KRAFT FOODS CORPORATION, COMPANY PORTFOLIO

Introduction

            During the 1920s, the ice cream industry in the United States was extremely fragmented. It was these reason that led to the formation of Kraft Foods Corporation in 1923. The formation of the company had the view of consolidating the already fragmented industry. Nevertheless, through various acquisitions, Kraft Foods Corporation expanded its product line to include various dairy products. As such, the company emerged the largest dairy company in not only the United States but also the entire world. Kraft Food Corporation achieved this milestone within less than a decade, that is, the company had emerged as the world’s largest dairy company by 1930. In this regard, this paper discusses the company portfolio of Kraft Foods Corporation.

Overview of Kraft Food Corporation

            In 1909, James L. Kraft established a cheese business in Chicago. James named his business as J.L Kraft and Bros. Company. By then, the strategies of this young business included product development and marketing. Through the effective execution of this strategy, the company was able to sell 31 varieties of cheese within the borders of the US. Due to the merger between J. L Kraft and Bros Company and the Rieck McJunkin Dairy of Pittsburgh, PA, the company changed its name to the National Dairy Products Corporation. The company was listed on the New York Stock Exchange (NYSE). The acquisitions of the company were done via stock instead of cash. The company began diversifying into the confectionary businesses such macaroni, candies, and margarines in 1950s. This was because dairy products started becoming low value added. The degree of the company’s diversification is indicated by the fact that it also invested into the business of glass packaging with the Metro Glass acquisition. The company continued venturing into this business even into the 1960s as it raided into markets internationally via acquisitions. According to Allen and Fjermestad (2001), the company changed its name to Kraft 1969. This was followed by the reorganization in the structure of the company. Burke (2009) also pointed out that marketing and advertisement of the products has remained to be one of the focus points of the company. In fact, this is what Kraft Foods Corporation heavily relies on for the sale of its product internationally.

Kraft Foods have various product offerings in confectionery: cheese, dairy foods, beverages, snack foods and convenience foods. These products are marketed in over 170 nations. The company’s brand portfolio contains 12 brands with revenues exceeding 1 billion dollars and 50 other brands with revenues over 100 billion dollars. The company has ventured into several product domains and various markets internationally. It achieved this primarily via mergers and acquisitions. According to Eisingerich and Ghardwaj (2011), mergers and acquisitions appear to be the adopted way of the company of increasing its operations and introducing new products from its portfolio into the local markets. The 2010 statistics showed that the company was headquartered in Northfield Illinois and that it had revenues of 49.2 billion dollars. In addition, as of 2010, the company had about 127 thousand employees internationally.

Organization Structure and Integration

            The company has been working on a new organization structure that streamlines it better. The company has a long-term strategy of having a broad portfolio, and therefore it wants to shift away from being only a chocolate producer. The company uses a functional organizational structure. The diagram below shows a portion of organizational structure of Kraft Foods Corporation.

 

In functional organizational structure, employees within functional divisions of the organizations seem to perform specialized assignments. For example, the IT department might only be staffed with IT professionals only. According to English (2000), this organizational structure results in operational efficiencies within the various functional divisions within Kraft Foods Corporation. Functional organizations comprises of specialized divisions reporting to single authority that is usually referred to as the top management. These functional units comprise of personnel possessing the same skills. According to Goi (2009), every division handles a single aspect of a service or a product. Some of the functional divisions as Kraft Foods Corporation include marketing, development, and research among others. The top management has the primary role of coordinating the efforts of every functional unit and meshing them into a cohesive whole.

The first advantage of this structure is that it results in the development of specialists, particularly in technical fields. This structure clusters individuals with the same knowledge in the same division. According to Goi (2005), if an organization has a well-crafted performance management, which encourages the visibility of individual skills, this structure makes it extremely easy to coach other.

This structure promotes high performance among employees. The objective of this structure is to put all informational and human resources required for a single assignment in one place. According to Goldschmidt (2010), this capitalizes on performance by enabling the sharing of important expertise between superiors and subordinates. The leaders of these divisions are experts in both their respective fields and in the available resources. This enables every functional division to reach its greatest capacity and inhibit the overexploitation of limited resources. Involved management and specialized training imply that standout employees are quickly noticed and placed where they can be most efficient.

