Kraft Foods: The Coffee Pod Launch (A) Harvard Case Solution & Analysis

Bargaining Power of a Supplier

The bargaining power of supplier is low due to the presence of many competitors in the market which provides a very little opportunity to the companies in setting a higher prices in comparison with its competitors. However, the competitive nature of the market does not allow companies to extract higher amount of profits from the products. Kraft Food has been very competitive in its approach of providing competitive pricing for its products.

Competitive Rivalry

The competition is intense in the coffee pod market due to the presence of One-to-One, Home Café, Senseo, and Bunn My Café. Apart from the coffee pod market, the Canadian market is surrounded with other giant coffee competitors which includes Starbucks, Tim Hortons, McCafe, and other companies. The particular market tends to have low switching cost which makes the limited impression of brand loyalty in capturing the attention of the consumers.

Alternatives

Alternative 1

The first alternative for the Kraft Foods is to launch the SSP product simultaneously with the launch of SSP in the United States market.

Alternative 2

The second alternative is to delay the launching of SSP in the Canadian market and to first await the market test results for the particular brand and then make decisions regarding the entrance of SSP.

Analysis of Alternatives

Alternative 1: Simultaneously Launch SSP

Advantages

While launching the SSP simultaneously in the Canadian and the United States market, the company would gain a first mover advantage which would result in huge revenues for the company. This strategy would also allow Kraft Foods to gain comprehensive market share. The company can utilize its existing distribution strategy in the country and has an upper edge from its competitors. The particular target market for this strategy may include single professionals from the age type 25 to 54.

Disadvantages

The company is new in the market of SSP, and if it takes the first move in entering the Canadian market without constructive research then it would become difficult for the company. Furthermore, without the knowledge of the existing coffee pod market and the consumers approach, the company might endanger the goodwill of its existing coffee brands in Canada which has acquired good reputation in the country.

Alternative 2: Await Market Test in US

Advantages

The particular strategy would allow the company to device a near perfect strategy that could easily face the challenges in the Canadian market after the market test in the United States. The US market would provide a great head start for the company as consumers are savvy in the market and would need less marketing efforts to spread awareness. The particular target would be similar as proposed in the first alternative which targets professional individuals.

Disadvantages

The US market is even more saturated than the Canadian market which would yield less desired results than it is expected from the Canadian market. The company would also lose its competitive advantage of moving first in the Canadian market. The US market is different from the Canadian market, and therefore the results that might be produced in the particular strategy might not be applicable for the Canadian market.

Recommendations

The alternative recommended to the company is to simultaneously launch the SSP product in the Canadian and the US market. Kraft Foods can easily market the brand in one million budget which has been provided by the company. The company needs to ascertain the market gap in the coffee prod market in Canada and to achieve a first mover advantage in the relevant market. The company also has a strong presence in the Canadian market than in the United States which might yield better results than the simultaneous country.The objective of the company shall remain on becoming the leader in the food market and to create innovative products and to adjust accordingly with the need of consumers. The target market for the strategy includes individuals with the income group of 25 to 54 years of age. Direct-to-Sales Delivery (DSD) shall be adopted by the company because the company has a strong DSD network and is more cost effective than the conventional form of distribution network. The suggested retail price of 18 pods shall be $4.04.

Pricing

The pricing strategy is set while bearing in mind about a considerable amount of margin for retailers that shall motivate retailers to promote its products. The price shall also be competitive for its product but shall not be undervalued that it negatively contrast with the quality of the product. Therefore, the price for 18 pods shall remain $4.04 which allows the company to offer 35% of the margins to its retailers. It would still be considered as a premium price because the price is competitive and has not been placed below the competitive line.............................

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