University of South Wales

Business School

Strategic Analysis; Tools and Techniques (ST4S38-V1)

Lecturer: Christodoulos Kakouris

Assessment Report I

Present a Critical Strategic Analysis of the Current Strategic Change Within the
Following Case: Post Holding buying Weetabix

Kpeli –Semabia Favour Mawusi

22 July 2018
Table of Contents
Introduction .................................................................Error! Bookmark not defined.

Strategic Position of the Company ............................................................................. 5

Stakeholders Analysis and Mapping .......................................................................... 9

PEST Analysis ......................................................................................................... 11

Industry Analysis ...................................................................................................... 13

Conclusion ............................................................................................................... 15

References ............................................................................................................... 16

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INTRODUCTION:

This research work is to present a critical strategic analysis of the strategic change within
Post Holding buying Weetabix. The analysis will cover the strategic position of Weetabix
which is a company in the cereals industry. We will also do an analysis of its Stakeholder,
External and Industry positions. The global cereal industry is a very competitive one since
the schedules of many are pushing their preference for breakfast towards an easy to eat
on the go breakfast option. Key players in the industry includes Kellogg’s which produces
cornflakes, Nestle which has a range of easy to prepare and eat lines for snacks and
breakfast and Quaker which is known for their oats brands. These various competitors
make the cereals industry a competitive one since there will be a struggle to either
maintain or increase market share.

Business operations have evolved over the years due to the fact that most businesses
have gone global. This has led to organizations having to position themselves
strategically to succeed. Strategic positions involves taking account of the changing
phase of the business environment and adopting strategies that will put the organization
in a desired positon in the future so as the ensure continuity of the organization into the
future. In adopting the best strategy for the growth of the organizations, managers or
business leaders will have to question themselves on how the future of the business looks
like, how could they position the organisation to take advantage of changing business
environment, which opportunities could be seized and which threats could be neutralized
etc.

As part of the strategies adopted by organizations, we have some companies taking over
others in acquisitions and some collaborating with others in the form of mergers. Mergers
and Acquisitions have become very popular business strategies for companies, who are
looking into expanding into new markets or territories, gain a competitive advantage,
acquire new technology and skills set (Frederiksen, 2018). Companies that are willing to

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expand into other markets to grab new product lines, add some additional facilities or
enter newer markets most often use this strategy of mergers and acquisition. Post holding
according to their history entered the UK market by acquiring Weetabix and already know
brand with its presence in over 80 countries worldwide and this gives post holdings and
already existing large market for its products. Post holdings was already a market leader
in the cereals industry in that it was already the third largest cereals firm in the US and
they also share the same value of providing great tasting nutritious products for the whole
family and based on this shared culture, the acquisition was going to be mutually
beneficial.

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STRATEGIC POSITION OF THE COMPANY

According to Johnson and Scholes (2005), the strategic position of an organization is

concerned with the impact of its strategy on the external environment, internal resources
and competences and the expectations and influence of stakeholders. In considering the
strategic position, it is very important to take account of the future of the organization and
to assess whether the current strategy being used or adopted will position the
organization well into the future. If it will not, then the organisation needs to identify
changes it should make to place it in a strategic position.

Understanding the organization’s strategic position includes an in-depth understanding of

the link between the external environment, the organization’s capabilities in terms of
resources and its competence and the influence of its stakeholders in terms of their
culture and ethical values. Johnson and Scholes summarizes this by saying that
successful organizations will have found a way of operating such that environmental
forces, organizational resources and competencies, and stakeholder expectations
mutually reinforce one another. Understanding this link helps organizations to use its
knowledge to develop and implement successful strategy.

Porter (2012) argues that the strategy of an organization defines its distinct approach to
competing. Again identifying the factors that determine competition lime rivals, new
entrants, bargaining power of customers and suppliers, threat of substitutes and the
economics of particular industries and adopting a strategic plan based these factors helps
to position the organization to defend itself against the forces over time.

From the analysis, Weetabix already has a considerable market share and should
continue to be competitive. In order for them to continue to succeed, they should pay
particular attention to the competitive forces so they can tailor their strategy to mitigate
the negative effects of those forces so they can either maintain their hold in the market or
increase their market share.

