HR Strategy and Business Strategy
Kellogg company is the leading global manufacturer of cereal and other so-called convenience goods (such as cookies, waffles, pastries, crackers, bars, and other snacks). The organisation operates in more than 180 counties and holds a Royal Warrant from Elizabeth II in the UK (Galbraith, 2014).
This international, century-old company currently employs 31,000 employees. It relies on human relationship to support sustainable development and expansion. Further growth necessitated transformation of HR strategies. The company had to retool the delivery of HR services step-by-step. The new HR service delivery project was implemented in 13 countries. It resulted in improved flexibility allowing Kellogg to satisfy its pressing business needs while ensuring more efficient HR services (Frigo & Ubelhart, 2016).
At present, the company has a dynamic HR policy. Kellogg Business Leaders Model (KBLM) managed to identify and develop competencies of each activity performed in the company and continues to successfully track the individual and the overall improvement. It is now the most significant innovation the company has introduced concerning its HR strategy (Frigo & Ubelhart, 2016).
As far as recruitment is concerned, Kellogg is looking for competent professionals who are creative, productive, and open to innovation. The recruitment is performed internationally. The company provides training program to its employees to increase profitability of the business along with developing each career. A worker can acquire new skills in all spheres of his/her activity with a particular emphasis on creative potential. Various rewards are guaranteed to those who contribute to the competitive advantage of the company through continuous self-development (Galbraith, 2014).
The business strategy of Kellogg is based on the following principles (Galbraith, 2014):
- The organisation pursues leadership in the sphere of innovation. Kellogg has introduced several unique premium line cereals (e.g. Country Inn Specialties) that allowed it to be ahead of its competitors.
- Kellogg realizes the importance of unceasing strengthening of its seven major markets (the US, the UK, Mexico, Canada, Australia, France, and Germany), which cover more than 80% of the business. The investments into these markets are constantly increasing.
- The company is aimed to expand into new markets of convenience products. It tries to familiarize new distribution channels including convenience shops, gas stations, vending machines, etc.
- The leaders of Kellogg attempt to create a more focused, simplified organisation. This way Kellogg can be more accountable and more closely aligned with the development strategy.
- Kellogg is going to reduce the costs of its products saving millions due to its previous initiatives. The total spending is going to drop by app. 150$ million to create a consistent pattern of annual earnings increase.
Competitive Environment
The current value of the UK cereals market amounts to app. ÂŁ1.1 billion annually with 42% of the share belonging to Kellogg. The share is increasing every year by 3-6% on the average. The key to this competitive advantage lies in the ability of the company to develop such a wide range of products that they can satisfy all age groups of the population. Such customer orientation has managed to win trust and commitment allowing Kellogg to maintain its premium position as a market leader (Collins, 2014). The following companies can be named among its most strong rivalries (West, Ford, & Ibrahim, 2015):
- Alpen (Weetamix Company): no-added-sugar cereal;
- Nestle Whole Grain – Low Fat
- Wight Waters: no-added-sugar cereal;
- Ralcorp Holdings, Inc.;
- General Mill’s Green Giant: no-added-sugar cereal.
The competitive structure of the any product industry can be estimated and understood with the evaluation of the strategic business group, which includes organisations that share similar goals, offer similar goods and services, and implement almost the same strategies for creating a competitive edge (West, Ford, & Ibrahim, 2015). Thus, all the companies enumerated above form the strategic group of Kellogg. To stay competitive, the organisation has adopted differentiation strategy that is possible with diversification of the brand portfolio (Collins, 2014).
Porter’s Five Forces Analysis of the company allows estimating which factors can be perceived as real threats to Kellogg’s position in the market (West, Ford, & Ibrahim, 2015):
- Threat of new entrants: Since the market continues to grow, a lot of new international organisations are attracted to it. However, due to Kellogg’s position and the guaranteed quality of its products, the threat of new entrants ranges from low to medium.
- Threat of substitutes: The company has a huge customer base who are loyal to its products, which implies that they are very unlikely to shift to similar goods.
- Bargaining power of suppliers: The raw material Kellogg need for its operations is rice and corn. Both can be provided by a huge number of suppliers, which lowers their bargaining power rather significantly.
