KELLOGG’S CORN FLAKES UK

6BE003 STRATEGIC MANAGEMENT

Year:2021 Level:6
Assessment Number/Sequence:1 Due Date:12//03/2021
Module Leader: Mo Bashir Module Tutor: Katyayni Thakur
Assessment Type: Individual Word Count (if any): 2966
Course Title: International Business Management at Merryland College Biratnagar,
Nepal (MCB)

Submitted to: Mo Bashir , University of Wolverhampton

Submitted by: Aleya Gupta
<ID> 2040686
Submission Date: 12/03/2021
6BE003 Strategic Management Student Id – 2040686

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Student Number - 2040686

Student Name: Aleya Gupta
Date - 12/03/2021

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Acknowledgement

We feel honored in expressing our sincere thanks to our module Lecturer Mr. Mo Bashir
and the tutor Katyayni Thakur for her continued assistance and guidance to accomplish
our report on time.

Thanks and appreciation also goes to the University of Wolverhampton for making us
work on this assignment which has helped us to get more in-depth knowledge regarding
Kellogg’s Co the UK.

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Executive Summary

The main objectives of this report was to evaluate the internal and external environment
of Kellogg’s Corn flaxes in UK market. For this, different tools have been used to identify
its competiveness in the UK market and negative impacts caused by external factors.

In introduction, company background and history has been described and its mission,
objectives, aims and values and culture in the organizations. Moreover, the Cereal
Industry analysis and Impact of Brexit has also been discussed clearly.

The Internal environments tools like SWOT analysis to identify its market strength,
Weakness, opportunities and threat. VRIO analysis helped to identify the resources and
capabilities of the company to measure the competitive advantages. PESTEL and
Porter’s five forces have been used to find out the strange factors impact its business.

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Contents
1. Introduction to the company’s history.............................................................................................. 6
1.1 Mission .............................................................................................................................................. 6
1.2 Business strategy ............................................................................................................................ 6
1.3 Values and culture ........................................................................................................................... 7
2. The Industry ........................................................................................................................................ 7
2.1 The Cereal Industry analysis UK ................................................................................................... 7
3. Brexit .................................................................................................................................................... 8
3.1 The Impact of Brexit ........................................................................................................................ 8
4. Internal Environment .......................................................................................................................... 8
4.1 SWOT analysis ................................................................................................................................ 8
4.2 Strategic capabilities and Core competencies ............................................................................ 9
4.3 Resources based view .................................................................................................................. 10
4.4 Porter’s value chain ....................................................................................................................... 10
4.5 VRIO analysis................................................................................................................................. 12
4.6 BCG Matrix ................................................................................................................................ 13
5. External environment ....................................................................................................................... 13
5.1 PESTEL Analysis........................................................................................................................... 14
5.2 Porter’s five forces ......................................................................................................................... 15
Conclusion ................................................................................................................................................. 17
References ................................................................................................................................................ 18
Appendices................................................................................................................................................ 22
.................................................................................................................................................................... 25

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1. Introduction to the company’s history

The most popular cereal Corn flakes was made by John Harvey Kellogg’s in 1894. He
introduced it as a healthy food particularly for the patients of sanitarium. However, in the
commercial manner it was first introduced to British people back in 1922. In the year 1924,
the first office of Kellogg’s was opened in Holborn, London (Kellogg’s.co.uk, n.d). The
effort in making good advertisement regarding the benefits of the product stating that, it
is enrich with vitamins and iron which is beneficial to health was the first initiation taken
by them. It has always focused on young household and continuous new animated TV
advertisement with many pictures of the product and its effectiveness was also the major
reason getting success in attracting large number of people during that time (Thomson,
n.d). At present, Kellogg’s brand holds nearly 42% value share of market, particularly for
ready to eat cereals in alone the UK with the retails sales of 1 billion pound, which vividly
shows it as the leader in the UK market (Business Case Studies, 2019).

