University of South Wales Business School
Strategic Analysis, Tools and Techniques (ST4S38-V1) MBA
Lecturer: Rajeev Bali
Topic: Critical Strategic Analysis of Weetabix Acquisition by Post Holdings
Table of Contents
Strategic Position of Company —————————————————————————-4
Porter Generic Analysis ————————————————————————————6
Bowman Clock Analysis ———————————————————————————–6
Stakeholders Strategic Map ——————————————————————————–7
PEST Analysis ———————————————————————————————–9
Porter’s five force Analysis ——————————————————————————12
Conclusion and Recommendation ———————————————————————- 14
Companies merging during the history has been very vital for growth of the firms, specially when the subject comes to entrance of a company to a new market abroad.
And Post Holding since past 20 years bought around sixteen other small and large food production companies in United States and Canada, for the first time Post Management decided on acquisition of Weetabix for $1.4 Billion to enter the UK and African Market.
This paper is an effort to do a critical strategic analysis of Post Holdings Inc. an American company buying Weetabix a United Kingdom based company from a chines company.
Overall the food market, specially cereal market is highly competitive leaded by Nestle, Weetabix and cheerios in United Kingdom market, the entrance of Post Holdings into this market strategically will have an effect which might take the Weetabix to the higher level of market leading.
This Changes will effect on stakeholders both internally and externally and will require both Post and Weetabix to evaluate and formulate their strategies and business plans to protect their competitive advantage in both markets.
Going forward Companies Strategic positions have been elaborated based on Bowman’s Clock and Porter’s Generic Analysis, Stakeholders analysis and map has been illustrated and finally PESTLE and Porters five forces Identified and critically analyzed the relevant industry factors and this paper is finalized with a conclusion that I found out during the research and evaluations point out some recommendations for both Companies.
Strategic Position of the Company
The essential step in extensive formation of a business strategy is determine by its strategic position and Strategic position of a company is stood out of the consideration of the business that the company operates in and via that understanding to give the company a competitive leverage over its competitors. (Porter, 2008)
Which means understanding of marketplace and the competitors help the companies for using multi sources and understanding of production profitability at the same time making the strategies for anticipation of forecasting production profit in the future.
Once the company find out rates of its productions in a newly competitive marketplace it helps them to plan their business accordingly, in order to achieve competitive advantage and takes up the company in a favorable or superior business position.
In Strategic Positioning competitive advantage marketing is a good tool to operate but couldn’t play a significant role for branding the company in a higher position. As Seth Godin Water in Brand Equity of June 4, 2003 says:
“Marketers are doing exactly the wrong thing, they’re running more ads, they’re putting ads on parking meters, in hotel elevators, in washrooms. Because they think that the answer to clutter is more clutter. That’s why there’s so much spam in your e-mail box. Because marketers are desperate.”
This Desperation takes the case to a long drive toward success and avoid the shortcuts which is more beneficial and profitable, you can’t stop the fire with fire, obviously you would need water to bring it down. Hence the only answer to clutter is making things in order and this uniqueness will blow up the mind of everyone and makes its place in there.
To success, the first step is to position the brand in the target buyer’s attention in a particular way that is in their observation of the brand, it is distinctive and offers a influential customer value better then its competitors. Which is called competitive advantage and strategic positioning. (Subroto Sengupta, 2005)
By using Bowman’s strategy clock and Porter generic strategy analysis a company can easily and definitely formulate a strategy to achieve the competitive advantage over their competitors within the industry. Both analysis distinguishing overall the cost, differentiation and focus which is always vital for companies working on their long-term strategies and formulating business plans.
Cost leadership strategy is one of easy and efficient method of strategies to gain competitive advantages over their rivals in market within a very short time and less efforts. However, it requires more consideration of raw materials, labor and substantial market share advantage and some other important inputs which are vital factors of this strategy to protect the company from the competitors. In this strategy companies are playing the competition with the prices of their products and services for example the Easy Jet and Spirit Airlines have most of the flights in hand in United States airlines market because they offer the half price of other companies to customers. This method is easy, efficient but very risky needs more consideration of market and competitors study, require usual research and continuous efforts for cost reductions in all aspects of the business.
