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Outlining the tools and techniques for strategic analysis of a business
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Module Code & Title: ST4S-V1- 17262 Strategic Analysis; Tools and Techniques Module Lecturer: Dr. Amarachi Amaugo Assignment Title: Strategic Analysis: Tools & Techniques - Coursework 1 Student Number & Name: R1908D Harrison Chisomo Chisonga
Introduction It is every organisations desire to lead in the industry they are in. Organisations are continuously strategising on achieving this goal in the midst of the various forces within their industries or due to external forces. Companies are therefore responding by coming up with strategic approaches to survive, increase market shares and ultimately to gain competitive advantage by growing and expanding their companies either through business acquisition or mergers. Malik et al., (2014) emphasises that acquisition is one among the strategic approaches for organizational growth, accomplishment of business objectives and profitability. In this case study I am presenting a critical strategic analysis of the current Strategic Change within the case of Post Holdings buying Weetabix. Weetabix has been operating in the UK from 1932, producing breakfast cereal and breakfast drinks to over 80 countries around the world. Among their products are Alpen, Weetabix, Weetabix Crispy Minis, Weetabix Protein, Weetabix on-the-go drinks, Oatibix, Weetos and cereal bars (Weetabix.com; BBC, 2017). In 2012 China's Bright Food bought 60% of the majority stake in Weetabix to enter the Chinese breakfast cereals industry. This turned out not to work as anticipated and Weetabix failed to crack the Chinese market because the Chinese consumers prefer a hot, rice-based breakfast to cold cereal (BBC, 2017) hence the sale to Post Holdings, a USA based company, in 2017. In his interview with BBC.com (2017), George Salmon, equity analyst at Hargreaves Lansdown was quoted saying “Weetabix has struggled to crack the Chinese market, so it is no surprise to see Bright Food selling up.” Post Holdings was founded in 1895, and is the 3rd^ largest cereal company in America. Among its products are Great Grains, Golden Crisp, Cocoa Pebbles, Grape-Nuts, Raisin Bran, Honey Bunches of Oats and protein brands including PowerBar. Post Holdings also has other businesses in the food industry among them big brands such as Michael Foods Group and Active Nutrition (Post Holdings, 2016).
looking at the competitive strategy which is more of differentiation approach, developing market opportunities - such as in Kenya, implementing a distribution by bicycle strategy that suits the local mode of consumption, while at the same time adopting a different strategy positioning in Mexico (Allchin, 2012) and resource allocation within the SBU, that saw Sally Abbott, director of marketing at Weetabix, becoming managing director of Weetabix UK and Ireland (bbc.com, 2017). Using Porter’s Generic Strategy and Bowman’s clock in analysing and re-aligning the strategic position in the market and its target market, Post Holdings has the best tools to evaluate the environment, competition and strategise how to edge the competition in the industry. Porter ( 1985 ) underlines that the basic foundation of above average profitability in the long run is the ability to being able to maintain at a certain rate or level of competitive advantage. There are two basic types of competitive advantage a company can take: differentiation or low cost, combined with the objectives that Post Holdings seeks to achieve, these two types lead to three generic strategies for achieving above average performance in their industry: cost leadership, differentiation , and focus. The focus strategy has two variants, cost focus and differentiation focus. Fig 1. Porter’s Generic Strategy. Source: calltheone.com/en/management-goeroes
Post Holdings’ options to gain competitive advantages using Porter’s generic Strategies could pick one of the four strategies as explained below;
This is where Post Holdings has to answer to the question, “Whom does the Post Holdings serve?” Freeman (1984) further simplifies the definition of a stakeholder as “…any group or individual who can affect or is affected by the achievement of an organisation’s objectives.” Post Holdings has done a great job in identifying its primary and secondary stakeholders and appreciating their values. It has engaged the local farmers, 50 miles from the factory, The Weetabix Growers Group forming a joint venture with mutual dependence. It has also identified primary and secondary stakeholders and continuously manages their demands as outlined in the figure below. Fig 3. Post Holdings’ Primary and Secondary Stakeholders Post Holdings has also identified its stakeholders in terms of power and interest. While the media, unions and general public have low power and low interest in Post holdings and Weetabix, the governments and other watchdogs on the other hand have high interest because regulatory compliances. Furthermore, shareholders and investors are at a high risk in this transaction and are interested in the successful operations of Post Holdings. The 2000
employees of Weetabix are affected by this acquisition by Posts Holdings, while at the same time Post Holdings has to ensure that consumers are satisfied and not negatively impacted by the acquisition of Weetabix. Fig 4. Post Holdings’ stakeholders, Power vs. Interest Main External Factors Driving the Strategies Being Explored The acquisition of Weetabix by Post Holdings has its own influences to and from the external environment. An external environment is made up of all the outside aspects or influences that affect the operation of business. Post Holdings must act or react to keep up its flow of operations within these forces. Using the PEST (Political and Legal, Economic and Finance, Social-Cultural factors and Technological) analysis we will explore and analyse the main external factors that are driving the strategies being implored by Post Holdings. Bearing in mind that the nature of the environment can be simple or complex, static or dynamic and certain or uncertain, strategies should be monitored and assessed periodically and when major
remain in foreign ownership, due to the pound's weakness... In contrast, the dollar's recent strength has helped the successful bidder, US consumer group Post Holdings." (BBC.com, 2017). Much as the acquisition would have better remained in the hands of the British any domestic buyers would have had to overcome the headwind of the pound's reduced buying power. Post Holdings needs to be fully aware and act swiftly in any case of changes in GDP, Interest Rates, Inflation, interest rates, growth and exchange rates to keep its pulse on the UK business. The global presence that Post Holdings has established itself in operates at different economic waves compounding America, Europe, Asia and Africa. For example, it was reported that economic growth in Britain for 2017 dropped sharply to 1.7% due to the Brexit vote; while at the same time in US, it was unaffected at 2.2% and China’s was forecast at 6.8% for 2018 (Chance 2017).
