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University of South Wales

Business School
Strategic Analysis, Tools and Techniques (ST4S38-V1)
MBA
Lecturer: Rajeev Bali

Topic: Critical Strategic Analysis of Weetabix Acquisition by Post Holdings

Student No. Name Enrolment

R1701D2182513 Naledi Katlego Melamu ST4S38-V1

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Table of Contents
Introduction............................................................................................................................................ 3
Strategic Position of the Company .................................................................................................... 4
Porter Generic Strategy Grid .............................................................................................................. 5
Bowman’s Strategy Clock ................................................................................................................... 6
Stakeholders Analysis and Mapping ................................................................................................. 7
PEST Analysis ...................................................................................................................................... 9
Industry Analysis ................................................................................................................................ 11
Porter’s Five Forces Analysis ........................................................................................................... 12
Conclusion ........................................................................................................................................... 14
References .......................................................................................................................................... 15

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Introduction
This paper is to do a critical strategic analysis of the acquisition of Weetabix by Post
Holdings. It will cover the analysis strategic Position of Weetabix in cereal industry
and including stakeholder, external and industry Analysis. The cereal industry is
exceedingly competitive with various organizations competing to dominate the
market. The key players in the cereal industry are Kellogg’s, Nestle, Weetabix and
Quaker, Cheerios, Malt-O-Meal and Cinnamon toast crunch and this makes the
industry to be highly competitive with numerous businesses competing for an
increased market share.

Strategy has evolved throughout the years and organisations can analyse their
environment, competitive advantages, position and to withstand advantage in the
face of challenging competitive threats. The amount of competitive pressure facing
organisations around the world is a result of globalisation. It has influenced
businesses to come up with strategic approaches to survive, increase market shares
and most importantly to gain competitive advantage. Acquisition is one of the
strategic approaches; According to Malik et al., 2014 acquisitions are a global
business strategy that enables firms to enter into new potential markets or to a new
business area. Post Holdings as of late entered the UK market by obtaining
Weetabix, a breakfast cereal company that was beforehand owned by a Chinese
corporation called Bright Foods. Post holdings wanted to expand to other markets
and this was an opportunity for them as Weetabix already has an international foot
print that Post holdings can leverage on. Post Holding has guaranteed to expand the
Weetabix business by entering the growing breakfast cereal market globally.
Acquisitions are progressively turning into a vital strategic choice for organizational
growth and accomplishment of business objectives including revenue, competitive
advantage and long haul survival and most importantly maximization of shareholder
value.

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Strategic Position of the Company

Strategic Position of the Company concentrate on understanding the way an industry
is organized. It involves an organisation attempting to set up desirable future position
in view of the present and foreseeable improvement and subsequently making
arrangements on the best way to achieve that position. According to Porter, 2008,
understanding the competitive forces, and their under- lying causes, reveals the
roots of an industry’s current profit- ability while providing a framework for
anticipating and influencing competition (and profitability) over time. Porter 2012
discusses that strategy defines the company’s distinctive approach to competing and
the competitive advantages on which it will be based. Weetabix have a considerable
market share and continue to be competitive within the industry. For Weetabix to
succeed an ideal positioning on various markets, regardless of whether they are
geographic, economic, social or demographic, in principle there are a few strategies
that can be embraced in the positioning approach of the brand and they should hold
competitive advantage so that they can withstand the market

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Porter Generic Strategy Grid

Source: Mindtools.com, 2018

Porter’s generic competitive strategies include cost leadership, differentiation

strategy, and focus strategy Porter’s generic competitive strategy for Weetabix is
Differentiation focus. According to Tanwar, 2013 in this strategy the firm focuses on
a chosen few target markets; it is likewise called a niche strategy. Differentiation
focus strategy in regards to Weetabix means that organisations can be able to be
innovative for new markets after the acquisition to attract specific customers. For
example in 2013 Weetabix introduced a range of breakfast biscuits this was to cater
for customers that do not like the cereal breakfast. Bowman’s Strategy Clock model
is considered to be an addition of Porter’s generic strategies.

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Bowman’s Strategy Clock

Source: Marketingteacher.com, 2018

Expanding Porter’s generic strategies was Cliff Bowman were Porters strategic
positions were expanded to eight identifiable positions which were mainly focusing
on the value proposition to customers (Thebusinessprofessor.com, 2018).Bowman's
Clock has been developed as part of breaking down how an organisation’s product
can be positioned to bargain the most competitive position in the market.

In relation to Weetabix it falls under differentiation strategy because it actively

conduct research and development in relation to their customers and market so it
engages in creating unique value for their customers. Weetabix partake in
diversification it develops products that stand out from the rest of its competitors for
example, according to Rogers, 2017 Weetabix for the past years has launched
Weetabix protein and protein crunch to dominate the cereal category, a sector which
includes competitors like Kellogg’s. In 2014 Weetabix introduced Breakfast on The
Go drinks, which was an innovative procedure involving research and development.
The product tested positively and initial sales results are above expectations, this

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was because there was an increase in numbers of consumers who were looking for
healthy sources of protein so they wanted to cater for that certain niche market.

