Kraft
Kraft foods is one of the leading food manufacturing companies in the United States, providing employment to roughly 127,000 employees globally with 46,500 from North America. The company has however, had to make formidable decisions in the past few months due to the consistent losses the company has incurred. The big question that is raised is; can the company blame its poor financial performance on the depressing economy or on its poor management techniques? The country has started to show signs of recovery with its GDP rising and the ordinary’s citizen purchasing power increasing, yet several companies, Kraft included still has yet to show any improvement in its performance. The company decided to reduce its operating costs and to do so, the CEO of Kraft foods Inc. Tony Vernon, believed that solution lays in restructuring the company which is followed with loss of employment in 1600 positions that will leave very many people with any source of livelihood (Associated press ).
The worst hit department is in the sales department where 40% of the cut back lies among the sales people. The company decided to outsource a major part of the sales people by contracting two business agencies: Acosta Sales and Marketing and big box retailer and Crossmark to handle the company’s store sales. Though the move will reduce its operation cost helping the company increase its share prices, the move will have a negative effect on the country’s move to reduce unemployment rates as it recovers from recession.
Kraft foods Inc. made a move of splitting the company into two major branches; Global snacks company to be primarily based in Canada and North American grocery business in a bid to target more customers and increase its market share. This move did not work and the management was still forced to let go a large number of its employees in a bid to keep the company afloat and start making profits. The move to cut back is always a good move for a poor performing company but affects the employees negatively. The company decided to consolidate a number of its management offices from its current four to two, a move meant to reduce operation cost. Due to consolidating its offices, work of many employees became redundant as one job was done by more than one person, it therefore, became necessary for the company to let go a number of management and administration employees so as to ensure those remaining could manage to do a lot of work with minimum work force.
The recession did have a grave effect on the economy, banks stop giving out loans to companies due to fear of non-repayment when the company became bankrupt. Lack of extra capital from banks forced many companies to close down and those that survived like Kraft food Inc. performed poorly. Tony Vernon said the he recognized the impact the direction the company was taking was having on the people, but it was however, a necessary step to enable the company continue investing in its brands while operating in the present economic and competitive pressures among the existing companies.
The main question of the company’s poor performance being pegged on the current recession was ignored by the CEO stating that it was the poor management policies adopted that led to the poor performance. The economy is improving yet the company continues to make losses. The CEO stated that if the profits are not commensurate with the management expectations, then certain eliminations or cutbacks have to be made in a bid to boost its profits and reduce cost. After the move, the company had a stock increase of up to 58% to $38.35 and a share price of $ 2.29. The move to cut back is therefore, a vital one for the company’s continued existence in the market.
Work cited
Associated Press. Kraft Foods to Cut up to 1,600 positions. Jan 17, 2012. Retrieved from
http://finance.yahoo.com/news/kraft-foods-cut-1-600-170800634.html
