Priyanka Puri

21827109

MGW1010 Assignment Two

Introduction to Management MGW1010 Assignment 2
Prepare a report that addresses how managers can deal with challenges that increased financial uncertainty in the external environment creates for their organisation using any two functions of management.

Prepared by Priyanka Puri [21827109]

for

Dr. Imam Baihaqi [Sunway Campus]

Dr. Imam Baihaqi [Wedenesday, 9:00 am]

1

1 Introduction 1.2.4 Criticisms and Limitation 8 3.2.4 Assumptions 1.3 Methodology 1.7 Plan Page 2 3 5 2.1 Establish Goals – Management by objectives 2.2.3 Issues that arise from control 11 14 15 4.2 Strategic Planning 2.0 Controlling 3.Priyanka Puri 21827109 MGW1010 Assignment Two Table of Contents Executive Summary 1.1.2 Types of Control 3.1 Definition 3.1. 0 Conclusion Recommendations 2 .1 The challenges created by the increased financial uncertainty in the externale nvironment to Kraft Foods can be dealt with through planning and controlling\ 7 2.6 Background 1.2 Scope 1.2.2 Planning 2.5 Limitations 1.1 Aim 1.0 Discussion 2.3 Operational Plans 2.1.

India has a strong confectionary market that Kraft Foods operates in 86 countries. Thus in order to carry this out successfully Kraft must plan a strategy to sustain and dominate developing economies as had Cadbury doing in the past. Kraft Foods must form a plan to gain loyalty and respect from Cadbury’s current customers in order to be successful and meet their objectives by 2013. In February 2010 it merged with the British Candymaker Cadbury. Currently Kraft Foods is the 2 nd largest in the world and the first in America. The Global Financial crisis has led to instability in the American economy. As an American company. it aims to improve profitability by 10%. Mexico. This would also benefit Kraft in the long run especially in the developing markets like India. Brazil . Kraft Foods recent merger with Cadbury has caused much outrage from customers and employees in United Kingdom. This report includes investigations of relevant theories and concepts selected from planning and controlling to meet its goals. There have been talks of boycotts of Kraft Foods goods. through the use of management function control. Challenges such as the Global Financial Crisis of 2007 to present. beverage.4% of the world gum market.Priyanka Puri 21827109 MGW1010 Assignment Two Executive Summary This report analyses how Kraft Foods managers can deal effectively with challenges created by the increased financial uncertainty in the external environment through the use of management tools planning and controlling. Kraft Foods Confectionary Sector is committed to becoming a world leader and surpassing competitors.1%. reduce debts and build a strong foundation in promising developing countries by 2013. Although Kraft Foods is a food. and confectionary company this report will focus mainly on its confectionary business.000 employees according to its company website. Kraft Foods must plan to establish itself more firmly in other less affected developing countries with more stable economies such an India and China. Indicated in a article Scott (2010) Cadbury has 28. It has 98. 3 . the health of the current American economy and the recent merger of Kraft Foods and Cadbury are all part of the financial uncertainty that managers of Kraft Foods face today.China and Russia where Cadbury has leading position. while Kraft's share stood at 0.

4 . Researching competitors current business activity in terms of products out in the market. and the limitations that come with the management function planning. Analysis includes assessing bureaucratic and clan control and the issues that can arise through the use of control in a multinational like Kraft Foods. suppliers. Use bureaucratic and clan control to administer rules and regulations within Kraft Foods. recommendations would be provided for Kraft Foods to perform. It explores how goals can be established through the utilization of management by objective. And finally suggesting that Managers of Kraft Foods should draw up detailed structured strategic and operational plans to deal with challenges that arise from the financial uncertainty of the external environment. and general position in the market. This report draws recommendations such as using Management by Objectives to establish well defined goals. Be aware of the limitations of both planning and control and eliminate issues that can possibly arise as much as possible. the different types of plans that can be formulated.Priyanka Puri 21827109 MGW1010 Assignment Two Based on the analysis. the possible tools that can assist in planning.

