Module Code & Title :

ST4S38- Strategic Analysis; Tools and Techniques

ST4S38-V1

Assessment 1Present a critical strategic analysis of the current Strategic

Change within the following case: Post Holdings buying Weetabix
Student’s Name & email address:
Abdou Fadimatou
fadmatouabdou@gmail.com

University &Student Number:

University of South Wales
R1710D3778631

Mentor’s Name:
Dr. Bernardo Batiz Lazo

Date of submission:
11/10/2018
Summary :

Introduction: ............................................................................................................. 1

I. Evaluation of the relevant strategy ............................................................... 2

II. Evaluation of key stakeholders ..................................................................... 5

III. External analysis ......................................................................................... 7

IV. Industry analysis ......................................................................................... 9

Conclusion and recommendations: ...................................................................... 12

References: ............................................................................................................. 13
List of figures

Figure 1: Generic strategy………………………………………………3

Figure 2: Bowman clock…………………………………………………4
Figure 3: Power interest grid…………………………………………….6
Graph 1: trading economics……………………………………………..8
Introduction:

In context of globalization and open market, there are a swarm of companies which
propose and sell same products and services. To be the choice of the customers and
find a competitive position, an organization must differentiate from others. In other to
do the differentiation, the organization has to put in place diverse strategies. One
strategy that a Company can use according to Porter (1980) is: the diversification of
products like the case of Starbucks. Another strategy that used the organization was
the acquisition of other brand to enter in new markets and diversify its products.
Gwendolyn and Marvin (2009, p.140) found during their investigation that “the
acquisitions are used to extend the enterprise in new directions”. It is the case of Post
Holdings which bought Weetabix.
Post Holdings is an American consumer packaged Goods Company founded in St
Louis, Missouri. It stands as third position with 19,1% in US ready-to-eat cereal
category through its renowned brands such as Honey Bunches of Oats, Pebbles.
Post Holdings, 2017). To tackle other markets such as United Kingdom, Post comes
with strategy that of ‘acquisition of Weetabix’ a breakfast cereal company, which is
number 2 in its industry. This transaction is going to lead to many changes in this
sector. In view of this, the aim of this report is to present a critical strategic analysis of
current strategy change within the case of post holdings buying Weetabix. In other to
do this critical analysis, the following points are going to be explored. Firstly the
evaluation of the relevant levels of strategy of company, secondly the critical analysis
of the key stakeholders, thirdly the External analysis and finally industry analysis.

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 I. Evaluation of the relevant strategy

In a company, there are three levels of strategy: corporate level, business level
strategy and functional level strategy. But in this report, we are going to focus only on
first two ones.

The corporate is concerned according to Surhi (2017) “with the overall objective and
scope of business to fulfil stakeholder’s expectations”. There are three major
corporate strategies: stability, expansion and retrenchment. As far as the case post
holdings buying Weetabix, the strategy level of the post holdings is the expansion
particularly the internationalize one. Besides William and Robert (2017) stated
“Weetabix is our first major international expansion platform”. This expansion
strategy is used by companies which are looking for higher profit, prestige, survival,
etc. different techniques are used. For instance, Starbucks to get high profit has
focused on the creation of stores around all America and world (Team Macchiato,
2018).

Business level strategy was focused on the customers’ needs and satisfaction, the
selection of the product and competitive advantage (Surbhi). A successful business
model is the one which permit to generate competitive advantage over competitors.
“The ability to adequately determine the position of an organization in its external
environment, i.e. in terms of other entities in the sector, is essential for strategic
decision making. ………Ensuring a unique strategic position is directly related to (and
depends on) the ability of an organization to create value”. Teofana (2017). The
ability of a Company to create sustainable position in its industry is the most
important element of its success (Porter, 1985).Porter in his book “Competitive
Strategy: Techniques for Analyzing Industries and Competitors” proposes three
generic strategies that enable organization to create this position and gain
competitive advantage from its competitors. These are: Cost Leadership,
Differentiation and market segmentation (cost focus and differentiation focus) as it is
shown in the figure 1 below.

