Kraft Foods Entrance Into China Marketing Essay

The paper that we write is about Kraft Foods which entered the Chinese market. At present, Kraft Foods is the worlds second largest food company, as far as we know, the world’s largest food company is Nestle company. However, we do believe that Kraft Foods Company has its particular advantages, for example, it has outstanding achievements in its operating management, personnel training and so on. In the near future, we think it will go beyond itself, realize new breakthrough, so we chose Kraft Foods at last.

About this paper, we mainly focus on Kraft Foods’ history, the reason why it entered Chinese market, and the condition of organization and management in Chinese market.

At beginning, the paper was made up of six parts: they are executive summary, conclusion and section one to four. Then, we divided every Section into several parts; everyone has her or his own duties. Now, the allocation of every member’s task is as followings. Firstly, Vera’s task are the second question of section 3, the forth and eighth questions of section 4. Secondly, Jane’s tasks are the first and third question of section 3, the sixth question of section 4, and she is responsible for the summary and clearing up as well. Thirdly, Naomi’s tasks are the three questions of section 2, and the fifth question of section 4, catalogue and conclusion. Fourthly, Shelia’s tasks are the three questions of section 2, the seventh question of section 4, catalogue and conclusion as well. At last, Alfred’s tasks are section 1 and the first three questions of section 4. We distributed equally according to the difficulty of the problems and the field who is good at. We have ordered the question according to the catalogue.

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In the paper, we introduce the history of the company firstly, because the history is the procedure of the development of the company. we can understand the company’s culture and history that in turn will help us understand why they decided to expand internationally, and specifically into China so that we can judge the wisdom of that decision. This “judgment” will be an important part of the Conclusion. In addition, we write the reason why Kraft Foods entered the Chinese market; we take the Chinese market as example, specifically represent the model of their operating management and achievements. Besides, the form and organizational structure Kraft Foods Company came into China. Combine our learning with them to analyze the management of Kraft Foods. Finally, we put forward some reasonable suggestions.

As all the efforts we have devoted to, we have further understanding of Kraft’s business and management. At the same time, with Kraft Foods as an example, we got the more practical comprehension.

Section I: History of the Kraft Foods Company

James Kraft is the founder of Kraft. He founded the company in 1903,Ms Irene Rosenfeld headed the Kraft Foods for more than 20 years .she help Kraft foods successfully listed in 2001.Altria announced the promotion of two executive Beth Howden and Dailuomeidi served as Co-chief CEO, she became Chief Executive Officer since June 2006,in March 2007,she became the chairman of Kraft Foods.

(Kraft Foods Corporate Home

http://www.kraftfoodscompany.com/cn/zh/home/index.aspx

Oct 29, 2012)

With the development of company, especially initiating the reforms and open policy, according to GDP, China is the second largest in the world. China cached up with Japan. According to figures released by the World Bank, in accordance with the PPP (purchasing power parity), China is the world’s second-evaluation of purchasing power. The world is about $ 55 trillion. China is probably more than one trillion U.S. dollars, accounted for about 9% of the world’s, and greatly increased the proportion of China’s international economic. China’s foreign exchange reserves have reached more than 14,000 billion, has accounted for one in the world. The rapid development of the economy, as the most populous nation of the world¼ŒKraft Foods will not pass the big market.

(Kraft Foods Corporate Home

http://www.kraftfoodscompany.com/cn/zh/home/index.aspx

Oct 29, 2012)

