Unit : 7 Business Strategy

Pearson BTEC HNC/D Diploma Business – Unit : 7 Business Strategy


Unit Description

Business Strategy


This is solution of HND business strategy assignment, made on the case study given by Mont Rose college

Business Strategy

Introduction to the Case
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Business Strategy

The case given is about Kellogg’s and how tragically sound the organization is.
The case deals with various issues in the strategies and overall organizational structure prevalent in Kellogg’s,
the case also talks about how Kellogg’s is using the promotional techniques like various marathons, clubs, talks etc. to promote their product by relating the brand with health which is the way the organization want to project itself.
It is also prevalent through this case on Kellogg’s that communication strategy and the overall brand positioning of the brand Kellogg’s is undergoing strategically thinking process, thus to put it in nutshell this case is about “Kellogg’s defining itself and its strategy”.
Task 1:- Strategy Formulation

1.1 Strategic context and terminology

Mission

A mission statement is the overall purpose of role through which the organization serves and provides the required assistance to its shareholders at large. It is this mission statement that describes what the organization has currently which are the current capabilities of an organization, who will benefit or who will the organization serve which refers to the shareholders and finally what is the particular thing that distinguishes and differentiates one organization from another one which is also the reason why an organization is existing. Thus to put it in nutshell a mission statement of an organization is simply the reason why an organization exists and what is the purpose of the organization. (Hitt, Ireland, & Hoskisson, 2008)

Vision

Vision statement in contrast with the mission statement defines what the organization intends to be in future or deciding what or where the organization has to be placed in future in order to meet the needs of the shareholders effectively and efficiently. (Hitt, Ireland, & Hoskisson, 2008) A vision statement to be effective must fulfil the following characteristics namely:-

A vision statement must be powerful,
It must have the capability of giving clear direction and a possible image of the future to whoever reading the statement,
Must be able to mobilize the resources of the organization in the direction of the future and objectives set.
Core Competencies

Core competencies are the proven and well defined expertise that an organization has which differentiates the success and overall functioning of one organization from another either in the same industry or any other industry. Core competency in a nutshell is an expertise that one organization has and which has been built overtime and difficult to be imitated by the counter parts easily. It is the USP of an organization. (Hill & Jones, 2012)

Objectives

Objectives are a shorter time framed mission of an organization. Basically the objectives of an organization is the purpose towards which the organization tends to move, thus the direction in which the resources of the organizations moves to achieve a set short term plan are the objectives of an organization.

Goals

Goals are similar to the objectives with the only difference being they are long term and are generally the end purpose of any task or plan. Thus we can also put that a combination of objectives form the goal.1.2 Issues in strategic planning

Strategic planning is a process to find out what the organization has in terms of its resources and what does the organization wants to achieve in future through the already existing resources in the organization or by adding newer resources to the organizational structure. Any organization in order to plan effectively and strategically must keep a regular know how about the changing business environment and keeping it in view the changes must be initiated in the organization structure in order to be strategic (Pitt & Koufopoulos, 2012).

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According to the case:-

Positioning By Benefits:-

Kellogg’s which is a brand which is trying to position itself and its products in a way that they are healthy, thus in order to position itself effectively Kellogg’s is planning strategically and thus it is coming up with marathon, also introducing and joining hands with various health clubs etc., thus the positioning strategy is clear that Kellogg’s is using the strategy of positioning by benefits as the product they deal in are all low on cholesterol and are healthy food like cereals etc.

However there are few issues as well in this planning strategy which are:-

The importance given to external environment and also the issue of changes and learning and consumption style is not given too much importance,
Also Kellogg’s strategy of brand positioning seems to be bit confusing as more importance is given to promotion however other aspects are not given emphasis on which may be more important for Kellogg’s like pricing etc.
When to Plan

Who to Involve in Planning
The process of planning must follow a chain and this can come through the supply chain process which means as the products flow from the organization which is Kellogg’s in this case to ultimate consumers through the suppliers, retailers etc. Thus information and the planning process must involve everyone in the supply chain as they age enriched with the information and they would be able to plan efficiently, thus the planning department must get the knowledge from the people in supply chain before designing plans for the organization. (Spulber, 2007)
1.3 Planning Techniques Can Be Used by Kellogg’s

BCG growth matrix

BCG growth matrix is a process of placing the products and ski (stock keeping units) of an organization under four heads which are divided on the basis of: – (Katsioloudes, 2009)

Relative market share each possess by each product of ski of an organization in comparison to the similar products of counter parts etc.,
Market growth which means the possibility and scope of growth avail be in a particular market in which the pre-cut or ski is sold or exists.
On the basis of these 2 heads every product in an organization can be divided into 4 heads namely,

Stars:- Products high on market share and where the growth of market is there,
Question marks: – Products having low market share but the growth in the market or the industry is high.
Dogs: – Products having low market share and low market growth.
Cash Cows: – Products with low market growth rate and still having high market share.
Diagrammatically Kellogg’s products can be divided into 4 heads:-

kellogs business strategy assignment

Strategies by using BCG matrix are: – (Spulber, 2007)

