Kellogg’s Business Environment Analysis

Kellogg’s—An Overview: Past & Present

During 19^th century, breakfast consumption pattern was changed in USA due to food reforms (Puis, 2007). Major driver behind this change was shift in breakfast trend from traditional meat to cereal (Puis, 2007).  This shift in breakfast trend created the long term business opportunities for cereal manufacturers (Puis, 2007) and Kellogg’s grabbed this opportunity efficiently. Currently cereal industry is growing rapidly due to increase in healthy breakfast trend (Lucintel, 2013).

Kellogg was founded in 1906 and now Kellogg is largest US based international cereal and packaged food manufacturing company. Kellogg is specialised in cereal and convenience foods (Yahoo Finance, 2014). Its business is divided into two major divisions which are known as Kellogg North America and Kellogg International (Newsroom Kellogg Company, 2014). Its major products also include cookies, snacks, waffles, energy cereal bars, pastries, veggie foods and hygienic beverages (Yahoo Finance, 2014). Its distribution channels include brokers, distributors, supermarkets and grocery shops (Yahoo Finance, 2014).

Kellogg’s Worldwide Growth

According to Kellogg History (2014) Kellogg has achieved many milestones since 1906 to date which are listed below.

1900s: Kellogg was founded on 1906 and got immediate success due to diverse product line and innovative packaging style. 1910s: Kellogg successfully captured further market share by introducing new brands which were compatible with pasteurized milk. Moreover Kellogg entered in global market in 1914 and marketed its products in Canada. 1920s: Kellogg expanded its international operations and entered into the markets of UK and Australia. It further expanded its brands and got successful response from consumers. 1930s: Despite of economic crisis in USA, Kellogg expanded its business operations aggressively. 1960s: Kellogg further expanded globally and entered in markets of Africa, Europe and Asia. 1970s: Kellogg issued its sugar quantity in product list voluntarily in response to government awareness programme regarding nutrition and fitness.

1980s: Kellogg installed advanced technological equipment’s to ensure high quality of its products. 1990s: Kellogg sales boosted with the emergence of new brand of convenience food “On the Go”. During this period competition grew for Kellogg locally and globally but Kellogg was still market leader. In this period Kellogg initiated W.K. Kellogg Institute for Food and Nutrition Research in Battle Creek with investment of $75 million. 2000s: Kellogg acquired Keebler Food Company, a leading manufacturer of crackers and cookies, in $4.56 billion. Moreover, Kellogg also acquired many other companies and expanded its product line never matched/imitated by any of its competitor. During 2009, Kellogg issued its first CSR report globally. 2013: In sales volume of $14.8 billion, Kellogg is largest company in cereal industry worldwide, largest in frozen food products in Northern American and second largest in production of snacks, crackers and cookies (Kellogg Company Fact Sheet, 2014). Kellogg has won many corporate awards whose brief description is shown in Figure 1.

Figure 1: Kellogg Award List (Source: Kellogg Company Fact Sheet, 2014)

Kellogg’s Corporate Objectives

Every business starts to achieve something with the help of its ideas and resources and that desired achievement is termed as corporate objective (McDonald & Dunbar, 2004, p.387).

Figure 2: Start your Day with Kellogg’s (Source: Kellogg Company, 2014)

Companies normally accomplish these corporate objectives through corporate strategies which includes the utilization of resources for objectives accomplishment (McDonald & Dunbar, 2004, p.387). Kellogg has corporate objective to amuse and develop the world through its innovative brands and quality foods. Kellogg wants to achieve this strategic objective through its core values such as reliability, enthusiasm, accountability, simplicity, humility and results. Kellogg has adopted SMART objective approach which means objectives set by Kellogg are specific, measureable, achievable, realistic and time-related (Business Case Studies, 2014).

Kellogg’s Key Brands

Being the market leader in breakfast cereal industry the company has been offering a wide range of 29 diverse brands fulfilling customer varying needs efficiently (Kellogg Company, 2014).

Figure 3: Brand Development Strategy (Source: Kellogg Company, 2014)

A brief list of Kellogg’s brands is presented in figure 4.

Figure 4: Kellogg’s Brands (Source: Kellogg Brands, 2014)

Branding always has strong impact on consumer mind and product positioning can be developed by managing the brand (Business Case Studies, 2014). Kellogg has created a unique positioning in the mind of consumers by using its aims and objectives (Business Case Studies, 2014).

Figure 5: Branding Process (Source: Business Case Studies, 2014).

Despite of large number of diverse brands as shown in figure 4, Kellogg has successfully positioned its brands successfully with multiple product branding and each product communicates a clear message to consumers (Business Case Studies, 2014). Kellogg’s annual expense of brand advertisement and marketing goes beyond $1 billion (Rooney, 2012).

Kellogg’s Strategic Group and Generic Strategy

Competitive structure of any industry can be understood by evaluating strategic group (Aaker & McLoughlin, 2010). Strategic group includes those companies which share similar competitive strategies, characteristics, and assets & competences (Aaker & McLoughlin, 2010). Kellogg has been working in industry of Processes & Packaged Goods and its strategic group includes companies like General Mills, Nestle S. A. and Ralcorp Holdings, Inc. (Yahoo Finance, 2014).

