A CRITICAL STRATEGIC ANALYSIS OF THE CURRENT STRATEGIC CHANGE

WITHIN POST HOLDINGS BUYING WEETABIX

BY

STUDENTS NAME: RACHAEL EMMANUEL-USEN….

STUDENTS NO: R1702D2370772

MASTERS BUSINESS ADMINISTRATION

UNIVERSITY OF SOUTH WALES

AUGUST, 2019.
1. INTRODUCTION TO THE REPORT

Growth and Expansion has always been the desire of most companies in the world, to achieve this,
it has become pertinent for companies operating in the current dynamic global market where most
companies persistently and continuously strive for a pole position to develop sound strategies that
will assist them grow their companies, increase their market share, increase shareholders value and
expand either through business acquisition or other mediums.

In view of the above, it may be established by that ‘Organizations use acquisition as a strategy to
enter into new markets as well as to increase their market share.’

Post Holdings Inc., an American Consumer goods holding Company that deals with branded cereal
products has adopted acquisition of companies in the food industry as a medium for its growth and
expansion as between 2014 and 2017, Post Holdings has acquired more than eight (8) companies
based on the information provided on their website.

This report is design to use different strategic tools and techniques to strategically analyze the
recent acquisition of Weetabix Limited a breakfast cereal company formerly owned by a Chines
Food Company known as Bright Foods by Post Holdings Inc.

The report focuses on a strategic appraisal of the company through six sections, the first section
gives an overview of the work in general, the second chapter evaluates the relevant levels of
strategy, the third section critically evaluates key stakeholders, the fourth section provides an
external analysis using PESTEL to identify and explore key trends, the fifth section gives an
industry based analysis using the Porters’ Five Forces to critically describe the relevant industry
factors and the last section shows a conclusion to the entire report.
2. AN EVALUATION OF THE RELEVANT LEVELS OF STRATEGY

Strategy is the determination of the basic long-term goals and the objectives of an enterprise, and
the adoption of courses of action and the allocation of resources necessary for carrying out these
goals. However, in the views of Ramon & Joan (2009) strategy is “a contingent plan of action
designed to achieve a particular goal.”

Furthermore, Strategy may be seen as the overall long term goals in which an organization wishes
to achieve over a long period of time. The three levels of strategy are; corporate strategy, Business
strategy and the Functional strategy.

Corporate Strategy

Chew (2009) defined the corporate strategy as a process through which a company clearly specifies
where it will be located, its target market and its rivals. As seen in this case; Weetabix choice of
the UK market over the China Market depicts a good corporate strategic business location choice
since when it was formerly owned by the Chinese Company the ‘Bright Food Group’, the company
faced low turnover as the Chinese preferred hot breakfast over cold cereal breakfast which is most
preferred by the western culture in the UK an US making it have higher turnover the UK market.

Business Strategy

Source: Mindtools.com
The business strategy also known as competitive strategy as shown above is concerned with how
each business activity within the entity contributes towards the achievement of the corporate
strategy, large organizations often have Strategic Business Units (SBUs) with their own business
strategy. According to Porter (2008), a successful competitive strategy must be based on either:
Cost Leadership, Differentiation or Focus.

The Cost Leadership

Cost leadership simply means being the least cost producer in the industry. A company that
produce products or provide services at the least cost compared to its rivals will succeed, by selling
at lower prices and winning the largest share of the market.
Weetabix acquisition by Post Holding will generate cost synergies and Post holdings may choose
to improve process efficiencies, control and reduce cost then stand a chance of getting advantage
over its competitors.

Differentiation

Differentiation refers to making goods or services that are seen by customers to be unique and
unique from those of competitors, and because they are unique they are deemed to be better. A
company that is not the least-cost producer can therefore succeed by offering product or service
that customers will pay a higher price (than the least-cost producer’s price) to obtain.

From the case analyzed, over the period, Weetabix has adopted the differentiation strategy by
focusing on building the unique value for their customers, this is confirmed in the words of Rogers
(2017), ‘Weetabix has been able to create different brands with unique value on their market
segments.’

Focus

This is a focus strategy implies the concentration on selling the product to a particular segment of
the market and to a particular type of customer.

In the analysis of Post Holdings, Weetabix chose the Differentiation focus since the firm decided
to focus on few targeted niche markets as shown in 2013 when Weetabix created a niche product
in form of breakfast biscuits to cater specifically for those who didn’t value the cereal breakfast.
Vision research in 2017 disclosed that Weetabix Focus strategy aimed at meeting consumers
unique needs.

