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University of South Wales

Business School
Strategic Analysis, Tools and Techniques (ST4S38-V1)
MBA
Lecturer: Bernardo Batiz Lazo

Topic: Critical Strategic Analysis of Weetabix Acquisition by Post Holdings

Student No. Name Enrolment

R1704D2560370 Otto Tawanda Chisiri ST4S38-V1

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Table of Contents

Introduction .................................................................Error! Bookmark not defined.

Strategic Position of the Company ............................................................................. 4

Porter Generic Strategy Grid ...................................................................................... 4

Bowman’s Strategy Clock ...........................................Error! Bookmark not defined.

Stakeholders Analysis and Mapping .......................................................................... 7

PEST Analysis ............................................................Error! Bookmark not defined.

Industry Analysis .........................................................Error! Bookmark not defined.

Porter’s Five Forces Analysis ................................................................................... 12

Conclusion ..................................................................Error! Bookmark not defined.

References ................................................................................................................. 3

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Introduction

"Growth is never by mere chance; it is the result of forces working together,” as aptly
put by James Cash Penney, founder, JC Penney, this masterpiece statement gives
an insight into what it takes to grow personally or grow a company. In a dynamic
global market where companies constantly jostle for pole position and dominance
executives have to be deliberate about their plans to grow their companies and
enhance the market share there by increasing shareholder value. As noted by
Lieberman et al (2009), Malik et al., 2014 organisation use acquisition as a strategy
to enter into new markets and as well as to increase to their market share.

This essay is at pains to do a critical strategic analysis of Post Holdings Inc. , an

American , consumer packaged goods holding company that specialise in both
branded and private label cereal products, that entered into the British market
through acquisition of Weetabix Limited in 2017, also breakfast cereal company a
company previously owned by a chines food company called Bright foods. The idea
behind acquiring Weetabix by Post Holdings was to expand to other markets as
Weetabix had a strong footprint in Britain and other African markets especially South
Africa and Kenya and this was an opportunity for them as Weetabix already has an
international foot print that Post holdings can leverage on. This strategy is the
trademark of Post holding which in the previous years had grown in leaps and
bounds through acquisitions of companies in the food industry. In 2013, Post
acquired a private label cereal and granola business of Hearthside Food Solutions
followed by acquisition of Dakota Growers Pasta CompanyInc, Golden Boy Foods
Ltd, Dymatize Enterprises, LLC, Michael Foods, all in 2014. Between 2014 and 2017
the Post Holdings acquires more 8 companies according to the information on their
website.

The British cereal market is a highly competitive market with leading brands like
Nestles Kellogg’s, Weetabix , Cheerios’ , among others. The entrant of Post
holdings into this market brought with it changes to Post Holding stakeholders both
internally and externally. This change prompted the company to analyse and re-
evaluate its strategic objectives in order to maintain competitive advantage as well

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as to set up the new team for success and give it direction. In order to do this the
organisation needs to re-organise, refocus and come up with new strategies to
function in the new environment. It is without doubt that Post holdings had previously
employed acquisitions as a vital strategic choice for its organizational growth and
meeting its business objectives and maintaining competitive edge. In this essay
focus will be on critical strategic analysis of the current strategic change within Post
Holdings buying Weetabix covering areas such as, strategic position of Post
holdings, stakeholder analysis, external analysis and industry analysis. This will be in
the context of acquisition of Weetabix by Post Holdings and applying strategic
frameworks for us to critically appreciate the strategic change brought by this
acquisition.

Strategic Position of the Company

Strategic position of a company is borne out of the understanding the industry that
the company operates in and using that understanding to give the company a
competitive leverage over its competitors. Porter, 2008, highlighted that the
understanding of the competitive forces helps companies to know the background
and source of industry profitability whilst creating basis for anticipating and
forecasting profitability in the future. Once an organisation has understood its
industry and how it fares compared to its rivals it then seeks to define its strategic
position by differentiating itself from its competitors Wickham (2001). Porter 2012
further reiterate by asserting that strategy expresses an organisation unique style to
competing and the competitive advantages it has. (Isc.hbs.edu, 2018) defines
strategic position as a reflection, “…of choices a company makes about the kind of
value it will create and how that value will be created differently than rivals……” and
this will lead to achieving superior performance within an industry through an
organisation being able to select a peculiar niche Galal (2013).

