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The aim of this assignment is concerned with the enhancement of the business organization. This can be done by conducting modern research about a company dealing or operating in the “Food and Beverage” industry. This industry forms the basis of my research and I am going to focus on the most common food and beverage company i.e. “Kraft Heinz”. The detailed information about the company can be found on their website: https://www.kraftheinzcompany.com/.
Initially, Kraft and Heinz were two different companies working in the name of Kraft Foods Group Inc. and HJ. Heinz Co, respectively. Kraft Foods is a well-established manufacturer of consumer goods whereas Heinz had a backing of Berkshire Hathway Inc company owned by Warren Buffet and 3G Capital Inc. Both Berkshire and 3G Capital had immense experience in restructuring and investing which helps companies increase their profit margin and equity in the market (Hathaway 2013).
Kraft Foods Group Inc. and HJ. Heinz Co. expressed their intention to get merged in March 2015. This deal is considered as an acquisition by various research analysts. However, there was a positive response from the market on this merger in the sense of stock trading. The Directors of both the companies were also very positive about the merger given which they publicly announced in the month of July 2015 that their merger is complete. The main objective of the newly formed company was the integration of its business affairs and the establishment of a new internal structure well prepared to cater to the population.
The main reason for choosing this industry and this specific company is the major losses that the company has incurred in the fourth quarter of 2018. The company’s stock fell more than 30 per cent in the month of February 2019. There were major reasons of the same: Firstly, the company wrote off its intangible assets to the tune of 15.4 billion dollars. These assets were related to Oscar Meyer and Kraft brands. Secondly, the company expressed publicly that it would reduce the amount of dividend to 36 per cent. And lastly, there was an announcement by the company that its books of accounts are being investigated by the Securities and Exchange Commission of the United States. Due to this, the stock prices fell dramatically in a single day. The company incurred a loss of 12.61 billion dollars in the year 2018. According to the annual report of 2019, the company incurred a major loss of 13.5 billion dollars which was considerably more than in 2018 (Forbes 2019). Since then the share prices and the market value of the company have not been recovered. This does not mean that the company does not have the potential to grow and catch up its pace in the market. I feel that there is a great scope for the company to grow in near future as being a company dealing in consumer goods, and people will not stop eating and drinking as it is a basic need. Consumers who are the end-users of these goods will always look up for a better quality product at a reasonable price.
Every business at some point passes through a stage of transformation which helps the company in improving the methods and strategies adopted by it in the production of materials or services. This process of transformation which helps in improving the value of an organization or enhancing the value of its employees, product, services or processes is known as Business Enhancement. Food and Beverage industry is a very competitive one as it involves consumer goods which are manufactured daily. The structure of the company constantly changes in this competitive environment. Competition is well known to a dynamic process. There are various factors both external and internal which gives a company advantage over this diverse competition. An analysis is done to determine where the company stands in the market (Grant 2016). This analysis can help provide a business to estimate its enhancement given increasing financial and operational forecasts and business strategy models.
To understand the business environment and how one can enhance its business, one has to understand the market wherein Kraft, Heinz and ensuing Kraft Heinz Company (KHC) were/are working, some comprehension is required on patterns concerning the fundamental clients of these organizations; the basic food item retail industry. The consumer goods industry has seen a considerable growth of 4.5 per cent in the past decade but then too this industry is facing difficulties. Disruptions are created by 3 major factors: Changing Habits of the Consumers or Customers, High Competition, Innovation in Technology (Simmons and Wamelen 2018). Due to these factors many consumer-related industries are entering into mergers in the United States and Western Europe. There is ample data available showing that big names and big players of this industry have merged or acquired with small chains to obtain returns of scale and drive through a high rate of competition (Loria 2017).
Both the quick-moving consumer goods or basic food item manufacturing sector and the consumer goods retail industry are developed businesses with a significant level of rivalry among the major parts in this market. KHC is in the developed/shakeout period of the business life-cycle, which is by and large portrayed by mass-market substitution purchases, battles to safeguard or additional share to the detriment of competitors, price rivalry, and on the shakeout stage, the disappointment of mergers and obtaining prompts abundant capacity in the industry. Competition between existing contenders can turn out to be all the more similar as industry grows, innovation diffuses and consumer tastes combine. This will likewise lead to a fall in working edges and industry profitability, driving more fragile contenders from the market (Porter 2008). These impacts are obvious at KHC given its falling apart profitability proportions.
This does not mean that the company cannot develop and enhance its business in this competition phase. Every company has the potential to improve its operations and understanding with the customer as clearly visible in the case of Kraft Heinz. Innovating new and developed products is the need of the hour and to maintain itself and thrive in high competition of today’s world, the company needs a strategy which helps it in gaining a front foot over other companies in the market.
Under this part of the assignment, I will be discussing how customers or consumers play an important role in business and related enterprises and how good relations with customers can lead to business enhancement. The focus of the discussion would be based on “Know Your Customers, Jobs to be done” (Christensen, Hall, Dillon and Duncan 2016). I will use Kraft Heinz Company as my example for this understanding and relevance.