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Michael Porter identifies some competitive strategies that will help an organization to
succeed in the face of competition. These strategies are

1. A low-cost provider strategy— This strategy strives to achieve lower prices than
rivals by usually underpricing competitive products and this is to attract large
customers.
2. A broad differentiation strategy— This strategy seeks to differentiate the
company’s products by offering products with superior qualities that will appeal to
a broad spectrum of buyers.
3. A focused low-cost strategy—concentrating on a narrow buyer segment (or market
niche)
and outcompeting rivals on costs, thus being able to serve niche members at a
lower price.
4. A focused differentiation strategy—concentrating on a narrow buyer segment (or
market
niche) and outcompeting rivals by offering niche members customized attributes
that meet their tastes and requirements better than rivals’ products.
5. A best-cost provider strategy—giving customers more value for their money by
satisfying buyers’ expectations on key quality, features, performance, and/or
service attributes while beating their price expectations. This option is a hybrid
strategy that blends elements of low-cost provider and differentiation strategies;
the aim is to have the lowest (best) costs and prices among sellers offering
products with comparable differentiating attributes.
(source:
https://unicaf.vitalsource.com/#/books/9781307106244/cfi/145!/4/4@0.00:41.7)

In order for Weetabix to succeed, the best competitive strategy to adopt is the
focused differentiation strategy. Under this strategy, the firm will focus on a few
target markets and developing customized products to meet the tastes and
requirements of the market which are better than what competitors offer.

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 Bowman expanded on Porters Strategic position by coming up with eight positions
which focused on how to position the product to give it competitive position in the
market.

According to Bowman, a low price and Low value added means that the product is not
differentiated and the customer thinks less of its value. The main concern here is price
and the organization needs to ensure that no one is able to offer a lower price than what
they offer.

The Low price position strategy means that the organizations needs to strive to operate
at minimum costs so as offer low prices. Profits in this strategy are not high but selling
high volumes will ultimately end up in generating high profits.

Bowman explains the Hybrid strategy as offering a differentiated product at a relatively

low price. This is to persuade customers about the value added but this value must be
consistent.
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The differentiation strategy as explained here is to offer customers with high levels of
perceived quality and this is done through promotion of the brand. Here customer loyalty
is key to achieve relative prices and added value that the strategy requires.

Most people perceive highly priced goods as of high quality and this is what the Focused
Differentiation strategy seeks to achieve. This strategy aims to offer highly priced products
where customers buy because of its perceived quality. This can lead to very high profits
but the product must meet certain best standards and the brand should be able to sustain
itself in the long term.

The Risky High Margin products are priced very high without any perceived value. Profits
can only be realized if customers buy at these high values but when they find a product
that offers perceived value and at the same or lower price, they shift. This is very risky
since the company selling at premium price without any justification is difficult.

The monopoly pricing strategy means that only one business is offering the product. With
this strategy, the organization is not too concerned about quality or customer perception
since there are no alternatives. Here the monopolists can set any prices they wish.

The Loss of Market Share position strategy means the organization sets a middle range
or standard price for a product with a perceived low value. Customers may prefer to pay
more for a product with a perceived high value or

Weetabix adopts the product differentiation strategy because it is actively involved in

conducting research in order to create unique products to meet customer’s needs. This
research I believe has led to a diversification of all their products to suit the various needs
and requirements of all the age groups. The ranges of products being offered by Weetabix
are for infants to adults with nutritional requirements for all these age ranges considered
and factored into the making of product.

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STAKEHOLDER ANALYSIS AND MAPPING

According to Freeman (2009) Stakeholder theory is an idea about how a business works
and for a business to succeed it has to create value for its customers, suppliers,
employees, communities, financiers or shareholders. Stakeholders are persons who are
affected by or can affect the operations of the business and they have various levels of
power. Post holding after acquiring Weetabix will need to identify the many different
stakeholders which will be affected by this transaction.

Some of the Identifiable stakeholders of Weetabix include.

