Business Strategy - Kellogs Case Study.

Question 2

Three problems with Strategic Planning.

1. When a business is setting a strategy, there is a need for clarity, an understanding of what are the desired outcomes. If this is not understood the strategy will run into problems.
2. The strategists need to know exactly how they are going to turn these desires into reality, using SMART objectives, that is, specific, measurable, achievable, realistic and time framed. If SMART or a similar framework is not used the project risks running out of time, over running the budget or other possible setbacks.
3. The strategy needs to be a fit with the corporate culture otherwise it will not succeed. It is quicker to change strategy than to change a company’s culture. There needs to be a link between the strategy to the brand

Merit Question

Looking at key elements of Kellogg’s business strategy that I have listed for Question two, above, I would like to examine how well I think the Kellogg’s company is facing up to those  potential problems.

The first possible setback with strategic planning is when a company lacks clarity of purpose;

I really do not think this is the case with Kellogg’s, as their mission and objectives are clearly set out on their website for all their stakeholders to see and clearly communicated through advertising.

As regards to having SMART objectives, this is also very clearly the case with Kellogg’s. Their objectives were measured to be achievable, communicated very clearly to all their employees, and were set over a time frame with all staff agreeing to certain actions required of them to implement the strategy over a three year period.

Whether it was a goal of achieving best in class safety performance within their workplaces, implementing food labelling or any other objective, they have very clear goal setting within a specific time frame and they do constantly measure, monitor and publish their results, as well as renewing their commitments to even better results.

The strategies that they choose fit with their corporate culture. They bring everybody on board by encouraging diversity within the workplace, running leadership programs for their workforce; encourage participation for all in healthy lifestyle initiatives, not just for their employees but the community as a whole.

On their website, their beliefs, goals, commitments and overall initiatives are communicated clearly and strongly include their workforce who their openly state is their greatest asset, borne witness by this quote by W Kellogg himself, “Whatever success I have had in business has been as a result of my good fortune in selecting employees who could do their jobs better than I could have done them myself”.

 

This is another one of their mottos which also expresses this corporate culture, ‘Kellogg’s- people, passion, pride’.

Source: . Accessed 27/04/2012

------------------------------------------------------------------------------------------------------------------------------------------

Apple 

The organisation of my choice is Apple and I am going to look at some of the strategic planning problems they faced in 1997 and how they dealt with them, or rather how Steve Jobs turned the company around to an astonishing degree.

After Microsoft’s Windows 95 release, Apple was in a slump, struggling to stay afloat in a world dominated by Windows lintel driven PCs.

CEO Gil Amelio cut staff and reorganized Apples products into 4 groups:  Macintosh, information appliances, printers and peripherals, and alternative platforms, but nothing worked.

On Feb 5th 1996 Business week had written them off with a cover  article with the Apple logo and titled, ‘The Fall of an American Icon’; other articles abounded with titles like ‘101 ways to save apple’, and many Wall Street analysts were hoping they would do a deal with  Sony or Hewlett Packard.

In September 1997, Apple was 2 months away from bankruptcy!

Steve jobs, who had co-founded the company in 1976 with Steve Wozniek and had been pushed out of his own company, had agreed to return to serve on a board of directors and to act as an interim CEO.

Fans of the Apple Macintosh were overjoyed at his return but people in the business world were not expecting much.

However against all expectations, within a year of his return, things were to change dramatically!

So how did Jobs turn apple around and set it on the path to becoming one of the most successful companies ever?

Jobs decided on a retrenchment strategy; he cut Apple back to its core, he shrunk the company back and decided to focus on being a niche producer of quality products within the highly competitive PC market.

For example he drastically cut product selection, focusing on just one desktop rather than fifteen; he cut out all the printers and peripherals, software development and engineers.

 As well as this he cut virtually all his manufacturing, moving it to Taiwan.  Costs were less, short cycle times, and overall much less working capital was needed.

A much simplified product line cut inventory by 80%, and reduced costs everywhere. A new Apple web store sold direct to customers, cutting out distributors and dealers.

