price while also expanding its brand value.

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 REFERENCES

● Ambaras Khan, M., (2010), Allocation of control in hostile takeover: lessons from
Cadbury. Current Law Journal, Vol. 26, No. 8.

● Anwar, S.T., (2019), Kraft's acquisition of Cadbury: Was it an amicable transatlantic

merger or a hostile takeover?. Thunderbird International Business Review, Vol. 61,
No. 2, pp.439-451.

● Beaudin, G., (2010), ‘Kraft-Cadbury: Making Acquisitions Work’, Bloomberg.com,

pp. 9, viewed 27 October 2020, <https://search-ebscohost-
com.ezproxy.uow.edu.au/login.aspx?direct=true&db=heh&AN=48094978>.

● Blackaby, A., (2010), Fears marketers face a hit from Cadbury deal: With attention
focusing on the job security of Cadbury's manufacturing workforce in Bournville in
the light of the Kraft takeover, Anna Blackaby looks at how local marketing and
advertising firms working on the chocolate maker's innovative campaigns may fare,
Birmingham (UK).

● Blogspot, (2013), Economics Analysis of Cadbury, Blogspot.com, Available at:

http://economics-on-cadbury.blogspot.com/2013/10/economics-analysis-of-
cadbury.html.

● Butler, S., (2015), 'Sugar tax will not change diets, says Cadbury chief' Guardian,
October 22 [online] Available from
https://www.theguardian.com/business/2015/oct/22/sugar-tax-not-change-diets-
cadbury-mondelez-childhood-obesity-public-health-england.

● Helms, M.M. and Nixon, J., (2010), Exploring SWOT analysis–where are we
now?, Journal of strategy and management.

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● Hsia, S., Coyle, A., Brummett, D. and O’Rourke, J.S., (2010), Kraft foods: Krafting
the case for cadbury. The Eugene D. Fanning Center for Business Communication,
Mendoza College of Business, University of Notre Dame.

● Lopes, T.d.S., (2016), "Building Brand Reputation through Third-Party Endorsement:

Fair Trade in British Chocolate", Business History Review, vol. 90, no. 3, pp. 457-482.

● Lucas, L. & Rappeport, A., (2011), "Mergers and acquisitions: A bitter taste", FT.com

● Morris, B., (2014), 'The Cadbury deal: How it changed takeovers' BBC Business
News, May 2 [online] Available from: http://www.bbc.co.uk/news/business-27258143

● Odih, P., (2010), Advertising and Cultural Politics in Global Times, Ashgate
Publishing, New York.

● Rodrigo, (2012), Corporate Strategy Analysis Of Kraft In Relation To Cadbury

Acquisition – The Writepass Journal, [online] Available at:
https://writepass.com/journal/2012/11/corporate-strategy-analysis-of-kraft-in-relation-
to-cadbury-acquisition/

● Sec.gov, (n.d.), (2020), Kraft Foods, Inc. Slide Presentation, [online] Available at:
https://www.sec.gov/Archives/edgar/data/1103982/000119312509120308/dex991.htm
● Tsagas, G., (2014), A Long-Term Vision for UK Firms? Revisiting the Target
Director's Advisory Role Since the Takeover of Cadbury'S PLC. Journal of Corporate
Law Studies, Vol. 14, No.1, pp. 241-275.

● Zachary, E., (2018), VRIO Analysis of Kraft Foods Inc and Cadbury PLC B A Sweet
Divorce, [online] Available at: https://www.case48.com/vrio-case/8200-Kraft-Foods-
Inc-and-Cadbury-PLC-B-A-Sweet-Divorce

