LONDON SCHOOL OF COMMERCE

MASTERS IN BUSINESS ADMINISTRATION

JUNE 2010

GROUP B (18) MBA 1 , CASE STUDY, KELLOGG

L0724IMIM0210: Bolaji Michael Sayo

L0739GGMH0210: Hossain Md Shahadat
L0747ALAL0210: Kibunja Emma
L0751KRKR0210: Ali Abid
L0754MIMI0210: Ali Mudassir Ali
L0755SZSZ0210: Hossain Shakir
L0769QCQC0210: Mispah Tarkeh
L0770GGGG0210: Ngo Timothy Anyamukong
L0771VLVL0210: Gu Yaping
L0788SZSZ0210: Yushkova Nataliya

LECTURER

PROFESSOR GOEFF LANCASTER

DATE OF PRESENTATION
24 AUGUST 2010
Table of Contents
1.0.INTRODUCTION..................................................................................................................................2

2.0.PRODUCT LIFE CYCLE.............................................................................................................................3

3.0.AIMS AND OBJECTIVES FOR A SMALL MEDIUM AND LARGE BUSINESS...............................................10

4.0.THE DIFFERENCE BETWEEN MARKET ORIENTED AND PRODUCT ORIENTED ROUTES IN ANSOFF’S
MATRIX......................................................................................................................................................12

5.0.WAYS OF PORDUCT DIVERSIFICATION........................................................................................16

6.0.CONCLUSION...................................................................................................................................18

REFERENCES:.........................................................................................................................................19

WEBSITES:...............................................................................................................................................20

BIBLIOGRAPHY.......................................................................................................................................20
1.0.INTRODUCTION

Kellogg’s company is world’s leading producer of breakfast cereals and convenience

foods.consumer around the world enjoy Kellogg company product, one of which is kellog’s corn
flakes. Kellogg Company began in 1960 with only 44 employees in Battle Creek, Michigan,
USA. Today Kellogg’s manufacture in 18 countries and sell their product in more than 180
countries around the world. By 2006, Kellogg had worldwide sales of almost £ 5.5 billion. Its
product line includes ready-to-eat cereals and nutritious snacks, some of its brands include rice
krispies, special k, crunchy nut and corn flakes. Each brand holds its own competitive market
and is monitored in terms of market share, growth and performance against competition.

Our discussion on this case study is going to dwell on the product life cycle and its stages,
suggestions of aims and objectives to small, medium and large business, the difference that exist
between market oriented routes and product oriented route in Ansoff’s matrix and the ways that
Kellogg’s could diversify product instead of product development.

2.0.PRODUCT LIFE CYCLE

A product life cycle basically portrays how the sales of a product change over time, normally it
has five stages: launch, growth, maturity, saturation and declinetion and decline.

a) Launch: Product is being introduced into the market

b) Growth: Acceptance in the market and increase in profits
c) Maturity: Product has achieved acceptance by most buyers, sales growth slows down.
d) Saturation: Competition flocks the market
e) Decline: sales fall off and profits drop

However, “according to Philip & Gary (2010, p. 297) states that not all products follow this
product life cycle. Some products are introduced and die quickly; others stay in the mature stage
for long, long time. Some enter the decline stage through strong promotion or repositioning.” A
product life cycle can describe the product class, product forms and brand.
Figure :1. close up tooth paste

SALES

TIME

Intro Growth Maturity Saturation Decline

Close-up is a Unilever toothpaste brand targeting the youth

1. Launch: From launch in 1967 Close up (1 st gel tooth paste aiming at the youth segment)
proved to be successful. It forced the market leader to change its strategy and launch a gel
variant.
2. Growth: Close-up sales and profits increased steadily, showing an acceptance in the
market. Promotions were high to inform its consumers, Unilever used different
advertising strategies, and in 1987 they came up with the famous “HA HA”. They also
made new developments by expanding and coming up with a range of flavours examples;
lemon mint & Eros red

3. Maturity: This is a period of maximum profitability. Sales increased at slower pace and
competing products were very similar at this point increasing the difficulty of
differentiating the product. There were different price wars in targeting customers. Close-
up found that its mono-attribute focus (fresh breath) was losing its sheen, thus Unilever
came up with new focus on 3 attributes fresh breath, white teeth & strong teeth. However
competition came in and offered same benefits as those of close- up example Colgate &
Pepsodent
 4. Saturation: Competitors flocked the market and close-up sales declined as customers
tastes changed, due to the fact that there were a variety of similar products and cheaper
options in the market. By 200 onwards close-up sales were declining, thus entered the
decline stage.