Functional strategy

Functional strategy relates to particular functions within an organization, such as manufacturing,

distribution, marketing and selling, research and development, accounting, IT and so on. The
purpose of functional strategy should be to support the business strategies and corporate strategy
of the organization.

Bowman’s Clock Model

Source: Thebusinessprofessor.com

The Bowman’s strategic clock is a useful basis for making an analysis looking at the business
strategies of competitors, and what a company must do to find a most suitable combination of price
and perceived benefits that it should offer to customers.
In this case, Weetabix has strived to be distinct from its competitors by creating extra value for her
customers, they have achieved this through sales of products like Weetabix Protein and Protein
crunch to a niche, and this gave them a large market share and made them unique from their rivals.

3. A CRITICAL EVALUATION OF THE KEY STAKEHOLDERS

Source: Walker, D. Bourne, L. and Shelley, A. (2008)

The matrix shown above is often used to assist management identify its major stakeholder groups,
their power and their expectations since it is necessary for business entities to manage its
stakeholders, especially those with the highest influence and as a part of a review of the strategic
position of a company.

Walker, Bourne and Shelly (2008) explained that “stakeholders are groups and persons who have
interest or a stake in an organization”. Stakeholders include shareholders, investors, customers,
suppliers, employees, the government, the press and the whole public etc. (Shawn, 2017)

Post Holdings and Weetabix had stakeholders before the acquisition took place, each of these
stakeholders were affected either positively or negatively by the acquisition decision; some of the
Shareholders of Weetabix sold their shares, some employees lost their jobs, and some suppliers
lost contracts, these were all effects of the decision. However, it is necessary for management to
keep primary stakeholders like shareholders, investors, and partners managed closely and satisfied
based on their level of influence and interest as shown on the Matrix above.

4. AN EXTERNAL ANALYSIS USING PESTEL

In analyzing the external business factors affecting Weetabix and Post Holdings, PESTEL will be
used to identify and explore key trends.

PESTEL analysis is a structured means of analyzing the external environment of a company. The
influences of the environment on the company are grouped into categories: P – Political
environment, E – Economic environment, S – Social and cultural environment, T – Technological
environment, E – Ecological influences, and L – Legal environment.

P – Political Environment

The political environment are made up of political factors that can have influence on business
entities, Political considerations are important for companies operating in environments with an
unstable political regime, or a dictatorship.

The UK is known for its political instability, the acquisition of Weetabix took place when the UK
government recently amended its employment law by increasing the minimum wage per employee
aged groups. (Minimum Wage UK, 2017), this thus affects the company as they need to reduce its
production cost, or downsize her labor force to help reduce and control total cost.

E – Economic Environment

The economic environment are made up of the economic influences on an entity and the effect of
possible changes in economic elements or factors on future business prospects, economic factors
often include disposable income, inflation rates, employment rates, international trade etc.

During the acquisition of Weetabix by Post Holdings, Chu (2017) showed that the US economy
was growing at 2.7% while the UK economy grew at 0.4% and also experienced an increasing
inflation of 3%. Since the companies are global, economic factors like interest rates and exchange
rate fluctuation also affected the company significantly.
S – Social and Cultural Environment

Companies are affected by the social customs, cultural trends, Demography, ethnicity, family
structure, geography, culture, lifestyle, population and attitudes in the countries where they
operates.

Weetabix made high turnover in the UK as opposed to her turnover in China since consumers in
China preferred a hot breakfast while consumers in UK preferred cold cereal breakfast, this is an
indication of the social factor affecting the company.

T – Technological Environment

The technological environment consists of the science, technology available to the company and
its competitors together with the changes and developments in science and technology.

Weetabix and Post Holdings operates in a dynamic terrain, the most trending technology when it
comes to breakfast cereal companies is the provision of takeaways so that people can eat on the go
and not waste time to sit in a restaurant. The company have tried to achieve this to an extent but
are advised to keep up with technology.

The E-commerce is another means were technology has affected the business particularly dealing
directly with the customers, and getting feedback.

E – Ecological influences

The Ecological influence is concerned with the effect of the company on the ecosystem, Post
Holdings must ensure that her packaging materials can be recycled to reduce the environmental
pollution caused by using Plastics and other non-recyclable packaging materials.

L – Legal environment.

The legal environment consists of the laws like; Health & safety laws, employment law, data
protection act etc., enactments made by authorities in the company’s location. The amendment of
the UK Employment law to increase minimum wage for different ages of the labor force may also
be considered a legal factor affecting Post Holdings and Weetabix.
5. AN INTERNAL ANALYSIS USING PORTER’S FIVE FORCES MODEL

Porter (2008) developed the Five-Force model which analysis the competitive strength of different
rivals in a particular industry, it is often used to assist organizations’ create a sound competitive
strategy and also get a good knowledge about the market.

