Post Holdings Buying Weetabix

Osagie, Obazee
R1704D2623249
Strategic Analysis; Tools and Techniques/ST4S38-V1-17254
Amarachi Amaugo
7 June 2020.

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 Table of Contents

1. Introduction
2. Strategic position of the company
2.1 Porter's Generic Strategies
2.2 Bowman’s Strategy Clock
2.3 Relevant Levels of Strategy
2.4 Strategy Mapping
3. Stakeholder Mapping
4. Environmental Analysis Using PESTEL
4.1 Political
4.2 Economic
4.3 Social
4.4 Technology
4.5 Legal Environment
4.6 Environmental Influences

5. Industry analysis
5.1 Threat of Substitutes
5.2 Threat of new Entrants
5.3 Bargaining power of buyers
5.4 Bargaining power of suppliers
5.5 Industrial Rivalry

6. Conclusion
7. References

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 1. INTRODUCTION
Post Holdings an American base cereal establishment acquired Weetabix, a United Kingdom
based breakfast cereal establishment for $1.76 billion to break into the British and African
market. This move was calculated to take both firms existing product across pending frontiers
especially in the international market. Malik et al., (2014) explains acquisition as one of the
strategic approaches for organizational growth, accomplishment of business objectives and
profitability. Being aware that the aim of every organization strategy is targeted towards growth
and expansion, we will discuss critically the strategic analysis of the acquisition, the strategic
position of the company, stakeholder’s analysis, external analysis and industrial analysis with
relevant diagrams as illustration to enable us see how the strategic positioning of an organization
as well as a how a strategic approach to organizations challenges and resources results in growth.

2.0 STRATEGIC POSITION OF THE COMPANY

Weetabix is the second largest manufacturer in the UK ready-to -eat (RTE) cereal
category with iconic leading brand of 88 years heritage and best in class Health credentials
supported by leading brands like Alpen, Weetos, Ready Brex, and Barbaras. It holds a royal
warrant from Queen Elizabeth the second and the Prince of Wales.
Being at a competitive advantage is the goal of every organization. According to Johnson
et al., (2017) ‘strategy could be defined as the direction and scope of an organization over a long
term which achieves advantage for the organization through its configuration of resources within
a changing environment to meet the needs of markets and to fulfill stakeholders’ expectations’.

2.1 Porter's Generic Strategies

From Michael Porters perspective, one of the strategies from the diagram below is a
bases for competitive strategy.
According to Wickham (2001) on strategic positioning, it explains it as ‘the process in which an
organization seeks to distinguish itself from her competitors’. Weetabix applies focus
differentiation by making her product to be perceived by buyers as more unique than that of her
competitors. Example of such products are ‘Weetabix Biscuits’ and ‘Weetabix on the go’
targeting consumers who do not value cereal breakfast.

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 Figure (2.1)

2.2 Bowman’s Strategy Clock

Bowman and Faulkner (1997) explains that ‘in a competitive environment where similar
brands exist, customers would buy products based on perceived value’. Again, Weetabix will be
placed on ‘focus differentiation’ on Bowman’s strategy clock given her engagement in research
and development meant to bring her product to new market and satisfy changing customer trends
(Drakakis 2017). A result of such research is Weetabix-on-the-go. The differentiation strategy
was developed to break Weetabix into existing market in any new location or country and attract
customers loyalty.

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 Figure (2.2)

2.3 Relevant levels of Strategy

The three basic levels of strategies are network, cooperate and business level strategies.

2.31 Network Level Strategy

The existing strategic locations of Weetabix, her brands and numerous endorsements will
take it across existing frontiers and launch it into bigger market bringing a wider percentage of
international patronage. It also will now leverage on having Post as a major US cereal industry.
However, Post will now suffer some setback because UK left the European Union (EU) in
January 2020. An exclusion that will deny it free market economy with EU countries. On this
ground, Post absorbs some lost because it obviously won’t have bided that much on Weetabix if
she was not an EU member country.

2.32 Cooperate Strategy

By virtue of this acquisition, both firms will leverage jointly on their existing success and
will be expected to come out with more outstanding brands. This also puts Post on better bidding

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 platforms for other cereal company. On EBITDA which is a measure of an establishment overall
financial performance as well as its relevance to alternative/simple earnings or net income, Post
will enjoy expected Run-rate cost synergies, limited capex needs leading to less maintenance
capital expenditure and tax efficiency.

2.33 Business Strategy

This comprises of the benefits from both network and cooperate strategies which will
bring increase in shareholders dividends making them want to invest more.

2.4 Strategy Mapping

Below strategy map on figure 2.4 is used to analyze Post Holdings strategy in sustaining
competitiveness in the cereal industry.