Since 1924, Kraft Foods to be listed on the stock market, from time to time during the acquisition of other companies, and extended to the food business. Kraft in 1982 and 1984 respectively into Taiwan and mainland China market, in 1988, and Altria group predecessor Philip Morris acquisition Kraft Foods, in 1989, Philip Morris will its General food and Kraft merge for Kraft General Foods. In 2000, Philip Morris acquired Nano Beth and then merge it into Kraft. In July 2007 by acquiring rival Danone, Kraft starts its biscuit business. Kraft encourage the expansion into china. Before the world’s second-largest food group Kraft Global Board concluded in Beijing. Despite the growing number of multinational global board of directors moved to China, for Kraft, this is the first time. Since 2002, the global business restructuring Kraft yogurt sold to milk ternary .the name of Kraft in China is not so loud, it makes Kraft some grievances. in fact, Kraft’s biscuit business sit tight the first. TANG- the Guozhen solid instant drinks and Maxwell House coffee were also occupy the first, second market share in their respective fields. Kraft was on the rise in the global “downsizing” while on the high-speed development of the investment in developing countries, China has become one of the five countries of the Kraft focused investment, and the Chinese people to re-recognize Kraft become increasingly important

(Kraft Foods Corporate Home

http://www.kraftfoodscompany.com/cn/zh/home/index.aspx

Oct 29, 2012)

In 1982, General Foods and Unity to set up a joint venture company in Taiwan, Kraft Foods locate in china in Beijing in 1984, in 1996, and Nabisco biscuit completed the factory in Beijing and Suzhou. So far, Kraft’s investment in China is more than $ 200 million. In early 2006, Kraft Australia factory production migrated to Suzhou, in 2000, Nabisco acquisition of United Biscuits biscuit business in the Greater China region, in the same year Kraft acquired Nabisco. In 2001, Kraft sold Beijing Kraft dairy business. In 2005, Kraft began building a new biscuit factory in Beijing. In 2006, Kraft will integrate all the entities in China to Kraft Foods.

(Kraft Foods Corporate Home

http://www.kraftfoodscompany.com/cn/zh/home/index.aspx

Oct 29, 2012)

Section II: Why Kraft Foods Company came to China?

Kraft Foods came to China in 1984. Now, the company has 4,000 employees in China approximately, and its products cover 4 consumer goods sectors: biscuits, coffee, powdered beverages and confectionary. The company has set up offices in 250 cities across China and 8 manufacturing facilities in Beijing, Suzhou, Shanghai, Guangzhou and so on. Kraft Foods Corporate Management (Shanghai) Co., Ltd is the headquarters of Kraft Foods in China.

(Expanding Market in China: Kraft Foods Commissions New Production Line in Suzhou

http://www.kraftfoodscompany.com/cn/en/mediacenter/kraftfoodschinanews/2011/20110704.aspx

10-30-2012)

Obviously, Kraft Foods Company expanded elsewhere. October 1, 2012, MondelÄ“z international launched the world’s top snack food brand of former Kraft food with 10 million people around the world. Kraft Foods is the world’s second largest food company, doing business in 145 countries around the world, one of the subsidiaries of MondelÄ“z International Company. It is one of the most outstanding makers of coffee, chocolate, gum, biscuits and candy in the world. The company has its main branches in North America, China and Canada. The company already has around 100,000 MondelÄ“z International employees across more than 80 countries and areas. Kraft has become the giants of the food industry, and its affiliates are around the world. Though MondelÄ“z International is new, the company’s brands are as diversified and rich with heritage as the 170 countries in which its products appear on the market

(Kraft foods Company http://www.mondelezinternational.com/SiteCollectionDocuments/pdf/mondelez_intl_fact_sheet.pdf 28 October 2012 )

The Kraft focuses on improving its growth to expand the Company’s global scale, the Company is expanding its marketing now, also they growing markets and making infrastructure investments larger, such as the markets like China, Brazil, Mexico, Russia and so on.

(United States Securities and Exchange Commission

http://www.mondelezinternational.com/assets/pdf/KraftAR04_10K.pdf

10-30-2012)

In addition, they consider differences in governments. The U.S. government has an open attitude and policy about export. The company is no longer a simple “export” the brand of the United States around the world, but expects them to automatically do well. Kraft priority to China as the most important countries in its developing markets division. They have taken into account the differences in the Chinese government and the Chinese market and will use the advantage of the Chinese market. It has invested distribution, research and development, marketing Oreo, Tang orange drink, its best-selling item, and its dozens of brands of disproportionate resources. Their company official said that they believe that the Chinese market is to teach us how to focus and how to distinguish and how innovation. The official also said that they will continue to do their utmost to provide safe, delicious, high-quality products for Chinese consumers with a variety of methods, expanding the scale of production, increased R & D investment intensity, open up new markets, and so on.

