Chapter 1

INTRODUCTION

In today’s world, the evolution of a company is tactically planned by executives, and this
involves formation of strategies and a stipulated timeline for execution of the strategies. Often
times, the procedures and policies, of an organization changes from time to time, this is because
a successful organizational goal must be achieved. An organization has numerous goals ranging
from increasing of market share index, to completive advantage, to customer satisfaction, this
are the various strategies why an organisation enters into a new market (Lee and Lieberman,
2009). For example, Post Holdings (PHs) who is a consumer-packaged goods holding company
in the United State, recently entered into the United Kingdom market by acquiring Weetabix a
known brand which has been in existence in over 80 countries worldwide and this sprang Post
Holdings into an existing large market for its products. This study, will cover a thorough
strategic analysis of the acquisition of Weetabix by PHs. The analysis will be on the strategic
position of Weetabix, a company in the global breakfast cereal market, also analysis will be
done on the stakeholder, External and Industry positions.

The global breakfast cereal industry is an immense competitive market, the market players goal
is to always push their brand to the face of the consumer as breakfast on the go option. The
market players consist of the following players: Nestlé who is the world’s largest food and
beverage company with various types of quick to prepare food for breakfast and snacks and
Quaker which is their oat meal brand. Kellogg’s an American multinational food-
manufacturing company, that produces cornflakes, Quaker, Cheerios, Malt-O-Meal and
Cinnamon toast crunch etc. All this companies made the breakfast cereal industry to be a strife
competitive one, since there has to always be a struggle for market share increment. Over the
past years business operations has evolved greatly, due globalization of businesses which has
made organizations to position themselves strategically for competitive advantage over other
competitors. Organizations are faced with immense competitions which has made them come
up with strategic approaches on how to survive in a highly competitive environment, gain
advantage over their competitor and increase market share.

Malik et al, (2014) states that acquisitions are a business strategy that allows an organization
to penetrate into a potential new market. Merger and acquisition play a very vital role in the
expansion of a business in different countries, most researchers in the work now believe in
this (Goyal and Joshi 2011). Just like PHs a US company entered into the UK by acquisition of
Weetabix whole grain wheat breakfast cereal owned by Chinese company called Bright
Foods. Globalization was key to PHs and acquisition was the best way as Weetabix already
has an international trademark that PHs could always leverage on. For any business that has
the intention to successfully grow internationally acquisition is a vital strategy that will help
the company’s objectives to be attained such objectives as gaining competitive advantage,
increased market share, long term survival in the market and maximization of shareholders
value.
 Chapter 2

STRATEGIC POSITIONING

Johnson G. et al, (2005) defined strategic position as “the concern with identifying the impact
on strategy of the external environment, an organisation’s strategic capability (resources and
competences) and the expectations and influence of stakeholders”. This simply means that
organisational strategic and environmental competence is greatly influenced by the
stakeholders. The environment consists of the external forces such as the economy, political,
sociocultural variables, this result to opportunities and treat that is faced by the organization.
Whilst the strategic capacity is the resources and competences, that best illustrate the
organization’s competitive advantage gained in the market. The strategic position of an
organization is known from its unique approach to competing and gaining competitive
advantage in the market (Porter 2012). Unlike the environmental variables, the strategic
position is the internal variables that determines the strategic plan of how the organization will
penetrate into the market to gain market share, competitive advantage, meeting the stipulated
revenue required by the stakeholders. In addition, some literatures such as (Chew C., 2009)
tried to differentiate between the following: strategic positioning, strategic position, and
positioning strategy. (Zineldin and Bredenlow 2001) as cited in Chew C., (2009) well-defined
strategic positioning as: “A process of defining and maintaining a distinctive place in the
marketplace for an organization and/or its product offerings so that the target market/prospect
understands and appreciates what the organization stands for in relation to its competitors.”

From (Chew C., 2009), it is well -defined that an organization’s strategic position is determined
by its market share. The strategic position of an organization depends on the satisfaction
consumer derives from the perceived value and price, understanding the value of the customer
helps organizations to position their needs to meet this need, this determines consumer
satisfactions.

Bowman, C. and Faulkner, D. (1997), differentiated strategic position of an organization based

on the perceived value against price. There are different types of value that consumers seek for
in a product.

