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

0. Today Kellogg¶s manufacture in 18 countries and sell their product in more than 180 countries around the world. p. Kellogg Company began in 1960 with only 44 employees in Battle Creek. growth and performance against competition. some of its brands include rice krispies. crunchy nut and corn flakes. d) Saturation: Competition flocks the market e) Decline: sales fall off and profits drop However. USA. saturation and declinetion and decline.0.´ A product life cycle can describe the product class. product forms and brand. long time. 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. Some products are introduced and die quickly. one of which is kellog¶s corn flakes. medium and large business.5 billion. Each brand holds its own competitive market and is monitored in terms of market share.1. 297) states that not all products follow this product life cycle. .consumer around the world enjoy Kellogg company product. Kellogg had worldwide sales of almost £ 5. 2. maturity. growth. special k. others stay in the mature stage for long. suggestions of aims and objectives to small. sales growth slows down. By 2006. Michigan.PRODUCT LIFE CYCLE A product life cycle basically portrays how the sales of a product change over time. Its product line includes ready-to-eat cereals and nutritious snacks. Some enter the decline stage through strong promotion or repositioning. ³according to Philip & Gary (2010.INTRODUCTION Kellogg¶s company is world¶s leading producer of breakfast cereals and convenience foods. normally it has five stages: launch. 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. Our discussion on this case study is going to dwell on the product life cycle and its stages.

Promotions were high to inform its consumers. However competition came in and offered same benefits as those of close. They also made new developments by expanding and coming up with a range of flavours examples. Launch: From launch in 1967 Close up (1st gel tooth paste aiming at the youth segment) proved to be successful. Sales increased at slower pace and competing products were very similar at this point increasing the difficulty of differentiating the product. 2. and in 1987 they came up with the famous ³HA HA´. Closeup found that its mono-attribute focus (fresh breath) was losing its sheen. Unilever used different advertising strategies. showing an acceptance in the market. white teeth & strong teeth. Growth: Close-up sales and profits increased steadily. Maturity: This is a period of maximum profitability. It forced the market leader to change its strategy and launch a gel variant. There were different price wars in targeting customers. close up tooth paste SALES TIME Intro Growth Maturity Saturation Decline Close-up is a Unilever toothpaste brand targeting the youth 1.Figure :1. thus Unilever came up with new focus on 3 attributes fresh breath. lemon mint & Eros red 3.up example Colgate & Pepsodent .

Product life cycle A. a completely new formulation is developed. By 200 onwards close-up sales were declining.4. Under the initial name. Crunchy nut cornflake (CNC) SALES Intro TIME Growth Maturity Saturation Decline . due to the fact that there were a variety of similar products and cheaper options in the market. on a positive note the whole new version of the product with new marketing strategy was to be considered. thus entered the decline stage. Saturation: Competitors flocked the market and close-up sales declined as customers tastes changed. Unilever. Figure:2. made a decision on brand revival. Decline: Close-up sales fell off and profits dropped. it was losing its position in the market.

there are also different price wars in the market in targeting consumers. promotions are made though not heavily due to lack of competitions associated with the product. Growth Sales and profits of crunchy nut cornflakes increased steadily. as expected other competitors are bound to come in. Launch Crunchy nut cornflake has proved to be successful since its launch in 1980. markets for breakfast cereals/meals is vast and offers some benefits as the brand does example Weetabix mini bits.Crunchy nut cornflake is a Kellogg¶s cereal brand targeting twenty to thirty year old professionals. When it first entered the market it gained almost 60% share immediately. Crunchy nut cornflake is still at the maturity stage and Kellogg¶s is still developing advertising campaigns to keep the brand in the market. thus becoming one of the most important brands for Kellogg¶s. However. 1. . Since its launch it has maintained sales value of £68 million. this has been made possible through developments of a new flavour and texture for consumer¶s example crunchy nut bites. As crunchy nut cornflake strives its success. Maturity This is the period of maximum profitability. showing an acceptance in the market. 2. 3.

