International Marketing of Kellogg Company - Essay Example

?International Marketing Introduction: Kellogg’s Kellogg’s also known as the Kellogg Company is a multinational food corporation which specializes inmanufacturing cereal and other convenience food like crackers, pastries, toaster, cereal bars, waffles and other vegetarian foods (Kellogg’s, 2013b). The brands include regular cornflakes, frosted flakes, Special K, Rice Krispies, Coco Pops, Pringles, Nutri Grain and Pop Tarts (Kellogg’s, 2013h).The vision of the company is to offer customers healthy and tasty snacks which cater to their needs and also suit their taste buds. One of the main objectives of the company is to promote healthy food for the betterment of the society and community. Kellogg’s cereal is manufactured in more than 20 countries in the world and is marketed in more than 180 countries of the world (Kellogg’s, 2013j). The company is headquartered at Michigan and the largest factory is situated in Trafford Park. Kellogg’s was formed by W.K. Kellogg’s in the year 1906 (Kellogg’s, 2013c). Kellogg’s maintains a diverse workforce and believes in promoting a healthy work environment (Kellogg’s, 2013f) for successful completion and attainment of goals (Kellogg’s, 2013d). In the year 2012 Kellogg’s was considered as the world’s second largest snack company after Pepsi Co Ltd by acquiring Pringles Potato chips from Procter &Gamble for an amount of $2.7 million (Kellogg’s, 2013k). The company has been offered several awards for delivering excellent performance and high quality products like the “Top 50 Company for Diversity from Diversity Inc and “100 Best Places to Work” from Computer World (Kellogg’s, 2013e). Although, the brand has been successful in marketing cereals of varied flavours the company earns majority of its revenue from its core product which is the plain flavoured cereal. Marketing Mix of Kellogg’s The marketing Mix concept of Kellogg’s has become one of the most fundamental concepts of marketing management. It was essentially claimed by Borden who also named it as “Mixer of Ingredients.” The essence of marketing mix emerged as an asset of controllable variables also known as tool kit which was basically used to influence customer purchases and behaviour. However, it is observed that companies generally use the standardization or adapted version of marketing mix to adapt to the marketing environment (Birnik and Bowman, 2007).The decision to use a standardization or adopted marketing mix is situation specific and should be thoroughly evaluated and assessed for relevant contingency factors. It is observed that most of US multinational corporations utilize the standardization marketing mix rather than the adopted one. Small and medium enterprises utilize the adopted marketing mix because it serves the purpose of the guide for adapting to the marketing environment. a) Product: Uniqueness of the product signifies that the product is dependent on firm and time specific factors. It also signifies that the company alters the core value of the product sometimes with the changing marketing environment (Birnik and Bowman, 2007). Apart from offering cereal in plain and other flavours the company also offers food products like raisin bran, frosted toaster pastries, flatbreads etc (Kellogg’s, 2013a). The main objective of Kellogg’s is to offer customers a unique breakfast food range. The plain flavoured cereal is the USP of the product and is offered for the entire mass but the cereal manufactured in varied flavours is a source of additional revenue. Thus, it can be stated that the company follows the standardization product market mix in manufacturing the plain flavoured cereal and the adopted approach in manufacturing its other convenience food. a) Price: The price range of Kellogg’s varies from product to product but the cereals are moderately priced for the affordability of the customers. However, the prices range of the certain food products like cookies, oatmeal, pastries are high priced for the additional flavouring content put in it. Standardized approach is used for pricing the plain flavoured cereal because unlike the other food products like oatmeal, pastries and cereal of varied flavours additional content is not utilized for manufacturing the plain flavoured cereal. b) Place: The availability of the cereal is easy and high. The brands of Kellogg’s are readily available in supermarkets, retail outlets, schools, colleges, hotels and flights. The company uses higher degree of standardization for direct market entry modes like franchising and licensing in developing countries. However, Kellogg’s uses the adopted approach in marketing and distributing the products in the local markets for reducing the effect of local competitive intensity (Larimo and Kontkanen, 2008). c) Promotion: The brand is promoted through the common promotional strategies