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Figure 1: Generic strategy

Source: Mindtools, 2012

In cost leadership strategy, the company is leader in its industry in terms of cost
minimization. At this level all the strategies of the organization focus on the cost
reduction. The products and the services propose to customers are produced at the
lowest cost in comparison to its competitors. This position enable to gain competitive
advantage and make profit. By reducing its cost, its revenue doubtlessly increase.
But in case of usage of this strategy by some competitors, the company risks to lose
market share. (Mindtools, 2012).
As far as the differentiation is concerned, company which used this strategy has to
propose to customers products or services which are different from those of
opponents in the same sector. The proposed products or services must be more
attractive. This attractiveness can be done at the level of the functionality, brand etc.
To maintain competitiveness, the organizations in this differentiation position have to
put emphasis on research and development. Otherwise, they are subjected to attacks
of competitors which use the same strategy. (Mindtools, 2012).

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In terms of market segmentation, a company identifies a segment of market which is
neglected by the competitors and focuses on it. In this segment calls niche market,
the company can use either cost focus or differentiation focus (Mindtools, 2012).
The strategy which suits with Weetabix is the strategy of differentiation of porter. As
explained by Porter in the differentiation, this company has range of products
Weetabix + Fruitibix variant, Alpen, Crunchy Bran, Weetos, Advantage and Ready
Brek (Katherine and Richard, 1996).
To go deeper in the analysis of the position of Strategy business unit, let us use the
Bowman’s strategy clock. The Bowman clock is a marketing model used to evaluate
a company’s position in relation to its competitor’s in term of competition (Mulder,
2018).According to Bowman (2008), a company has eight possible strategies in
function of price and customer value. Those strategies are distributed as a clock in
figure 2 below:

Figure 2: Bowman clock

Source: Mbaknol,

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Like with porter strategies, with the bowman clock is the strategy of differentiation
which is used too by Weetabix. It proposes a diversify portfolio with leader brands
such as Alphen, Ready Brek and Weetabix. To be unlike to competitors, it always
tries to give a high value to its customers. Verbruggen the head of brand stated in
fact in marketing week “We’ve got to try and make our products as relevant to
consumers today and a lot of that comes back to the fact people want a healthy
breakfast”. To response to that need, Weetabix launched in January 2016 the
Weetabix protein and Protein Crunch.
Despite the used of the strategy of differentiation, its competitors such Kellogg and
Nestle which used the same strategy are more positioned than them. With Kellogg as
the leader of the industry.

II. Evaluation of key stakeholders

The activity of a company can be affected or affected different elements. It is the

case of stakeholders which is defined by Freeman (1984, p.46) as “any group or
individual who can affect or is affected by the achievement of an organization’s
objectives.” According to Clarke and Cleek (1998) those stakeholders can be
classified in four: Primary social stakeholders (local communities, supplies,
customers, equity shareholders etc.), Secondary social stakeholders (government,
media, competitors etc.), primary non-social stakeholders (Environment, future
generations etc.) and secondary non-social stakeholders (animal welfare group
etc).In the regard that stakeholders have important impact on the decision making of
any firm, an organization before making any change in its activity has to analysis first
the impact of or on stakeholders. Companies have various methods of analyzing and
management of those stakeholders. For this case, we are going to use the method
stakeholder register & power interest grid proposed by Praizion in 2016.

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Table 1: Stakeholders Register

Stakeholders Power Interest

UK Government High high
Competitors High high
customers High low
Shareholders High High
Media Low Low
Employees of Weetabix Low High
Lenders High high
Supplier Low High
Partners Low High
Public Low low

Figure 3: Power interest grid

Low
KEEP SATISFIED MANAGE CLOSED

Customers UK government

Competitors

Shareholders

KEEP INFORMED KEEP INFORMED

POWER
Media Suppliers

Public Employees

Partners

Low INTEREST High

As showed on the interest-power grid, stakeholders who have high level of interest
and high level power have to be managed closely. In the case of Post Holdings
buying Weetabix, those to manage closely are UK government, competitors, lenders
and shareholders. If for example we take the UK government, at the level of power,
this government has to approve the acquisition by verifying that the transaction is

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done to respect the legislation. At the level of interest, this transaction is good for
local economies.
For those who have low level of power and high level interest, they have to be
informed. The organization has to keep them informed. In this case, they are
suppliers, employees and Partners. The organization must inform them about shift of
owner.
Stakeholders with high level power and low level of interest have to be satisfied. It is
the case of customers who can make company lose market share if they are not kept
satisfied. Concerning those with low level of power and interest, firm must just
monitor them. In our case, we have media.