However.B. showing a massive acceptance in the market. 3. successful products do attract competition from other businesses. 2010) All-Bran is a Kellogg¶s breakfast cereal brand 1. in the fibre sector of the cereal market. By 1980¶s All. Maturity All.Bran was launched in the 1930¶s.Bran is currently at this stage. Promotions were high to inform its consumers and hence provide support to its product development. Launch: All. which come into the market and offer products with similar benefits and cheaper prices to attract consumers.Bran¶s growth went up through its massive publicity for the µF¶ plan diet from nutritionists and health experts. and it proved to be a success. Kellogg¶s however.Bran sales experienced a steady growth. 2. has engaged in skilful marketing techniques in support of . As a cereal rich in its ingredients sales performance raised. It gained almost 50% share in the breakfast cereal market. it is growing and flourishing in the cereal market. All. Growth All.Bran SALES 1930 Intro 1980 Growth Maturity Saturation Decline TIME (The Times 100.

development of the brand through a massive £3 million campaign it has looked into rebranding a range of fibre cereals to maintain its growth and consumers interest. When it first entered the market it gained almost 60% share immediately. 5. showing an acceptance in the market. . 4. Since its launch it has maintained sales value of £68 million. Crunchy nut cornflake (CNC) SALES Intro TIME Growth Maturity Saturation Decline Crunchy nut cornflake is a Kellogg¶s cereal brand targeting twenty to thirty year old professionals. Launch Crunchy nut cornflake has proved to be successful since its launch in 1980. promotions are made though not heavily due to lack of competitions associated with the product. Growth Sales and profits of crunchy nut cornflakes increased steadily.

Bran SALES 1930 Intro 1980 Growth Maturity Saturation Decline TIME (The Times 100. there are also different price wars in the market in targeting consumers. C. All.thus becoming one of the most important brands for Kellogg¶s. markets for breakfast cereals/meals is vast and offers some benefits as the brand does example Weetabix mini bits. this has been made possible through developments of a new flavour and texture for consumer¶s example crunchy nut bites. as expected other competitors are bound to come in. However. Crunchy nut cornflake is still at the maturity stage and Kellogg¶s is still developing advertising campaigns to keep the brand in the market. As crunchy nut cornflake strives its success. Maturity This is the period of maximum profitability. 2010) All-Bran is a Kellogg¶s breakfast cereal brand . 6.

The aims of all business is to bring to its customers good and services that meet and satisfy their needs. As a cereal rich in its ingredients sales performance raised. make profit for shareholders and reinvest in the business.Bran is currently at this stage. 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. However. and it proved to be a success. Re-investment leads to growth. Launch: All. Maturity All. which come into the market and offer products with similar benefits and cheaper prices to attract consumers. It is a statement of purpose. medium and large. It gained almost 50% share in the breakfast cereal market.Bran sales experienced a steady growth. it is usually assumed in business that bigger is better than smaller. 5. it is growing and flourishing in the cereal market. its goals.0.Bran¶s growth went up through its massive publicity for the µF¶ plan diet from nutritionists and health experts. Growth All. Business goals represent intentions that come from the overall mission statement. Promotions were high to inform its consumers and hence provide support to its product development. Kellogg¶s however. they all strive to remain competitive in the market today. 3.Bran was launched in the 1930¶s. in the fibre sector of the cereal market.4. showing a massive acceptance in the market. The higher . 6. do have different aims and objectives and no matter what. Organisations however. Therefore smaller business have more aims for growth so as to earn more profit. is where they want to be in future. By 1980¶s All. The primary aim of all businesses is to add value and in the private sector it includes profit making and survival. AIMS AND OBJECTIVES FOR A SMALL MEDIUM AND LARGE BUSINESS The aims of businesses small. Bigger business already have a big market share. and provides a sense of direction which leads to the achievement of its inspirational vision and challenging position in the future. their aim is focused on maintaining that position in the market. successful products do attract competition from other businesses.

profit maximization. Quantitative and qualitative objectives. 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. y Specific ± Objectives should be an explicit statement of required out come. Examples include. 1. Because of this many identify with the brand and develop brand loyalty. The main objectives of businesses are. Survival. and should be a means of assessing results against plans. Clear and easy to understand. a time limit at which the objective must be achieved. y Measurable ± They should be able to be quantified. More strategic business aims include expansion. Small and medium businesses aim to gain economic stability by increasing its size. The successful achievement of quantitative objectives can be easily seen and it is equally visible when they are not attained. Quantitative objectives are those objectives whose achievement can be measured financially or numerically. Business targets are quantified and time-based objectives that define the measurable outputs. For example d uring recession the cost of obtaining finance rises substantially in terms of the fees and the security of the collaterals required. Growth. y Targets for market share. Time bound ± They should be associated with a particular time frame. There are two types of business objectives.e. Objectives are the key elements for a business¶s success. .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. y y Realistic ± They should be practical and sensible. 2. This is to help them withstand any sudden decline in sales or sudden change in government policy. They give the business a clearly defined target. i. Effective objectives must be SMART. Smaller companies cannot withstand these but the large company can still obtain finance because it can easily meet these conditions. y Achievable ± They should be within the capabilities of the people and resources employed. 3.