- Bargaining power of buyers: The popularity of healthy life style accounts for the fact that a lot of customers are ready to pay rather a lot for making sure that their meals contribute to health improvement. The ability of Kellogg to satisfy this need lowers the bargaining power of consumers.
- Rivalry among competitors: General Mills is the most powerful competitor of all the enumerated. To maintain its leading position, Kellogg has created a wide range of goods that would be able to meet customers’ demands. Nevertheless, the rivalry is very high and is not going to lower.
Customer Service and Quality
Poor customer service rates are among the major weaknesses of Kellogg. It creates a threat that even committed customers may prefer the company’s competitors who are more respondent and more attentive to their clients. The company’s analysts largely ignore the problems though it is worth thorough consideration and immediate solution. Unless the problem is addressed in time, it will have a long-term adverse effect on the company’s market value. Customer dissatisfaction may result in a considerable increase in costs, which will inevitably affect Kellogg’s profit. Luckily, the issue is not hard to deal with taking into account high level of customers’ commitment (Werbach, 2013).
Despite the exiting weaknesses of customer service, it has always been the primary goal of the company to provide the best quality products. The company has realized the necessity to integrate Total Quality Management into its production process. This is one of the main reasons Kellogg has been so successful in delivering premium goods to its customers. The need to ensure quality places a great individual responsibility upon each employee involved into the manufacturing process. They all have to guarantee that the high standards set by the company are met. All the stages of the manufacturing including resources selection, actual production of goods, packaging, etc. have to pass quality control. The proper texture, flavour, and purity have to be ensured (Dranove, Besanko, Shanley, & Schaefer, 2015).
Another quality measure is the relation of Kellogg with its suppliers, which also have to perform TQM. The Quality Assurance Personnel is hired by the company to check if its suppliers manage to meet all the quality requirements including sanitation procedures. When all these procedures have been performed, the materials can be shipped to manufacturing warehouses where they are checked one more time to be used in production (Werbach, 2013).
During the production process, some random samples are always taken to undergo the quality control test. This allows resolving problems at the initial stage of manufacturing when the losses are lower. For instance, incorrect amount of the ingredients, redundant or insufficient amount of products in one pack and any other issued can be addressed before the product enters the next stage. The same test is performed after the product goes to retailers. A random sample of shelf product can be taken by the Kellogg Quality Assurance department. This department is also responsible for developing new quality policies that would allow improving the product quality and avoiding costly mistakes(Werbach, 2013).
The company strictly sticks to the stringent standards developed by the International Organisation for Standardisation – a global federation involved in promoting the growth of production, trade, and interaction among businesses through the maintenance and improvement of quality. It facilitates business operations providing standards that every company must follow. Kellogg does business only with partners that manage to meet those requirements (Werbach, 2013).
Organisational Theory and Business
Any organisation is a highly structured system that is maintained at different levels by groups of people who agreed to cooperate to meet certain short- and long-term objectives. Organisational Theory (OT) deals with studying companies to find common issues. Finding similarities helps increase efficiency, determine universal solutions, boost productivity, and meet stakeholders’ needs (Foropon & McLachlin, 2013).
Organisational Theory at Kellogg is applied at three major levels: individual processes, group processes, and the overall organisational process. Studying the manufacturing process from the basics helps the leaders of the company to be more effective participants and ensures better understanding of the employees’ needs. Organisational theory includes such concepts as motivation factors, personality peculiarities, teamwork and roles distribution, organisational culture, etc. The latter is granted special attention by Kellogg leaders. They are deeply concerned with beliefs, behaviours, and opinions that employees have in common and that may affect the productivity of the company. The key point is that Kellogg does not view organisation as a detached body with the views and goals entirely different and unrelated to the goals of its members. The company strives to match individuals to the organisation creating favorable organisational culture that does not ignore the values of the employees (Eden & Ackermann, 2013).
Kelogg is a business with clearly defined roles of every stakeholder. The company gives guidelines concerning appropriate and inappropriate behaviour. Despite the strictness of the approach, creativity is considered more important than status quo. Although the quality of the product is highly valued, the organisational process is still people-oriented, which ensures job satisfaction (Foropon & McLachlin, 2013).