5 billion to buy over. As most of its activity has been focused most in America. It has is the largest confectionery. increase profitability by 10% or more and reduce their debts by December 2013.Priyanka Puri 21827109 MGW1010 Assignment Two 1. the recent downturn in the American economy can have damaging effects on its business. The financial uncertainty in this case is the Global Financial Crisis of 2007 to now. 5 . It financed part of this through selling its frozen pizza business to its Nestle competitors for $3. As of present Kraft Foods has taken over all of Cadburys geographically diverse markets but needs to plan to sustain customer loyalty if it aims to pay back its loan by 2013 and survive the economic downturn in America and the Global Financial Crisis. Scope: When investigating Kraft Foods sustainability by the challenges created by the Global Financial crisis it faces. discuss. This requires managers of Kraft Foods to use planning and controlling to deal with the challenges faced in the external environment. Illinois. and beverage corporation in America and second largest in the world to Nestle. The rest ($15.7 billion as indicated in the Nestle press release on its company website.8 billion with interest to banks. it is important to consider its recent takeover of Cadbury as it reduces Kraft Foods cash flow as well as creating a risk to pay back the $15.0 Introduction: Purpose: The purpose of this report is to identify. food. due to its recent merger with Cadbury.8 billion) was financed through loans from banks. and evaluate how the ideas from the two management functions planning and controlling can be used by managers of Kraft Foods to deal with the challenges that increased financial uncertainty in the external environment creates for their organisation. and the current economic downturn in the United States. This is due to the potential impacts of the global financial crisis. Thus the management of Kraft have decided to focus on building and sustain a stronger foothold in promising developing countries where Cadbury is the leader. Background: Kraft Foods is a American multinational company headquartered in Northfield. Especially due its takeover of Cadbury which cost Kraft Foods $19.

Assumptions: It is assumed that the information provided by the relevant journals. Furthermore. only the relevant key elements within the planning and controlling management functions have been discussed. company website and articles are accurate and appropriately used for this report. 6 . company websites and Online news articles. Planning: This report will first illustrate a background on the challenges created by the increased financial uncertainty in the external environment to Kraft Foodsthat can be dealt with through planning and controlling. it is understood that other elements that could also achieve the purpose of the report are not taken into account. Limitations: This report is limited by the need to focus solely on planning and controlling as the management elements to meet the requirements of this report.Priyanka Puri 21827109 MGW1010 Assignment Two Methodology: The information in this report was collected by online journals. Significant functions regarding these two topics will be explained and their application to Kraft Foods will be analysed as well as evaluated that will ultimately lead to necessary recommendations to management to deal with the challenges that will occur due to the Global Financial Crisis. In doing so.

Priyanka Puri 21827109 MGW1010 Assignment Two 2. managers can attain their goals to deal with challenges caused by the Global Financial Crisis. The rest was borrowed from banks. Goals such as building a strong foothold in developing countries that show promising growth such as India and China.7 billion in cash. beverages and confectionary faces many challenges now to pay backs it debts to banks due to its recent merger with the British brand Cadbury.1 The challenges created by the increased financial uncertainty in the external environment to Kraft Foods. especially its bank loan for the Cadbury merger. Due to the Global Financial Crisis of 2007 to present. Kraft although being number one in America in food. This can be seen when Jennie Formby at the union explains that “. Kraft Foods also as stated previously aims to improve profitability by 10% each year till 2013. Furthermore the Cadbury takeover caused much outrage and concerns in Great Britain from employees. For analysis sake to be current and straightforward the main focus will be on Kraft Foods in the confectionary industry. 7 . Kraft Foods being an American based company is susceptible to many financial challenges such as decreased sales as customers will be spending less while Kraft Foods cost of production remains the same.0 Discussion 2. and this raises real fears for jobs and investment in this country” (Dan Roberts. Thus through effective planning and controlling. The company used money generated from selling it frozen pizza business to its competitor Nestle for a USD 3. This can hinder Kraft Foods progress to become world number one in the confectionary industry if it does not plan and control its staff and sustain customer loyalty appropriately. Kraft Foods paid 7 billion pounds to acquire Cadbury as. families of employees and British customers. 2010).. Due to this Kraft Foods must maintain increased profits until 2013 so that all of its loans are paid back with interest to banks by the end of this period.the sad truth is there will be an irresistible imperative to pay down their debt. the worlds developed countries such as America face unstable markets in their economy. Inc can be dealt with through planning and controlling. And finally reduce debts.

