Question

The H. J. Heinz Company, better known simply as Heinz, is an American food processing company based in Pittsburg, Pennsylvania. Originally, the company was founded by Henry John Heinz in 1869. Heinz manufactures thousands of food products in plants on six continents, and markets these products in more than 200 countries and territories. The company claims to have 150 number-one or number-two brands worldwide. Heinz ranked first in ketchup in the US with a market share in excess of 50%; the Ore-Ida label held 46% of the frozen potato sector in 2003. Since 1896, the company has used its “57 Varieties” slogan; it was inspired by a sign advertising 21 styles of shoes, and Henry Heinz chose the number 57 even though the company manufactured more than 60 products at the time. In February 2013, Heinz agreed to be purchased by Berkshire Hathaway and the Brazilian 3G Capital for $23 billion. On March 25, 2015, Kraft announced its merger with Heinz, arranged by Berkshire Hathaway and 3G Capital. The resulting Kraft Heinz company is the fifth largest food company in the world. Berkshire Hathaway became a majority owner of Heinz on June 18, 2015. Based on the information provided do the following: a) Indicate the growth strategy used by Heinz on March 25, 2015; and b) Think for a moment about the company’s core competences that represent its business domain to help the company to grow further. You can opt between two possible Diversification Strategies - Concentric Strategy and Horizontal Strategy. Explain Your answer.

Answer 1

A. The strategy adopted by Heinz on March 25 2015 was of growth through acquisition. In acquisition, a company purchases another company to expand its operations and since Kraft Merged with heinz, this was acquisition expansion strategy.

B. I will use Horizontal diversification strategy. This is because the company has, for most products, already exhausted the concentric diversification strategy. In concentric diversification a company diversifies using similar products (for example, a ketchup company starts producing Salsa). It will clear that Heinz, given its huge number of products, already produces most of them. In horizontal diversification, company branches out in closely aligned products (such as an airconditioning company starting to produce televisions). In this strategy, Heinz can start producing bakery products, flour and such raw cooking materials etc. if it wants to go further, it can start producing ovens, flour machines etc.