The core values of Kellogg are deeply rooted in its organisational culture. They include the highest possible standards of quality and safety, employees’ discipline, visibility of the process, financial accountability, creativity, innovation, etc. The company is aimed to bring benefits to its customers, partners, and communities within which it operates. This approach helped Kellogg become the leader of the global market (Foropon & McLachlin, 2013).
As far as organisational structure is concerned, it can be stated that Kellogg adheres neither to top down nor to bottom up approach: the leadership is not automatic, and the decisions are not passed down to the employees; however, their role in decision making is not unlimited. The company tends to have a flat organisational structure. This allows the company’s leaders be flexible in controlling the changing trends in the market and track customer preferences that predetermine the success of the business (Eden & Ackermann, 2013).
One more important factor of the Organisational Theory that is applied in practice at Kellogg is motivation. The company believes that motivation is a powerful driver of the performance. That is why various incentives (including cash rewards and self-improvement trainings) are provided to those who prove his/her loyalty to the company and contribute to its current development (Eden & Ackermann, 2013).
Technology
As it has already been mentioned, innovation is one of the key factors predetermining Kellogg’s operations. The company develops its products to meet not only consumers’ health and nutrition needs but also to demonstrate the application of the latest technology in the field to stay in trend, which increases competitiveness. The following innovations can be identified (Kale, 2014):
- the development of new packaging to achieve the maximum comfort level of the consumer;
- constant improvement of the product image (e.g. introduction of cereal for men);
- innovation of the type of product (e.g. differentiation between the technology of cereal and muesli production);
- the use of technological advances to preserve vitamins and iron in the product to increase its value and customers’ demand;
- the use of innovations for attracting attention of the media and increase visibility of the product (e.g. the company announced that it was testing a new technology involving lasers, which immediately created a stir in the media);
- using innovative means of advertisement and communication around the world.
One of the latest technological advances the company is currently testing is the US-based Augme Technologies that are now working on the optimisation of the interactive packaging. Its purpose is to get data about the customer base of the producer (Dunning, 2013).
Kellogg interactive packaging will give the company brand buyer information that is based upon the way consumers interact with the content. The boxes of cereals now have Quick Response (QR) codes. When it is scanned with a camera of a smart phone, it will immediately direct the customer to the site with the promotion video. The technology allowed Kellogg to access the Crunchy Nut’s customer base, which is the key reason for its implementation. With the help of the technology, it was identified that the key audience consists of young males. This group of customers most readily engages with their gadgets even if it concerns advertising and promotion campaigns. Thus, the company learnt more about its target audience and could modify its manufacturing and promotion policies. The technology made it possible to build consumers’ profiles and deliver customized services and content back to them. Moreover, Kellogg researched the information that could be most valuable to the individuals that scan the code (Dunning, 2013).
Thus, as it is evident from the company’s experience, technological advances assisted it significantly in keeping competitive advantage in the aggressive business environment.
References
Collins, E. J. T. (2014). 12 Brands and breakfast cereals in Britain. Adding Value (RLE Marketing): Brands and Marketing in Food and Drink, 237-289.
Dranove, D., Besanko, D., Shanley, M., & Schaefer, M. (2015). Economics of strategy. New York, NY: Wiley Global Education.
Dunning, J. H. (2013). Multinationals, technology & competitiveness (RLE International Business). London, UK: Routledge.
Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management. New York, NY: Sage.
Foropon, C., & McLachlin, R. (2013). Metaphors in operations management theory building. International Journal of Operations & Production Management, 33(2), 181-196.
Frigo, M. L., & Ubelhart, M. C. (2016). Human capital management: The central element of all risk. People and Strategy, 39(1), 42-46.
Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the business unit and enterprise levels. Hoboken, NJ: John Wiley & Sons.
Kale, V. (2014). Implementing SAP® CRM: The guide for business and technology managers. New York, NY: CRC Press.
Werbach, A. (2013). Strategy for sustainability: A business manifesto. Brighton, MA: Harvard Business Press.
West, D., Ford, J., & Ibrahim, E. (2015). Strategic marketing: creating competitive advantage. Oxford, UK: Oxford University Press.