1 Definition Planning is described as the process of defining goals. Moreover purpose of planning is to provide goals. This is critical in the case of Kraft Foods.d.2 Planning 2. Management by objectives is the 8 . Kraft Foods can use management by objectives (MBO) to set its goals. Locke and Latham define goal as “that which one wants to accomplish. as cited Strecher. Glasgow. end state”. 2. 2006). it concerns a valued.1.2. establishing strategies for achieving those goals and developing plans to integrate and coordinate activities (Robbins. Furthermore Mintzberg (1994) clarifies that formal planning has very “analytical” nature and relies on the preservation and rearrangement of established categories (the existing levels of strategy). 2006).2. As stated by Mintzberg (1994) planning is expected to produce the best step by step strategies as well making sure that managers of organisations would not make carry out instructions wrongly. or entire organisation (Robbins. Bergman. Kok. 2. DeVellis. .2 Formal Approach of planning Planning works best with goals and objectives written down.Priyanka Puri 21827109 MGW1010 Assignment Two 2. These goals are written down and shared with organisation’s managers. Lee. Stagg & Coulter. n. 2006). Locke and Latham. Instead of using the traditional goal setting methods. Meertens and Bulger. Seijts. groups. Kraft Foods should use a formal approach in terms of planning to deal with the Global Financial Crisis. et al. future. Formal planning is when specific goals covering a period of years are defined (Robbins.Thus provide direction and evaluation performance criteria. et al. reduce uncertainty so that managers are able to anticipate changes and develop responses.3 Establish Goals – Management by objectives Goals described as desired outcomes for individuals. The theory is based on the assumption that goals represent an end state towards which a person strives and that they serve as immediate regulators of action (Lee. 1995). Latham.

It is highlighted that effective 9 . 2. an explicit time period and performance feedback. and rewards are allocated on the basis of this progress. It should not have a goal that cannot be reached with its current resources. which includes both a corporate mission statement and a statement of organizational objectives. A strategic plan includes strategies indicating how objectives will be accomplished. It forms the basis for a business model – i. 2006). It is when specific performance goals are jointly determined by employees and their managers.4 Strategic Planning Strategic plans described as general plans and have longer time horizons normally covering a one-to-five-year time period. It coordinates diverse organisational units. Strategic planning is also considered to provide the substance from which overall company performance can be controlled and measured (Shrader. It should be challenging yet attainable. A well designed goal should be written in terms of outcomes rather than actions such increasing profitability by 10% at end of the year till 2013 is a clear and specific goal. It is a written long-range plan. This is a well designed goal because it is measurable and quantifiable and has clear time frame. It results in higher organisational performance (Robbins. Firstly the organisation’s mission should be reviewed. helping them focus on organisational goals.Priyanka Puri 21827109 MGW1010 Assignment Two process of setting mutually agreed-upon goals and using those goals to evaluate employee performance (Robbins. Blackburn. It requires that managers examine and adapt to business environment changes. 2006). et al. Making people aware of the goals ensures that they are all on the same page and working in ways to ensure the accomplishment of the organisational goals thus dealing with the challenges that the Global Crisis will bring. And finally all well designed goals are communicated to all the managers of Kraft Foods. Then Kraft Foods should evaluate what available resources it has. Mulford . It is very much involved in the managerial decision-making process. et al. goal specificity. The goal with the use of MBO can be determined with input from the other managers of other departments (refer to Appendix 1). participative decision making. MBO has four elements. et al. work processes and work activities. It need to be written down for future reference and no opportunity of miscommunication (Robbins. 1989).e. progress towards accomplishing these goals is periodically reviewed. how a company intends to profit from its strategies.2. 2006). In order to set goals the CEO & Chairman of Kraft Foods should certain steps.

