ASSIGNMENT 1

THE CASE OF POST HOLDINGS BUYING WEETABIX:

A Presentation of a Critical Analysis of the Current Strategic Change

WORD COUNT: WITHOUT REFERENCES =3,257

WITH REFERENCES SECTION = 3,782

BY

AUGUSTUS NYERERE MULI

STUDENT I. D. NO. 74105027; REGISTRATION NO. R1711D3986419

ST4S38-V1 - Strategic Analysis: Tools and Techniques

MODULE TUTOR: DR.JUSTON MUBWANDARIKWA

FEBRUARY 16 2019
CONTENTS

1.0 INTRODUCTION...................................................................................................................2
2.0 STRATEGIC POSITION OF THE COMPANY..................................................................3
2.1 Porter's Generic Strategies...................................................................................................3
2.2 Bowman’s Strategy Clock.....................................................................................................5
Figure 1: Browman’s Strategy Clock......................................................................................5
3.0 STAKEHOLDER ANALYSIS................................................................................................6
Figure 2: Stakeholder Map.........................................................................................................8
4.0 EXTERNAL FACTORS DRIVING THE STRATEGY.......................................................9
4.1 PEST Analysis......................................................................................................................9
4.1.1 Political Factors.........................................................................................................9
Table 1. UK Minimum Wage Rates from 2010 to 1 April 2019 .............................9
4.1.2 Economic Factors.........................................................................................................10
4.1.3 Social Factors..........................................................................................................11
4.1.4 Technological Factors...........................................................................................11
5.0 INDUSTRY ANALYSIS.......................................................................................................12
5.1 Supplier Power...................................................................................................................12
Figure 3: Porter’s Model of the Five Competitive Forces: The case of Weetabix......13
5.3 Threat of Substitution.......................................................................................................14
5.4 Threat of New Entry..........................................................................................................14
5.0.1 Findings and Conclusion of the Industry Analysis..................................................14
6.0 CONCLUSION......................................................................................................................15
7.0 REFERENCES......................................................................................................................16
1.0 INTRODUCTION

Strategy has evolved throughout the years. The amount of competitive forces
facingorganisations may be the result of globalisation. This has forced companies to come up
with strategic approaches to survive, increase market sharesand most importantly to gain
competitive advantage. Acquisition is one of thestrategic approachesfor organizationalgrowth
and accomplishment of business objectives and profitability (Malik et al., 2014).

This paper presents a critical analysis of Post Holdings’ acquisition of Weetabix. It explores
the strategic framework of the acquisition, critically reviews and analyses the relevant
internal and externalstakeholders and the breakfast cereal industry. Porter’s Generic strategies
and Bowman’s strategic clock would be used to explore the Weetabix strategic positioning.
Stakeholder Map of Weetabix case will be drawn and discussed. PEST analysis will be
carried out to analyse what drives the Weetabix’s strategy to achieve profitability. Finally,
Porter’s Model of Fives Competitive Forces will be used to analyse the breakfast cereal
Industry in the case of Weetabix case and its attractiveness in terms of profitability..

Post Holdings Inc. is a consumer-packaged goods company, which manufactures, markets

and sells both branded and private label cereal products. In 2017 it acquired Weetabix
Limited, also a breakfast cereal company, thus entering into the British market. The
acquisition would result to change of internal and external stakeholders and thus requiring re-
alignment of company to steer it to increased profitability.

2.0 STRATEGIC POSITION OF THE COMPANY

Johnson et al., 2017 refers strategy as the capacity and direction of an organisation over the
long term which achieves advantage for the organisation through its mobilisation of resources
within a changing environment to meet the needs and expectations of its markets and
stakeholders eBook (2019) defines strategy as a set of actions that managers take to
outperform its competitors and achieve superior probability. Strategy is about competing
differently from rivals; doing what competitors don’t do, or even better what they can’t do.
Wickham (2001) takes it further by defining strategic positioning as the method by which an
organization seeks to distinguish itself from its competitors. In buying of Weetabix, Post
holdings had to analyse its position in the target markets in respect to its competition as

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argued by eBook (2019), Chew (2009) and Porter (2008). Thus Weetabix acquisition by Post
Holdings had to conduct a deliberate strategic positioning process to understand the internal
and external environment in which they will operate and then adequately align themselves to
outperform its competitors and achieve superior profitability (eBook (2019), Galal 2013) in a
globally changing environment.

