This is a Strategic audit on Kellogg completed for an MBA assignment.

1. Danielle
Burnett
Colby Cornett
Stefan Durr
Luis Terron
1

3. Current Situation
3

4. Current Situation
Overview
Operates in more than 180 countries
54 manufacturing plants in 18 countries
Global leaders in cereals, cookies/crackers, and
snacks
Current Performance
Continues to increase
 Currently ranked 5th
Recent decline in ROI but still higher than
competitor
4

5. Current Situation-
Strategic Posture
Vision -
―To enrich and delight the world through foods
and brands that matter‖
Mission –
―Nourishing families so they can flourish and
thrive‖
5

6. Current Situation-
Objectives
North America
Strategic
Expand emerging market potential
Category expansion in health & wellness
Continue commercial levers
Innovation
Financial
Expect to see DD% growth in 4 sectors of health &
wellness
6

7. Current Situation-
Objectives
International
Strategic
Accelerate cereal consumption
Unlock the potential of snacks
Financial
Growth %s in ALL markets in cereal business
Continued CAGR growth in cereals
7

8. Current Situation-
Strategies
Corporate :
 Mixture of Parenting & Directional
4 Components :
 Global Cereal Leader
 Global Snacks Player
 Category Expansion
 Global Footprint
Diversification Level: Related Constrained
8

9. Current Situation-
Strategies
Business
Generic: Intergraded Cost Leadership/ Differentiation
Examples: Porridge in South Africa, Saffron Cornflakes and
Carry bags in India
Competitive:
Offensive: ―Other‖ Category Expansion and Acquisition
Krave
Keebler and Pringles
Defensive: Harvest
Strategic Actions
Acquisitions of product lines and manufacturing plants
globally
Tactical Actions
Differentiation of plant’s production operations 9

10. Current Situation-
Strategies
Functional
Production is being optimized
Marketing
R&D focus on innovation
Operational
Structural
Location
Choice of process
Infrastructural
Quality
Workforce ( Diversity & Inclusion Program)
Procurement 10

11. Current Situation-
Policies
K Values
Social Responsibility
Diversity & Inclusion
11

12. Corporate Governance
12

13. Corporate Governance
Board of Directors
Chairman of the Board:
James M. Jenness
President, CEO, Member, Board of Directors
John A. Bryant
13

14. Board of Directors
Benjamin S. Carson, M.D.
Gordon Gund Donald R. Knauss
John T. Dillion
Sterling Speirn
Ann McLaughlin Korologos
Rogelio M. Rebolled
Dorothy A. Johnson John L. Zabriskie
14

15. Top Management
Margaret Bath
Senior VP Research, Quality and Technology
Mark R. Baynes
Senior VP, Global CMO
Kris Charles
Vice President Global Communications and Philanthropy
15

16. Top Management
Brad J. Davidson
Senior VP, President Kellogg North America
Ronald L. Dissinger
CFO
Alistair Hirst Brigitte Schmidt Gwyn
Senior VP, Global Supply Chain Vice President Government Relation
16

17. Top Management
Paul Norman
Senior VP, President Kellogg International
Gary H. Plinick
Senior VP General Counsel, Corpora
Development and Security
Dennis Shuler Brian S. Rice
Senior VP Global Human Resources Senior VP, CIO
17

18. External Environment:
Opportunities and Threats
18

19. External Environment:
Opportunities and Threats - Societal Environment
Demographic: Opportunities
 Increasing global population
 Aging Population is increasing
 Future change in US demographics
Asian and Hispanic population is growing
19

20. External Environment:
Opportunities and Threats - Societal Environment
Demographics: Threats
 Obesity and Diabetes are increasing
at alarming rates
 Parents might steer clear of unhealthy
snack food and breakfast cereals
20

21. External Environment:
Opportunities and Threats - Societal Environment
Economic Opportunities:
 Current Administration has offered $400
million in a Healthy Food Financing
Initiative
 Invest
in research and advertising as
economy is in a downturn
21

22. External Environment:
Opportunities and Threats - Societal Environment
Economic Threats:
 Cost-Conscious consumers are
substituting name brand products to
generic or store brand products
22

