This is solution of Mont Rose College Business Strategy assignment, part of HND Business Course.
Business strategy can be defined as a long term planning for the resources at the disposable of an organization and how these resources can be applied to achieve and yield maximum benefit to the organization. Thus long term shifts that give directions to the organization as a whole to achieve its specified goals or objectives is what can be defined as Business strategy. (Johnson, Whittington, & Scholes, 2011)
Mission statement of an organization answers to the two main questions which defines the overall perspectives of a business they are:-
- What is the organization going to do?
- And how will the organization do what is set by it?
Stakeholders of any organization have expectations to the organization and how the organization meets these expectations of its stakeholders is what does defines the vision of an organisation. Vision in a nutshell is what the organization wants to achieve in future. Unlike the mission statement that describes “the present state” of any organization, the vision statement describes “the future state” of an organization.
Objectives are the missions of any organization, which are made more specific by applying a set time period or by making various constraints, as to the manner to achieve the desired goals of an organization. In other words objectives of an organization are specific missions and have constraints of achievement attached to it.
For example: – Mission of an organization “to be the world leaders in the business” objectives can be “Become the world leader by 2020 in terms of sale”.
Goal of any organization are the ways and means through which it is going to achieve its missions. Goal are short term in nature, they are the specific erodes that the organization wants to make and these smaller erodes have an additive effect in achieving the long term mission of an organization.
Core competencies are the internal skill set, processes or systems in any organization which differentiates the organization with its counterparts in the industry. It is these competencies that give any organization a completive edge and it’s though these competencies that the organization is able to add value to its products and services.
Issues involved in strategic planning for Kellogg’s Business strategy
In the current strategy of Kellogg’s the issues present are:
- The strategy is not innovative and does not influence the employees and associated people for acting differently
- The company is not focusing on the new growth opportunities
- The plans of the company appear to more of tactical plan rather than a strategic one.
Boston Consulting Group growth-share matrix commonly known as BCG matrix is used by the company’s to define their product portfolio and then classifying each product or product class on the basis of two parameters used by the matrix namely Relative Market share and Market Growth rate. Relative Market share- Market share is the product penetration and how it defines how comparative is sale of a product (produced by one’s company) with the market leader’s product in the same category.
Market growth rate: – Market growth rate means how many opportunities of growth still lies in the market and to what extent is the market ready for newer products and newer varieties. It’s on the basis of these two parameters that the product of the company is distributed under four heads namely:-
1)Cash Cows:- Cash cow in this matrix means products having large market share and the growth rate however of the market seems to be low or slow. These are products of an organization which are the base of an organization; these products are high cash generating products and are mostly the organizations core products. Strategies for cash cow products are: – AS and when the products coming under this category loose there sheen the company will also lose its existence thus the retrenchment strategy is to be adopted here and very less investment is to be put here.
2)Dogs:-Dogs are products having low market share and a lower growth rate, these products are the loss making units generally, here the business has no opportunity left with their products so it advice here to liquidate from this product and use the investments more into products of higher growth.
3) Stars: – Stars in this matrix are products having high growth rate and a higher market share; these are products which are most profitable and the products where a business should invest more.
4) Question marks: – Question marks are products where the market share is less however the growth of the precut category or market growth is very high for other competitor’s products. Thus a business has to improve their product by investing more on the features and thereby enhancing the products demand and thereby working for the market growth. (Strategy Formulation: BCG Growth-Share Matrix Model, 2010)
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Strategic management’s PIMS model defines the competitive advantages of a firm and the way that the organization sustains such benefits over a span of long time. PIMS is the acronym of Profit Impact of Marketing Strategy and provides answers to the organization’s three main questions – Ever product class’ typical rate, Organization’s operational future, and the conduct of organization in improvement of results in the future.
The main information areas are – business environment, organization’s competitive analysis, process of production, allocation of budget, and results of operations
PIMS assists in analyzing the manner in which the operations and process of organizational change works in the scenarios of business as well as the profitability of the operations. It explains the cost is in a particular process and the advantages associated with the process. (Gupta)
It should be the top business management in addition to the lower management in consultation should make the strategies about each and every product under the Kellogg’s Umbrella of product and then also describe where do the company as a whole stand and what it should do about each product unit and where is the organization headed to.
In case of Kellogg’s which is in the business of Food and preservatives, management should make plans about the future as to how is the industry of food supposed to move in future and what should Kellogg’s do to meet those futuristic changes.