2. This flexibility is not allowed by formal planning as indicated by Mintzberg(1994). In the business world there is a lot of uncertainty. Mulford. Thus the Kraft Foods manager can face trouble if they rigorously follow the original plan. anticipate the final results. In this case Kraft Foods Chief Financial Officer (refer to Appendix One) can plan written inventory and sales forecasts. marketing. This may mean the original plans Kraft Foods drew may have to change in reaction to that. Donald. Operational plans cover periods of less than a year. It will mean inability to cope with changes for example if Hershey (their confectionary competitor) acquires a business like Mars to have a more competitive edge in the market. examine and understand individuals willingness to achieve the goals (Shrader. on the other hand. 2.7 Criticisms and Limitations Planning can create rigidity according to Robbins et al (2006). 2001).Priyanka Puri 21827109 MGW1010 Assignment Two strategies are about being different (Eisenhardt. advertising budgets and individual budgets for each department of Kraft Foods. 1989). These budgets will usually be for a time period of one month or quarter. and increase profitability by 10% each year till 2013.5 Operational Plans Operational planning. is defined as the setting of short-term objectives for specific functional areas such as finance. Blackburn. build a strong sustainability and foothold in developing countries like China and India. 10 . 2.2. Formal planning means an organisation is locked to the specific goals it made in the past. and personnel. Krafts operational plan is to reduce debts. It does not allow managers of Kraft Foods to create or reinvent an industry. Operational Planning It is important that the manager explains the goals at hand and how they will execute plans. formal planning doesn’t not consider the idea that the environment can change. Kathleen. Sull.

It requires close personal surveillance and direction of subordinates by superiors. Effective control system provides information and feedback on the performance of subordinates (Robbins. and inferring from their behaviour who is doing their job well or poorly (Ouchi.1 Definition Controlling is the process of monitoring business activities to ensure they are being accomplished from planning and then correcting any significant deviations (Robbins. The manager of Developing Markets and Global Categories (refer to Appendix One) can make it a policy for the department to hold reviews once a week about what is being done to build a strong foundation in promising developing nations. 2006). 2006). Also administrative rules on areas such as lunch breaks should be followed rigorously to maintain productivity. 2006). The manager of Kraft Foods should with the application of bureaucratic control make sure that employees do not take more than a maximum of 11 . According to theory the manager collects information in regard to the flow of work by watching the actions of his subordinates. The information necessary for task completion is contained in rules. 3. Kraft Foods manager can benefit from implementing these types of control systems in order to deal with challenges created by increased the Global Financial Crisis.1. these may be rules concerning processes to be completed or rules which specify standards of output or quality (Ouchi. et al.1.Priyanka Puri 21827109 MGW1010 Assignment Two 3. et al.2 Types of Control There are three main types of control systems but the two main control systems Kraft Foods would benefit from are bureaucratic and clan in this situation. This is the essence of bureaucratic control. goals are being met and what future actions to take. procedures and policies (Robbins. Bureaucratic control is the organisational authority that ensures employees exhibit appropriate behaviours and performance standards through the use of administrative rules. The manager than confirms his inference by checking a record of outputs for each worker at the end of the day. regulations. Bureaucratic control can be used by the mangers of Kraft Foods in several ways. The purpose of control is to ensure activities are completed in ways that lead to accomplishment of organisational goals.0 Controlling 3. Controlling complements planning as it requires informing managers if their plans are on target. 1979). et al. 1979).

values. As the manager is up to date with what is going on in the business world it will make employees more likely to find out and seek knowledge so as to keep up with expected norms displayed by said manager. 2009). employees will inadvertently form a norm to stay focussed on Kraft Foods goal for 2013 which will assist managers to deal with challenges of the Global Financial Crisis . et al. It attempts to foster common goals between the controller and controllee by propagating norms. (Tiwana and Keil. This can be used by Kraft Foods managers such as the heads of each department (Refer to Appendix One). and a shared ideology. Thus this allows Kraft Foods to have more control over their key objective for 2013. Company policy should also dictate that those who frequently come in late will be given less control of projects until performance observed in a period of one month shows changes or consistent improvement. The manager of Developing Markets and Global Categories can make a daily effort to briefly speak with each individual in his project team about the current stability of the economies of developing countries. Through the behaviour and actions of each manager in Kraft Foods. Clan Control on the other hand is when employee’s conduct is regulated by shared values. traditions. This then creates a shared norm or value. Finally the Chief Financial Officer of Kraft Foods could emphasis by sending a daily memo every morning that debts have to be reduced as their main objective of activity. norms. While the Executive vice president of Strategy can discuss and remind his project team what actions are being taken by Kraft Foods competitors and how to counteract that to maximize profitability. beliefs and other aspects of the organisational culture (Robbins. 12 . Clan control therefore operates through socialization.Priyanka Puri 21827109 MGW1010 Assignment Two one hour for lunch. 2006). rituals. This can be monitored by Company Scanners by the doors of the office building.