23. External Environment:
Opportunities and Threats - Societal Environment
Political-Legal Sector opportunities:
 Companies are urging Congress to
improve government regulation on
food safety
 Emphasize and inform parents about
proper nutrition and exercise
Making foods more affordable and accessible for
families
23

24. External Environment:
Opportunities and Threats - Societal Environment
Socio-cultural opportunities:
 78% of Americans want clear
nutritional info and clear ingredient list
on the back of food products (39)
 Increasing trends in healthy eating
and living
Reduce risk of heart disease, high
cholesterol, high blood pressure etc.
24

25. External Environment:
Opportunities and Threats - Societal Environment
Socio-Cultural Threats:
 Immigrants in Europe are showing an
increased risk for diet related diseases
as they adjust to western food
 Any sweet foods has the potential to
be labeled as junk food
25

26. External Environment:
Opportunities and Threats - Societal Environment
Technological opportunities:
 Taking advantage of mobile apps;
a key discipline of its brand planning,
marketing and customer relationship
management
 Smart Agriculture: taking initiatives to
reduce waste, GHG and conserving
water and energy
26

27. External Environment:
Opportunities and Threats - Societal Environment
Global Opportunities:
 Expand into new markets
 Reach more consumers through
growth and strategic expansion
27

28. External Environment:
Opportunities and Threats - Societal Environment
Global Threats:
 Adjusting accordingly to local tastes
and preferences
 Taking account various food and drug
regulations in various countries
28

29. External Environment:
Opportunities and Threats – Competitive Forces
 Threat of new entrants
 Bargaining power of buyers
 Threat of substitute products and
services
 Bargaining power of suppliers
 Rivalry among competing firms 29

30. External Environment:
Opportunities and Threats – Competitive Forces
Threat of new Entrants
 Limited threat of new entrants into the
industry (2)
 Kellogg's is a well-established brand in
the industry
 Cereals are also already well-established
 Difficult for new entrants to pose a real
threat
30

31. External Environment:
Opportunities and Threats – Competitive Forces
Bargaining Power of Buyers
 Kellogg’smain buyers consist of
wholesalers, grocery stores and
supermarkets (4)
 These buyers have great amounts of
power
 They determine prices and whether to
hold Kellogg products etc. 31

32. External Environment:
Opportunities and Threats – Competitive Forces
Threat of Substitute Products or Services
 High Threat of substitute products (4)
 Consumers can choose from
countless cereal, cookie and snack
alternatives
 Consumers can also choose from
various cereal, cookie and snack
types and brands 32

33. External Environment:
Opportunities and Threats – Competitive Forces
Bargaining Power of Suppliers
 Suppliershave medium bargaining
power with respect to Kellogg (3)
 Kellogg has contracts with their
farmers
 Pricesof wheat, corn and oil are
determined by various forces
33

34. External Environment:
Opportunities and Threats – Competitive Forces
Rivalry among Competing Firms
 High degree of Rivalry (5)
 General Mills and Kraft pose biggest
threats by competitors
 High degree of rivalry in the cereal
and snacks/convenience food markets
34

35. External Environment:
Opportunities and Threats – Driving Forces
 Rising agricultural commodity prices
 Competitive Pricing Environment
 Decreased Consumer Spending
 Healthy Living benefits
35

36. External Environment:
Opportunities and Threats – Strategic Group Map
high
Kellogg
Price/quality range
Genera
l Mills
Kraft
low
low Product Lines (food) high 36

37. External Environment:
– Boston Consulting Group Matrix
High North America Low
High Stars Question
Industry Growth Rate Marks
Low Cash Cows Dogs
Relative Market Share 37

38. External Environment:
– Boston Consulting Group Matrix
High International Low
High Stars Question
Industry Growth Rate Marks
Low Cash Cows Dogs
Relative Market Share 38

39. External Environment:
Opportunities and Threats – Competitor Analysis
39

40. External Environment:
Opportunities and Threats – Competitor Analysis
General Mills:
Investing in innovation ―Innovation
Intersection‖
Post (Cereal):
Kids initiatives linking education and theme
parks with food
40

41. External Environment:
Opportunities and Threats – Key Success Factors
 Continue catering towards consumer
trends and preferences
 Take advantage of global opportunities
in order to grow global brands
 Promote innovation and marketing in
order to stay ahead of the competition
41

