Strategic Business Plan for General Mills - Coursework Example

1 Define the contexts of business strategy – such as - (missions, visions, objectives, goals, core competencies) and also explain the following for the organization selected by you of your own choice (P1). An organization’s mission is its reason for being. It defines who we are and what we do as an organization. The mission is the vessel that leads to the vision (“How to Write Vision and Mission,” 2011). A vision is more like a dream because it is an image of the future that the organization seeks to create. The organization we have selected to compare with Kellogg is General Mills, a manufacturer and marketer of branded consumer foods. General Mills’ mission is nourishing lives. General Mills seeks to attain this mission through making lives healthier, easier and richer (General Mills, 2010). The organization makes lives healthier by continuously improving the health profile of its products. It makes lives easier with foods that are simple to prepare and it makes lives richer by making foods for special moments such as birthdays. Goals and objectives help an organization in controlling its plans and providing its staff with the direction to take for the organization to realize its mission and vision. General Mills has not clearly delineated its vision through a vision statement. However, this can be inferred from the organization’s mission and values statement. Likewise, we can use the values statement to point out General Mills’ goals. From the values statement General Mills aims to assert its values everyday through its people, its brands, its innovation and its performance. These goals are: to ensure that its brands continue to win consumers trust around the world; to nurture diverse, talented, committed people who contribute to their communities; to continue developing and implementing innovative ideas that further build the company’s brands and business; and to continue delivering outstanding performance for its investors. According to Kotelnikov (2011) core competencies are the things that a company does better than its competitors in the critical, central areas of the organization where the most value is added to its products and/or services. For General Mills, its core competencies are in its intimate consumer knowledge and its innovation. These two competencies manifest themselves in in the mix of new products and improvements to existing products that General Mills is renowned. The company extends its legacy of learning about products, processes and unique disciplines; improving production efficiencies, elevate quality and reducing costs; and preserving precious institutional memory through its multiple schools such as Cereal School, Yogurt School and Packing School. 1.2 Explain the significance of stakeholder analysis, (especially for the selected organization) (P2) The topic of stakeholders is very popular and contested among theorists. There is quite an amount of contesting literature around which theorists try to update and replace. Freeman, the “father” of stakeholder theory has also given different definitions of whom or what constitutes a stakeholder. In 1984 Freeman defined stakeholders as “any group or individual who can affect or is affected by the achievement of the organization objectives” while in 2004, Freeman defined stakeholders as “those groups who are vital to the survival and success of the corporation” (Fontaine, Haarman, & Schmid, 2006). The former definition (Freeman 1984) is preferred in academic circles because it is entirely organization orientated. This is the one we shall use in this discussion. General Mills’ mission is to nourish lives. Nourishing lives refers to nutrition, which as the cliche goes, “you are what you eat”, is the crux of human health. Furthermore, General Mills is also a Fortune 500 company, among the largest food companies in the world, with a presence in more than 100 countries on six continents. This inter-continental presence implies that General Mills has the capacity to affect the nutrition of billions of consumers globally. With humans increasingly living sedentary lifestyles and having fast foods as their core meal, organizations with large market share in the food industry such as General Mills have to be at the forefront in not only advocating for a healthy lifestyles but also by providing the alternative nutritious, easy to prepare foods, so that customers may be pulled away from eating the less nutritious foods. On the other hand, General Mills as a business also has to fulfill its mandate of existence by returning value to its owners. In today’s ultra-competitive food industry, General Mills can only realize this end if it has a competitive edge over its competitors. In an increasingly health conscious market, the organization has to match and surpass the product offerings of its rivals such as Kraft foods and Kellogg. This means that consumers are also part of the stakeholders that General Mills has to please if it is to survive, be profitable and grow. 1.3 – Conduct an environmental and organizational audit of a given organization (compare Kellogg with your own selected organization). (P3) General Mills and Kellogg are two major rivals in the packaged food industry. They are both huge multinationals that compete globally in almost an equal number of countries. This implies that a PESTLE analysis would be similar for both companies. However, similarity in the environmental audits for General Mills and Kellogg does not imply similarity in organizational audit. Organizational audits are very specific because they help one to know how an organization runs. This informs one how well an organization is doing with regards to accomplishing its mission. An extensive organizational audit would include evaluations on mission, image and purpose; human resources; financial profile; activities and programs; planning and evaluation (Byrnes, n.d.) From the