(Kraft food Company

http://www.kraftfoodscompany.com/cn/en/mediacenter/kraftfoodschinanews/2011/20110704.aspx 28 October 2012)

At the same time, they consider differences in business practices and customs. “China is one of the top 10 markets in terms of development priority for Kraft Food. Many famous brands of Kraft Foods, such as Oreo, Chips Ahoy, and Uguan, have become the favorites of Chinese customers.” said Lorna Davis, and she told us that they will continue to make their best efforts to provide safe, delicious and high quality products to Chinese consumers with a variety of approaches, their goal is expands production scale and develops new markets, because China is a big market. When Kraft firstly came to China, their products sold not very well. Because that it different between Chinese and foreigners’ tastes. The Chinese people can not stand the sweetness of the products. Then Kraft changed the sales strategy.

(Expanding Market in China: Kraft Foods Commissions New Production Line in Suzhou

http://www.kraftfoodscompany.com/cn/en/mediacenter/kraftfoodschinanews/2011/20110704.aspx

10-29-2012)

At last, there are same personal differences within the company in deciding that China was a good market for them. Shawn Warren is the president of Kraft Foods China. Due to the sale trouble in 2005, he proposed to launch a combination of local tastes Oreo cookies. Shawn Warren said, “Consumers in China said they hope to get a little taste of the stimulus as well. Therefore, that is what we want to hear.” He advocates should seize the opportunity, improved the taste of the food, according to the tastes of Chinese consumers to take full advantage of the Chinese market. By clicking on Kraft’s distribution network in China’s cities, the number of Cadbury candy sales will rise to about 40. Lorna Davis, president and chairman of the board of Kraft’s business in China in an interview with reporters, Reuters reporters said on the sidelines of the World Economic Forum. “China’s economic situation has been changing annually, the real challenge is how to choose the right opportunity” Davis said. “If I had unlimited resources and unlimited people, I will take with Kraft, but now the focus is in the integration of Cadbury biscuits and expanding our product line.” She advocated a long-term view point, and not just confined to the Chinese market.

(Kraft Foods China pushes for local flavors in Oreos

http://www.china.org.cn/learning_english/2012-06/08/content_25597524.htm

October 28, 2012)

Section III: The Form Kraft Foods Company Came into China

Kraft Foods chooses the form of expanding to come into China. Kraft Foods expand a brand in China, and up to now, it has several brands not only in china but also some Asian countries. Traces back to its history, Kraft Foods started to sell the products in China in 1984. At present, there has been have 4 consumer goods sectors in the field of foods; they are confectionary, biscuits, coffee, and powdered beverages, each of them is popular in China. The headquarters of Kraft Foods in China is Kraft Foods Corporate Management (Shanghai) Co., Ltd. The company has set up 250 offices and 8 manufacturing facilities across China, the main brands are distributed in Beijing, Suzhou, Shanghai, Guangzhou and Jiangmen. This measure makes people in china enjoy the nice snacks from America.

(Expanding Market in China_ Kraft Foods Commissions New Production Line in Suzhou http://www.kraftfoodscompany.com/cn/en/mediacenter/kraftfoodschinanews/2011/20110704.aspx 10-30-2012)

As the words said above, it is not the only option for Kraft to enter Chinese market. And it has other options. For example, they came into china by the form of acquisition. As Danone was in Chinese market, and when Kraft acquired Danone, the market in China which Danone had was belong to Kraft.

