Globalization is the procedure by which regional economic systems have become integrated through the exchange of worlds, capital, goods, services and thoughts. Technological progresss in the Fieldss of communications and conveyance have merely served to decrease the economic distance between planetary parts. In the event, the procedure of globalisation has accelerated in recent decades.1
Yet, globalisation is barely a new phenomenon. Worlds have engaged in inter-regional trade since clip immemorial, as the trade paths of the Ancient World attest. Furthermore, the economic rule upon which that trade was built, remains merely as it was so – the jurisprudence of comparative advantage! Economists diversely define this construct, but suffice to state, it is the capacity of an economic entity – a state, an economic zone within that state, or even an endeavor within that part, to bring forth an point at a comparatively lower chance cost than its rivals can.2
And that is exactly the economic terrain across which the present study travels.
1.1 THE TURBULANCE OF THE GLOBAL MARKET
As the economic environment alterations, concerns must react to these alterations in order to keep and better both market portion and profitableness. At times, this is a dashing undertaking, given that clients outlooks must invariably be satisfied. For a company that operates on a planetary graduated table, the challenges are even more daunting.
As a general proposition, organisations that might moderately be regarded as international participants, when confronted with such issues, respond in two ways:
By trying to achieve a heightened presence in those markets within their domain of influence. Constantly, they achieve this through enhanced production installations, domestic acquisitions and joint-ventures ; and,
By trying to sharpen the consciousness of their planetary power trade names, through aggressive selling and a renewed focal point on their nucleus products.3
1.2 H.J. HEINZ & A ; CO
The topic of this study, H.J. Heinz & A ; Co, has a immense presence in the planetary markets. Heinz is one of the universe s taking makers of food market merchandises. Based in Pittsburgh, Pennsylvania, the company was founded by Henry J Heinz in 1876. It rapidly built its repute on its flagship merchandise – catsup – and its advertisement slogan – 57 assortments.4
Heinz markets its nutrient lines in some 200 states and claims laterality of market portion in 150 of its branded merchandises. Its nucleus activities include the production of ( a ) condiments ( B ) frozen nutrients ( degree Celsius ) tuna ( vitamin D ) soups, beans and pasta ( vitamin E ) baby nutrients, and ( degree Fahrenheit ) pet nutrient. The company generates gross revenues volumes transcending $ US 10 billion and employs 32,500 people worldwide.5
1.3 THE NEED FOR STRUCTURAL CHANGE AT HEINZ
The background to the present study, is non so unfamiliar, as to hold made Heinz a planetary participant sing alone jobs.
During the late 1990 s, Heinz began to see sulky growing. This was indicated by worsening market portion and falling gross revenues. Worse still, the value of Heinz portions dipped. Not surprisingly, stockholders sought a scheme to turn the company s fundss around. On 30 April 1998, William R Johnson replaced the ebullient Anthony O Reilly as Company Chairman. Johnson instantly set about inventing such a scheme.
As portion of this program of action, a forensic survey of the company construction indicated that its unease was caused by a combination of exogenic ( external ) and endogenous ( internal ) factors.
Exogenous factors included:
Increasing international competition from planetary giants such as Kellogg s, Jenny Craig, Campbell s Soups, Nabisco and Del Monte ; and,
The appreciating US Dollar exchange rate
Endogenous factors included:
Puting higher monetary values ; and,
1.4 THE MILLENNIUM PROJECT
Under the former leading of Dr O Reilly, Heinz sought to better its profitableness by raising its contract monetary values and cut downing its outgo on advertisement. This attack can be likened to the technique of planing, whereby companies leverage a power trade name name come ining a new market and put a higher monetary value for it. The gambit is calculated to plane off flush consumers. But this scheme does non ever work. And that is what stakeholders in Heinz shortly realised. In the event, the new CEO, William Johnson rebutted this attack. His program for alteration, the alleged Millennium Project, consisted of the undermentioned elements:
Reducing the international work force by 2,500 employees ( subsequently, by 3,000 4,000 )
Consolidating the figure of workss, shuting 25 of 101 worldwide
Reducing the figure of non-core activities, such as the Weight Watcher s schoolroom concern
Imparting nest eggs into selling, advertisement and research
Changing the ethos of the company, in an effort to purge it of a excess of yes work forces
Link wages and inducements of direction to performance6
1.5 THE IMPLEMENTATION OF CHANGE AT HEINZ
The Millennium Project ( subsequently revised as Project Excel ) incorporated a figure of drastic proposals. Many of these involved works closings in Europe, where staff might hold been forgiven for sing the company s leading as unsympathetic with the predicament of European workers7. Subsequently, Heinz has gained a repute as a company which makes one-sided determinations. It is besides a company which has an appetency for wage differences, as the recent stand-off between direction and shop-floor secret agents at Wigan demonstrates8. Notwithstanding, the execution of its corporate alteration plans has encountered comparatively small opposition, possibly as a consequence of the text book mode in which alteration has been promulgated. In the event, Heinz has carefully built a platform for uninterrupted alteration.