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 Figure (2.4)

Vision/Mission

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 3.0 STAKEHOLDER MAPPING
- Be the number one global cereal brand
According
- Grow to Edward
presenceFreeman
in key(1984)
globaloncities
stakeholder approach, ‘Stakeholder can be
defined as any group or individual
- Continuously meet whothecan affectoforStake
needs is affected by the achievement of the
Holders
organization’s objectives. Below stakeholders are therefore classified relevant to Post Holdings.
Financial
 Investors, partners, board of directors’ senior executives and shareholders: These class of
- Tax efficiency and meaningful synergy potential
stake holders make the major decisions that determines the growth of the organization.
- Attractive adjusted EBITDA margins on each fiscal year and free cash flow
They are also the major financiers of the organization.
- Create flow-on acquisition opportunities
 The Government, trade union/bodies and pressure groups are the regulatory bodies on
factory ACT, taxes and issues regarding labor/employee wages and right. They are not
Customer
really interested in the organizations growth but has powers to regulate her activities.
- Advertisement, sales and promotion through multiple channels
 The local community,
- Continuous UK manufacturers,
improvement in Customercustomers, suppliersManagement
Relationship and employees form the
class with high
-Platform interest who
expansion want thewellness
in Health, organization to stay asnatural
offerings, a resultand
of their benefits but
organic
however
channels possess low power to control the event of management decisions.
 Competitors,
- Provide variety of products
the global to keep
society, future customers
generations, onpress-media
public, its brand commentators are
the groups with low interest and low power. They are neither at any form of advantage or
Process
disadvantage by the decisions or outcome of the organization nor do they possess high
Be sound
powers stewards
to change to capital,
the course foster a rewarding and respectful
of events.
environment, give adequate attention to social responsibility, partner with
Input from these
customers stakeholder
in a groups
manner that affects/provide
achieves the business
both our strategic direction of the
objectives,
organization.
provide choices that are safe and affordable with high quality and
acquiring a leading brand in a category to post
Figure (3.1)
Values
- Integrity, impact (continuously seeking improvement), interdependence,
INTEREST
insight and imagination

Learning/growth Low Level of Interest High Level of Interest

- More
High Level acquisition
of Power  Trade Bodies  Shareholders
- Product differentiation Pressure Groups  Senior Executives
- Research  Government  Board of Directors
- Training and retraining  Investors
POWER

 Alliance Partners
Low Level of Power  Press-media and  Local Community
commentators  UK Manufacturers
 Public  Suppliers
 Future Generation  Customers
 Global Society  Employees
 Competitors

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 4.0 ENVIRONMENTAL ANALYSIS USING PESTLE
Every business is affected by Political, Economic, Social, Technological, legal and the
Environment. These factors cause an upward or downward trend on every business.

4.1 Political Environment

Since Post acquired Weetabix, there have been an increase in minimum wage, UK left the
EU making it pay more in transacting with EU countries. This will make it pay staff more,
leading to increase in the cost of production and invariably increase in product price causing a
downward trend in competitiveness. This is just one of the ways political decisions affects
business.
4.2 Economic Environment
This include economic influences such as exchange rates, taxes, minimum wage, inflation
and interest rate that causes trends in business growth. For example, Post in 2017 acquired
Weetabix at the time when US economy was growing at 2.7% while the UK economy grew at
0.4%. this means Post had to do lots of strategic thinking to succeed with Weetabix on board.
4.3 Social Environment
Weetabix has and will have to keep producing brands that suits the taste of consumers, its
cold breakfast cereal suits the taste/lifestyle of UK. Its cold breakfast cereal suits the lifestyle of
Britain’s. It’s also noteworthy that America was colonized by UK as such, they by and large
share common social values like religion, language, attitude amongst other similarities.
4.4 Technological Environment
Social media adverts, Virtual meetings, e-commerce and online customer feedback
survey are some of the benefits of technology to Weetabix. The provision of Weetabix-on-the
-go, food packaging, online ordering of food with home delivery services are some of the
numerous services emerging form market survey and its relevance is more obvious in these
period of global pandemic COVID-19; where customers can have their food packaged and taken
to a convenient place to ensure social distancing.
4.5 Legal Environment
Post must comply with all factory Act (Health and Safety, Employment, Minimum wage,
and Labor Act) both locally and internationally.
4.6 Environmental Influences
In other not to pollute the environment and as a Health champion, recyclable and

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 environmentally friendly packaging materials must be used for food packaging.

Also, environmentally friendly process must be adopted in production process.