As mentioned above, in the year 2018, the growth in net sales of Kraft Heinz Company was only 0.7% and then in February 2019, the company’s stock fell more than 30 per cent. The company incurred a loss of 12.61 billion dollars in the year 2018. According to the annual report of 2019, the company incurred a major loss of 13.5 billion dollars which was considerably more than in 2018. The company claims that it knows its customers and maintains a good relationship with them in terms of providing quality products at a reasonable price. This at once can be considered as a valid point as in the digital age of today, the companies keep an immense amount of information about the target customers but the fundamental problem arises that this data or information regarding the customer choices is based on the correlation between different customers, for example, A has a similar preference to B. So, if A will choose our product, then B will also do the same.
The approach is misguided in terms of knowing the customers. I am considering myself as one of the customers of Kraft Heinz Company; I am a 23-year-old student who likes to eat junk. I am 6 feet tall. The size of my shoe is 44. I go to college every day. I love riding cars. I read the newspaper to pass time in a plane. These are my details which are not looked into by businesses collecting consumer information. They just rely on correlations with other segments of the same stream and estimate the growth of their product. Knowing your customers is good but too much involvement in such data which is based on correlation takes away the focus of the company in the wrong direction. To counter this problem, I have pointed out various things which can be done to obtain exact and authentic information regarding customers. These are as follows:
The expanded combination in the basic food item retail industry brings about expanded purchasing power for the enormous chains and squeezes working edges of providers like Kraft Heinz Company, as well as other (universally) contending organizations like Nestlé, The Kellogg Company, General Mills, Unilever, Danone and Mondelez. The significant brands of every one of these organizations are feeling the squeeze from less expensive private mark brands of significant basic food item chains. In this manner, solidification in the quick-moving goods related to consumers/basic food item producing segment appears to be a sensible outcome to accomplish returns of scale and lessen costs, if these organizations need to stay competitive as well (or remain in business by any means). In the recent years, it has been observed that the inclinations of a huge segment of consumers or customers have changed towards healthier nourishing foods, as indicated by Grocery Dive, which represents a test to Kraft Heinz (Dumont 2019). Customers give more consideration to the food they purchase, and customers' consideration are moving to new home-prepared food as another option, as viewed as more advantageous and healthy foods. Both Heinz and Kraft are generally solid in prepared foods which are regularly seen as unhealthy.
This section of the assignment focuses upon the discussion on enhancing a business with due respect to innovation. I am going to discuss the research related to innovation in the product and how they can help a particular business organization in achieving its goal of profitability and obtaining market share. For this discussion, I will be focusing on “Marketing in the Age of Alexa” (Dawar and Bendle 2018). I will also be referring to Larry Selden and Ian Macmillan, 2006 “Manage Customer-Centric Innovation - Systematically”. I will also be discussing innovation in the business model for which reference will be made to “Reinventing Your Business Model” (Johnson, Christensen and Kagermann 2009).
Marketing and Artificial Intelligence
In the age of technological advancements and innovation, customers can approach various avenues and compare products according to their choices while sitting at home and this becomes possible by way of Artificial Intelligence (AI). AI assistants such as Echo and Alexa have made it possible for the customers to navigate their choices which change with the introduction of new and innovative products. Consistently individuals purchase from a huge number of item classes, settling on handfuls or several choices in each. Indeed, even routine buys can be tedious; non-routine buys regularly require figuring out the subtleties of contending offers and are laden with hazard. While looking for shoes might be fun, picking the correct toothbrush from more than 200 items is truly dreary. Picking an inappropriate tennis racket can demolish your game, and purchasing a poorly considered wireless arrangement or protection strategy can be expensive.
AI won't just limit costs and dangers for customers but will also offer them remarkable comfort. They'll guarantee that standard buys stream continuous to family units similarly as water and power do now and deal with the intricacy of more-included shopping choices by learning customer's measures and upgrading whatever compromises individuals are happy to make, for example, a more significant expense for greater maintainability. The impacts on the business scene will be sweeping. Advancements that upset how the customers associate with a commercial marketplace additionally tend to reconfigure its elements and reshape the organizations that sell into it.
Innovation concerning customer choices
Companies like Kraft Heinz spend a huge amount of money in their Research and Development yet they fail to survive in the market. This assignment will suggest an approach which will help the companies in improving their growth according to the understanding of the customers and their needs. This approach is usually used by a flourishing business organization such as Best Buy, Seven-Eleven, etc. There are three benefits which this kind of approach seeks to provide and if adopted by Kraft Heinz would yield better results. The benefits are:
Innovation in the Business Model
Kraft Heinz Company should change its business model to enhance its business growth. There are four most important steps to be followed if a company wants an ideal model of business. These are as follows:
In this particular section of the assignment, I will be focusing upon the future aspects of the Kraft Heinz Company and how its business can be enhanced to grow in future. For this purpose, I will be referring to “Strategy as a wicked problem” (Camillus 2008).
