Question

Use all applicable material and tools in the Discussion Boards and etextbook Chapters 6,7,8 to answer the attached set of questions relating to the Mondelez International case (this case is in the online textbook MGMT 5390).

What is the Mondelez International Company’s corporate strategy?

What is your assessment of the long-term attractiveness of the industries represented in Mondelez Internationaly Company’s business portfolio?

What is your assessment of the competitive strength of Mondelez International Company’s different business units?

What does a 9-cell industry attractiveness/business strength matrix displaying Mondelez International Company’s business units look like? Identify its strongest business units.

Does Mondelez International's portfolio exhibit good strategic fit? What value chain match-ups do you see? What opportunities for skill transfer, cost sharing, or brand sharing do you see?

What is your assessment of Mondelez International Company’s financial and operating performance ? (Refer to the financial ratio file under Course Documents ... remember there are more types of important ratios than profitability ratios.)

What action do you recommend that the Mondelez International Company’s management take to improve the company and increase shareholder value? Your recommended actions must be supported with convincing, analysis-based argument.

Answer 1

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What is Mondelēz International’s corporate strategy?

In 2007, the company’s upper management and its board believed the underlying cause of its poor market performance was a corporate strategy that was not sufficiently focused on growth. The company implemented a corporate restructuring in 2012 to createa high-growth global snacks business and a high-margin North American grocery business.

What is your assessment of the long-term attractiveness of the industries represented in Mondelez Internationaly Company’s business portfolio?

Mondelez International has 12 brands with annual revenues exceeding $1 billion each and approximately 80 brands that generated annual revenues of more than $100 million each. Their stock prices are only going up. Kraft foods are the second largest food company in North America, which would only increase stock prices. The success of manysmaller businesses under the Mondelez will continue to drive its successes.

What is your assessment of the competitive strength of Mondelez International Company’s different business units?

It is good, Mondelez divided into five reportable segments based on geography (North America, Latin America, Asia Pacific, Europe, and Eastern Europe, Middle East, and Africa (EEMEA)), each segment has five product categories; biscuits, chocolate, gum and candy, beverages, and cheese . Although they went into competitive markets that demanded top of the line distribution and business kill overall, brand building, consumer health and wellness, and advertising and promotions were all critical to success in the industry. Mondelēz’s ability to compete against lower-priced branded and store-brand products was a function of its ability to successfully differentiate its products from lower-priced alternatives.

What does a 9-cell industry attractiveness/business strength matrix displaying Mondelez International Company’s business units look like? Identify its strongest business units.

Mondelez has a strong competitive strength business position, and long term industry attractiveness which puts them in the upper left section of the 9-cell industry, which makes them high priority for investments.

Does Mondelez International's portfolio exhibit good strategic fit? What value chain match-ups do you see? What opportunities for skill transfer, cost sharing, or brand sharing do you see?

I believe Mondelez International portfolio exhibits good strategic fit because 12 of their brands have annual revenues exceeding $1 billion each and approximately 80 brands that generated annual revenues of more than $100 million each. When it comes to value, chain match ups all business units share marketing power, distribution channels to create strong selling capacity. All business units share direct or indirect customer service with the Mondelez brand name. Being that they are a multi business organization, they have the ability to share skills that could help create stronger operation performance.

What is your assessment of Mondelez International Company’s financial and operating performance ?

My overall evaluation would be that this new change and reconstruction has been better for the company. If you look at their net revenue, it has been increasing. The evidence that supports that the shareholders have been benefiting would be the massive increased in the earnings per share. In 2013, it was 2.21 and in 2015, it was 4.49, the dividends were even increased.Mondelēz management was confident in its corporate strategy and projected that the company would achieve 2 percent organic revenue growth and a 15–16 percent operating income margin to deliver double-digit growth in EPS by year-end. One of Mondelez International corporate long-term goals are organic net revenue growth at orabove category growth rates, which would allow the operation income growth to continue a constant currency and remain in the double digits. Mondelez is mainly focused on their portfolio and cutting costs for long- term growth. There is also a major plan set in place that will allow them to reinvent its supply chain, which is on track to deliver $3 billion in gross productivity savings, $1.5 billion in net productivity and $1 billion in incremental cash flow over three years

What action do you recommend that the Mondelez International Company’s management take to improve the company and increase shareholder value? Your recommended actions must be supported with convincing, analysis-based argument

Despite a challenging macro environment, I believe Mondelez’s management should continue to launch different brands in different regions in order to capitalize on potential growth opportunities. With a growing marketing, shares and sales will rise. The evidence is by the launch of Milka chocolate in China, a 2.8 billion market with significant growth and substantial investment in e-commerce. Modelēz International’s increase in income from operations from 2014 to 2015 was $7.3 billion out of which $6.8 billion was attributed to a pre-tax gain from the spin off of its coffee brands in Europe. The company’s revenues in all of its geographical segments, except North America, were on a decline. The major reasons for declining income in these segments were unfavourable exchange rates, elimination of lower-margin products, increasing ingredient costs leading to increased prices and reduced consumer demand, higher advertisement and promotional expenditure, and restructuring costs. Modelēz must ensure that its revenues are in excess of its costs by way of redesigning its promotional strategies. For instance, because the inflated prices have reduced consumer demand, the company must advertise its products such that it conveys their value proposition in a manner that encourages consumers to pay the premium. Besides, the company must understand the market it’s operating in. The elimination of coffee brands in the European market significantly impacted its revenues. The company must revisit its decision on their spin off of coffee brands. Since the ingredient costs are high, the company must find alternative suppliers to take advantage of lower costs of inputs.

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