Nevertheless, this structure comes along with some drawbacks. According to Kotler (2003), the same attributes resulting in increased specialization and production result in sophisticated decision-making and communication process. Because the functional groups at Kraft Foods Corporation are not accountable to each other, the decision-making process is extremely bureaucratic and seems to take long. Despite the flow of communication within the functional unit being convenient, communication between various units and work synchronization, and completion of project are more difficult to manage.

Kraft’s Corporate Strategies

             The company unveiled various corporate strategies in order to influence growth in the near future in its yearly Consumer Analyst Group conference held in New York (Kraft Foods Corporation 2010). The company’s management perceived that the company is in a good position to grow because of the virtuous cycle shown below. The diagram below shows the corporate strategies that Kraft Foods Corporation pursues in order to grow and have a competitive edge over its rivals in the confectionary industry (Kraft Foods Corporation 2010).

 

Figure 1: corporate strategies

The visualized virtuous cycle that was perceived by the management of the corporation had various key features. The first key feature is that the virtuous cycle was perceived to have the ability to revitalize the power brands. This was achievable through highly investing in the advertisement of the power brand driving innovation. Kraft also strategized on revitalizing the power brands by using the policies of entrepreneurial management to grow the local brands. The second feature of this virtuous cycle was the increase in marketing excellence and sales. In addition, the virtuous cycle was also perceived to have the ability to implement end-to-end cost management in order to attain record savings. The diagram below shows the virtuous cycle that the company uses to achieve its corporate strategies (Kraft Foods Corporation 2010).

Figure 2: Virtuous cycle

Therefore, the overall focus of the company’s corporate strategy appears to be divided into two significant parts that include brand building and cost reduction. In relation to brand building, the strategy attempts to associate the quality and the uniqueness of its products with the power brands the consumers’ mind. The company pursues this first part of the strategy by performing aggressive advertising, increasing sales and incorporating additional marketing efforts. In relation to cost reduction, the company hopes to achieve cost saving initiatives in order to increase its profitability. According to Kraft Foods Corporation (2010), the corporate strategy of the company can also be divided in to two: business level strategy and international strategy.

Business level Strategy

For companies like Kraft Foods Corporation that have an extremely broad product lines across the various categories of product, the specific business level strategies seem to vary from one product line to another. For instance, the coffee brand of Maxwell House Division that is marketed by Kraft Foods pursues the cost leadership strategy with its regular ground strategy. However, the Maxwell House Division has a strategy of differentiation for few of its products such as the Rich French Roast and Colombian Supreme. Kraft is capable of combining various product lines along with the cost leadership strategy, though doing it is not easy to achieve. According to Kraft Foods Corporation (2010), this is because of the company’s impressive efficiencies of distribution linked to its scale and size. In addition, the experience of Kraft Foods in the foods and beverage industry enables the company to be able to combine cost leadership strategy with various product lines. Therefore, as much as, the business level strategy might vary from one product line to another, the broad corporate level strategy shows that the company follows an integrated differentiation or leadership strategy.

International Strategy

            The company has divided its market based on geographical aspects into 3 significant sections: American market, European market and developing market. The pie chart below shows the 3 main markets that the company seems to cater to. From the chart, it is evident that the American market still has the highest share of the company’s sales. Nevertheless, the company is currently focusing in developing markets. According to Milton (2007), these developing markets seem to be growing at 20 per cent on annual basis. In addition, these markets hold an enormous potential for the future (Kraft Foods Corporation 2010).

Figure 3: Markets

 

In order to cater for the increasing needs of these developing markets, the company has devised a strategy referred to as 5-10-10 strategy. With this new strategy, the company targets the developing markets. According to Goldschmidt (2010), the company has identified about 10 precedence markets and 10 power brands across the 5 categories of its products that will be launched in the near future. The 10 priority markets include Brazil, India, Russia, China, Mexico, Ukraine, Poland and South Africa among others. The 10 power brands include MILKA chocolate, Jacobs coffee, Cadbury, Tang Beverages and Trident gums among others. The five categories of products include coffee, chocolate, Biscuits, Powdered drinks, and candy and gum.