2.1 Porter's Generic Strategies

Michael Porter (1980) proposed three general strategic approaches namely: cost leadership,
differentiation and focus as seen in Figure 1 below. Cost leadership is where a company will
lower its costs to increase sales, thereby increasing market share and may result to
profitability. In differentiation strategy a company’s products/services will be differentiated
so that it stands out and is more attractive than it’s competitors and is more attractive thus
creating a niche market. This strategy is successful in markets that are not price sensitive and
has few rivals. In focus strategy a companytakes a narrow focus and pays attention to a few
target markets or segments of the industry. The focus strategy is perfect for companies that
are fully aware of its market and has developed products to meet specific needs. In meeting
these needs, the company can employ either a cost focus or a differentiation focus.

Figure 1. Porter's Generic Strategy Grid. Source: https://s3-eu-west-1.amazonaws.com/tutor2u-

media/subjects/business/diagrams/porter-generic-strategies-diagram.jpg?mtime=20150418103059

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With this in mind, it seems that Weetabixwill employeddifferentiation strategy to market its
products globally especially in China, UK, Mexico and Africa. Its products are exported to 80
countries, while it also has factories in Europe, East Africa and North America (BBC 2017)
Focused Differentiation approach may increase sales to niche markets. As reported by the
BBC article, China’s market sales have not seen significant increases due to the Chinese
preference to liquid-based cereals. Knowing this position, the acquisition would strategize on
ways to of how to reach the Chinese market. Although Weetabix had a range of breakfast
cereal, thecompany research would identify conditions of particular markets and created a
version of its product to meet the specific needs of the particular niche. According to Tanwar
(2013)the differentiation strategy, otherwise called niche strategy would be adopted to
produce and market products for the target markets. Focussed differentiation strategy would
mean that Weetabix would have to be more innovative and position themselves after the
acquisition to attract specific customers. Forexample in 2013 Weetabix introduced a range of
breakfast biscuits to caterfor customers that do not like the cereal breakfast as mentioned
above.

2.2 Bowman’s Strategy Clock

Cliff Bowman expanded on Porter’s strategic positions, mainly focusing on eight possible
positions by which a company’s product or service can be classified by focusing on the price
and perceived value to the customer (Thebusinessprofessor.com, 2018).Bowman'sClock has
been developed as part of breaking down how an organisation’s productcan be positioned to
bargain for the most competitive position in the market. The strategy clock is used by
companies to determine their competitive position relative to other players in the market. It
assumes that in a competitive environment were similar brands exists; customers would buy
based on perceived value as argued by Bowman and Faulkner (1997).

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 Figure 2. Bowman's Strategy Clock. Source. Pininterest.com

On Bowman’s Strategy Clock, the Weetabix case would beplaced at differentiation

strategyposition given the focus on research and development the company has been involved
in to bring its product to new markets and changing consumer trends (Drakakis 2017). The
fact that Weetabix exports cereals to more than 80 countries (BBC 2017) where each locality
has its uniqueconsumers’ needsconfirms that Weetabix spends time studying differentiated
markets for its products.

Weetabix employed a differentiation strategy to grow the business internationally. Although

Weetabix had a portfolio of brands including Weetos, Ready Brek, Oatibixetc, the company
decided to use only Alpen and Weetabix in its international expansion effort (Allchin, 2012).
Based on its market research which pointed to the need for a healthier option, Weetabix
introduced Breakfast on The Go drinks in 2014.Staying relevant, after years of product
development,Weetabix launched Weetabix protein and protein crunch to meet change
consumer needs for healthier products and compete with large competitors like Kellogg’s
brands.

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Weetabix also used the differentiation focus strategy in global markets by adopting unique
strategies in particular markets that create higher value proposition
(Thebusinessprofessor.com, 2018). For example; to meet specific needs of the market, the
company also employed a differentiation focus strategy in global markets such as Kenyaby
implementing a distribution strategy that suits the mode of consumption by the use ofbicycles
to deliver their product, at the same time adopting a different strategy positioning in
Mexicoas reported by Allchin (2012).