Decline: Close-up sales fell off and profits dropped, it was losing its position in the market.
Unilever, made a decision on brand revival, on a positive note the whole new version of the
product with new marketing strategy was to be considered. Under the initial name, a completely
new formulation is developed.

Figure:2. Product life cycle

A. Crunchy nut cornflake (CNC)

SALES

Intro Growth Maturity Saturation Decline

TIME
Crunchy nut cornflake is a Kellogg’s cereal brand targeting twenty to thirty year old
professionals.

1. Launch
Crunchy nut cornflake has proved to be successful since its launch in 1980. When it first
entered the market it gained almost 60% share immediately.

2. Growth
Sales and profits of crunchy nut cornflakes increased steadily, showing an acceptance in
the market, promotions are made though not heavily due to lack of competitions
associated with the product. Since its launch it has maintained sales value of £68 million,
thus becoming one of the most important brands for Kellogg’s, this has been made
possible through developments of a new flavour and texture for consumer’s example
crunchy nut bites.

3. Maturity
This is the period of maximum profitability. As crunchy nut cornflake strives its success,
as expected other competitors are bound to come in, markets for breakfast cereals/meals
is vast and offers some benefits as the brand does example Weetabix mini bits. However,
there are also different price wars in the market in targeting consumers. Crunchy nut
cornflake is still at the maturity stage and Kellogg’s is still developing advertising
campaigns to keep the brand in the market.
 B. All- Bran

SALES

1930 1980
Intro Growth Maturity Saturation Decline TIME

(The Times 100, 2010)

All-Bran is a Kellogg’s breakfast cereal brand

1. Launch: All- Bran was launched in the 1930’s, in the fibre sector of the cereal market,
and it proved to be a success. As a cereal rich in its ingredients sales performance raised.
It gained almost 50% share in the breakfast cereal market.

2. Growth
All- Bran sales experienced a steady growth, showing a massive acceptance in the
market. Promotions were high to inform its consumers and hence provide support to its
product development. By 1980’s All- Bran’s growth went up through its massive
publicity for the ‘F’ plan diet from nutritionists and health experts.

3. Maturity
All- Bran is currently at this stage, it is growing and flourishing in the cereal market.
However, successful products do attract competition from other businesses, which come
into the market and offer products with similar benefits and cheaper prices to attract
consumers. Kellogg’s however, has engaged in skilful marketing techniques in support of
 development of the brand through a massive £3 million campaign it has looked into re-
branding a range of fibre cereals to maintain its growth and consumers interest.

Crunchy nut cornflake (CNC)

SALES

Intro Growth Maturity Saturation Decline

TIME

Crunchy nut cornflake is a Kellogg’s cereal brand targeting twenty to thirty year old
professionals.

4. Launch
Crunchy nut cornflake has proved to be successful since its launch in 1980. When it first
entered the market it gained almost 60% share immediately.
5. Growth
Sales and profits of crunchy nut cornflakes increased steadily, showing an acceptance in
the market, promotions are made though not heavily due to lack of competitions
associated with the product. Since its launch it has maintained sales value of £68 million,
 thus becoming one of the most important brands for Kellogg’s, this has been made
possible through developments of a new flavour and texture for consumer’s example
crunchy nut bites.

6. Maturity
This is the period of maximum profitability. As crunchy nut cornflake strives its success,
as expected other competitors are bound to come in, markets for breakfast cereals/meals
is vast and offers some benefits as the brand does example Weetabix mini bits. However,
there are also different price wars in the market in targeting consumers. Crunchy nut
cornflake is still at the maturity stage and Kellogg’s is still developing advertising
campaigns to keep the brand in the market.