Products of Kellogg’s namely Kellogg’s Cornflakes, K special, POP Tarts, COCO POPS, POP Tarts, Honey Loops, Rice Krispies, Frosted Flakes, Nutri Grain are taken into consideration and then dividing them under 4 heads.
The organizational audit for Kellogg’s should be directed at examining the various current practices, policies, strategies and actions of the company. This audit would also help the business to be able to find out the current status and further explore the opportunities available in the market. It is important that such a strategic audit is carried out so that Kellogg’s is aware in the machine and human resource management with their competencies. The organizational audit in this case, would follow the following steps:
- Audit of available resources would show what all is available at the disposal of the business.
- Value chain analysis would demonstrate the activities that are currently ongoing. It is important for Kellogg’s to run this analysis and relate it to the competitive strength analysis.
- The core competencies analysis would assist in identifying the capabilities, which are vital for obtaining competitive advantage by a business.
- Performance analysis would help in demonstrating the position of the product which will help Kellogg’s in better understanding of the measures to be taken.
- SWOT analysis would provide the Strengths, Weaknesses, Opportunities and Threats pertaining to Kellogg’s and help in determining the trend, current position as well as future plans.
PESTLE Analysis is a tool to analyse the external environment of a business, which includes the Economics, Social, Technological, Legal and Environmental analysis. Kellogg’s PESTLE analysis has been shown as under:
Political – Kellogg’s is surrounded by strong government intervention since it belongs to the food and beverage industry. The Association of Cereal Food Manufacturers (ACFM) actively deals with the issues related with cereal and there is food act laid by the government.
Economic – The food and beverage industry is impacted by the disposable income that comes in the hands of the consumers. Due to low income of people because of the crisis, there has been an impact in the saes of the product. Still, since it is a necessity, it is still highly used however, people do tend to use the traditional breakfast in case of low availability of money.
Socio-cultural – The eating habits of the people have evolved in general. In the initial times, the target of such companies were the children, however, it has now grown to the entire faily members because of the busy lives of people.
Technological Factors – The process of production of such products as supplied by the company are quite computerized. The companies are adopting more and more highly computerized machinery for diversifying the portfolio.
Legal – The legislation of European Union pertaining to ingredients, health, labelling as well as storage of food products is applicable.
Environment – Since the industry relates to hygiene and health of the society, these companies are quite active in Corporate Social Responsibility and are sponsors of several events that relate to food. (Bhoir, 2011)
Porter’s Five Forces
Competitive Rivalry – There are low exit barriers in the industry and the industry is growing at a rapid pace. There are few companies that are in the industry but experience intense competition.
Buying Power – There is low switching cost experienced by the buyers, however, due to a situation of oligopoly, there is very low bargaining power of consumers.
Supplier Power – There is no control that the suppliers have over the raw materials and the prices of these are controlled by the government. Therefore, the suppliers experience low bargaining power.
Threat of Substitute – Substitutes are readily available and hence this threat exists.
The Threat of Entry – The cost of entering the industry is very high because there is saturation in the market by the big players. (Chavda, 2010)
Significance of Stake holder’s Analysis
The present attention to the activities that are value-based, promotes the significance carrying out business in a manner that generates and augments stakeholders value for all the stakeholders. It therefore becomes important for Kellogg’s as well. Even though it is difficult to be accomplished by Kellogg’s in the given scenario, since there is diversity in the different needs of the stakeholders. For satisfying the stakeholders of Kellogg’s that include the customers, employers, and the overall community, it is important that the company identifies all the segments of relevant stakeholders and then further transact with them in a proper manner.
In the current scenario, it is the competition that needs the attention of the company. Kellogg’s is making all the efforts towards the promotional activities, such as sponsoring and organizing events. It is also taking measure of labelling that would attract he people who want to know what exactly is being consumed by them. Hover, it is important that Kellogg’s pays required attention towards introduction of new and diet products which is demand in the market today.
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Unit Solution –
The possible alternative growth strategies are:
Limited Growth strategies
- Penetrating in the market. This can be through a deliberate attempt of building share in the market or as a consolidation form for protecting base to a customer
- Development of market. This can be done through commencing the new options with diverse customers, probably in international markets
- Development of Product. This is done through extension of a product range so as to provide expansion to the level of business with already existing customers.
