STRATEGIC ANALYSIS OF POST-HOLDING’s ACQUISTION OF

WEETABIX

by Onwuasor Obianuju
R1511D1136036

Strategic Analysis: Tools & Techniques (ST4S38-V1)

Tutor: Apostolos Pistolas
University of South Wales

8 JULY 2018
Table of Contents

1.0 Introduction ...............................................................................................3

2.0 Strategic positioning of the company.....................................................3
2.1 Stakeholders involved .................................................................................7
3.0 External forces driving the strategy .......................................................9
3.1 PEST ANALYSIS ........................................................................................9
3.1.1 Political Analysis ......................................................................................9
3.1.2 Economical Analysis ..............................................................................10
3.1.3 Social Analysis .......................................................................................11
3.1.4 Technological Analysis ..........................................................................11
4.0 Industry Analysis ....................................................................................12
4.1 Supplier power ..........................................................................................12
4.2 Buyer power ..............................................................................................12
4.3 Competitive Rivalry ...................................................................................13
4.4 Threat of Substitution ................................................................................13
4.4 Threat of new entry ...................................................................................13
5.0 Conclusion/Recommendation ...............................................................14
REFRENCE ...................................................................................................15

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1.0 Introduction
Organizations worldwide are faced with a variety of competition.
Organizations may offer lower prices, better customer service, a
wider/narrower variety of products, faster technological adaptation etc. in
attempt to overthrow their competitors. In order for these organizations to
remain competitive, there is a need to venture into new markets to increase its
market share. Lieberman et al (2009) asserts that acquisition strategy
amongst other things is a typical method employed by organizations who want
to easily enter a new market, gaining market share and remaining
competitive.
Post Holdings Inc. is a consumer-packaged goods holding organization, which
manufactures, markets and sells both branded and private label cereal
products. They came up with a smart strategy of entering the British market in
2017 by acquiring Weetabix Limited, also a breakfast cereal company. This
acquisition means that there would be a change in stakeholder both internally
and externally. There would also be a need to analysis and set clear roles and
objectives for competitive advantage in order to gel the new team together to
avoid hiccups along the way. There is a need for continuous interaction and
integration between organizations, people and governments during M&A. The
pressure for synergy, sharpened business focus and growth drives
organizations to reappraise and create better strategies and methods of
achieving short/long-term objectives, gain advantage over competition and
gain a larger market share in its product market.
Therefore, this study will focus on the critical strategic appraisal of Post
Holding acquisition of Weetabix applying strategic framework in a cohesive
manner in order to develop a clear understanding of the current strategic
change in this acquisition.

2.0 Strategic positioning of the company

A vital step in defining the strategy of a business is by ascertaining its

strategic positioning – the actuality of how it compares to its rival company
and serves customers in its product markets (http://www.dean.com/delta-
model/strategic-positioning.html, no date)

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Wickham (2001) defines strategic positioning as the way an organization
seeks to differentiate itself from it competitors and how it allots utility to the
customer segment. Chew (2009) also refers to strategic positioning as the
way in which an organization has a unique position in its product market with
the target market comprehending where its organizations position in respect
to its competition. Strategic position takes into account the position of a SBU
in the future without ignoring the constantly evolving environment and the
methodologies required to achieve that position. Galal (2013) asserts that
positioning is important because it enables organisation select a peculiar
niche. This reflects the company’s choices about the value it intends to create
and how these values differs from that its competitor.
Porter's 5 forces Analysis and Bowman’s Strategy clock are strategic
frameworks that can be easily adopted to understand how to gain advantage
over rival companies. Porter (2008) states,
“that being able to understand the competitive forces and its causes helps
reveal the roots of an industry’s current-profitability while providing a
framework for anticipating and influencing competition and profitability over
time”
There are three generic strategy approaches that can be applied to any
industry or organization. Michael Porters in 1985 set out these generic
strategies to include cost leadership, differentiation, and focus in the figure
below (Mindtools,2012) . He argues that an organization that employs cost
leadership as a way of gaining competitive advantage focuses on creating an
“edge” that’s pulls in sale and also takes away sale from its competition. He
also asserts that cost leadership can be achieved by reducing the cost
thereby increasing profit while charging average prices for products/services
or by increasing market share. Cost leadership is focused on reducing the
cost incurred to the organization for delivering products and service and not
the actual cost of the products it self.