APPENDIX

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1. SWOT ANALYSIS OF CADBURY
STRENGTHS
1. Powerful global presence/products
with additional strong brands (e.g.
Dairy Milk, Oreo) in its portfolio.
2. Strong brand name and loyalty among
consumers.
3. Strong in terms of product innovation
and distribution network.
4. Research & Development is a focal
point.
OPPORTUNITIES
1. Cadbury’s defence document pushed
Kraft into increasing its bidding value
in order to win plus it piqued the
interest of other chocolatiers (e.g. FR,
Hershey’s and Nestle).
2. Cadbury used its successful 2009
trading results to get the offer
increased to £ 8.40 per share.
3. Will allow to increase global market
share whilst also increasing market
share in the US through Mondelez.
4. Cadbury will have access to the
economies of scale that Kraft enjoys
and can easily penetrate the markets
kraft operates in or to which it
supplies.
(Helms and Nixon, 2010)
2. SWOT ANALYSIS OF KRAFT
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WEAKNESSES
1. Weak rural distribution channel and
penetration; products delivered only
in urban and semi-urban areas.
2. Relatively high-priced brand.
3. Lack of US rights provided resulting
in low expansion rate.
4. Dependent on confectionary &
beverage market; limited product
range.
THREATS
1. People being more health conscious
and as a result switching to healthier
alternatives.
2. Increase in distribution cost due to
rising fuel prices and transportation
costs.
3. Decreasing value of chocolate as
purchasing power and demand
increases (gifts demanded change
from chocolates to toy cars).
 STRENGTHS
1. Globally recognized brand along with
successful mergers (e.g. General
Foods, Heinz).
2. Wide/diverse product portfolio
including brands popular with
consumers.
3. Strong financial strength.
4. Strong distribution network.
5. Excellent performance in
new/emerging markets due to
investments in R&D and innovative
technologies.
OPPORTUNITIES
1. Cadbury acts as a gateway for Kraft
into developing countries (India,
Mexico, SA).
2. Acquisition will provide Kraft
shareholders with a bigger portfolio
with high-margin growth products.
3. Splitting into two corporations each
having different strategic priorities,
operational focus.
4. Changing consumer taste and
behaviour gives opportunity to create
revenue streams with new products
5. Exploit each other's technology for
economies of scale.
(Helms and Nixon, 2010)
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WEAKNESSES
1. Low market penetration in European
countries
2. Declining sales due to more
competition and lower switching
costs.
3. Damaged brand image due to product
recalls.
4. Gaps in capabilities.
THREATS
1. Substitutes and low-quality products
are threats, especially in the low-
income markets.
2. Fluctuations in the price of raw
materials is a huge risk.
3. High competition in the food industry.
4. Economic recession effects such as an
increase in cost of living and rising
wage rates.
3. PESTLE ANALYSIS OF CADBURY – KRAFT

I. Political - Due to the increasing governmental concern regarding escalating

obesity levels, the UK started considering whether imposing taxes on sugar were
necessary in order to pressurize manufacturers to utilize lower sugar levels in their
products (Butler, 2015). In the wake of Cadbury’s hostile takeover by Kraft,
additional political responses were also put forward regarding business activities
(Morris, 2014).

II. Economical - As the recession hit, the value of the pound fell during 2010
resulting in a fall in GBP (Hsia et al., 2010), which led Cadbury to bid its shares in
the international market as a result of share price & currency fluctuations. This led
Kraft to bid Cadbury at a lower price than its actual value, with Kraft's primary focus
being the profit it would gain from this takeover. This was mainly motivated by the
fact that Cadbury continued a strong performance in these recessionary times due to
its global economic presence (Anwar, 2019).

III. Socio-cultural - Social patterns in the macro environment affects the behaviours
of the customers. The trend of snacking and crisps is increasing day by day and the
threat of obesity is forcing consumers to reduce their intake of sugar and milk
products. There is a huge pressure on Cadbury and Kraft to keep up with the constant
changes in the customer’s preferences. As customers become more educated, they are
able to identify the issues with the product themselves and might switch. Since both
Cadbury and Kraft are in the food industry, they need to be more customer oriented
rather than product oriented and hence will have to be extremely alert (Anwar, 2019).

IV. Technological - Due to rapid technological advancements, Cadbury and Kraft

must constantly attempt to push boundaries through innovative measures. Online
retailing and social media are measures that can be utilized to boost sales through e-
commerce and interact with target markets/consumers respectively. Efforts must be
made to upgrade the value chain network and keep up with emerging innovative
technologies in order to maintain competitive advantage and ensure business growth
in the future.

V. Legal - a legal obligation both brands hold is to specify the nutritional value and
ingredients, to make sure consumers are fully aware of the product content before
they decide to make a purchase. Also due to the scale of the Kraft and Cadbury
merger as well as the publicity it received forced the UK to strengthen its legal and
regulatory framework in regard to mergers/takeovers. Moreover, the rising concern
with health and obesity have led to stricter food regulations (Ambaras Khan, 2010).

VI. Environmental - the source of material and amount of packaging used is an area
of concern as the environmental impact is significant. Another concern is the total
carbon footprint emission due to activities of production/manufacturing,

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 distribution/logistics. Not to mention, Cadbury is already committed to sourcing its
Cocoa beans from fair trade channels which is a positive initiative (Lopes, 2016).
4. VRIO ANALYSIS

I. Value

1. The financial resources of Kraft and Cadbury assist both in countering outside threats as
well as in the exploitation and financing of any future external opportunities. As such,
these resources are considered very valuable.

