UNIVERSITY OF SOUTH WALES

Masters of Business Administration

Strategic Analysis; Tools and Techniques (ST4S38)

Tutor: Dr Christodoulos Kakouris

SUMMATIVE ASSESSMENT 1
A Critical Strategic Analysis of the Current Strategic Change within Weetabix by Post Holdings

Augustina Mary Akintolu

ID: R1701D2243191

22nd October, 2020

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Table of Contents

1. Introduction 3
2. The Relevant Types of Strategy 4
Corporate Strategy 4
Business Strategy 4
- Cost Leadership 5
- Differentiation 5
- Focus 5
Functional Strategy 6
Bowman’s Strategy Clock 6
3. Critical Evaluation of Major Stakeholders 7
4. External Analysis Using PESTEL 8
Political 8
Economic 9
Social and Cultural 10
Technology 10
Ecological 10
Legal 10
5. Internal Analysis Using Porter’s Five Forces Model 11
Threat of new Entrants 12
Threat from Substitute 12
Bargaining Power of Suppliers 12
Bargaining Power of Buyers 12
Competitive Rivalry 13
6. Conclusion and Recommendation 13
7. References 15

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1.0. Introduction

Organizational evolution and development is the sole desire of all established organizations
around the world. This organization do all odds to remain in business despite competitions in the
global market, they strive for a solid position to implement plans for the growth and
sustainability of their organization as well as increase the market share and not forgetting to raise
the value of their shareholders also creating business for the organization through acquisition and
mergers of another existing organization. According to Malik et al., (2014), he noted that
acquisition is a strategy used by an organization to enter and explore new market so as to
increase their market share.

Post Holdings Inc., an American based consumer company that produces, market and retail
branded cereal products and who has acquired eight (8) companies in the food industry as a
strategy for growth and expansion between 2014 and 2017. Weetabix was also one of its
acquisition in 2017 for the sum of $1.76 billion and it was an entry into the British and African
market for the Post Holding Inc. There is a very high competition in the British cereal market
where top brands with the likes of Nestle, Kellogg’s Cheerios, Weetabix, just to mention a few
dominate. The acquisition of Weetabix by Post Holdings brought about change in management
for both the internal and the external shareholders. This change paves way for the company to re-
evaluate and analyze its purpose so as to remain at a competitive advantage.

This report is aimed to analyze critically, the Post Holdings acquisition of Weetabix which was
previously owned by a Chinese food company called “Bright Foods”. The report will center on
using various strategic tools and techniques to arrive at a conclusion on the position of the
company and its shareholders strategically using six (6) segments. The first is the overview of
the work, the second segment analyzes the relevant types of strategy, while the third evaluate
critically the major stakeholders, the fourth segment will look at analyzing externally using
PESTEL to recognize and survey major market trends, second to the last will provide an analysis
of the industry using the Porters’ Five Forces to describe the pertinent industry element and the
last segment will provide the conclusion of the report.

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2. 0. The Relevant Types of Strategy

Johnson et al., define strategy as the function and management of an establishment or an
organization over a prolonged time that benefits or puts the organization in a convenient position
from the use of the resources within an evolving environment so as to achieve and exceed its
stakeholders' expectations. According to Ramon & Joan (2009), A strategy is a “contingent plan
of action which is design to achieve a specific purpose or goal.” Strategy then is said to be the
whole objective of an organization for its setup over a prolonged span of time. There are three
(3) types of strategy: corporate strategy, business strategy, and functional strategy.

2.1. Corporate Strategy

Corporate strategy is a process where all information about the organization or company is
clearly stated like its location, its target market, and competitors (Chew, 2009). The case of
Weetabix is an example, where China was not considered as a strategic location for the market
instead the market choice considered was the British market despite its company's former owner
being Chinese. The company (Bright Foods) experienced a decline in their turnover because the
Chinese prefer their breakfast hot instead of cold cereal which is a rather preferred option for the
westerners.