1. Primary Stakeholders: Those who are directly affected by the transaction or have
direct interest in the company
 Customers
 Employees of Weetabix
 Suppliers
 Community within which Weetabix is situated
 Shareholders
2. Secondary Stakeholders: Those who have indirect interest in the company
 Competitors
 Media
 UK Government

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 Stakeholder Map
Power

 UK Government

 Customers  Shareholders
high

 Weetabix
 Agencies that deal employees
with the organization  Breakfast cereal
indirectly Industry /
Competitors
low

low high
Interest

In drawing an analysis of the stakeholder map we can say that the government has high
interest in the takeover of Weetabix because it will want to ensure that it is done properly
and legitimately because of other obligations it has to the state. Shareholders are the
owners of the business and therefore will have high interest and high power in the
takeover. The shareholders can decide to sell off their shares or vote against the takeover
therefore they need to be always be informed of the details of the takeover and how it is
going to affect their fortunes going forward. Competitors also have high interest in the
takeover because they would want to observe the impact the takeover will have on their
own businesses in terms of the new strategies to be adopted by the new group which
may impact on their own market share. Employees have high interest in the takeover
because of its repercussions on their job security or income. Customers are going to be
directly affected by the outcome of the takeover in that if the new product that is produced
after the takeover does not appeal to them, Weetabix will lose their market share.

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Because of this, they must be always informed about how the deal is going to affect or
benefit them and making them happy should be the priority of both Weetabix and Post
Holdings. Other agencies that deal with Weetabix only need to be informed about what
the transactions entail.

PESTLE ANALYSIS

Political

The acquisition of Weetabix by Post holdings means that Weetabix will now have to deal
with both the UK and the US political environments. The UK after having voted in support
of Brexit and to leave the European Union, have a hanging political future that is yet to be
determined. This is something that Weetabix needs to keep an eye on to assess how it
is going to affect its operations going forward. The weakening pound and the strong dollar
will also mean that the price of Weetabix products may go up if some of their raw materials
will have to be purchased from the United States. Again Weetabix will have to consider
the tax implications, import or export regulations and other laws associates with operating
from both the US and UK and how these laws will affect their operations. The
considerations here should be manages such that these political influences will not
adversely affect the quality and price of Weetabix products.

Economic

Before the acquisition by Post holdings, Weetabix had operations in both the UK and
China. Post-acquisition means that Weetabix will now be operating from three different
economies namely UK, China and the US. The economic indicators of all three
economies are different and this needs to be seriously considered by Weetabix. The cost
of production will ultimately reflect on the price therefore there need to be a strategy in
place to ensure that the best economic approach is adapted for all three economies.
According to tradingeconomics.com (2018) growth rate for the UK economy as at March
2018 is 1.2% whereas that of the China and the US as at the same period is 7% and 2.8%
respectively as compared to 1.3%, 6.8% and 2.6% in 2007. This is an indication that the

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globally economic growth has receded but the growth rate in both US and China are still
higher than in the Uk and Weetabix can take advantage of the higher economic growth
of China to increase their sales and ultimately profits. Again they will also need to consider
the impact of interest rates, exchange rates, inflation on their operations.

Social

Weetabix will also have to consider the many different customers they are serving in order
to produce products to meet their tastes. A BBC news article indicates that Chinese
consumers prefer hot breakfast to cold cereals whereas consumers in the US prefer
Cereals therefore Weetabix will need to produce breakfast options that will meet these
two different consumer preferences.

Technological:

Weetabix will have to explore new ways of producing their products to take advantage of
the technologies available in all three countries. The best technology which will ensure
lower cost will be most beneficial to the company. Again the use of technology in
advertisement, products and service distribution and in communicating with target market
will be valuable to its operations.

Legal:

Weetabix will have to stay abreast with legal requirements of all three countries where
they will be operating from. These include health and safety laws or requirements,
advertisements standards, product labelling and safety. Again Weetabix will also have to
familiarize itself with trade laws available in the US market since its country has its own
set of rules

Environmental:

Weetabix will have to ensure that all their operations do not cause harm to the
environment but are in line with internationally acceptable limits. Raw materials sourced
for the production of their must be done in an ethical manner because consumers are
becoming more and more discerning and any suspicion of unethical behaviour in the

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production or adverse effect on the environment will cause them to boycott their products
no matter the nutritional value or low the price.