Weetabix also used the differentiation focus strategy in global markets because it
has to adapt to the unique attributes of that particular market these attribute create a
higher value proposition (Thebusinessprofessor.com, 2018). In Kenya Weetabix has
found a distribution strategy that suits the mode of consumption by the use of
bicycles to deliver their product (Allchin, 2012).

Stakeholders Analysis and Mapping

Stakeholders have different levels of power and interest. According to Walker,
Bourne, and Shelley (2008) stakeholders are groups and persons who have interest
in a business. The acquisition of Weetabix by Post Holdings involved different
stakeholders in with the key stakeholders being the shareholders/investors of
Weetabix and Post Holdings.

The stake holders relevant to the acquisition of Weetabix by Post Holdings are:

1. Primary Social Stakeholders:

 Customers
 Investors/ Shareholders
 Employees of Weetabix
 suppliers and partners
 Public/community

2. Secondary Social Stakeholders:

 UK Government and society
 Competitors
 Media

3. Primary Non Social Stakeholders:

 Breakfast cereal Industry

4. Secondary Non Social Stakeholders:

 Regulator

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Stakeholder Map


high

UK Government and
society
 Customers  Shareholders
 Competitors
Power

low

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

low high
Interest

In analysing the government is a major stakeholder because it oversees and

watches the acquisition procedure to assure that it is done legitimately. Investors of
Weetabix are impacted by the acquisition because their returns will be affected while
employees are affected some may lose their jobs because of the new deal. Other
stakeholders are customers, suppliers and partners, the public and agencies.

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PEST Analysis
Political

The acquisition of Weetbix means that the organisation will have to deal with the US
politics and not the UK only, since the UK voted in support of Brexit in 2016 June,
the political fate of the nation is obscure. This is the situation essentially in light of the
fact that the UK has not yet finalized the move to exit the European Union therefore
Weetabix and Post Holdings have to wait and manage the result of the exit.
According to Daneshkhu, 2017 the price of Weetabix breakfast cereal is going up as
the UK was hit by the weak pound, Turrell, chief executive of Weetabix, mentioned
that the company was absorbing the higher cost of dollar denominated wheat but
that Weetabix prices were likely to go.

Source: Minimum Wage, 2018

The government of the UK continues to increase every year since 2010 it has
gradually been rising as seen in the above employment law. The table shows that
wage rates are accumulative and Weetabix will face larger wage bills because of the
change of the employment law with that the company will have to discover ways to
reduce costs like cutting down on costs by using cheaper raw materials which also
be reputational risk. Lastly, because Weetabix will be operating different countries

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respect the standards and controls set by the governments as they are distinctive in
various regions .Weetabix will have to consider political elements like tax
assessment, import export regulations.

Economic

The acquisition of Weetabix by Post Holdings means that it will be affected by

different economies being the US, UK and that of China. Economy of nations varies
all over the world and countries have diverse level of development. Weetabix will
need to set distinctive economic approaches for various countries. The cost of the
product is a critical decision to take while strategizing the economic approaches
according to the different inflation rate and the purchasing power of a country. These
economies’s growth rate is different therefore they will have to ways to deal with
various challenges. The global economic recession is the prime external economic
factor which can persuade customers to move to less expensive options from
Weetabix competitors. According to Chance, 2017 economic growth in Britain for
2017 had already been revised sharply lower to 1.7% in the wake of the nation's vote
to leave the European Union, United States was unaffected at 2.2% for 2017 and
2.3% in 2018 because tax breaks under President Trump's organization have not yet
appeared and lastly China forecast is 6.8% growth for 2018. This means will have to
implement new arrangement on how to deal with the different economies for
example when one of the economies sales or growth decline they will have to come
up with new product to boost sales across the world.

Social

Weetabix has considered the social perspective because they have to understand
the company has consumers changing attitude for example people are now inclined
to the healthy life style so customers now prefer healthier products which have low
sugar. According to Bakeryandsnacks.com, 2017 UK leads breakfast cereal
consumption and the Chinese prefer hot breakfast however consumers the US
prefer breakfast cereal therefore there is a high chance of success from the
acquisition. However to be competitive it needs to introduce new breakfast options.
For example, according to Dye, 2017 Post holding acquired Bob Evans after

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Weetabix, Bob Evans is a US based maker of sausages to add another breakfast

alternative to meet different consumer tastes and preferences.