2. Consumers hold high regard for the products as these items are viewed as being greatly
differentiated to that of other competitors. Due to this, the perceived value among
customers increases, and in turn makes the products more valuable for the firm.

3. A skilled labour force improves production levels for Kraft and Cadbury. Having a loyal,
hardworking staff while also maintaining a high level of employee retention rate adds to
the organisations as well. All these qualities only serve to increase value to the resulting
product for consumers.

4. A well-established distribution network that encompasses a wide customer base and

makes products readily obtainable adds value for the organisations in the form of higher
income.

5. Taking out patents assists in reducing obstruction efforts from rivals while conducting
trade. Furthermore, by granting patent licenses to external manufacturers, an additional
profit stream can be gained, making this a valuable firm asset.

6. The research & development and cost structure of the organisations do not add significant
value as the costs outweigh the potential benefits making them competitive
disadvantages.

II. Rarity

1. The financial resources are seen as strong and rare, as Kraft had built a strong operating
and financial momentum as a foundation for the acquisition which will be enhanced
further along with cost savings.

2. The current trading and prospects of Kraft are unique, which provided sustainability and
a strong strategic business model (Zachary, 2018).

3. The food products (snack, beverage, cheese, grocery, convenient meals) would be
deemed not so rare as there are many competitors in the market providing the same

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 product line. But this resource is still valuable and is an important resource for the
company.
4. The strong employee force with strengthened leadership and skills are a rare and
beneficial resource for the company.

5. Well-built distribution network in traditional grocery channels with growth in emerging

markets through presence in instant consumption channels. This is also a rare resource as
it needs investment of time and effort to create an effective distribution network that
gives tough competition.

III. Imitability

1. The financial assets of Kraft and Cadbury have been obtained over a number of years
using their earnings. The same is true for their distribution network, which was also
developed gradually. As such, their rivals would have to go through a similar long
process to build a substantial distribution network or finance assets on Kraft and
Cadbury’s scale. Therefore, these resources are difficult to imitate.

2. In terms of trading prospects both Kraft and Cadbury’s products wouldn’t be too difficult
to imitate as long as competitors invest generously on R&D in terms of time and money.
Making it easy for rivals to gain a competitive edge or even become direct competition in
the long-run.

3. Company employees often require training as part of their job requirement to improve
their skill levels. The same is true for most businesses including both Cadbury and Kraft.
Other rival companies can easily imitate and train their own employees in a similar
fashion, or even lure Cadbury/Kraft employees to their firm through more attractive job
offers.

4. Patents are what protects the integrity and innovation of a firm as they assist in boosting
product differentiation and productivity. Rivals are forced to create and innovate their
products around Kraft and Cadbury patents. As such, patents are an imitable resource.

IV. Organization

1. Kraft and Cadbury’s financial assets are thoughtfully invested to maximize opportunities
and to thwart any emerging threats. This strategic use of their resource provides the firms
with a sustained competitive advantage.

2. The full potential of the patents are not being properly utilized by Kraft and Cadbury
according to the analysis conducted. It is an unexploited competitive advantage which
can be transformed into a sustained competitive advantage if they were to sell their
patented products before the expiry date.

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3. The Kraft and Cadbury distribution network is a well-established and organized one
ensuring product availability to outlets and consumers. Thus, this also becomes an area of
sustained competitive advantage.

4. Cadbury under Kraft would have no shortage of products and thus, the customers have a
wide variety to choose from. This part of their strategy has been organized well in order
to have a sustained competitive advantage.

Resources V R I O
Financial assets yes yes yes yes

Trading Prospects yes yes no no

Product line yes no no yes

Skilled labor force yes yes no no

Effective Distribution network yes yes yes yes

R&D no no no no

Patents yes yes yes no

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5. VALUE CHAIN ANALYSIS OF KRAFT

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 Kraft Foods Value Chain Analysis
(Further details in Appendix 7)

Primary activities

Inbound logistics - low cost supplies, inventory control and adequate raw materials
(Lopes, 2016)

Operations - process from raw material to finished product. Includes both manufacturing
and service activities.

Outbound logistics - using intermediaries to deliver to end users. Can be used to find
competitive advantages and achieve business growth.

