Five Disciplines for Creating what the Customer Wants)

Identify Customer Needs: Use surveys to identify what customers needs are. Ask what kind of foods they would like to see on the shelves. Ask what suppliers would like to see improved.

Solutions to Needs: Over the years, Kellogg’s has continued to introduce healthier products. Kellogg’s created the Kellogg’s Breakfast Council, which consists of “seven independent experts dedicated to helping all of us understand nutrition information…” http://www.kelloggs.com/en_US/our-commitment-to-nutrition/kelloggs-breakfast-council.html

They have focused especially on their cereals. Now even the “sugary” cereals are nutritious. They also introduced their Heart Healthy Selection of cereals, which include brands such as Smart Start, Fiber Plus and All Bran. Kellogg’s has also introduced My Special K, which is a challenge geared towards women to eat healthy and lose weight. http://www.specialk.com/aboutchallenge

Structure of Company: Kellogg’s organizational design is an International design, which I discussed in a previous post. However, their management structure consists of a Board of Directors and a Leadership Team of 13 members. http://investor.kelloggs.com/management.cfm?navSection=BInfo

“Innovation Champions”: At Kellogg’s I believe that their Leadership Team members are al Innovation Champions. After reading through a lot of their biographies, it seems like they have all had a lot of experience and enjoy being in their leadership positions. They also seem to all have the drive to keep innovating the products that Kellogg’s has to offer.

Create Value for Customers: Kellogg’s creates value for their customers by creating and promoting programs for their consumers. I mentioned some of them above. These create value by going above and beyond just selling food and drinks. Kellogg’s has decided to get their consumers involved and are promoting healthy living and eating. 

Exit Strategy: I could not find an exit strategy on their website, but I do not know if they need one. They are a highly established company and are doing very well. I do not think Kellogg’s is going anywhere. I believe that they will keep expanding into new markets and innovating their products. 

Strategic Leadership and Ethics

Strategic Leadership started with Kellogg’s founder, W.K. Kellogg, back in 1906. Mr. Kellogg had a strong commitment to nutrition, health and quality and we still see these qualities being carried out today. His vision to drive improvement in Kellogg products and processes and produce the greatest tasting, nutritious products still continues, as well. By Mr. Kellogg being an inspirational and motivated founder, he set the tone in the company early. He pushed that their purpose was to “nourish families so they can flourish and thrive.” This has been driving Kellogg’s to success since the beginning.

Kellogg’s also shows strategic leadership by empowering employees. Kellogg’s employees are their competitive advantage. They have created a culture in which employees can succeed and grow in the company. Leadership believes that the company won’t succeed unless the employees succeed. They also empower their employees by recognizing their efforts with awards through out the year.

Internal knowledge is shared through out the company. I read through some of the employee biographies and this is what I learned. Employees enjoy working for Kellogg’s because they get to work in cross-functional teams, network to share and gain information, and that everyone is truly working towards the same goal.

Kellogg’s also uses external information to make decisions about products. Since they are a global company, they have to adjust their products to the tastes and preference of each culture. In order to find out what those consumers want, Kellogg’s listens to them and makes products that fit the different cultures. They have also listened to consumers when they said they wanted healthier foods. Kellogg’s has created the most nutritious foods to meet the needs of their consumers.

Ethics are a concern in every company, however Kellogg’s has created a Global Code of Ethics to promote ethical decision-making through out the company. Their 5 key points are integrity, trust, fair, accurate and respect. It states that Kellogg employees act with integrity and show respect for themselves, each other, consumers, customers, shareholders, communities and in the marketplace. They have an Ethics Office if ethical concerns arise and need to be discussed. Every year, employees are required to take a Business Conduct Questionnaire to reflect on personal circumstances and disclose any information about ethical misconduct.

http://www.kelloggcompany.com/company.aspx?id=32

http://files.shareholder.com/downloads/K/1701282836x0x148401/0FBF97EA-585E-4ADA-B9D5-2C49AE56491D/KelloggsCodeOfEthics.pdf