Kraft’s Marketing Mix

            Every company, including Kraft relies on its sales to keep them in the turbulent industry. Therefore, the responsibility of the sales division or department is critical in ensuring the success of any company or business. The four Ps include product, price, place and promotion. According to Kotler (2003), the four Ps of marketing are extremely crucial in determining what consumers prefer. While the 4Ps are conventionally perceived as elements of marketing, it is within the function of sales that they actually manifest themselves. The product mix is critical in identifying the products looked for by consumers. The price mix is crucial in determining the price consumers are willing to pay for a certain product. The place mix is significant in determining the location where consumer can buy the products. The promotion mix determines the form of advertising and promotional efforts that will attract consumers of a product. Marketing requires effective coordination of these 4Ps. It involves researching the requirements of the consumer in order to satisfy them. According to English (2000), marketing involves delivering the right product at the right price and delivering the right promotion at the right place. As such, marketing involves persuading consumers that the organizations has the four Ps they want.

Through the sales division, Kraft concentrates on fulfilling the needs of both consumers and customers. The company achieves this by ensuring that their products are available on retailers’ shelves for consumers to buy. According to Kraft Foods Corporation (2010), majority of the company’s UK Sales force is based in Cheltenham, which is Kraft’s Head Office. Kraft’s sales force operates based on teams. Each of these teams takes care of specific customers. Within every team, members are responsible for a certain product categories such as coffee or cheese. According to Eisingerich and Ghardwaj (2011), this role is referred to as account management. Goi (2005) pointed out that success in selling is based on carefully managing certain accounts. The main aim is to assist retailers to sell Kraft products and ensuring that the sales figures not only fulfil the company’s targets but also the targets of customers. The company strives to assist retailers meet the increasing demands of consumers in the current competitive market place.

In relation to promotion mix, Kraft Foods Corporation has various specialist roles within the sales. The Category planning guarantees that the sales targets are achieved by managing the various promotional plans for every customer. The Category Development utilizes the information gathered through market research to create the sales rationale. According to Goi (2005), this is product and market knowledge that account managers can share with retailers in order to assist them sell the company’s products. The Sales Point of Purchase team offers the expertise on Point of Purchase activity such as promotional materials.

Kraft has various types of customers. The account managers at the company lease with the head office of every specific customer. This allows them to negotiate a deal with one important contact from every retail chain rather than with every store separately. According to Allen and Fjermestad (2001), this is both time and cost effective. It also promotes consistency across all the respective stores because they are co-ordinated by their head office.

Kraft’s Approach to Human Resource

            Human resource management is a strategic and rational approach to the overseeing of the most valued assets of an organization. The working people at Kraft Foods collectively and individually contribute to the attainment of the objectives of the company. According to Goi (2009), the terms human resource (HR) and human resource management (HRM) have replaced the term personnel management. English (2000) refers to HRM as employing people, utilizing, maintaining and paying for their services. The features of HRM at Kraft Foods Corporation include organizational management, personnel management, labor management, and industrial management.

According to Goldschmidt (2010), the future of the Kraft Foods Corporation relies on the quality of the people employees and their experience once they are hired. This is where the Kraft’s Food Corporation turns to human resource resources. However, there is lots of human resources at Kraft Foods. According to Milton (2007), this is because the company shapes each strategic decision it makes. In this regard, it is evident that the company deploys the philosophy of strategic human resource management (SHRM). There are three strands of work that can be observed within strategic human resource management: best fit, best practice and resource-based view (RBV). The concept of best practice, which also called high commitment HRM, argues that the adoption of specific HRM practices will lead to better organizational performance. The concept of best fit, also known as contingency approach to HRM, proposes that HRM enhances performance where there is a close vertical fit between the company’s strategy and HRM practices.

The philosophy of SHRM deployed by Kraft Foods Corporation has various benefits. The philosophy enables open communication that results in improved information delivery and discovery. According to Allen and Fjermestad (2001), SHRM it allows employees to discuss post news, discuss ideas, share links and ask questions. It also offers an opening to widen the business contacts. Some authors have claimed that SHRM aims at a wider audience, which makes it an effective and useful tool for recruitment.

On the other hand, SHRM comes along with several drawbacks. The first drawback is that it leads to negative comments from the workforce concerning the possible legal consequences or company. In addition, SHRM might possibly lead to lost productivity, particularly if employees busy updating their work profiles.