C. All- Bran

SALES

1930 1980
Intro Growth Maturity Saturation Decline TIME

(The Times 100, 2010)

All-Bran is a Kellogg’s breakfast cereal brand

 4. Launch: All- Bran was launched in the 1930’s, in the fibre sector of the cereal market,
and it proved to be a success. As a cereal rich in its ingredients sales performance raised.
It gained almost 50% share in the breakfast cereal market.
5. Growth
All- Bran sales experienced a steady growth, showing a massive acceptance in the
market. Promotions were high to inform its consumers and hence provide support to its
product development. By 1980’s All- Bran’s growth went up through its massive
publicity for the ‘F’ plan diet from nutritionists and health experts.
6. Maturity

All- Bran is currently at this stage, it is growing and flourishing in the cereal market. However,
successful products do attract competition from other businesses, which come into the market
and offer products with similar benefits and cheaper prices to attract consumers. Kellogg’s
however, has engaged in skilful marketing techniques in support of development of the brand
through a massive £3 million campaign it has looked into re-branding a range of fibre cereals to
maintain its growth and consumers interest. Organisations however, do have different aims and
objectives and no matter what, they all strive to remain competitive in the market today.

3.0. AIMS AND OBJECTIVES FOR A SMALL MEDIUM AND

LARGE BUSINESS
The aims of businesses small, medium and large, is where they want to be in future, its
goals. It is a statement of purpose. Business goals represent intentions that come from the overall
mission statement, and provides a sense of direction which leads to the achievement of its
inspirational vision and challenging position in the future.

The aims of all business is to bring to its customers good and services that meet and satisfy their
needs.

The primary aim of all businesses is to add value and in the private sector it includes profit
making and survival, make profit for shareholders and reinvest in the business.

Re-investment leads to growth, it is usually assumed in business that bigger is better than smaller.
Therefore smaller business have more aims for growth so as to earn more profit. Bigger business already
have a big market share, their aim is focused on maintaining that position in the market. The higher
market share allows the large business to have more influence over the market price of a product which is
an opportunity for making more profit.

Small and medium businesses aim to gain economic stability by increasing its size. This is to help them
withstand any sudden decline in sales or sudden change in government policy. For example during
recession the cost of obtaining finance rises substantially in terms of the fees and the security of the
collaterals required. Smaller companies cannot withstand these but the large company can still obtain
finance because it can easily meet these conditions.

More strategic business aims include expansion, market leadership and brand building for
example Kelloggs has maintained Market leadership by providing the best quality of cereals to
its consumers for ages now. Because of this many identify with the brand and develop brand
loyalty.

Objectives are the key elements for a business’s success. They give the business a clearly
defined target. Business targets are quantified and time-based objectives that define the
measurable outputs. Effective objectives must be SMART;

 Specific – Objectives should be an explicit statement of required out come. Clear and
easy to understand.
 Measurable – They should be able to be quantified, and should be a means of assessing
results against plans.
 Achievable – They should be within the capabilities of the people and resources
employed.
 Realistic – They should be practical and sensible.
 Time bound – They should be associated with a particular time frame, i.e. a time limit at
which the objective must be achieved.
The main objectives of businesses are;

1. Survival.
2. profit maximization.
3. Growth.
There are two types of business objectives. Quantitative and qualitative objectives.

Quantitative objectives are those objectives whose achievement can be measured

financially or numerically. The successful achievement of quantitative objectives can be easily
seen and it is equally visible when they are not attained. Examples include,

 Targets for market share,

  Target for financial performance,
 Target levels of year to year growth,
 Target level of productivity or efficiency,
 Number of new product launches,
 To gain a quality accreditation certificate
Qualitative objectives are not based on numerical indicator. But this does not make then less
important than quantitative objectives. Examples may be,

 To attain a public perception of being a good employer,

 To be seen as being responsible to the environment or ‘green’.
 To improve the quality of management,
 To improve customer satisfaction,
 To improve staff training.
It is difficult for businesses to access at what point these objectives are satisfactorily attained.

 It can also mean the creation of different quality versions of the same product. For
example Nutri-Grain made a more healthy snack food, a brand model of a car made with
different specifications like leather chairs, airbags, high quality paint etc.

This approach is common to businesses that feel they know their customers and can supply
more of their needs and wants. The principal reason for pursuing this growth approach are;

 The company holds a high share of the market and feels it can strengthen its position by
launching new products.