1.6 THE SUCCESS OF THE MILLENNIUM ( AND EXCEL ) Undertaking
Market analysts have adjudged the result of the Millennium and Excel undertakings as a success, when measured against the undermentioned indices ;
Streamlined direction construction
Rising portion value
Continuing laterality of market portion
Soaring gross revenues volumes9
More late, Heinz has confronted other issues. Rising fuel costs and the impact of the planetary recession have buffeted this concern, along with practically every other endeavor runing globally.
The menace of competition from international challengers continues to stalk the company. Such companies wield considerable advertisement power, conduct their ain market research, and are disposed to work spreads in new markets. They besides invest to a great extent in nutrient engineering ; in some cases, directing their attempts at the ethnicity of an emerging market and orienting their merchandises to accommodate. To that extent, other planetary participants constitute a menace.
1.7 Further Corporate Reform AT HEINZ
In the early portion of 2010, Heinz trotted out a pilot plan ( Heinz Global Performance System ) , whose purpose is to proclaim farther strategic reform across the supply, logistics and production grapevine. At the clip, the company ramped up its gross revenues marks, an nonsubjective non readily accomplishable in the context of a dead planetary economic system. HGPS is at present restricted to a test stage at 25 production installations throughout North America and Europe. At the bosom of the HGPS plan is a templet of standardized betterment across all aspects of the organisation.
1.8 THE SMALL PRINT OF THE HGPS PROGRAM
HGPS is designed to streamline the company s full value-added procedure, from research and development to selling. It is envisaged that this can be achieved through:
Further committedness to research and development
Increased attending to send on supply planning
Diversifying the provider web
Bettering information engineering applied to the supply rhythm
On the production side, the company intends to:
Maintain quality confidence
Improve end product
Make farther labour-saving efficiencies through state-of-the-art production engineering ; and
Further standardise merchandise design and packaging
Maintain its committedness to core activities
Maintain its committedness to marketing10
1.9 THE AIM OF THE PRESENT REPORT
In the visible radiation of the corporate reforms inaugurated under the Millennium, Excel and HGPS undertakings, it is the intent of the present study to see whether Heinz s planetary trading place can be improved in the current economic environment.
This undertaking calls upon such strategic planning tools as SWOT and PEST analysis to make its decisions.
2.0 SWOT ANALYSIS
SWOT analysis is a tool used by strategic planning analysts to find the viability of an endeavor s overall trading place.
SWOT analysis is mostly associated with its primogenitor, Albert S Humphrey, who throughout the 1960 s and 1970 s, assembled selling intelligence about a big array of organisations on the Fortune 100 Companies List. SWOT is an acronym formed from the initial letters of the constitutional elements of this analysis – to humor: the STRENGTHS, WEAKNESSES, OPPORTUNITIES and THREATS that both stimulate and compress a house s growing and development. The paradigm is widely used by analysts, though it is far from unequivocal in its ability to measure a company s standing in the market.