3.0 STAKEHOLDER ANALYSIS

Stakeholders are persons and groups that have a vested interest in abusiness. A basic
definition of stakeholder is: “…any group or individual who can affect or is affected by the
achievement of an organization’s objectives.” (Freeman, 1984 pp46).Other variants of
stakeholder definition were put forward by Nutt and Backoff, (1992), Bryson, (1995, pp27)
and Eden and Ackermann(1998, pp117). These persons and groups would have different
levels of interest in the business and can be classified as either primaryor secondary. Primary
stakeholders have control of activities that are internal to the business. In the case of
Weetabix acquisition by Post Holdings, the stakeholders were grouped as below.

Primary Social Stakeholders:

 Owners/Shareholders of Post Holding and Weetabix
 Investors and financiers
 Employees of Weetabix
 Customers
 Suppliers and partners

Secondary Social Stakeholders:

 Government, councils, counties
 Competitors
 Media and journalists
 Public
Primary Non-Social Stakeholders:

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  Breakfast Cereal Industry, Environmental groups
Secondary Non-Social Stakeholders:
 Regulator, CSR charities

Bryson (2003) in his review “What to Do When Stakeholders Matter: A Guide to Stakeholder
Identification and Analysis Techniques” gives an in-depth literature review on the importance
of stakeholder analysis. The author argues that stakeholder analysis is the ‘smart move’ by
which companies get to understand, craft strategies and manage internal and external
environment for the company to achieve superior profitability. In doing so, the power and
interest of each stakeholder in a business is known and prioritized. This is done by using the
stakeholder map.

The acquisition of Weetabix by Post Holding has various stakeholders as stated above. Using
a Power Register and Power Interest Grid, a Stakeholder Map is drawn with four quadrants
showing power and interest of various stakeholders in the case of Weetabix. As seen in
Figure 2. It’s observed that media and charities have low power and low interest but they
need to be informed and monitored. Governments and regulators on the other have high
power because of licensing and regulation. Their conditions must be met without fail.
Owners, investors, shareholders have high power and are interested in the success of their
business thus strategies must be crafted to satisfy them. It was important that the customers
remained satisfied and not be negatively impacted by the activities of the acquisition.
Managing competitors was of high interest. Employees should be kept informed so that their
concerns about job tenure is assured.

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 Figure 3: Stakeholder Map

 Government, Councils  Owners/ Shareholders/ Investors

 Regulators  Competitors
High

 Customers and Suppliers

Keep Satisfied
Satisfy and
POWER

Manage Closely
 Media/ Journalists  Employees
 CSR Charities  Breakfast cereal Industry
 Trade unions
Low

Monitor and Key Players. Keep

Informed
Inform
Low High
INTEREST
EXTERNAL FACTORS DRIVING THE STRATEGY

4.1 PEST Analysis

There are a number of factors that impact on the success of an organisation. In

reviewing the macro-environment, it is important to analyse the factors that may
impact the organisation’s demand and supply mechanisms thereby delaying the
accomplishing of the organisation’s strategy. (Johnson and Scholes, 1993).

A PEST Analysis is a strategic tool that provides an analysis of the organisation’s

external environment. The analysis provides a snapshot of the company’s Political,
Economic, Social and Technological environment. The analysis essentially provides
a view, via separate lenses, of the environment in which the institution operates.

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3.1.1 Political Factors
UK wage bill continues to increase since 2010 to 2019 as seen in Table 1 below.This
scenario is bound to affect the profitability of Weetabix due to extra costs in financing
of its labour. Strategies for company to stay profitable maybe many and diverse
with various consequences. Research and innovation? Reduced workforce?
Products price increase? Entry to new markets?