Source: Business-to-you.com

The Internal analysis of Post Holdings and Weetabix will be done by explaining each of the
components of the model shown above.

THREAT OF NEW ENTRANTS

This is the threat that new competitors will enter the market and increase the prevailing
competition. New entrants might be attracted by the high profits earned by existing competitors
into the market, when got into the market, new entrants will try to get a share of the market that is
large enough to be profitable. One way of getting market share would be to compete on price and
charge lower prices than existing competitors.
The barrier for new entrants into the market appears very strong as Weetabix and other existing
competitors have gained large market share, customers’ loyalty, and they have understood
customers’ needs, this post a serious threats to new entrants into the market.

THREATS FROM SUBSTITUTE PRODUCTS

This refers to threats arising from the existence of substitute products when customers can switch
fairly easily to buying alternative products.

Post holdings and Weetabix are in the cereal market and according to Topper (2015), “looking at
the breakfast cereals market, the threat of substitute is very high since customers may choose
alternatives such as fast food, fruits, bread or yogurts being available at lower prices.” This implies
there is a strong threat for Post holdings in terms of substitute goods, however the only opportunity
to reduce this threat is for Post Holdings to develop her own substitutes for customers.

BAGAINING POWER OF SUPPLIERS

Porter (2008) wrote: ‘Suppliers can exercise bargaining power over participants in an industry by
threatening to raise prices or reduce the quality of purchased goods or services. Powerful suppliers
can thereby squeeze profitability out of an industry which is unable to recover cost increases in its
own prices.’

In the industry in which Weetabix and Post holdings operate, there is a low bargaining power of
suppliers as Newswire (2017) opined ‘the bargaining power of suppliers is low because wheat and
grains, the main raw materials are quantitatively produced in the US and UK.

BARGAINING POWER OF CUSTOMERS

Customer have a strong influence on the company especially the large scale and powerful buyers,
they are able to demand lower prices, or improved product specifications, as a condition of buying.
Strong buyers often make rival firms compete to supply them with their products.

In the UK, a notable example of buyer power is the power of supermarkets as buyers in the market
for many consumer goods. They have the ability to force down the prices from suppliers of
products for re-sale, using the threat of refusing to buy and switching to other suppliers. This is
also applicable with Weetabix and Post Holdings as they faces this threats seriously however,
Drakakis (2017) recommended that to increase sales, a company must work closely with in-
country wholesalers

COMPETITIVE RIVALRY

Competition within an industry is obviously also determined by the rivalry between the
competitors existing in the industry. A Strong competition forces rival firms to offer their products
to customers at a low price relative to the product quality and this keeps profitability fairly low.

Analyzing the competitive rivalry in the breakfast cereal industry, there are very many existing
competitors like Kellogg, Nestle, Post Holdings, General Mills and Quaker. These companies
strive to get a larger market share by introducing new products from time to time and offering
subsidized prices to get larger customers. This thus throws a serious necessity for Post Holdings
to improve her position in the market by introducing new brands, carrying out intensive marketing
and improve customers care to gain sufficient market share in the breakfast cereal Industry.
6. CONCLUSION

This report studied Post Holdings Inc., an American company in the Breakfast cereal industry that
have employed acquisition of companies as a medium of growing and expanding into new markets,
The report specifically analyzed Post Holdings Inc. acquisition of Weetabix a UK based producer
of breakfast cereals drinks from Bright foods a Chinese giant. Weetabix is known for a number of
unique product in which it sells to different niches outstandingly the Weetabuddies for children.

This acquisition which took place in 2017 for about 1.7 billion pounds gave Post Holdings Inc. an
opportunity to explore the breakfast cereal market and gain vast market share. However, as found
in the report, there are some environmental factors that affects Post Holdings, a good example
being the technological factors based on recent changes in technology that makes consumers
appreciate breakfasts on the go rather the sitting in the restaurants to eat, this calls for improved
packaging of the products and great necessity for Post Holdings to go into innovative market
research to satisfy her customers.

Furthermore, the internal analysis of the market showed a high competitive rivalry in the breakfast
cereal market making it pertinent for Post Holdings to adopt sound business strategies that will
assist it maintain a significant market share in the market despite the existence of other rivals. The
existence of low bargaining power of suppliers need to be taken advantage of by Post Holdings as
most raw materials are sourced from the UK.

Lastly the company should partner with her customers especially the large and strong ones as
analysis in the report showed that customers have higher threat to companies turnover, Post
holding should thus consider these analysis to assist it grow, expand and achieve the pole position
in which all companies strive for in the industry.
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