Jobs brought the NXT software with him that he had developed successfully in his time away from Apple.

He even persuaded Microsoft, his main rival to invest £150 million in Apple, convincing Bill Gates that a failed Apple would lead to problems with the Department of Justice, and importantly he needed up to date version of Microsoft software to work on Apples computers.

He didn’t announce any major plans or targets, just concentrated on cutting back and simplifying, cutting Apple back to its ‘core’ ironically.

He didn’t try to restore Apple computers to its former market share; at that stage they had just 4% of the computer market share.

Interestingly when asked by ‘Good Strategy, Bad Strategy’ author Richard Rumelt exactly what his strategy was he replied ‘I am going to wait for the next big thing’, ( Rumelt, 2011, p.14) , which of course we now know was the I pod and I tunes, followed by the I-phone, but he couldn’t have known that then.  

He was just putting himself in a position where he was ready to pounce and capitalise on the next window of opportunity he recognised.

------------------------------------------------------------------------------------------------------------------------------------

Question 3

(Business strategy assignment case study 2011)

The above planning technique is called a Boston Matrix and it is used to analyse a company or their products based on their market share and whether that is growing or stagnating, or just needs more investment.

When a new product is launched it is always a ‘Question Mark’ as it has a small market share and needs time and investment to grow; its future is uncertain as it needs the benefit of time and investment for it to grow and it may fail as many new products do.

A Rising Star has a high share of a growing market, but is likely to face fierce competition because of the growing market so it still needs a lot of marketing.

A Cash cow has high share in a low growth market; it is a stable product that brings continuous income which can be used to finance the new ‘question mark’ products and the Rising Stars.

A Dog however has low share and a declining market, perhaps it is an outdated product that needs to be revived, and maybe it is only kept to complete a line range of products or to satisfy established loyal customers who may still need the parts or customer service.

-----------------------------------------------------------------------------------------------------------------------------------

When Kellogg’s decided to launch the FRUIT WINDER, which box in the above matrix did it fall into? Using other information apart from the case study explain and justify your answer.

When Kellogg’s decided to launch the Fruit Winder in 2001 for the UK market, it was their first non-cereal based product; therefore for Kellogg’s it was a completely new product for a completely new market.

It required a lot of very clever marketing to appeal to children, as it was marketed as a cross between a fruit and a toy in fact. The objectives for Kellogg were for the Fruit winder to become a Top 10 kid’s confectionery snack, to generate sales of over £15 million and to be profitable within two years of the launch.

To this end they developed an interactive online campaign where they developed characters for all the Fruit winders, with names like ‘Sorbabe’, a female Strawberry who loves to dance to music as a musical and ‘D.J. Booster’ , a male Blackcurrant who is intelligent with his gadgets and whatnots. The Fruit winders come in various flavours and Kellogg’s even developed a secret language for them that only kids could understand.

This was followed by a TV advertising campaign but the online campaign had already had huge success, this just built on that success.

It appears that Kellogg’s was more than successful in achieving their objectives to become a top selling kids snacks, despite some bad press from parents groups who claimed there was very little real fruit or goodness in the Fruit winders.

Fruit winders are now an established popular brand with its target market of children ages 6 to 12.

Looking at the Boston Matrix I believe that the Fruit Winder is in fact a ‘Question Mark’ product for the following reasons.

Fruit winders were a new product for a new market, but needed considerable investment to grow and raise awareness.

Although there is a similar product in the USA called Fruit Roll ups marketed by a Kellogg’s competitor, Fruit winders were only sold in the UK market therefore profits are somewhat limited by this fact.

Question marks are products that are growing rapidly and consume large amounts of cash, as we can assume the marketing campaigns for these types of product do, as they need to be kept in the target markets awareness.

It has the potential to gain market share and become a star but needs continual investment to do so, perhaps at the expense of other products.

If it is not a Star, neither is it a Cash Cow, as it has not yet reached the maturation stage, neither is it a Dog, as it is not in a stage of decline either.