Differentiation is intended at the comprehensive marketplace that contains the formation of a production which is alleged through its business as unique. Which could be associated with new designs a great feature of technology, using different networks and/or a great customer service. Studies proved that differentiation is more profitable then all other applicable strategies at the broad market. However, Focus strategy has more concentration over a selected target or better to say production in specific market. This strategy is well effective for small firms but for large companies its really useless strategy.
After the analysis of Post holdings and Weetabix I found that Weetabix business strategy is differentiation focus (a combination of two methods) as Weetabix wants to focus on a particular target in markets but it has been seen that the firm invented and introduced new products during past one or two decades.
In 2013 Weetabix introduced Weetabix Biscuits and after that the Weetabix on the go to target those consumers who did not find value in the cereal breakfast and trying to save time, this uniqueness playing of competition made a miserable life for its rivals in UK market and as found in a research by Visionone in 2017 that Weetabix focus strategy aimed at meeting consumer unique needs.
In other hand Post Holding which is a huge company in compare to Weetabix has all time chosen Comprehensive strategy by operating in different market and production of different brands and acquisitioning of small firms within the industry made a great strategic position in American food market.
Porter Generic Strategy:
Other then Porter’s generic strategy, Bowman’s strategy clock is another great and easy understandable strategy analysis method which can be used to identify strategic position and strategic competitive advantage of a company.
Bowman’s Strategy Clock
As they say Bowman’s strategy clock extension of porters generic method mostly focused on value scheme to customers (Thebusinessprofessor.com, 2018) This framework was developed by Cliff Bowman and David Faulkner as an elaboration of the three porter generic strategies (Wikipedia, 2003).
The Clock strategy method is a model that propose the options for strategic positioning and elaborates how a product should be placed to bounce it the most competitive position in the marketplace.
Differentiation in Clock method:
“The aim of a differentiation strategy is to offer customers the highest level of perceived added value. Branding plays a key role in this strategy, as dose product quality” (Abhishek Gupta – 2013)
“this Strategy aims to position a product at the highest price levels, where customers buy the product because of the high perceived value, this is positioning strategy adopted by luxury brands to achieve premium prices” (Abhishek Gupta – 2013)
This framework is game of price and perceived value and we see that these two options (Differentiation and Focused Differentiation) differently formulated in these two methods. Therefore, we can say that Weetabix in clock strategy analysis comes under Differentiation strategy option by placing its products in the market in different time to pledge its best competitive position between the rivals in the marketplace. Weetabix introduced its new product brand (Weetabix to go) drinks in 2014 after research came out on cereal market in UK to value consumers demand.
The focus of Weetabix on its target made them popular in their productivity and creativity on how they value their market and consumers for instants in Kenya they are delivering their products by bicycles to customers showing their commitment to consumers and their ability of being dynamic to fulfill market needs. (Allchin, 2012)
Stakeholders Analysis and Mapping
Literally Stakeholders “are any group or individual who can affect or is affected by the achievement of the firm’s objectives” (R.Edward Freeman, 2010).
Practically stakeholder is a person, group or institution that has interest in company’s development and progress and/or concerned about the marketplace, competitive advantage of the firm.
Obviously, Weetabix and Post has their own stakeholders and this acquisition may have a significant impact on them at the same time they are strategically involved in this historical endeavor which requires compromise, consent and agreement of all affected stakeholders. Therefore, for each transformation management is required to make a strategy for their stakeholders at first to have a smooth and efficient transformation (R. Edward Freeman, 2010)
Each company involved with two category of stakeholders; Primary and Secondary and they have their own rank of priorities and management is required to review and analysis their ranking based on effectiveness, as each company gain more from a different stakeholder, chronically the primary stakeholder is as important for a company as its whole production and market competition since they are the operating system of the company that have control over the internal activities and/or support them to operate their functions which include but not limited to shareholders, employees, consumers, investors, suppliers etc. while on other hand the stakeholders dose not have the control of operations but needs more consciousness as they indirectly impact on the primary stakeholders for instants government and media.
