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PHILIPPINE CHRISTIAN UNIVERSITY

GRADUATE SCHOOL
STRATEGIC MANAGEMENT
Submitted by:
Prof. Murallos

Submitted to:

Jerwin Tubay
Study
Odessa Jarina
Michelle Lou
Statement &

Kraft Case
Assumptions
Problem
Alternative Courses of Action

A. Assumptions
1.

General Environment Stability

2.

3.
4.

Industry Growth Prospects


Expected positive growth revenue for U.S. market
Expected negative growth in revenue for international market due to dollar gains.
Financial Strength and competitive position
Show relevant ratios

Financial ratios
Current Ratio
Acid test ratio
Debt-to-Equity Ratio
Asset-to-debt ratio
Accounts Receivable
turnover
Inventory turnover
ROE
ROA

I.

Expected steady growth of packaged and processed food in US market which will give
large profit in retail sales.
Increase in worldwide demand because people do not have enough time to prepare for
their foods.
Rising rate of obesity
Rising cost of petroleum

2008

Actual
2007
2006

Remarks

1.03
0.54
84%
154%

0.63
0.34
47%
167%

0.79
0.39
25%
206%

Weak
Weak
Highly leveraged
Can liquidate debt upon liquidation

8.52
10.79
11.7%
4.4%

7.97
9.51
9.3%
4.2%

N/A
N/A
N/A
N/A

Increasing trend
Increasing trend
Increasing trend
Steady growth

PROBLEM STATEMENT

Maintaining to be the leading and largest food company in the United States and
becoming the largest food company globally both in terms of revenue and profit.
1. Support information why this is a problem

a. There is no evident negative problem that affects Kraft that will reduced
their profit and position in the market. Thus, their problem is to maintain
their position and grow more
2. Time Context 2009
3. View Point Irene Rosenfeld, CEO
II.

ALTERNATIVE COURSES OF ACTIONS


1. TOWS / SWOT Matrix
Strength
1. Highly leveraged with 84%
debt-to-equity ratio for 2008 which
means making profit out of others
money.
2. Solvent enough to pay-off all
liabilities with 154% and 167%
asset-to-debt ratio for 2008 and
2007 respectively
3. Increasing accounts receivable
and inventory turn-over ratios of
8.52x from 7.97x for accounts
receivable and 10.79x and 9.51x
for inventory all in years 2008 and
2007 respectively.
4. Increasing return on equity and
return on assets ratio of 11.7%
from 9.3% for equity and 4.4% and
4.2% for assets all in years 2008
and 2007 respectively.
5. Positive revenue growth in US
convenient meals (7%), US
Grocery (7%), US Beverages
(6%), US Snacks (1%).
6. Early user of all
communications media (outdoor
billboards, journals, magazines,
radio)
7. Effective launch of several
websites for advertising and
publicity (Oreo Double Stuf
Racing League (DSRL)
8. Having customer interactive
website which include Product
Info and Recipe Box which allow
the visitor to store and retrieve
favorite recipe whether personal or
own by Kraft.
9. Simple and clear mission
statement
10. Having a CEO regarded as
highly effective female manager in
United States.

Weaknesses
1. Weak liquidity ratios of
1.03x and 0.63x current ratio
for 2008 and 2007
respectively also 0.54x and
0.34x acid-test ratio for
2008 and 2009 respectively.
2. Negative revenue growth
rate for US Cheese (9%),
Canada & North American
Foodservice (10%) and
European Union (17%)
3. Divisions are determined
by geographical area and not
by product.

Opportunities
1. Enhance waters containing
vitamins or supplements are
gaining popularity.
2. Expected steady growth of
packaged and processed food
in US market which will give
large profit in retail sales.
3. Increase in worldwide
demand because people do
not have enough time to
prepare for their foods.
4. Expiration and
renegotiation of commodity
prices in mid-2008 will expect
to lower the production cost
of baked products relying on
wheat, eggs and natural gas.