2.2. Business Strategy

The business strategy focuses on the activities of each business within the organization partake
and deliver on the corporate strategy. Porter (2008) stated that for an organization to be
successful, the business strategy depends on cost leadership, differentiation, or focus strategies.
Some established and large corporate bodies have strategic units and also establish their own
business strategy within the organization. This business strategy is also referred to as a
competitive strategy and can be seen in table 1 below

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2.2.1. Cost Leadership

Cost leadership can be defined as the retailing or selling at the lowest price in an industry. This
strategy is deployed to increase the turnover of an organization as a result of attracting a lot of
buys by selling at a lesser price from the competitor. In the case of Weetabix acquisition by Post
Holding, the company may consider growing its profitability by harmonizing the group and may
control the cost of production to decide upward review or downward review of price so as to
achieve a competitive advantage from competitors is the cereal industry.

2.2.2. Differentiation

Differentiation is when a product or service is perceived by its customer to be distinct from those
of its competitors. This distinctive is seen by the customers to be better and unique from its
competitors in the same industry. This type of strategy is successful where there is no price
sensitivity and competition are few. Weetabix adopted a differentiation strategy by concentrating
on growing the distinctive value for their customer. According to Roger (2017), “Weetabix has
been able to build various brands with a distinctive value proposition in their market segment.”

2.2.3 Focus

A focus strategy is where an organization or company focuses on a particular sector of market

space to sell its products and to a particular audience. When an organization operate on a focus
strategy, the company gain customer loyalty and it is always difficult for competitors to penetrate

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in suchmarket. This type of strategy is effective in a small or medium company and will be
ineffective in a larger organization.

In analyzing Post Holdings, it was discovered the Weetabix operates a differentiation focused
strategy. This strategy is employed to market their products in the global market, especially in
the UK and in Africa. These products are sold in 80 countries abroad with factories across
Europe, East Africa, and North America (BBC, 2017). Based on the BBC (2017) the article
reported sales in China have not been profitable due to the fact that the Chinese prefer hot liquid
cereal instead of cold cereal. This fact will give insight into the management of Post Holdings to
strategize and come up with a product that will interest the Chinese market based on their
preference. According to Tanwar (2013), the differentiation focused strategy which can also be
called a niche strategy will be applied to produce and supply goods and services to a specific
target audience. This strategy was adopted by Weetabix in 2013 when a niche product of
breakfast biscuits was introduced to substitute for consumers who do not like the breakfast
cereal.

2.3. Functional Strategy

Functional strategy has to do with specific actions, role or goals assign to different departments
and units within an organization to support the business and corporate strategy. Some functional
strategies are marketing strategy, Human Resources Strategy, Information Management Strategy,
Accounting Strategy, Research and Development Strategy, etc.

2.4. Bowman’s Strategy Clock

Bowman Strategy seems like an addendum or an alternative from the porter’s generic strategies
which address the company’s position in the market. It is a detailed way to map out the company
position within a market space which is based on price and perceived value. An illustration is
Weetabix, the company has continued to stand out with constant innovation by creating a valve
for its consumer with a unique product. This is achieved by the company from investment in
market research which was a result of equipping the research and development department and in
turn, they were able to provide useful and effective understanding for the company marketing
campaigns.

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In 2014, Weetabix introduced Breakfast on The Go beverage, this introduction was as a result of
research carried out on another top brand competitor Nestle. In the United Kingdom, Weetabix
also introduced the Weetabuddies campaign which encourages children to eat fruit with breakfast
cereal. As a result of this campaign, the company sales increased by 14 percent (Talking Retail,
2016). There was also the launch of Weetabix Protein and Protein crunch which also gave the
company a large market share from its competitors. Table 2 below is Bowman’s Strategy Clock

Source: Thebusinessprofessor.com

3.0. Critical Evaluation of Major Stakeholders

Stakeholders are individuals, groups, or bodies of an institution who has an interest in the
decision making and growth of an organization. According to Bryson, J. M. (2003), stakeholders
are individuals, groups who are considered by management or business leaders in an
organization. Walker, Bourne, and Shelley (2008), also define stakeholders as persons and
groups who have a shared interest in an organization. Furthermore, Stakeholders of an
organization include shareholders, customers, investors, employees, vendors, government, the
press, etc. (Shawn, 2017).

In the case of Post Holdings and Weetabix acquisition, both organizations had stakeholders. This
acquisition decision affected the stakeholders either positively or negatively, some shareholders

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of Weetabix sold their shares, some employees lost their jobs, and some vendor's contract was
dissolved. Applying an influence or power of stakeholders and interest of stakeholder’s matrix, a
map of stakeholder is drawn with four sections highlighting the power and interest of different
stakeholders of Weetabix as seen in table 3 below.

