Kellogg's Company Term Paper

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Breakfast is considered the important meal of the day. It is a good, nutritional start for the rest of the day. The metabolism of the human body is at its peak from morning to noon. More energy is required during this period. Nutritionists believe that breakfast should be the heaviest meal of the day. And meals should become smaller as the day progresses. Cereal is a good source of carbohydrates -- the body's primary fuel-source. When the body does not get enough carbohydrates, it scavenges muscles for fuel. This leads to a toxic condition known as ketosis.

In this day of hectic time-schedules and careers, a mother's access to a quick and healthy diet is essential. Cold cereals are healthy. They are quick and easy to prepare. They often provide both carbohydrates (from the cereal) and protein (from the milk) -- essential components for the body. Many recent studies have indicated that a bowl of cereal at the end of the day can help reduce temptation for more fatty and higher caloric food. In addition, cereal also forces consumption of milk, which is a very good source of calcium -- an essential ingredient for bones.

The Kellogg Company has been around from 1906. It is headquartered in Battle Creek, Michigan Some of the products marketed by the Kellogg Company are Kellogg's®, Keebler®, Pop-Tarts®, Eggo®, Cheez-It®, Nutri-Grain®, Rice Krispies®, Special K®, Murray®, Austin®, Morningstar Farms®, Famous Amos®, Carr's®, Plantation®, and Kashi®.

Marketing Environment Audit

Microenvironment:

Demographic: The company has sales operations in more than 160 countries in the world. It has 27 manufacturing facilities in the U.S.; and 22 manufacturing facilities outside the U.S. (See Appendix; Table 1) Tony the Tiger ™ is a well-recognized character. It is a widely recognized Kellogg's emblem all over the world by people of ages. [3]

Economic: Kellogg's has utilized integrated business units and compensation incentive systems to increase the accountability of the cash expenditure and improve the functionality of the organization. Products sales have been increasing in the U.S. As well as in other countries. (See Appendix; Table 2) The pricing and availability of the product determines the profitability of a product. Streamlining many of the operations in recent times has helped the Kellogg increase the profit margin. More resources could therefore be spent on the marketing and advertisement of products. In addition, Kellogg's also increased the number and frequency of promotional offers -- more toys and DVD's in cereal boxes, tie-ins with movies and charitable donations to local schools and charities. In 2002, a new strategy of 'Volume to Value' was introduced throughout the company. More value was added to the product sold to the customer rather that decreasing the cost of the product.

Technology: Kellogg's is constantly using new and innovative technologies to improve the production and decrease the environmental impact of the factory on the local ecology at all its manufacturing plants. Many of these new innovations are getting company awards and acclamations in the countries of operation. Kellogg's plant in Queretaro, Mexico was recognized in 2001 with the Clean Industry Award by the National Environmental Ministry ("Certificado do Industria Limpia)." Awards and recognitions have helped the marketing department project a good and wholesome image for the company in the local advertisements. In addition these new technologies have help in increasing the profits for the company and reducing the cost of developing new promotional material for the public. [2]

Political: The advertising and marketing department has to ensure that all promotional and advertisement material are in compliance with the applicable federal, state, and local laws and regulations, including the self-regulatory guidelines of the National Advertising Division (NAD) and Children's Advertising Review Unit (CARU) in the U.S. [4] Marketing strategies should also observe the general code of ethics when preparing and distributing their marketing material.

Cultural: Kellogg also provides advertising that is truthful and not misleading to consumers and to placing its commercials with quality television programming. Kellogg uses the local cultural issues to its advantage. The company also is extensively promoting the brand image of the company in a very brand conscious society in the U.S. The brand image concept is also very strong in Western Europe and is slowly gaining popularity in other countries around the world. In the U.S., where obesity is a problem and where an entire industry devoted to weight loss is being marketed to the public, the "Lose 6 Pounds in Two Weeks" advertisement made a big impact. The program recommended eating cereal for two meals a day over a two-week period. The program helped to increase the sales of Special K® by 14% and Smart Start® by 39%.

Task Environment:

Markets: The market for products like cereal, cookies, crackers, toaster pastries, cereal bars, frozen waffles, piecrusts and cones is present in the U.S. And in many countries around the world. This is a very fast moving consumer product that is sold in all supermarkets, convenience stores and wholesale stores around the country. Kellogg has been constantly trying to develop new products for the market and a very oriented team that conducts extensive market research prior to launch of a new product. Based on the expectation of cereal volume growth, and strong results from product innovation and the continued global rollout of convenience foods, manufacturers of these products are well positioned to deliver sales and earnings growth for the financial year.

Customers: Nutritional and dietary needs of the population are constantly changing and so are the food patterns and taste. Experts and analyst are constantly reviewing the market and identifying the changing food patterns. In an international market regional preferences and taste may affect the sales of certain brands and market expertise will determine the brands that will be profitable. Surveys are used to ensure that the consumer's expectations are fulfilled and that the existing and new products constantly satisfy the customer. In addition very stringent quality controls ensure that the product is beyond reproach.

Competitors: It is estimated that the company has approximately 35-40% of the total market share for their products. Kellogg's makes four of the five most popular cereals (Kellogg's Corn Flakes is the highest selling cereal brand in the world), with General Mills' "Cheerios" being the fifth. General Mills is the main competitor to Kellogg's although there are some other smaller brands that cater to a smaller market. [5]

Distribution: Operations are managed via four major geographic areas, North America, Europe, Asia-Pacific and Latin America. There are manufacturing plants are around the world (Appendix, Figure 1) which supply to the local markets. The distribution of the goods to the public is also through local markets and stores. The company sells 12 of the most popular cereals in the world and the option of stock out of the product at any location at any point in time is not desirable. [6] The maximum revenue of the company is through the sales of cereal.

Suppliers: Kellogg Company is very stringent about the quality of the raw material used for cereal manufacture. Manufacturing personnel are responsible for assuring that the company's quality standards are met. The company and the suppliers for the company use total quality methods to meeting these high standards. Raw materials, processing, and packaging operations are continually checked to assure the production of cereal with consistent flavor, texture, purity, and nutritional content. Kellogg's is a very big client for most of its suppliers and therefore is able to retain its better quality suppliers. The quality of the product is check when the raw material is received as well as at every step of the manufacturing process.

Facilitators: The financial strength of the company is found to be stable (see Appendix, Figures 4, 5, 6, and 7) Major improvements have been made in the capital equipment requirements for the company. The company owns and operates many assets over the five continents. All plants are also equipped with state of the art technology to ensure the quality of all its products. Packaging and transportation is very important. Packaging is designed to help maintain nutrient levels, freshness, and flavor; protect the products during handling, shipping and storage; identify the product; and provide important consumer information. [7]

Public Policies: Some times there are major trend changes in the likes of the public. The U.S. has moved from a "cereal and milk" breakfast culture to a "coffee and bagel" breakfast culture. In addition the cereal industry without question uses the strategy of differentiation. Kellogg's produces a range of products and targets various markets as per the brand; there are brands for kids, teenagers, adults (parents), and the health conscious.

Marketing Strategy Audit:

Business Mission:

Will Keith Kellogg stated: "We are a company of dedicated people making quality products for a healthier world." This has been the basic mission statement of the company from the time of its inception. Kellogg's Corn Flakes® was eaten aboard Apollo 11, the first lunar landing in the form of compressed flakes mixed with fruits. [8]

Marketing Objectives and Goals:

The objective of…[continue]

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