Analysis of Business Problems at Kellogg Company - Research Paper Example

Research and Analysis of Business Problems Question Kellogg Company operates in consumer goods sector and processed and packaged food industry. It is a leading multinational food company which has many international competitors. Most competing company of Kellogg is General Mills. It is also a US based multinational company operates in the same sector and industry as Kellogg. Sales volume in million USD Annual Corporate Revenue of Kellogg Co and General Mills for past five financial years Financial Year 2011 2010 2009 2008 2007 CAGR Annual Corporate Revenue (Sales) of Kellogg Co $13,198.00 $12,397.00 $12,575.00 $12,822.00 $11,776.00 2.89%               Annual Corporate Revenue (Sales) of General Mills $14,880.20 $14,635.60 $14,555.80 $13,652.10 $12,441.50 4.58% From the past five years revenue data of both the company, compounded annual growth rate of sales of both the company have been determined. Kellogg has annual sales growth rate of 2.89% whereas it best competitors General Mills has sales growth rate of 4.58% which is near about double of Kellogg’s growth rate. Kellogg enjoyed higher growth rate from 2007 to 2009 and after that it had quite steady growth rate till 2011. On the other hand, General Mills had quite volatile revenue growth because revenue decreased from 2008 to 2010 and again increased in 2011. From the above table it can be said that, General Mills had higher revenue than Kellogg each of the last five years. Question 2 Most recent personal decision that I have made is job preference. I have developed job preference for best suitable job for me after completing my study. As a student of business management, I would have multiple job opportunities in diverse areas of corporate sector. Most suitable options that are under my level of competence and knowledge are trainee business analyst, strategic marketing analyst and business development executive. These are the three alternative career fields for my future from numbers of major areas. Criteria Weights Trainee business analyst 33.33% Strategic marketing analyst 33.33% Business development executive 33.33% Total 100 Business analysis is most wide area among these three. It involves detailed analysis of all areas of a business like marketing, finance, operations, manpower management etc. Therefore, all four major areas of business management study and I can evaluate my core strength are from these four major areas and can chose that as major area in future. Second job preference is strategic marketing analysis which involves development of marketing planning for new product and service and also redesigning of existing marketing plans. This would help me to implement my marketing knowledge and develop marketing as a major area of my future career. Third job opportunity is business development executive which involves generating sales for the company by selling product and services offered by the company. This area covers organizations of all sectors and industry. It is quite tough at trainee or fresher level until some client base is developed. Therefore, most of companies ask for experienced candidates. Trainee business analyst Trainee marketing analyst Business development executive   Weight               Rank Score Rank Score Rank Score Career growth 0.3 2 0.6 2 0.6 1 0.3 Income 0.25 2 0.5 2 0.5 3 0.75 Knowledge 0.2 3 0.6 2 0.4 1 0.2 Time engagement 0.15 1 0.15 1 0.15 2 0.3 Future Security 0.1 2 0.2 2 0.2 1 0.1 Total 1 10 2.05 9 1.85 8 1.65 From the most suitable three career solution for me, I have chosen first option which is Trainee business analyst as it is a job profile with wide area where I would have been expertise in multiple areas. Trainee marketing analyst needs comparatively less knowledge and skills than business analyst. Future career would be narrow and I can shift to other analyst field in future. Business development executive profile needs personal contacts and client base to fulfill targets. Therefore, business analyst would be most preferable because according to above decision matrix analysis table, it has highest score based on five important parameters. Question 3 1.) Executive Summary The world of business has become a very competitive place. Various companies, of various dimensions are trying to cater to establish their businesses by offering significant product offerings which promises to create, generate or add value to the consumers. This massive increase in competition in the marketplace has created a lot of feasible options to the consumers, thereby providing them with an enormous amount of choice of substitutes. This increase in choice for the consumers has led to a shift of power from the sellers to the buyers. In an attempt to retain the attention of the consumers for a particular brand or product lineup, companies in the marketplace all over the globe are focusing in brand building exercises by using various physical and virtual platforms. The main motive is to increase consumer connect while increasing the brand equity for the company’s brands. However, in the recent days, companies are increasingly getting involved with the brands while judging the products of the brands in terms of quality as well as value for money. Hence companies around the globe are increasingly focusing on building quality products. This paper focuses on identifying the main issues behind the current set of challenges that are faced by the globally renowned Kellogg Company. The paper also moves on to discuss the various sub factors that are contributing to the main problem through the process of root cause analysis. Also, the paper discusses some of the effective solutions that can be implemented to handle the problems. The paper ends with the discussion of the most effective solution that will solve the root cause of the problem and also the significant steps of implementation of the solution. 