Functional value: here consumers buy the product to fulfil a particular function, e.g some
consumers buy a car so that it can move them from point A to B. Physiological value: here
consumers buy product because of the status it brings to them, e.g buying of Rolls Royce is not
for moving from point A to B but because of the status it will bring to the buyer. Transactional
value: here consumer buy a product or services because of the distinguishing features between
identical products. They designed the Bowman's Strategy Clock for Strategic Positioning as
seen in figure 1 below:

Figure 1: Bowman’s Strategy Clock

(Original design from Bowman, C. and Faulkner, D. 1997)

Weetabix Strategic Positioning

Over the years Bowman’s Strategy Clock, had argued that the vital factors as far as position is
concerned are price and perceived quality. Weetabix, practised the Differentiation strategic
positioning approach, this is done through brand differentiation by understanding the value
of the customers helps Weetabix to position their needs to meet the need of their customers by

suit the product to the lifestyle of the targeted customer. e.g, “Weetabix On The Go Breakfast
Drinks”, this particular brand was targeted at consumer who don’t have time to take their
breakfast at home and at the same time it was relatively cheap too. Then again, the “On The
Go” characteristic of the product provided the perceived value. The product made life easier
for the specific type of consumers that have no time for breakfast at home, the ease of purchase
was another strategy used by Weetabix, this relates to the Hybrid strategic positioning, where
an organization penetrate the market with a low-cost approach and emphasis on differentiation
with the goal of giving consumer a value for their money. It was report by Talking Retail in
2016, that Weetabix delivered increase in sales volume of 14% and 4% value in January 2015
against January 2014, when the company launched “Weetabuddies” a brand of Weetabix that
is targeted at children between the average age of 4 – 10 years, this brand of cereal encourages
children to get creative whilst starting the day with a healthy breakfast by having real fruit in
their breakfast. This is also another differentiation strategy used by Weetabix to position itself
in market through demographic segmentation.

In spite of high ranked competitors like Kellogg’s, Cheerios, Quaker, Cinnamon Toast Crunch
Malt-O-Meal and Post, Weetabix still achieved its increase in sales volume and value by
understanding the need of the consumers and also knowing how best to satisfy the needs of
their customers

“Weetabix On The Go Breakfast Drinks” was another way of responding to the UK’s changing
breakfast habit and this was an extremely competitive kick for Nestle (WARC, 2017).

Post Holdings Strategic Positioning

PHs had always determined to maintain a steady competitive position in the market, has a
leading firm in the Food market which produces nut butter, dried fruit and nut, pasta and
granola products for top retailers, distributors and manufactures. From 2013 – 2017, PHs came
up with a strategic approach to expand its business strength though acquisition of other
competitive product, acquisition were done with the following companies

Bob Evans Weetabix Willamette MOM Brands American

Farms 2017 Egg 2015 2015 Blanching
2017 Co 2014

Michael PowerBar Musashi Dakota Attune

Foods 2014 2014 Growers Pasta Foods
2014 Co, 2013 2013
With PHs enthusiasm for endless acquisition, the company was ability to maintain a highly
competitive advantage based on the following strategies such as cost – leadership, customer
differentiation and focus strategies. Once the takeover is done, here are some strategies that
PHs use in entering the market after acquisition:

“Cost – Leadership’’ (no frills), here the product price is lowered, which will in turn lower the
selling price of the product though this does not affect the product quality. The price reduction
is done in order to attract more customer to purchase the product, this help them grab market
share. This was used a strategy used to return from deal for Weetabix.

“Differentiation’’ here PHs creates a unique product, makes the product different and more
attractive than that of competitors, e.g. “Weetabix On The Go Breakfast Drinks”

“Focus” here PHs tries to concentrate on a niche markets and understand the needs of the
customers in the market, develop a unique product for the market, e.g. “Weetabuddies’’
 Chapter 3

STAKEHOLDER ANALYSIS AND MAPPING

A stakeholder in any business is any someone who is affected by the actions of a business or
has a stake in the goings –on of a business. Freeman (1984) “any group or individual who can
affect or is affected by the achievement of the organization's objectives”.

Walker et. al. (2008) said “Stakeholders are individuals or groups who have an interest or
some aspect of rights or ownership in the project, and can contribute to, or be impacted by,
either the work or the outcomes of the project”

Identifying the Stakeholders

For PHs and Weetabix acquisition the following are identified as stakeholders that are
directly affected by the transaction.