Industry Factors Impacting On the Competitive Position of Post Holdings Breakfast cereals industry has a number of players competing for the same consumer. Having looked at the external environment of Post Holdings’ industry, and social-cultural factor being the key driver to pushing growth and profitability in this business as consumers are opting for ready-to-go cereals and cold meals, it is only optimal to analyse the industry factors impacting on the competitive position in which Post Holdings is part of. To better understand and have a clear picture of the industry factors impacting the position of Post Holdings’ marketing strategy, the Porter’s 5 factors are an ideal tool to measure and understand the industry and devise a perfect strategy to gain competitive advantage. Fig. 4. Porter’s 5 Forces The analysis looks at five competitive forces namely; the threat of entry, the power of buyers, the power of suppliers, threat of substitutes and competitive rivalry. Competitive rivalry : Much as we have seen the supermarkets making their own brands of breakfast cereals, the consumer is mindful and health conscious and sticks to brand loyalty. To beat this force, Weetabix introduced and invented new product range for the consumer needs. Other players in the industry such as Kellogg’s and Nestle are also scrambling for the market by making their own new products and offering the consumer a wide range of products.
about the expansion to the footprint of the Weetabix brand across the globe, Americas, Europe, Asia and Africa. Although the political, economic, social-cultural and technological environments are at different levels, Post Holdings is poised to continue leading the park of Breakfast Cereal manufacturers. It is commendable that Post Holdings and Weetabix are continuously innovating and bringing new products on the market, they have successfully mastered the art of differentiation in its strategies than putting their focus on cost. New entrants are discouraged to enter an ever changing and improving industry where the reputable players such as Post Holdings are defining the standards regularly. By having a mutual and interdependent relationship with The Weetabix Growers Group, Post Holdings established and managed the bargaining power of its suppliers which allows them to negotiate and control their profit margins.
References: Allchin, J., (2012), Weetabix: Teach a market to love your product - Marketing Week. Available at: https://www.marketingweek.com/2012/04/11/weetabix-teach-a-market-to-love- your-product (Accessed 19 June 2020) Bowman, C. (2008), The Bowman’s strategic clock and hybrid competitive strategies. McGraw-Hill. Chance, D. (2017 ), World economic growth improving, even as U.S., UK potential slows: IMF U.S. Available at:https://uk.reuters.com/article/uk-imf-g20-outlook/world-economic- growth-improving-even-as-u-s-uk-potential-slows-imf-idUKKBN1CF1OR (Accessed: 20 June 2020) Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P., (2017), Exploring Strategy: Text and Cases. Harlow: Pearson. Malik, F. M., Anuar, A. M., and Khan, A. W., (2014), ‘Mergers and Acquisitions: A Conceptual Review’, International Journal of Accounting and Financial Reporting. Available at: www.macrothink.org/journal/index.php/ijafr/article/view/6623/_ (Accessed: 20 June 2020) Mulder, P. (2018). Bowman Strategy Clock. Available at: https://www.toolshero.com/strategy/bowman-strategy-clock/ (Accessed: 20 June 2020) Porter, M. E., (1985), Competitive Advantage , The Free Press, New York, pp 11-15. Weetabix to be sold to US company Post Holdings. Available at: https://www.bbc.com/news/business- 39625715 (Accessed 16th June, 2020)
