A critical strategic analysis
of the current strategic
position within Post
Holdings- Weetabix.
Bolu Olatunji – 74112105
Lecturer: Amarachi AMAUGO
Strategic Analysis; Tools and
Techniques (ST4S38)
28th February, 2021.
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Post Holding’s Strategic Position , Essays (university) of Strategic Management
A critical analysis on postholding's strategy in weetabix
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2020/2021
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A critical strategic analysis
of the current strategic
position within Post
Holdings- Weetabix.
Bolu Olatunji – 74112105 Lecturer: Amarachi AMAUGO Strategic Analysis; Tools and Techniques ( ST4S38) 28 th^ February, 2021.
Contents
- 1.0 Introduction
- 2.0 Post Holding’s Strategic Position
- 2.1 Porter’s Generic Strategy Grid
- 2.2 Bowman’s Strategy Clock
- 3.0 Stakeholders Analysis and Mapping
- 4.0 External Environment PESTLE Analysis
- 4.1 Politics
- 4.2 Economic
- 4.3 Social
- 4.4 Technological
- 4.5 Environmental
- 4.6 Legal
- 5.0 Industry Analysis – Porter’s 5 Forces
- 5.1 Threat of new entrants
- 5.2 Bargaining power of buyers
- 5.3 Threat of substitute products or services
- 5.4 Bargaining power of suppliers
- 5.5 Competitive Rivalry
- 6.0 Conclusion and Recommendation
- 7.0 References
Post holdings and Weetabix which were rivals in a very competitive market with other brands like Cheerios’, Kellogg’s etc. In order for Post Holdings to uphold its competitive superiority, the company had to analyze its strategic objectives and thus their resolve to acquire Weetabix. 2.1 Porter’s Generic Strategy Grid Michael Porter postulates from the diagram below, as a general base for which a company should be able to ascertain its strategy of choice. He went on to say that competitive advantage (in many industries) could be view from two perspectives: cost leadership or delimitation (differentiation). He went on to say that failure to do any of the two will lead companies like McDonald to end up in a “stuck in the middle scenario” where the said organization will not achieve sustainable market dominance. Source: https://fourweekmba.com/porters-generic-strategies/ Post Holdings, is a consumer-packed cereal company. Through the myriad of products that they offer owing to the companies that they have acquired over 10 plus decades, they are able to stifle the competition through differentiation. Of the major global competition which include Mondelez International, General Mills, Treehouse Foods, & Kellogg’s, Post Holdings is the oldest but has the second lowest valuation of $6.3Bn only
surpassing Treehouse Foods which is valued at $2.4Bn. According to craft.co (2021), Post Holdings, has the least number of staff (10,200 employees). One could deduce through the revenue they generate, that it will be difficult to be a cost leader in this fierce competition. An attempt to reduce the selling prices of products, may be unsustainable and will thus lead to a possible downsizing of staff in the future. On the contrary, because of the myriad of their product offerings, they stand a great chance go forward in their chosen strategy (Differentiation focus). This is because, from their acquisitions in time past, we can see that they like to aim for niche markets. This opinion, is backed by Visionone (2017), who points us to the fact that, meeting customers unique needs is Weetabix’s chosen strategy of focus. 2.2 Bowman’s Strategy Clock As an addendum to Porter’s generic strategy grid, Bowman’s strategy clock, extends porter’s model by examining a company’s value proposition to its customers. This opinion was made by “thebusinessprofessor.com”. According to ‘Four-week MBA’, they said that the Bowman’s Strategy Clock is “a marketing model concerned with strategic positioning”. They said “The Bowman’s Strategy Clock seeks to illustrate graphically that product positioning, is based on the dimensions of price and perceived value”. Source: https://fourweekmba.com/bowmans-strategy-clock/
This pretty much summarizes the stakeholders of many companies. Weetabix’s priority is to keep their customers, partners and investors satisfied; customers because, they are the whole essence of the business. Investors, because they are the ones who help to fund the operations necessary for meeting the consumer needs. Partners because, they are the ones who will help connect their products to the customers. They also need to be informed and keep the government informed of their activities in order to ensure that they are playing safely within the stipulated regulations in order to deliver quality products to their customers. 4.0External Environment PESTLE Analysis Without properly understanding the environment a business operates in, it will not be around for long if it ever gets to lift off the ground. Source: https://fourweekmba.com/pestel-analysis/