Using Porter Generic strategy Analysis and Bowman’s Strategy clock as strategic
frameworks organisation can easily formulate strategies to gain competitive
advantages over their rivals. They are three distinctive generic strategies that are
applicable to industry as set out by Michael Porters in 1985 namely Focus, Cost
Leadership and Differentiation. These generic strategies are used differently to
achieve strategic goals as per organisational focus. When a company applies cost

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leadership as a strategy it seek to reduce cost of delivering products and services to

their clients through offering competitive prices to the market thereby gaining and
increasing its market share. Another strategy that a company can pursue is that of
differentiation strategy, this is when a company makes sure that its products are
different and carry unique characteristic as opposed to rival’s products. This can be
through adding extra functionalities that stand out from rival’s products, or support
service that goes beyond normal market standards. Focus strategy can either be
cost focus or differentiation focus, either of the two the company seeks to focus and
concentrate as pointed by Tanwar (2013) on a particular niche in the industry.
Whether it is cost focus or differentiation focus there is need to make sure that
particular niche chosen receives extra value.

From the analysis of Post holdings we can see that Weetabix chosen strategy is
Differentiation focus as the firm chose to focus on few targeted niche markets. This
can be seen in 2013 when Weetabix introduced a niche product in form of breakfast
biscuits to cater for those who did not find value in the cereal breakfast. This is
epitomised by a research carried out by Visionone in 2017 that revealed that
Weetabix focus strategy aimed at meeting consumers unique needs.

Porter Generic Strategy Grid

Source: Mindtools.com,

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In addition to Porters’ generic strategy, Bowman’s strategy clock is another strategy

framework that can be used to identifying company strategic position.

Bowman’s Strategy Clock

Source (Google.com, 2018)

The Bowman’s strategy clock which is an extension of Porters generic strategy main
focus is value proposition to customers (Thebusinessprofessor.com, 2018). This
framework was established to analyse how organisations products and services can
be placed in order to snip the most competitive position in the market. This
characteristically means placing products in the market to guarantee its best
competitive position in the market. Looking at Weetabix we can see that it falls under
differentiation strategy as it engages in creating unique value for their customers
through niche products like Weetabix protein and protein crunch which spurred them
to market leadership and differentiated them for their rivals. The company through
products like The Go drinks introduced in 2014 after a lot of research and
development marked the company as market leader as sales results soared above

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expectations as they were able tap into a niche market of customers who sought
healthy sources of protein.

This differentiation focus strategy by Weetabix has transcended global markets as

they had to adapt to the unique attributes of different markets. In places like Kenya
they have been delivering using bicycles to the consumer showing their ability to
adapt to market needs and dynamics (Allchin, 2012). (Roger, 2017).noted that
company has been able to create different brands that service various customers in
different segments.

Stakeholders Analysis and Mapping

According to business dictionary a stakeholder is, “a person, group or organization

that has interest or concern in an organization.” Stakeholders have an affect or are
affected by the organization's actions, objectives and policies. According to Walker
Bourne and Shelley (2008) stakeholders are people and groups who have interest in
a business. When Weetabix was acquired by Post Holdings they were many
stakeholders involved and the success of such ventures requires consensus of the
stakeholders pulling in the same direction in order create and sustain winning
coalitions (Riker 1986; Baumgartner and Jones, 1993). These key stakeholders
satisfaction even minimal is necessary for policies organisations and communities to
be successful (Bryson and Crosby 1992; Jacobs and Shapiro 2000).
Stakeholders do not hold the same importance and it is important for an organisation
do to a stakeholder analysis and to engage them according to their rank of priorities
for its programs to be successful.

Primary stakeholders are the most important and powerful group of stakeholders as
they have internal control of activities include but not limited to shareholders,
customers, suppliers, investors, employees, etc. While secondary stakeholders
might not have control over the internal operations of the organisation they still exact
a lot of power and such stakeholders are public, government, regulatory bodies,
media competitors etc. In the acquisition of Weetabix they were a lot of stakeholders
that were involved and have grouped them diagrammatical below.

The stake holders relevant to the acquisition of Weetabix by Post Holdings and
strategies of dealing with them can be categorized as following:

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Stakeholder Analysis Matrix of Post Holdings acquisition of Weetabix

Keep satisfied Manage closely

1. Customers 1. Senior Executives
2. Investors 2. Shareholders
High 3. Partners 3. Employees
4. Competitors

Monitor (minimum effort) Keep informed

1. Press 1. Government
2. Public 2. Regulatory bodies
Low 3. Supplier
POWER

Low High
Interest

As we can see from the diagram various stakeholders were involved and different
strategies and different methods of engagement had to be used to make the
acquisition a success.

