Heinz - Competitive Strategy
1. The challenges
Heinz is a multinational company and observers suggest that the company has lagged behind its competitors under the globalisation race. The company is facing the following two challenges:
Poor brand image
Heinz does not have a consistent product range across the international markets with the exception of the Heinz Tomato Ketchup and the Weight Watchers brand. They are far lagged behind as their major competitors such as Procter and Gamble, etc have been successful by focusing on global brands. As stated by McCarthy et al (1999), brands are of great importance to their owners as they help to identify the company・s marketing mix and help customers to recognise the company・s products and advertising.
Furthermore, the company・s brands are often perceived as being downmarket. With such a low image, it is difficult to expand the company・s products to gain widely recognition and purchases.
Insensitive to market trends
Heinz has not kept in pace with its competitors not only the global brands, but also its insensitivity to the market trends. The chilled food market is growing fast in the industry but Heinz has not seriously entered the market and is lagged behind its competitors such as Unilever and Kraft.
2. Alternative strategies
The following strategies can be considered to improve Heinz・s competitive position in the global market:
Option 1: Nothing to be done
This option is status quo and remains the current strategies as multinational company with a dual adaptation policy, which treats each country market as culturally unique, adapts product line and communication for each country with different brand names.
This involves the company in no substantial change and risk in the short-term. However, this conservative management style is not responsive to the dynamic of the competition and environments. The company will eventually lose its edge for survival in the long run.
Option 2: Branding strategy
This option involves the rethinking of the current branding strategy. According to Kotler et al (1999), a brand can deliver four levels of meaning: attributes, benefits, values and personality so Heinz must redefine its overall branding strategy, which might affect the long-term sustainability of its products. The following alternatives are available:
(1) Status quo, which is multibrands and new brand strategies, using new names introduced in the same product category or new brand names in new product categories. The advantage is that there is not necessary for a coordination, which requires cost to maintain. The disadvantage is that there is a lack of unique image and consumers do not remember the corporate name. This will affect the long-term development of the company in the focus of globalisation strategy.
(2) Corporate branding strategy where the company makes its company name the dominant brand identity across all of its products. The main advantages are economies of scale in marketing investments and wider recognition of the brand name. It also facilitates introduction of new products, especially when the corporate name is well established. The disadvantage is when the brand image is bad, it will affect the sales of all product lines. Hence the company has to be committed to protect this valuable asset.
Option 3: Global marketing strategy by own resources
This option adopts straight extension strategy to market products without any change, which uses a standardised marketing mix in all foreign countries.
This strategy is tempted as it involves less additional product-development costs, manufacturing changes or new promotion. The company can gain synergy between the strategic business units in the long-term. In addition, it helps to build brand awareness and competitive advantages, which creating consistent values. Finally, the company can keep full control over the investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives.
However, this strategy can be costly in the long run if products fail to satisfy foreign consumers. There are number of issues to be considered due to the diversity of different countries, of which the company may face many risks as a result of ignoring cultural differences. Also the standardisation involves a huge investment in the short-term for all the changes.
Option 4: Transnational strategy by own resources
This option adopts communication or product adaptation strategy. It is to market products with maximum standardisation but can be adapted whenever culturally necessary. It attempt to simultaneously optimise efficiency, local responsiveness, and learning throughout their worldwide operations (Kedia et al, 2002).
This strategy considers the diversity of each country but the drawback is that the company require investing heavily to adapt different requirements.
Option 5: Joint Venture
This option adopts strategy from option 3-4 but uses a joint venture strategy to market the products. It involves three alternatives:
(1) Licensing is a system in which a licensee pays commissions or royalties on sales or supplies used in manufacturing (Dibb et al, 2001). Most famous apparel brands are doing this way for their international strategies. This is the minimum risk of join venture and the company is required to provide production expertise to ensure the quality. The downside is the company has less control over the licensee and possibility to create a competitor when the contract ends.