like radio, billboards, magazine, television etc. Information regarding the products is offered through the official website. The company follows the standardized promotional strategies to promote its brands aggressively like providing the customers different promotional options through sweepstakes, mail, Facebook, mail in offer etc. The company does not differentiate while promoting its brand and offers varied promotional offers for a wide customer range. Presently, the company is offering nail polish, health magazines and toys as free products for different products (Kellogg’s, 2013l). d) Physical Evidence: Although, Kellogg’s is a product and not a service the physical element does not play a crucial role in promoting the product. However, the packaging of the product is given high priority and it is ensured that the product is available in colourful boxes to attract the customers. The availability of the product in economic sizes like standardized boxes and sachets highlights the fact that standardized marketing mix element is used while developing the physical evidence of the product. e) Process: A smooth and efficient operational system in Kellogg’s ensures the high quality and mass production of breakfast cereals. The company has a large factory layout with strong mechanization process which gives the management to produce in large batches and an opportunity for incremental growth in developing and developed countries. The company ensures a smooth mechanization process for its convenience and frozen foods to ensure prompt delivery to the retail outlets. The company invests a huge amount of revenue for its brand building and innovation activities which ensures the enhancement of brand value. f) People: The Company comprises 31000 employees worldwide which help in the development of food products which have high nutritional content (Kellogg’s, 2013i). Employees are considered as valuable assets of the company which contribute significantly to food innovation. The employee resource group created by the management plays a crucial role which helps in the manufacturing of functional convenience foods. The senior management of the company have created approximately seven employee groups known as HOLA (Kellogg Latino ERG), KMERG (Kellogg Multinational ERG), KPride &Allies, Kvets &Supporters, WOK (Women of Kellogg’s) and YP (Young Professionals). The human resource (HR) policies of the company are implemented by following the human resource standards and regulations laid down by the IHRM institute. This indicates that Kellogg’s follows the standardization process where the responsibilities and tasks are clearly defined for the smooth execution of process. Summary of Marketing Mix Globalization has compelled Kellogg’s to follow the standardization approach with the help of technological drivers and deliver high quality products. It can be seen that Kellogg’s manufactures cereal, pastries and oatmeal cakes by adhering to the standardized health guidelines and distributing through standardized packages. We can observe that Kellogg’s is following a mixture of standardized and adopted marketing mix to manufacture and market its brands. Adopting a mixture would enable the company to penetrate further into markets and also cater to wider customer base. This is because the cultural variations in different countries have allowed the company to modify it marketing strategy and adapt as per the changing marketing environment of the developed and developing countries. The design of the product is done in such a way that the content for the product remain fresh for a longer duration and the nutritional requirements of the product remain intact. However, unlike other companies Kellogg’s tries to maintain the authenticity of the product by focussing on the packaging of the product. The company tries to cater to a wide customer base by developing products according to taste and preferences of specific customer range. Kellogg’s has developed a special brand named Special K which is specially targeted to women customers who are health conscious. Every brand of the company comes with a key health message which provides information about the nutritional ingredients of the products. The official website of the company is designed in a unique way which provides information regarding the products, company and the benefits of the products (Kellogg’s, 2013g). Globalization has compelled the company to develop products which can be marketed internationally and also cater to the needs and preferences of the customers. It can be seen that the packaging, promotion, price and physical evidence adds creational value to the product without altering the core value of the product. Internationalization Process Theory The concept of internationalization process was formulated by Johanson and Wiedersheim-Paul and was modified gradually by other