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 Porter’s generic strategies

An organization that uses differentiation focuses on making their

products/services different and more attractive than those of rival companies.
Companies products that use differentiation approach to strategy typically
adds extra values like better functionality, effective pre and post purchase
support and normally has a brand name that customers value. Tanwar (2013)
argues that the focus strategy centres on organizations that concentrate on a
particular niche in the industry market by understanding the unique dynamics
of the market and its customer’s needs by either developing low cost products
or well-specified product. Focus based strategy can sub divided into either
cost focus or differentiation focus. Whichever subdivision that is chosen it is
best to ensure that extra values is added as a result of serving a particular
niche. A research carried out by Visionone in 2017 stated that Weetabix has
employed the differentiation focus strategy in recent years by placing
importance on brand management and providing consumers with products
that serves their unique needs. Weetabix has a variety of brands each
specially made with consumers need in mind.
Bowman’s strategy clock traverses the choices for strategic positioning. This
typically means how products should be placed to guarantee it competitive
position in the market. According to West et al (2015), Bowman’s strategic
clock (Tutor2u, 2016) an extension to Porter's generic strategy seeks to
elucidate that businesses would possesses variety of options of how to

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position a product based on perceived value the customer derives from the
product and price a customer will comfortably agree to pay for that product.
Weetabix falls under the differentiation strategy on the Bowman’s strategy
clock because Weetabix seeks to offer customers the highest level of
perceived value at an averagely suitable price. This means that there has to
be continuous evolution of strategies that helps them stand out from rival
companies in spite of them selling the same product. Weetabix has
successfully been able to achieve said strategy through the creation of
different brands that service a wider range of customers in various market
segments (Roger, 2017).

Bowman’s Strategy clock

The aim of the differentiation strategy employed by Weetabix is to provide its

customers with a higher level of perceived value by incorporating RndD into
its core purposes. The Research and Development team provides the
marketing team with insightful market surveys and research, which is in turn
employed when carrying out marketing campaign. In 2014, Weetabix
introduced Breakfast on the Go, after thoroughly building from a market
research carried out on its rival company Nestle. The research showed that at

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least six out of 10 people usually would have a “to go” breakfast and less than
30% would spend more than 10 minutes preparing breakfast (Warc, 2017).
From this research, Weetabix was able to capture target market by using
branding and product quality where the combined convenience and a healthy
source. This research helped them fast track the development of the product
by more than 10 months (Happen, 2017). Weetabix has successfully been
able to capture 70% of cereal sales in Kenya by adapting the differentiation
strategy (Marketingweek, 2017). They have been able to break in because
they have found a distribution strategy that suits the method of consumption.
In Kenya, consumers prefer small-value transactions, which are a completely
opposite strategy employed in Mexico where consumers prefer to buy in
larger quantity. In Britain, most campaigns are carried out based on insight
and emotional positioning because it would be easier to sell the idea that their
products can help busy families with healthier breakfast cereals. Over the
years, Weetabix has been able to successfully adapted to the peculiar market
conditions where their products are being sold. In 2015, Weetabix started a
campaign called “Weetabuddies” was able to increase its sales by 14%
percentage simply by being able to capture the minds of health conscious
parents who are of the opinion that kids should eat healthy (Talking Retail,
2016).

2.1 Stakeholders involved

Freeman (1984) defined stakeholders as,” any group or individual who can
affect or is affected by the achievement of an organization’ objective. These
individuals or groups of individuals, have a stake in the success of the
company. Various businesses have varying approaches to stakeholder
management. Stakeholders may either be primary stakeholders as they
control the internal activities of the organization e.g. Equity shareholders,
customer, suppliers, employees, business partners, shareholders, investors
etc. or secondary stakeholders whom have interest in the organization but
have no control over the internal operations of the organization e.g. the public,
government, global society, media, trade bodies, competitors etc.
In the acquisition of Weetabix by Post Holding, various stakeholders were
involved. The primary stakeholders consist of the shareholders of both Post

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Holdings and Weetabix; they govern the activities and operations of both
organizations. They have a high level of power and interest in the companies.
They must at all points be satisfied. The Post Holding shareholders are
acquiring Weetabix while Weetabix Shareholders have the selling stake.
Investors, employees and the British government are also primary
stakeholders. The British government plays an important role in making sure
the sale/acquisition process is done legally and following all stipulated
corporate rules. Employee might be affected either negatively that is a few of
these employees would lose their jobs and incentives while some positively;
increased pay or new job roles. On the other hand, investor returns maybe
affected. The other secondary shareholders include the public, global society
etc would have an effect or be affected indirectly on the organization and vice
versa