42. External Environment:
Opportunities and Threats – Industry
Attractiveness
42

43. Kellogg’s Internal Environment
Corporate Structure
43

44. Kellogg’s Internal
Environment -Corporate Structure
Decision- Making Authority
Kellogg is based around a centralized
structure where employees listen their
department managers. The managers and
employee’s decisions need to match up
with the CEO’s strategy and the mission
and vision of the company.
44

45. Kellogg’s Internal
Environment -Corporate Structure
Organizational Structure
Kellogg has a Cooperative Form of
Multidivisional Structure.
45

46. Kellogg’s Corporate Structure
46

47. Kellogg’s Internal
Environment - Corporate Culture
 Kelloggoperates under a mission culture.
The company has a clear vision of
organizational purpose.
Kellogg’s Vision:
―To enrich and delight the world through foods and brands that matter‖
 Kellogg evaluates performance with two
metrics:
 Sustainable Growth
 Investments (people & brands)
 Kellogg
focuses highly on its values, their
competition and becoming more efficient.
47

48. Kellogg’s Internal
Environment - Corporate Resources
Marketing
I. Marketing Objectives
 To maintain large retail customers
 To supply Kellogg products globally
II. Marketing Strategy (general)
 Build demand with global costumers which
leaded to retail grocery stores ordering Kellogg
products
III. Marketing Strategy (specific)
 Kellogg pursues a multi-segment strategy
where it manufactures and markets ready-to-
eat cereal and convenience foods
48

49. Kellogg’s Internal
Environment - Corporate Resources
Marketing
IV. Marketing Mix
 Product
 Kellogg manufactures ready-to-eat cereal and convenience
foods
 Price
 Kellogg’s products are market based. Kellogg analyzes similar
products and tries to capitalize with pricing strategies
 Place
 Headquartered in Battle Creek Michigan but the channels and
distribution points are in retail grocery and convenience stores
globally
 Promotion
 Kellogg promotes its products by TV Ads & Promotional
Programs
49

50. Kellogg’s Internal
Environment - Corporate Resources
Finance
Financial Situation 5 years
A. Revenue
Net sales growth of 12%
The results exceeded the target of 5%
This reflects Kellogg's focus on introducing innovative products
and investing in brand building
B. Operating Profit- (2011) decreased 1%
This was below the long term target of single digit internal growth.
This results from the shares that were repurchased
Kellogg's long term goal is to increase earnings per share at a high
single digit rate
/ 50

51. Kellogg’s Internal
Environment - Corporate Resources
Total Sales- 12% Increase
51

52. Kellogg’s Internal
Environment - Corporate Resources
Operating Profit- 5% Increase
52

53. Kellogg’s Internal
Environment - Corporate Resources
Finance
Financial Situation 5 years
C. Cash Flow-$1.5 Billion
Fund the dividend- $1.72 annual dividend (2011)
Maintain target levels of debt
Fund share repurchases- $798M (2011)
Pursue complementary acquisitions
Kellogg has returned a total of $6 billion to shareholders over the
last 5 years.
D. Acquisition(s)
Bought Pringles for $2 billion from Procter & Gamble Co (2011)
/ 53

60. Kellogg’s Internal
Environment - Corporate Resources
Industry Ratios
http://www.mergentonline.com.ezproxy.shsu.edu/companyfinancials.php?pagetype=ratios&compnumber=
4686
60

62. Kellogg’s Internal
Environment - Corporate Resources
B. Finance
Altman’s Z
Z= 1.2(-2%)+ 1.4(55%)+ 3.3(10%)+ .6(171%)+1(1.08)
X1 -2% Z= 3.191
X2 55%
The score shows Kellogg is a
X3 10% healthy organization and does
X4 171% not have any significant
X5 1.08 problems financially
62

64. Kellogg’s Internal
Environment - Corporate Resources
C. Operations Management
 Location- products produced in 18
countries
 Products sold in180 countries
64

66. Kellogg’s Internal
Environment - Corporate Resources
D. Research and Design
 Look for ways to brighten the consumers future
 Better ingredients
 Labels that encourage a healthier tomorrow
Kellogg is on a constant journey to improve the nutrition of
their foods — without forgetting the things that consumers
love most about us: taste and goodness
66