III. External analysis

On the side to the internal environment, there is external one which also has a
considerable influence on a company performance. Thus, every company before
introducing new products in the market or entering in the new market has to analyze
and determine the level of impact of this environment on its project. (pestleanlysis
contributor, 2013). In order to do so, there are a range of analytical methods that can
be used (PESTLE, PEST, Porter 5 forces etc.) For the current case, we are going to
use the Method of PEST.
PEST is a tool which enables organization to understand the macro environment
market in regard to its business. This acronym is used for political, economic, socio-
cultural and technological environment (Jim and Technical Information Service,
2007). This tool is used to define how those political, economic, social-cultural and
technological affect the activities of a firm in a long run.

- Political: The political analysis is the evaluation of the effect of the political
factors on business. Among other factors, we have political stability, trade
regulations, and employment laws. Thus, Post holding by buying Weetabix
has to deal with standard implemented by UK government and other markets
such as Kenya. In the regards of employment law for instance, post holdings
has to handle the every year changing of minimum wage. As shown by the
graph 1 below, this wage ranges from 5.73 in 2008 to 7.5 in 2017 (trading
economics, 2018). By handling the every year changing, Post holdings is

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 going to see every year an increase of its salary expenses. Out of the
standard, post holdings has also to manage consequences of Brexit view that
UK is still in process of exiting from European Union.

Graph 1: trading economics

Source: Trading economics, 2018

- Economic: As far as the economic factors are concerned, the analysis has to
be done on the unemployment, interest rate, gross domestic product, inflation
change etc (Jenifer; 2018). The current political situation of Britain (exit from
European Union) is going to lead to slower growth. According to Richard
(2017) “the growth would slow to 1% for the year”. Post holdings by entering in
this market has to deal with this regression situation. Even though this
expectation was changed from 1% to 1, 5% in 2017, it is possible that this
condition continue in 2018. Richard (2018) declared in fact that “This trend
could persist into 2018, confounding the worst forecasts for the rate of
expansion to slow closer to 1%”. View that, Post holdings must be able to
manage this state. Another trend that can be discussed in this case is the

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 inflation that undergoes this country at this time due to devaluation of livre
sterling. Richard (2018) said indeed that the prices of products increase in the
shops and that household are asphyxiated by the rise. Thus, Post holdings
risk to seeing the reduction of its sale because customers could not be able to
afford Weetabix products view its prices.
- Social: Analysis of social factors comes down to consider the consumers
habits and needs, what is the change at the level of culture and society
(Jenifer, 2018). By acquiring Weetabix, post holdings is going to face different
types of customers given the extent of its market. Angela ( 2017) declared
that aside UK, Weetabix operate also in south Africa, Germany, Spain, North
America china and African market through joint venture of Kenya. For
instance, China customers and UK ones have different needs. UK population
like to eat cereal in the morning. Katherine and Richard (1996) declared “UK
enjoys the highest global per capita consumption of cereal at 7.62kg, with
approximately 95% of the population eating cereal” This preference of cereal
in UK is going to affect positively the sale of Post holdings. Also, the majority
of the population are now more concerned by their health. Weetabix
introduced a lot of healthy products. Post Holdings by buying has to continue
to keep producing those products why not introduce new ones.
- Technological: Here it is to determine the impact of internet, advancements in
technology, the lifecycle of technologies and technological research on
introduction of new products or the entry in new market. (pestleanlysis
contributor, 2013). Post holdings is going to be influenced by the new method
of manufacturing products and the introduction of the project of delivery
system implemented by leading of the industry Kellogg. Also, post holdings is
going to be impact by Marval MSM Platform put in place by Weetabix to
improve its service and the journey of its consumers.(James, 2017).