Primary Secondary
Post Holdings & Weetabix Management UK Government
Post Holdings & Weetabix employee Competitors
Post Holdings & Weetabix Customer Press
Post Holdings & Weetabix Shareholders Regulatory bodies
Weetabix & Post Holdings Investors
Business Partners
Post Holdings & Weetabix Suppliers

Figure 2: Stakeholders Categorization

Stakeholders Analysis

Rottger and Fritz (2006) define stakeholder analysis as “an approach, a tool, or set of tools for
generating knowledge about actors’ individuals and organizations- so as to understand their
behavior, intentions, interrelations and interests, and for assessing the influences and
resources they bring to bear on decision- making or implementation processes”.

Mayers (2005) “Stakeholder power analysis is particularly useful for assisting in decision-
making situations where various stakeholders have competing interests, resources are limited,
and stakeholder needs must be appropriately balanced”.

Below is a summary of PHs and Weetabix stakeholders, this analysis is done by categorizing
the stakeholders through the following, High Power and High Interest, High Power and Low
Interest, Low Power and Low interest and Low Power High Interest. This analysis will be
done on the variables of acquisition. Different business use different approaches to handle
stakeholder management. Stakeholders can either be primary or secondary. The primary
stakeholders are in charge of the internal activities of an organization, e.g. Shareholders,
employees, suppliers, customers, investors, business partners etc. whilst the secondary
stakeholders are those who have interest in the organization, but does not have influence over
the internal activities of the organization e.g. Government, media, competitor, regulatory
bodies, global society etc.

Therefore the acquisition of PHs and Weetabix involves various stakeholders such as PHs &
Weetabix shareholders this group control the internal activities of the organization, they have
high power and high interest in the company, they are the key player and are closely engaged,

High Power and Low Interest, this includes the Customer, suppliers, business partner and
investors.

Low Power and Low interest, this includes the regulatory bodies, global society and Press

Low Power High Interest, this includes the employees and government they show
consideration and must be kept informed, in this acquisition, the British government plays a
vital role by ensuring that all legal terms are adhere to.
 Stakeholder Map

high
 Customers

 Suppliers  UK Government

 Investors  Shareholders

 Business Partners
Power

 Regulatory Bodies
 Employees
 Press
 Competitors
 Global Society

low

Low Interest Power high

Figure 3
 Chapter 4

EXTERNAL ANALYSIS

An external analysis helps an organization to stay abreast of all the happenings within the
industry that may affect the organization, such happenings are usually out of the
organization’s control. External analysis could be said to include the microeconomic,
political, technology, social, global and demographic analysis. External analysis enables an
organization to determine the opportunity and threats that are in the industry.

PESTEL Analysis

The macro environment of an organization is usually analysed through the use of PESTEL analysis.
PESTEL means - Political, Economic, Social, Technological, Environmental & Legal factors that impact
the macro environment of an organization, so therefore PESTEL will be used to analysis the macro
environment of Weetabix.

PESTEL Analysis for Weetabix

Political Analysis

PHs was able to enter into the UK market where Weetabix was in existence through acquisition,
PHs would have to obey all laws imposed on it by the British government, either directly or
indirectly, the operation of the organization must be in accordance to the employment law, the
industry law, foreign trade regulations, legislative law, the stability of the government must
also be put into consideration. In April 2018 the minimum hourly wage for age 25 and above
was increased by the British government from 7.50 pounds to 7.83pounds, which was a 4.4%
increase from 2017, this means Post Holdings will be paying more wages in the UK compared
to US, since it must maintain compliance.

Economic Analysis

Before the acquisition of Weetabix, the company operates in both UK and China, and now the
company will operates in three different economies. It is certain that the 3 economies differ
from one another and are growing at different rates, therefore the organization has to figure out
how to integrate the three economies together. Tradingeconomics.com (2018) stated that the
growth rate for UK economy as at March 2018 was 1.2% while that of the China and the US
as at same period was 7% and 2.8% respectively as compared to 1.3%, 6.8% and 2.6% in 2007.
This means that the economic growth in UK has reduced whilst the growth in US and China
are higher than UK. Weetabix can leverage on the higher economic growth in both US and
China to increase sales and profit. Then again the Exchange Rate, interest rates and inflation
must also be put into consideration.
Social Analysis

The social analysis consist of the social environment, cultural trends, demographic etc. for example it is
said that consumers in UK and US ordinarily prefer to have cereal for breakfast as opposed to consumers
in China who would prefer a hot breakfast. This means that the purchase of Weetabix will be lower in
china compared to US and UK, where breakfast cereal is preferred.