For products like K special and cornflakes where both the market share and market growth is high, the strategies will be to INVEST MORE AND PLAN MORE,
For products like pop tarts, coco pops where market growth is high and market share is low which means the competitor is eating away all the share, thus the strategy has to be to DIVERSIFY MORE PRODUCTS AND PROMOTE MORE so that people start to use these products as well,
Products like honey loops, ricicles etc. which have low market share and a low growth rate are mostly the loss making products thus the strategy should be TO DIVEST AND USE THE FUNDS TO A STAR PRODUCTS TO EARN MORE,
Finally for products like ricekrispies etc. which have low market growth and high market share or are cow products, thus the strategy should be TO EARN MORE AND INVEST LESS HERE AND USE THE FUNDS TO PRODUCTS NEEDING THEM LIKE question marks etc.
Application of BCG growth matrix to Kellogg’s gives the following result:-

The products of Kellogg’s that are stars are Kellogg’s cornflakes, Special K,
Question marks are pop tarts and coco pops,
Cash cows are nutria grain, rice crispiest and frosted flakes, and
Dogs are Kellogg’s Ricicles and Honey Loops.
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Task 2:- Strategy Formulation

2.1 Organisational Audit

Process of Strategic Planning

Resource Audit:- Resources which are used in the organization which consists of human resources, technological resources etc. would all be analysed and devalued in order to fin if any change is needed and implementing the same if found.
Value Chain Analysis: – Under analysis the procedure of producing each product at Kellogg’s will be analysed in order to find out can the products be prepared in any other manner and more profitably.
Performance Analysis:- Kellogg’s will analyse the performance of each of its business units, departments etc. in order to analyse how each process is performed at Kellogg’s and can any change be initiated for the betterment of the whole process and performance.
Product Positions:- The positioning of each product will be analysed also the market share and growth rate everything about a product will be analysed with the sole objective to understand how profitable a product is to the overall product line of Kellogg’s (Spulber, 2007).
SWOT analysis

A SWOT analysis is a view at the strengths, weaknesses, opportunities and threats of a company for getting a company’s detailed and thorough perspective.

STRENGHTS: –
· Dividend: A dividend of $0.44 is paid by Kellogg quarterly and yields a dividend of 3.29% annually.

· Solid Revenue Growth: Kellogg has shown a stable growth of around 3.89% over years.
WEAKNESSES: –
· Massive Valuation: When the company’s price to earnings ratio and price to sale ratio is looked upon, Kellogg is relatively average.

· Reliance on One Product: The wide majority of Kellogg’s revenues are derived from a wide array of cereal brands.

· Debt: Kellogg possesses a debt of around $7.366 billion.
OPPORTUNITIES: –
· Product Innovation: Kellogg keeps on innovating and creating new brands which promotes growth of sales.

· Selling Brands for Cash: It helps Kellogg to reinvest in their own company which will lead to rise in cash.
THREATS: –
· Competition: Food industry is the crowded industry in the world; therefore there is a fierce competition.

· Shift in Market: With the invention of cereals, everybody wanted to have it for the breakfast as it was new and interesting.

· Rising Food Prices: The price of food have raised high due to the drought this year
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2.2 Environmental Audit

Pestle Analysis

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Political : There are various reforms being undertaken by the government regarding obesity. In the United Kingdom, the focus on the problem of obesity has grown attention towards these products.
Economical : The industry is faced with various problems related to finance, as well as access to different markets. There is decreased buying power in the customers and hence they are unable to buy expressive food.
Social : The people have become health conscious and there has been an increase in the obesity rate and the rate of ill health. This has induced the industry to prepare light food considering the increasing market of health conscious people.
Technological : There has been a large innovation taking place in the cereal market, which includes, new packaging, small snack bars, resalable packaging, recyclable packaging, new advertising and communication level, healthy diet food.
Environmental : There are several steps that this industry is taking for the overall community, such as, recyclable and ecologic packaging for avoiding wastage. (Scapens, 2014)
Legal : There is a rise in the number of claims in relation to health. The main driver for standardization is the globalization.
PORTER’S ANALYSIS

Industry competitor: There is a condition of oligopoly, where there are very less number of sellers, however a large number of buyers.
Substitutes: There are several substitutes available due to private labelling.
Threat of entry: Due to the oligopolistic situation, it is difficult for the new firms to enter in the market.
Bargaining power of buyers: There is very low bargaining power of buyers in the cereal industry.
Bargaining power of suppliers: The suppliers in the cereal industry also have a very low bargaining power due to the significance of private labels market shares.
The current strategy at Kellogg’s is about product repositioning which is mentioned in the case, however according to the porter’s model of 5 forces we come to the conclusion that:-

The competitive rivalry is quite intense in the industry and it becomes important that the company drafts strategy that is focused on getting an upper edge over the competitors.
Also the bargaining power of the buyer is very high in the fact industry which consists of Kellogg’s as well, thus in order to incorporate more consumers to buy Kellogg’s product acceptance has to be increased towards the products of Kellogg’s which can be through promotion, making people taste the products, celebrity endorsements etc.
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2.3 Stakeholder’s analysis

