Beruflich Dokumente
Kultur Dokumente
5/6, 2014
Monica Thiel*
School of Social and Behavioural Sciences,
Tilburg University,
Warandelaan 2, 5037 AB Tilburg, Netherlands
E-mail: mthiel@uvt.nl
*Corresponding author
Abstract: Frequent searching for a great solution implies taking a risk on a
start-up company, an entrepreneur, an inventor or a smaller partner. Knowing
how to achieve sustainable innovation can create huge results. This teaching
case addresses differing innovative growth strategies in a fiercely competitive
environment adopted by Mondelz International, formerly known as
Kraft Foods, Incorporated. Overall, Mondelz International aggressively seeks
win-win partnerships and alliances for solutions that create mutual value and
sustainable product innovation.
Keywords: innovation; products; sustainability; competitive advantage.
Reference to this paper should be made as follows: Agarwal, R. and Thiel, M.
(2014) World class sustainable product innovation: a case study, Int. J.
Entrepreneurship and Innovation Management, Vol. 18, Nos. 5/6, pp.397408.
Biographical notes: Raveesh Agarwal is with RIMT, Bareilly, India. His
research interests include marketing research, organisational behaviour and
breakthrough management.
Monica Thiel is a PhD candidate in Social Sciences at Tilburg University,
Netherlands. Her research interests include sustainability, corporate social
responsibility, and competitiveness.
This paper is a revised and expanded version of a paper entitled Mondelz
international: world class sustainable product innovation in fierce competition
presented at the International Conference on Management Cases (ICMC) 2013,
BIMTech Campus, Uttar Pradesh, India, 56 December 2013.
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Introduction
Kraft Foods Inc. changed its name to Mondelz International, Inc. in October 2012
resulting in two independent public companies: Mondelz International, Inc. and Kraft
Foods Group, Inc. (NASDAQ: MDLZ). Monde is a French word meaning world and
delez an alternative to delicious (Kraft Foods, 2013a). Mondelz International, Inc. is a
global leader in gum, biscuits, candy, powdered beverages, chocolate and coffee. The
company is a member of the Standard and Poors 500, NASDAQ 100 and Dow Jones
Sustainability Index with headquarters in Chicago, Illinois, USA and originates from a
combination of three large snack companies beginning with Kraft Foods, Inc., Cadbury in
2010 and Nabisco in 2000.
Mondelz International began its business operations in ice cream, and further
expanded its business operations to several dairy products, resulting in fast expansion
through a large number of acquisitions.
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Product failures
Improvement steps
Kraft revised its innovation processes in 2009. The company decided in 2010 to focus on
ideas that had sustainable potential. A second step required the company to create a
culture shift. Kraft decided to celebrate its innovators making them the heroes and rock
stars of the company. The new mantra became Positive discontent. It encouraged
employees to get angry and motivated enough to make necessary and sustainable change
rather than disengagement. Employees sparked the positive culture shifts that were
previously not adequately engaged in productive activities of the company. Now the
employees are committed to continuous learning for innovation and consistent in
execution and growth. These forms of employee innovation help to foster and create new
product platforms, improve product features and reinvent its iconic brands.
tell it like it is
keep it simple
inspire trust
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The company launched a new portal to move from a single private innovation
submission form where the public can volunteer to submit any idea on any type of project
to innovate with Kraft (IWK). The Kraft Foods Collaboration Kitchen (KFCK) is a
significant change in their open innovation strategy. The new portal manages innovative
ideas from the public on solutions, new products, and technologies with particular topics
in mind that are predetermined internally (Figure 1).
Figure 1
The idea submission process at Kraft (see online version for colours)
Anyone with an innovative idea such as tech savvy individuals, university or college
students, entrepreneurs or someone with great ideas can bring enhanced flavour to the
products they love and bring their ideas to Kraft. The public can review the collaboration
Kitchen guidelines on how to get submit innovative ideas and suggestions. Consequently,
Kraft realised many benefits from open innovation, which are depicted in Figure 2.
Figure 2
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The initiatives of open innovation address delivering external solutions for the companys
strategic consumer needs and demands as a catalyst to accelerate growth. It is clear that
innovation is one of the primary and key goals of Kraft Foods. Innovation is what makes
the company one of the best and well-established food companies worldwide. In addition,
the companys merger with other companies has also helped Kraft Foods grow their icon
brands. Kraft is also committed to fighting hunger and promoting active and healthy
lifestyles. For these reasons, Kraft is taking a collaborative approach by working with
consumers, companies, governments and leading non-governmental organisations. Any
meaningful and successful change from innovation takes time and requires huge
investment. Therefore, Kraft Foods is increasing the companys innovation investments
for several years, thereby driving business momentum.
A brief overview of Kraft innovation investment established in various countries
around the world is listed below:
USA: Newly created product categories are developed by Kraft Foods R&D teams
in New Jersey, New York, Wisconsin and Illinois.
Singapore: Consumer sensory analytics are tested at Kraft Foods R&D Centre in
Singapore to create new indulgent confections in Asia and abroad.
China: The Suzhou R&D Centre team at Kraft Foods has established over 60 new
products since it is installation in the spring of 2009. Recently, a new brand category,
stride gum was launched in China (Seeking Alpha, 2013).
Brazil: The Company has invested approximately USD15 million in its R&D centre
that includes approximately 100 employees across the companys portfolio.
Employee teams devote efforts towards the companys global categories to
accommodate local tastes. In addition, the employees collaborate with their R&D
colleagues in Bourneville, UK to meet the growing demand for the countrys top
popular chocolate brand, Lacta.