(2) Franchising is a form of licensing granting the right to use certain intellectual property rights, such as trade names, brand names, designs, patents and copyright (Dibb et al, 2001), for example IKEA. The advantage is that the company retains control over the manner in which the business is conducted and assists the franchisee in running the business.
(3) Joint ownership is a partnership between a domestic company and a foreign company (Dibb et al, 2001). The drawback is the possibility of disagreement over investment, marketing or other policies between partners.
Option 6: Product invention
This option adopts strategy to create new products for foreign markets. As Heinz is lagged behind in the market trends, they need to catch up in product invention to gain opportunities from the globalisation. This strategy can be costly as the company will need to invest heavily in R&D and promotion to gain product awareness. However the payoff are worthwhile when the newly invested product is successful.
Option 7: Market Positioning
This option requires the company to rethink their market positioning strategy. Heinz is perceived as downmarket brand and market positioning is important as it is the way the products are defined by consumers on important attributes, of which the place the products occupy in consumers・ minds relative to competing products (Kotler et al, 1999). There are three alternatives:
(1) Strengthen current position in the mind of consumers
(2) Search for new unoccupied position that is valued by enough consumers and grab it
(3) Deposition or reposition the competition
This strategy will involve huge investment such as promotion campaigns but can serve the purpose of securing a worthwhile position in the prospect・s mind (Kotler et al, 1999).
3. Recommended strategy
The strategy chosen should best reflect an analysis of market potential for the product line, a company・s capabilities, and the degree of marketing involvement and commitment the company is prepare to make (Price, 1997).
Option 1, 2(1) and 7(1) are not feasible for the challenges that Heinz is facing and the company has to change to meet the threats and opportunities. Option 3 does not provide flexibility to the diversity of different countries so it is not feasible in reality especially for food industry.
Hence, it is recommended Heinz to adopt a combination of the following strategies:
Option 2(2) Corporate branding strategy
This strategy is aligned to the new objective of the company in standardisation of brands. In the new strategy, ．Heinz・ should be used as the corporate brand and adopts a new logo. All products of each category are required to streamline to form the new corporate brand strategy. For example, the petfood might use the brand name such as ．Heinz 9-Lives・ for cats and ．Heinz Reward・ for dog with different favours for all countries and abandon the other names.
Option 4 Transnational strategy
This strategy allows standardisation of most process except slight modification for different countries so it allows flexibility. It involves lesser change than option 3 but the company still requires putting a lot of efforts to investigate which activities or processes require standardisation and adaptation. Extensive market research is suggested to contribute the success of this strategy.
Option 5 Joint venture
This strategy reduces much risk and cost that the company may encounter in the development of the above strategies. Option 5(1) and 5(2) are more favourable than option 5(3). The company may consider to formulate a new company, for example Heinz Worldwide Inc, to manage global brand strategy across its business activities, additional licensing and product opportunities planned as part of the Heinz global expansion. The company can tactfully direct, teach, evaluate the brand・s communication to ensure consistency while at the same time preserving the autonomy of local management (Chevron, 1995).
Option 6 Product invention
This strategy is necessary due to the intense competition globally. With the 5(1) or 5(2) strategies, the company may relief their cost burden and human resources to focus on its R&D for core competence and product invention.
Option 7(2) and 7(3) Market positioning
The company needs to position itself in a higher market. For example, they may reposition itself as a ．healthy food・ to meet the socio changes in the recent years. With the option 5(1) and 5(2), Heinz may consider to forward integrate to retail business and open their own ．Heinz shop・ all around the world. The retail shops use the same value and renovation to sell its full line products with distribution of its values. This can improve brand image and positioning.
Finally, Heinz should also consider the following issues for the strategy formulation:
(1) Appropriate organisational structure
(2) Skills of employees and professionalism available to execute the strategy
(3) The level of commitment and motivation from the employees
(4) The nature and extent of information communication and reporting systems needed to support the strategy
(5) The commitment of top management
(6) The new vision, values and strategy are communicated and shared with all in the organisation
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