INDUSTRY ANALYSIS

Understanding the industry in which Weetabix operates will hep them to develop a
strategy that will make them competitive and to gain advantage against its forces. In trying
to understand the industry, Michael porter comes out with five models to help analyze the
industry. These forces are

1. The Bargaining power of suppliers

2. The threat of substitutes
3. The Power of Buyers
4. The Threat of new Entry
5. The Competitive Rivalry

The bargaining power of suppliers

The bargaining power of supplier’s looks at the number of suppliers in the industry, the
cost of substituting suppliers, supplier’s credit terms etc. These factors when high allow
suppliers to determine the cost of supplies to their buyers and these may lead to high cost
of inputs. Weetabix decided to mitigate this risk by sourcing 50% of their wheat directly
from farmers and this is to enable them stay competitive and to cushion consumers
against prices (Business Daily, 2015)

The Threat of Substitutes

The availability of substitutes on the market gives consumers choices when prices
increase for their regular products. The threat of substitutes in the cereals industry is
already high because of several breakfast options. Weetabix struggled to maintain their

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market on the Chinese market for example because they preferred hot food to cold
cereals.

The power of buyers

The power of buyers is determined by the number of buyers in the market and the cost of
them being able to switch to other suppliers. Distributing the product using departmental
and grocery stores gets the products very close to the consumers. Weetabix already is
the largest producer of breakfast cereals in the UK and therefore will not be so much
affected by the power of buyers because of its large consumer base.

The Threat of new Entry

Tough competition in the cereals industry may hinder new entrants from entering the
market. Other barriers may include economies of scale, capital requirements and
government policies. The cereals markets is already dominated by very old known \
brands such as Nestle, Kellogs, Weetabix and the like and therefore a new company
entering will have a lot of competition to face in order to establish their brands.

The Competitive Rivalry

Competition in the industry may drive down costs and this will be beneficial to consumers.
There is high competition in the cereals market with the presence of some companies like
Kellogg’s and Nestle. Competition in the market exposes the company to threats of other
companies trying to imitate their products. This is evident in the recent court case against
a Kenyan biscuit manufacturer by Weetabix for imitating their brand by marketing a
product named Multibix. The court ruled that the Kenyan firm should stop selling their
brand and withdraw their products from the market (farmbizafrica, 2016)

CONCLUSION

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Weetabix is a well-known brand and a market leader in the UK and its acquisition by Post
Holdings offers it an opportunity for growth outside of the UK and China. Even though the
US market is a new one, entry to the market will be easy because Post Holding itself
already has presence on the US market with many other brands. The group will now have
to come up with innovative ideas to increase market share or sales so as to raise profits.
The research and development department of the group will have to find new ways of
ensuring that Weetabix can come up with products that will be appealing to the US
consumers so as to shore up its sales.

The only challenge available now to both Weetabix and Post holdings is the outcome of
the UK voting for Brexit. Both companies should look for ways of assessing raw materials
in the Us to hedge the company against the exchange rate risk to enable them manage
production costs so that prices can be relatively low for consumers.

References

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BBC News. (2017). Weetabix to be sold to US company. [online] Available at:
http://www.bbc.com/news/business-39625715 [Accessed 14 July 2018].

CGMA. (2013). Porter’s Five Forces of Competitive Position Analysis. [online] Available
at: https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html
[Accessed 17 July 2018].

Corporateethics (2009). What is Stakeholder Theory?- R. Edward Freeman. Available

at: https://www.youtube.com/watch?time_continue=10&v=bIRUaLcvPe8 [Accessed 21
July 2018]

Ft.com. (2017). Weetabix to be sold to US group Post Holdings for $1.76bn. [online]
Available at: https://www.ft.com/content/1c98e144-23aa-11e7-8691-d5f7e0cd0a16
[Accessed 15 July 2018].

Mwaura ,C. (2016) All Weetabix Wheat to Come from British Farmers. [Online] Available
at: http://farmbizafrica.com/markets/992-all-weetabix-wheat-to-come-from-british-
farmers [Accessed 21 July 2018]

Porter, M. E. (2008) Competitive Strategy: Techniques for Analyzing Industries and

Competitors , New York: Simon and Schuster

Weetabix Corporate. (2017). Weetabix Corporate | Post Holdings Completes Acquisition

of Weetabix. [online] Available at: https://www.weetabixfoodcompany.co.uk/press/news-
archive/post-holdings-completes-acquisition-of-weetabix [Accessed 14 July 2018].

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