(Expanding Market in China_ Kraft Foods Commissions New Production Line in Suzhouhttp://www.kraftfoodscompany.com/cn/en/mediacenter/kraftfoodschinanews/2011/20110704.aspx 10-29-2012)

You must have a doubt that why did they make the decision? China is one of the top 10 markets in Kraft Food in terms of development priority. There are many famous kinds of Kraft Foods, these products attract almost every Chinese. Such as Oreo, Chips Ahoy, and Uguan, many people think these are their favorite foods. Nowadays, Suzhou Industrial Park is preparing to welcome the Kraft foods’ coming. Because Kraft foods bring us energy and talents, promote employment and economic development. The most important is that they intend to take root germination in China and based on their sustainable development, they want to make use of their business philosophy to create win-win situations for the whole society.

(Expanding Market in China_ Kraft Foods Commissions New Production Line in Suzhou http://www.kraftfoodscompany.com/cn/en/mediacenter/kraftfoodschinanews/2011/20110704.aspx 10-30-2012)

Section IV¼šThe Organization Structure Taken by Kraft Foods Company in Coming to China

Strong corporate governance is essential, Our Board of Directors believes that effective corporate governance principles and practices, together with the company’s Articles of Incorporation , By-laws , Code of Business Conduct and Ethics for Directors and Corporate Governance Guidelines , provide a strong framework to assist them in upholding their fiduciary responsibilities to shareholders and promoting the long-term success of the company.

(Corporate Governance

http://www.mondelezinternational.com/Investor/corporate-governance/index.aspx

Oct 30, 2012)

When Health staff are working, they are full of enthusiasm, a successful business needs a healthy workforce, which is why we want to encourage our employees to have a healthy lifestyle, and every year our goal is to expand these efforts. Our staff’s Lifestyle need to improve, they can do such as stress management, weight management and smoking cessation, and so on.

(Wellness

http://www.mondelezinternational.com/DeliciousWorld/workplaceandculture/wellness.aspx Oct 30, 2012)

We may make it a priority to treat our people well, we can help them develop and give them a rewarding working life, Excel in their performance Develop skills for improvement Move towards their career goals By providing training and development programs, on-the-job learning, coaching and feedback, we could make sure that everyone who works with us has the resources they need to learn more and build their careers. The success depends on motivated and committed employees. We would need them to feel that they play a real part in helping our business meet its goals and have an understanding of what they are. We should have several different ways of measuring our employees’ level of engagement with the business and satisfaction with their working lives – such as through constructive dialogue with our employee representative groups and employee survey.

(Wellness

http://www.mondelezinternational.com/DeliciousWorld/workplaceandculture/wellness.aspx Oct 30, 2012)

The organizational structure of Kraft is matrix structure. Kraft has five global consumer sectors, which are Beverages, Cheese and Dairy, Snacks, Convenient Meals, and Grocery. Then in this structure, organization dimensions are also divided into three parts. First, in order to improve growth and global expansion, a brand new global marketing and category development group is being established. Second, for the sake of better severing local consumers and customers, the geographic-based commercial units is forming to strength the development county by country. Third, within our business system, our key functions will be responsible for promoting cost savings and accelerating effectiveness.

(Kraft Foods Announces New Global Organizational Structure http://www.lexdon.com/article/kraft_foods_announces_new_global/56574.html 10-30-2012)

There are other structure discussed in the chapter might allow Kraft to operate more effectively. The move to a product team will lead to greater effectiveness and efficiency. The dual reporting relationships that are at the heart of matrix structure have always difficult for managers and employees to deal with. Often, the functional boss and the product boss make conflicting demands on team members, who do not know which boss to satisfy first. The product team structure differs from a matrix structure in two ways. First, it does away with dual reporting relationship and tow-boss managers. Second, functional employees are permanently assigned to a cross-functional team that is empowered to bring a new or redesigned product to market. And it can avoid problems of two-way communication and the conflicting demands of functional and product team bosses.