SWOT analysis consists of a series of logical stairss which an analyst must take, in order to construct up a composite image or snap-shot of an endeavor as it performs in the market topographic point. The analysis starts with the mission statement of the endeavor – its long-run marks and aims. The four corners of the SWOT matrix so supply a model within which the probabilistic result of those marks being met, is analysed at length. That result must take into history both internal and external factors, as they impinge upon the endeavor s public presentation in the market topographic point. To clear up affairs further, internal factors are those which arise from within the endeavor ; they constitute the organisation s STRENGTHS and WEAKNESSES. External factors are those which originate outside the endeavor ; they constitute the organisation s OPPORTUNITIES and THREATS.11
2.1 THE HEINZ MISSION STATEMENT
The long-run aims set by the H J Heinz & A ; Co are recurrent. Broadly talking, they include:
Consolidation of market portion in established domains of involvement
Expansion of the company s presence in the emergent markets of North Africa and Asia ; and,
Development of new power trade names, particularly those targeted at the emergent markets
2.2 THE HEINZ SWOT MATRIX
Well established power trade names
Supply rhythm cost nest eggs
State-of-the-art production engineering
Significant research committedness
Ability to alter tack rapidly
Strongly Incentivised Management Structure
Industrial Relations Issues
Rapid alteration threatens motive and morale degrees among staff
The demand to keep an overarching planetary direction construction
Consolidation of market portion in established markets
Expansion of market portion in emergent parts of North Africa and Asia
Development of new power trade names, particularly those targeted at the emergent markets
Acquisition of established domestic trade names in emergent markets
Escalating planetary energy cost
Increasing competition from major planetary participants
Rise of generic trade names
2.3 CHALLENGES CONFRONTING HEINZ AS INDICATED BY SWOT ANALYSIS
Having addressed the critical internal factors gnawing Heinz s competitory public presentation, the company recognizes that it is confronted by a bunch of external menaces to its viability. To a big extent, these external menaces are ubiquitous. SWOT analysis suggests that they include:
Escalating energy costs
Increasing competition from both domestic and planetary participants
In the event, Heinz must react to these challenges by:
Concentrating production, procurance and distribution within the cardinal economic zones, so as to cut down the impact of exchange rate volatility
Investing in alternate energy options
Continuing to prosecute cost-savings plans
Tailoring the aims of research and development to the emergent markets.
2.4 PEST Analysis
Whereas SWOT analysis is mostly concerned with the public presentation of a company or an endeavor within its domain of influence, PEST analysis provides analysts with a utile tool to understand the market within which that entity operates.
PEST is an acronym formed from the initial letters of the constitutional elements of the analysis – to humor, those POLITICAL, ECONOMIC, SOCIAL and TECHNOLOGICAL factors that influence the economic environment in which an entity finds itself. Some analysts regard PEST analysis as an extension or amplification of the external elements of SWOT analysis – viz. , those elements subsumed under the rubrics of OPPORTUNITIES and THREATS! That much is apprehensible, since both trade with the external factors act uponing a company s public presentation in the market topographic point. In any event, external factors bear to a great extent on that public presentation. They can either advance a company s growing or compress it. They surely affect investing degrees in a company ; and they either attract or repel investors merchandising in company shares.12
2.5 THE MECHANICS OF PEST ANALYSIS
Some analysts find PEST analysis utile when certain factors in the economic environment base out. These factors might positively or negatively impinge on the viability of a company. Other analysts use PEST analysis as a check-list, in much the same manner as an actuary might utilize a hazard appraisal to find a individual s or company s exposure to hazard. Although the cheque list is about unlimited, most analysts take a practical position and simply concentrate on those variables they regard as holding a critical bearing on the way and growing of a company. Then there are those analysts who simply consider a few variables, utilizing them as something of a accelerator to trip a brainstorming event, in which an array of critical factors is used to measure a company s standing in that environment.
Notwithstanding, the following constitute some typical elements subsumed under the chief rubrics of PEST analysis. A figure of these variables ( * ) , affect the external environment in which Heinz operates in the Middle East and throughout Asia.
