Internal and external analysis of Kelloggs

In this assignment I’m going to make an external analysis and an internal analysis of the Kelloggs company. I’m going to choose four tools to make the all analysis. For the external analysis I will do PESTEL and Porter’s five force models and for the internal analysis I will do the Value chain and a benchmarking on Cereal SBU

Presentation of the organization

Kellogg Company is the United States’ largest cereal-Maker.

In 1898, Will Keith and John Harvey give birth to the famous breakfast cereal Kellogg’s Corn Flakes. Thanks to the success of the products Will Keith create in 1906 the Battle Creek Toasted Corn Flake Company. Kellogg is the leading producer of breakfast cereals in the world. It takes places in 18 countries and sells it products in more than 180 countries.

Between 1938 and the present day Kellogg opened manufacturing plants in the UK, Canada, Australia, Latin America and Asia.

Kellogg produce a wide range of cereal product including the well-know brand of Kellogg’s corn flakes, rice krispies, special K , fruit n fibre, as well as the nuti-grain cereal bars.

The philosophy was “improved diet leads to improved health”

Kellogg company mission statement:

“Kellogg is a Global Company Committed to Building Long-Term Growth in Volume and Profit and to Enhancing its Worldwide Leadership Position by Providing Nutritious Food Products of Superior Value”

Analysis of Kellogg’s external environment

Analysis of Macro-environment influences through the PESTEL model

The headquarter of Kellogg company is currently base in Battle Creek in the Michigan. I will base my PESTEL analysis in the country of the USA

Political :

Reforms for the problem of obesity in USA (wide problem)

US focus on cereal products in the level of 17% of the food market(2000)

Economical :

The deterioration of general economic activity and the contraction of the food market have not been without consequences for the food industry .Faced with financial difficulties and difficulties of access People doesn’t have money to buy expressive food because of the decrease of salary.

High unemployment rate : 9,00%( january 2011)

GDP in 2009:14 266 milliards of $

Curent Deft: 6% of GDP

Increase of the inflation rate:1,5%

Decrease of the money , low rate of the dollar

Hard competition between the breakfast and snack brands

Decrease of all the sales in cereal market (began in 2005 with less 0, 4%)

Social :

Population of USA: 312.061.000 people

increase of obesity rate so the cereal market develop the sector of light food

Lack of time to take a breakfast: American people would like some easy to transport at work or at school to eat.

The increase in the Third Age population group (due to better living conditions and better health care) will decrease the sales of Kellogg children product and down growth for “adult” products.

Importance of the health, safety

People want to be inform on what people it

Technological :

Innovation on the cereal market: different package, small bar (snack), resealable package (or close package)

Recycling package

Innovation in communication and advertising level

Scientific progress on the health- diet food

Increase the cost of R&D

Kellogg’s did a matrix Sustainability ingredients

Environmental :

Development of the biologic and natural food

Development of ecologic packaging, and recyclable packaging to avoid the waste

Legal :

environnemental charter

Health claims is becoming more prevalent with the increase of the power of American heath associations.

Globalization creates homogeneity of consumer behaviour. Globalization is a key driver for standardization. This sector of tourism has to take into account the requirements of global customers. (Standardize the food, the drink, the activities…). Because of this standardization competition increases between firms within the tourism sector. This price war will lead to decrease price.

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The five porter’s force Analysis

Industry competitor: In the market industry four large companies are dominant (Kellogg, Nestlé, MDD and Jordan’s). It’s an oligopolistic situation (a small number of sellers and a large number of applicants). The competition between the organizations is high and intense because of the price principally.

Threat of a Substitution: there are many substitutes because of private label

Threat of entry: The cereal industry is oligopolistic, so is very difficult for other firm to enter in this sector. If firm want to penetrate this market he has to have competitive prices, and has to make marketing communication and promotion to attract consumers

Bargaining power of buyers: the power of buyer is low in the cereal industry; consumers don’t have a deep impact.

Bargaining power of suppliers: the power of suppliers is low because the importance of the market shares of private labels. They do exactly the products in cheaper prices. Suppliers can buy product independently.

Source: Adapted from Porter M (1998, cited by Johnson G & al, 2008)

Analysis of Kellogg’s internal environment (internal strategy)

The Kellogg’s value chain

Support Activities

Firm infrastructure:

In order to maintain a good satisfaction level from its clients, Kellogg uses several services and the entire organisation is flexible.

