Philippine Christian University

1648 Taft Ave, Malate, Manila, 1000 Metro Manila

(02) 526 2261

I.

CASE BACKGROUND

James kraft founded yahoo in 1903. The company grew and was soon distributing some 30
varieties of cheese packaged under the brand of Karft and Elkhorn,
1911- was advertised in Chicago elevated trains using outdoors billboards and the first to
advertised in consumers journal
1914 the cheeses were available in most towns across the united states.
1916 was granted a patent for what came to be known process cheese and began to produce
mass number of specialty cheese like Gouda and blue cheese
1920 began exporting products to Canada and Europe and owned plant in England and
Germany
1933- started to used radio on a extensive scale and sponsor musical and variety Kraft Musical
Review. Launched Miracle whip salad dressing
1937 Launched Kraft Macaroni and cheese dinner
1940- Parkay margarine
1951 -52 sliced processed cheese and cheese whiz
1988- sold to Philip Morris for $12.9 billion
1989- Philip Morris merged Kraft and its General Foods unit into one entity called Kraft General
Foods, Inc. As a result become the largest food company in USA and the second largest in the
world
2000 Acquisition of Nabisco for $ 14.9B in cash and 4B debt
2001 Philip Morris created a new holding firm for the combined operations called the Kraft
Foods Inc. Philip Morris sold 16.1 percent of shares to public and considered second largest
Initial Public Offering (IPO) in U.S History
2007 Manufactures in Illinois turned up a batch of fruits and nuts were contaminated with
Salmonela
2008 another positive sample appeared. The company revenues increased to 42.2B while
earning increased to 2.9B

2009 - Kraft Foods issued a voluntary recall of products containing pistachios after discovering
salmonella in one of its Illinois manufacturers. The company had save a total of 1.1 billion
through streamlined manufacturing and a simplified organizational structure.
Mission: One company growing by nourishing lives and finding a better way today one bite at a
time.
Vision: Make Today Delicious.
II.

External Environment Analysis

1. General Environment

External Environment
Socio-Cultural Environment

Opportunities
More people are dining out,
and food producers are
devoting more attention to
products designed for
restaurants, vending
machines, and other
foodservice providers

Threats
Obesity is increasing
drastically in both children
and adults and accordingly
consumers are deviating from
having snacks, cheeses and
such

Political/Legal Environment

The U.S. market for packaged

and processed foods has seen
large profits in retail sales, and
this number is expected to see
steady growth

Global warming becoming a

major political issue and food
producers are simultaneously
cast as perpetrator and
potential healer

Technological Environment

Bottled water has become

well established in the market
and
enhanced
waters
containing
vitamins
or
supplements are gaining
popularity

Food safety programs have

been adopted recently as
issues of chemical and
bacterial contamination and
new food-borne pathogens
remain a public health
concern

Economic Environment

Worldwide, demand is also

on the rise for packaged type
of food as more people adopt
a lifestyle that includes less
time for the preparation of
food

Because the industry is so

competitive, it is difficult for
these companies to raise their
prices accordingly, and profit
margins have suffered as a
result due to weak economy
and increase in
unemployment, many

consumers have switched

from brand name to generics
2. Industry Environment

Industry Environment
Rivalry

Bargaining Power of
Suppliers

Bargaining Power of
Customer

New Entrants & Entry

Barriers

Threats from Product

Substitution

Opportunities
Established market share by
inducing brand loyalty among
consumers and by ensuring
presence across multiple
market segments
Kraft can choose from a
variety of suppliers to source
its raw materials at affordable
best price
Established market share to
achieved economic of scale
and scope to attract the
attention of buyers

Threats
Minimal switching cost for
the consumers and the
products

Competition in the food and

beverages industry are very
high
Due to competitors the buyers
have the freedom to switch to
seller who offer acceptable
quality product at the lowest
prices
Startups may bring a different
product to market, but its
benefits must be clearly
communicated to the target
customer

National competitive
advantage for Kraft foods
Inc.
Its very difficult for new
entrant to match the existing
players expenditure branding,
R & D and scale of
production
Kraft foods Inc. perform The consumer weighs the
major branding exercises to tradeoff between quality and
establish the image of quality price of products
in the consumer mind.

Submitted By:

Submitted to:

Levi L. Eugenio
Alvin Ang
Dung Tien Nguyen

Prof. Murallos