Discuss strategic management(sustainability, porter five forces) of the product “Oreo Cookies” from Kraft foods…………
This paper evaluates marketing strategic management of Oreo products. The history of product has been highlighted as well as an overview of product positioning and marketing strategies. Reasons for its sustainability in global markets and marketing strategies used in penetrating the Japanese markets have also been discussed.
History of Oreos Cookies
Oreo product was born on 6th march 1912 and has significantly developed its brand name to become the top selling cookie in the world today. Enjoyed in more 100 countries, Oreo is milk cookie biscuit which have been innovated into local flavors of to different regions and markets they are consumed in, (Company Overview, n. d).
Oreo was first sold in Hoboken, New Jersey, where the product was packaged in bulk tins and sold in weight. The original Oreo was made at Nabisco library and has a street named after it, Oreo way in the in New York. It is the most favorite and best selling cookie brand in the world, generating global annual revenue of over 1.5 billion dollars for the Kraft foods company as at 2010 statistics.
In 1913, Oreo cookie was registered as a Nabisco trademark and changed its name from ‘Oreo Biscuit ‘to Oreo sandwich in 1921 and later to ‘Oreo crème sandwich‘ in 1937. Two years later, the product was first advertised on Trolley cars and was first exported to Spanish speaking nations of central and Latin America. Global moments campaigns for the product were launched in 1998 and a variety of its brands were introduced into different countries.
Kraft Company is the custodian of Oreo products which are found in more 100 countries worldwide. Its biggest markets are in the US, China, Venezuela, Canada, Indonesia, Mexico, Spain, UK, Central America, Argentina and the Caribbean. Oreos are made in 21 bakeries of Kraft foods spread across the world. The product has over 23 million facebook lovers representing more than 200 plus countries of different languages and is ranked among the top five facebook pages in the world today.
Porter’s competitive strategy analysis in Oreo brands
Threat of entry: the threat of new entrants into food industry is generally high and this extends to the snacks, biscuits and other similar brands. This is because of low initial capital required to establish a food processing factory. The increasing demand for food items due to the swelling world population has made the industry attractive to potential investors. However, established brand names of Oreo have scared away new entrants into markets where Oreo brands are highly recognized like China, Canada, US, Indonesia, Japan and Mexico among other locations.
Power of suppliers: The suppliers of raw materials and labor are diversified; this has drastically reduced their power. Raw materials can be easily obtained, an example is milk and sugar whose supply is not only high but also readily available and can be obtained from various sources. Inputs are highly differentiated especially in the production of Oreo chocolates and biscuits, and supplier size is relatively big which gives the company more independency to choose the best supplier hence reducing their powers. The switching cost from one supplier to another is almost zero and there exists a variety of substitute inputs for the production of Oreo products.
Power of Buyers: The power of buyers is very high because of very low switching costs in the food industry. Consumers of food products are generally sensitive to price changes which make buyers to influence prices of products. They can easily switch to competitor products hence the need to develop brand name and build consumer loyalty. However, large size of buyers of Oreo brands and market segmentation has helped in reducing the power of buyers.
Substitutes: Oreo products have a variety of cheap substitutes, ranging from milk powder, snacks and biscuits. This is complemented by low switching cost to substitute products. Building Oreo brand name and consumer loyalty is necessary to maintain high performance of the products
Competitive rivalry is relatively high, main competitors being Keeler, which is the second largest in the US, whose sales have been increasing significantly and is also engaged in massive product innovations and diversification. Competitive rivalry is high in this industry which is attributed to easiness of entry by investors. However, brand recognition and product differentiation has sustained the performance of Oreo brands in the global market. Low installation costs, growing demands for food products and low exit rate from the industry have increased competition in the industry.
Overview of Oreo strategy
Kraft Company employs various strategies to survive in the global competitive markets. This includes both marketing mix and marketing analysis strategies.
Market target strategies involve expanding into fast growing demographics and economic segments. Oreo products have been extended in Asian markets which have experienced economic growths, Canada and America. The growing population in target markets offered a wide market for the Oreo branded products, (Company Overview, n. d).