(Kraft Foods Announces New Global Organizational Structure http://www.lexdon.com/article/kraft_foods_announces_new_global/56574.html 10-30-2012)

Then, there are three levels in the organization’s hierarchy. And it is authority centralized. Irene B. Rosenfeld presides over one of the world’s biggest food companies, she has the supreme authority, so in my mind, it is authority centralized. Then, let me describe the span of control of the top manager and of middle or first-line managers. The CEO in Kraft Foods is Irene B. Rosenfeld. She presides over one of the world’s biggest food companies. Under the CEO, there are some Executive Vice Presidents and Presidents; they are responsible for each region and each field. Then, there are some teams leaders, their work are specific, what they need to do are concentrating on variety kind of production.

(Management Team http://www.kraftfoodscompany.com/eu/en/about/management_team/index.aspx

Kraft foods Team leader profiles _ LinkedIn http://www.linkedin.com/title/team-leader/at-kraft-foods)

According to all the learning that we got, we think that the distribution of authority appropriate for the organization and its activities. Kraft produces food goods at refrigerated, dry and frozen Kraft plants third party manufacturers located across the country. From the plants to a network of upstream Kraft buffer facilities as storage overflow buffer located near the plant. The physical characteristics of these are similar products, so we can not say that it is very fragile or brittle, these goods should flow through the DSD channels, in order to reduce the losses caused by touch points on the network and product damage.

(Direct Store Delivery Versus Centralized Distribution

http://www.mwpvl.com/html/dsd__vs_central_distribution.html

October 30, 2012)

I think it is possible to flatten the hierarchy by decentralizing authority and empowering employees. Roger K. Deromedi is the Chief Executive Officer of Kraft Foods. He announced a new global organizational structure to achieve a more solid positioning Kraft sustainable growth. “Kraft’s management team is unmatched. Every member has a vision of a world-class leader in professional knowledge and broad perspective to help Kraft to achieve sustainable growth.” said Betsy Holden, 48, has been named President, Global Marketing and Category Development, and will continue as a member of the Kraft Foods Board of Directors. Holden, co-CEO of Kraft Foods (Kraft Foods) and Kraft Foods North America President and CEO.Holden’s group will fugle Kraft’s growth agenda by driving category development across countries with global category strategy, new product development platform and superior marketing. This new team will build on the success of Kraft Foods global categories Parliament by creating a global classification team. Kraft’s business units based on geographic location will be divided into the North American commercial and international business, with directly responsible for the marketing and sales between countries, including profit and loss responsibility. At the local level, these organizations will promote the Kraft business; make full use of the category strategy, development platform development and global marketing cooperation with global marketing and category development group.

(Kraft Foods Announces New Global Organizational Structure

http://www.lexdon.com/article/kraft_foods_announces_new_global/56574.html

30 October 2012)

The principal integrating mechanisms used in Kraft Foods Company and sufficient coordination among individuals and functions that they provide are followings. The Kraft’s final strategy is to act responsibly. As the Company strives for sustainable growth, it seeks business success in ways that honor ethical and legal standards and that respect people, communities and the natural environment. This strategy includes a commitment to strong compliance and integrity programs and sound corporate governance, as well as a number of health and wellness initiatives, such as enhanced nutrition labeling, the development and funding of community-based programs and voluntary limitations on advertising to younger children. It also includes taking steps to contribute to the sustainability of the Company’s agricultural supply base through several programs with respected international and local partners.

Through the Kraft’s years of the development process, we can see that Kraft has been continuously through the acquisition of local enterprises to expand its business in China, and this is Kraft’s business model in America. At the beginning, Kraft came to China, Kraft also did not think too much about the changes about demand for cross-cultural product development or local marketing decision. Completely copy American model approach also makes Kraft lose the Chinese market narrowly. Until 2005, Kraft realized the problem and began to reform, increase the Chinese capital market and the investment of human resource and so on. Then Kraft earns a success in China.