Issues like legal constraints on corrective actions in foreign countries must be dealt with appropriately by the Legal council (refer to Appendix One). it must have strong vigilant policies that do not allow employees to be in a position to behave in such a manner. 2006).3 Issues that arise from control Mangers of Kraft Foods should also be aware of the issues that come with control. Distance is another issue that can hinder the flow and process of controlling for managers of Kraft Foods. In order for Kraft Foods to reduce cost and increase sales to sustain and increase its market share during economic downturn. Sometimes there can be a difficult with the comparability of data collected from operation in different countries. Technology can be used to increase direct corporate control of local operations.Priyanka Puri 21827109 MGW1010 Assignment Two 3. It is said that 85% of all organisational theft and fraud is commited by employees. to fraudulent filling of expense reports. to removing equipement and parts. software and office supplies is common. Another issue to look at when evaluating workplace concerns is employee theft. Embezzlement. 13 . et al. not be outsiders (Robbins.1. As Kraft Foods is a American company that hires employees all over the world it is detrimental that areas such cross-cultural differences and workplace concerns are considered and control is adjusted accordingly.

reduce uncertainty so that managers are able to anticipate changes and develop responses. However Managers of Kraft Foods should be aware that planning can also posses limitations such formal planning where it doesn’t not consider the idea that the environment can change. 14 . helping them focus on organisational goals. The purpose of control is to ensure activities are completed in ways that lead to accomplishment of organisational goals. Controlling ensures that plans are being accomplished from planning and then correcting any significant deviations (Robbins. distance and workplace concerns such as fraud and embezzlement. Strategic plans require that managers examine and adapt to business environment changes. While Kraft Foods can use operational plan to reduce debts. 0 Conclusion Planning provides goals. 2006). Such as cross-cultural differences. It coordinates diverse organisational units. this is essential for sustainability and growth that Kraft Foods aims for. Clan control creates a shared norm or value while bureaucratic control is making sure employees know what behavior is expected of them through Kraft Foods rules and regulations. Kraft Foods managers will reduce the chances of miscommunication and things going wrong. Thus if Kraft Foods managers implement the management function planning and controlling effectively as described in this report and keep in mind there limitations then the managers will be able to deal with Global Financial Crisis and challenges that come with it in the external environment.Priyanka Puri 21827109 MGW1010 Assignment Two 4. et al. And use operational plans to run the day to day activity of Kraft Foods. Kraft Foods can use Management of Objectives to plan its goals and so making subordinates aware of the goals ensures that they are all on the same page and working in ways to ensure the accomplishment of the organisational goals thus dealing with the challenges that the Global Financial Crisis brings. and increase profitability by 10% each year till 2013. Through the use of formal planning. Bureaucratic and clan control a can be used by the mangers of Kraft Foods as different ways to control Kraft Foods employees. build a strong sustainability and foothold in developing countries like China and India. Mangers of Kraft Foods should also be aware of the issues that come when using control. Thus the Kraft Foods manager can face trouble if they follow the plan exactly with no flexibility.

and general position in the market  Use bureaucratic and clan control to administer rules and regulations within Kraft Foods.Priyanka Puri 21827109 MGW1010 Assignment Two Recommendations  Use Management by Objectives to establish well defined goals.  Managers of Kraft Foods should draw up detailed structured strategic and operational plans to deal with challenges that arise from the financial uncertainty of the external environment  Research competitors current business activity in terms of products out in the market. 15 . suppliers.  Be aware of the limitations of both planning and control and eliminate issues that can possibly arise as much as possible.