In acquisition of Weetabix both stakeholders were involved effectively and very welcomed by both markets; US and UK. In bellow diagram we see the structure of stakeholders based on their ranking and involvement in the transformation:
Stakeholder Analysis Matrix of Post Holdings acquisition of Weetabix
Referred to the diagram numerous stakeholders were involved, and plenty strategies were engaged which this transaction of acquisition success.
External Factors Driving the Strategy
The PEST analysis is very vital to formulate the external analysis and one of the most common approach for considering the external business environment (Abhishek Gupta, 2013).
PEST analysis stands for Political, Economic, Social and Technological analysis, in bellow we will analysis the company in accordance with PESTLE which includes PEST plus two more factors Legal and Environmental analysis to explore the trends:
Diagram of PEST analysis:
The acquisition of Weetabix happened in a very hyped situation where United kingdom voted and exited from the European Union (E.U) which brought lots of uncertainty in to the many business environment and limited the market only for United Kingdom Investors, Suppliers and consumers. However, in the past UK’s market was very wide since other European Union countries were included in.
Weetabix alike other UK based companies unsure to prepare for European Union legislative laws and foreign trade regulations or not since there are many aspects still remained unclear with the trade zone of European Union and UK and the Brexit created a deadlock after the recent negotiations.
The major impact of Brexit on international companies are that this exodus between Britain and European Union dragged down the value of pound in front of other currencies and will affect Post to fascinate high cost dollar influence in wheat and other materials which imported from foreign countries particularly European Union members to UK market.
While the price of wheat and other material went up and the Acquisition recently happened Post is not able to bring any changes in pricing of cereals in such a strategic situation they need to stay calm and ensure they never lose their stakeholders and competitive strategic advantage within the United Kingdom Market.
The Brexit took place in 2016 which immediately brought down the business market of United Kingdom 20% down and 2017 evaluation shows a significant changes in market business increment and a research held by Trade tech in which 64.7% people thinks that British market can remain the lead in the future years.
As an International Company Post Holdings entrance into British market has a great opportunity but recently the company would face some uncertainty of profit due to the currency falling, Brexit impacts for other then UK Companies and unfortunately for the time being the economies are not growing at the same rates for the company which is require the management strategies to figure out on how to handle the discrepancies in the two different economies.
Both Post and Weetabix require individual economic and strategic approach since both are dealing with two different markets which has disparities in the economies they operate in and each economy grants its particular diverse contests and challenges meanwhile it presents inflation, interest rates and purchasing power among other variables is concerned.
The Social factors are vital due to understanding of consumers tradition, culture trends, taste, interest even keeping religious importance has a significant impact on consuming of the goods and products.
For food production companies its important to evaluate the social aspect of its trade nature in market for instants in Islamic countries give importance more to religious perspective you should produce Halal food and mark it in the packages, Indian Bangladesh and Pakistan etc. market taste of spice is very important to them and has a various consuming. For breakfast the research conducted by Kim Mclynn of the NDP Group shows that China and other Asian Countries prefer a hot breakfast and Cereal’s consumer are limited, however, UK, US and Canada consumers prefer only cold cereal breakfast and recently studies shows that consumers now a days prefer more to go and fast cereals to save their morning times. With such a social aspect Weetabix and Post both has a great value in both Markets specially when Weetabix’s new cereal brands which has been greatly appreciated by the consumers.
Today more then half of the world is dealing with E-Commers and usage of Technology became very important for Production process, marketing and even production invention which facilitate the business strategy.
