A valuable part of strategic analysis is the analysis of external environment for the company. The target company in this report is Mondelez International Inc. The purpose of this report is to consider general trends in the environment using PEST framework, to consider external environment in foods manufacturing industry (confectionery sector) for Mondelez International Inc. and to outline major opportunities and threats for the target company using the results of external analysis.
It was identified that legislation and relations between countries are the key political factors affecting external environment, economic recovery, increase of the demand for consumer goods and the changes of gas prices are key economic factors, trends towards healthy life and increasing urbanization belong to most notable socioeconomic factors important for the target industry, and with regard to technology, the use of CRM and SAP frameworks, along with cloud computing, and social/mobile marketing are the most important trends.
In the sphere of food manufacturing, threat of new entrants was identified as high, threat of substitution ”“ low, bargaining power of suppliers ”“ medium, bargaining power of customers ”“ medium, and competitive rivalry ”“ high. Section 3 of the report lists key opportunities and threats for Mondelez International Inc. which were identified using the results of the external analysis.
Mondelez International Inc. emerged in October 2012, due to the spin-off of Kraft Foods Inc. Kraft Foods has been divided into Kraft Foods Group, operating in North America, and Mondelez International Inc., operating in more than 80 countries all over the world. Mondelez International Inc. is focused on international operations with regard to food brands and global snacking (Qineqt, 2012).
This report continues strategic analysis of Mondelez International Inc. In this part of the report, analysis of external environment will be performed: Porter’s five forces analysis will be applied to analyze environment in the industry, and PEST framework will be used for analyzing external macroenvironment for Mondelez International Inc. Different data sources will be used to draw conclusions about the influence of each factor in both frameworks. Current opportunities and threats for Mondelez International Inc. will be formulated using the results of the analysis.
1. Porter’s Five Forces
1.1. Threat of new entrants
Year 2011 has been quite beneficial for the food manufacturing industry, as the revenues in the industry have increased, and EBITDA multiples for companies in food manufacturing increased from 10.4 in year 2010 by 10.8 in year 2011 (Food Institute, 2012). In 2011, three companies planned spin-offs due to large company sizes and extreme diversity (Kraft Foods, Sara Lee and Ralcorp) (Food Institute, 2012). Total number of companies operating in the industry equals to 20,673 (U.S. Business Reporter, 2012). With regard to market concentration in food manufacturing industry, the Herfindahl-Hirschman index for this industry is 102.1 (U.S. Business Reporter, 2012). This means that food manufacturing industry is a highly competitive marketplace. Since the industry is quickly developing, and it is possible to consider the market as competitive, the threat of new entrants is high.