5.0 INDUSTRIAL ANALYSIS

Michael Porters five force analysis is used to explain the categories and intensity of
rivalry in an industry. Post Holdings is expected to combine the knowledge and strength of
Weetabix and eventually excel in its rivalry with other industry putting it at a competitive
advantage. Carnite (2003) defines competition as ‘direct or indirect challenges that takes place
between companies that are selling or rendering similar products or services with the goal of
market share growth’.
Figure 5.0

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 5.1 Threat of Substitutes
New brands emerge continually in the cereal business because it has a ready market. A
newly created brand is expected to sell products cheaper in other to break into the existing cereal
market. Now there will be customers choice between the expensive and cheaper brand. Knowing
fully well that the poor in any society are always more than the opulent, be rest assured that the
cheaper product will get higher patronage. With the current global pandemic COVID-19 that
negatively affected economy globally with poverty on the increase and massive loos of source of
income, if countries can no longer set aside money to purchase foreign goods the citizenry will
be left with no choice other than to look within and outsource locally produced contents which
will be easily affordable, cheaper and which will eventually start growing their local economy.
We know Weetabix is a big brand and we also know all brands were once small. If new brands
keep proliferating, the existing market of Weetabix will be shared leaving it with lots of business
challenges which might include reduced partners and investors, reduced exportation of products
and invariable reduction of staff to salvage such embattling situation. Post must stand up to
challenges of this kind by using the advantage of an already established global organization with
more efficient production techniques to immediately create a brand that will be affordable to
consumers and cheaper to the extent that competitors cannot sell. They must also use their
advertising powers to educate consumers that their products have some classes of ingredient that
will boost their immune system making them withstand the current COVID-19 infection. With
these among other business strategies like a loud market presence with a big brand name, new
substitutes will find it difficult breaking into Weetabix market. Instead Weetabix will get more
market as their product are now closest to the poor masses.
5.2 Threats of Entrants
Weetabix have never stopped dazzling her customers with various brands. The drink-on-
the-go brand is one that customers will not stop talking about and it’s a good example of product
differentiation. Customers have this preferential biasness when it comes to a product, they are
conversant with. Considering also the huge financial implication of setting up a standard cereal
company with facilities that can produce so many products to meet the constant demand of
consumers and the experience of Her existing market players; it will be considered practically
difficult though not impossible for the proliferation of new products. Post Holdings must flood
every market continuously with all Weetabix brand and at most affordable price possible such
that every consumer will find their preference. All these still won’t stop new entry as the cereal
business is profitably attractive with a ready market that are willing to be the least cost producer.
Partnering with the Government of any country with terms of monopolizing its brands like the
Dangote group from Nigeria that enjoys the Government support to stop importing some brands
competing with his. Post must continue to build edge against new entrants by continuing its
strides of gaining larger market share by buying more leading cereal brands, product

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 differentiation, building customers preference, loyalty, economies of scale, innovation,
development on distribution channels and a better understanding of customers’ needs which they
must drive continually.
5.3 Bargaining Power of Buyers
Business.com (2017) reported that Weetabix is UK’s most recommended cereal brand,
the number one seller of breakfast cereal and an exporter to eighth other countries. These shows
it has a big market. Buyers are now smart enough to always go online and compare prices of
similar product, patronize a cheap brand and remain loyal to it if it remains the cheapest of its
brand/class and continually offers satisfaction. Wheelen and Hunger (2008) on competitive
business strategy explains that ‘product that are sold by two different firms may be the same, but
the first will get a differentiation advantage if customers believe the first is more valuable than
the second. This also is an edge for Weetabix.
5.4 Bargaining Power of Suppliers
Weetabix has a close relationship with farmers with an agreed supply of quality wheat
grown in the most responsible way with less fertilizer, a small carbon foot print and protected
hedgerows. with an assures food standard (safety, hygiene, traceability and environmental
impact), as well as an established relationship and support to suppliers of raw materials,
Weetabix has gained an advantageous position in bargaining with suppliers.
5.5 Industrial Rivalry
Being the leading brand is the number one objective of every establishment. This leads to
the advancement of diverse rivalry techniques such as marketing, politicizing with government
(in other to gain market monopoly), reduction of product price (to target larger scale buyers),
continuous introduction of improved/new product to meet customers preference, continuous
market survey to get customers feedback and continuous monitoring of competitors product.
Weetabix with Post still has lots of competitors; being involve with a generally accepted product.
Some of her leading competitors’ product are Nestle, Kellogg, Quaker and General mills. To
withstand these class of competitors, Post will have to be more innovative in rebranding and
marketing Weetabix.

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 6.0 CONCLUSION
Post Holdings and Weetabix are both world class organizations leading in the breakfast
cereal industry. Hence the acquisition of Weetabix by Post will result in the creation of more
formidable brand that will be driven by more powerful workforce with the support of stronger
stakeholders. To withstand industrial rivalry, Post should be more political in approach by
partnering with the Government in every country where she has her presence and if possible,
propose for monopoly of her brands.
The Government should be continuously coerced to only make legislation to her favor. To
remain number one choice of customers, it must improve continually in customer relationship
management. On a final note, to keep making huge profit, Post must only establish industry in
frontiers breaking countries ( that have good relation/connection with other countries) like the
EU countries, China (where it can get cheap labor), establish factories close to the source of raw
materials to create logistics advantage and last but not the least, should always conduct in dept
analysis of the political and economic environment of any country it intends having an
establishment.

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