politico-legal perspective, both General Mills and Kellogg operate in countries that have fairly stable governments that are unlikely to come up with unfriendly legislations. However, the challenge may arise with regards to environmental regulation and protection. Both companies have been proactive in creating efficient environmental policies and providing for acceptable environmental attitude within their processes. For example, both companies are also exploiting the use of sustainable packaging for their products and transportation of raw material by sea or river where possible instead of by road. When it comes to the economy, most of the Western world has yet to fully recover from the recession. Today, the US and European unemployment rates, growth, and production are still extremely weak (Larive, 2011), yet these are the key markets for both Kellogg and General Mills. Furthermore, the weak economy has had a big impact on the social environment for example many customers have had to change their lifestyles due to reduced disposable income. On the other hand, Brazil, Russia, India and China (BRIC) countries and most of Asia have stronger economies. This could imply that these two food giants could leverage the negative effects of the major markets through increase their presence and sales in these regions. Organizational audits help one to know how an organization runs such that one can tell how well the organization is doing with regards to accomplishing its mission. An extensive organizational audit would include evaluations on mission, image and purpose; human resources; financial profile; activities and programs; planning and evaluation (Byrnes, n.d.). However, in this instance we shall only compare the evaluations on mission, image and purpose of General Mills’ with Kellogg’s. When it comes to the organizational audit we see that Kellogg has a mission and a vision statement while General Mills has only the former. Both organizations have values statements. Having all three statements clearly defined, Kellogg’s message comes out clearer to its stakeholders. This does not lessen General Mills positioning because both companies appear to be sticking to their values and following their missions and visions in the following way: the active promotion of health and wellness in the community through dietary choices in their products; supporting nutrition education and research efforts; and funding programs that support youth nutrition and fitness (“General Mills: Health and wellness,” 2011). Furthermore both organizations are well known in their communities for example Kellogg with through its work with Britain’s Amateur Swimming Association and General Mills work with Box Tops for Education in the United States. Most of all there are no gaps between how both organizations view themselves in the community and how the community views them. 1.4 – Apply strategic positioning techniques to the analysis of a given organization. (P4) Strategic positioning refers to devising of the desired future position of the organization’s position and its products / services that will enable the organization leverage its competitive advantage and then dominate its market niche as much as possible. For General Mills to make an analysis of the strategic position it has to conduct an external and internal research using Porter’s Five Forces model and SWOT analysis. The packaged foods industry in which General Mills operates is dominated by a few major players at the top thus rivalry among existing firms is moderate to low. These major players offer a wide array of products and have high brand loyalty which is one of the reasons for the low competition among these rival companies. In addition to that, these few major players have large product variety and sell across the globe thus have huge economies of scale that create a huge barrier to entry for new market entrants. This industry is also characterized by having weak supplier power, reason being that the raw materials used are commodities that have an unlimited number of suppliers. This implies that General Mills can obtain its raw materials at the lowest cost possible. The Achilles’ heels in this industry are the threat of substitutes and powerful buyers. In virtually every industry segment where General Mills does business, it is possible to find very similar products competing on cost. This threat is especially real in these post-recession years when consumers are more willing to switch in order to save money. Nevertheless, General Mills can tackle this threat by focusing on continuous differentiation of its products. Also, because of its market leadership, the organization has the financial resources to support continuous research and development. Bargaining power of buyers is strong since most of the products that General Mills makes are undifferentiated thus buyers are generally more price sensitive. We do not see the external environment changing much in future. General Mills has a strong differentiated position as a result of its constant innovation strategy and investment in brand image. Also, through the General Mills Foundation the organization has been able to increase community involvement which further strengthens its consumer and customer image. By continuing with this approach, General Mills will be able to sustain its competitive edge over its rivals and thus continue achieving its mission of nourishing lives now and in future. 