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To deal with the slump, different strategic approaches have been taken. Smucker’s, for
example, has moved into pet food through its acquisition of Big Heart Pet Foods (maker
of Milk-Bone dog treats and Meow Mix cat food). Others, such as Nestlé (maker of Crunch
and Butterfinger candy bars and other chocolates), are removing artificial ingredients
such as colors and dyes from candy and chocolate. Hershey Company and Mars, Incor-
porated, who make up 65 percent of the global markets share in packaged candy, are
reducing high fructose corn syrup and increasing the sugar content. Mondelēz is seeking
to reduce saturated fats and sodium in its snacks by 10 percent. However, these changes
do not allow these firms to overcome the problem of rapidly changing consumer tastes
toward nature food.
Grocery stores are also seeking to enter in this natural segment. To compete with Trader
Joe’s, Whole Foods, and the trend among other supermarkets (such as Kroger and Safeway)
who are moving into in this segment, Walmart is introducing a line of low-priced organic
foods. Walmart is joining Wild Oats Marketplace (an independent producer in the natural food
segment) “to place about 100 organic products into its store” and the “Wild Oats line will be
priced 25 percent lower than competing national organic brands.” However, Hain Celestial has
the more direct strategy and image to take advantage of this trend and sell to those outlets
seeking to distribute more natural and organic food products.
This same trend is occurring in restaurants. Chipotle Mexican Grill, Inc. has successfully
taken advantage of the trend towards natural foods, while McDonald’s is struggling to take
advantage of the same trend.
Sources: J. Bacon, 2015, Brands capitalise on health-driven resolutions, Marketing Week, http://www.marketingweek.com,
January 29; A. Chen & A. Gasparro, 2015, Smucker’s latest food firm hurt by changing tastes, Wall Street Journal,
February 14–15, B4; A. Gasparro, 2015, Indigestion hits food giants, Wall Street Journal, February 13, B1; A. Gasparro, 2015,
Nestlé bars artificial color, flavors, Wall Street Journal, February 18, B6; M. Esterl, 2015, PepsiCo earnings, revenue drop
on foreign-exchange impact. Wall Street Journal, http://www.wsj.com, February 12; L. Light, 2015, How to revive McDonald’s,
Wall Street Journal, http://www.wsj.com, February 11; M. Alva, 2014, Organic growth comes naturally to Hain Celestial Group,
Investor’s Business Daily, July 24, A5; A. Kingston, 2014, Juice junkies, Maclean’s, June 30, 64–66; SCTWeek, 2014,
Walmart to sell low-price organic food, 2014, SCTWeek, April 11, 4.I
ncreasingly important to firm success, strategy is concerned with making choices
among two or more alternatives.^1 As noted in Chapter 1, when choosing a strategy, the
firm decides to pursue one course of action instead of others. The choices are influenced
by opportunities and threats in the firm’s external environment^2 (see Chapter 2) as well as
the nature and quality of the resources, capabilities, and core competencies in its internal
organization^3 (see Chapter 3). As shown in the Opening Case, Hain Celestial Group has
the right capabilities (strong producer of natural and organic food products) matched to
an opportunity in the industry environment (strong consumer demand for natural and
organic food products) which has made it a formidable competitor producing above-
average returns. However, other branded food producers have struggled to meet chang-
ing consumer tastes and have realized poorer performance as a result.^4
In previous chapters, analysis of the external environment and of internal firm
resources and capabilities, which is the first step in the strategic management process,
was discussed. This chapter is the first on strategy, which is the second part of the strate-
gic management process explained in Chapter 1. The fundamental objective of using any
type of strategy (see Figure 1.1) is to gain strategic competitiveness and earn above-
average returns.^5 Strategies are purposeful, precede the taking of actions to which they
apply, and demonstrate a shared understanding of the firm’s vision and mission.^6 An effec-
tively formulated strategy marshals, integrates, and allocates the firm’s resources, capabil-
ities, and competencies so that it will be properly aligned with its external environment.^7
A properly developed strategy also rationalizes the firm’s vision and mission along with