Technological

Technology gives many opportunities for research and development of new products
or improvement of existing ones. For example in past Weetabix introduced Drinkable
Cereal called Weetabix on the go. According to Happen, 2018 this Weetabix On the
Go tested positively in concept research and initial sales results comes about are
above expectations. E-commerce as a platform is used for supply and people use to
understand nature of product through the Weetabix website

Industry Analysis
Industry analysis helps organisations in understanding and developing its
competitive strategy so that it can be able to gain competitive advantage against its
competitive forces. The most important thing is to understand the sources of the
competitive forces. Porter’s Five Forces Model can be used to analyse the industry
based on these five forces: 1) Bargaining Power of Suppliers, 2) threat of substitutes,
3) power of buyers, 4) Threat of entry, and 5) Competitive Rivalry Porter’s Five
Forces Analysis

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Porter’s Five Forces Analysis

Source: (CGMA, 2013)

Competitive Rivalry

In the event that the competition among the current players in an industry is
exceptional then it will drive down costs and reduction the general benefit of the
business. There is high competition within the cereal industry with organizations like
Kellogg’s and Nestle fighting to dominate the market. The continuous introduction of
new products helps to ensure that rivalry between all the companies remains high.
The intense competition in this industry enables Weetabix to be more innovative for
example it developed Breakfast On the Go this was to increase its market share and
gain competitive advantage over its competitors (Happen, 2018).

Bargaining Power of Suppliers

This force looks at bargaining power of supplier’s which is driven by the: number of
suppliers; exclusivity of product /service, cost of substituting of suppliers so a strong
bargaining power permits suppliers to raise prices to their buyers. Almost every one
of the organizations in the industry purchases their raw material from various

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suppliers. The bargaining power of suppliers is low because grain and wheat are the
main raw materials being used. In relation with Weetabix, it has control of the quality
of raw materials as it has a dedicated supplier. It decided on to source wheat from
farmers of a 50 mile range from the production plant (Weetabix, 2017).

Bargaining Power of Buyers

Supermarkets and grocery stores are the main buyers and distribution channels and
with a high number of competitors it will be easy for buyers to switch to other
alternative brand in the market. As a result Weetabix implemented a wholesale
strategy by working closely with wholesalers to grow sales and consequently get
bigger shelf spaces as a reward (Drakakis, 2017).Buyers are demanding, they need
to purchase the best offerings accessible by paying the minimum price and this put
weight on Weetabix profitability over the long haul so Weetabix have to build a large
customer base. This will cut the bargaining power of the buyers; in this case The
Weetabix brand has successfully reflected a positive brand image with the British
markets. On the other hand, the recent acquisition could have negative impact as it
could be seen as the loss of native company to a foreign multinational and may
weaken the brand value (UK Essays, 2013).

Threats of substitutes

When substitute products exist in a market, it surges the probability of consumers

changing to alternatives because of price increases.

The threat of substitutes in this industry is high because of the increase of

competitors in the industry and with breakfast alternative like fruits, bread/toast and
yoghurts which could be thought to be more convenient and affordable. When
substitute products exist in a market, it surges the probability of consumers changing
to alternatives because of price increases. For example in China the sale of
Weetabix demonstrates that the brand has failed to get a substantial market share
because Chinese prefer hot meals like rice, porridge for breakfast
(Businesswire.com, 2017).

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Threat of entry

The barrier to entry for breakfast cereal industry is high as potential new companies
may encounter trouble in entering the market as the companies may lack the
appropriate experience of the market. Also the tough competition from the existing
organisations may hinder the new entrants from making progress inside the market.

Conclusion
Weetabix is one of the most recognised brands and the Acquisition of Weetabix by
Post Holding means that there is an opportunity for growth of the brand and they will
gain a larger market share worldwide as it opened up new markets. Entry to the US
market will be significantly at ease because the majority shareholding of the
Weetabix brand is by the US firm Post Holding. The organisations will have to be
innovative and come up with marketing strategies that can maintain and surge sales.
One of the advantages of the acquisition is that Weetabix will be promoted in
collaboration with products that Post Holding offer within the US and the global
market. Consumer taste and preferences are constantly changing therefore the
organisation will have to research and develop products that consumers prefer. It will
allow the organisation to remain competitive in the market. For example innovation of
the Breakfast on the Go which caters for consumers that do not have time for
breakfast cereal, the invention was successful and the organisation was able to
survive in the market. Another challenge that the organisation does not have control
over is Brexit, it affects the organisations production which is based in the UK a
nation whose future political security is vague in view of Brexit. The bargaining power
of suppliers is low therefore they are able to negotiate prices. The organisation is
getting raw materials from farmers of a 50 mile radius of their production plant in the
UK. In spite of the fact that this can be seen as a positive pledge to the community, it
might adversely have an effect on production when the weather changes.
Recommendation is that the organisation should invest more in suppliers and its
employees to encourage international growth during the acquisition and apply better

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internal correspondence mechanism to improve strategy implementation this will

permit smooth transition.

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