1.4-a As a business analyst Identify and apply strategies to find appropriate solutions for Kellogg and focus its targets; when to plan; who should be involved (M1) Follow P2 Kellogg’s commitment to building a stronger business has to go in tandem with acting responsibly towards its stakeholders. In its website, Kellogg identifies its key stakeholders through a categorization of its activities into four parts: the marketplace, the workplace, the community and the environment. Within the marketplace Kellogg seeks to be a role model with regards to how it conducts itself through responsible sourcing and marketing, provision of consumer information, and ensuring that their products are not only meet safety standards but are also nutritious and healthy. At the workplace, Kellogg practices diversity and inclusion, ensures that at a minimum all labor standards are adhered to and most of all seeks to improve its staff wellbeing through health and wellness programs as well as talent management. Under the community category Kellogg carries out its infamous breakfast and physical fitness programs. Here the organization also seeks to partner with other institutions that foster community development through strategic philanthropy. Finally as a manufacturing company, Kellogg has instituted measures to reduce its greenhouse gas emissions, waste, and energy and water consumption. The company is also exploring new strategies such as sustainable packaging. 1.4-b- Apply any appropriate methods/techniques for Kellogg either BCG growth-share matrix or SPACE or PIMS (M2) Follow P3 The Strategic Position and Action Evaluation matrix (SPACE) matrix is a strategic management tool broken down to four quadrants that suggests different types of strategy to undertake. These quadrants are categorized as: aggressive, conservative, defensive and competitive. The SPACE Matrix analysis uses two external and two internal dimensions in order to determine the organization's strategic posture in the industry. For the external strategic dimension we look at (1) industry strength factors such as barriers to entry, growth potential, access to financing, consolidation etc. and (2) environmental stability factors such as inflation, technology, demand elasticity and taxation. For the internal strategic dimension we look at (1) financial strength factors such as Return on Assets (ROA), leverage, liquidity, cash flow etc. and (2) competitive advantage factors such as product quality, market share, brand and image, and product life cycle and so on. The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X and Y coordinates. For Kellogg we have obtained the table shown below for the calculating the SPACE matrix. Table -1: Kellogg SPACE Matrix Kellogg SPACE Matrix Internal Strategic Position External Strategic Position AXIS Y Financial Strength Environmental Stability (+1 worst, +6 best) (-6 worst, -1 best) 3 ROA -4 Inflation 1 Leverage -2 Technology 5 Liquidity -3 Demand Elasticity 4 Cash Flow -3 Taxation 3.25 Average -3 Average Total Y axis score = + 0.25 AXIS X Competitive Advantage Industry Strength (-6 worst, -1 best) (+1 worst, +6 best) -1 Product Quality 6 Barriers to Entry -2 Market Share 4 Growth Potential -1 Brand & Image 6 Access to Financing -4 Product life cycle 3 Consolidation -2 Average 4.75 Average Total X axis score = + 2.75 From the calculations of the SPACE matrix (X, Y) = (+2.75, + 0.25), Kellogg should pursue an aggressive strategy especially considering its strong competitive position and the potential for growth into the global market especially Asia and the BRIC nations. 2.2 prepare a strategic plan for a given organization, based on previous analysis. (P6) Strategic Business Plan for General Mills Introduction This document comprises a strategic plan for General Mills. It reviews its strengths, weaknesses, threats and opportunities; presents a series of fundamental statements relating to General Mills' vision, mission, values and objectives; and sets out General Mills' proposed strategies, goals and action programs. Strengths, Weaknesses, Threats & Opportunities This strategic plan addresses the following key strengths, weaknesses, threats and opportunities which apply to General Mills now and in the foreseeable future: Strengths: Weaknesses: Product innovation skills Growing international operations Strong brand on key products Strong community involvement in key markets Highly dependent on the US market Selling, General & Administrative expenses are rising very fast Threats: Opportunities: Erosion of market especially in the US Increases in commodity prices Growing demand for cereals in emerging markets Growing health consciousness, globally Growing food service sector in general Vision The promoters' vision of General Mills in 3-4 years’ time is: General Mills will be the leading ready-to-eat cereals manufacturer in BRICS (Brazil, Russia, India, China and South Africa) through provision of cereals customized to these palates. General Mills will have 50% of its sales realized from the international market. Mission Statement Our mission is to nourish every one by making their lives healthier, easier and richer Corporate Values The corporate values governing General Mills’ development will include the following: We reinforce our values everyday through our people, our brands, our innovation and our performance. Championship Brands ... building leading brands that our consumers trust around the world – making lives easier, healthier and more fun. Championship People ... diverse, talented, committed people – constantly learning and growing and contributing to our communities. Championship Innovation ... developing and implementing innovative ideas to build our brands and drive our business. Championship Performance ... delivering outstanding performance for our investors, our customers, our consumers and ourselves Business Objectives To be the most-innovative nutritional packaged food manufacturer To expand the business aggressively and offer above-average returns to shareholders. Key Strategies The following critical strategies will be pursued by General Mills: 1. Seek new markets segments in the US and Europe 2. Develop overseas market entry plans 3. Organizational restructuring to mitigate rising Selling, General & Administrative expenses The following important strategies will also be followed: 1. Increase promotion of nutrition and physical fitness among pre-teens 2. Pursue strategic alliances especially for overseas markets 3. Strengthen Research & Development function Major Goals The following key targets will be achieved by General Mills over the next 4-5 years: Achieve international sales of USD 10 billion by 2015 Have manufacturing plants in Brazil and China before 2013 Secure 10% market share in BRICS by 2014 Strategic Action Programs The following strategic action programs will be implemented: 1. Board: Expand Board of Directors to include overseas expertise before expanding presence in emerging markets. 