1.1 Mission
The mission of Kellogg’s brand is to be seated on the table of every household making
their days better via their high quality and trusted food brands. Moreover they wants to be
the company of promises and possibilities (Kellogg’s.co.uk, n.d).

1.2 Business strategy

Kellogg’s corn flakes main business strategy is based on use of heavy promotion
campaign to increase the sales and brand value of the company. There are main two
reason why Kellogg’s business model always prioritize the advertisement rather than any
other companies:

 They wants customers their brand name and products to be store in the memory
of the customers and let customer about their new coming products and services.
 With the powerful marketing strategy they try to encourage customers to buy their
goods and services which is of more than value for the money as well as the health
benefits they will gain (Business Case Studies, 2019).

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1.3 Values and culture

Their values are the part of their DNA. All the guidelines has helped them to shape the
business culture working legally, ethically and responsibly. Moreover, it has six main
values that has impact to reshape it culture and tradition in the organization are given
below:

 Integrity
 Accountability
 Passion
 Humility
 Simplicity
 Results oriented (Kellogg’s.co.uk, n.d).

2. The Industry

2.1 The Cereal Industry analysis UK

The UK is the second largest consumers of cereal in the world after Ireland (Business
Case Studies, 2019). It has been expected that the total revenue generation of cereal
industry for the year 2021 would be 2813 million USD with the growth rate of 3%,
increased by 2% in comparison to 2020. Among all of them, Muesli and Granola saw a
rapid growth in its revenue in the year 2020 by 8% reaching to 285 million pound.
However, the Britain largest dominator Kellogg’s Corporation was remained as the largest
breakfast cereals in 2020 too. It has a retail share value of 24.1% (shown in graph 1 –
appendix) in the market. In graph 2 (appendix) shows that the sales volume and the
current value of breakfast Cereals has been soared to 8.6 kg per capita consumption
despite of pandemic lockdown. The growth has been increase to 4.6% from below 1% in
2019. But the further years till 2025 graph shows it will fall down by 1% and reach to 3%
in the predicted year 2025 (Passport, 2021).

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3. Brexit

3.1 The Impact of Brexit

If Britain had not agreed the deal, then it would have to face the trade barriers and had to
abide the rules under World Trade Organization (WTO). It could turned into shortages of
food and disruption in the supply chain of Imports and exports. There was high possibility
loss of investment (like Tesla is planning to shift its Giga factory to Germany), Uncertainty,
declination in productivity and devalue of currency by 10-11%. Moreover, the import tariffs
from EU could rise to up to 50% (Gov.scot, 2020). The European Union’s economy is
more than 6 times larger in comparison to the UK and almost 50% of goods are supplied
to EU nations. On the contrary, no deal Brexit could have drop the UK export to 6.2%.
This clearly shows that, EU has been playing crucial roles in the UK supply chain and its
economy maintenance. According to statement made by Kellogg’s CEO Steve Chilane,
there would be product shortages and down fall of company’s profit leaving it to struggle
to compete with the other brands (Hyslop, 2019). In 2018, Kellogg’s 18% of total sales
were generated from European Union Market.

4. Internal Environment

Internal environment refers to all the tangible and intangible factors that have a
connection to the organization and will make a direct impacts on its daily business
activities (Business Jargons, n.d).

4.1 SWOT analysis

It the framework that helps company to develop strategic planning and assess the
company’s competitive position in the market. Moreover, it evaluate both internal factors
– Strength and Weakness and external factors – opportunities and threat (GRANT, 2021).
Below down, SWOT analysis of Kellogg’s UK have been evaluated:

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Strength Opportunities

 It has the First mover advantages in the  It can focus on maintaining pricing
market – Kellogg’s’ Corn flakes. strategy
 It offers multiple variants such as  It should also more focus on
Honey, Loops and Chocos, Oats and developing countries like Nepal
so on. educating people about Corn Flakes
 It is the market leader in the UK with advantages
11% of market share only Kellogg’s
Cornflakes and 37% share of global
food market.
 It uses strong marketing campaigns
while introducing new products
(Bhasin, 2021).