Organizational Design

Kellogg Company’s organizational design is International Operations. The three major contingencies that influence structure adopted by Kellogg’s is the type of strategy driving their foreign operations, product diversity and the extent to which they are dependent on foreign sales. As I have mentioned in posts before, Kellogg’s manufactures their products in 18 different countries and sells their products in 180 countries. They also adapt their products to the culture of the country in which they are selling their products. Kellogg’s has a wide variety of products including cereal, pop tarts, breakfast bars, fruit snacks, chips and beverages. International sales account for 1/3 of their 2011 sales, which was $13.2 billion. Unfortunately, I could not find the exact numbers for their foreign sales.  http://www.annualreport2011.kelloggcompany.com/financial2.htm

To manage their international operations, Kellogg’s uses a geographic-area division structure. A geographic-area division structure means that geographic regions group their operations internally. Kellogg’s uses this strategy because their foreign sales are a fair percentage of their total sales. 

Corporate Responsibility

Kellogg’s puts out a Corporate Responsibility Report each year. It says on their Corporate Responsibility page on their website that they are, “committed to building a strong business while acting responsibly toward our customers and consumers, our employees, our communities and the environment.” Kellogg’s four key aspects are marketplace, workplace, environment and community. 

Marketplace includes producing great tasting foods that are safe, wholesome and high-quality. Kellogg’s is continually trying to improve the nutrition of their products. This section of their Corporate Responsibility Report contains information about nutrition and health, responsible marketing, labeling, product safety and quality, responsible sourcing, challenges Kellogg’s face, and where Kellogg’s is going. An award they won in 2010 is Canada’s “Most Trusted Brand of Breakfast Cereals.”

Workplace involves keeping employees their most important resource. This section of the Report contains labor standards, talent management, diversity and inclusion, employee safety, employee health, wellness and benefits, challenges they face, and where they are going. Since 2009, Kellogg’s has implemented a new leadership development program, established a new “total health management” program for all employees, and was named one of the “2011 Best Places to Work for LGBT Equality” by the Human Rights Campaign.

Environment involves Kellogg’s using natural resources to create their products. This section of the Report includes environmental management, energy and greenhouse gases, water, waste, sustainable packaging, sustainable agriculture, employee initiatives, challenges they face in this area and were they are going in the future in this area. Kellogg’s set two goals for 2015, which were to reduce their energy use, GHG emissions and water use by 15-20 percent and to continue to reduce their waste sent to landfill beyond the 51 percent already reduced since 2005. Kellogg’s surpassed these goals in 2010.

Community is being involved in the community and giving to charities that support communities. These charitable contributions are funded through the Kellogg Company and Kellogg’s Corporate Citizenship Fund, which is supervised by their Board of Directors and its Social Responsibility Committee. This section of the Report includes strategic philanthropy, breakfast programs, physical fitness, community development, disaster relief, challenges they face in this area and where they will being headed in the future in this are.

In 2010, Kellogg’s donated $32 million in cash and products to charitable organizations worldwide. The company donated food to food banks and distributed breakfast food to millions of schools across the globe. Kellogg’s also donated cash and products to assist with disaster relief efforts in Haiti, Chile and Japan.

http://www.kelloggcompany.com/corporateresponsibility.aspx

International Strategy

According to Kellogg’s website, one of it’s greatest competitive advantages is their global infrastructure. Kellogg’s expanded into new geographies in its early years, which has led them to be a successful global business. Their products are manufactured in 18 different countries and sold in more than 180 countries worldwide. A list of countries can be found at this link for their website.  http://www.kelloggcompany.com/company.aspx?id=38

I think their strategic focus was to increase the size of potential markets. Kellogg’s wanted their cereals and snacks to be located on shelves across the world because they knew and still know they have great products. I looked at the Kellogg’s website for South Africa to get an idea of what Kellogg’s has done there. They offer many of the same products, but much fewer than in the United States. Some of the cereals are the same, but the boxes have different images on them. These two things have led me to conclude that Kellogg’s uses a multi-domestic strategy because they adopt their products to the countries they are located in. For example, in South Africa they can buy Special K Bars Red Berries and I have never seen these on the shelves in South Dakota.   

Diversification

Kellogg Company is a diversified business because they offer many different products. I mentioned their products in my last post, but I will state them again to relate it to diversification. Kellogg’s has seven different products, which are bars, beverages, cereal, crackers, fruit flavored snacks, toaster pastries, and waffles, pancakes and syrup. This makes them diversified because their products are not in one specific food area, even though most of them do fall in the breakfast category.

