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Strategic Analysis: Tools and Technique
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Masters of Business Administration Strategic Analysis; Tools and Techniques (ST4S38) Tutor: Dr Christodoulos Kakouris SUMMATIVE ASSESSMENT 1 A Critical Strategic Analysis of the Current Strategic Change within Weetabix by Post Holdings Augustina Mary Akintolu ID: R1701D 22 nd^ October, 2020
2. 0. The Relevant Types of Strategy Johnson et al., define strategy as the function and management of an establishment or an organization over a prolonged time that benefits or puts the organization in a convenient position from the use of the resources within an evolving environment so as to achieve and exceed its stakeholders' expectations. According to Ramon & Joan (2009), A strategy is a âcontingent plan of action which is design to achieve a specific purpose or goal.â Strategy then is said to be the whole objective of an organization for its setup over a prolonged span of time. There are three (3) types of strategy: corporate strategy, business strategy, and functional strategy. 2.1. Corporate Strategy Corporate strategy is a process where all information about the organization or company is clearly stated like its location, its target market, and competitors (Chew, 2009). The case of Weetabix is an example, where China was not considered as a strategic location for the market instead the market choice considered was the British market despite its company's former owner being Chinese. The company (Bright Foods) experienced a decline in their turnover because the Chinese prefer their breakfast hot instead of cold cereal which is a rather preferred option for the westerners. 2.2. Business Strategy The business strategy focuses on the activities of each business within the organization partake and deliver on the corporate strategy. Porter (2008) stated that for an organization to be successful, the business strategy depends on cost leadership, differentiation, or focus strategies. Some established and large corporate bodies have strategic units and also establish their own business strategy within the organization. This business strategy is also referred to as a competitive strategy and can be seen in table 1 below
2.2.1. Cost Leadership Cost leadership can be defined as the retailing or selling at the lowest price in an industry. This strategy is deployed to increase the turnover of an organization as a result of attracting a lot of buys by selling at a lesser price from the competitor. In the case of Weetabix acquisition by Post Holding, the company may consider growing its profitability by harmonizing the group and may control the cost of production to decide upward review or downward review of price so as to achieve a competitive advantage from competitors is the cereal industry. 2.2.2. Differentiation Differentiation is when a product or service is perceived by its customer to be distinct from those of its competitors. This distinctive is seen by the customers to be better and unique from its competitors in the same industry. This type of strategy is successful where there is no price sensitivity and competition are few. Weetabix adopted a differentiation strategy by concentrating on growing the distinctive value for their customer. According to Roger (2017), âWeetabix has been able to build various brands with a distinctive value proposition in their market segment.â 2.2.3 Focus A focus strategy is where an organization or company focuses on a particular sector of market space to sell its products and to a particular audience. When an organization operate on a focus strategy, the company gain customer loyalty and it is always difficult for competitors to penetrate
In 2014, Weetabix introduced Breakfast on The Go beverage, this introduction was as a result of research carried out on another top brand competitor Nestle. In the United Kingdom, Weetabix also introduced the Weetabuddies campaign which encourages children to eat fruit with breakfast cereal. As a result of this campaign, the company sales increased by 14 percent (Talking Retail, 2016). There was also the launch of Weetabix Protein and Protein crunch which also gave the company a large market share from its competitors. Table 2 below is Bowmanâs Strategy Clock Source: Thebusinessprofessor.com 3.0. Critical Evaluation of Major Stakeholders Stakeholders are individuals, groups, or bodies of an institution who has an interest in the decision making and growth of an organization. According to Bryson, J. M. (2003), stakeholders are individuals, groups who are considered by management or business leaders in an organization. Walker, Bourne, and Shelley (2008), also define stakeholders as persons and groups who have a shared interest in an organization. Furthermore, Stakeholders of an organization include shareholders, customers, investors, employees, vendors, government, the press, etc. (Shawn, 2017). In the case of Post Holdings and Weetabix acquisition, both organizations had stakeholders. This acquisition decision affected the stakeholders either positively or negatively, some shareholders
of Weetabix sold their shares, some employees lost their jobs, and some vendor's contract was dissolved. Applying an influence or power of stakeholders and interest of stakeholderâs matrix, a map of stakeholder is drawn with four sections highlighting the power and interest of different stakeholders of Weetabix as seen in table 3 below. Stakeholder Matrix Source: Walker, D. Bourne, L. and Shelley, A. (2008) 4.0. External Analysis using PESTEL PESTEL is a strategic tools or framework used by marketers to monitor the external environment that has an impact on an organization. There is no business or organization that can survive in isolation from the environment it operates. In analyzing the external factor affecting Weetabix and Post Holdings, strategic tools PESTEL will be used to analyze its environment. PESTEL is grouped into six (6) classifications: P â Political Environment, E â Economic Environment, S â Social and Cultural Environment, T â Technological Environment, E â Ecological Influences, and L â Legal Environment. 4.1. P â Political Environment The political environment is factors that have a strong influence over a business, it includes government laws that regulate an organization. An example is the acquisition of Weetabix in the United Kingdom where there was political instability after the country voted from the European