4.0.THE DIFFERENCE BETWEEN MARKET ORIENTED AND

PRODUCT ORIENTED ROUTES IN ANSOFF’S MATRIX
There is growth potential in the market providing a good opportunity to launch new products.
Like as any other things every product has a life time normally which measures by the sales
volume or the quantity demand of that particular product. Some of them are very short and some
of them are long. This life of a product starts when the manufacturer launched the product in to
market. After a certain period of time the product sales might goes down. In that point
manufacturer may thinks that’s the end of that product life or they can try different orientation of
marketing to increase the sales of that product. From the launch to declining stage of the product
is the product life cycle. It has five stages –
Introduction stage
Growth stage
Maturity stage
Saturation stage
Declining stage

Fig.3. Product life cycle

Source: The times 100

Introduction stage:
When a new product launched in the market then introduction stage begin. In this
stage the product sales volume in low as result profit is comparatively narrative or low. Here,
another reasons for the low profit is high distribution and promotion cost. Especially the market
pioneer is the main customer in this stage.

Growth stage:
If the product can satisfy the market demand then it will enter to the growth stage from
the introduction stage. Here, company profit level will increase and the distribution and the
promotion cost are lower than introduction stage. New competitors enter in to the market with
the new product features. In this stage the early adopter will lead the late buyers if they hear the
favourable word from the early adopter.

Maturity stage:
At this point sales volume is in pike. The profit margin is also in high. In this stage
company can make their brand image stronger with the profit. They invest money in R & D to
find the better vision of the product. They to fight with the competitor in various ways and try to
prove they are the best in the industry. That’s the main battle field of marketing management.

Saturation stage:
When the market is full with the product, certainly the sales of the product goes down.
This the saturation stage of the product life cycle. Here, marketer try to make some modification
of the actual product, looks for the new market segment or new use of the product to increase the
sales.

Declining stage:
When the product sale goes down even plunge to zero for various reasons like –
technological advancement shifts in customer taste, increase competition. Here the profit also
decline as the sales is low.

When the sales of any product goes down that’s the most critical time for any marketer or
manufacturer either they will try to stay on the market or they will remove the existing product.
Saturation stage is called the product life cycles most critical part. If the marketer wants to stay
in the market, then the question arises – HOW? This answer is not a simple math. Here, the
question of the survival of the product, investment of money or sometimes the question of the
survival of the company. So every decision should be perfect. If they make any wrong decision
then it must be a costly mistake.
Kellogg has also taken a decision about their product. They try to extend the product life cycle
rather than withdraw the product from the market. To try the extend the product life cycle most
common and popular matrix is Ansoff’s matrix since it was first published in 1957 in the
Harvard Business Review in a article called ‘’Strategies for Diversification’’. This matrix offers
the strategic choice to achieve the objectives. There are four major choices in this matrix.
Figure: 4. Ansoff’s Matrix
 Market penetration:
Existing product and the existing market is the main concern. Marketers try with the
existing product within the existing customer. They take various promotional programs,
repositioning of brand and so on to increase the revenue.

Market Development:
Product remains same but marketers try to enter new market segment. Manufacturer keep
their product same but they looks for new customer or audience. Marketing in the new region or
different target customer is the way to increase the sales or revenue.

Product development:
New product with the existing market is the main concern for the marketer. Here,
marketer replaces the existing product with the new product and offers to the existing customer.
Manufacturer brings a new version of the existing product. Technological advancement is one of
the main reasons behind of product development.

Diversification:
New market with the new product. Manufacturer comes with completely new product to
the new customer. Sometimes it could be related diversification or sometimes it could be
unrelated diversification. If the new product remains with the same industry of the existing
product then its related diversification. On the other hand if the new product is in different
industry with the existing product then it’s called unrelated diversification. Product
diversification or launching completely new product is almost same for the manufacturer.
In Ansoff’s matrix there are two routes. That is –
 Market oriented routes
  Product oriented routes
For any manufacture, there are two main concerns to increase the sale volume or
profitability. One is about the customer and another is about the product. Ansoff’s matrix Market
oriented routes discuss about the market or customer. In this part marketer only think about the
customer. How they can increase the sale within the existing customer or make a different
segment of customer. However, they try to keep the existing product same. They never change
the product feature. When the marketer follows the market penetration then it is a low risk game
for the company. However, when the marketer goes for the development then it is more risk than
the market penetration.
If we look at the other routes of Ansoff’s matrix, its total concern is all about the product. In the
product, development manufacturer brings the new version of the existing product. Sometimes
advancement of technology makes the manufacturer bound to do that. In that case, marketers try
with the existing customer. They do not to think about the new customer. Here, risk is
comparatively high then the market penetration or same risk likes market development. But
when marketer thinks about diversification then it is a high risk. Here the marker thinks about the
new product and the new customer. They have to think everything from the beginning.
In the marketing oriented routes, the company or marketer can utilize enhancing the quality
products, strengthening, advertising and various promotional activities to make the new customer
along with the existing customer. Here they low investment and the risk is low. However, for the
product oriented route – it based on the different product, the company should decide to extend
and existing products or develop the new products. If the company has lack of capital and do not
get capacity to develop new products, then they should not go with this route. Because, product
oriented route is high risk then the marketing oriented route. With the competition grow, Kellogg
has to monitor the success of each brand and make sure that it holds strong competitive position
in the market.

