Kellogg Company - Brand Champion in the Foodstuffs Market - Case Study Example

KELLOGS SPECIAL K Contents INTRODUCTION 1 SITUATIONAL ANALYSIS 1 ENVIRONMENTAL SCANNING 6 SWOT ANALYSIS 10 SEGMENTATION 11 Target Market 12 Target Market Collage 13 CONCLUSION 16 REFFERNCES 17 INTRODUCTION Kellogg Company is the world’s leader in cereal products production and a leading producer in foods like crackers, cookies, cereal bars, toaster pastries, frozen waffles, fruit flavored snacks and vegetarian foods. Its brands include Keebler, Tarts, Eggo, Rice Krispies, Nutri-Grain, Cheez-It, Morningstar, BearNaked, Famous Amos, All-Bran and the list is long. The products are manufactured in 18 countries and marketed in over 190 countries all over the continent. The headquarters are situated at Battle Creek, USA. The company was established at the Battle Creek Toast Corn Flake Company in 1906. It was founded by Will Keith Kellogg to illustrate the increase in his wealth from his work with the brother John Harvey Kellogg at the Battle Creek Sanitarium. The wealth had been created out of sale of Kellogg's Toasted Corn flakes on a huge scale. This led to the renaming of the company into Kellogg Company in 1922 (Kellogg Company, 2011). The strength of the company lies in its world-class innovation abilities. SITUATIONAL ANALYSIS The internal analysis of Kellogg Company is that it focuses on business. Its senior management is aimed at becoming the leader in food retailing industry worldwide. To achieve this, they are empowering their employees and building their brand supported by the integrated focus strategy and operating principles. The foundation of its business lies in its values, its people and its societal commitments. Its core competencies are the skills among the employees that provide the advantage to the company consisting of the resources available. Kellogg's has far reaching; well defined and clear competences to enable them beat a world’s best. The competences are; it is strategic, functional, and has a corporate ability. It has a flexible structure of organization that fits in the demands and needs of the locals. Kellogg has been developing its image through creating a customer values, customer service efficiency and proper channels of distribution. The Marketing Mix “Marketing Mix is a well established framework that helps marketers to plan their approach to each market” (Smith. & Chaffey, 2005). Marketing mix of Kellogg’s which is mainly concerned with cereal products, being the major producer of cereal in the world. Consumer wants are fulfilled through the products sold. The current world has consumers that are much more concerned with their health; they tend to buy food products that are healthier especially for their children. Kellogg’s K special has a range of products that meet the customer demands that are currently higher than expected. They have products that are low in fat, have no preservatives and they have no artificial flavors. There packaging is attractive to children because their mail target is children. Kellogg's supplier power lies under its customers. It poses mainly medium power when purchasing from suppliers. Wheat varies in price because of its extensive force and the cost is passed onto customers of Kellogg’s. Michael Porter’s Five Forces theory states that an industry is influenced by five forces, which are Barriers to Entry, Supplier Power, Buyer Power, Degree of Rivalry and Threat of Substitutes (Kurtz et al., 2009). Kelloggs is not an exception at all and the effect of the forces is evident in its financial as well as managerial reports. Kellogg's product lines are cereals, crackers, cookies, snacks, frozen foods and water. The benefits that a consumer gets are healthy products that are standard in nature. The products are manufactured in over 17 countries and are marketed in more than 190 countries according to their annual reports for 2009. The highest consumers are the North America with a 67% margin followed by Europe at 20% then Latin America and Asia Pacific at 8% and 5% respectively. Buyers of Kellogg's products are mostly supermarkets and stores because the hold the power of the whole wheat industry and set the prices. The marketing mix, product planning, pricing, branding, distribution ways, person to person selling, promotions, selling, packaging, display, physical handling, servicing and fact finding are all incorporated in the strategies that make Kellogg’s a successful company. Product planning is perfect as seen in numerous countries; their products exist in the countries with a higher percentage of market value. This is reflected in the fact that their products are found in all the continents around the world at affordable prices. Kellogg is mostly a breakfast company and anything that is presumed consumable at breakfast time is said to have been manufactured by Kellogg’s. This may include fruit bars, toast, doughnuts and most cereal products. Any other company trying to break into the breakfast cereal production may have to encounter many hardships In terms of winning customers and keeping them. There are three companies that can pose a threat to Kellogg; those are PepsiCo, Kraft and General Mills. The companies are well established in the cereal production market and they have the money at their disposal to break into Kellogg's customers. Kellogg Company has a clear mission statement that states that it is a Global Company that is committed to build long term growth in profit and volume. Through this, it’s meant to enhance its worldwide leadership of producing superior food products. This mission statement is met considering its widespread consumer base all over the world. They have managed to capture most markets and all the consumers of cereal products all over the world which becomes a milestone. Children and adults even the elderly use these products which are said to be of greater value in terms of nutrition. Consumers can make a substitute for other products from upcoming brands that are meant that pose a threat to Kellogg Company if there is a laxity in their quality management. Their product segmentation is such that the best-selling cereal brands favored by children like GM Count Cholula, GM Lucky Charms, Post Marshmallow