Stakeholder Matrix

Source: Walker, D. Bourne, L. and Shelley, A. (2008)

4.0. External Analysis using PESTEL

PESTEL is a strategic tools or framework used by marketers to monitor the external environment
that has an impact on an organization. There is no business or organization that can survive in
isolation from the environment it operates. In analyzing the external factor affecting Weetabix
and Post Holdings, strategic tools PESTEL will be used to analyze its environment. PESTEL is
grouped into six (6) classifications: P – Political Environment, E – Economic Environment, S –
Social and Cultural Environment, T – Technological Environment, E – Ecological Influences,
and L – Legal Environment.

4.1. P – Political Environment

The political environment is factors that have a strong influence over a business, it includes
government laws that regulate an organization. An example is the acquisition of Weetabix in the
United Kingdom where there was political instability after the country voted from the European

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Union (EU.) which led to uncertainty in the business environment. Due to the Brexit, the market
was limited to United Kingdom investors and suppliers, the value of the pound was also affected
and in turn, affected Post Holdings cost to acquire dollars to import wheat and other materials for
production from foreign countries. There was also an amendment of the employment law where
the minimum wage was reviewed upward per age group of an employee (Minimum Wage UK,
2017). Table 4 below shows the United Kingdom minimum wage 2017.
Minimum Wage in GBP

0
£7.05 £6.95 £6.7 £6.5
£7.5 £7.2 £6.7 £6.5
2017 2016 2015 2014

18-20 Under 18 Apprentice Under 18 Apprentice

Minimum Wage UK, 2017

4.2. Economic Environment

The economic environment is factors within the economy that has an influence on a business that
affects the capital and purchasing power and the future growth of an organization. These
economic factors can be inflation rate, disposable income, international trade, exchange rate,
employment rate, etc. When Weetabix was acquired by Post Holdings, Chu (2017) reported that
United State of America economy was growing at 2.7% while the United Kingdom grew at
0.4%, the country also experiences an increasing rate of inflation at 3%. Since these two
countries are at different economic growth and development, each country will have to strategize
on available options to trade and carry out business despite the acquisition which was to bring in
the bigger scale of production and trading. The company may consider opening outlets in

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different locations outside the owners’ territory and may also produce at low cost or introduce
new products.

4.3. Social Environment

Social factors are the influence that affects business decisions; they impact consumer’s needs and
the market size for goods and services of an organization. Some of these factors are culture and
norms of the people, demographic characteristics, ethnicity, religion, values, lifestyles, and taste
which can impact the operations in its various market, region, and customers. Weetabix being a
food production company that produces cereal was able to make a high turnover in the UK and
US compared to China who prefers hot breakfast.

4.4. Technological Environment

The world is ever changing with new technological advancement, this change in technology give
producers’ opportunity to improve on their product by investing in their research and
development to come up with new ideas to beat competitors. Weetabix has been able to
showcase of some their ideas by coming up with a cereal that is in form of a liquid called
Weetabix on the Go (Happen, 2018). E-commerce can also affect a business post-acquisition in
the international market, supply chain, and dealing directly with customers while also getting
feedback.

4.5. Ecological/Environmental Influences

Since current global discussion is climate change and global warming, it is important for an
organization to practice and abide by environmental laws by recycling packaging materials to
reduce environmental pollution. Post Holdings must consider package materials that are
ecosystem friendly not harmful to the populace.

4.6. Legal Environment

Legal environment comprises of laws and regulations that govern a country where a business is
located, laws like employment law, data protection act, health and safely law, etc. The United
Kingdom modification on employment law to review minimum wages up according to the age of
the labor force is a legal factor that affected Weetabix and Post Holdings.

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5.0. Internal Analysis Using Porter’s Five Forces Model

Johnson et al (2017) define an industry to be made up of a group of companies that produces
similar product or render the same services. Analyzing competitions in a market is important for
strategizing and to determine the position of an organization. Porter (2008) Five –Forces model
is used to analyze the aggressive strength of various competitors in a specific industry, it is used
to understand the market and assist the organization to develop a standard aggressive
strategy. He further argued that “the structure of the industry and the competition within the
industry are two different factors that can influence the profitability of a company.

