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Founded in 1910 by Jed Thomas, United Cereal is a diverse company that produces snack foods, dairy items, beverages, frozen foods, baked goods, and cereals. The cereal sector alone contributes to one-third of the company's revenue. Known for prioritizing commitment, diligence, and loyalty, United Cereal has attracted many employees who embody "The UC Way." Jed Thomas expected his Managers to uphold a strong set of values and prioritize listening to customers while staying informed on current market trends.
United Cereal was recognized for its innovative approach in the cereal industry, particularly with its "brand management" system, giving brand Managers full responsibility for their brands.
In 1952, as United Cereal expanded globally, the company introduced Country Managers (CM) in Europe to focus on customer satisfaction by analyzing cultural trends. The company believed in listening to customers and developing products based on their preferences. By catering to the diverse needs of customers across different regions in Europe, the Country Managers contributed to the success of the European breakfast cereal market, which was highly profitable and largely resistant to economic downturns due to limited competition.
After Kellogg's, United Cereal was the second largest player in the cereal market with 26% market share.
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Laura Brill, the European vice president of United Cereal, faced a challenging decision when it came to launching Healthy Berry Crunch. She envisioned a pan-European launch for the new cereal, despite hesitance from managers and vice-presidents. The central dilemma is determining the best international strategy for United Cereal to reduce costs and expand market share in Europe with Healthy Berry Crunch.
This case discusses international strategies, focusing on the choice between multi-domestic and global strategies for United Cereal.
The company has established national subsidiaries with Country Managers who are in charge of all aspects within their respective countries, including product development, marketing, and manufacturing. With individual subsidiaries in each country, the company faced challenges related to innovation and production costs. Many Country Managers prioritized cost reduction over launching new products, leading to a shift towards a cost reduction strategy instead of an innovative approach in a competitive market. While the multi-domestic strategy led to the creation of customer-satisfying products, it also resulted in subsidiaries being empowered to make decisions, including inexperienced young Managers.
Laura Brill's innovative idea, the global strategy known as "Eurobrands," aims to centralize decisions for products, marketing, promotion, and advertising. This approach is expected to lead to a 10% to 15% reduction in SG&A costs over a 3-year period. The Eurobrand concept aligns with the changing cultural landscape in Europe where old behaviors are disappearing and many EU regulations on labeling and marketing no longer apply. However, there is a downside: it may result in United Cereal losing its traditional approach of seeking input from all Europeans. For example, only France tested the Healthy Berry Crunch product, leaving uncertainty about how the rest of Europe will react.
Two options are being considered in this scenario: Launching Healthy Berry Crunch in France or launching it as United Cereals' first Eurobrand concept. Launching in France seems promising, as a survey revealed that 64% of respondents would buy the product again in the next three months. Currently, Kellogg's Special K with strawberries is the only competitor offering healthy cereal in the market. Jean-Luc Michel conducted thorough testing and found a growing trend towards healthy food in France, indicating that introducing Healthy Berry Crunch could be a successful move in the country.
Launching Healthy Berry Crunch as United Cereals' First Eurobrand will showcase the company's core values and innovations, saving 10 to 15% in research and development costs over 3 years. By being the first to introduce this healthy product across Europe, United Cereal can gain a competitive edge and prevent competitors from entering the market. While initial tests were conducted in France, the growing trend towards healthier eating habits in Europe suggests that this product will resonate with consumers continent-wide.
After careful analysis of the case, the optimal decision is to launch Healthy Berry Crunch as United Cereals' inaugural Eurobrand concept. To support this initiative, a significant overhaul of the company's organizational structure is necessary, including downsizing of staff and reduction of costs in areas such as marketing and production. Laura Brill envisions the future organizational structure to consist of Eurobrand teams, which will include brand managers from subsidiary companies and a regional vice president. These teams will be responsible for the development, engineering, marketing, and research of new products. By implementing the Eurobrand strategy, United Cereals aims to introduce Healthy Berry Crunch in Europe and surpass competitors in market penetration.
Despite criticisms and concerns, the Eurobrand strategy brings leadership and teamwork among team members. They will act as leaders in product formulation, market positioning, packaging, advertising, pricing, and promotions, while also cutting costs and finding revenue-raising strategies for United Cereal. In contrast, the multi-domestic strategy focuses solely on individual markets or regions, acting like a "mini UC" in each country. This strategy is often not very profitable due to high expenses and time commitments.
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 expand into global markets, they must choose between two strategies: multi-domestic or global. The decision on which strategy to use depends on the balance between achieving economies of scale and offering customized products to their customers.
United Cereal: Choosing Between Multi-Domestic and Global Strategies. (2016, Dec 17). Retrieved from https://studymoose.com/diversified-company-united-cereal-essay
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