Alphabits, Rice Crispy and Q Marshmallow Safari are all separated by different flavors that attract children and even the grownups. One can’t just resist the urge to have a taste of the cereals on a daily basis. The market share is such that there is much competition at a high rate as flat sales, low quality and low priced clones all have taken up the market shares of both Kellogg Company and General Mills. According to Kellogg Company, (2009), the future of Kellogg company seems bright because the Market Forecast shows that the children market is growing at a constant rate approximately more than 15% in a year. This is as per the annual report for 2009. It reflects the growth in market share for the last 5 to 7 years; the survey shows no sign of ever slowing to a lower speed. The growth mostly had been influenced by the gains in cereal. The aspects making Kellogg’s products unique are their nutritive value and taste. The products are standard and measure the cost of investment, consumer are often pleased with the use of their cash, not to have wasted by buying Kellogg products. The pricing policy for Kellogg products are pocket friendly to consumers. Due to flooding of the market by sub standard cereal products and clones, consumers often prefer quality to quantity. The current league of consumers values their money and its use than the quantity of food they consume. The slogan “the strength of our people” makes Kellogg a leading company. The slogan markets itself, it ids found on each and every package that Kellogg produces. They have good quality packaging strategies that are attractive to customers and the public. To maintain such a big customer base, the company is committed to regular advertisements and excellence. It is passionate about reaching its goals and embracing new challenges. The company’s business model is to be resilient and to prove relevant to all economies so that the health of many (customers) is sustained to the long term (Kellogs.mediaroom, 2009). The company has invested heavily in advertising, in 2009; $1.1 billion was used to advertise hence making a profit of more than $1.2 billion. The purchasing decision often is made on the image quality rather than the price. The business costs are more important when determining the price. Kellogg's has product that are very expensive like weet-bix. The products are of higher quality than most cereal products on the market today. The business costs in determining the price makes it difficult to come up with the proper prices for the products but in Kellogg’s case, the investment is heavily on quality and the price is often high. The business cannot go at a loss if the products are of high quality. Currently, Kellogg's products are manufactured in over 17 countries and marketed in over 190 countries. This highlights the presence of their products in nearly all countries. Consumers can purchase the products from any store around them. There are supermarkets, wholesale stores, the local retailer outlets and vendors. The prices vary depending on the location of purchase and country. Consumers can buy directly from Kellogg’s Company if they don’t get the product they need in the shops near them, they are able to order directly from the manufacturer near them and the product is delivered at their doorsteps. The advertisement; Frosted Mini-Wheats is Clinically Shown to improve kids’ Attentiveness in class by nearly 20%. This advertisement is seen to be misleading to the customers but aimed at gaining a faster customer base. It is a strategy that can work out miracles if the customers don’t find the message behind it or no intervention is made. Another message that had been seen on the internet was “A New Face in Victoria Lane”; the advertisement has been circulated on the internet to show that Special K is now sponsoring Desperate Housewives. In the advertisement, the neighborhood is aware that one of the actors is actually using a Special K product. This advertisement is meant to tell the other desperate housewives to use the same and avoid being desperate. The current promotions that have been observed include the buy-one-get-one-free promotion. The promotion is aimed at getting a more customer base to use Kellogg products. The promotion runs on weet-bix currently on the television. The theme is to get more customers to add on the ones that are there at present. The other promotion is the reduction in price prices for waffles. The promotion is meant to boost the number of people buying waffles and to maintain the customer base. Both promotions are aimed for the same goal of attaining the customer base to add on the present number. They want the customers to know the products and try to make them buy the products (Kellogg Company, 2009). ENVIRONMENTAL SCANNING This section deals with how Kellogg Company is affected by the environmental factors. Kellogg as a company exists in different macro environments as a whole. When it comes to environmental analysis, the market structure is what strikes the management. The business operates in separate economic, social and political environments/frameworks. Individual countries offer different environments of operation which makes it tricky and calls for closer analysis of each market structure before venturing into it. To identify, compare and assess the variable factors that can affect or have a negative impact to Kellogg Company was important. An example was the comparison between the United Kingdom and Taiwan. Political/legal Environment The United Kingdom has a stable political as well as legal environment. The private enterprise is highly encouraged in this country which means that Kellogg can have a very good investment channel that can be created here. A country like Afghanistan has an unstable political environment with a hostile reception. Investment in such an environment may cost a great deal of input with minimal outcomes. The two disparities mean that the legal and political environments of a country matter a lot and are the major reason why the products have not yet reached some countries. Economic Environment The economic environment of the United Kingdom is growing even though facing a downturn. This may be a negative impact to Kellogg as a company to