I. Key Problem
United Cereal is a diversified company established in 1910 by Jed Thomas. The company produces snack foods, dairy products, beverages, frozen foods, baked goods, and cereals. The cereal industry generates one third of United Cereals revenue. United Cereal focuses on “commitment, diligence, and loyalty” which attracted many people to work for the company. Jed expected his Managers to adhere to a strong set of values and wanted committed Managers that would uphold his philosophy of the “The UC Way” to its customers. In addition, the company focused on listening to its customers and spotting current trends to make the market part of their core value.
United Cereal was well known as an innovator in the cereal industry and had implemented the “brand management” system, where brand Managers had sole leadership of the brands. During the global expansion of United Cereal in 1952, the company implemented Country Managers (CM) in Europe, who worked on customer satisfaction by studying changes in cultural trends. The company’s philosophy was to listen to the customer and create a product that the customer wants. The Country Managers constantly strived to meet customers’ needs around different regions in Europe. European breakfast cereal was a very profitable recession-proof market with few competitors.
United Cereal was second, after Kellogg’s, who had 26% of the cereal market. Laura Brill was United Cereal’s European vice president when Healthy Berry Crunch was going to be launched. This became one of the toughest decisions of her career. Laura wanted to launch it to all of Europe and for this new cereal to be the company’s first coordinated multimarket launch. Managers and vice-presidents were hesitant about this idea. The following question arises from this dilemma. What international strategy should United Cereal implement with Healthy Berry Crunch cereal in order to reduce costs and increase market share in the European sector?
II. Relevant Theory
This case relates to international strategies, which compounds the choice of multi-domestic and global strategies. United Cereal has established national subsidiaries, which are led by Country Managers. The Country Managers are fully responsible for the product and market in their Country as well as manufacturing, marketing, R&D, etc. of the product. By having individual subsidiaries in each Country, the cost of innovation and production became a major factor for United Cereal. Many of the Country Managers worked very hard on reducing costs, instead of launching and innovating new products. This strategy in a competitive market was not enough and each subsidiary shifted their strategy into a cost reduction strategy instead of an innovative and competitive strategy. The good side of multi-domestic strategy is the creation of new products that met customers’ satisfaction. The disadvantage of this strategy is that the subsidiaries are fully empowered by the brand, and any decisions made were by inexperienced young Managers.
On the other hand, the innovative idea that Laura Brill has is the global strategy, which she wanted to name “Eurobrands.” Eurobrands will centralize decisions for products as well as marketing, promotion, and advertising. This will reduce cost on SG&A by 10% to 15% over 3 years. In addition, the Eurobrand concept will work perfectly today as old cultural behaviors have disappeared in the European community, and many of the EU regulations in regard to labeling and marketing are no longer relevant. The disadvantage with the Eurobrand concept is that the United Cereal way of listening to all Europeans could be lost. In the case of Healthy Berry Crunch, only France tested the product, therefore, United Cereal does not know how or if the rest of Europe will respond to the product.
III. Assessment on Alternatives
In this case there are two alternatives. Launch Healthy Berry Crunch in France or launch Healthy Berry Crunch as United Cereals first Eurobrand concept. a. Launch Healthy Berry Crunch in France – according to the survey given in France, 64% of the people said that they would re-purchase the product in the next three months. Kellogg’s Special K with strawberries is the only competitor in the market currently offering healthy cereal to the consumers. Jean-Luc Michel did intensive testing of the product and the analysis has shown a trend towards healthy food in France. Therefore, the introduction of Healthy Berry Crunch would be a great success in the Country.
In addition, Healthy Berry Crunch will reflect the company’s core values and innovations that each subsidiary has been known for. b. Launch Healthy Berry Crunch as United Cereals First Eurobrand – if this alternativeis chosen, United Cereal will save between 10 to 15% in research and development over a period of 3 years. By being the first to launch a healthy product like this all over Europe, it will create a big advantage over United Cereal competitors and reduce the threat of competitors entering the European market. Although Healthy Berry Crunch tests were only performed in France, the overall European culture is becoming similar in that they are trending towards healthier eating habits. Therefore, the likelihood of this product being liked by the rest of the population is great.
IV. Suggested Course of Action
After analyzing this case, the best course of action is to launch Healthy Berry Crunch as United Cereals first Eurobrand concept. In order to support this idea, a major change in the organizational structure of United Cereal must be done. This will result in staff reduction and other savings such as marketing and production costs. The direction that Laura Brill wants to take with the future organizational structure is to create Eurobrand teams. The brand Managers from the subsidiary and a regional vice president will be part of the Eurobrand team. This team will be responsible for the development, engineering, marketing, and research of new products. The Eurobrand strategy will introduce Healthy Berry Crunch in Europe and will gain more market penetration than any other competitor.
On the other hand, depending on the circumstances, the multi-domestic strategy is a strategy that does not look at other possibilities in other markets or regions. They act like a “mini UC” in each Country, and the expenses and the time spent are usually not very profitable to the company. Despite the criticisms and concerns that may occur during the organizational structural change, the Eurobrand strategy will bring leadership and teamwork among the members of the team. They will act as leaders in the product formulation, market positioning, packaging, advertising, pricing, and promotions. At the same time, they will be responsible on cutting costs and finding ways to raise revenue to United Cereal.
V. Key Takeaways
Learning about the two different international business strategies: multi-domestic and global strategy was very interesting. Each Country, continent, region, etc., could differ from each other, and that is when leaders must be wise in choosing international strategies. In the case of Europe, most of the countries that surround the continent have been unified in one community. That is the reason why their cultures, economies, policies, and so on, have been converging over the years. A practical way to study the international market is applying the CAGE model. This model will provide us with another way to look at global expansion by analyzing cultures, administrations, geography, and economics globally.
When industries reach international markets, they are either multi-domestic or global. What dictates which of these strategies is better, depends on the economies of scale and how customized the industries want to be with their products.
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