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Strategic Analysis tools and techniques
Typology: Exercises
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Introduction Acquisition is an important strategic idea aim at organization development and growth .It specifies big corporate alteration in the organization management, process, environment, strategy and stakeholder to mention but a few. Because of criticality of acquisition, it is necessary to use appropriate strategic tools to measure its impact on organization profit and performance. In this essay the case of acquisition of Weetabix by Post Holdings will be treated in the context of the organizations strategic position using Porterâs and Bowman's strategic practice , stakeholders analysis, analysis of the organization external environmental factor to gain competitive strategy and analysis of those factors that hinder business profit with Porter five forces framework. Post Holdings, Inc. has its Headquarters in U.S, St. Louis, Missouri. It is a consumer package goods company and the third largest firm producing cereal in the US. Weetabix in the other hand is the number one UK breakfast cereals maker formally owned by Chinese firm call Bright Food that bought the company at 60% stake back in 2012. An evaluation of relevant levels of strategy A strategy is an important part of organization practice, an organization with efficient strategy practice mostly turn out to be successful and for a company to achieve success, appropriate strategic tools are required. An organization strategy is define as the business foresight and long-term scope that is expected to achieve markets and shareholders need through resource management with proper consideration for the continuous change in organization environment (Johnson et al ., 2017). In addition, a companyâs strategy according to McGraw-Hill (2017) âis the set of actions that managers take to outperform the companyâs competitors and achieve superior profitabilityâ. In order to comprehend organization current strategic problem or situation, it is necessary to understand the three-dimensional forms of strategic problem, which are content, context and practice. Content as part of strategic problem describes the Business, Corporate, Network and Functional level strategy. In the case of the acquisition of Weetabix by Post Holdings, Post Holdings has explored corporate level strategy because it aim to achieve profit through international expansion. Applying corporate level strategy has also helped Post holdings to carry out post- acquisition strategy and give
Figure 1. Michael Porter (1980) Generic Strategy diagram ( Porterâs Generic Strategies describes how organization like Post Holding can achieve competitiveMister Simplify, 2018) advantages by practicing narrow or broad strategic scope with any of the two sources of competitive advantage low cost and differentiation. From the chart organisation can achieve Overall Cost, Cost Focus, Overall Differentiation and Differentiation Focus strategy. The strategic scope assert the way organization product or service reach customer base. As regard to Weetabix acquisition by post holdings, the implementation of Overall Differentiation strategy is important in order to achieve higher quality and brand value and this most have been the reason why Weetabix is having better competitive advantage in the market. In recent time have said âWeetabix has been able to create different brands with unique value in their market segments.â Weetabix has already established its presence in over 80 countries using Overall Rogers was quoted in marketingweek (2017), to Differentiation strategy.
Bowman's Strategic Clock is another competitive strategic tool that might have been used by Post^ Figure 2. Bowman's Strategic Clock diagram (tutor2u, 2016) Holdings to gain sustainable competitive edge in market after the acquisition process. Bowman build
on the existing Michael Porter Generic Strategy and discover the choice of strategic position. According to give it the most competitive spot in the marketâ. Bowman claims that competitive advantage can be tutor2u, (2016) strategic position is defined âas how a product should be positioned to achieved over the competitors by giving consumers greater value for product either through lowering the price of the commodities or buy providing paybacks and service that can justify rise in price. Bowman's Strategic Clock consists of eight different strategic position base on price on x-axis and value perceive by customer on y-axis. With respects to the Post Holdings acquisition of Weetabix, product differentiation principle would be an effective position strategy to be used to earn advantage in market competition. Bowman Product differentiation is similar to Porter Overall Differentiation strategy but it has some element of low price combine with the product differentiation. This strategy would have been the best for Post Holdings to earn market and profit in China, by persuading the Chinese customer that there are good benefit in their product and some element of differentiation, as against the traditional Chinese consumers hot, rice-based breakfast cereal. A critical evaluation of the key stakeholders organization business decision and activities. In addition, stakeholders can be define as the groups, institutions or individuals that possess desires to know the organization programmes and policies.^ A stakeholder is any organizations or group of individuals that have committed interested in the Stakeholder are integral part of any organization whose roles are important to have complete understanding of problem and proper solution execution. Stakeholder value as part of organisation purpose are realized through stakeholder interest management, identification of primary and secondary stakeholder and recognising of organization as joint venture that mutually depends on the count of stakeholders.