invest here. Other factors kept constant, this may hinder investment in the cereal industry in this country. The income levels are high but racism is also high leading to discrimination and discouragements from other races. The credit levels are encouraging bud going in a downturn which has negative impacts. Taiwan on the other hand has an economy that is at a constant growth. The economy looks to be having a good outlook for the future. This has encouraged Kellogg to have a bigger consumer base here, to base more promotion here and to invest here heavily. A stable economy encourages investors from foreign countries as well as internal investors. Sadler (2002) states the relationship that exists between the industry and the economic level of a country as being very important for a national growth and development. The Social Cultural Environment This is how individuals interact with each other in a given environment. The United Kingdom has a Western lifestyle. Their tradition of eating cereals in the morning for breakfast is an advantage to Kellogg that seems to gain a ground and acquire a constant stable market base. This culture makes Kellogg an interested party in investing in the culture. When an opportunity presents itself, the best seller or marketer will take up the opportunity as fast as possible and this is what Kellogg as a company has done in the past. The Taiwan culture as an example has the Eastern Chinese Life-style, they have no tradition or culture compared to that of the United Kingdom, but they always try to adapt to good foreign cultures. The given environment provides a potential for investment. An example of McDonald business of restaurants that has been successful in the culture is good news for a company like Kellogg’s Special. The cereal business has potential to grow given the fact that Taiwan citizens often want to discover new products and know their goodness and the negative sides of the products. The existing environment gives the best opportunity and potential for growth of Kellogg as a company that mainly deals in cereal products. Technological Environment The United Kingdom environment provides good infrastructure, well established channels and means of distribution and it has good communication network. This combination makes it possible for investors like Kellogg to have an advantage in the area of investment. Cereal products can thrive well in a competitive environment and Kellogg has an upper hand in this because of its edge in number of years it has been in business. The Taiwan environment seems to have an environment same as that of the United Kingdom with good infrastructure and good channels of communication. Natural environment This is the availability of raw materials, cost of energy and pollution. Both United Kingdom and Taiwan have good sources of raw materials because of their agricultural environment, energy costs are high compared to other developing countries. Some environments like in Afghanistan may experience a difficulty in establishing a company like Kellogg because agriculturally it is poor hence provision of raw materials can be a challenge. The presence of good energy sources with poor raw materials may not be a balance in producing the desired cereal products (Kellogg, 2009). Competitive environment Kellogg has a fair competition from its competitors, it has an upper hand in the breakfast cereal and when most environments are assessed it tends to be the one that most consumers like. General Mills is the main competitor of Kellogg’s; they both are in mature stages of their market share in most of their products. The marketing strategy employed by both competitors is trying to make most out of advertisements and promotions to win a customer base. Demographic Environment The changing age structure of the world is that more children are being born, the elderly are more while the middle aged are continuously getting low in numbers due to diseases like HIV. Being a cereal company, Kellogg’s Special K has an advantage of the target population, its main target is the young children going to primary, lower level education (Kellogg Company 2010). With their current rise in population, it is expected to provide the cereals for breakfast for them on a daily basis. The products are designed to be consumed by all the age levels but preferably children with no discrimination to educational level, they are found in all countries to cover all ethnic backgrounds. SWOT ANALYSIS SWOT analysis is an important for internal analysis of a company’s situation (Bohm, 2009). STRENGTHS Kellogg’s has a financial base that is stronger and has been growing each year. They have a strong brand in terms of recognition and advertisement. It has a strong global base; it has captured most of its customers with its brand. It has the ability to find new market bases worldwide. It has diverse product ranges that make it safe to trade even at low financial economies. It has innovated new products that come as a surprise to get new customers. WEAKNESSES There is a limitation to growth of its product margins Sometimes pollution occurs in production lines making it lose some customers. They are mere followers when it comes to pricing of their products, prices are decided by consumers. The slow reduction in market share in the United States has caused it to lose its sales in the past years. Not many new cereal products have been produced in the recent past years. OPORRTUNITIES It can slowly and continuously diversify its products to remain in business as the core suppliers with high profits. Developing better pricing strategies with low prices can reduce costs as well as increase their market share. If they expand their international affiliations, they can be guaranteed for growth at a faster rate. Improving the channel of distribution can be a way of saving costs to attain better business deals. THREATS The rising cost of product raw materials is one threat that may affect their sales. The intensity of competition from other countries and products that may erode Kellogg's share to the market. Clones are many in the market in circulation at a discounted price and have reduced Kellogg’s shares. SEGMENTATION Segmentation is a term used in marketing and economics