Power Interest

Individuals or groups that posses high power and are highly interested should
be managed closely. There is a need to engage these individuals fully and
make an effort to satisfy them. Also, the “key satisfied” group on the matrix
are the individuals/groups are the individuals you have to put in work to keep
them satisfied but not bore them with the message. Whereas, the “key

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informed” group are the group with low power but are highly interested.
People in this category are helpful in providing needed information for your
project. The “monitor” category is people with low power and lessly to be
interested.

3. External Factors Driving the Strategy

3.1 PEST Analysis

PEST Analysis allows for effective evaluation of an organization's external

environment. It is a strategic tool used in the analysis of the macro
environment of the organization. Companies employ this notion as a tool used
to track the environment an organization plans to kick-starts a new project,
product or service. This analysis examines the political, economical, social,
technological, environmental and legal environment. It gives a clear view of
the operating environment from varying angles listed above.

3.1.1 Political Analysis

Post Holdings acquiring of Weetabix entails that it would have to follow all
laws imposed by the British government whether directly or indirectly. They
would have to act in accordance with employment laws, business operating
legislative laws, foreign trade regulations and the government stability has to
be put into account. The British government in 2017, increased the minimum
hourly wage for employees 25 and above from 7.2 pounds to 7.5 pounds in an
attempt to improve their welfare (Minimum Wage Uk, 2017). The table below
illustrates the minimum hourly rates across various age groups over the past
four years

YEAR 25 AND 21-24 18-20 UNDER APPRENTI

OVER 18 CE

2017 7.5 7.05 5.6 4.1 3.5

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2016 7.2 6.95 5.55 4.0 3.4

2015 6.7 6.7 5.3 3.87 3.3

2014 6.5 6.5 5.13 3.79 2.73

(Minimum Wage UK,2017)

The table above shows the rates as they have increased yearly across all
employees age range. Being that the production company of Weetabix is
located in the United Kingdom; Post Holdings will face an increased salary
wage as opposed to what its pays in America. In the United Kingdom, The
Work Time Regulation 1998 allows employees to get 28 days paid leave
days. Also the employment rights act 1996 permits employees the right to
request for flexible working hours for child care etc. (Wikipedia, 2018). If the
organizations opt to not abide by the new laws, they would have issues with
the government. In order to cut the cost incurred from wage increases and
other miscellaneous, Post Holdings will need to source for other methods of
cutting cost.

3.1.2 Economic

The Economy of the United Kingdom and US would be affected by the

acquisition of Weetabix by Post Holdings. Since these economies are different
and are growing at different rates, the organization has to figure out of tackling
and coping with new experiences. Chu (2017) asserted that the US grew by
2.7% by the second quarter of 2017 while the UK only noticed a slight growth
of about 0.4 % in the third quarter due to its inflation rate, which rose in
september to about 3%. This rise in inflation rate would affect the prices of
Weetabix products in the United Kingdom and would possibly change the
demand and supply model of the economy (http://pestleanalysis.com/what-is-
pestle-analysis/, no date)
An illustration like this proves that both organizations have to create a
strategic to deal with the various economic trends. To cushion these varying
trends, the company can choose to product new products and sell to new
markets across the world. This simple initiative would help distribute the risk

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of retarded growth that may occur when economies experience slow growth
rate.

3.1.3 Social

Social factors examine carefully the markets social environment and models
cultural trends, demographics, consumerism, population analytics. It takes
into account present and future consumers taste and proclivities. For
example, Consumers in the United Kingdom and US would pick a breakfast
cereal as opposed to consumers in China whom have an inclination to go with
a hot breakfast (Monaghan, 2017). On that account, the likelihood of
purchasing Weetabix would be lower in China as compared to the UK or US.
Due to the higher chance of purchase of breakfast cereal in the Uk and US,
there is a stronger probability of success as Post Holdings bought into a
receptive market. Williams (2015) propounds that in 2014, when Weetabix
sold to bright food a Chinese company, there was a decline of 4% of total
turnover and 7% of pre tax profit. This turnover was as a decline in the
consumption of cereal.
In order to increase sales, it would be advisable for the company to diversify
and start selling other products that are in line with customers taste and
proclivities.