Marketing and Sales - promotional activities to differentiate brand from other competitors
and to develop brand equity.

Customer Service - includes pre and post sales services to improve customer loyalty and
create good brand reputation

Secondary Activities

Firm infrastructure - quality & strategic management, control overhead costs, legal
matters handling (acquisition and expansion in various emerging markets globally).

HRM - analyzing HRM helps with skills and commitment of the employees whilst
minimizing competitive pressure.

Technology - all activities are tech dependent. Divided into product and process
development activities.

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Procurement - linked to multiple activities of the value chain and so Kraft should be strict
with procurement.
 6. PORTER’S 5 FORCES

I. Threat of New Entrants

The rate of new entrants would be low because to survive competition against well-
established brands like Kraft and Cadbury, an entrant will need a strong competitive
advantage or a USP to make themselves standout.

Another reason for this threat being low is that the investment amount to enter or even
survive is still exceptionally high. Additionally, to survive such competition, new entrants
will need something that benefits them like prominent distributors or a strong brand
equity.

II. Threat of Existing Rivalry

The food industry is a highly competitive one as there are numerous rivals. Moreover, the
cost of switching to substitute products is low which further increases the threat of
rivalry. Nevertheless, with the acquisition, Kraft and Cadbury have become stronger with
the combined resources. Kraft’s main aim behind the acquisition was to make use of
Cadbury to gain a competitive advantage.

III. Bargaining Power of Buyers

Since purchasing decisions change on the basis of preference, buyers look for good
quality at relatively low prices. Moreover, there are plenty of substitutes in the market
and being a customer oriented industry, there is a huge threat of losing customers to other
brands. However, there are also brand loyal customers that will not compromise on the
brand they use and pay a premium price. In that case, the bargaining power of buyers is
likely to be low.

IV. Bargaining Power of Suppliers

Having Cadbury under Kraft acquisition increases the global footprint of Kraft, enabling
it to source raw materials and other manufacturing essentials from various suppliers, thus
providing them leverage and keeping inbound costs low and profits higher (Odih, 2010).
Thus, the bargaining power is low.

V. Threat of Substitutes

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Medium threat is posed as Kraft and Cadbury are providers of products with substantial
quality, so other lower quality products are less likely to grab customer attention or
convince them to switch. However substitutes or products priced lower than Cadbury or
Kraft are likely to pose as threats when considering price sensitive consumers who are
more willing to forgo quality for lower price.

(Blogspot, 2013)

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 7. KRAFT RESOURCES, CAPABILITIES & COMPETITIVE
ASSETS

For any organization or company, the resources & capabilities are the most essential
success factors and are the competitive assets. To perform activities proficiently, it is
important to have the required tangible & intangible resources and the competency to
create value.

Tangible Resources & Global scale distribution:

In case of Kraft Foods, with turnover of around $42 billion and sales in 150 countries,
operations are carried out in almost 70 countries with around 100,000 employees which
are valuable to the company (Sec.Gov, 2020). They also have around 37 facilities for
manufacturing and processing spread over US & Canada.

Net revenue/distribution by geography (Sec.Gov, 2020)

Most of the revenue comes from North America and this shows their strong presence and
distribution channel allocation by continents. Kraft foods have also created a mass
product line with 50+ brands of $100 million giving them a strong portfolio mix.

Sustainable strategy:

Kraft foods use a sustainable model to foster growth which includes:

1. Exploiting their resources & capabilities to generate sales
2. Reframing and rewiring for growth
3. Managing and balancing operational costs and ensuring quality (Sec.Gov, 2020)

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Through this they create a strong leadership team that focuses on innovation, R&D and
brand growth. A high performing company requires a skilled team to drive profits,
decentralized business units and appropriate incentives.

The spread in brand base for Kraft foods increases value for the company and restores
power to increase capital investments.

Exploiting capabilities:

To ensure the proper use of their resources, Kraft foods uses a wall-to-wall method to
enhance in-house efficiency and effectiveness. This creates high visibility and through
increased customer collaboration and expansion in the distribution channel, the
capabilities are put to good use.

Managing cost & quality:

It is important to monitor operational, administrative, in-house costs to build savings that

increase pricing power. This is done through streamlining production and flexible
departmental positioning. Building brand equity and providing quality products to
consumers is one of the main missions of Kraft’s strategy, and they accomplish this by
implementing improvement programs in the form of end-to-end approach, SAP systems
and overall channel & network optimization (Sec.Gov, 2020).

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