- Horizontal integration is done through merging of two companies, which are competitors, direct or indirect, for the purpose of increasing the share in the market
- Vertical integration refers to connecting with other organization in the same supply chain
- Related diversification refers to movement to a region, where either technology or marketing problems are identical, mostly through acquisition, strategic alliance, or merger
- Unrelated diversification is the greater strategy of risk, which involves new products, new markets, as well as new technologies. (Kragelund)
The limited growth strategy that can be used by the company is the product development strategy. In this strategy, the company can develop and diversify its products so that it attains an upper edge in the market as well as over its competitors. There is a high market share that is enjoyed by Kellogg’s. It can maintain the same hold through this limited growth strategy of product development.
The retrenchment strategy is not recommended as of now as it serves as the remedial measure. However, the available strategies are asset reduction, revenue generation, and cost reduction.
It is advisable that Kellogg’s take up the product development strategy. The company should undertake development of new product as well as modification of the current product for being offered to the market. This strategy suggestion is not as simple as it appears. There is keen attention required towards the acts of competitors as well as the needs of the customers now as well as that expected in the future. In the current trend, people are now demanding products that cater to the requirements of their health and are not calorific as well. They need to have the details description of the product that influences them to buy new products. It is advisable that the health range is introduced by the company so that the people are attracted towards the new range and the sales of the company increases. There are other channels that are required to be highlighted along with it such as effective marketing as well as communication and hence this strategy needs to be combined with the interactive strategies. (Nielsen)
In all the strategies that are planned to be implemented, the performance and execution of the strategy is quite a significant stage. It is important that Kellogg’s use appropriate tools and techniques for the implementation of the product development strategy. Proper methods and procedures should be exploited so as to contest with the plan and also the plan’s successful execution. The roles and responsibilities for the implementation of the strategy should be compared, resources requirements checked and the planning of the timescales and targets should be done.
There are basically three roles of implementation of strategy. (Sadler, 2003) They are, envisioning a strategy for future, alignment of the organisation for delivering the strategy and exemplifying change.
The role of envisioning future strategy involves clear communication of the strategy to all the involved parties – internal as well as external. In this, the internal party comprises of the organization and the stakeholders are the external party. Second role is the alignment of the organisation for delivering the strategy i.e. how retail management delivery maintained!. It is expected in this role that the organization’s people have commitment towards the strategy. There should be motivation provided to these people for following the strategy and must have empowerment for delivering the change. Embodiment of change is the final role. There is high level of the strategic implementation with change in the organization. All of these roles are required to be implemented by the management of Kellogg’s
Two chief parties take up the responsibility of strategy implementation. (Sadler, 2003) These parties are outsiders and middle managers. Outsiders are responsible for implementing strategy. In case of Kellogg’s, particularly in group of outsiders, all the external stakeholders and consultants have a lot of responsibilities. Formulation of the strategies for process of change is always done by the consultants. As agents of strategy implementation, middle managers are the implementers of strategic plan of top management. The top-management has responsibilities in three main domains. These areas are strategy’s sense-making, adjustment and reinterpretation and of responses in strategy, and advisers to more senior management.
Allocation of resources is crucial in strategy implementation. The resources may differ from one organization to another. (Coulter, 2001)
As discussed before, that Kellogg’s should implement a product development strategy in future, there are three main resources that Kellogg’s would require. These resources are physical resources, financial resources and human resources.
For monitoring the strategy, Kellogg’s can use the techniques of suitability, feasibility, and acceptability. Suitability refers to the check if the proposed business strategy addresses the main concern issue. Feasibility checks if the strategy can actually be implemented and will deliver fruitful results. Acceptability checks if the proposed strategy meets stakeholders’ expectations.
Since the future strategy of Kellogg’s is product development strategy, it can be effectively monitored by the suitability criteria. The strategy should be able to address the key concern of competition and gaining competitive edge. Also, the acceptability measure can be used for checking if the interest of stakeholders is served by the strategy and the feasibility can be checked for checking the financial targets.
The new strategy of product development can be done through effective research an development. Surveys and visits can be done in various sections for understanding the needs and demands of the consumers. The market research has to be extensive in this case as it is the base on which the new product would be developed. Before actual release, the product should be tested with a restricted group and understood if there are further improvements needed.
Kellogg’s has a high potential for further growth in the industry. It has even fared well in the tough and difficult times faced by the economy as well as the company. However, a bad strategic planning can spoil all the efforts and past records. It is important that effective strategies are implemented for fighting on the weak areas and exploring the opportunities by Kellogg’s o as to maintain its position in the market. In the current competitive scenario, it is most advisable that the company introduces a new product which meets the current health requirements of the people.
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