4.1 Politics As said earlier that every business exists within an environment. These environments usually consist within geographical space that is governed by the politics of that nation. Any political sway, is likely to affect the organizations in that country. There has been uncertainty in Post Holdings’ history in the case of Brexit which caused a depreciation in the value of the British Pound (Daneshkhu, 2017). He analyzed that this Brexit change at that time was going to increase the production costs of Weetabix products which would in turn, lead to higher selling price per product unit. This means lower sales. 4.2 Economic Global companies like Weetabix by Post Holdings often experience balance of trade issues due to the different operating locations within different countries. Weetabix for instance that operates in 80 countries will have to reconcile their accounts quite often to cater for inflation, depreciation, amortization, taxation, duties and tariffs on exportation of fast-moving consumer goods. Weetabix will need to apply different strategies which is dependent on the country where they conduct trade. 4.3 Social The social construct of the any country that an organization might be working in, is critical for its operations. Things like demographic characteristics, socio-cultural values, consumer interests, holidays and festivities, religion, norms, mores and other cultural elements. In the case of the merger between Lenovo and IBM. The merger which was more of the case where David (Lenovo) was swallowing Goliath (IBM’s PC division). There were obvious socio-cultural changes which included; huge time-zone differences and the very different cultures. The CEO of IBM’s PC division had to resign. These things take great tolls on companies if they are not well managed. Orr and Xing (2007) said that “cultural integration is still one of the biggest challenges… We face the combined effect of different corporate cultures and the difference between the cultures of the East and the West.”
through innovation, they found a way to stay profitable which reducing the impact that their products have on their operating environment. 4.6 Legal Various countries have different ways they coin their constitution from the processes involved in registering the companies, to intellectual property infringement, health and safety laws etc. The degree of strictness of these laws could hamper corporate productivity. The head of the Legal team in Weetabix, Helen Wilson (2018) said, “I do a lot of Intellectual Property work for our brands, while food safety and competition laws are also key areas for us. We also spend time looking at legislation in new territories to ensure we have considered everything before launching in a new market.” In 2018, there was a class action Lawsuit in New Zealand against Weetabix by an Australian company named ‘Weet-Bix’ for allegedly infringing on New Zealand’s copyright laws by the importation of Weetabix. They claimed that the products confuse their customers owing to the fact that the Australian company got there before the British company. The court ruled in favor of the Australian food giant ‘Sanitarium’ which was the parent company of ‘Weet-Bix’.
5 .0 Industry Analysis – Porter’s 5 Forces
In order to gain a better understanding of the industry and the competitive forces at play in Post Holdings’ space, we will use Michael Porter’s 5 forces model. Source : https://fourweekmba.com/porter-five-forces/ 5 .1 Threat of new entrants Every business should be well aware that there will always be an opportunity for new competition. The new entrants usually come with differentiation and an attempt to be a cost leader. In Nigeria, St. Louis sugar was the in-thing until Dangote sugar stepped in. Dangote’s strategy was to enter with a very competitive price strategy which was less than half the price that a single unit of St. Louis Sugar was going for. Dangote studied the market and realized that Nigerians favored cost leadership over differentiation. Weetabix has its products in Nigeria as with other products like Kellogg’s, Golden morn and other cereals. Their strategy has been to drive home their differentiation strategy but their high competition has reduced their profitability margin owing to the Nigerian market culture. Weetabix in Nigeria however, is more popular among the upper middle class who have access to disposable income.