France: The European Biscuits R&D Centre in Saclay received about USD 20
million from Kraft Foods that opened in April 2011 and focuses on sustainability,
product quality, and food nutrition.
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Joint development agreements: Kraft Foods may enter into joint development
agreements or other collaborative agreements with innovators that have unique and
potentially protectable ideas for its exclusive use or jointly owned development
agreements with Kraft Foods underwriting the efforts of the patent protection.
Patent or trademark licensing or purchase: Kraft Foods may enter into licensing
agreements or outright purchases from Innovators with existing patent or trademark
protection.
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Mondelz International strives to address the companys energy use within its control by
monitoring the supply chain, agricultural commodity purchases, and manufacturing and
transportation fleet operations (Kraft Foods, 2010). As a result, the company reduced
CO2 emissions in 20052010 by 18%. Mondelz International proposes, By changing
our operations, improving facilities and training employees to modify their behaviour
that will result in an additional 15% reduction of CO2 emissions by 2015 (Ibid).
Incorporating cost and sustainability to foster innovative business strategies, Mondelz
International understood that treating whey replaces approximately 30% of the natural
gas used annually, thereby omitting waste disposal, and fuel and CO2 emissions.
Furthermore, Mondelz International is focusing on reinvesting its supply chain network
by upgrading production lines with leading technologies (Seeking Alpha, 2013). Overall,
the company is committed to finding innovative and sustainable methods to decrease
energy and water needs, wastewater discharge, consumption, and net and solid waste
while increasing profits.
Mondelz International is one of the worlds largest purchasers of cocoa, coffee and
cashews. Consequently, a central point of focus is on sustainable agriculture and local
farming communities. Sustainable farming creates opportunities for education and
protects the environment while promoting The social and economic conditions of local
communities (Mondelz International, 2013a). Robust collaborative partnerships in the
companys supply chain and key partnerships within governments, non-governmental
organisations (NGOs) and industry promote understanding of how Mondelz
International can compete and innovate to develop new consumer sections. The company
welcomes challenges for improving relations with local communities from developing
countries to Increase awareness of responsible farming practices, improve living and
working conditions, have more educational opportunities and respect and protect the
environment (Kraft, 2011). Consequently, the products of Mondelz Internationals are
certified Fair Trade, Rainforest Alliance and 4C Association. Recently, the company
developed a Cocoa Life pilot programme with the Ivorian Government to increase
sustainable cocoa supply production in Cote dIvoire, Africa. This pilot programme
promotes sustainable farming, economic development and gender equality, for farmers in
local communities.
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Kraft Foods, Inc. announced the division of its business operations into two
independently listed companies, Mondelz International and Kraft Foods Group, Inc.,
inviting streamlined portfolios of both companies to concentrate their resources on key
brands, categories, innovation and marketing. Mondelz International covers a large
geographic market, thereby creating a good position to drive volume growth in emerging
focus markets such as Brazil, India and Russia, where volume growth prospects in snack
food categories are positive. In juxtaposition, Kraft Foods Group Inc. will have to focus
more on value driven growth, through continuous innovation in the mature North
American market environment. Despite these innovative business strategies, there are
challenges to establish future success. One key challenge of both companies is to master
fierce competition and multinational control in growth categories and markets. For
example, Mondelz International has 1% value share in China for confectionery brands,
while the market leader, Mars Inc. holds an 18% share. Fierce competition from
international companies in key markets can result in considerably higher competitive
barriers for further business development and expansion. Nonetheless, Kraft Foods
entire operations in China will be reestablished under Mondelz International, and the
reorganisation will not decrease the it is competitive position.
The current scale of Kraft Foods Inc. in North America will be divided by a 40:60
ratio between Mondelz International and Kraft Foods Group, Inc. Prior to the structural
split, Kraft Foods Inc. was the largest North American food company with 2012 retail
value sales of USD29 billion. However, after the structural split, the company ranks third,
behind PepsiCo and Nestl. The structural split in scale of infrastructure in North
America negatively impacts manufacturing and distribution competitive advantage,
thereby raising logistical challenges, and complex conditions and processes to the
management and development of brands under shared ownership, such as Philadelphia or
Maxwell House. The unstable macroeconomic environment in Western Europe and North
America, coupled with highly volatile commodity prices, significantly contributes to a
challenging and competitive innovative operating environment for the two new launched
companies (EuroMonitor Blog, 2013).
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Conclusions
There are benefits to open innovation such as developing new categories, increasing
profits while enhancing the well-being of consumers and the natural environment.
Nevertheless, the benefits may not sustain growth and competitive advantage due to
continually changing volatile markets in advanced and emerging economies. What works
in the present time may quickly fade necessitating robust and changing innovative
strategies. A company cannot constantly change the company structure and alignment
effectively in temporary frameworks. Moreover, consumer and customer behaviour, and
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decision-making are complex and cannot be managed solely by food nutrition, quality,
product cost and sustainability. Therefore, innovative change for greater competitive
advantage within the present proper paradigm may keep a company aligned sustainably
to ensure the well-being of consumers and the natural environment while increasing
profits. For example, Mondelz International must invest in key strengths of its portfolio
to sustain growth in fierce competition and master numerous challenges both in focus
categories and operating environments, and in central developed markets for long-term
success.
Disclaimer
This case has been written solely for class discussion, for educational and development
purposes and is not intended to illustrate either effective or ineffective handling of an
administrative situation or to represent successful or unsuccessful managerial decision
making or endorse the management views. The authors may have disguised or
camouflaged some of the names, events, financial and other recognisable information to
protect the identity of individuals and confidentiality. The case uses both primary and
secondary sources of information.
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