Table 1. UK Minimum Wage Rates from 2010 to 1 April 2019

Y EA R 25 A ND O V ER 21 TO 2 4 1 8 TO 20 U ND E R 18 AP PR E N TI C E

2019 £8.21 £7.70 £6.15 £4.35 £3.90

2018 £7.83 £7.38 £5.90 £4.20 £3.70

2017 £7.50 £7.05 £5.60 £4.05 £3.50

2016 £7.20 £6.95 £5.55 £4.00 £3.40

2015 £6.70 £6.70 £5.30 £3.87 £3.30

2014 £6.50 £6.50 £5.13 £3.79 £2.73

2013 £6.31 £6.31 £5.03 £3.72 £2.68

2012 £6.19 £6.19 £4.98 £3.68 £2.65

2011 £6.08 £6.08 £4.98 £3.68 £2.60

2010 £5.93 £5.93 £4.92 £3.64 £2.50

Source: Minimum Wage, 2019. Online: http://www.minimum-wage.co.uk/

Further, the weakening of the British Pound after Brexit as reported by Daneshkhu
(2017) will see an increase in Weetabix products across the board in UK.Higher
costs may mean less sales as customers buying power is generally eroded. In the
same article Weetabix’s CEO confirmed that prices may increase though the
company had absorbed the costs of a weakened Pound.

Finally Weetabix will be operating in different countries and thus will have to adhere
to their regulations, laws, taxes and standards and controls set by these
governments.

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3.1.2 Economic Factors
After Weetabix was bought by Post Holdings, its activities went fully global: US, UK,
China and East Africa. These regions are at different levels of economic growth and
development which is compounded by different political factors in play. For instant,
Chance (2017)reported that economic growth in Britain for 2017 had dropped
sharply to 1.7% due to the Brexit vote; while in US it was unaffected at 2.2% in 2017
compared to 2.3% in 2018 and China’s was forecast at 6.8% for 2018.

Thus, Weetabix acquisition case will have to craft country and region specific
strategies to trade and do business despite that the acquisition may have brought in
bigger economies of scale in production and trading. Research, innovation and
product development and marketing; plus understanding the local economies,
education level of customers maybe some of these strategies.

The global nature of acquisition by a US entity, inter-country trade relations

especially for US with other countries will come into play. If relationships are
strained e.g., US-China, products from Post Holdings will face more trade barriers in
China.

3.1.3 Social Factors

This dimension represents the demographic characteristics, norms, customs and
values of the population within which Weetabix operates. Population trends such as
the population growth rate, age distribution, income distribution, career attitudes,
safety emphasis, health consciousness, lifestyle attitudes and cultural barriers are
key factors in driving Weetabix’s strategy. Due to the global nature of the acquisition,
labour, product development and marketing strategies will be country, region and
customers’ segment specific. In addition, it also says something about the local
workforce and its willingness to work under certain conditions.

After the acquisition, Weetabix and Post Holdings operation will be in various regions
as mentioned earlier and operations will be varied to meet the needs of all its
stakeholders. Thus company’s focus on market research and innovation will be key
so as to stay relevant to different cultures, cultural shifts and lifestyles as seen in
China’s breakfast options (Allchin 2012).

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3.1.4 Technological Factors
Technology provides opportunities for research and development of new products,
improvement of existing ones and marketing strategies. A case in point is
introduction of DrinkableCereal called ‘Weetabix on the Go’ (Happen, 2018) which
reported above-expectations initial sales. Due to E-commerce as a platforms and
internet technologies customers may be able to learn key products easily and
quickly. Drakakis (2017) reported thatWeetabix seeks to spot market trends early
and to invest in the required innovation to meetthe specific demand.

4.0 INDUSTRY ANALYSIS

An industry is made of the group of companies that produce essentially the same
goods or services (Johnson et al, 2017). Porter’s Five Forces Framework, developed
by Porter (1980) is a tool that helps to identify the attractiveness, in terms of
profitability potential, of an industry based on these five forces: 1) threat of new
entrants, 2) threat of substitutes, 3) power of buyers, 4) power of suppliers, and 5)
extent of rivalry between competitors.

In the case of Weetabix acquisition by Post Holdings, Figure 3 attempts to identify

the powers and factors that show its profitability within the cereal industry.