Weakness Threat

 Lack of research on consumer  Shortages of skilled worker after post

behavior while entering into new
market such as India and China.
 It has lack of sensitivity to culture
 Different demographic could lead to
conflict and difference in opinion to the
new product (Bhasin, 2021).
Brexit deal could lead to lack of
expertise in the company.
 Intense competition with other
companies and similar product to
Cornflakes such as Nestle, Wheata
bix and Quarters might leads to short-
fall in revenue generation.

4.2 Strategic capabilities and Core competencies

The strategic capabilities of company refers to the ability of the company to harness its
skills and knowledge to gain the competitive advantages over its competitors. Similarly,
Core competencies refers to the major resources of the company that is unique and will

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results it to competitive advantages Strategiccfo.com. 2020. In terms of Kellogg’s Co, its

distinct capabilities and competencies are the manufacturing capacities; launching
effective marketing campaign; designing new food products; managing supply chain
effectively; food-specific logistics and meeting customer demands for food it produced.
Kellogg’s nature thinking big and its innovation driven concepts to every new products
has helped it to be a global leader in the food and cereal industries (Ladd, 2021).

4.3 Resources based view

Resource based view also talk’s similar things which has been discussed above in
strategic capabilities and core competencies. Pankaj (2012) stated that RBV concept
seeks companies to use its limited resources and capabilities to build itself as a strong
defender which cannot be imitable and non-substitutable to gain competitive advantages.
Especially, RBV models more focuses on internal resources of the company to strengthen
itself and overcome the weakness it possess. On this point, Kellogg’s resources would
be it financial strength, Human resources, Kellogg’s corn flakes, brand value, marketing
effectiveness and be further evaluated in VRIO Analysis.

4.4 Porter’s value chain

In the porter’s value chain 1985, two major activities are involved: Primary activities and
secondary activities. As per the Cambridge University, value chain is the entirely based
on the process view of the organization and system of manufacturing organization.
Organizational inputs, transformation process and outputs are the major factors that
involves in acquisition and utilization of available resources. It involves, materials,
building, equipment, land, management and administrative works. To operate this, many
companies try to convert input material into output. So, primary and support activities
must undergo by them (Ifm.eng.cam.ac.uk, 2021).

Primary activities

o Inbound logistics

The major activities and support performs by its suppliers are supply of required
ingredients, packaging, company factoring and indirect services. The largest suppliers
are TDG and Kimberly Clark, particularly for logistics has help customers across the world

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to build strong as concrete relationship to create the value of the brand (Kellogg’s
Company, n.d)

o Operations

Kellogg’s brand obtain all the raw material across the world to make Corn flakes or other
product line. The main raw materials for its operation are, Corn, Wheat, sugar, Cocoa,
Sugar, soya bean, oil and so on. Moreover, it major raw material for packaging materials
are Plastic, Corrugated and Cartoon board. All the material help its operation to make
more than 40 different breakfast (Csimarket.com, n.d).

o Outbound logistics

Kellogg’s corn flakes has 11% of market share in the United Kingdom. Out of every 10
packets of Corn flaxes made, 3 packets have been eaten by British customers
(Campaignlive.co.uk, 2021). Similarly, the companies like Tesco, ASDA and some
wholesaler like Marko has been helping for their product’s supply chain management and
making a smooth relationship with customers (Business Case Studies, 2019).

o Marketing and Sales

It uses very strong and unique marketing campaign. Once Kellogg’s organized the events
where an apology to its customers for making their new product so “Crunchy Nut so
irresistible”. For this, they were asked to text or post via their social media or enter online
with lots of the unique prizes. More over its sales increase by 9.2% in just three months
of 2020 (Hyslop, 2019).