Political stableness of a part
Environmental statute law
Handiness of skilled staff
Research and development sector of economic system
Communication and |Information Technology
Investing in sustainable energy as opposed to fossil fuels
2.6 APPLICATION OF PEST ANALYSIS TO THE STRATEGIC GOALS OF HEINZ
Given that Heinz is aiming the emergent markets of North Africa and Asia, where it has already experienced exponential growing, the company should take the undermentioned geo-political concerns into history:
In recent months, the North African part has become something of a political caldron. Political instability extends from Tunisia to Libya and beyond. In Egypt, the result of a popular rebellion which resulted in the overthrow of the Mubarak government, has yet to be decided. Nevertheless, Egypt holds out the greatest promise as a consumer market. It has an progressively good educated, English speech production work force. Though Sharia jurisprudence is the fount from which Egyptian jurisprudence is largely drawn, really few issues, apart from lifestyle 1s, are affected by the stenosiss of Islam in Egypt. Environmental and employment statute law are less strict throughout the Middle East.
While political stableness is non an issue in China, political limitations on the usage of communications engineering may halter the production and supply rhythm from clip to clip. A overplus of extremely trained, English talking workers in China, augurs good for an enlargement of production installations at that place. Throughout the wider South-East Asiatic part, per capita income is lifting, particularly in such tiger economic systems as Thailand and Vietnam. In the former, political instability looms as an issue. On the other manus, the Philippines remains a house ground tackle in the part. This thickly settled island state is sing something of an economic revival in the Fieldss of information and communications engineering. Consumer growing is expected to lift dramatically.13
Competition FROM OTHER GLOBAL PLAYERS DOES NOT Show A SERIOUS OR IMMEDIATE THREAT TO HEINZ S ASPIRATIONS IN THE EMERGENT MARKETS
2.7 PORTER S FOUR CORNER5 AND FIVE FORCES MODELS OF STRATEGIC MARKET ANALYSIS
Apart from SWOT AND PEST analysis, some research workers prefer a less structured attack to the undertaking of measuring a company s mentality in the market. Porter s Four Corners theoretical account is of some aid in this regard. It is a prognostic tool which is designed to expose a rival s strategic class of action. This attack focuses on the analyst s ability to understand the implicit in motive behind a company s behavior, in the visible radiation of those ends which it has set itself.14
By contrast, Porter s Five Forces theoretical account is more attuned to those factors which emerge externally ; viz. , those external forces which bear upon a house s capacity to vie in the market topographic point. Suffice to state, that three of these forces are represented by the menace of replacement merchandises, as they originate from either new or seasoned participants in the industry. But the analysis besides takes into history, the bargaining power of providers, together with the dickering power of customers.15
The Five Forces theoretical account is of peculiar relevancy to the findings of this study.
2.8 THE MAJOR EXTERNAL Menace: THE RISE OF THE GENERIC BRANDS
The menace posed by the proliferation of generic trade names is calculated to weaken Heinz s overall trading place. It is no lupus erythematosus of a menace to its challengers, excessively. The generic trade names are utility merchandises, which find their manner onto the shelves of the big multiples and bear the sanction of these companies. Here in the United Kingdom, that menace is tangible, as leviathans such as Tesco and Sainsbury s, through sharp merchandise arrangement, are able to advance their ain symbol trade names to the hurt of their providers. These companies operate from behind the protective walls of an oligopoly. Their presence distorts the market as their buying power bourgeons. Worse still, oligopolists tend to both anticipate and mimic one another s behavior.
There can be small uncertainty that most consumers will avail of generic trade names, at some clip or other. Nevertheless, certain generic trade names experience trouble developing merchandise trueness, particularly when those merchandises vie for gustatory sensations and penchants. For all that, generic merchandises are designed to act like all other replacement merchandises. They exhibit transverse snap of demand. In other words, as Tesco sharpens the shelf monetary value of its ain trade name catsup, it is sensible to presume that the demand for Heinz ( Secret Ingredient ) Ketchup will fall within. If Sainsbury s mimics this behavior ( which is to be expected ) , so gross revenues of Heinz tomato catsup will skid in its shops, excessively! 16
2.9 THE REPORT S RECOMMENDATIONS
( I ) THE BACKGROUND TO THE REPORT:
H J Heinz & A ; Co is one of the universe s taking makers of food market merchandises. The company operates on a planetary graduated table and seaport planetary aspirations. Its long tally aims include:
Consolidation of market portion in established markets
An expanded presence in the emergent markets
For all that, Heinz is besides a company confronted by planetary issues.