3.1.4 Technological

Post holding needs to be in tune with the constantly change needs of its
consumers. In recent times, consumers prefer to eat there cereal on the go,
so post holding as to put in place the technology needed to continuously be
involving and changing. They need to provide breakfast cereals that match
the needs of their consumers. In the cereal industry, there are available
machines which can cut cereals into various shapes and forms like the
shapes of tubes, bars, rings etc. (Maskan, 2016). This is also something that
Post holding should consider for growth and success

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4. Industry Analysis

The breakfast cereal industry is high concentrated and there is a need for
organizations to understand what factors can easily affect its profitability. This
also provides organization with a platform to envisage and influence
competition by fine-tuning their strategies. Porter (2008) propounded five
forces as a tool for analyzing competition of a business, the competitive
intensity and its attractiveness in terms of profit.
(https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis, no date)
These five forces include supplier power, buyer power, competitive rivalry,
threat of substitution and threat of new entry.

4.1 Supplier power

This force is also called the market of input. Suppliers of raw materials, labor
and expertise have power over organization if there are fewer substitutes.
These suppliers are normally aware of the uniqueness of their product and
know that switching from one supplier to another wouldn’t be an easy feat. In
the breakfast cereal industry suppliers of grains and wheat needed for
production are relatively low (Newswire, 2017). Weetabix prefers to get their
raw materials from a 50-mile radius of their factory in order to be able to check
quality easily (Weetabix, 2017).

4.2 Buyer power

This force also called the market of outputs. This measures the buyers ability
to change/drive down prices of commodities. Supermarkets and grocery
outlets serve as the main distribution channel for the breakfast and cereal
industry. The number of cereal brands available in this stores makes buyers
power relatively high. It is easy for a consumer to switch to an alternate brand
if prices increase or the quality reduces (Schultz, 2012). To help increase
sale, Weetabix works closely with this distribution channels (Drakakis, 2017).

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4.3 Competitive Rivalry

In the breakfast cereal industry, the intensity of industry rivalry is the primary
determinant of the competitively. In order for an organization to successfully
sell a product there was be a clear understanding of industry rival. How the
public sees your product and differentiates it from competition. In the US, the
cereal industry is highly concentrated with leading players like Kellogg, Post,
Quacker holding 85% of the market share while Nestle, Weetabix etc. hold
78% of the global market share. Weetabix must continuously be aware of its
rivals strategies and pricing and be more proactive in order to increase or hold
its current market share (Newswire, 2017).

4.4 Threat of substitution.

The force seeks to look into the possibility of finding a replacement for fulfilling
ones need without having to purchase organisation product. A substitute
product uses a different technology to try to solve the same economic need.
There are a wide variety of breakfast meals available so the threat of
substitution is high. For example, in china where consumers prefer hot
breakfast to cold breakfast Weetabix wasn’t able to successfully break into the
Chinese market (Wade, 2017).

4.5 Threat of new entry.

This force dives into the number of restraints that a new organisation will
experience when trying to enter into a particular industry. Profitable industries
that yield high returns will attract new firms. These threats are influenced by
ease of access to labour, expertise, raw material, government policies etc. In
the breakfast cereal industry, the entry of new organisations is low because
leading players hold a large portion of the market share. These lead players
also understand customer’s need and have been able to create a brand that
customers are loyal to.

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5.0 Conclusions and Recommendation.

In 2017, Post Holdings acquired Weetabix for 1.4 billion pounds. Weetabix is
a breakfast cereal industry, which employed differentiation strategy as a
means of getting competitive advantage over their competition. They
produced different products and different marketing strategies to suit different
markets. External environments, which the countries cannot control, include
the political stability of the country, a change in consumers taste and
frivolities. Due to uncontrollable situations as the ones listed above, there is a
need to come up with strategies and adapt to changing technology in order
not to lose market share. Innovation and continuous evolution is required to
maintain competitive advantage.
The breakfast cereal industry has at least 78 lead players; in other for Post
Holdings to remain competitive to must continue to remain averagely priced
with a strong perceived value. Due to the fact that suppliers of raw materials
have a low bargaining, it affords the company with advantages because
negotiate for lower prices of high-quality inputs. Thus, it could reduce or
neutralize the effect of increased wage bills that are a result of the new
minimum wages in the United Kingdom.
-

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