External Factors Driving the Strategy

PEST Analysis

PESTLE Analysis is a tool that can be used to have a comprehensive analysis of an

organization's external environment. As a strategic tool used in the analysis it paints
a clear picture of the macro environment of the organization is operating in. The tool
allows the organisation to have an understanding the Political, Economic, Social.

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Technological, Environmental and Legal Environment that it will be operating in since

the success of the organisation lies in its ability to navigate in its environment.

Political

The acquisition of Weetabix took place during the much touted Brexit which brought
so much uncertainty in the political and business environment. The continued delay
in finalisation of the exit from the European Union (E.U) made it impossible for many
businesses to plan well ahead as they are still to find out about the trading terms with
E.U after the exit. This is further compounded be a declaration of a deadlock in the
exit negotiators further clouding the obscure political fate of the nation. The company
also find itself subject unsure whether to prepare for European Union business
operating legislative laws, foreign trade regulations or not. The company is also
unsure of how it will be affected by the free-zone trading existed between Britain and
E.U since this is some of the matters that created a deadlock in the negotiations.
This continued dragging of Brexit has affected the pound weakening it amongst
major currencies and forcing the company according to chief Executive to absorb
high cost dollar denominated wheat thereby affecting cost and profitability of
Weetabix. Above it also means that the company will now be affected by political
environment in both USA and Britain unlike previously when it only concentrated on
political environment in USA

3.3 Economic

As a global company the acquisition of Weetabix by Post Holdings meant that it

will be affected by different economies being the US and UK. Unfortunately for the
organisation these economies are not growing at the same rates thereby requiring
that management strategies and figure out on how to handle the disparities in the
two economies. The difference in the economic growth between UK and USA in
2017 as noted to Chu (2017) due to the weakening pound brought about high
inflation in the country. Weetabix require individual economic approach to each
economy due to disparities in the economies they operate in. Each economy
presents its own different challenges as far as inflation, interest rates and purchasing
power among other variables is concerned. Globally the economic recession would
ultimately drive the Weetabix customers to substitutes unless the company find a
way to reduce it cost and push the savings to the consumers.

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In UK the government increased the minimum hourly wage (minimum Wage U.k,
2017). This increase in minimum wage will consequently result in ballooning cost for
labour the U.K economy as opposed to American front.
3.4 Social

Social factors include but not limited social aspects of life like cultural trends,
demographics, , population analytics and future consumer taste. It is important for
nay organisation to understand the social aspect of the environment they are
operating in. Whilst consumers in China and Asia would prefer a hot breakfast the
case in to so with consumers in U.K and USA who would prefer a cereal breakfast
(Monaghan, 2017). With such knowledge of the social aspect of the market the
success rate of Weetabix is higher in UK as opposed to China. In order to grow sales
the company had to start selling products that align and are sensitive with the social
taste of their consumers. Another aspect that the company has to take into account
Is the rising consciousness of healthy food among its consumers and increased
activism against food that causes obesity especially in children. As a result the
company has to develop healthy cereals to meet the consumer needs.

3.5 Technological

We live in a world of ever changing technology, the rapi change in technology avails
opportunities for product improvement and continued research. This technology has
made it possible for the company to introduce Drinkable Cereal called Weetabix on
the go aimed on those that love to take their breakfast in liquid form. For the
organisation to be in tune with the demands of its customers it had to deploy
technology in various ways like deploying machines that cut cereal in different
shapes tubes, bars, rings etc. (Maskan, 2016). E-commerce has also opened a
platform to deal directly with customers and getting feedback and the organisation
has to harness the power of this platform to get to know their customers

Environmental

With the global warming and climate change being the current buzz words, it is
imperative that the organisation operate within the acceptable environmental laws.

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Recycling-Reuse and Reduce are the motto of any organisation that seek to be
considered a social citizen of repute,

Post Holdings has to make sure that its packaging materials are degradable and
minimise use of packaging and materials that harm the environment like plastics.