After a certain period of time the product sales might goes down. From the launch to declining stage of the product is the product life cycle. To improve staff training. y y y y y To attain a public perception of being a good employer. 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.y y y y y Target for financial performance. 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. This life of a product starts when the manufacturer launched the product in to market. For e example Nutri-Grain made a more healthy snack food. This approach is common to businesses that feel they know their customers and can supply more of their needs and wants. It is difficult for businesses to access at what point these objectives are satisfactorily attained. a brand model of a car made with different specifications like leather chairs. Number of new product launches. Examples may be. Target level of productivity or efficiency. 4. The principal reason for pursuing this growth approach are. To be seen as being responsible to the environment or µgreen¶. It has five stages ± . y It can also mean the creation of different quality versions of the sam product.0. y The company holds a high share of the market and feels it can strengthen its position by launching new products. Some of them are very short and some of them are long. airbags. To improve customer satisfaction.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. To improve the quality of management. Target levels of year to year growth. high quality paint etc.

In this stage the early adopter will lead the late buyers if they hear the favourable word from the early adopter. Especially the market pioneer is the main customer in this stage. Product life cycle Source: The times 100 Introduction stage: When a new product launched in the market then introduction stage begin. Here. another reasons for the low profit is high distribution and promotion cost. company profit level will increase and the distribution and the promotion cost are lower than introduction stage.3.Introduction stage Growth stage Maturity stage Saturation stage Declining stage Fig. They invest money in R & D to . Maturity stage: At this point sales volume is in pike. The profit margin is also in high. Here. Growth stage: If the product can satisfy the market demand then it will enter to the growth stage from the introduction stage. New competitors enter in to the market with the new product features. In this stage company can make their brand image stronger with the profit. In this stage the product sales volume in low as result profit is comparatively narrative or low.

If the marketer wants to stay in the market. increase competition. There are four major choices in this matrix. Saturation stage is called the product life cycles most critical part. Figure: 4. Ansoff¶s Matrix . Kellogg has also taken a decision about their product.find the better vision of the product. So every decision should be perfect. If they make any wrong decision then it must be a costly mistake. That¶s the main battle field of marketing management. They to fight with the competitor in various ways and try to prove they are the best in the industry. Here. Saturation stage: When the market is full with the product. 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 µ¶Strategies for Diversification¶¶. Here the profit also decline as the sales is low. certainly the sales of the product goes down. They try to extend the product life cycle rather than withdraw the product from the market. Declining stage: When the product sale goes down even plunge to zero for various reasons like ± technological advancement shifts in customer taste. investment of money or sometimes the question of the survival of the company. then the question arises ± HOW? This answer is not a simple math. This matrix offers the strategic choice to achieve the objectives. marketer try to make some modification of the actual product. This the saturation stage of the product life cycle. Here. 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. looks for the new market segment or new use of the product to increase the sales. the question of the survival of the product.

They take various promotional programs. That is ± y Market oriented routes . Market Development: Product remains same but marketers try to enter new market segment. In Ansoff¶s matrix there are two routes. Marketing in the new region or different target customer is the way to increase the sales or revenue. Manufacturer comes with completely new product to the new customer. repositioning of brand and so on to increase the revenue. If the new product remains with the same industry of the existing product then its related diversification. Manufacturer brings a new version of the existing product. Technological advancement is one of the main reasons behind of product development. 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. marketer replaces the existing product with the new product and offers to the existing customer. Diversification: New market with the new product.Market penetration: Existing product and the existing market is the main concern. Product development: New product with the existing market is the main concern for the marketer. Here. Sometimes it could be related diversification or sometimes it could be unrelated diversification. Manufacturer keep their product same but they looks for new customer or audience. Marketers try with the existing product within the existing customer.

