External Environment Analysis Kraft Foods Essay Example

External Environment Analysis Kraft Foods Paper The PEST analysis on the other hand examines the macro-environment, looking at potential political and social threats to industry. The utilization of these two models together will better equip organizations to face ever changing industries and see potential threats. Below the author will discuss the different aspect of each model as well as provide useful web links to gather additional information. Porter Five Forces Analysis The Porter Five Analysis was developed by Michael Porter as a tool utilized by organizations to help identify the structure and competitiveness within an industry (Porter, 2008). It encompasses five different forces that shape the industry; threat of new entrants, threat of substitute products, bargaining power of buyers, bargaining power of suppliers and rivalry among existing competitors (Porter). The ability to analyze and understand trends and threats within an industry is critical for effective strategic planning that will render organizational success (Porter). Below is an analysis of Kraft Foods utilizing the Porter Five analysis model. Buyer Power With so many different varieties of brands available to consumers it is essential that organizations research consumer needs and demands in order o remain successful. As competition increases within the industry, organizations must create new products that adapt to the changing lifestyles and preferences of consumers, which have shifted to a focus on health and wellness (Hathaway, Mark-Plumber, Weaker-Oberon, 2006). Consumers have no loyalty or obligation to stay with one brand and will easily switch as prices and nutritional labels fit their needs. We will write a custom essay sample on External Environment Analysis Kraft Foods specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on External Environment Analysis Kraft Foods specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on External Environment Analysis Kraft Foods specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Conducting analysis of competitors financial statements will also help paint a picture of consumer trends helping organizations to adjust their products. Below are several websites that roved different information on the power that consumers hold. 1. This website discusses Some very important facts relating to the immense power that consumers possess in the food industry and how the demand for healthy food is increasing the price of raw materials resulting in organizations absorbing the overhead costs to keep prices low. It also provides some information of Kraft Foods biggest competitors. Analysis of competitors can help strategists determine future marketing strategies and how to establish brand loyalty. Monitoring competition allows for change and adaptability remitting one to stay on top of their industry by tailoring products to consumer needs/demands. Http://win. Wackiness. Com/stock/ 2. This website provides information that describes the growing demands of consumers and the growth of the healthy food craze. This website really demonstrates the power that consumers hold in the food industry. Consumers are mandating healthy food choices with no SMOG labeling. This has caused organizations to generate new products that are healthy and cater to consumer needs if they are to stay successful. Analyzing consumer trends is extremely important as it will allow a business to better tailor their DOD products and draw in new consumers and maintain loyalty of old consumers. Towpath. Inspirational. Com/vote-yes-on-37. Tm Supplier Power Although there are only ten major suppliers for Kraft Foods they have extreme power over the food industry. Walter is one of Kraft Foods largest clients with the most revenue generated and with so many competitors on the market Kraft Foods must absorb the additional costs of producing cheap food in order to Stay competitive. An individual supplier must offer something special to stand out from the crowd, such as a lower price, faster livery time, more flexible credit t erms, higher product quality or volume discounts (Sullivan, n. . ) 1. This article provides a thorough discussion and different view point on supplier power and monopoly in the food industry. It provides a discussion on how big organizations, such as Wall-Mart, exert their power over their suppliers. Different suppliers have monopolies at supermarkets and can pay for primary shelf space and promote their brands. This leads to smaller suppliers struggling in an industry dominated by large supply companies and large retailers. Http:// documents. Featherweights. Org/doc/Arteriosclerosis-web. UDF 2. Pratt provides a good discussion on how to analyze the bargaining power of suppliers. Understanding the questions he poses will enable an organization to potentially avoid competition and build quality relationships with suppliers thus enhancing chances of industry success. Http://centralizes. Com/ ? Understanding-the-Bargaining-Power-of-Your-Suppliers=4251948 3. This informative website provides a list of the Kraft Foods suppliers. Determining the number of suppliers in an industry can help strategist determine the bargaining power of the suppliers. In hard times suppliers can ration their rodents causing organizations to spend more money upfront and lose revenues. When an organization is able to differentiate their product from competitors it is easier for them to bargain with suppliers for fair pricing. Http://www. Deliberately. Com/as-Kraft-foods/suppliers. HTML Threats of Entrants When an industry is booming the threat of new entrants is high as everyone wants to make profits. The threat of new organizations creates competition among an industry and influences their ability to maintain profits (Wilkinson, 2013). Firms in this industry preserve market share through brand loyalty, versification and the barriers placed within the industry to enter the market (Porter, 2008). It is therefore imperative that these brands maintain quality at a competitive price and drive off new competition. 