External Environment Analysis - Kraft Foods

Executive Summary

The following report serves as an evaluation of external environment of Kraft Foods (now Mondelez International Inc.) using Porter's Five Force Model and PEST analysis as strategic management tools. The environmental analysis reveals that company is having a significant position in the market with considerable competition. In order to reduce that competition, Kraft Foods need to make investment in innovation and increase its range of products. Due to its size, Kraft Foods is in a good position to bargain with its supplier and also have capability to raise entry barrier through its brand-recognition.

The PEST analysis reveals that that general political environment is in favor of the company to develop and implement new business strategies. Kraft Foods also addresses the need of a population segment that does not eat products with pork ingredients. As far as the opportunities for the company are concerned, the Cadbury deal should be used as a capturing strategy for European region. Further, Nestle is a significant threat for Kraft Foods as the company is also large in size as well as offer wide range of food items. The means, Kraft Food should invest enough on innovation and new products.

External Environment Analysis - Kraft Foods

Introduction

Strategic Management allows any organization to conduct its business in a radically different way beyond the traditional boundaries. In fact, strategic management enables a company to conduct environmental analysis that further enables a company to meet business challenges in order to meet customer demand and gain competitive advantage in its competitive landscape (Andriopoulos & Dawson, 2008). Kraft Food is recognized as a well-known and popular grocery manufacturer and processing company in North America. In fact, Kraft Foods can be seen as one of leading producers, sellers and distributors of grocery, dairy products and other food items. In addition, company's brand strategy is to increase the customer base putting emphasis on the product promotion with creative marketing strategies (Kraft Foods, 2011).

In order to understand the industry environment, it is vital to use Five Forces Model. As far as external environment is concerned, the external analysis is an important component in the strategic thinking process that causes the organization or the senior management to develop new strategic options or take away from the everyday operational problems (Morrison, 2011). The suggested procedure to conduct external analysis includes PEST analysis.

Discussion

Porter's Five Forces

Porter's Five Forces framework serves as a competitive position model that is simple but powerful tool to assess the industry situation and understand the power in the industry. In fact, the Five Forces Model allows a business to analyze its competitive strength as well as the position the company is intending to gain (Henry, 2008). Porter's Five Force Model comprises of five strategic elements including threat of entry, bargaining power of supplier, bargaining power of buyer, substitutes and rivalry as shown in the following figure.

Figure-1: Porter's Five Forces

Threat of Entry

Power of any company in the industry is determined by it capability to raise entry barriers for other companies to restrict ...