Support activities

o Procurement

Kellogg’s Corporation have more than 20,000 suppliers from across the world, who are
proficient and give efficient services. They bought every stuff in huge quantity letting the
cost of marked price to be reduced (Kellogg’scompany, n.d).

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o Human resources

Kellogg’s have around 31000 direct employees across the world (Statista, 2019). A
survey conducted in UK shows that, 77% of employees loved working at Kellogg’s Co,
79% said employees care each other and have a great respect to each other. All the staffs
regardless of their position have been getting free rice Krispy’s for breakfast. Indeed,
employees have a lot of pride working in Kellogg’s Co UK. This clearly states that,
Company has built good relationship with staff and has taken good care (Best
Companies, n.d)

o Technological development

The company called TDG has been working with Kellogg’s for its technological
development in terms of distribution system. It has computerized stock-holding system
and computerized heating system to make sure about its product remain always full and
keeping its warehouse cost minimum (Lu, n.d).

o Infrastructure

Trafford Park in Manchester is the largest Kellogg’s manufacturing plants. Moreover, it

has setup production plant in 19 countries and sold the products to over 160 counties
(Hyslop, 2019).

4.5 VRIO analysis

VRIO analysis framework is the basic foundation for internal analysis of the company. In
other words, it is one of the valuable tool that helps companies to evaluate their
organizational resources and the level of competitive advantages over their competitors.
It is the acronym for Valuable, Rare, Inimitable and Organization. Indeed, this framework
was developed by Jay B Barney as an evaluation tool for micro environment of the
organization (ManagementMania.com, n.d). Below down, Kellogg’s resources have
been evaluated:

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Resource/capabilities Valuable Rare Imitability Organizational Competitive

Support Implications
Financial strength Yes Yes No Yes Competitive
advantages
Human resources Yes NO No Yes Temporary
competitive
advantage
Kellogg’s Corn flakes Yes No Yes Yes Temporary
competitive
advantage
Brand Value Yes Yes No Yes Sustainable
competitive
advantages

4.6 BCG Matrix

The BCG matrix has been named after Boston Consulting Group which is basically use
another important graphical evaluation of goods and services to help the companies to
finalize what to sell and how much and where to invest in. This matrix plots was first
introduced in 1970 offerings 4 square matrix with x-axis represent the market share and
y-axis represent the market growth (HAYES, 2020). Similarly, Kellogg’s corn flakes on
BCG matrix remains on Stars because it has a high growth and high market share with
11% in the UK market (Campaignlive.co.uk, 2021). Around 80% of UK house hold prefer
to have a Corn flakes. The shows that it can continuously promote itself to gain more
market share and penetrate into new market.

5. External environment

The External environments are the factors that are of outside of the organizations which
can be both tangible and intangible and makes indirect impacts to the operation of the

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organizations. These external factor’s negative impact are not much aware by the
company. The widely used tools to evaluate the external factors are PESTEL analysis
and Porter’s five forces.

5.1 PESTEL Analysis

 Political

Despite of having trade deal between EU and UK, disruption while importing and
exporting the goods to EU market has still remain standby. EU being 50% food export
market, if no Brexit deal then the price of imported product could be increased by 50%
due to tariffs (Gov.scot, 2020). Kellogg’s Cornflakes has a more than 18% of market
share in EU. This post-Brexit will delay in supply chain and rise in the prices in comparison
to priors ones.

 Economic

The cereal industry has been contributing more than 2098 million pound to the GDP of
UK Nfuonline.com. 2017. Record shows around 41.21 USD has been expected to
generate per person. In the time of pandemic, most of the companies are still closed but
cereal markets revenue increase by more than 9% showing positive trending to market
growth (Passport, 2021).

 Socio-cultural

British population is the second largest consumer of cereal product in the world.
Moreover, Kellogg’s cornflakes is widely popular and loved my large number of
households (Business Case Studies, 2019). This is the reason why, Kellogg’s has
donated more than 70 million of Cornflakes to the community and 1600 school across the
UK to make their day better (Kellogg’s.co.uk, n.d).

