Competitive strategies used by Heinz against Beech-Nut
It was Michael Porter who formulated four generic competitive strategies that can be adopted by a business in for it to gain competitive advantage. One of the competitive strategies that Heinz has implemented in differentiation strategy, here Heinz has formulated different products such as strained carrots, apple sauce among others so that it can cater for different customer segments. The company main objective is to offer products that Beech-Nut is not offering. Similarly, the company has adopted market expansion strategy, whereby by it has focused on expanding its operations to new markets in different countries where Beech-Nut does not have presence. Indeed, as noted in the case study, Heinz is the leading company of baby food with estimated global sales of 1 billion.
Competitive strategies used by Beech-Nut against Heinz
Accordingly, from the case study, we can say that Beech-Nut is following cost leadership competitive strategy. In this kind of strategy the company aims at being the lowest-cost company within the industry. The company focuses on reducing cost of production so that it can low its final price for its products. The philosophy behind this strategy is that if that the company will be able to enjoy more profits than its competitors if it reduces it costs. Nonetheless, because of this strategy, the level of differentiation of its products is not high its only at the level that can be accepted by the majority of its customers. As seen form the case, Beech-Nut ensures a price difference with Heinz by selling its products at slightly lower price than Heinz. This aspect as noted by Porter (1985) is strategy to increase its market share, through low pricing strategy. Indeed, it has succeed has the company commands 15.4 of the market share as from the case study
Question 3, b) Are the barriers to entry high or low for this market What are they
Baby food industry has got high barriers to entry, this simply because the industry his highly regulated by various regulating bodies because baby food is a sensitive product that needs to be watched carefully. Below are three main barriers within the industry.
High regulations and licensing
Another barrier in the industry is the huge initial capital.
High competition within the industry discourages new entrants
Question 4 What were the arguments used by Heinz and Beech-Nut in favor of the merger
The two companies that they are not actually competing one another when it comes at the retail level. In addition, they state that their individual customers do not consider their products as substitutes of one another. More so, just one of the two brands from these two companies is available at any particular retail shop. Thus according to them this will result in a very slight competitive loss occurring form the merger.
The second point put forward by these companies is that the merger will greatly improve the operations of the two companies as a single company and make it to be more effective. This effectiveness will help the merged company to compete more competitively, especially with Gerber, a major competitor within the industry.
The third point supporting the merger by the two companies is innovation. According to the companies, their merger will enable them innovate more products or improve on the existing ones. This will as well enable them compete well with Gerber Company. Heinz and Beech-Nut notes that they lack enough shelf presence (All Commodity Volume) in the retail shops around the country, thus their merger will give them enough shelf presence and thus improve their competitiveness.
Conclusion
The current business environment is more competitive than ever, this has resulted in many organizations re-examining their business strategies in order to formulate competitive business strategies that can give them an advantage over their competitors.