Increasing international competition from other grocery giants such as Kellogg s, Jenny Craig and Campbell s Soups, has highlighted the demand for deep structural alteration. This precedence asserted itself from the late 1990 s, as Heinz began to lose market portion and its gross revenues turnover tumbled. In the event, emboldened by a new leading, the company set about implementing corporate alteration. At present, Heinz continues to construct on the successful result of the Millennium, Excel and HGPS plans for corporate reform. That reform has ensured the viability of the company. Restructuring has involved extremist decision-making, bearing down to a great extent on extra capacity, labor costs and operating expenses. Heinz remains committed to the dogmas of these plans.
This study concurs with this attack.
( two ) THE OUTLOOK FOR H J HEINZ & A ; CO
The present study relies upon the conventional selling tools of SWOT and PEST analysis to find the company s mentality.
These analyses reveal that Heinz mostly trades on its repute and the impulse of its immense power trade names. Notwithstanding, Heinz continues to be stalked by its international rivals ; they wield considerable advertisement clout and are disposed to work spreads in new markets. But Heinz is more than a lucifer for its challengers, as it has benefitted from its thin corporate construction. A company s ability to react to alter is an index of its leaning to run into challenges, particularly those which arise from planetary competition. Consequently, it would look that Heinz is good positioned to run into these challenges, as it is a company whose leading is geared to alter!
However, utilizing Porter s Five Forces theoretical account, a far more baleful menace to the company s viability is revealed. It, excessively, is a menace which originates externally. It is the menace posed by the rise of the generic trade names – those utility merchandises smartly marketed by powerful groups of oligopolists practically everyplace. To battle this menace, Heinz must go on to put to a great extent in advertisement which communicates the message that its merchandises are readily differentiated from those of its rivals.
Given that Heinz intends to enlarge its presence in the emergent markets of North Africa and Asia, it would be advisable for the company to suspend farther investing in these parts, until political stableness is restored.
In the meantime, Heinz must capitalise on its ability to vie at a comparatively low cost. It besides benefits from immense economic systems of graduated table. The nest eggs generated from the reform plans, should be channelled into farther investing in nutrient engineering. Much of this research should be targeted toward the progressively sophisticated consumerism of the emergent markets.
On balance, Heinz is poised to accomplish its planetary aims.
1. Lipsey, Richard and Chrystal, Alec, Economics, Oxford University Press, 11th Edition, 2007, p 641.
2. Ibid, pp 9-10
3. Hiatt, Jeff, The definition and history of alteration direction: Change Management Learning Center, at www.change-management.com
4. Prince alberts, Robert, The Good Supplier: H.J. Heinz and his 57 Assortments, Boston Houghton, Lindsey, Miffin Co, 1973, passim, ISBN: 0-395-17125-1
Koehn, Nancy F. , Henry Heinz and Brand Creation in the Late Nineteenth Century, The Business History Review, Vol 73. ( Autumn 1999 ) pp 349-393
5. Heinz: www.heinz.com/heinz-global
11. Kotter, John, Schlesinger, Leonard, Choosing Strategies for Change, Harvard Business Review, 1991, passim
Kotter, John, Holger, Rathgeber, Our Iceberg is Melting, St. Martins Press, 2006
Kotter, John, CBS Interactive Business Network: John Kotter on Leadership Management Change: An Interview
13. The Times, assorted explosive detection systems
14. Competitive Analysis Training, Society of Competitive Intelligence Professionals
Michael E. Porter, The Five Competitive Forces that Shape Strategy, Harvard Business Review, January, 2008, p 86-104
15. Michael E. Porter, The Five Competitive Forces that Shape Strategy, Harvard Business Review, January 2008, p. 86-104
16. Lipsey, Richard and Chrystal, Alec, loc cit, p. 74-5