2. All: Develop and implement accelerated market entry and development plans. 2.2-a-Explain Kellogg’s Present strategy and communicate appropriate situation and focus Porter’s 5 force analysis (M3) Follow P5 The packaged consumer food industry within which Kellogg is operating is rapidly growing especially in the emerging markets and has relatively few major players all of whom offer a wide variety of products that can be easily substituted with their competitors. However, the market is characterized by high loyalty and as such these few major players, including Kellogg, experience low rivalry. The low rivalry may work for Kellogg but the semblance of the offering of these major players leads to high threat of substitutes. One would therefore expect the companies in this industry to compete of cost, however, as mentioned earlier consumers are very loyal to their brands, an attribute that has led most of the industry players to seek the differentiation strategy rather than cost. Furthermore, the prices for the products in this industry are low and as such profitability is mainly realized through economies of scale. This implies that for any organization to seek to venture into this industry it would require huge capital outlay if it is to realize the economies of scale necessary to make a profit. This is a huge barrier to entry that has so far made Kraft, Kellogg and General Mills to remain dominant in this market. Kellogg’s present strategy is therefore that for differentiation which allows it to leverage on its huge market share by enhancing customer loyalty. With its economies of scale the organization is able to offer a diverse range of unique products its powerful buyers. Buyers are powerful because they could easily obtain similar substitute products from Kraft or General Mills, the other major players. The differentiation strategy also fosters continuous innovation and product improvement which further increases the barrier to entry into this market. 3.1 evaluate possible alternative strategies relating to substantive growth, limited growth or retrenchment (considering Kellogg’s vs. your own selected organization) (P7) Kellogg and General Mills are two major players in the same industry and as such they face similar challenges. This analysis of alternative strategies will therefore be applicable to both, though each individual company may slightly vary their execution strategy. Substantive growth strategies are realized through vertical integration, horizontal integration, related diversification and unrelated diversification. These strategies would enable Kellogg respond to market decline in the key markets of US and UK, increase market power through economies of scale, market reach especially in overseas markets and to gain market efficiencies for example through shorter supply chains. The disadvantages of this could be increased effects of big organization ‘blues’ (such as information asymmetry, slow decision making), rising selling, general and administration costs, and increased consumer apathy. Limited growth strategies are realized through product development, market development and market penetration. The biggest benefit of using these strategies is that they greatly limit the risk for the organization because they involve improving upon what the organization already knows best. This would be the best approach for Kellogg to pursue if it is to revitalize its key market, the US. These strategies also increase switching costs by ensuring that customers continue to receive increased value for their money. Retrenchment strategies involve divesting from a poorly performing market or reducing costs. The advantage of these strategies is that they reduce losses for the company by offloading of unprofitable business units and increasing focus on areas that the organization has sustainable competitive advantage. Kellogg and General Mills should use this strategy together with the limited growth strategy to achieve greater success. 3.2 select an appropriate future strategy for a given organization (considering Kellogg’s vs. your own selected organization) (P8) General Mills, like Kellogg, is over reliant on the US market for a large fraction of its revenue and with the US market yet to fully recover from the 2008 economic recession and financial crisis; it is advisable to develop new markets overseas. With rising incomes and effects of globalization, there is a growing market for cereals and other packaged consumer foods in the emerging markets. General Mills should follow a strategy of mergers and acquisitions to give it a quicker and a less risky market development strategy than that of establishing their own outlets. The US market still remains key as General Mills expands its reach abroad therefore the organization will have to focus on increasing consumer penetration through continued product development (e.g. introducing new lines of product, developing new products for the same market) and market penetration by increasing product usage. In a nutshell, both General Mills and Kellogg will have to continue with strong innovation, brand building and execution to drive sustainable growth. 