Threats
1. More people are now more
inclined to dine-out
2. Rising rate of obesity
3. Public health concern of
chemical and bacterial
contamination.
4. Rising cost of petroleum
5. U.S. dollar gains
6. Nestle largest food
products in the world with
sales coming primarily in
international sales. Also
produces health, beauty and
pet care products.

11. Commitment in developing


new products and innovation
12. Food safety program has been
adopted as issues of chemical as
issues of chemical and bacterial
contamination and new food-borne
pathogens remain a public health
concern.
13. Actively researching
consumers eating habits and
preferences at home and at
Restaurants
SO
1. Obtain a loan from bank
amounting to $3.6billion to
finance further expansion
strategies (S1, O1, O2, O3)
2. Increase market cap for
additional financing (S4, O1,
O2, O3)
3. Expansion of business
operations not only in US but
also internationally like Asia
(S5, O1, O2, O3)
4. Create an advertising
website that will further
support the positive growth
rate of the demand of
products. (S6, S7, S8, O1, O2,
O3)
5. Research and develop new
product or raw materials of
existing product that are
much cheaper to current
ones. (S11, S13, O4)
ST
1. Obtain a loan from bank
amounting to $3.6billion to
finance renovation and
modifications of grocery
stores to include small dining
area (S1, T1)
2. Create an advertising
media that will show
nutritional facts of Kraft
product and how it will not a
big impact to rising rate of
obesity. (S6, S7, S8, T2, T8)
3. Create an advertising that
will explain how the new
safety program adopted by
Kraft prevent the possibility
of chemical and bacterial

WO
1. Look for new supplier
contract that will give
lower prices to reduce
the current or
operational liabilities
(W1, O4)

WT
1. Invest more on
foreign financial
instrument. This will
compensate the slow
revenue growth for
international operations.
(W2, T5)

7. ConAgra Foods primary


competitor domestically
(North America) together with
other domestic stores such as
Heinz Company and Sara Lee.
8. Development of healthy
foods or those not containing
less trans-fat and fewer
calories or made of only
organic ingredients.

contamination.
4. Research and develop new
product that can be prepared
without the use of petroleum
like grilled. (S11, S13, T4)
5. Research raw material
substitute that can be
imported from other
countries to lower the cost of
product brought by US dollar
gains (S11, S13, T5)
6. Invest in foreign financial
instrument to increase
international operations
through foreign currency
gains (S1, S2, T6)
7. Market Penetration to
expand operations and
maintain position in US (S4,
S5, T7)

2. IFE/EFE Matrix

EFE

High (3.0 -4.0)


Medium(2.0
2.0)
Low (1.0
1.99)

Strong (3.0
4.0)
I
IV

IFE
Average (2.0
2.9)
II
V

VII

Conclusion: Grow and Build


a. Backward, Forward or Horizontal Integration
b. Market Penetration
c. Market Development
d. Product Development
3. SPACE Matrix

VIII

Weak (1.0 1.99)


III
VI
IX

Conclusion: Aggressive
a. Backward, Forward or Horizontal Integration
b. Market Penetration
c. Market Development
d. Product Development
e. Diversification
4. GRAND Strategy Matrix
RMG
Q2

Q1

WCP

SCP
Q3

Q4
SMG

KFC fall under Quadrant 1 for having rapid growth industry and strong
competitive position. Suggested Strategies are:
1. Market Development
2. Market Penetration
3. Product Development
4. Forward Integration
5. Backward Integration
6. Horizontal Integration
7. Related Diversification
5. SUMMARY OF STRATEGY
STRATEGY OPTIONS
Market Development
Market Penetration
Product Development
Integration Strategies
Diversification

IFE/EFE
1
2

SPACE
1
2

----------------END---------------

GSM
3
2
1

TOTAL
5
6
1
6

ACA 3
ACA 1
ACA 2