Technological Analysis

The world is fast growing in term of technology, now a days consumers are inclined to having
their breakfast on the go so therefore, the technology of the three countries must be put into
consideration, PHs and Weetabix must ensure that the type of technology employed in the 3
countries must match the need of consumers in each country. E.g. innovating breakfast on the
go for US and UK consumers, a hot meal cereal must be considered for China market.

Environmental Analysis

Different country with different laws that governor its environment, Weetabix must ensure at
all time that its existence in the 3 country does not cause any environmental hazard, the raw
materials used for production must be sourced for in an ethical manner and it must not be of
threat to the environment where it is been produced.

Legal Analysis

There is a saying that says no ignorance in law, therefore, Weetabix must have a good
knowledge of the legal requirement of the 3 countries that they are operating from. These will
include the following laws, health and safety laws, product labelling, consumer protection law,
trade laws etc.
 Chapter 5

INDUSTRY ANALYSIS

The global breakfast cereal industry is a highly concentrated industry at the moment the
industry is experiencing a change in consumer eating habit in breakfast meal, which is
tending towards a dietary pattern in most countries. Innovation is very consequential in this
industry and the market leaders are catching in on it. The industry was estimated at USD
47.10 billion in 2016 and is poised to grow at a CAGR of 4.5% during the forecast period, to
reach USD 58.73 billion by 2022. Seeing this organizations have to fine-tune their strategies in
order to continue to be relevant in the industry. Porter (2008) state that being a ware of "Five
Forces that Shape Strategy" can help a company recognise the structure of its industry and
place itself in a profitable position and a less competitive position. These include Threats of
New Entrants, Supplier power, Buyer power, Threat of substitution and Competitive rivalry.

Threats of New Entrants: This is how easy or difficult a new company can enter into an
industry. New entrants brings new innovation into the market so that they can gain market
share. The cereal industry is a very competitive market, and for PHs, to enter into the UK
market there has to be a major diversification, PHs, Weetabix approached the UK market in a
geographic manner rather than product focus, this means, PHs products was added to
Weetabix. So “active nutrition’’ brands such as PowerBar and Premier Protein food and
beverages, were introduced into UK market, this sprang up a new innovation in the cereal
industry.

Power of suppliers: This is the bargaining power of suppliers in an industry, when an

industry relies on few suppliers, the suppliers tend to gain the industry bargaining power, in
this industry the suppliers can capture more values for themselves, they can charge higher
prices, reduce the quality of the services. In relating to Weetabix, the raw material (Wheat)
used for production was sourced from within 50 miles of the Burton Latimer factory in
Northamptonshire. This means Weetabix is able to control the quality and cost of the raw
materials, which in turn makes them the market player in the cereal industry.

Power of Buyers: There the consumer is a determinant factor, they can demand for lower
price or higher, product quality form producers, when their demand is strong. The
wholesalers also play a major role in the model that was why in 2017 Weetabix, adopted
wholesalers strategy, where they work closely with the wholesalers to gain their market
share.

Threat of substitutes: This is when buyers can easily switch to an alternative products, due
lower price, better quality and individual preference. Topper (2015) states that the “threat of
substitutes for breakfast cereals is very high with other alternatives such as bread, fruits,
yogurts and fast foods being conveniently available at lower prices”. Weetabix not able to
maintain a good market share in China, because the Chinese prefer hot meals for breakfast.

Rivalry among competitors: This is a determinant factor in an industry, as it determines

how competitive and profitable and industry is. The cereal industry is a very competitive
market, and for players to survive they have to be innovative or must differentiate their
product, so that it cannot be easily substituted. Weetabix knew that for them to continue to
be a market leader, they have to be innovative, that was why they introduced, “Weetabix On
The Go Breakfast Drinks” for breakfast lover with busy schedule and “Weetabuddies’’ for
children. All this innovation was to increase market share and gain competitive advantage in
the industry.
 CONCLUSIONS

In 2017, PHs, acquired UK market leader in the cereal industry, Weetabix, this gave PHs the
opportunity to enter into UK and China and also Weetabix, was gained presences in the US
market too, and also gain a large market share worldwide. PHs came up with marketing
strategies and innovative approach, which helped her maintain its market share worldwide,
puts into consideration the bargaining power of buyers since they are a major determinant in
the industry, e.g. Switching to Weetabix On The Go Breakfast Drinks” when it noticed that
breakfast lover have busy schedules, also more strategies need to be adopted so as to maintain
the position of market leader.
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