This is why I conclude that Fruit Winder is a Question Mark, and therefore need to be analysed continually in order to determine whether it is worth the investment required to grow market share and become a Star or a Cash Cow.

--------------------------------------------------------------------------------------------------------------------------

Question 4

Explain how the terminology of organisational and environmental audit below applies to Kellogg's:

Merit Question

Another organizational audit that Kellogg’s could use would be Porter’s Value chain analysis.

This is an audit whereby you can look at all the activities and processes within an organization and analyse where value can be created, rather than just seeing it as a cost.

Below is a diagram depicting the Value Chain, you can see that it is broken down into several categories.  

Primary Activities are those directly related to manufacturing or creating a product and Support activities, for example management or human resources are those that may increase efficiency in other ways by supporting the various functions of the business.

Value Chain analysis is useful in deciding which activities are best taken on in house and which are better outsourced, and helps mangers to focus on those specific activities that create value for their customers.

After analysis of where value is lost or gained, it may be that they invent better way to do things, for example a restaurant may decide to gain value by growing its own garden vegetables.

They may decide to outsource various activities or share some costs with another company by bulk buying certain produce.

In this way they can gain competitive advantage over their competitors.

()

Distinction Question

In looking at which is the most effective audit for a global company like Kellogg’s, I think the answer may depend on what the goal or objective is.

The PESTEL analysis can be used to provide a context for the organisation's role in relation to the external environment. It is useful as a framework to examine the outside factors which the business must adapt to, whether political, environmental, socio cultural, technological, economic or legal.

Once a PESTEL analysis is complete it is useful as a framework to then map out a SWOT analysis to look at the perceived strengths, weaknesses, opportunities and threats within the organisation and the business environment; this is useful for planning and marketing strategies.

A value chain analysis is useful to look at potential operational inefficiencies and is extremely useful to analyse where costs savings could be made and more value could be created therefore creating competitive advantage for the company.

SWOT although useful for planning and strategy gives a less complete picture than a value chain analysis, as it doesn’t take into account many of the operations so the company, whereas the value chain gives more details on the internal environment of a business, but doesn’t focus so much on the externalities.

The PESTEL model looks more at the external environment which a business operates in, those factors a business cannot control but can only adapt to.

In conclusion I think that they are more useful combined as analysis tools, using the value chain for the internal environment, the PESTEL for the external factors and the SWOT  to look  at where the opportunities and threats exist within both for creating efficiencies and minimising inefficiencies within the organisation as a whole. I would say that they are all useful analytical frameworks and support each other to a large degree; therefore I find it hard to say one is more effective than another but rather it depends on the context.

-----------------------------------------------------------------------------------------------------------------

Question 5

What is meant by STAKEHOLDER and who are the stakeholders for Kellogg’s?

A stakeholder is any person who has an interest in the business or can be affected by the business

The stakeholders for Kellogg’s can be divided into internal and external categories, and their needs must be looked after to varying degrees.

Internal stakeholders are mainly employees, management, and internal directors.

External Stakeholders include local government, central government, environmental groups, financial analysts, the local community, and of course the media. Connected stakeholders are their suppliers, distributers, customers, and creditors; these shareholders are internal in a sense and certainly connected, I feel they fall somewhere in between internal and external.

---

---

References:

Rumelt, Richard(2001) Good Strategy Bad Strategy. USA: Profile Books

(1996) ‘The Fall of an American Icon’ Business week 5th May 1996

BPP Learning Media(2010) Business Strategy. UK: BPP Learning media.

‘Launching Real Fruit Winders through new media’ Available from Times 100 website

 Information on Kellogg’s values. Available from Kellogg’s website , accessed 7/4/2012

‘People Passion Pride’   . Accessed 27/04/2012

Bibliography

Lashinsky, Adam (2012) Inside Apple. London: John Murray

Margretta, Joan (2012) Understanding Michael Porter.US: Harvard Business Review Press

Rumelt, Richard(2001) Good Strategy Bad Strategy. USA: Profile Books