WAYS OF PORDUCT DIVERSIFICATION Every product has its life cycle that includes five steps: launch. . They do not to think about the new customer. maturity. risk is comparatively high then the market penetration or same risk likes market development. Matrix represents market-oriented strategy and product-oriented strategy. which is gone into decline step. when the marketer goes for the development then it is more risk than the market penetration. 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. 5. product oriented route is high risk then the marketing oriented route. They never change the product feature. its total concern is all about the product. However. they had to decide what business strategy to choose to return it to growth. But when marketer thinks about diversification then it is a high risk. development manufacturer brings the new version of the existing product. In the marketing oriented routes. Because. One is about the customer and another is about the product. In this part marketer only think about the customer. Here they low investment and the risk is low. marketers try with the existing customer. In the product. In that case. Here the marker thinks about the new product and the new customer. They have to think everything from the beginning. then they should not go with this route. there are two main concerns to increase the sale volume or profitability. However. Sometimes advancement of technology makes the manufacturer bound to do that. When managers recognized that there was a problem with Nutri-Grain. the company should decide to extend and existing products or develop the new products. If we look at the other routes of Ansoff¶s matrix. they try to keep the existing product same. advertising and various promotional activities to make the new customer along with the existing customer. strengthening. When the marketer follows the market penetration then it is a low risk game for the company.y Product oriented routes For any manufacture. growth. the company or marketer can utilize enhancing the quality products. However. Here. With the competition grow. If the company has lack of capital and do not get capacity to develop new products.0. How they can increase the sale within the existing customer or make a different segment of customer. saturation and decline. for the product oriented route ± it based on the different product. Ansoff¶s matrix Market oriented routes discuss about the market or customer. Kellogg has to monitor the success of each brand and make sure that it holds strong competitive position in the market.

and features that appeal to different groups. Market Research Based on product brainstorming. location or ethnic differences. but tasty. consumer demands were changed. Successful product diversification requires accurate targeting and product differentiation to prevent eroding your current market and increase overall sales and profits.uk) There are two ways that company had to choose from. Product diversification involves modifying existing products in order to expand the market potential of a product. focus groups and product trials to ensure product success prior to launching a new product. This diversification added readership and leveraged an existing brand to diversify and increase revenue. A good example of demographic diversification by age is "Teen People" magazine. conduct extensive market research into the viability of new products. Consider geographic differences. Consider demographic diversification if there are wide differences in preferences for your product based on gender. The market was growing up by over 15%.product diversification can be carry out through the following ways. From changes in brands to changes in a product's target market. Brainstorm Brainstorm potential markets for an existing product with slight alterations.thetimes100. Price Diversification . product development or product diversification. The standard "People" targets adult readers whereas "Teen People" targets preteens and teenagers. Demographic Diversification Diversify your product base by implementing changes in your demographic targets. in market or both. with increasing the need not only for quick healthy snack. In addition. Obtain a strong list of potential new products for diversification efforts. age. Conduct surveys. Considering this.Kellogg had to decide where the problem was: in product. however Nutri ±Grain sales had decreased. 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. company went for product-oriented strategy (www. demographic differences such as gender and age. 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.co.

Marriott hotels targets mid. Product Modifications Product modifications such as color or different features can help diversify your product offers. which involve the market. Kellogg¶s has a passionate team that is working together to make sure that Kellogg¶s remain the food company of choice.CONCLUSION The success of Kellogg¶s company in the cereal and food industry cannot be over emphasized. 6. The success of every business is about bearing risk.0. For example. The aims and objectives of Kellogg¶s have made the company to gain sustainable competitive advantage over its competitor.Diversification can target new price points. The company also attaches strength in its core values.to upperprice point hotel customers. . Marriott expanded into budget hotels by creating new brands--Fairfield Inn and Courtyard by Marriott hotels. 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. In all. Product Extension Create a new product that builds off your established brand image. Kellogg¶s is able to achieve the best business alternative. Reebok is known for athletic footwear. and product oriented route. For example. Consider price diversification if there is a wide range of prices for the products or services you offer. Heinz expanded its ketchup offerings to include colored ketchup in purple and green. With the Ansoff matrix. Kellogg¶s has a variety of product that represents different stages on the product life cycle. These products targeted consumers with kids to capture additional market share. 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. Ansoff matrix has two routes. For example.

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