Quality Control

Finance & Accounting

Information system(internal communication) : high level

Kellogg’s has an intranet to expose the information of the firm

Legal service : the law concerning the production of the product

Logistical support (restoration…)

Planning : Provide a planning to clients and Anticipate customers needs

Human Resources Management:

The company allows a dynamic of human resources management policy.

For doing that well, Kellogg establish a model wish name is “Kellogg business leaders model” (KBLM).It is the base of everyone in Kellogg industry, it improves the competencies of each works and allow to progress in the company. This model is one of the most important competitive advantage, it allow adding value to the firm.

Recruitment policy:

Kellogg is looking for talent workers to develop new products and give freedom to do innovation. It does recruitment on international dimension.

Training:

Kellogg establishes the standing coaching to help workers to improve future operations and profitability.

Kellogg is developing plan for individual career to respond to the worker’s needs (new skills)

The innovation is one of the most important sectors that Kellogg develops; it gives time to worker just to think about innovation.

Performance measure

Kellogg measuring performance and make feedback to add value

Add value

Kellogg motivates employees in giving merit reward when they perform.

Technology Development:

R&D for products

The innovation is a part of Kellogg’s culture, it is the most important cereal heathcare company

The development of products aimed at meeting consumers’ health and nutrition needs.

The development of products packaging to ameliorate the communication for consumer and his comfort (when he use the product)

Innovation on the image of health cereal: cereal for men target.

Innovation the type of product(museli, cereal)

Innovation to keep the iron in the cereal culture

Innovation to give notoriety and visibility of the product “The company has announced that it is testing the possibility of using lasers to etch the company’s name into corn flakes to let customer’s know they are eating a genuine Kellog’s product”(geek.com)

Innovation in communication all around the world

Procurement:

To achieve economies of scale, purchasing division negotiate with suppliers to obtain group rates to reduce reduce cost and save time on delivery.

Inbound Logistics:

Kellogg calls the best suppliers and partners in term of cost efficiency, maintain the quality of the products. The suppliers are responsible (deal with) all the tasks upstream.( packaging, manufacturing, transportation management services, logistics management services and supplier management/procureme

nt)

the inbound logistic is automatic , evry part of the production is automated.

Operations:

Kellogg has un structure for all operation system very flexible.

Kellogg set up On office in each country of the world. So Kellogg can manage the transformation between the raw material and the final product

Outbound logistics:

The distribution of the products to consumers (end user) is doing via a multi-layer’s channel system.

The different channel of distribution allows comforting the consumers during the purchase.

(distribution on retail, hypermarket and supermarket in general)

Marketing and sales:

All the consumers are familiar with the Kellogg’s brand and Kellogg cereal.

Kellogg company make sponsorships locally to height brand awareness.

Thank to that Kellogg cereal are famous in all around the world.

Kellogg’s cereal use sometime promotion to reduce the price and increase the purchase.

Kellogg has managed to establish itself in almost all

 supermarkets and hypermarkets in the world

Services:

Kellogg offers several

 services that can 

enhance these product to the consumer.

Kellogg offering outstanding customer services( promotion to attract people and to loyaty the consumer with a relational 

communication program across all brands for adults and children, built around a mini-consumer

Primary Activities

Benchmarking

To do this benchmark we are going to take the Kellogg’s human resources sector and we will compare with Nestlé human resource (Nestlé is the principal competitor).

Kellogg’s

Nestlé

HR culture

– Goal: add value thanks to innovation

– HR program: “Kellogg business leaders model”

– Kellogg join the high ethical standards

-Freedom in the post

– HR program:”Principles of Conduct Nestlé’s business”

– relationships between employees

– Communication is the principal factor of the HR policy.

– Equity between employees has to be respected.

– Give responsibility to employees

– Non freedom in the post

Selection & recruitment

– Kellogg is looking for talent workers

– Human Diversity

– attract and loyalty future employees(long term contract)

– Recruitment on the personality and professional skills develop a long term relationship.

Training and Development

– Trainee program

– Personal development and team development

– Tainting program

-Personal development

Pay & Benefit

– employee rewarding

– benefit: adaptation of working hours

– Employee’s social security.

– wage level( inferior to superior)

– Equity

– Financial compensation allows motivating employees.

Participation/employee relation/communication

-Power of employees unions

-participation in important decisions.

– Every employee has got a personal responsibility in the company.

-Importance of employee association.