Weetabix and Post Holding Owners^ Primary Stakeholder^^ Weetabix owner interested in Investment return and Post Holding owner interested in success and growth of the business after acquisition Likely Interest Manager & Employee of both Post Holding and Weetabix The Weetabix Cereals food consumer acquisitionGuarantee for the same value for their money after Weetabix Acquisition Job security and position rearrangement after investor Supplier and Customer (^) Secondary Stakeholder Profit on investmentContinuous trade after acquisition 4^ Media houses and news outlets | P a g e^ The acquisition progress monitoring
Employees and Labour union need regular communication and need to be kept informed. In all, Post Holdings must have kept the analysis of the stakeholders in stakeholder register for effective management of necessary ethical stance and the knowledge of different source of stakeholderâs power to achieve perfect business strategy. External analysis by using PESTEL to identify and explore key trends A manager can plan strategy that best fit organisation situation after full understanding of both the internal and external environment, this assist manager to execute long-time plan and at the same develop strategic vision. Environmental analysis identifies those forces that hindering the strategic process and that might likely affect the future of an organization .Every organization operates in broad environment called macro environment and according to McGraw-Hill (2017), a macro- environment âcomprise of six main components which are political, economic, sociocultural, technological, environmental/Ecological, and legal/ regulatoryâ. The analysis of the mention components of macro-environment is known as PESTLE. Macro-economic components affect companies in different ways and to different degree because of this, it is necessary for managers to choose the external factors that are capable of affecting the Company long time strategy and business decision. Therefore, in analysing the environmental factors that might have contributed to Post Holdings acquisition of Weetabix, the six component of the macro-environment is discuss below: Political Factor Prior to the news of acquisition of Weetabix by Post Holdings, there has been news about Breexit, which has politically affected UK economy. This political instability brought slump in pound sterling and as reported by Independent (2017) âa string of companies in the UK have already attempted to offset sterling weakness by passing on the additional cost to consumersâ. In addition, as companies like Unilever and Tesco were bracing for the impact of the Pound Sterling slump, Weetabix as well was planning to increase the price of it commodity because of Pounds Sterling weakness against US Dollar. Wheat as main ingredients of Weetabix is a global commodity purchased in US dollars and its cost in pounds sterling has jumped. According to BBC (2017) "..., the dollar's strength has helped the successful bidder, US consumer group Post Holdings." Amidst the political instability, UK has been experiencing increase in workers minimum wage over the time except between 2007 and 2009 where there was little drop and after then it has gradually
been increasing ( as it has incurred more expenditure in running the business. Economic Factor https://www.minimum-wage.co.uk/, no date).This further affect Weetabix business Economically US economic is waxing strong during the Brexit plan that has weakened the Pound Sterling again the Dollar. There is no argument in saying that Post Holding has utilized the opportunity to clamp top of other bidders in Europe, because it would have been difficult to have any domestic buyers to overcome the issue of Pounds reduced buying power. According to BBC (2017), "UK-listed Associated British Foods was rumoured to have been interested in a deal as well â ,but the company might have decided to step aside its ambition because of the UK economic issue. In other for Weetabix to remain in competition, Post Holding needs to adopt Weetabix strategies of selling large volume of the product outside UK to reduce the impact of economic fallout in UK. Sociocultural Factor One of the reason why Weetabix struggle in the Chinese market as reported by BBC (2017) is because âChinese consumers prefer a hot, rice-based breakfast to cold cereal â .Guardian (2017) quoted George Salmon saying, âWeetabix has struggled to crack the Chinese market, so it is no surprise to see Bright Food selling upâ. Consuming hot rice is typical Chinese culture and according to Reuters (2017)â Post Holdings has agreed to create a joint venture with China Bright Food and Baring to manage the Weetabix China operations â. Also Reuters (2017) as quoted Robert Waldschmidt before the acquisition saying that the problem of Weetabix struggle in china market is âprobably going to be a much better fit with Post Holdingsâ. Technological factor Before the acquisition of Weetabix by Post Holdings, a great innovation came out from Weetabix manufacturing process in form of product research through the help of science and technology. Weetabix was able to develop the new protein enhance cereals product because of technology change awareness in its external environment. The cereals consumers are beginning to be aware of the advantages of consuming high protein food and Weetabix was able to deliver this to them. Weetabix is known for its proactive way of spotting market trends and turning its observation to innovate product. Post holdings should continue with this Weetabix strategy to enhance its technological innovation. Ecological Factors 7 | P a g e
Threats of New Entrants Figure 4: Michael Porter five forces framework Weetabix Case The competition in the Cereals industry brings innovation and because of this, new entrants to the industry will probably bring new differential product that will pressurise Weetabix to review is price strategy. In this case, Post Holdings should continue to be more innovative and dedicate more effort to research and development to have effective competitive edge whenever there is new entrant in the industry. Also its should be more focus on achieving economic of scale.
