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Assessment 1
Rasha Elbanna
R1805D5376972
Tutor: Rajeev Bali
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ST4S38-V1-Strategic Analysis; Tools and Techniques R1805D5376972
Table of Contents
1.0 Introduction ...............................................................................................3
2.0 Strategic positioning of the company......................................................4
2.1 Porter’s Generic Strategic Analysis………………………………………..5
2.1.1 The Cost Leadership Strategy ……………………………………………6
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1.0 Introduction
The need for strategic management has become crucial recently, as businesses /
organizations encounter multitudinous challenges from competitors, customers , new
technology and suppliers .According to Liebowitz, 2006 organizational survival and
sustainability has increasingly been a challenge. Strategic planning illuminates long
term objectives and sets the incumbent actions to achieve them. According to plans set,
businesses would be able envisage company’s future and dispose a formula to reach to
that end point. Moreover, the necessity for strategic leadership is what positions any
firm relative to its rivals.
Expansion strategy has been acquired by many organizations in the past years.
The Expansion Strategy is endorsed by organizations in attempt to secure high thrive
compared to past achievements. In other words, when an organization decides to grow
through widening of its business scope in one of aspects, for example customer groups,
customer functions or technology alternatives, either individually or jointly, then it follows
the Expansion Strategy. One of the easiest ways in business expansion is acquisition. It
is the fastest way to grow your company. Acquisition helps to extend market share,
expand in new markets, and obtain advanced technology as well as acquiring
readymade skilled personnel / teams. Mergers and acquisitions, have adopted as vital
corporate strategies for rapid growth and development (Ramakrishnan 2010).According
to strategic researchers, mergers and acquisitions are successful not only in the
realization of underlying intents but they are also helpful in the attainment of other
objectives (Brouthers et al. 1998; Lahovnik 2000).
Post Holdings, the third-largest cereal firm in the US and posses brands including Great
Grains, Golden Crisp and Cocoa Pebbles. Post is a leader within its markets and shares
a commitment to delivering great tasting nutritious products for the whole family .Post
Holdings, a company which is dated back to more than 100 years, and dedicated to
serve shareholders, employees, consumers and customers in order to grow and
succeed. To attain this vision a strategy has to be in place, to strive in a global
competitive market. One of the main strategies employed by Post Holdings is
acquisition in order to expand in new markets. Since 2008, Post Holdings has achieved
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several acquisitions which have remodeled the company into a diversified consumer
products holding company. In order to penetrate, the British market the easiest strategy
was through acquiring UK number one ready-to-eat cereal products, Weetabix.
Moreover, Weetabix products were exported to 80 countries, with factories in Europe,
east Africa and North America. This acquisition means that there would be a change in
stakeholder both internally and externally. In order to have a successful M&A, this would
require setting objectives and carryout the desired strategic analysis to avoid failure and
ensure competitive asset or bonus by this synergy.
The objective of this study is to spotlight on critical strategic analysis of Weetabix
acquisition by Post Holdings. It will explore and analyze the strategic position of
Weetabix in cereal industry and stakeholder involved as well as external and industry
analysis. In order to execute this analysis, use of appropriate literature and academic
principles, models and theories to fortify the opinion and recommendation, as required.
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Figure-1. A diagram of Michael Porter's Three Generic Strategies based on an image from Porter M. E.,
Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980),
page 39.
Porter proposed four "generic" business strategies that could be embraced with a view
to achieve competitive advantage. The strategies correlate the level to which area of a
business' activities are narrow versus broad and the extent to which a business seeks to
differentiate its products. Porter noted that strategy determines company’s exclusive
perspective in competing and the competitive privilege on which it will be based. A
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competitive advantage can be earned over rivals, by providing greater value, better
prices, better services etc.
This strategy aims at reducing the cost of production. This strategy is applicable in large
scale business where the cost of production is lessened. This would lead to a product
that reaches end user with a more valuable lesser price.
In case of Weetabix acquisition by Post Holdings, it was clearly stated that due to this
acquisition with post , that the firm will have a “meaningful cost reduction opportunities
through leveraging each other's manufacturing and supply chains where we overlap, as
well as combining our global procurement purchases".