5.0.WAYS OF PORDUCT DIVERSIFICATION

Every product has its life cycle that includes five steps: launch, growth, maturity, saturation
and decline. When managers recognized that there was a problem with Nutri-Grain, which is
gone into decline step, they had to decide what business strategy to choose to return it to growth.

Defining new strategy can be a big challenge for the companies. Ansoff’s matrix helps to
identify which strategy is the most appropriate according to company’s aims and objectives.
Matrix represents market-oriented strategy and product-oriented strategy.
 Kellogg had to decide where the problem was: in product, in market or both. The market was
growing up by over 15%, however Nutri –Grain sales had decreased. In addition, consumer
demands were changed, with increasing the need not only for quick healthy snack, but tasty.
Considering this, company went for product-oriented strategy (www.thetimes100.co.uk)

There are two ways that company had to choose from, product development or product
diversification. Product diversification involves modifying existing products in order to expand
the market potential of a product. From changes in brands to changes in a product's target
market, product 0diversification can obtain new clients for your product by leveraging an
existing product's reputation and development platform to produce and sell a modified product.
Successful product diversification requires accurate targeting and product differentiation to
prevent eroding your current market and increase overall sales and profits.product diversification
can be carry out through the following ways;

Brainstorm

Brainstorm potential markets for an existing product with slight alterations. Consider geographic
differences, demographic differences such as gender and age, and features that appeal to
different groups. Obtain a strong list of potential new products for diversification efforts.

Market Research

Based on product brainstorming, conduct extensive market research into the viability of new
products. Make sure new products align with different target markets than the customer base for
your existing product to avoid eroding market share for your current product. Conduct surveys,
focus groups and product trials to ensure product success prior to launching a new product.

Demographic Diversification

Diversify your product base by implementing changes in your demographic targets. A good
example of demographic diversification by age is "Teen People" magazine. The standard
"People" targets adult readers whereas "Teen People" targets preteens and teenagers. This
diversification added readership and leveraged an existing brand to diversify and increase
revenue. Consider demographic diversification if there are wide differences in preferences for
your product based on gender, age, location or ethnic differences.

Price Diversification
Diversification can target new price points. For example, Marriott hotels targets mid- to upper-
price point hotel customers. Marriott expanded into budget hotels by creating new brands---
Fairfield Inn and Courtyard by Marriott hotels. Consider price diversification if there is a wide
range of prices for the products or services you offer.

Product Extension

Create a new product that builds off your established brand image. For example, Reebok is
known for athletic footwear. Reebok extended this image and created Reebok Fitness Water to
diversify its product line and build off the success of its shoe line. Consider a product extension
strategy if the existing market for the type of product you offer is already saturated and there are
convenient ties to other product types. This strategy also helps reduce overall business risk by
offering products in a variety of customer categories.
Product Modifications

Product modifications such as color or different features can help diversify your product offers.
For example, Heinz expanded its ketchup offerings to include colored ketchup in purple and
green. These products targeted consumers with kids to capture additional market share. Consider
a product modification strategy if you have budgetary constraints, or if slight modifications
could lead to expanded market share or reinvigorate your existing product's image.

6.0.CONCLUSION
The success of Kellogg’s company in the cereal and food industry cannot be over emphasized.
Kellogg’s has a variety of product that represents different stages on the product life cycle. The
aims and objectives of Kellogg’s have made the company to gain sustainable competitive
advantage over its competitor. With the Ansoff matrix, Kellogg’s is able to achieve the best
business alternative. The success of every business is about bearing risk, Ansoff matrix has two
routes, which involve the market, and product oriented route. In all, Kellogg’s has a passionate
team that is working together to make sure that Kellogg’s remain the food company of choice.
The company also attaches strength in its core values.
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 The Times Newspaper 2010. The Times 100. Retrieved August 13, 2010, from
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