Kraft’s Corporate Social Responsibility

            Corporate Social Responsibility (CSR) refers to a form of corporate self-management incorporated into a business model. According to Burke (2009), CSR policies function as a self-regulating and built-in mechanism whereby an organization monitors and ensures its active compliance with the ethical standards, spirit of the law and international norms. CSR encourages a positive impact via its activities on consumers, environment, communities, employees, stakeholders and other public members. People eat and drink almost 900 million servings of products Kraft Foods each day worldwide. This gives the company a vast opportunity to have a positive effect on the health and well-being of consumers. Therefore, the company’s focus is on making their products more wholesome and nutritious, while offering the same taste consumers have expected.

The company has various programs all over the world that positively affects the people and the environment. The first activity is “Feeding America.” The Kraft Mobile Pantry Program is positively affecting families living in the US food-scarce regions. In 2009, the company pledged about 5 million dollars to Feeding America. According to Goi (2005), the mobile pantry program brings more food and nutrition to families and children who need the most.

The Canadian confectionary team of Kraft Foods created the Bicycle Factory in 2009 in order to unite Canadians send bicycles to children in cocoa-growing communities in Ghana. This program had the main objective of helping the children in these communities to have an access to education. According to Kraft Foods Corporation (2010), this program is based on the simple concept that small purchases can result in a big difference for the needy people. The company also joined the initiative of the World Economic Forum, which was referred to as New Vision for Agriculture. The objective of this initiative is to define the various ways to ensure food security. From the various CSR programs of Kraft Foods, it is evident that the company has a good name.

Conclusion

            The formation of the company had the view of consolidating the already fragmented industry. Through the effective execution of this strategy, the company was able to sell 31 varieties of cheese within the borders of the US. The company uses a functional organizational structure. In functional organizational structure, employees within functional divisions of the organizations seem to perform specialized assignments. The overall focus of the company’s corporate strategy appears to be divided into two significant parts that include brand building and cost reduction. The broad corporate level strategy shows that the company follows an integrated differentiation or leadership strategy. It is evident that the company deploys the philosophy of strategic human resource management (SHRM).

References List

Allen, E & Fjermestad, J 2001, ‘E-commerce marketing strategies: an integrated framework and case analysis’, Logistics Information Management, vol 14, no. 1, pp. 14-23.

Burke, G 2009, Kraft Foods offers salmonella timeline, viewed 9 April 2013, <  HYPERLINK “http://usatoday30.usatoday.com/news/health/2009-04-06-salmonella-pistachio_N.htm”   http://usatoday30.usatoday.com/news/health/2009-04-06-salmonella-pistachio_N.htm >.

Eisingerich, B & Ghardwaj, G 2011, ‘Corporate Social Responsibility: does social responsibility help protect a company’s reputation?’, MIT Sloan Management Review, vol 52, pp. 8-18.

English, J 2000, ‘The four “P”s of marketing are dead’, Marketing Health Services, vol 20, no. 2, pp. 20-23.

Goi, L 2005, ‘Marketing mix: a review of ‘P’’, Journal of Internet Banking and Commence, vol 10, pp. 31-43.

Goi, C 2009, ‘A review of marketing mix: 4Ps or more? ‘, International Journal of Marketing Studies , vol 1, no. 1, pp. 1-15.

Goldschmidt, B 2010, Corporate Social Responsibility: Kraft, Feeding America Provide Oasis in Midst of Food Deserts, viewed 9 April 2013, <  HYPERLINK “http://www.progressivegrocer.com/top-stories/special-features/vegetable/id31055/corporate-social-responsibility-kraft-feeding-america-provide-oasis-in-midst-of-food-deserts/”   http://www.progressivegrocer.com/top-stories/special-features/vegetable/id31055/corporate-social-responsibility-kraft-feeding-america-provide-oasis-in-midst-of-food-deserts/ >.

Kotler, P 2003, Marketing management, 11th edn, Prentice Hall, London.

Kraft Foods Corporation 2010, Creating a more delicious world, New York, viewed 9 April 2013, <  HYPERLINK “www.kraftfoodscompany.com/DeliciousWorld”   www.kraftfoodscompany.com/DeliciousWorld >.

Milton, T 2007, Kraft plans to regionalise organisational structure, viewed 9 April 2013, <  HYPERLINK “http://www.dfnionline.com/article/Kraft-plans-to-regionalise-organisational-structure-1388353.html”   http://www.dfnionline.com/article/Kraft-plans-to-regionalise-organisational-structure-1388353.html >.