An Analysis of Kellogg Company's Success - Case Study Example

Running Head: KELLOGG COMPANY Kellogg Company Name Course Lecturer Date Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Case study analysis of Kellogg’s success 4 2.1 Manufacturing 4 2.2 Marketing 5 2.3 Economic factors 7 2.4 Stakeholders 8 3.0 Conclusion 10 References 11 1.0 Introduction Kellogg was formed in 1906 as a food company that basically centered on production of cornflakes. Key mission of the company was to produce a breakfast dish that was ready-to-eat and at the same time affordable to a large proportion of the population. Strong commitment of the management to drive innovation saw the company expand internationally beginning 1914. In addition to physical expansion of its facilities to most countries of the world, Kellogg has established massive brand success and has expanded introduced other breakfast convenience foods including Nutri-Grain, Eggo frozen waffles and Pop-Tarts. In addition, Kellogg leads in the production of innovative, health-conscious breakfast choices such as 19 Cereals, All Bran and Special K. Kellogg’s successful operational expansion has been majorly contributed by acquisitions like the Washington Foods acquired in 1999 and Keebler Food Company in 2001 as well joint ventures with multi-national organizations such as Disney. In 2011, Kellogg was ranked as the world’s leading producer of frozen foods, snacks and cereals. Its brands are produced in 18 countries and marketed in also most all countries of the world. Of concern for other companies in the food industry, marketers and research is what really makes Kellogg successful. Addressing this concern is the statement from the chairman of board of the company who states that the company’s founder, William Keith Kellogg was driven by an entrepreneurial spirit that gave him a strong commitment and passion in his work. The company’s philosophy is based on optimizing customer satisfaction by providing high quality and nutritious food. In an increasingly complex global business environment, Kellogg has developed concrete policies and strategies that have actually pushed it to a competitive edge. These strategies basically form the elements of successful businesses and they include manufacturing processes, stakeholders, marketing and economic factors. 2.0 Case study analysis of Kellogg’s success 2.1 Manufacturing Manufacturing is a fundamental aspect underlying supply chain management. It is basically a process that ensures that products or services are produces consistently and in the correct quality standards for their intended use. According to WHO, a good manufacturing process is characterized by a number of processes which include suitable premises, quality control and trained production personnel, adequate laboratory facilities, records of procedures used and appropriate distribution channels (Schnetzler et al, 2004). Kellogg clearly justifies this argument through its comprehensive supply chain strategies that stretch from the manufacturing of raw materials to the distribution of finished goods to customers. The company has been established as a large-scale manufacturer which is sufficiently able to produce over 40 different brands and store adequate stocks to meet the needs of its customers. The company has strategized its manufacturing process through several ways which include location of the business. Location of most of Kellogg’s production facilities take into consideration nearness to source of raw material as well as closeness to customers so as to reduce distribution costs. In addition, Kellogg has built large facilities that are able to accommodate large equipment and bulks of stocks. In a bid to meet the needs of increasing demand and to reduce wastage; Kellogg has established a 24 hour production facility in Trafford Park. Also contributing to its tremendous manufacturing success is its collaboration with TDG, a logistic specialist which has subsequently caused the company to cut down on transport costs. Doyle (2000) maintains that good manufacturing processes should take into account environmental matters. Together with other 21 companies, Kellogg is signatory to the Food and Drink Federation (FDF) agreement which commits its members to cutting carbon dioxide emissions, reduction of wastage and water efficiency. In addition to reducing Kellogg’s water by a significantly large amount, the initiative has acted as part of the organization’s social corporate responsibility which has greatly scaled up sales. As a part of the right marketing mix, manufacturing processes should ensure production of the right products, in the right place and at the right time. Kellogg invests in intense Research and Development in order to manufacture right products based on consumer needs. Furthermore, it employs cost effective systems that ultimately ensure that the prices of its products are highly competitive. By use of a just-in-time system, Kellogg ensures that its retailers to not hold up excessive stock; which is sometimes discouraging for retailers. 2.2 Marketing Kellogg has embraced the marketing philosophy which is a process that enables organizations to identifying what they want and need by realizing their value, providing it, communicating it and delivering it to consumers. Concepts underlying marketing are consumer values, wants and needs; relationships; communication; and products. Melewar (2004) maintains that knowledge about the key marketing success factor is essential in mapping the most appropriate marketing approach through which performance objectives will be optimally attained. In realizing the importance of communication, Kellogg is committed to a marketing approach that emphasizes on communication of brands in transparent, truthful and responsible manner and allows consumers to make informed choices. In addition, Kellogg endorses the proposition that creation of long-term mutually profitable relationships with customers is best achieved by seeking value of their perspectives and ideas about a brand. This is demonstrated by the establishment of the ‘Worldwide Marketing and Communication Guideline’ which forms the platform for customers’ communication with the company. This embeds a continuous relationship with the customer as the customers and not the product is viewed as the profit center (Coombs and Holladay, 2012). Kellogg’s marketing communication strategies take into account diversity of its customers in terms of customs and values which vary from country to country as well as generational differences. Through these communication channels, Kellogg constantly reformulates its products which has enabled it to continually deliver high quality products as desired by its consumers. Promotional strategies are key to the success of any marketing strategy. Advertising is an essential promotional activity that enables a marketer to achieve his marketing objectives by reaching a significantly large number of the target audience. Knowledge about the type of customers in a given market is required to know the advertising method to use. Although an expensive venture, Kellogg has realized the importance of advertisements which has not only helped to increase sales but has also boosted brand popularity. In addition, the public is more informed about Kellogg’s products more so recently developed products that have not penetrated into the market. Through meaningful distinctions about the usage of its products, quality, prices and attributes, Kellogg has acquired a market position that appeals to its customers. 