Kraft General Foods: The Merger (A) Harvard Case Solution & Analysis

Kraft General Foods: The Merger (A) Case Solution

Introduction and key issues:

It is expected that Philip Morris Cos. is considered as the largest consumer product company in the world and by acquiring the Kraft foods it would become the largest food company in the world. The company sells top food brands of US and has significant recognition across the globe. Although the operations of the company were going in a positive manner, however it has been facing the integration issues within the operation of the Kraft Foods and General Foods irrespective of the same nature of business and industry. Moreover, it also created serious concerns for the management with respect to the future perspective of the business as the cultural differences, structural differences, and different product portfolios were creating managerial issues for the top management of both the companies.

Analysis:

Porter Five Forces

 In order to analyze the micro environment of the business, porter’s five forces have been used.

Bargaining power of buyers:

It is expected that there are several players are operating in the market with a wide range of product offering, which means the customers have greater options and the switching cost related to shifting from one seller to another seller is low, therefore the bargaining power of buyers is expected to be high. In addition to this, the companies are operating at economies and are offering lower prices to the buyers. Hence, the firms are following the price war strategy to attract the greater market share, which also makes the bargaining power of buyers high.

Bargaining power of suppliers:

It is expected that many global players are operating in the food industry with having global manufacturing operations, therefore they have easy access to greater international suppliers. The greater number of suppliers makes the switching cost low as the companies could easily shift from one supplier to other which would result in low bargaining power of suppliers. In addition to this, the suppliers of the raw material of food products are also striving for greater market share through product offering at lower prices, which also makes the bargaining power of suppliers low.

Threat of new entrants:

It is expected that the food industry is a capital-intensive industry in which huge mount is required to start the operations. Therefore, the threat of new entrant is low due to the capital-intensive nature of the business. In addition to this, the industry is saturated with many global players having significant market share, hence the potential of growth in the food industry is low, therefore, the lower potential for growth in the industry is a significant barrier for the new entrants. Moreover, operating in the food industry requires significant operating cost such as high distribution cost, market cost and research and development cost and the largest player are operating at economies. Therefore, it is difficult for the new players to enter into the market and operate at breakeven as well. Hence, the threat of new entrants is low.

Threat of new substitutes:

Numerous players are operating in the industry with diversified portfolios and greater product offerings, and it is expected that these products satisfy the same need of customers. However, the global players are operating in the market along KGF with offering quality products at lower prices, and the brand recognition of these players is also high across the globe. Therefore, the threat of substitutes is moderate due to the brand loyalty of customers.................

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