4.1 Supplier Power

As Figure 3 shows, one of the main inputs required by Weetabix is wheat. Suppliers’
power to bargain is weak due to its availability in well-established farms within 50-
mile radius from the head office in Burton Latimer (Businesswire.com, 2017).  This
may be threatened by changing global weather patterns which may require the
company to enter into research in wheat production in the long term.

4.2 Buyer Power

Thebuyer’s power to reduce the price of Weetabix products in this case is weak.
Though there is high concern of buyers to switch to other brands, the customer base
for the Weetabix products is extensive. Businesswire.com (2017) reported that
Weetabix is UK's number one seller of breakfast cereal and is said to be the most
trusted and most recommended cereal, exporting to 80 countries globally. Further,

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Drakakis (2017) reported that Weetabix was ’’…..the only major manufacturer to grow
value and volume sales in a declining category’’

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Figure 4: Porter’s Model of the Five Competitive Forces: The case of Weetabix

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4.3 Threat of Substitution
The power of substitutes in the Weetabix case appears to be high but it can be argued that,
new cereals industry products may be rare due the fact that many cereal products have
already been manufactured. And customers may have tried them all. But due to quality and
preference, the customers may have stayed loyal to known and high-value Weetabix
products. Of note is Weetabix’s failure to penetrate the Chinese market yet it didn’t invest
into production of hot cereal meals (Businesswire.com, 2017).

4.4 Threat of New Entrants

This competitive force seeks to assess the power and threat of new entrants into cereal
breakfast industry.As seen in Figure 3, there are many reasons as to why new entrants will be
able to threaten Weetabix products. Thus there is weak threat to Weetabix from new
entrants.

4.5 Competitive Rivalry

This competitive force seeks to measure the strength of the players in the market to increase
their market share. Nestle, Weetabix, etc. hold 78% of the global market share while its
market share in USA is low. The USA cereal industry is very concentrated with top players
like Kellogg, Post Holdings and Quackerwho have 85% market share (Newswire, 2017).
Thus Posts acquisition of Weetabix will see its products gain market share in USA.

5.0.1 Findings and Conclusion of the Industry Analysis

From this analysis of the breakfast cereal industryit may be concluded that Weetabix will
continue to be profitable in the long-term:

 The threat of new entrants is low.

 Though competitive rivalry is high Weetabix remains a formidable company within

the industry.

 Buyer Power is weak implying prices of its inputs will not be dictated by the buyers.

 Threat of substitution though moderate will not decrease the company’s profits

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5.0 CONCLUSION

Weetabix and Post Holdings were separate formidable companies in breakfast cereal industry
and their merger results to a global company with highly respected brands. The strategic
framework analysis of Weetabix case shows that the acquisition is expected to be beneficial
for both companies’ products and brands, resulting to an easy entry to new marketswith a
wide range of products as Lee and Lieberman (2009)argued. Weetabix’s entry to US and Post
holding entry to China and other regions will be easy and may result to increased
profitability.

Changing consumer tastes and preference plus marketing calls for the merger to invest more
in research and innovation so as to stay competitive. The merger has no control over spiral
effects on Brexit in UK, and the global changing weather patterns. It remains to be seen what
the effects will be on the merger’s profitability. Though a gleam forecast, it’s expected that,
the strong research and development portfolio and the strategic framework of the acquisition
will see Weetabix’s profitability will continue to grow in the future.

6.0 REFERENCES

1. Allchin, J. (2012). Weetabix: Teach a market to love your product - Marketing Week.
[online] Marketing Week. Available at:
https://www.marketingweek.com/2012/04/11/weetabix-teach-a-market-to-love-your-
product/ [Accessed 8 February 2019].
2. Bowman, C. and Faulkner, D. (1997).  Competitive and Corporate Strategy. Irwin.
3. Businesswire.com (2017). Failure Case Study: Weetabix in China - An International
Expansion that Failed to Reach Expectations - Research and Markets. [online]
Available at: https://www.businesswire.com/news/home/20170623005405/en/Failure-
Case-Study-Weetabix-China---International/[Accessed 10 February 2019].
4. BBC News.com (April 2017). Weetabix to be sold to US company Post
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18. Lee, G.K., and Lieberman, M.B. (2009). Acquisition vs. Internal Development
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