2.3 Economic factors Economic factors indeed shape the financial performance of an organization. More importantly when making economic decisions is to make sure that costs are kept on the minimum while profitability is maximized. Cullen and Gordon (2007) point out matters of individual and corporate taxes as well as currency exchange rates are crucial considerations when deciding on the location of a premise. Kellogg’s decision to move its headquarters to Ireland is clearly a well calculated move that has subsequently earned the company extra profits saved from taxes. High tax rates as those found in the UK, going up to 30%, normally curtail an organization’s risk taking abilities in terms of exploring entrepreneurial and innovative opportunities. In a bid to avoid such effects, Kellogg opted to move to Ireland where tax rates were much less and thus would provide the company with the opportunity to innovate and expand further. In addition, the company has accrued a lot of benefits through establishment of its headquarters in Ireland which uses Euros which have more friendly exchange rates in comparison to UK pounds. Internal and external audits are important in assessment, evaluation and monitoring of financial performance of an organization. Kellogg has had a culture of auditing since its inception which was recently expanded and updated to emphasize greater accountability and responsibility of the organization to its stakeholders. Since the year 2002, the company made a policy to integrate women and minorities into its list of suppliers in order to create diversity and opportunities. 2.4 Stakeholders Engaging stakeholders in the businesses of the organization is crucial in ensuring good corporate governance which requires that corporations act in the best interest of the society. Stakeholders are people who have direct or indirect interest with the company. Some have invested into the organization and therefore have interest in its performance. Kellogg has a strong affiliation for its stakeholder who basically includes customers, employees, the government, local communities, suppliers and creditors among others. This is following the knowledge that maintaining good relationships with stakeholders produces mutual benefits for both the organization and the stakeholders. According to Kellogg people are everything. The organization highly upholds its employees and believes that they are the cornerstone to a successful organization. It is devoted to establishing a workplace that is value-driven and fosters a sense of inclusiveness and safety for all its employees. Its employment policy encourages diversity of the workforce in terms of cultural variations of the employees has enabled the company to accrue a wide range of expertise and experience. This has ultimately driven innovation in the company which has given it a competitive advantage in the global arena. Kellogg believes that by orienting new employees with the company policies, philosophies and values is through onbording programs is one of the easiest ways of empowering the workforce as they become conversant with the vision, mission and goals of the company. Kellogg’s employee engagement is about 7% higher than in comparable companies which again count for its impressive performance. Engaging employees in corporate decision making processes has a proportionate effect towards profitability (Polonsky, 2005). Developing a powerhouse of talent through training and development of employees is a stepping stone to success. Kellogg believes that through learning and development programs that have continued to be done within the organization since its inception will transform its workforce into employees who are better leaders and managers. A core HR policy within Kellogg is diversity of workforce with regard to skills, culture, sexual orientation, age and gender which should essentially reflect all types of customers served by the company. Diversity is key to the ongoing success of the company as it enables retention of highly talented workforce, enhances collaboration and sparks innovation. An executive compensation and reward system as well as an occupational health and safety activities keep Kellogg employees motivated thus more productive. As part of the community, Kellogg believes it is accountable to its adjacent community which is a central concepts underlying its corporate social responsibility. The company owns the WK Kellogg foundation which was founded for the purpose of making donations to worthy courses in UK and the world over. In addition, Kellogg has established initiatives aimed at environmental preservation. This has been achieved through formulation and implementation of Global Environmental Policies which are in line with reduction of greenhouse gases, wastage, water use and packaging. Environmental issues are continually shaping the way of doing business as well as public perception towards the environment. Customers always like to be associated and even trust companies that are environmentally friendly. 3.0 Conclusion Through 100 years of its existence, Kellogg has made huge milestones and is envy for many contemporary organizations. The entrepreneurial spirit bore by its founder spills to the present day. The company has developed outstanding business strategies which have seen it emerge successful amidst many economic storms affecting modern organizations. Kellogg has a comprehensive manufacturing and supply chain logistics that emphasizes on reduction of costs and maximization of output through use of energy efficient production methods and proper location of facilities. Marketing at Kellogg which is well articulated has indeed played a major part in its success. This has been greatly achieved through its customer communication programs that enable constant restructuring of products to meet the needs of consumers. In addition, it devotes a large portion of its capital in advertisement which has is attributed to its brand success. Economic considerations within Kellogg are quite exceptional and have enabled it survive tough economic moments. It has strategically established units in countries where tax rates and currency exchange rates are relatively low. To account for its responsibility to stakeholders, the company has employed executive internal and external audit procedures. Kellogg’s philosophy that people are everything in a business has made it establish concrete relationships with its stakeholders which has subsequently reflected in increased productivity and heightened sales. Clearly, proper application of the key management aspects has proven fruitful for Kellogg. References Coombs, W. and Holladay, S. (2012). Managing corporate social responsibility: a communication approach. Malden: Wileyt-Blackwell. Cullen, J. and Gordon, R. (2007). Taxes and entrepreneurial risk-taking: Theory and evidence for the U.S. journal of public economics. Volume 91, Issue 1, p. 1479-1505. Doyle, P. (2000). Valuing marketing’s contribution. European Management Journal, Volume 18, Issue 3, p. 233–45. Melewar, T. (2004). International advertising strategy: A review, reassessment and recommendations. Management decision, Volume 42, Issue 7, P. 863-881. Polonsky, M. (2005). Stakeholder thinking in marketing. Bradford: Emerald Group of publishers Schnetzler, M., Sennheiser, A. and Weidemann, M. (2004). Supply chain strategies for business success. Proceedings of the International IMS Forum 2004 "Global Challenges in Manufacturing", Cernobbio (Italy), 17-19 May 2004, pp. 691-698. Read More