In the case of Weetabix after acquisition by Post Holdings, where the breakfast cereal industry is
highly competitive, with the likes of Kellogg, Nestle, Cheerios just to mention a few, the porter
Five-Force model will best identify the factors that can influence the profitability of Weetabix.
The porter five force models are used to analyze Weetabix industry based on the following
models; the threat of new entrants, the threat of substitute products, bargaining power of
suppliers, bargaining power of buyers, and rivalry among existing competitors. Table 5 below
highlights Porter's five force models.

Source: Business-to-you.com

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5.1. The Threat of New Entrants

This refers to the threat from a new brand penetrating the market which will pose another
competition for the existing brands which can be a result of the high turnover to attract new
competitors into the industry. Once these new competitors gain access to the market, they will
try to gain market share by reducing their price lower than the price of the existing competitors
or the cost of production to gain an audience that is large enough to be profitable. Weetabix and
the existing cereal industry have strong customer loyalty and have a large market audience such
that entrance into the market is difficult.

5.2. Threats from Substitute Products

This is a threat which can occur when consumer switch to alternate products that can also satisfy
their needs. “The treat in breakfast cereal industry is very high because consumers have the
option of choosing alternative breakfast like fruits, yogurts, bread, fast food which are less
expensive” compare to cereal (Topper, 2015). Weetabix and Post Holdings can withhold this
treat only if they are able to produce substitute products for their consumers.

5.3. Bargaining Power of Suppliers

According to Porter (2008), suppliers has the right to influence bargaining power over buyers
with the threat to increase the price to make more profit or reduce the quality of goods or
services rendered. Wheat suppliers in the UK do not have that bargaining power over Weetabix
and Post Holdings because it is abundant in the region and there is a well-established farm within
a fifty-mile radius from Weetabix corporate head office in Burton Latimer (Businesswire.com,
2017). In this regard, the bargaining power of suppliers are low because wheat and grain which is
the main raw material for the production of Weetabix is readily available in large quantities in
the US and UK.

5.4. Bargaining Power of Buyers

Profit reduction for Weetabix is moderate despite Weetabix has a large consumer base, the threat
still exists and there is concern that consumers may switch brands and patronize other similar
product. According to Businesswire.com (2017), Weetabix is the UK’s most preferred and
number one selling breakfast cereal and also export to eighty (80) different

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countries. Furthermore, Weetabix is working with various wholesalers and distributors in the
form of target creation and presenting rewards for meeting targets. Through brand management
and campaigns of healthy food, Weetabix has gained the attention of the audience of grocery
store shoppers who will rather pay a premium price for healthy food.

5.5. Competitive Rivalry

The breakfast cereal market is a competitive market where strong branded rivalry exists, brands
like Kellogg, Nestle, Quaker, etc. Companies in this industry constantly come up with new ideas
and introduction of new products thereby making competition in the industry high. The rate of
competition in the cereal industry will make Weetabix invest in research so as to come up with
innovative ideas that will keep them in business and retain the market leader.

6.0. Conclusion and Recommendation

Post Holdings Inc. An American company that has grown over a couple of years from the
acquisition of companies ventured into the British market by acquiring Weetabix in 2017 form a
Chinese business owner under the name of Bright Foods for the sum of 1.7Billion Pounds. This
acquisition is as a result of the brand recognition of Weetabix as the most favored cereal brand in
the UK and Africa which will bring about a new market share and growth for Post Holdings.

Weetabix operate the differentiation strategy through the production of different product for
different market, an example is the “Breakfast on the Go” which was a hit with consumers who
do not have the times to sit in to have cereal breakfast but rather have it on the go. The ability of
the company to utilizes technology as a change management to be able to meet consumers need,
consider the political uncertainty like the Brexit to strategize will signify how the company will
be successful and retain the market leader in the long run.

Weetabix operate in a market where the bargaining power of the suppliers and buyers are low
because of the strategy Weetabix has put in place. The company partner with grocery stores to
sell their product in wholesales to attract consumers when they go shopping. Wheat is also in
abundant in the region which prevented suppliers of wheat not to inflate the price especially that
there is a wheat farm 50miles radius from the production plant in the UK. There is also the law

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of the country which also dictate the wages of labour in the country, for Post Holdings to
continually increase its turnover; it must consider reducing the cost of production through
investing in research and development with the current trend of technological advancement to
remain profitable.

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