According to Porter’s generic strategies framework, it is concluded that Kellogg has adopted differentiation generic strategy. Because cereal industry is very broad industry and Kellogg is offering its products with premium price. Moreover, Kellogg has achieved its differentiation generic strategy through the chain of its diversified and strongly positioned brand portfolio.

Figure 6: Porter’s Generic Strategy Framework (Source: Botten, 2009)

Porter’s Five Forces Analysis of Kellogg’s

Threat of New Entrants

As cereal market is growing which attracts many global players to enter the market (Lucintel, 2013) but it is not possible for new companies to enter the market and compete with Kellogg due to its high brand positioning and high quality products so threat of new entrants for Kellogg is medium.

Threat of Substitutes

As Kellogg is largest cereal producer in market and has strong brand positioning and loyal customers so consumers hardly shift to other substitutes which lower the threat of substitutes for Kellogg. So, substitute products threat is lower.

Bargaining Power of Suppliers

Major raw material for Kellogg includes corn and rice and abundance of suppliers are available for this raw material which reduces overall bargaining power of supplier for Kellogg.

Bargaining Power of Buyers

Trend of healthy breakfast has increased in consumers and consumers do not hesitate to pay for eating quality and hygienic meal. Moreover, Kellogg provides high quality nutrition food products which lower the bargaining power of buyers as well.

Rivalry among Competitors

Major competitors of Kellogg include General Mills, Nestle S. A. and Ralcorp Holdings, Inc. (Hoovers, 2014) for which Kellogg is facing an intense competition from General Mills for which Kellogg has developed a wide range of diverse brands and product line to fulfill consumers’ varying needs. So, rivalry among competitors is very high.

References

Aaker, D. A. and McLoughlin, D., (2010), Strategic Market Management: Global Perspectives, 1^st ed. UK: John Wiley & Sons.

Botten, N., (2009), CIMA Official Learning System Enterprise Strategy, 1^st ed. UK: CIMA Publishing.

Business Case Studies., (2014), Introduction - Using aims and objectives to create a business strategy - Kellogg's | Kellogg's case studies, videos, social media and information | The Times 100, [online] Available at: http://businesscasestudies.co.uk/kelloggs/using-aims-and-objectives-to-create-a-business-strategy/introduction.html#axzz2yHyOagU4 [Accessed: 7 Apr 2014].

Business Case Studies., (2014), What Is A Brand - Re-branding a Corporate Image - Kellogg's | Kellogg's case studies, videos, social media and information | The Times 100, [online] Available at: http://businesscasestudies.co.uk/kelloggs/re-branding-a-corporate-image/what-is-a-brand.html#axzz2yHyOagU4 [Accessed: 7 Apr 2014].

Hoovers., (2014), Kellogg Company Names of Competitors, [online] Available at: http://www.hoovers.com/company-information/cs/competition.Kellogg_Company.b530620d866a5afc.html [Accessed: 7 Apr 2014].

Kellogg Brands., (2014), Kellogg's Brands | Explore all Kellogg's Has to Offer and New Products, [online] Available at: http://www.kelloggs.com/en_US/our-brands.html [Accessed: 7 Apr 2014].

Kellogg Company Fact Sheet., (2014), Kellogg Company News Room - Fact Sheets/Positions, [online] Available at: http://newsroom.kelloggcompany.com/fact-sheets [Accessed: 7 Apr 2014].

Kellogg Company., (2014), Our Values, [online] Available at: http://www.kelloggcompany.com/en_US/our-values.html [Accessed: 7 Apr 2014].

Kellogg History., (2014), Check out the Kellogg's® History Website, [online] Available at: http://www.kellogghistory.com/history.html [Accessed: 7 Apr 2014].

Lucintel., (2013), Global Gum and Cereal Bars Confectionery Industry 2013-2018: Trend, Profit, and Forecast Analysis, [report] Research and Markets.

McDonald, M. and Dunbar, I., (2004), Market Segmentation: How to Do it, How to Perform it, 1^st ed. Burlington: Elsevier Butterworth-Heinemann, p.387.

Newsroom Kellogg Company., (2014), Kellogg Company News Room - Company Overview, [online] Available at: http://newsroom.kelloggcompany.com/index.php?s=27521 [Accessed: 7 Apr 2014].

Puis, E., (2007), Angels and Vegetables: A Brief History of Food Advice in America, Gastronomica: The Journal of Food and Culture, 7:3, 34 – 44.

Rooney, J., (2012), Kellogg's Completes Major Brand Overhaul, [online] Available at: http://www.forbes.com/sites/jenniferrooney/2012/05/10/kelloggs-embarks-on-major-brand-overhaul/ [Accessed: 7 Apr 2014].

Yahoo Finance., (2014), K Profile | Kellogg Company Common Stock Stock - Yahoo! UK & Ireland Finance, [online] Available at: https://uk.finance.yahoo.com/q/pr?s=K [Accessed: 7 Apr 2014].