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Kraft Foods Case Study

Essay by   •  May 7, 2011  •  Essay  •  1,220 Words (5 Pages)  •  4,628 Views

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Kraft Foods, Inc., is a $42B global corporation. Its U.S. brands include well-known brand names such as Kraft cheeses, dinners, and dressings, Maxwell House coffee, Nabisco cookies and crackers, Oscar Mayer meats, Philadelphia cream cheese, and Oreo-brand cookies. The purchase of Nabisco has left the company with $18.5B in long term debt. The company is also much stronger in the US than in other countries. Kraft needs to determine a way to reduce their debt while showing product sustainability in the US and growth in the international market. While Kraft foods continue to show strong margins and net income compared to their competition, the earnings per share for Kraft could be improved. This paper details the long term objectives for Kraft foods and provides recommended strategy implementations.

Long Term objectives:

* Sustainable, long-term growth

* Reduced long term debt

* Improved international growth

* Decision making agility

Understanding the long term objectives are key to building an effective strategy. Kraft Foods has four distinct long term objectives. First, they must determine how to have sustainable, long-term growth for products in the US. New competition in generic brand names are a danger to Kraft as customers cut down on their spending. Kraft needs to determine methods to continue to appeal to customers and compete with cheaper, generic products. Second, they must work to reduce their long term debt. Third, international growth is a key for Kraft. Kraft has a significant hold on market share in the US, but they are not strong in other countries. Improving their international market share will help Kraft with long term growth. Finally, a company as large as Kraft must ensure that their decision making policies to react quickly compared to competition that may be much smaller companies.

Recommended strategies:

* Market Expansion

o Restaurant sales

* Decentralization

o Organizational Structure

o Incentive Structure

o Business and accounting procedures

o Work flow processes

* Leverage economy of scale advantages

o Distribution

* Improve efficiencies

o Packaging

* Talent Development

There are five recommended strategies for Kraft foods to reach their long term objectives. To allow for a changing market, it is advisable that Kraft look at marketing their foods to restaurants. This will reduce the amount of risk Kraft has if the market changes focus from grocery shopping to eating out at restaurants. This will help Kraft reach their sustainability goals. Decentralization is also a key strategy for Kraft. A strong decentralization plan will allow Kraft to make nimble decisions with relation to the market. Decentralization will also improve the company's ability to grow internationally. This is because decision makers within a regional BU can tailor their business to cultural trends. A centralized organization would result in the executive staff making decisions for a region that they may not easily understand. This could result in wrong decisions or a slow decision making process. While decentralizing, they must continue to act as a large company. Strong communication between business units will allow Kraft to leverage the economy of scale benefits. Improving efficiencies will also allow for Kraft to grow internationally and compete with new competition. Leveraging economy of scales and improving efficiencies will improve operating margins that could help with lowering Kraft's long term debt. Development of talent in the company will also allow for sustainable,

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