Advancing the technology make the production easier and less expensive and attract consumers attention to the productions by marketing in television and social media but most importantly the impact of technology on business strategy is having feedback of consumers on products and services and understanding of their demands easily whilst the management can work on how to improve it to protect their strategic position in the market.
During the past years Weetabix used this method and created new brands in response to demands of new generation specially the on the go drinks and protein bars.
Keeping in mind of climate, weather and pollution for the health and wealth of consumers are important and needs a serious attention by the production companies.
Post announced because of the global warming and climate change the management decided to focus more on environmental laws by making sure their packaging materials are degradable and should ensure to not use or at least maximize the usage of harmful and hazardous materials in their packaging i.e. plastics. (Postholdings.com/news , 2017)
Legal factors are complementary for local and international traders but in this case for Post Holdings its complicated to drive ahead by ensuring to complies with both market rules and regulations.
Employments rules, benefits, allowances and wages in both countries are different which needs attention in the strategy and calculation of balance sheet of the company.
Porter’s Five Forces Analysis
Supplier Power: Low to Moderate Pressure
- The main inputs into the value chain of Weetabix is wheat and oats which are pretty standard inputs and makes the cost of switching between additional suppliers, moderately low in United Kingdom market.
- After merging of Weetabix with Post the fear of Supplier power bring down to the lower lever for both individuals as they can use their resources in share from different regions.
- Weetabix also forms a highly important part of the supplier business due its huge number of productions in cereal and usage of wheat and size of scope which makes the power of the suppliers lower.
Buyer Power: Moderate to high Pressure
- The buyers which superstores and proceri shops exercised a various higher bargaining power as the numeral competitors’ costs were lower.
- Weetabix worked with wholesalers and distributors to exceed it’s sales of products accordingly by creating targets for each and appointing rewards for success. (Drakakis, 2017) this business development strategy was very smart and efficient.
- By campaigns of healthy food Weetabix attracted attention of consumers on paying premium for healthy food packs in grocery stores, through this way Weetabix brand commanded big sales and projected positive brand image within United kingdom market.
Competitive Rivalry: High to Moderate
- The Industry has an unchallengeable competition, while Weetabix has the largest market shares and its closest competitors also have a significant market share advantage which cost pressure on the company.
- Consumers do have more options of switching to other competitors specially when it comes to the price reductions which cause high intensity in rivalry.
- How ever Weetabix’s smart play over the competitors always succeed for instants introducing the breakfast on the go on 2018 took the competition to the next level amongst other cereal production firms.
Threat of substitution: Hight
- Obviously, all products has a substitute, where the substitutes for breakfast cereal are breads, biscuits, yogurts, donuts, fruits etc.
- The company needs to produce and take over the alternate productions to minimize the substitution pressure on market place of its brand mark.
- Weetabix will have a great opportunity by merging with Post that they will exchange the production brands in both market to take over the substitutions.
Threat of new entry: Moderate
- There is a threat of new entrants into the industry as the barriers however, it not that high to worry about but still needs a consideration for long term.
- The new entries some time are a big barriers in some of brands and the main reason are their low price in front of Weetabix products which cause a cost reduction of more effort on retail market.
Conclusions and Recommendation
Post Holdings biggest strength is the numerous brands of food productions which will help Weetabix in bargaining down the substitutions, meanwhile the newly invented production of breakfast of Weetabix would be a great source of income for Post in United States market.
It’s a great opportunity for Post Holdings by merging with Weetabix as it has wider market place globally and a great network with suppliers and distributers with will result enlargement of industry and growth of Post overseas as Weetabix has International segment.
I recommend that Post emphasize the success of Weetabix brands to do the same with their hesitating healthy brands and continuously allow the products sales by the same brand and production method.
And together work on a strategy to defense against smaller brands and increase market share and focus on sweet cereal also invest more on “on the go” drinks of Weetabix which has been a successful brand.
As newly the labor wages is increased in UK, Post management needs to find out alternative ways or work more on technology to replace the labors and save more budget as they say onetime payment is more profitable then all-time payments.
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