(United States Securities and Exchange Commission

http://www.mondelezinternational.com/assets/pdf/KraftAR04_10K.pdf

10-30-2012)

Now that we have analyzed the way this organization is organized, we want to give Kraft’s managers to help them improve the way it operates. Matrix structures have been successfully used for years at high-tech companies where new product development takes place frequently and the need to innovate quickly is vital to the organization’s survival. However, the dual reporting relationships of a matrix structure have always been difficult for managers and employees to deal with. So, it is better to improve the organizational structure to product team structure. The product team structure differs from a matrix in that: 1) it does away with dual reporting relationships and two-boss managers, and 2) functional employees are permanently assigned to a cross-functional team. It can help them gain a competitive advantage in fast-changing organizational environments.

Conclusion: An Analysis of Kraft Foods Company’s Entrance into China

To conclude, Kraft Foods is the world’s second largest food company, doing business in 145 countries around the world, one of the subsidiaries of MondelÄ“z international. It employs more than 60,000 employees worldwide. Kraft’s core product line is for coffee, confectionery, dairy products and beverages. Kraft’s business is in more than 70 countries, its products sell in 150 countries worldwide. Kraft North America and Kraft International two units manage the market of the United States and Canada, as well as Europe and developing markets. As the end of December 2007, Warren Buffet’s Berkshire Hathaway holding 8.6% of Kraft stock, is a float institutional investors. So far, Kraft’s investment in China is more than $ 200 million. In early 2006, Kraft Australia factory production migrated to the factory in Suzhou. The Suzhou plant is one of the few food factories that Kraft first entered the Chinese investment in the construction. The production of Kraft’s biscuit brand Oreo, music, Wealthy, Taiping and grimace toot has become the fastest-growing source of income in China. In the North American market, Kraft has a lot of product improvements, and mark calorie content on the packaging, in order to concern about people’s waist. In China, even though most people do not realize this, Kraft has taken the lead in product packaging clear stated calorie content. So that consumers can clearly choose to control the amount of food.

As we have researched the situations, we find some interesting problems that they encountered. Kraft Group as the world’s leading food companies, in recent years in China, with good operating performance and a remarkable position in the market, many of its products have been well known to consumers. However, as early as in 2005, Kraft’s sales in China are not satisfactory. In the beginning, Kraft came to China, Kraft also did not think too much about the changes about demand for cross-cultural product development or local marketing decision. Completely copy American model approach also makes Kraft lose the Chinese market narrowly. Until 2005, Kraft realized the problem and began to reform, increase the Chinese capital market and the investment of human resource and so on. So Kraft actively adjusted its marketing strategies in order to better adapt to the requirements of the competitive environment, Kraft eventually created the success in China market. Then Kraft earns a success in China.

I think the way they solve the problem is very scientific. Kraft made ​​some adjustments to the company in accordance with the China market situation and the tastes of Chinese consumers. They seize the opportunities. So they achieved success. Of course, they also have insufficient. I think they can be more active innovation. They can release more flavors and varieties of biscuits to catch the consumer’s stomach. So Kraft can attract the attention of consumers and increase sales and market share. I believe Kraft do create a better future.

Over the years, Kraft has always insists on the principle of “related to food quality never concessions”, which achieved a sales of over 300 billion U.S. dollars in the global top 500 enterprises. In order to ensure the food quality, Kraft’s new factory controls of physical, chemical, biological, three major sources of pollution tightly. Physical sources of pollution, the workshop all organic glass windows and stainless steel, metal, glass and hard plastic material to avoid entering the production line, all corner radian design to prevent dust left; plant cleaning are edible grade cleaner agents, equipment lubrication points with the product contact parts, use only food grade lubricants, to do so despite the high cost, but to avoid chemical pollutants entering the food; biological pollution control, Kraft raw flour define the amount of heat-resistant Bacillus, oven temperature curve have a special instrument verification, to ensure that the quality of food. The Kraft’s strict quality control is also reflected in many details. Some consumers are allergic to peanuts, and in order to protect the health of these people, Kraft specifically arranged a dedicated production line. Kraft pays attention to product quality in order to open the door to success.