4.1 compare the roles and responsibilities for strategy implementation in two different organizations. (P9). If we assume we are to implement the strategic plan for General Mills prepared in part 2.2 one major goal is to secure 10% market share in BRICS by 2014. For this to occur within the short timeframe of 3 years the organization would probably have to acquire local companies and make them its subsidiaries in each of these countries. In which case we can say, evaluate General Mills-US as a ‘different organization’ from General Mills-China. General Mills-US, being the driver of the goal would have to assume: (1) strategic planning from the top; (2) fund the expansion process / provide necessary resources for implementation of the strategy; (3) ensure that the executives for General Mills-China have adequate training to achieve the 10% market share growth; (4) share best practices / knowledge management from other General Mills successful ventures overseas. On the other hand, General Mills-China, being the implementer of the goal at the local level would assume the following responsibilities: (1) market research in China; (2) devising in-country sales and marketing activities; (3) setting local departmental milestones aimed at achieving the desired market share and so on. 4.2 identify and evaluate resource requirements to implement a new strategy for a given organization (P10) Sticking to General Mills goal to achieve 10% market share in BRICS by 2014, the strategy would be one of market development. This would require the following resources: finance, 1. Finance: to implement a merger or acquisition, General Mills will have to raise a significant amount of capital. This may be done through the US stock market or through debt. Finance would also be needed for the re-organization that would have to be done after a merger or acquisition. 2. Human resources: General Mills-US will have to bring in some of its own staff or hire new staff for some of the senior management positions at the new organization to spearhead or streamline the change needed to achieve the headquarters goals. 3. Materials: this may include a variety of items such as information systems to ensure effective knowledge management and information sharing so that General Mills’ US best practices may be customized for the local market and so on. 4.3 propose targets and timescales for achievement in a given organization to monitor a given strategy. (P11) The first step is to note that the duration within which General Mills would like achieve its 10% market share in, say South Africa is three years from today. The next step is to project what 10% of the South African cereals market would be in terms of sales. From this it would be better to breakdown the goal into yearly targets for 2011, 2012, 2013 and 2014. These yearly targets can then be further broken down into quarterly then monthly targets per say distribution center so that at the end each member of staff knows what role she has to play to ensure the organization achieves it 2014 goal. Achieving a 10% market share is not simply a sales issue, and it would be prudent for General Mills to use the balanced scorecard to ensure that its growth reflects wholesomely on the organization’s penetration of the new market. 4.3-a- Recommends from your position to demonstrate convergent/lateral/creative thinking for Kellogg a new strategy (D3) Follow P10 From the case it appears that Kellogg is greatly focused on achieving its goals through communication and active participation of its stakeholders. Kellogg, from the case, is effecting market penetration by promoting healthy lifestyles and wellness, and developing the products that supplement this new form of lifestyle. This strategy may work in the UK or the US because these are mature markets where the company already has a strong presence and loyal consumers. In a new market such as the emerging markets, this strategy may not work. We would advocate for Kellogg to either seek a strategic alliance, merger or acquisition when it ventures into the emerging markets because their cultures tend to be very different and influential to the consumers. A deep understanding of the new markets would be obtained through partnering with or acquiring businesses that have experience in achieving success in these emerging markets. Furthermore the financial crisis of 2008 showed that having a global presence could be advantageous to organizations because the effect are different on different regions e.g. the Asian market remained strong while the US and European markets fell to historic lows. 4.3-b-Use critical reflection to evaluate own work and justify valid conclusions in terms of Kellogg’s case (D1) As stated above, Kellogg’s strategy in the case is that of market penetration which is suitable for markets that are mature. However, if the organization hopes to continue achieving sustainable growth it has to leverage its market leadership and economies of scale to venture into the emerging markets. Moreover, for a company that is renowned for product innovation, entry into new markets could introduce it to new ideas, cultures that will further its innovation and enable it realize it vision of being the food company of choice, globally. References Byrnes, W. J. (n.d.). Organizational Audit Outline. Retrieved from http://www.managementandthearts.com/pdf/OrgAuditandBoardSurvey.pdf Fontaine, C., Haarman, A., & Schmid, S. (2006, December). The Stakehoder Theory. Retrieved from http://www.edalys.fr/documents/Stakeholders%20theory.pdf General Mills. (2010). Overview 2010. Minneapolis, MN: General Mills. General Mills: Health and wellness. (2011, June 11). generalmills.com. Retrieved June 11, 2011, from http://www.generalmills.com/en/Responsibility/health_and_wellness.aspx How to Write Vision and Mission. (2011, June 11). . Petra University, . Retrieved June 11, 2011, from http://www.uop.edu.jo/qa/visionMission.aspx?lang=en&location=qa Kotelnikov, V. (2011, June 11). Core Competencies. Retrieved June 11, 2011, from http://www.1000ventures.com/business_guide/crosscuttings/core_competencies.html Larive, M. (2011, June 11). Is Europe back in? European Union. Retrieved June 12, 2011, from http://eu.foreignpolicyblogs.com/2011/06/  Read More