Legal

Employment rules and work time regulation 1998 allows employees 28 days paid
leave. On the other hand the employment rights act 1996 regulates that employees
with small children are allowed flexible working hours. For the organisation to
operate in the British environment it has to comply with the said rules among others
or it will face lawsuits and backlash from the unions and society at large

4. Industry Analysis
The breakfast cereal industry is a cut throat industry with higly visible and
established competitors like Kellogg, Cheerio’s Nestle among others. In such an
industry there is a a need for one to maintain competitive edge of rivals. The Porter’s
Five Force Model is the most popular tool deployed in analysing the Industry
competitiveness. This tool is used in helping the organisation develop its competitive
strategy and gain understanding of competitive forces against it.
The model is used to analyse the industry based on the following forces:
1) Supplier Power
2) Buyer Power
3) Competitive Rivalry,
4) Threat of Substitute entry
5) Threat of new entry

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Porter’s Five Forces Analysis

Source: (CGMA)

4.1 Supplier Power

The fewer the suppliers they are in the market the more power they yield
against an organisation. These input suppliers of raw materials and unique are
aware of the power they yield and the high cost of switching suppliers.
(Newswire, 2017) established that the suppliers of wheat in the cereal industry
are not many hence the suppliers have huge bargaining power. To counteract
the bargaining power the organisation has to develop good and long-term
relationship with its suppliers to create dedicated suppliers. The organisation
can also employ the tactic of backward integration and buy or partner with its
suppliers subject to approval from Anti-competition trust.

4.2 Buyer power

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Having realised that the buyers who are supermarkets and grocery stores wielded
higher bargaining power as the number of competitors in the market were numerous
and switching costs were low, Weetabix decided work closely with wholesalers to
grow sales and consequently get bigger shelf spaces as a reward (Drakakis, 2017).
In order also to get relative bargaining power Weetabix grew a large customer
thereby cutting the bargaining power of the buyers;
The Weetabix brand commanded big sales and projected positive brand image with
the British markets resulting in huge sales that allowed them to negotiate favourable
with their buyers.

4.3 Competitive Rivalry

The breakfast cereal industry is a cut throat industry rivalry dominated by the likes of
Kellogg’s and Nestle. Companies seek to outdo each other as they introduce new
products periodical thereby keeping rivalry between all the companies high. The
intense competition keeps companies like Weetabix on their toes and are forced to
be innovative in order to increase its market share and gain competitive advantage
over its competitors giving birth to products like Breakfast On the Go (Happen,
2018). Without understating industry rivalry no organisation can be successful.

4.4 Threat of substitution.

Almost every product has an equivalent substitute, where substitutes abound in a
market the probability of consumers switching to the alternative product is high
especially if there is a price increase on the original product.
Substitutes for breakfast cereal are fruits, bread, yoghurts among others. In China
the availability of substitutes which are hot meals for cereals made it impossible for
Weetabix to have a strong market foothold. Sometimes when faced with a that of
substitutes it’s important that the company quickly adopt the substitute and make it
its own. A good example is when Coca-Cola faced bottled still water as a threat to its
market it started producing also bottled still water under Coca-Cola brand

4.5 Threat of new entry.

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The cereal Industry is a cut throat industry dominated by few players and the barrier
to entry is high as new companies might find it difficult to find a foothold in an
industry dominated by few giants. The tough competition among the players also
hinders the new entrants from making progress inside the market. The high
competition has also reduced profitability margin making the industry look very
unattractive to new entrants. Brand loyalty among consumers is also high making it
difficult for new entrants to get a significant market position

5.0 Conclusions and Recommendation

Post Holding Inc. In American company that has been growing in leaps and bounds
through acquisition of companies in the American market entered the British market
in 2017 by acquiring Weetabix from Bright Foods a Chinese giant for about. 1.7
billion pounds. Weetabix is one of the most recognised cereal brands with
footprints in China and Africa. The acquisition opened an opportunity for growth of
the brand as well as worldwide market share including entry in USA through its
holding company Post Holdings Inc. The company uses differentiation strategy as it
produces different products for various markets. This strategy will give the
organisation a leverage in the market where consumers have different tastes and
needs for their breakfast cereals. For example its Breakfast on the go was a hit with
consumers who do not have time fro cereal breakfast and revolutionised the
market. The ability of the company to adopt to technological change can also be a
proving factor in the success of the company in the long run

To succeed in the market the organisation have to come up with strategies or deal
with its external environment like the ever changing consumer tastes and
preferences, uncertainty in the political environment as exhibited by Brexit which
has hung on British economy like a dark cloud with no break in sight.

Fortunately for the company it is in the market were both the bargaining power of
the suppliers and buyers is low due to the strategies it has deployed in wholesale
strategy and partnership with local suppliers of wheat. Most of its wheat and raw
materials are from farmers of a 50 mile radius of their production plant in the UK.

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This has created a good image of the company in the community it operates though
there is need to diverse in terms if its supplier in order to spread the risk caused by
adverse weather conditions
Finally the company is faced with huge wage bill caused by ever increasing labour
costs, the company has to find ways to reduce cost of production through
introduction of technology or other innovative for it to maintain its profitability

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