5.5 Competitive Rivalry Every industry is replete with competition that seek to outdo with one another. A very good example of this exists in the beverage industry or FMCG (fast moving consumer goods) is the banter between Coca Cola and PepsiCo. It is littered in their adds and packaging but very little changes can be seen in their recipe. Weetabix was able to increase their market share when they introduced “Weetabix-on-the-go” by innovating their way out of the status quo. Innovation keeps a company afloat and sustainable.
6 .0 Conclusion and Recommendation
Weetabix has shown itself as an innovative brand who carries out research ceaselessly to keep itself at a competitive advantage against external market forces. However, as they innovate, they will need to find a way to effectively dispose of their under-performing products. According to Craft.co, Weetabix increased its staff strength by at least a hundred which implies that the company is doing pretty well. Kellogg’s is a bigger company by revenue; for Post Holdings to stay relevant in the cereal industry, it must continue to innovate whilst keeping in mind the law of diminishing returns on its revenue for its under-performing products. It should continue being lean in operation, mean in its innovation and green in its production to compete not just with rivals but to stay ahead of regulatory bottlenecks that may arise in the future.
7 .0 References
Bakery and Snacks (2018). ‘ Weet-Bix vs Weetabix: New Zealand judge rules Brit cereal to be destroyed in infringement ruling.’ Available at: https://www.bakeryandsnacks.com/Article/2018/09/26/Weet-Bix-vs-Weetabix-New- Zealand-judge-rules-Brit-cereal-to-be-destroyed-in-infringement-ruling. [Accessed on: 27 th^ February, 2021]. Businesswire.com (2017). Failure Case Study: Weetabix in China - An International Expansion that Failed to Reach Expectations - Research and Markets. Available at: https://www.businesswire. /news/home/20170623005405/en/Failure-Case-Study- `Weetabix-China---International/ [Accessed 28 th^ February 202 1 ]. Drakakis, H. (2017) ‘Rise and shine: Weetabix’s 2017 wholesale strategy, Better Wholesaling’. http://www.betterwholesaling.com/weetabix-2017/ [Accessed 26 th February 202 1 ]. Drucker, P. (2001). ‘Best of Drucker on Management’. Fried, J. and David, H. (2010). ‘Rework’ Four-week MBA (2021). ‘Bowman’s Strategy Clock in a nutshell’. Available at: https://fourweekmba.com/bowmans-strategy-clock/. [Accessed on: 26th^ February, 2021]. Interview with Wilson, H. (2018). ‘Spoonful of knowledge into Weetabix: An insight into their Legal team.’ Available at: https://www.lawyer-monthly.com/2018/09/spoonful-of-
Statista (2019). ‘Leading Breakfast Cereal Brands in Great Britain’ Available at: https://www.statista.com/statistics/301914/leading-breakfast-cereal-brands-in-the- uk/#:~:text=This%20statistic%20shows%20a%20ranking,third%20were%20Nestl%C3% A9%20and%20Weetabix. [Accessed on 28th^ February, 2021] Thebusinessprofessor.com. (20 21 ). Bowman's clock. [online] Available at: https://thebusinessprofessor.com/knowledge-base/bowmans-clock/ [Accessed 25 th February, 2021]. Weetabix Corporate. (20 21 ). Weetabix Corporate | Post Holdings Completes Acquisition of Weetabix. [online] Available at: https://www.weetabixfoodcompany.co.uk/press/news- archive/post-holdingscompletes-acquisition-of-weetabix [Accessed 25 th^ February, 2021]. Weetabix On the Go Breakfast Drink Chocolate 250ml (2021). Available at: https://www.indiamart.com/proddetail/weetabix-original-wholegrain-cereal-450g- 18958200491.html. [Accessed at: 27th^ February, 2021]. Weetabix nutritional value (2020). Available at: https://www.weetabix.co.uk/our- products/weetabix/weetabix/. [Accessed at: 28th^ February, 2021]. Weetabix-on-the-go (2021). Available at: https://www.weetabixonthego.co.uk/our- products/original/vanilla. [Accessed at: 27th^ February, 2021].