to mean, a market segment means a subset of the market that consists of people with one common characteristic (Wedel & Kamakura, 2000). They end up demanding the same type of product or/and service. Also used to describe consumers with same products are grouped separately to be charged a given different amount. This demand is often based on the qualities of the products like the price or nutritive value. A market segment must be different from other segments, it must be homogenous inside the segment, it can be easily reached by market interventions and responds in the same way to market stimulus. Market segmentation is to divide the market into individual market groups with related wants. Examples of segments are based on gender, interests and price. The different segments give a commercial advantage to the manufacturer because a given product from a given manufacturer is targeted which is an advantage. This gains a market base for the given manufacturer. According to Neal (1999), a multidimensional approach has benefits to both the consumer and the manufacturer. In this case Kellogg as a manufacturer. It helps initiate a rebranding initiative to a given company. This is because the customer base is already established and they will often come back for the same product. Whenever there is a new product in development, it gives clear direction to the consumers. This is the case of Kellogg’s corn flakes that were introduced in 1996; many consumers became aware of it in a matter of weeks. Multidimensional approach also allows senior management to formulate facts for executing both offensive and defensive perspectives in laying new businesses or products in the market. It helps manufacturers have a good view of the market place thus helping the customers forget some of the myths that often surround them for many years. Target Market Kellogg targets mainly children and the middle aged population. The fun packages majorly target the young but it is the elderly that do purchase the products for their young ones. Fun colorful packages do capture children’s attention easily. The products contain sweet, colorful nutritious elements that make customers come for more. The demographic description as per the countries, an example of The United States of America, it has a diverse number of states that have collaborations that mainly consume in terms of product segmentation. The segment size of Kellogg's special k is large compared to other brands. The structural attractiveness of the United States market is appealing even if the market base has been declining in the recent past. This has provided a space for improvement in terms of advertisement to gain a stable market. The target market for Kellogg’s has been constant with no discrimination to age and race. Most of the customers are well versed with Kellogg’s products in the United States which makes marketing strategies easier to formulate. Behavioral changes are not seen, in most cases the changes are due to availability of cheaper alternatives on the market that consumers purchase but come back for Kellogg products after noticing the difference as stated by Kellogg Company (2009). The loyalty rate is high as many consumers value their health more than their money and will go for the more expensive and more nutritious Kellogg products. Target Market Collage These images look attractive to the eyes of the individual consumer. The images do not make any offence and are clear to the person that may be of interest to the above products. On first sight, the observer may want to look again to know more about what is being sold. They are especially attractive to the target population that is the children. The above images are used to demonstrate where the energy posesed by the catoons is found from. They go ahead to encourage the consumer to serach the site and get to know more about the products of the company. The images illustrate a company dedicated to its customers. The demographic view shows a dedication to diverse number of customers young and old and both sexes. The images illustrate how the company Kellogg has presented itself to its customer base. It has a variety of ways of presenting itself which can capture several market bases in different cultural backgrounds. The logo is well styled in different shapes to attract customers. The images are used to attract customers who want to gain energy. The brand name Optivita seems to be an energy cereal because besides it is another strong lion to show that it actually works out the miracle. CONCLUSION In conclusion the information presented in the images and the whole document suggests that Kellogg’s Special K is a brand that has a market base that is so strong. The market base is laid on a strong foundation that can take time for another company to take over the customers. The marketing strategies adopted by Kellogg are the fundamental reasons why it is a successful company. The recommendations here are that the marketing strategies need further improvements because of the dynamism of the current world. There are technological changes and Kellogg company needs to improve to stay in the market. REFFERNCES Bohm, A. (2009). The SWOT Analysis. Germany: GRIN Verlag Kellogg Company (2011). Kellogs. Retrieved from: http://www.kelloggcompany.com/. Accessed on 10 an 2011. Kellogg Company (2010). Create your free personal plan. Retrieved from: http://specialkfoods.co.uk/. Accesssed on 10 Jan 2011. Kelloggs.mediaroom (2009). Kellogg company releases its first global corporate responsibility report. Retrieved from: http://kelloggs.mediaroom.com/index.php?s=43&item=229. Accessed on 12 Jan 2011. Kurtz, D.L., MacKenzie, H.F. & Snow, K. (2009). Contemporary Marketing. NJ: Cengage Learning Sadler, P. (2002). Building tomorrow's company: a guide to sustainable business success. CT: Kogan Page Publishers. Wedel, M. & Kamakura, W.A. (2000). Market segmentation: conceptual and methodological foundations. MA: Kluwer Academic Publishers. Neal, W. D. (1999) Satisfaction is nice but value drives loyalty - the most satisfied customer may not necessarily be the most loyal. Marketing Research, 11(1). P21-23. Smith, P.R. & Chaffey, D. (2005). emarketing excellence: the heart of ebusiness. MA: Elsevier Read More