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This strategy requires differentiating your product or services from other companies
competing within the same domain. To achieve this would require a strong Research
and development approach as well as marketing and sales team who monitor market
changes and customer’s needs and expectations. A well established organization as
Weetabix and supported by another strong organization as Post holdings would be a
strong competitor with its various products available plus the newly added ones to its
range from Post holdings
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businesses to rotate in eight directions in attempt to locate what they offer to customers
at what prices.
With reference to Bowman’s clock Weetabix would fall in Differentiation. Weetabix prior
Post holdings acquisition has managed to have a wide range of products through
launching highly innovated products such as Oatiflakes, Ready Brek Chocolate, Weetos
and Oaty Bars launched between 2007 -2010. In Addition Weetabix has successfully
adapted a “ to how people shop eat” strategy and accordingly introducing products for
different places for example offering two-biscuit packs in Kenya where shopping is more
little and often and 48 packs in Mexico where bulk buying is more common. Therefore
is it always crucial adopt product according to customers preferences .Moreover ,
according to Post Holdings to Acquire Weetabix presentation on April 18, 2017
Weetabix is an iconic leading brand with 85 years of heritage and best-in-class health
credentials and 97% of Weetabix products classified as “healthy”. Therefore, with
continuous stress and campaigns carried out to in support of adopting healthier
lifestyles, Weetabix would easily differentiate itself from competitors. According to Post,
Weetabix would give more strategic options. Weetabix, in 2015 adopt a smart age
differentiation strategy by introducing Weetabuddy campaign in cooperation with
Cartoon Network which targeted ages 4-10. The 2015 Weetabuddies campaign was
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huge success; delivering an increase in sales of 14 per cent (volume) and 4 per cent
(value) (January 2015 vs. January 2014). Further, Vitale (representative of Post
Holding), sees opportunities in selling the companies' products in each other's markets
and for tapping into the UK "active nutrition" market. This would again increase product
range and differentiation.
Customers
Secondary Social
Investors/ Shareholders of Weetabix and Post Holdings
Employees of Weetabix Stakeholders
suppliers and partners
Trade Bodies
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Society Customers
Regulatory Bodies Suppliers
Competitors
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low
Low High
Power
Figure 4. Power Versus Interest Grid
Primary stakeholders includes the shareholders of both Post Holdings and Weetabix;
they lead/ regulate the business overall functions. They possess a high level of power
and interest in the organization and must be satisfied at all levels. Moreover,
shareholders of both Post Holdings and Weetabix and employees are also primary
stakeholders with less power and high interest. The British government is considered as
secondary stakeholders. The British government is an essential player in ensuring
this acquisition process follows the proper legal routes and all stipulated
organization’s rules for employees’ welfare. On the other hand, investor returns maybe
affected. Individuals or groups who own high power and high interest as investors are
advice to be handled thoughtfully. These individuals should be employed fully in
organizations operations and require efforts to be satisfied. In recent years Customers
imposed great power through effect of social media which impacts buying power or may
even ruin brand. It is of great importance to monitor activities that can affect product
sales. Employees are the individuals with high interest and less power in the power /
interest grid and require as well high satisfaction to ensure continuity and smoothness in
workflow. According Post holding 2017 report, one of the obstacles to be faced for a
successful integration of these acquisitions depends on our ability to manage the
operations and personnel of the acquired businesses. Further, secondary shareholders
involve the public, global society etc. which has a direct or indirectly outcome on the
organization and vice-versa but would still require monitoring.