authors. Internationalization process differs marginally between policy formulations and status quo. Internationalization process helps in conceptualizing the international marketing theory in a different way which is often termed as an entrepreneurial fact (Shirani, 2009). The major objectives of the internationalization process is access to low cost production, proximity to suppliers, availability of the technical and non technical skills, reducing competition, energy, others etc. Internationalization process also helps in understanding the entry mode strategies and developing a market entry mode for the company accordingly. Internationalization process theories are time dependent and are usually generalized on the laws of succession. The internationalization process lays emphasis on the market entry modes on a specific time frame. The different market entry mode factors are dependent on time, firm, country and market specific factors. The various market entry modes are licensing, franchising, joint venture and wholly owned subsidiaries (Santamaria and Ni, 2008). Franchising and licensing modes are almost similar to each other which involve an agreement where the franchiser/ licensor sell his knowhow to the franchisee/licensee in turn of a royalty fee. The knowhow refers to the tangible properties and helps in expansion of the company in smooth and positive way (Santamaria and Ni, 2008). In this context Kellogg’s utilizes the licensing market entry mode. Under the licensing market entry mode the licensor will sell his technical knowhow to the licensee for a stipulated time frame. The knowhow refers to the intangible properties like patents, copyrights, trademarks, design, formulas and process. This refers to the primary stage of entering into the foreign market and due to the uncertainty in the political and economic uncertainty. Uncertainty can decrease the expansion costs of the company and it also gives a technological control and the major disadvantage would be to give the entire ownership to the licensee. There is a potentiality of conflict between the licensor and the licensee because selling of knowhow leads to difficulty in coordination among them and can hamper the productivity of the company. In this context Kellogg’s adopts the licensing mode where Kellogg’s, USA gives the sole authority to the various licensees worldwide to manufacture cereal and other convenience food under their brand name. Kellogg’s does not provide the entire intellectual property rights to its licensee which often creates misunderstanding between the management and the licensee. Misunderstanding arises when customers worldwide complain inconsistency in the taste and flavour of the cereal and other food products. Although, the licensee is provided with an IP number, trademark and copyright Kellogg’s, USA needs to focus on the manufacturing process in the developing countries. This is because the common people in developing countries require additional requirements than the people in developed countries and the nutritional content in cereal and other foods should not be altered. Nutritional information is available in the package of the product as well as through the official website. Although, the management of the company adopts the licensing market entry mode to enter into various markets it is seen that it has been unsuccessful in adopting the similar approach in various countries like India, Africa etc. The licensing mode has been a successful approach by Kellogg’s which has been able to deliver positive results for the company. However, this method proved to be unsuccessful while entering into the developing markets. Kellogg had adopted the licensing method while entering into the Indian and Chinese markets which proved to be unsuccessful (Arnold, 2003). Licensing method is favourable when the company adopts the mass marketing strategy for the successful distribution and marketing of products. This is because the licensee was unable to analyze the consumption pattern of the Indian and Chinese residents which ultimately led to the failure of marketing the product. In spite of the company’s monetary failure in the initial three years the company kept on adopting this strategy until the company’s net sales stood at an unimpressive $10 million. Thus, this forced the company management to change its marketing strategy for the betterment of the company and developed mass marketing strategy which would resonate with the common masses. The company realigned itself with Chocos to suit the local marketing conditions and priced it moderately. Thus, it can be stated that licensing is one of the profitable methods of penetrating into the international markets for Kellogg’s however different market entry modes have proved to be successful for Kellogg’s. Although, licensing agreement has proved to be successful for Kellogg’s it is needless to say that