different locations outside the ownersâ territory and may also produce at low cost or introduce new products. 4.3. Social Environment Social factors are the influence that affects business decisions; they impact consumerâs needs and the market size for goods and services of an organization. Some of these factors are culture and norms of the people, demographic characteristics, ethnicity, religion, values, lifestyles, and taste which can impact the operations in its various market, region, and customers. Weetabix being a food production company that produces cereal was able to make a high turnover in the UK and US compared to China who prefers hot breakfast. 4.4. Technological Environment The world is ever changing with new technological advancement, this change in technology give producersâ opportunity to improve on their product by investing in their research and development to come up with new ideas to beat competitors. Weetabix has been able to showcase of some their ideas by coming up with a cereal that is in form of a liquid called Weetabix on the Go (Happen, 2018). E-commerce can also affect a business post-acquisition in the international market, supply chain, and dealing directly with customers while also getting feedback. 4.5. Ecological/Environmental Influences Since current global discussion is climate change and global warming, it is important for an organization to practice and abide by environmental laws by recycling packaging materials to reduce environmental pollution. Post Holdings must consider package materials that are ecosystem friendly not harmful to the populace. 4.6. Legal Environment Legal environment comprises of laws and regulations that govern a country where a business is located, laws like employment law, data protection act, health and safely law, etc. The United Kingdom modification on employment law to review minimum wages up according to the age of the labor force is a legal factor that affected Weetabix and Post Holdings.
5.0. Internal Analysis Using Porterâs Five Forces Model Johnson et al (2017) define an industry to be made up of a group of companies that produces similar product or render the same services. Analyzing competitions in a market is important for strategizing and to determine the position of an organization. Porter (2008) Five â Forces model is used to analyze the aggressive strength of various competitors in a specific industry, it is used to understand the market and assist the organization to develop a standard aggressive strategy. He further argued that âthe structure of the industry and the competition within the industry are two different factors that can influence the profitability of a company. In the case of Weetabix after acquisition by Post Holdings, where the breakfast cereal industry is highly competitive, with the likes of Kellogg, Nestle, Cheerios just to mention a few, the porter Five-Force model will best identify the factors that can influence the profitability of Weetabix. The porter five force models are used to analyze Weetabix industry based on the following models; the threat of new entrants, the threat of substitute products, bargaining power of suppliers, bargaining power of buyers, and rivalry among existing competitors. Table 5 below highlights Porter's five force models. Source: Business-to-you.com
countries. Furthermore, Weetabix is working with various wholesalers and distributors in the form of target creation and presenting rewards for meeting targets. Through brand management and campaigns of healthy food, Weetabix has gained the attention of the audience of grocery store shoppers who will rather pay a premium price for healthy food. 5.5. Competitive Rivalry The breakfast cereal market is a competitive market where strong branded rivalry exists, brands like Kellogg, Nestle, Quaker, etc. Companies in this industry constantly come up with new ideas and introduction of new products thereby making competition in the industry high. The rate of competition in the cereal industry will make Weetabix invest in research so as to come up with innovative ideas that will keep them in business and retain the market leader. 6.0. Conclusion and Recommendation Post Holdings Inc. An American company that has grown over a couple of years from the acquisition of companies ventured into the British market by acquiring Weetabix in 2017 form a Chinese business owner under the name of Bright Foods for the sum of 1.7Billion Pounds. This acquisition is as a result of the brand recognition of Weetabix as the most favored cereal brand in the UK and Africa which will bring about a new market share and growth for Post Holdings. Weetabix operate the differentiation strategy through the production of different product for different market, an example is the âBreakfast on the Goâ which was a hit with consumers who do not have the times to sit in to have cereal breakfast but rather have it on the go. The ability of the company to utilizes technology as a change management to be able to meet consumers need, consider the political uncertainty like the Brexit to strategize will signify how the company will be successful and retain the market leader in the long run. Weetabix operate in a market where the bargaining power of the suppliers and buyers are low because of the strategy Weetabix has put in place. The company partner with grocery stores to sell their product in wholesales to attract consumers when they go shopping. Wheat is also in abundant in the region which prevented suppliers of wheat not to inflate the price especially that there is a wheat farm 50miles radius from the production plant in the UK. There is also the law
of the country which also dictate the wages of labour in the country, for Post Holdings to continually increase its turnover; it must consider reducing the cost of production through investing in research and development with the current trend of technological advancement to remain profitable.
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