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and research ability. One commonly used technique for environmental analysis is PEST:
P-POLITICAL, E-ECONOMIC, S-SOCIAL & T-TECHNOLOGICAL
Political factors include Political, taxation, legislation, foreign trade, employment law,
government stability. A stable political climate is what attracts investors. According to
Vitale CEO of Post holdings in its annual report 2017, the uncertainty perceived due to
the enforcement of Brexit, increased economic unpredictability impacting business
operations and business. The may also results cause disruptions to and create
uncertainty surrounding our business, including affecting our relationships with our
existing and future customers, suppliers and employees .Brexit may also affect
agreements the United Kingdom makes to retain access to European Union markets
either during a transitional period or more permanently which may affect geographical
expansion. Moreover, the acquisition of Weetabix by Post holdings would face negative
profit impact, due to increase funding and expenses to our qualified pension and other
post-retirement plans. They would be obligated to ensure that these plans are funded
or paid in accordance with applicable regulations to retain employees at Weetabix. In
addition , any change in legal and regulatory factors, including environmental laws,
advertising and labeling laws, changes in food safety and laws and regulations
governing animal feeding and housing operations would have a direct or in direct effect
in business operation
Economic factors include economic growth, interest rates, exchange rates, inflation
rate. These factors profoundly determine how businesses function and formulate
decisions. For example, Exchange rates can affect the costs of exporting goods and the
supply and price of imported goods in an economy.
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According to Kan& Massoudi (2017), Post – Brexit UK, experiences a drop in value and
a weaker pound, that makes UK a more attractive destination for investors/ buyers and
therefore more M&A. In addition, UK economy is slowing down after eight years trough
post global financial crisis. Demand, output and jobs have been tough in the two years
since the June 2016 Brexit vote which has dropped the buying power due to fear of
uncertainty. One of the economical significant factors impacting Business performance
is volatility in raw material cost, commodities, packaging or energy used to manufacture
goods Turell, warned of rising product prices Weetabix , as a post Brexit impact arising
from weak value of sterling, boosting ingredients prices leading to raw materials costs .
Moreover, as wheat are priced in dollars prices are even going higher.
breakfast trends or customer preference into products, through a strong R&D activity
determines barriers to entry. This was implemented by weetabix on launching Weetabix
on the go. A huge opportunity for Weetabix, to launch a high protein breakfast cereal
with the mainstream health trend of protein consumption. Application of new
technological techniques that can decrease cost of production and improve quality of
products.
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This refers to the ease of novel companies to the market. New entry would be attractive
if the cost of entrance is relatively low. The cost is controlled by various factors including
government policies, release of a low cost, quality product and differentiation of
products as well as cost of advertisement.
As weetabix is a well established strong, brand name, the effect of new entrants would
have a minor effect. Moreover, new entrants will find it hard to compete with high costs
of advertisement that can be paid by Weetabix. Moreover, Weetabix have a series
advertisement campaigns for example in 2011 Weetabix ‘Weetakid’ by Bartle Bogie
Hegarhy and in 2012 Weetabix ‘dad’s day out’ by Bartle Bogie Hegarhy As mentioned
earlier due to cost reduction caused by this synergy, profitability would increase as well
as there would be no cost of establishing a new organization. Moreover, Weetabix have
a series advertisement campaigns for example in 2011 Weetabix ‘Weetakid’ by Bartle
Bogie Hegarhy,In 2012 Weetabix ‘dad’s day out’ by Bartle Bogie Hegarhy
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Weetabix would need to set a marketing strategy to confirm customer’s needs and
preferences due to the high competitive market have strong rivals as Kellogg’s, Quaker
etc. Moreover, chain supermarkets, for example Asda, Sainsbury's, Tesco stock their
own brand of cereals at a highly competitive prices .A good marketing strategy would
ensure brand loyalty. Moreover, good incentives like offers as well as product placing in
well known supermarket chains and shops would support Weetabix market position.
Weetabix have increased its product lines in recent years which will assist the market
penetration. The wide variety of products offered by Weetabix means the business can
target a wider customer base. Weetabix could also specifically attract customers
associated with its competitors which would result in Weetabix gaining an increase in
market share at the expense of these competitors.
Successful businesses use all the tools at their disposal to stay at the top of their
chosen market. Weetabix has to realize the growing awareness in use of cereal based
food and healthy lifestyles. Focusing on a key range of Weetabix branded products, and
working even with retailers to ensure efficient feedbacks that would assure products that
fulfill customer preferences and using social media to attain beneficial outcomes to
improve customer service and value creation. Value creation ought to be a major
focus, through offering competitive prices along with value products.
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