I found a news release from February 15, 2012 on the Kellogg’s website. Kellogg announced that it would be acquiring Procter & Gamble’s Pringles business for $2.695 billion. Kellogg’s decided to acquire Pringles to achieve their goal of building a global snacks business. The brand strength that Pringles has fits well with Kellogg’s strengths in brand building and innovation. Kellogg’s believes the transition will be smooth due to the fact that Procter & Gamble have similar a culture and similar values. The transition is said to be complete by the end of this summer.  http://www.kelloggs.com/en_US/news-2.html

Business Level Strategy

Kellogg’s business strategy is based on differentiation. Kellogg’s has committed to having the best brands. They provide their customers with high-quality, nutritious products. They have seven product types, which include bars, beverages, cereal, crackers, fruit flavored snacks, toaster pastries, and waffles, pancakes and syrup. They also have 29 brands, which can be found on their website.

http://www.kelloggs.com/en_US/product-search.pt-Bars*.html

I decided differentiation because they have so many product lines that Kellogg’s couldn’t use a focus strategy. Kellogg’s is not the low cost provider in any of its product lines, therefore it is does not use the overall cost leadership strategy. Kellogg’s has a very strong reputation. Their customers expect Kellogg’s to offer great products and they are willing to pay the price Kellogg’s has set. 

Intellectual Property

Market Value: $18.69B

Book Value: $10.61B

Intellectual Capital: $8.08B

http://finance.yahoo.com/q/ks?s=K+Key+Statistics

Human capital consists of attracting, developing and retaining the best employees.

 http://www.kelloggcompany.com/company.aspx?id=1457

Attracting: Kellogg Company does a lot of its attracting on their website. Their website is full of information! They have recruiting events four times a year, from what I can see on their website. At these events, interested potential employees can meet and talk with Kellogg’s representatives about employment opportunities. Kellogg’s gives a description of their work environment to show potential employees what it would be like once with the company. They have a friendly, high-energy culture where employees can dress business-casual. Their culture is also based around their values. Kellogg Company strives to form strong relationships with their employees. They give interview tips such as to prepare, be yourself, be specific, practice, ask questions and do a follow-up. Their website also lists off all the benefits Kellogg employees receive. I thought this was awesome because they know exactly what they will be getting before they even get an interview! It also seems from their website that they hire for attitude and train for skill. They also have a section explaining jobs for students, experienced professionals and military. All these things that Kellogg’s does helps attract potential employees because the website lists a ton of important information about the company’s history, current financials, brands, employment opportunities, etc.

Developing: The Kellogg website discusses how employees can grow within the company. They provide resources and professional support to help employees reach their full potential. They offer training programs to help employees grow in their careers and personal lives. Kellogg’s also has partnerships with many outside organizations to give women and minorities more opportunities. They have Employee Resource Groups (ERGs) that offer employees support, development opportunities and networking. A couple of the ERGs are Women of Kellogg and Young Professionals.

Retaining: Kellogg’s value-based culture influences employee’s decision to stay with the company. Their values are as follows. Integrity: show respect and value all employees. Accountability: involve multiple employees in decision-making. Passion: promote creativity and innovation and promote an energizing, positive, optimistic and fun work environment. Humility: promote admitting to mistakes and providing honest feedback. Simplicity: deal with employees directly and eliminate non-added value activities. Results: celebrate results with recognition and awards and help employees achieve their goals with feedback.

Internal Environment

Kellogg’s value chain is very important to its business. Part of its operations is packaging. This is key for Kellogg’s because the packaging features the product, brand name, nutrient levels and other important information they want their consumers to know. The packaging is continuously being tested to make sure Kellogg’s is using the best. They want to keep their products fresh and safe during shipping and handling. Kellogg’s also uses several sizes of packaging to fit their target markets needs.

Having manufacturing facilities in 18 countries is Kellogg’s main outbound logistic. This allows for quick transportation to the 180 countries that sell their products.

Kellogg’s does a lot with marketing and sales. They are the industry leader in the level of advertising investment with over $1 billion. The marketing team is given 9% of Kellogg’s net sales to use for advertising their brands. Specifically for cereal, they use a lot of promotional techniques to advertise such as sweepstakes, mail in offers, toys inside the boxes and printable coupons online.