67. Kellogg’s Internal
Environment - Corporate Resources
E. Human Resource Management
 Ensuring diversity
 Values building a great relationship with their
employees — Kellogg knows goodness shines
from the inside out.
 Foster a safe work culture for our employees
 Support health and wellness with the benefits
programs.
67

68. Kellogg’s Internal
Environment
Summary of Internal Factors
Core competencies:
Brand Name
Employee Loyalty
Distinctive competencies
Effective Supply Chain Management
68

69. Analysis of Strategic Factors
69

70. Analysis of
Strategic Factors
Situational Analysis
Opportunities
Increase World Population
Ageing Demographic
Weakness Strengths
Smart Agriculture
Increase in debt due to
Acquisition Strong corporate culture
Agility to satisfy customer
demand
Threats
Increase consumer Health
awareness
Generic Substitutes
70

71. Analysis of
Strategic Factors
Opportunities
Turnaround
Weakness
Strengths
Offensive
Diversification
Defensive
Threats
71

72. Analysis of
Strategic Factors
Review of Mission and Objectives
Vision -
―To enrich and delight the world through foods and brands that
matter‖
Mission –
―Nourishing families so they can flourish and thrive‖
Objectives:
 Large Variety of Products
 Strong Financial Position
 Growing Markets
72

73. Analysis of
Strategic Factors
Analysis Of Strategic Issues
1. How will Kellogg deal with the diverting of corn for human
consumption to animal feed production?
 Rising costs / diminishing resources
 Developing nations vs. Developed nations
2. How will Kellogg deal with rising transportation costs involved
with food distribution?
 Larger distribution centers closer to customers
 More mid-size distribution centers closer to customers
73

74. Analysis of
Strategic Factors
Analysis Of Strategic Issues
3. How will Kellogg deal with the growing number of generic
substitutes for their most popular cereals?
 Introduce ―generic‖ brand to compete
 Lower prices of brands
4. How will Kellogg deal with the expansion into non western
cultures?
 Coco Puffs vs. Century eggs
 Change the concept of breakfast
74

75. Strategic Alternatives and
Recommended Strategy
A. Strategic Alternatives
1. Corporate Strategies
 Linked Diversification Economies of scope
 Unrelated Diversification - Improved financial resources
2. Business Strategies
A. Generic Strategies
 Focused differention
 Low cost leadership
B. Competitive Strategies
 Flank Attack
 Frontal Attack
 Leapfrog
75

76. Strategic Alternatives and
Recommended Strategy
B. Recommended Strategy
1. Recommended Corporate Strategy
 Linked Diversification
2. Recommended Business Strategy
 Focused Differention on a particular competitive segment (
health foods)
3. Recommended Competitive Strategy
 Flank attack against the competitors weakness of having
either no or "low" health foods market share
76

77. Implementation
77

78. Implementation
Exercising Strategic Leadership
 Efficient and effective management of the firm’s
resources
 Sustain an effective organizational culture
 CEO and Top Management
Building capable Organization
 Continuing investing in supply chain and information
technology infrastructure
 CEO and Top Management, Shareholders
78

79. Implementation
Allocating Resources
 Align budget requirements to turn question marks
to stars – Lower debt
 CFO
Shaping Corporate Culture to Fit Strategy
 Maintain policies, standards and training to keep
new companies in line with core company
philosophy
 CEO and all of the company s' leadership
79

80. Evaluation and Control
80

81. Evaluation and
Control
Organizational controls / evaluation
 Customer taste tests and consumer satisfaction surveys
 Labor efficiency and productivity
Financial controls / evaluation
 Quantitative metrics
 Incentive rewards
81

82. Lessons Learned
82

83. Lessons Learned
 Colby – Need to continue decreasing its debt position and
figure out an effective way to handle its pension program
 Danielle – Kellogg's rose to the market leader through
expansions and acquisitions
 Stefan – Globally there are great opportunities to increase
brand awareness and introduce Kellogg’s products as well as
their benefits to consumers
 Luis – Need for a better developed plan to capture non
western markets
83

84. 84