Stakeholder analysis has become increasingly significant since the 21st century, as it comprises of: the customers, communities, employees, as well as business partners. This analysis helps the company in drafting marketing strategies and forming corporate relationships, employee motivation and overall business. Also it is the stakeholders who help the business to expand and reach success be it in the firm of financing activities of the business or buying the produces f the organization etc. Thus the analysis of the stakeholders is all the more important to understand how effectively the stakeholders demands are met and any gap in the actual performance and needs of the stakeholders can also be addressed so that the organization does not land under any issue and the organization runs smoothly.
Task 3:- Planning

3.1 Alternative Strategies

Substantive Growth

Substantive growth strategy is a method to grow or increase the organization’s total presence in a particular business, product line, industry etc. Growth strategy which can be used by Kellogg’s are:-

Forward Integration:- Kellogg’s can open up K stores where in they can sell their products and also stores ambience should be such that it gives importance to health like keeping weighing machines etc., however this will increase the expenses but the total market share would increase as the sale of the products would rise. (Spulber, 2007)
Limited Growth

Limited growth strategy is similar to the process of substantive growth with the only difference being in the scale of changes or rapidness or growth, this form of growth can also be known as test growth where in there are tests made whether to grow and in which directions to grow. Limited growth strategy for Kellogg’s are:-

Test marketing:- Kellogg’s can come up with smaller packs of their products so that the whole issue which Kellogg’s faces in many countries which is less acceptance of its products, the basic problem is people haven’t tried the products , thus Kellogg’s can come up with small packs and can even distribute few as samples to increase the preference of customers.
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Divestment Strategy

Divestment:- Kellogg’s must divest and take their funds of the products coming under the dog category in the BCG matrix which are ricicles etc. as they age products which are the major reasons of losses and problems, thus Kellogg’s should use the strategy of PARTIAL divestment.
Responsibility for implementation of strategy:-

The responsibility of the business analyst is to analyse the internal and external business environment in the organization which is Kellogg’s in this case and to test the alternative strategies designed before applying them in full flow so as to save time and cost of the organization in case a strategy fails.

3.2 Appropriate Future Strategy for Kellogg’s

Strategy should be implemented to find the answer to the problem of non-acceptance of products:- Kellogg’s faces a problem of less acceptance in many countries where it sells its products, the basic problem is that Kellogg’s which had earlier positioned itself as a product for the breakfast and various cultures has different eating and breakfast habits, thus Kellogg’s found it very difficult to compete with the local eating habits and due to which Kellogg’s still does not have great acceptance for its products, thus Kellogg’s have to come up with strategies to change this thinking of the consumers, they can do so with the following plan:- (Digital News Agency, 2002)

Give more importance and re-position themselves in the mind of consumers and move away from a normal breakfast supplement also Kellogg’s should increase the acceptance by developing taste in the consumers this can be done by opening K stores and selling Kellogg’s product and also selling finished products like corn flakes which people can taste in the store so as to buy and increase acceptance.

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Task 4:- Defining Roles

4.1 Roles and Responsibilities

Any strategy can be formed and can be implemented effectively only in one has the right information and that too at the right time. The information so provided by the providers must be used by a team of trained analyst to form strategies beneficial for future: – (Hitt, Ireland, & Hoskisson, 2008)

Information Provider:-Each of the employee, manager, member of the board, member of the supply change or let’s say in short each person who is directly or indirectly must be a source of information for the organization, Kellogg’s should attain information to the deepest extent so that the strategies formed meet the needs of the organization.
Information Seekers: – Business analysts, planners etc. are the people who will use the information provided by the information providers and the role of these strategists and analyst is to keep the organization prepared for future by having a well-designed and defined organizational strategy.
4.2 Resources Required

The set of resources needed for the strategy formation can be many depending on the organization which is using them and the stage at which it is used for Kellogg’s the resources are:- (Hill & Jones, 2012)

Knowledge: – Knowledge is one of the most important resource an organization has in todays fast-paced and every changing dynamic world, it is this information base and knowledge which can be the distinguishing point between two organizations.
Human Resources: – Human resource are the next important resources they are the ones who strategies, who use all the other resources in a way that the overall outcome is beneficial for the organization.
Infrastructure Background: – Now once the knowledge base is there, human resources are at place the next resource required will be the infrastructure, for Kellogg’s infrastructure can various planning software’s, meeting rooms etc.
Kellogg’s must use the innovative and creative promotional strategies like coming up with internet campaigns, reason why internet is chosen is that consumers who are more knowledgeable and informed will only relate health with eating habits, and thus internet is a place where in Kellogg’s can find a large number of informed youth who have more inclination towards health which is the target market for Kellogg’s.

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4.3 Target and Timescales

Target

To increase the market share of Kellogg’s by 7% by 2015
To increase the revenue by 20% by 2015
Timescales

Reviews and reports: – Reviews would be made regularly in order to find out if there is any flaw existing and in case something is detected the changes must be made immediately in order to reduce the losses due to ineffective planning.
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