Human resource management consists of treating their employees well. Kellogg’s wants to see their employees succeed and support them in their professional and personal growth. Kellogg’s prides themselves on being an equal opportunity employer who is committed to workplace diversity. They strongly believe that their employees are their competitive advantage.

For service, Kellogg’s is constantly training their employees to make sure they are growing in their career and also to ensure great product quality.

I could not find much about the technology Kellogg’s uses for manufacturing, but I can guess that it is up to date since they strive for the innovation of new products for their brands.

The main aspect of Kellogg’s procurement is the great relationships they have with their suppliers. Kellogg’s has won numerous awards for having a diverse set of suppliers. They also have created a program called “Great Ideas.” This allows suppliers to fill out a form suggesting an idea of how to make their relationships more effective and useful.

Kellogg’s has stable financial statements and have been consistently growing. In Kellogg’s 2011 annual report, I found that they had net sales of over $13 billion. This number was a 4.5% growth from 2010. Their operating profits were almost $2 million, which grew 2.9% from 2010. Kellogg’s earning per share stated the same from 2010 at $3.38.

Kellogg’s has many tangible and intangible resources. Kellogg’s tangible resources include their employees, goods, and great manufacturing locations.  All of these are valuable to them because with out them they would not such a big success. Their employees could be considered rare because of the way they train them and encourage them to grow their career. However, there could be substitutes because Kellogg’s could find new employees to hire and train. 

Kellogg’s intangible resources are their reputation, brand names, and the culture of their company. These resources are also all very valuable. Their reputation would be difficult to imitate because they have been in business for so long. Their brand names are a sustainable competitive advantage because of their great quality. Their culture would also be difficult to replicate because the management and other employees set the culture for Kellogg’s.

http://www.kelloggcompany.com/company.aspx?id=37

Kellogg's History and External Environment

Introduction to Kellogg’s

W.K. Kellogg founded Kellogg Company in 1906 in Battle Creek, Michigan. Back then, there were only 44 employees, but today they sell their products in more than 180 countries and manufacture in 18 countries across the globe. Mr. Kellogg had a firm commitment to nutrition, health and quality. These elements are the drivers for their mission statement, which is “to drive sustainable growth through the power of our people and brands by better serving the needs of our consumers, customers and communities.” Kellogg’s vision is “to be the food company of choice.” Kellogg Company has been a long-time leader in industry, innovation and marketing.

Kellogg’s has been committed to being the best in each category they compete and it has paid off. Kellogg Company is the world’s leader in producing cereal, cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods. Their brands include Kellogg’s^®, Keebler^®, Pop-Tarts^®, Eggo^®, Cheez-It^®, All-Bran^®, Mini-Wheats^®, Nutri-Grain^®, Rice Krispies^®, Special K^®, Chips Deluxe^®, Famous Amos^®, Sandies^®, Austin^®, Club^®, Murray^®, Kashi^®, Bear Naked^®, Morningstar Farms^®, Gardenburger^® and Stretch Island^®.

Kellogg Company’s competitive advantage is their employees. They provide an environment in which each of their employees can succeed. Mr. Kellogg knew when he started his company that employees were key and that success would not come if they did not have successful employees.

http://www.kelloggcompany.com/company.aspx?id=32

Kellogg’s External Environment

First, I would just like to say I will only be discussing cereal, since this was Kellogg’s first product. Kellogg’s constantly needs to be watching its external environment. They need to be doing some external scanning, which is looking at what their competitors are doing. Their competitors include General Mills, Kashi, Cascadian Farm’s and store brand cereals. Their biggest of their competitors is General Mills. Kellogg’s does not really have a threat of new entrants because cereal is an established product and Kellogg’s is a well-established brand. Their customers, who are wholesalers, hold a lot of power because they decide if they will sell Kellogg’s cereals. However, Kellogg’s holds the power with their farmers, whom they have contracts with. There is a threat of substitute products because consumers are eating healthier foods. Consumers may switch to an organic cereal company such as Cascadian Farms, who makes similar cereals, but they are made of organic products. By looking at their website, it seems Kellogg Company has done a good job of watching their external environment.