Threats
Competitors: Are always a threat to any company. Heinz has many product lines and therefore there are many Companies that may cause a threat to Heinz. E.g. Bachelors and HP Sauces.
Brand Loyalty: As there are some many different brands in the same product lines, there is a great choice of variety and variance in prices available to the consumer. Therefore brand loyalty is not as common these days as in previous years.
P.E.S.T Analysis
What is it?
A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment.
Why use it?
Such external factors usually are beyond the firm's control and sometimes present themselves as threats. However, changes in the external environment also create new opportunities. As a company had no control over these factors, it should understands and be able to anticipate and take advantage off changes within their environment.
Political Factors
Heinz will at all times comply with the law. It will be normal practice to comply with Government guidelines and relevant codes of practice in labeling and advertising.
All employers are required to conform to the now mandatory workweek and to comply with the wage legislation- minimum wages and overtime.
Heinz had to make all the necessary changes to comply with the Industrial Health & Safety Regulations.
Economic Factors
The state of National Economy. The sales of many of Heinz products may fluctuate depending on the rise and fall of our economy: High disposable income more money to spend on luxury items i.e. meat products. Low disposable income less money to spend purchase of necessary items only i.e. pasta, beans, and potatoes.
The labor market. When there is a tight labor market it is a sellers market for employees and causes a wage increase, thus Heinz would find it hard to recruit employees and would incur high wage expenses. When there is a loose labor market it buyers market for employers and cause a wage decrease, thus Heinz would find it relatively easy to employ staff at a low wage rate.
Social Factors
Attitudes & Health Consciousness. People have become more health and weight conscious, Heinz have moved to meet these changes in consumer attitudes i.e. Low �V Fat Range, organic versions of some of there icon brands, Heinz's Company Nutrition Team will be able to discuss complex dietary needs or answer specific questions on product ingredients.
Lifestyle Changes. Many of today’s consumers do not want to spend time cooking due to hectic lifestyles, so Heinz have created products that can be effortlessly cooked, in convenient packaging that can be eaten from the microwave, and products that can be eaten on the move.
Population/ Age Distribution. Heinz have many products in traditional markets which are well known to the older generation in our population, Heinz have joined forces with companies that have products in the more modern markets to attract the younger generation of our population i.e. Walkers to create a new and unique flavored crisp Heinz Tomato Ketchup Flavor.
Technological Factors
New Product Development. Heinz knows that the innovation process depends on gathering a stream of new ideas from various sources e.g. customer feedback, market research and employees. By encouraging these new ideas, Heinz can also focus on those, which can meet consumer needs and are practical for the market place.
Information Technology. Heinz’s likes to keep up with fast moving technology. Heinz re-launched their salad cream in 2001. A new web site has been created to compliment the brand repositioning as well as television advertisements thus providing a mix of communication routes to meet new technology demands.
Infrastructure Technological Developments. During the past number of years there have vast changes in infrastructure and Heinz needed to change their transport procedures to meet these developments. Heinz makes 1.5 million cans of baked beans every day and the same number of soups. Heinz uses enough tomatoes to fill an Olympic size swimming pool. This will give you some idea of the amount of goods that need to be transported to and from Heinz factories.
Porter’s Five Forces
What is it?
Force Field Analysis is a technique based on the premise that change is a result of a struggle between forces of resistance (forces that impede change) and driving forces (forces that favor change). By using Force Field Analysis, you can learn which course of action will be the best one to implement because it will have the most driving forces and the least resistant forces.
Five forces look at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry.
Why use it?
To determine the best course of action to take.
Threat of Entry
Entry Barriers are low and Exit Barriers are low so firms can easily enter and leave the industry.
Entry Barriers are low as raw materials are easily accessible, and there are no government policies prohibiting entry into the market. Exit Barriers are low so poor performing companies can easily exit.
Threat of Buyers
The power of buyers is the impact that customers have on a producing industry. Buying power is low as Heinz products are very evenly distributed between large players in the market and small distributors. Heinz products are easily purchased by the buyer.
Power of Suppliers
A producing industry requires raw materials - labor, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. The power of suppliers to Heinz is low because they do not depend on any particular supplier i.e. raw materials are easily obtained. Many of Heinz suppliers may depend more on Heinz than Heinz depends on them i.e. Heinz use enough tomatoes a day to fill an Olympic sized swimming pool.
Threat of Substitutes
In Porter's model, substitute products refer to products in other industries. A close substitute product constrains the ability of firms in an industry to raise prices. The threat of substitute to Heinz is medium made up of a contribution of high and low factor. Products with a high threat of substitute to Heinz are other products that are quick and convenient these products compete with Heinz on price i.e. Own Brands, Homestead and Tesco. E.g. Substituting Bean for Spaghetti. Low threat to Heinz is that Heinz all ready has a large product mixed with products already in the markets that would be considered as a substitute. When the consumer is more quality conscious than price conscious Heinz products will nearly always out sell the cheaper product i.e. Heinz long established good quality brand name.
Competitive Rivalry
This force describes the intensity of competitors between existing players (Companies) in an Industry.
Competitive Rivalry to Heinz is medium to high. There is a threat of substitute products not only from the Heinz label itself i.e. substituting Heinz beans for Heinz spaghetti but also from other competing brands e.g. Bachelors and Tesco, however supplier and buyers in the market do not attempt to control i.e. number of competitors is high in the market but however product differentiation is low between competitors.
Mission/Vision Statement:
The only real vision statement Heinz offers is to ‘have a bottle of ketchup on every table.’ This vision statement reinforces the notion that Heinz only produces ketchup. It is unnecessary for Heinz to further identify them with ketchup. The ketchup market is not going to continue to expand much more than it has already. Since Heinz is synonymous with ketchup already, and customers are aware of this high quality product, they should make consumers aware of the other products they offer. Those who feel Heinz ketchup is of the highest quality would be eager to buy other products produced by Heinz believing they too would be of the highest quality. They do need a mission statement. One that identifies them with the wide variety of products they produce. Perhaps a vision statement is not as important since Heinz’s customers are not really looking for any kind of break-through products in the food industry.
Financial Analysis:
In 2000 Heinz income numbers were extraordinary when compared to its competitors. This is especially since their dollar amount in sales was less than many other companies who did not have near the income received by Heinz. This must be a testament to much attention given to becoming efficient and productive, keeping average total costs down. It appears as though Heinz has been very successful in the international market as domestic per capita income spent on ketchup ranked third internationally. 2001 shows a slight increase in Heinz�s assets, but this is more than offset by income figures. Net income was nearly cut in half from 2000. However, sales increased an insignificant amount. This decrease in net income was due to the sale of Weight Watchers in 2000. Heinz also decrease long-term debt and liabilities by nearly 20% in 2001. Overall, Heinz performed better in 2001 financially than in 2000 when the sale of Weight Watchers is left out of the equation.
Recommendation:
There is not much potential for Heinz to revolutionize the food industry, so growth and financial gains should be focused on cost cutting and efficiency strategies. The article failed to mention if Heinz owned all of its suppliers or not. If it does not one way it could bring down costs would be through some vertical integration. Heinz has already participated in diversification, but not conglomerate diversification. There are many opportunities outside of the food industry so it would be beneficial for Heinz to invest outside the food market.