1 . The following website points out the current economy/industry sales for Kraft Foods and their top competitors. This is a good website as it will paint a picture for future companies as to the market capital, net income, dividends, operating margin and growth revenue. All of which are great indicators as to expenses and revenue generated and allows them to determining if starting a business in his industry is worth the overhead, time and effort. It can also help determine how different products by different companies are comparing to each other. Http://financial. Mornings. Com/competitors/industry- peer. Action? T=KRAFT=usa=en-US 2. This web page provides a table with Kraft Foods top competitors broken down by categories allowing easy access to different aspects of the business. This also allows potential companies to determine which industry they would have the most impact in to succeed. Additionally it provides revenue, income and market share. Http:// scimitars. Com/stocks/competitions. PH? Ode=KRAFT 3. NASDAQ is a great reference for organizations looking at trends in the food industry as it provides information on the financial, size and growth trends as well as market cap. This information is essential to determine if an organization can compete in certain industries. Http://www. NASDAQ. Com/ symbol/Kraft/competitors 4. This informative document discusses current economic indicators and the growth of the food industry over the last 10 years. It talks about nature of the industry, market overview, demand and annual food spending at home. Additionally it provides a discussion on the issues affecting the industry. This resource will help paint a vivid picture of the economy of the industry and help determine if a new product will succeed. Http://trade. Gob/tad/cog/ reporter_predecessors. PDF Threat of Substitutes The growing health trends have led many companies to adapt and change products to fit consumer demands. With a variety of brands available it is imperative organizations cater to consumers in order to avoid losing their loyalty to another company. Consumers in the industry have minimal switching costs and there is never the guarantee Of brand loyalty (Hathaway, Mark-numbers Weaker-Oberon, 2006). In order to keep loyal consumers organizations in this industry must offer new and innovative products. 1 . This document provides valuable information on consumer trends, healthy eating industry dynamic, emerging products, and success factors. This valuable information helps organizations determine current trends and how they can adapt to remain successful and ahead of their competition within the industry. Http://www. PWS. Com/us/en/transaction-services/publications/ assets/functional-foods. PDF 2. This is a very informative website that discusses current trends in the food industry while stating growth regenerates specifically relating to the healthy snacking options. This is a good site to gain a better understanding and insight to healthy alternatives that competitors may be producing as well as market trends http:// www. Knackerys. Com/articles/84475;snack;food;industries 3. Organic Trade Association website provides information on industry statistics and projected growth trends which is can assist organizations in determining their future products based on consumer trends. Http://www. Tot. Com/ organic/met/business. HTML Rivalry Among Existing Competitors In every industry there is rivalry amongst organizations to wi n over nonusers. This can generate new and innovative products, intense sales promotions and pricing wars (Porter, 2008). On the outside this activities may appear to be beneficial but in reality it can lead to increased costs and decreased profits for organizations (Porter). 1. CSS Market online provides a nice graph detailing growth rates Of the major competitors in the food industry. This is an extremely useful tool to help determine where you stand financially next to your competition. Utilizing this information may assist in determining if a new product should be launched and if new marketing tactics are needed. Http://scimitars. Mom/stocks/competition. PH? Code=KRAFT 2. If an organization is to remain successful and on top of their organization they must produce numerous products that cater to consumer demands, I. E healthy food choices. This innovative thinking keeps consumers coming back to the same brands and generates loyalty. Http://www. Fool. Com/investing/ genera 1/201 3/04/22/these-food-companies-are-the-best-at-inspiring-bra. Asps PEST Analysis PEST analysis tool was developed by Francis Jugular to help organization see the macro-environment of their business environment in order to make changes and maximize financial success (Mind Tools, n. D. ). The ability to adapt and change business tactics to meet consumer demands can create new and improved products enhancing brand loyalty (Mind Tools). The PEST analysis focuses on political, economic, socio-cultural, and technological changes in the industry, helping organizations to determine different opportunities (Mind Tools). Political 1 . This website provides information on regulations of the food industry, agricultural industry and federal regulations. Understanding the political implications and regulations of the food industry will assist with licensing and production of food products.