the potential income would be lesser compared to exporting and franchising (Narotama, n.d.). Licensing proved to be time consuming process which requires several measures to protect it from various associated risks. As we have observed that Kellogg’s had introduced different marketing strategies in developing countries like India, China etc that had helped in yielding profits in bulk amount. Apart from the individual customers the company also caters to the needs and wants of the corporate clients. The nature of requirements, needs, volume and the packaging of the product is totally different from that of individual customers. When it comes to corporate clients Kellogg’s completely alters their distribution strategy and sometimes the core value of the product. The niche marketing strategy is used to serve the corporate clients of the company and sometimes this strategy helps in penetration into other markets for its corporate clients. Country of Origin effect on Kellogg’s The country of origin effect also known as halo effect is a psychological aspect of the customers and generally occurs when the customers are unfamiliar with the concept of the product or the product itself (Cai, 1994). A company with a positive marketing image may pave an easy path for marketers to develop a product which needs less promotional strategies and can introduce marketing concepts easily. This allows the marketers to develop products accordingly. The country of origin effect also depends upon the nature of the company like whether it is a multinational corporation, small and medium enterprise or a subsidiary. The country of origin effect would constitute of the differences between the internationalization and international control strategies that can be due to different national origins rather than the variations in the marketing environment. The differences in the market dynamics and the cultural differences is a contributing factor to the rise in the country of origin effects. The national culture and the upbringing of the customers play an important role in determining the purchasing behaviour. From the cultural perspective managers belonging to a large power distance will be more inclined to make centralized decisions and utilize the formal authority and procedure for the development of the product ( Harzing and Noorderhaven, 1994). In this context it can be seen that the country of origin of Kellogg’s is USA and the national culture of the country led to the development of the concept of cereal as a breakfast product. In the developed countries the lifestyle of the people influences the development of the product for example the western people believe in having a light and nutritious breakfast meal which helps in providing energy throughout the day. Presently, cereal forms an integral part of the consumer’s life and also influence the customers personally. Although, the local products of the country affect the purchasing behaviour of the customers to a large extent it is noticed that customers belonging to the western countries are not influenced by the local cereal brands and have maintained a brand loyalty towards Kellogg’s. The organizational culture has also been a contributing factor in developing the core content of the product to a large extent. The founder of Kellogg’s W.K Kellogg’s was inspired by the idea of developing a light breakfast meal which was meant to provide nutritional benefits to the workers and employees of the organization. Kellogg’s has become a worldwide popular cereal product which has helped the company to gain a positive image worldwide. Sometimes country of origin effect helps in attracting potential investors and companies in the development of an innovative functional food product. Kellogg’s has helped the researchers belonging from various countries to develop products which are healthy and cater to the needs, taste and wants of the customers. Demographic has a considerable influence on the on the country of origin effect especially on cereal products. For example New York has a highly populous working population hence people prefer cereal in their breakfast than pancakes or oatmeal cakes. The country of origin determines the quality and performance of the product. The customers associate the attributes of the product with the image of the country. The marketing of cereal in the developing countries like India and China was a failure because they associate the cereal as a western staple food rather than a healthy and nutritional breakfast meal. After analyzing the feedback from the Indian and Chinese people it was observed that the people were unaware of the health benefits related to the cereal. Moreover, cereal was not considered as a functional food which would suit appropriately with the lifestyle of the developing countries hence, the common people were unable to accept the product willingly with