Industrial rivalry Among Cereals sellers-This is moderate for Weetabix because it has been able to competition. manage the
Industrial rivalry Among Cereals sellers-This is moderate for Weetabix because it has been able to competition. manage the
but Weeatbix should^ low for Weetabix,^ Entrants-Threats of New Thi s^ is continue to review the price startegy and be more innovative but Weeatbix should^ low for Weetabix,^ Entrants-^ Threats of New Thi s^ is continue to review the price startegy and be more innovative
pressure from buyer This is weak in this bargaining power -conmpetitive been able to meet the^ case, Weetabix has demand for their products
pressure from buyer This is weak in this bargaining power -^ conmpetitive been able to meet the^ case, Weetabix has demand for their products Threats of substitute product-This is weak Weetabix should be for this case, oriented to keep the^ more threat weak^ service
Threats of substitute product-This is weak Weetabix should be for this case, oriented to keep the^ more threat weak^ service
supplier bargaining power-Weak for^ Pressure fromCompetitive Weatabix.Weatabix management for has outstanding suppy chain their Cereals
supplier bargaining power-Weak for^ Pressure from^ Competitive Weatabix.Weatabix management for has outstanding suppy chain their Cereals
Bargaining Power of Buyer Weetabix consumers are demanding and want the best and innovative product coming from Weetabix cereals product reason why high number of consumers buy On the Go cereal for their meal. Although Weetabix has been able to meet the demand for their product, as reported by Kevin Verbruggen in the Marketingweek (2017) âWeetabix has dominated new launches in the cereals category over two yearsâ but the consumer want them at reduce price. Post Holding has been able to tackle the bargaining power of buyer through production of innovative product and building of large number of customer base after acquisition. Threats of substitute product Weetabix is the largest producer of cereal food in UK and the third largest producer in US where it is having high competitive pressure. There is hardly room for substitute because the market is closed type. Post Holding can tackle this by being more service oriented rather than product oriented. Competitive Pressure from supplier bargaining power Weetabix has built efficient supply chain system for the cereals. One of the arguments for this is the purchase of the cereals from farmers located within 50miles of its factory and the sourcing techniques. Weetabix has also established good relationship with the cereals farmer and at the same time, working with them to achieve consistency and product quality (Weetabix, 2016).High supplier bargaining power could affect the Post Holdings profit. Industrial rivalry among competitive sellers Weetabix is operating in a very competitive industry and this would have a long time effect on the company profitability. Weetabix has been able to tackle this through introduction of differential product like Weetabix From the analysis of the five-force framework, it seems that all the forces are weak except the force on the Go cereal that has helped the company to withstand competition. of rivalry among the competitive sellers, which is moderate. In this case, Post Holding the new owner of Weetabix is working in an attractive industry where member can earning good profit and high return on investment at long run.
References BBC (2017) Weetabix to be sold to US company Post Holdings. Available at: https://www.bbc.com/news/business-39625715 (Accessed: 02 December 2010). Guardian (2017), Weetabix sold to US firm after breakfast cereal fails to catch on in China Available at: china-breakfast https://www.theguardian.com/business/2017/apr/18/weetabix-sold-us-firm-cereal-fails-catch-on- (Accessed: 02 December). Independent (2017) sterling weetabix-price-rises-pound-sterling-slump-drop-value-marmite-pg-tips-a7552726.html. Available at: https://www.independent.co.uk/news/business/news/brexit-latest-news- Brexit: Weetabix warns of price rises in 2017 sparked by slumping pound Just-food (2017) https://www.just-food.com/analysis/post-holdings-discusses-rationale-for-weetabix-five-things-to- learn_id136419.aspx Post Holdings discusses rationale for Weetabix - five things to learn (Accessed: 02 December 2019).. Available at: marketingweek (2017) https://www.marketingweek.com/weetabix-tv-hard-to-beat-roi/# Weetabix on why TV is âvery hard to beatâ for ROI (Accessed: 02 December 2010).. Available at: McGraw-Hill (2017) Available at: https://bookshelf.vitalsource.com/books/9781307106244 Strategic Analysis: Tools and Techniques. VitalSource format [e-book reader].. Mister Simplify at: https://www.youtube.com/watch?v=mZeNOaO3Pzk (Accessed: 02 December 2010). (2018) Porter's Generic Strategies - Simplest explanation with examples. Available National Minimum Wage Rates December 2010). https://www.minimum-wage.co.uk/ (no date) (Accessed: 02 Reuters (2017) https://uk.reuters.com/article/us-weetabix-m-a-post-holdings/u-s-post-holdings-tucks-into-british- breakfast-cereal-weetabix-idUKKBN17J1Q4 U.S. Post Holdings tucks into British breakfast cereal Weetabix. (Accessed: 02 December 2019). Available: at
Tutor2u (2016) v=hsV1mraa4AI (Accessed: 02 December 2019). Bowman's Strategic Clock. Available at: https://www.youtube.com/watch? Weetabix (2016) https://www.weetabixfoodcompany.co.uk/press/news-archive/weetabix-re-commits-to-source-wheat- from-local-farmers Weetabix re-commits to source wheat from local farmers (Accessed: 02 December 2019). Available at: Weetabix (2017) Post Holdings complete acquisition of Weetabix. Available at: https://www.weetabixfoodcompany.co.uk/press/news-archive/post-holdings-completes-acquisition- of-weetabix (Accessed: 02 December 2019).
