Kellogg Company’s Environmental Analysis

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Introduction

Kellogg Company (commonly known as Kellogg’s) is an American producer of food products. It was founded in 1900 by W.K. Kellogg and J.H. Kellogg in Battle Creek, Michigan, and is most famous for its ready-to-eat cereals (Pierre & Fischetto, 2020). The company has a global presence with customers in at least 180 countries, and this success is attributed to its innovative marketing strategies and the sustained improvement in the quality of its products (Ladd, 2019). The management has always been mindful of the changes in the environment, and their business decisions have consistently been informed by social/cultural, economic, legal/political, and global trends.

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The Social, Cultural, and Environmental Factors

Due to their busy lifestyles, Americans prefer ready-to-eat products to ones that they must dedicate time and effort to preparing. Breakfast cereals are popular, especially because they are nonperishable. Americans purchase at least 2.7 billion packages of ready-made cereals a year. Kellogg’s has a 30% market share, and its most famous products include Froot Loops, Frosted Flakes, and Corn Flakes (Pierre & Fischetto, 2020). The company has been in business for over 120 years, and therefore, it has a wealth of experience that its rivals lack.

Brand loyalty in the breakfast cereal industry is significantly high. As a consequence, most clients do not normally seek out alternative products. Supposing that Kellogg’s lost clients, therefore, it would be difficult to win them back as they are likely to remain faithful to their chosen substitutes. By the tradition, the current CEO, Steve Cahillane, emphasizes the need to address all concerns efficiently (Burrows, 2018; Ladd, 2019). This is in an endeavor to satisfy the needs and wants of their consumers while meeting the business goals.

Influence of Advertising on Purchasing Decisions

The industry has a high advertisement-to-sales ratio, and this is because young people are notably influenced by popular culture. They purchase a product based on how popular they think it is. Kellogg’s appreciates this fact, and it invests about $400 million in marketing every year (Serna-Saldivar, 2016). Pierre & Fischetto (2020) argue that the management would enhance their understanding of the emergent trends if they strengthened their social media presence. The discussions on social media tend to shape public opinion, and can consequently influence the demand (Markel, 2017). In that case, Kellogg’s should consider social media to be yet another platform where it can share its message with the current as well as the potential clients.

Kellogg’s Economic Environment

The management must understand a lot more than just how Kellogg’s can function on its own. Indeed, the sustainability of a business organization is influenced by both internal and external factors. One of the most impactful components is the status of the economy. Therefore, this element must be part of Kellogg’s strategy. In addition, the fact that it is a multinational corporation means that its success is dependent on the status of the local as well as international production activities and levels of consumption (Ladd, 2019). If the sources of raw materials are obstructed, production is impeded.

When the supply chain is hampered by a crisis like the COVID-19 pandemic, consumers may not satisfy their needs even if they had the finances to do so. This is the current scenario in Europe where strict lockdowns have been imposed for almost a year (Markel, 2017). Other economic problems which affect the performance of a business organization include unemployment and inflation rates. Unemployment translates into individuals having inadequate disposable income, and hence they are compelled to opt for cheap alternatives (Burrows, 2018). Similarly, a high inflation rate causes consumers to prioritize cost over quality (or even brand loyalty).

Influence of Political/Legal Frameworks on Kellogg’s Business Activities

Although the US is a capitalist economy, agencies of government often impose regulations on business organizations. Regulations are meant to facilitate the control of a particular economic endeavor. For instance, the Food and Drug Branch of the California Department of Public Health may require a decrease in sodium and sugar levels in all breakfast cereals sold in the State of California (Burrows, 2018; Markel, 2017). A federal agency may impose a similar condition, and hence Kellogg’s must always remain informed about the developments of the specifications which must be met to avoid fines and/or other punitive measures.

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Changes in the political environment must be tracked as well. Every political party in the US seeks to advance ideological views which impact businesses in one way or another. In addition to regulations, political leaders may enact laws that would make it mandatory for every business to operate within specific constraints (Ladd, 2019). Laws endure longer than regulations because the process of repealing them is complicated and often requires bi-partisan support (Pierre & Fischetto, 2020). Kellogg’s must monitor the legal and political trends and accommodate the changes in its strategic plan, particularly because these developments are beyond the management’s control.

Global Issues with Influence on Kellogg’s Business Endeavors

A misconception about globalization is that the entire world has been turned into one community. While geographical, language and communication barriers are continually being eliminated, it is erroneous to imagine the planet as a region whose inhabitants share the same cultural and ethical beliefs. Even though it had undertaken a massive advertisement campaign and invested over $65 billion in it, Kellogg’s still failed to win royal customers in India during the first few years of operation (Markel, 2017). The management had the mistake of assuming that the Indian market was similar to the US. The cultural conflict has since been addressed, and the company has a 56% share of the market (Jha, 2016). Cultural sensitivity demands an organization to involve as many local partners as possible and to seek their advice while making decisions.

Although such countries as Nigeria and South Africa are democracies, political leaders tend to implement policies that are biased against some organizations and in favor of others. The difference between such countries and the Western world is that while the leaders in the latter are motivated by ideology, those in the former are usually influenced by bribery and nationalistic views (Serna-Saldivar, 2016). For instance, despite the benefits that Kellogg’s has brought to communities around South Africa, it has still had to deal with litigations where it was accused of underpaying its employees. Almost all local competitors pay far less than Kellogg’s offers its workers, and hence the main reason for such charges is because it is a foreign company (Jha, 2016; Markel, 2017). Multinational companies face similar problems in Africa, Asia, and Latin America, and hence the management should be mindful of such concerns while strategizing.

Conclusion

Organizations such as Kellogg’s navigate a host of challenges of socio/cultural, economic, political/legal, and global nature. They must, for instance, appreciate the habits of the people living in the markets where they operate. Ignorance of lifestyles and habits would cause a mismatch between products being availed in the market and the needs of the consumers. Companies should also consider the status of the economy as factors like unemployment and inflation rates impact the consumers’ purchasing power. In case foreign opportunities are to be pursued, a firm must appreciate the fact that every market is unique and there is, therefore, no universal approach to investing in all of them.

References

Burrows, D. (2018). America’s most popular breakfast cereals (and the stocks behind them). Kiplinger. Web.

Jha, S. (2016). Kellogg’s journey in India: from being bland to scrumptious in culturally diversified international market. ELK Asia Pacific Journal of Marketing & Retail Management, 7(2). Web.

Ladd, B. (2019). Cereal killer: Kellogg’s must transform its company to survive—will it succeed? Observer. Web.

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Markel, H. (2017). The Kelloggs: The battling brothers of Battle Creek. Knopf Doubleday Publishing Group

Pierre, D. & Fischetto, T. (2020). The 20 best breakfast cereals of all time. Best. Web.

Serna-Saldivar, S. O. (2016). Cereal grains: Properties, processing, and nutritional attributes. CRC Press

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