 Technological

UK has all the modern technological tools and equipment’s are available for organization
to operate smoothly. Kellogg’s UK has also collaborated to one of the biggest supplier
group to make their supplies effective and efficient with the help of sophisticated
technology devices (Lu, n.d).

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 Environmental

Kellogg’s Co is very much serious regarding protection of environment. Supporting to

environment, it has promised to source 100% physically deforestation-free certified palm
oil by 2025 (edie.net, 2020).

 Legal

Due to Post- Brexit deal, now business need to have a lot of documents and papers at
the border which has delayed the supply chain and created much more disruption.

5.2 Porter’s five forces

This model is developed by Michael E. Porter, which consist five competitive forces that
actually helps company to shape themselves in terms of external threats and
weaknesses. Five forces are usually use by the company to identify an industry structure
to decide the corporate strategy. Moreover, it helps to comprehend the competition level
within the same industry and helps companies to prolong their profitability. Below down
Kellogg’s Co evaluation has been done using porter’s fiver forces.

 Competition in the Industry (high)

The UK’s cereal industry is expected to be valued at 2813 million USD in 2021
(Nfuonline.com, 2017). There are many companies which has the similar taste and
features to as Corn flakes. In UK, there are 5.4 million people use as a daily basis and it
holds 11% of market share. However, competitors like Contender and Weetabix has a
similar 9% of market share.

 Potential of new entrance (high)

The close supermarket partners of Kellogg’s ASDA and Tesco themselves have been
converted into as a competitors. They have introduced new brands of cornflakes and are
selling them into very cheaper rates in comparison to Kellogg’s UK. Moreover, other small
players are also emerging into the market (Fern Fort University, n.d).

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 Power of suppliers (Low)

Kellogg’s Co being largest global brands have around 20,000 suppliers. It needs to
produce in large amounts, so all the required items are brought at bulk amount from wide
spread suppliers around the world. Packaging companies has little power to bargain
otherwise it possess strong position (Kellogg’s company, 2018).

 Power of Buyers (medium)

In UK, Tesco and ASDA are the close partners who have been working to suppliers
required amount of corn flakes to the customers. However, Kellogg’s have been giving
good amount of discount them to circulate its product into the market (Business Case
Studies, 2019).

 Threats of Substitute products (high)

Being surrounded by many competitors, Kellogg’s corn flakes have been chased by
different exited and new brands. Tesco have been selling its cornflakes half of the price
to Kellogg’s corn flakes. Similarly, oats and frosted flakes are other similar products that
have been giving challenge to the Kellogg’s Corn flakes.

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Conclusion

From the overall evaluation of Kellogg’s corn flakes UK on the project of strategic
management, it can be concluded that, Kellogg’s Cornflakes despite being a global brand
its product have been chased by many new and existing products. The evaluation of
internal factors its strength can be used to grab the opportunities in the market. However,
it needs to overcome its weakness and minimize the threats. The other analysis tools
such as VRIO analysis shows that its product does not have substantial competitive
advantage. In the same way, external factors such as PESTEL analysis shows that
Kellogg’s might face the challenges due to political factors while supplying product to the
EU market. Moreover, Porter’s five forces also shows Kellogg’s will have threats from
both competitors as well new comers into the market. Its close partners have become the
rival to it selling product in the half of the amount of Kellogg’s Corn flakes. There is high
chances the market share could be occupied if competitors focuses on quality and uses
cost-leadership strategy to penetrate into people mind.