IV. Industry analysis

Understanding company competition is one of the best ways to categorize the
different forces which impact its business and profitability (Marci, 2018). The way to
do it, it is to analyze the industry where the organization operate. Several analyzing
techniques are used by the organization to improve their competitive situation. Those

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techniques are PESTLE and Porter’s Five Forces. While PESTLE is trying to identify
the forces which impact the company’s activity at the level of macro environment,
Porter’s five forces attempts to seek the level of power in competitive situation by
using fives forces of the industry. In the present analysis, we are going to use the
method of five forces to evaluate and assess UK cereal industry.
According to Porter, the five forces which identify the competition in an industry are:
Competitive rivalry, bargaining power of supplies, bargaining power of customers,
treat of new entrants and treat of substitute products or services.
- Competitive rivalry: According to James (2013) “The intensity of rivalry
among competitors in an industry refers to the extent to which firms within an
industry put pressure on another and limit each other’s profit potential.
Weetabix faces strong competition from Kellogg, Nestle and supermarket
which introduced their own brand of breakfast cereal (Paperop, 2007). Kellogg
the number 1 of the industry put in place all the strategies to maintain its
position. It diversifies its products and for instance, once it is aware that
customers are more interested by their health, it revues all its products by
reducing salt, sugar, fats and even introduce new products like Special K.
Weetabix and Nestle don’t stay behind, they have range of products and
introduce heathy products too. Also, Weetabix knowing the need of protein by
customers has lunched Weetabix protein crunch (Tryfon, 2017).
- Bargaining power of supplies: it is referred to pressure that suppliers have
on businesses (James, 2013). In the UK cereal market, the majority of
supplies in this industry are farmers. Their power is high. The companies in
sector Kellogg, Nestle and Weetabix don’t have any control on their supplies
(Paperop, 2007). The production of wheat principal raw material for the
breakfast cereal is low. The companies of the industry don’t have a lot of
possibility to change from one supplier to another and can’t dictate the conduct
to the suppliers. Knowing this information, suppliers control companies by
dictating the price of wheat.
- Bargaining power of buyer: this power refers to the pressure that customers
put on organizations to have high quality products at lower price. (James,
2013). In UK cereal industry, there are two type of buyers. The first type is the
buyer who takes products directly at the level of the company to sell back. This
buyer has a high level of power. If he doesn’t buy the products of a company,

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 this firm cannot be able to sell to the end customer. Knowing this, Weetabix
decided to reward wholesalers in function of the purchase (Drakakis, 2017).
The second type of buyer is the final customer (families, individual person etc).
The control of this buyer is low even though he can change from one brand to
another. (Paperop, 2007).
- Threats of substitutes: refers to the existence of products of another industry
which offer the same value to customers (James, 2013). In the cereal industry,
the threats of substitutes is really high. There are a lot of substitutes to
breakfast cereal which are croissants, cereal bars, egg-based breakfasts, fast
food and breakfast menus. For Paperop, as those products attract the
customers, they are going to replace the breakfast cereals in future. Thus, the
companies of breakfast cereal to keep their market share have started to
produce some of these products. It is the case of the Kellogg, general,
Weetabix which made cereal bars and energy drinks (Stealing Share, 2017).
- Threat of entry: refers to the menace of entering the industry by new
competitors (James, 2013). The cereal industry in UK, the threat of entry is
low, as the cost of entry is really high and it takes long time to put in place
such organization. Also, the leaders in this industry (Kellogg, Weetabix and
Nestle) dominate the market, it will be difficult for a new comer to gain market
share.

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Conclusion and recommendations:

In this report, we presented a critical strategic analysis of the current strategic

change within the case of Post holdings buying Weetabix. To make this critical
strategic analysis, we first evaluated the levels of strategy relevant to the case.
During this evaluation, we found that at the level of corporate, the strategy used
was the expansion and differentiation at the level strategy business unit.
Secondly, we assess the power and interest of the stakeholders. In this analysis,
UK government, shareholders and lenders have high level of power and interest,
whereas, media and public get a low power and interest. Thirdly, the evaluation of
external environment using PEST tool showed that post holdings by buying
Weetabix is going to face a lot of challenges such as the consequences of Brexit.
To end the analysis, an evaluation of industry was made too by using the fives
forces of porter. From this analysis, it has been noticed that, the companies in this
sector don’t have a control over the suppliers since the production of the raw
material is low. Also, the power the first type of buyer high. Also there are a lot of
substitute products and many barriers to entry. In view of that, here are the
recommendations that we can give.
Post holdings by entering the UK, to maintain why not increase its position in the
cereal industry should keep the good relation that Weetabix had with employees,
government and suppliers. Also, view the constant change in the need of
customers, the firm should always innovate by putting in place a team of research
and development. The company must attack other like Asian market.

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