Market segmentation strategies: The products have been segmented geographically and demographically. Deemographic targets were basically children for biscuit and crème filled products. Another target group is women who seem to be more health conscious, and company introduced fat free Oreo products for this market segment. The company offers different Oreo products for different regions. This is aimed at meeting different regional needs for goods and services especially in terms of tastes and packaging.
Another strategy is developing consumer loyalty among the customers to prevent them from switching to other similar products. This has been achieved through building brand name and offering discounts to different market segments such as children.
Marketing promotion strategies involve the use of media and online advertisements to reach the targeted consumers. Advertisements in magazines and television stations have been used to market Oreo brands. These have been supplemented with consumer campaigns through direct and personal selling.
Product positioning has been achieved through:
Product development and innovation strategies. Oreo products have been developed to suit the health requirements of its customers, such low calorie and fat content. Focusing on high demand product sectors such snacks, crèmes and biscuits have helped to increase company sales in Oreo brands. Product diversification has also been employed, currently; there are different brands of Oreo products spread across the world.
Branding and product recognition has been intensified through different forms of marketing promotion which has contributed to the growth of company brands including Oreo cookies. This has been achieved through focusing on sectors that have demands such snacks and convenient meals. The company has got a well established and faster growing distribution channels, hence product are easily accessed in most food retailing shops in its market of operation.
Packaging and product differentiation: product packaging has been differentiated to suit different categories of customers. This has also been adopted in product promotion and advertisement. An example is more colorful and eye appealing packages for products targeting children. The original Oreo products were blue in color; however, fat free products were packaged in red and blue colors, with red representing the health aspect which the product is addressing and blue color representing the Oreo brand.
Sustainability of Oreo products
Product sustainability has been enhanced through innovative nature of the marketing team. This has helped to maintain and increase sales of the Oreo products. An example is recent introduction of low calorie and fat free Oreo products which have revived declining sales of the Oreo brands. Products have been diversified to spread risks associated with non performing lines which have been covered by other brands.
Sustainability has also been achieved through expansive strategies into new locations of Asia, Europe and America. This has added to its growing customer base hence increased sales of the product and revenue. Expanding into emerging economies has helped reduce products risks in non performing locations due to poor global economic performance.
Company’s image and reputation, coupled with brand recognition of Oreo products has sustained Oreo brand despite stiff competition and poor performance in global economy. Marketing promotion and building customer loyalty has improved brand recognition. Effective marketing communication was employed to reach targeted markets of Oreo products, press release and media kits was used to communicate company products to the public and food retailers.
For public relation, Oreo Brand Company sponsored sporting activities in Japan and donated to charitable organization to build recognition in the new market. Company established a reliable distribution chain which ensured that products get to customers without delay and in good condition. It partnered with major food retailers and distributors which helped in getting goods to consumers.
Oreo marketing strategies in Japan
Oreo products in Japan involved the use of promotion strategies through the media, internet and use marketing and social media campaigns were also used to reach Japanese market. Consumer promotions were used to reach the target segment of customers in the Japanese market. The company used magazines, television, internet and social media network to reach its target customers. For instance, the use of social media was intended to reach youths within Japanese population.
Consumer promotional activities were conducted at major food stores across the country which allowed feedbacks from respective customers and coupons were also offered at sampling stations and company websites. Packaging of products was designed to suit Japanese standards, marketing demands and culture.
Products were innovated and diversified to make them as appealing as possible to Japanese taste and culture, (Company Overview, n. d). The company developed a variety of Oreo products which are sold to Japanese population such Green Oreo tea among other Oreo products. Promotion strategies involved the use of Japanese culture and legends to create a sense of Japanese ownership in the Oreo products.
This paper analyzed different strategies employed by Kraft Company to reach and maintain Oreo products in the global market. Expansive strategies and product innovations have been used to position and maintain product performances in the global markets. Company and brand recognition has been identified as reasons behind the excellent performances of Oreo products in the global market.
Analysis of Porter’s competitive strategy was undertaken to evaluate food industry and how Oreo products have responded to industry demands. Strategies employed by Oreo team to enter into Japanese market were discussed in this paper.
“Company Overview”. Kraft Foods Inc. (n. d) [online] retrieved from http://220.127.116.11/investors/strategies.html (Accessed on 26 Apr. 2004)
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