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Appendices

Appendix Graph - 1

Graph no 1, Source: passport, (2021) 1

Appendix – Graph no - 2

Graph no 2, source: Passport, (2021) 1

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Appendix - 3
Strengths of Kellogg’s:

 First mover advantage: Kellogg’s was the first to introduce the concept of
cornflakes. The first people to discover that roasted flakes when added to milk and
sugar can become a wholesome breakfast was Kellogg’s and since then there has
been no turning back.
 Multiple Variants: Kellogg’s has researched into the breakfast habits of customers
including what they add to their bowl of cornflakes to enhance its taste and this has
resulted in them coming up with variants like Honey Loops or Chocos. They have
also found out other popular breakfast options and introduced Kellogg’s oats or All
Bran.
 Market leader in the UK: Kellogg’s is the market leader in the UK breakfast cereals
with a sale of around 100 million packets per annum. In the UK the brand has an
annual sales for 2000 and is valued at around £110 million in the UK, with around
11% volume share of the market.
 Marketing campaigns: The marketing campaigns of Kellogg’s has always been
appealing to the audience through the clear messaging usage of right brand
ambassadors and the slice of life advertising wherever relevant. Recently Kellogg’s
moved out of just advertising on TV to other relevant media like radio and
newspaper to ensure that they maximize their impact at the relevant time of the day.

Appendix - 4
Weaknesses of Kellogg’s Cornflakes

 Initial failure in India & China: When Kellogg’s forayed into India for the first time,
the brand was not accepted primarily because corn flakes were traditionally not part
of the Indian breakfast. The company had to invest heavily in promotions and
education of the customer to build acceptance amongst customers.
 Lack of sensitivity to culture: Kellogg’s in spite of being present in almost 100
countries across the world have always kept their product the same and not realized
that the same may not be able to accept it as part of their breakfast. The sensitivity

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to various cultures is low for Kellogg’s which accounts for their low acceptance in
many cultures.

Appendix – 5
Porter’s value chain

Primary

Inbound Logistics

We rely on over 20,000 incredible suppliers from around the world everyday. Our supplier
partners from ingredients, packaging, indirect services & company facturing each play a
critical role in helping us to achieve our vision to enrich and delight the world through food
and brands that matte

Through building relationships with selected key suppliers, we can work together for
mutual benefit to reach our full potential and drive a competitive advantage. That’s why
we’ve launched a new strategic supplier program called K Partners Advantage. When we
all bring ideas and resources to the table, we can create something better.

Operations

Raw Materials. Agricultural commodities, including corn, wheat, soy bean oil, sugar and
cocoa, are the principal raw materials used in our products. Cartonboard, corrugated, and
plastic are the principal packaging materials used by us.

Kellogg's is a secondary sector business. It obtains its raw materials of wheat, corn,
cocoa, rice and sugar from primary suppliers around the world. These materials help
make over 40 different breakfast cereals and snacks to sell to customers through the
tertiary sector. It is a large-scale manufacturer and stores sufficient stocks to meet
customer orders.

Outbound Logistics

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Kellogg’s has major relationships in the tertiary sector of its supply chain. These include
the major retail supermarkets such as Tesco and ASDA and some in the wholesale sector
such as Makro. Kellogg’s relies on retailers to help it foster a good relationship between
the consumer and its products.
To drive sales, Kellogg’s is involved in initiatives that help add value for retailers. An
example of this is the Shelf Ready Unit that Kellogg’s developed with Tesco. This displays
Kellogg’s products easily and effectively. This means that the supermarket uses less staff
time (and cost) in setting up a display.

Appendix – 6
BCG matrix

Kellogg’s corn flakes on BCG matrix remains on Stars because it has a high growth and
high market share with 11% in the UK market. Around 80% of UK house hold prefer to
have a Corn flakes. The shows that it can continuously promote itself to gain more market
share and penetrate into new market. In the figure the second share contains the Pop
Tarts and Kellogg`s Coco Pops. These products have high market growth but low market
share. In this case the company has to invest a lot of money to increase the market share.
Kellogg`s has to invest more money to get the market share or invest money somewhere
else. In the third square the products have low market growth rate and high market share.

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In the BCG matrix this would be the Nutri-Grain, Rice Krispies and Frosted Flakes. The
products are well well-known and very popular. It`s better to not spend too much effort on
these because the market is growing only slowly.

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