Strategy should be made which helps the business in future. There is no shape of strategy neither it has any rule of stopping. Solutions taken strategically are good or bad and not true or false. Kraft Heinz shall make a strategy which has a direct focus on customer and profits. One-shot operation of its production and ideas would lead to immense growth in future. Well-organized operations must be incorporated into the strategy to fulfil the needs of customers. Unique problem has a unique solution.
The hindrances faced by Kraft Heinz are unique and hence there should be a unique solution to the same. The people forming a strategy shall have confidence in them that their strategy will not fail and it will rightly apply to the target audience. The organization is likewise battling with its new mutual corporate culture. The zero-based planning system accentuates cost-cutting, rather than putting resources into new items or representatives (Daneshkhu 2018). In the recent years, it has been observed that the inclinations of a huge segment of consumers or customers have changed towards healthier nourishing foods, as indicated by Grocery Dive which represents a test to Kraft Heinz (Dumont 2019).
When I look at myself being incorporated as a professional in such an esteemed organization, and how I could use this information which I am gathering now through various researches and studies, I was amazed to see how Clayton gave an example of strategies to be involved in the managerial processes of the company and how wicked the problem could be. But strategies at the same time can solve various problems be it wicked or not. The requirement only is to base your strategy on those points which would influence the mindset of the customers to buy my products. I would not place pressure on my managerial staff and the front line members in my regime would work in close contact of the customers.
Strength will be used over weakness in my regime and a policy lay down by relating to coordinates and action would be in practice. A strategy is an incorporated and composed arrangement of responsibilities and activities intended to abuse centre abilities and increase an upper hand (Rumelt 2017). An organization has a successful methodology and upper hand over its adversaries on the off chance that it makes predominant incentive for clients, contenders can't copy or view it as too exorbitant to even think about imitating. (Hit and Hoskissan 2017)
Camillus, J. C. 2008. Strategy as a wicked problem. Harvard Business Review, 2008, p. 101.
Christensen, C.M., Hall, T., Dillon, K., and Duncan, D.S. 2016. Know your customers, jobs to be done. Harvard Business Review, 2016, pp. 56-58.
Daneshkhu, S. 2018. Glassdoor comments on job satisfaction cannot be ignored. [online]. Available at https://www.ft.com/content/a24eb1ba-7f75-11e8-bc55-50daf11b720d [Accessed on August 29, 2020].
Dawar, N., and Bendle, N. 2018. Marketing in the age of Alexa. Harvard Business Review, 2018, pp. 82-83.
Dumont, J. 2019. Grocers can capitalize on shoppers' evolving health needs. Grocery Dive. [online]. Available at https://www.grocerydive.com/news/grocers-can-capitalize on-shoppers-evolving-health-needs-report-says/545041/ [Accessed on August 29, 2020].
Forbes, 2019. The companies that gained and lost the most in 2019. Forbes Times. [online]. Available at https://www.forbes.com/sites/sergeiklebnikov/2019/12/20/here-are-the-companies-that-gained-and-lost-the-most-market-value-in-2019/#7b3d768a299e [accessed on December, 20, 2019]
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. United Kingdom: John Wiley & Sons.
Hathaway, B. 2013. H.J. Heinz Company Enters into Agreement to be Acquired by Berkshire Hathaway and 3G Capitals. [online]. Available at http://www.berkshirehathaway.com/news/feb1413.pdf [Accessed on August 29th 2020].
Hit, S. D., and Hoskissan, A. R. 2017. Peltz Is Seen With 2 Seats at Heinz. New York Times. [online]. Available at https://www.nytimes.com/2006/08/17/business/17heinz.html [Accessed on August 29th 2020]
Johnson, M. W., Christensen, C. M., and Kagermann, H. 2009. Reinventing your business model. Harvard Business Review, 2008, pp. 52-53.
Kuijpers, D., Simmons, V., and Wamelen, J. 2018. Reviving grocery retail: Six imperatives. McKinsey - Perspectives on retail and consumer goods. Winter 2018/19. [online]. Available at https://www.mckinsey.com/industries/retail/our-insights/reviving-grocery-retail-six-imperatives?reload [Accessed on August 29th 2020]
Loria, K. 2017. What is fueling grocery consolidation?. Grocery Dive. [online]. Available at https://www.grocerydive.com/news/why-grocery-consolidation/535608/ [Accessed on August 29th 2020]
Porter, M. E. 2008. The Five Competitive Forces that Shape Strategy. Harvard Business Review, 2018, pp. 78-93.
Rumelt, R. 2017. Good Strategy – Bad Strategy, the difference and why it matters. United Kingdom: London Profile Books LTD.
Selden, L., and Macmillan, I. 2006. Manage customer-centric innovation – systematically. Harvard Business Review, 2006.
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