open arms. This has led the management of Kellogg’s to manufacture cereal in varied flavours and packet sizes. Certain cereal and pastries of Kellogg’s have been discontinued like Corn Soya cereal and Corn Pop Tarts and the reason is that these products were associated with western culture and lifestyle. Moreover, apart from the original cereal flavour the company did not earn majority of its revenue from its other products because they were not considered healthy and nutritious. There has been a rising influence of the country of origin effect on the important and essential impacts of managerial decision making. Presently, the impact of the country of origin philosophy of Kellogg’s is very profound and influential to its competitors. Cereal is regarded a high quality cross functional food product and has the capacity to dwarf the sales of breads, cookies, pastries, cereals, pasta etc (Costa, Krutulyte and Grunert, 2006). Much is contributed to the effective marketing strategies and the country of origin effect of the cereal product. Reference List Arnold, D., 2003. Strategies for Entering and Developing International Markets [online] Available at: < http://www.ftpress.com/articles/article.aspx?p=101588&seqNum=3 > [Accessed 03 July 2013]. Birnik, A. and Bowman, C., 2007. Standardization Marketing Mix Standardization in Multinational Corporations: A Review of the Evidence [Online] Available at: < http://academia.edu/176849/Marketing_Mix_Standardization_in_Multinational_Corporations_A_Review_of_the_Evidence > [Accessed 03 July 2013]. Cai, Y., 1994. Country-Of-Origin Effects on Consumers' Willingness to Buy Foreign Products: An Experiment In Consumer Decision Making [pdf] Available at: < http://athenaeum.libs.uga.edu/bitstream/handle/10724/6141/cai_yi_200208_ms.pdf?sequence=1 > [Accessed 03 July 2013]. Costa, A.I., Krutulyte, R. and Grunert, K.G., 2006. A Cross- Cultural Study of Cereal Foods’ Quality Perception [pdf] Available at: < http://ageconsearch.umn.edu/bitstream/10073/1/sp06kr09.pdf > [Accessed 03 July 2013]. Harzing, A.W. and Noorderhaven, N.G., 1994. The “Country-Of-Origin Effect” in Multinational Corporations: Sources, Mechanisms and Moderating Conditions [pdf] Available at: < http://www.harzing.com/download/cooeffect.pdf > [Accessed 03 July 2013]. Kellogg’s, 2013a. Brand Portfolio. [online] Available at: [Accessed 03 July 2013]. Kellogg’s, 2013b. About Kellogg Company. [online] Available at: < http://www.kelloggcompany.com/en_US/about-kellogg-company.html > [Accessed 03 July 2013]. Kellogg’s, 2013c. A Foundation for the Future. [online] Available at: < http://www.kelloggcompany.com/en_US/our-heritage.html > [Accessed 03 July 2013]. Kellogg’s, 2013d. Our Commitment to Diversity. [online] Available at: < http://www.kelloggcompany.com/en_US/about-diversity.html > [Accessed 03 July 2013]. Kellogg’s, 2013e. Kellogg Company Recognition. [online] Available at: < http://www.kelloggcompany.com/en_US/awards-and-recognition.html > [Accessed 03 July 2013]. Kellogg’s, 2013f. Our Values. [online] Available at: < http://www.kelloggcompany.com/en_US/our-values.html > [Accessed 03 July 2013]. Kellogg’s, 2013g. Our Commitment to Nutrition Education [online] Available at: < http://www.kelloggcompany.com/en_US/our-commitment-to-nutrition-education.html > [Accessed 03 July 2013]. Kellogg’s, 2013h. Our Brands [online] Available at: < http://www.kelloggs.com/en_US/our-brands.html > [Accessed 03 July 2013]. Kellogg’s, 2013i. How to Read a Nutrition Label [online] Available at: < http://www.kelloggs.com/en_US/the-benefits-of-cereal/how-to-read-a-nutrition-label.html > [Accessed 03 July 2013]. Kellogg’s, 2013j. Our Locations [online] Available at: < http://www.kelloggs.com/en_US/our-locations.html > [Accessed 03 July 2013]. Kellogg’s, 2013k. Annual Report [online] Available at: < http://investor.kelloggs.com/files/doc_financials/annual_reports/Final2012AnnualReportPDF.pdf > [Accessed 03 July 2013]. Kellogg’s, 2013l. Offers & Promotions [online] Available at: < http://www.kelloggs.com/en_US/offersAndPromotion.html > [Accessed 03 July 2013]. Larimo, J. and Kontkanen, M., 2008. Standardization vs Adaptation of the Marketing Mix Strategy in SME Exports [pdf] Available at: < http://eiba2008.ttu.ee/public/Papers/129.pdf > [Accessed 03 July 2013]. Narotama, n.d. Strategies for Entering and Developing International Markets [online] Available at: < http://ebooks.narotama.ac.id/files/Global%20Marketing%20Management%20(5th%20Edition)/Chapter%209%20GlobalMarketEntryStrategies.pdf > [Accessed 03 July 2013]. Santamaria, B. and Ni, S., 2008. Entry Modes of Starbucks [pdf] Available at: < http://mdh.diva-portal.org/smash/get/diva2:121498/FULLTEXT01 > [Accessed 03 July 2013]. Shirani, M., 2009. Internationalization Process Model [online] Available at: < http://epubl.ltu.se/1653-0187/2009/048/LTU-PB-EX-09048-SE.pdf > [Accessed 03 July 2013]. Read More