2.) Position a. The Kellogg Company was founded in the year 1906 and has been incorporated in the year 1922 at Delaware. The functions of the globally popular company are involved in the process of manufacturing as well as marketing of various kinds of foods ranging from convenience foods to ready to eat cereals. i. The company shares the vision of providing extreme delight through the company’s product offerings and brands. The company moves forward with the purpose of providing the nourishment for the flourishing of families. (Kellogg Co 2, “Our Vision”). ii. Talking about the company’s stakeholders it can be said that the company has a wide base of stakeholders comprising of suppliers, manufacturers, logistics providers as well as the end consumers. The company, acts with integrity and prefers to be responsible and accountable for its actions, which may affect the stakeholders of the company, who are located all over the world. (Kellogg’s Code of Ethics, p. 7) b. As of today’s date, the company has a highly diversified portfolio of food products, which are targeted at various markets around the world. The diversified product offering comprises of ready to eat food items like cereals bars, cookies, crackers, various kinds of pastries as well as fruit flavored snacks. The product offerings also include the highly innovative foods likes veggie foods and frozen waffles. c. Apart from the highly diversified product offerings, the company has a large number of popular product brands which help the global company to maintain a significant amount of market presence in around 180 countries all over the globe. The company also has a highly diversified manufacturing chain, thereby enabling the company to gain a significant amount of competitive edge in terms of product development. d. As of the recent times, the company is increasingly facing challenges from various factors of macro level. The company has recently reported a decline in operating profit in spite of rising sales, the main cause of which has been identified as the rise in inflation rates all over the world (Kellogg’s _11k, p. 18). 3.) Sense a. The study of Kellogg Company provided a lot of interesting insights on the company’s current condition. The company analysis revealed that the globally popular Kellogg Company is having some challenges in regards to the reduction in operating profits as well as earnings. In order to better identify the main issues related to the fall in operating profits, a root cause analysis has been performed. The root cause analysis will help to identify the main cause of the problem as well as the various factors that may directly or indirectly contribute to the creation of the main cause of the problem. b. The study and financial evaluation of the company revealed that thought the company’s revenue has increased by around 6.5% in the current year, yet the net profit has taken a significant dip by around 1.3%. This implies that the cost of sales has impacted the profit margin. c. The root cause analysis revealed that the main problem is related to the inefficient processes involved in the production and supply chain. The root cause is supported by a number of sub causes like the rising cost of inflation, falling of market share, recall of various popular cereal brands, quality issues, inability to find considerable substitute raw materials etc. 4.) Uncover a. The company’s current problems in relation to the fall in operating profits and earning despite of higher sales can be attributed to a couple of factors. Further analysis of the company’s current issues using the root cause analysis method revealed that the main issues behind this problem is related mostly to inefficient practices that have cropped up in the production and supply chain. The analysis of the main cause also revealed that there are a couple of sub factors that can be attributed directly to the process of the creation and significant contribution of the root cause. i. The very first factor that has to be increasingly taken in to consideration, while talking in terms of identification of problems related to Kellogg’s current challenges is of macroeconomic nature. The rising cost of inflation of commodity products in various regions across the globe has been an important sub factor contributing the formation of the root cause. (Annual Report, p.2) ii. The second factor that has to be taken into consideration which has effectively contributed to the root cause is the factor in relation to the recall of cereal brands over a glitch at a manufacturing facility, which has ultimately led to the compromise on quality for a particular brand of product. In an attempt to control the damage of brand reputation, the globally renowned company has attempted to recall all the products of the defected batches from various points of distribution on a global note (Patch, p.1). The recall of the food products due to quality problems have significantly contributed to the process of increasing the list of expenses for the company, while also taking into account the potential incurring of costs in regards to logistics movement of the damaged products as well as significant brand building exercise. (Dow Jones & Company Inc, p.1). iii. The third factor that has to be increasingly taken into account is the case of small life cycle of the products of the Kellogg Company. The small lifecycle of the products of the Kellogg Company leads to the process of increase focus on research and development for the purpose of inserting new food products in the market. As a result of this increased focus on research and development in regards to new products by the company, the expenditure in regards to the development of the new products as well as significant brand building exercises for those newly launched products in the markets leads to the increase in expenses for the company. It can be increasingly said that the process of increase in expenses for the company are indirectly impacting the root cause for the company. (The Times 100, p.4). iv. The fourth factor that has significantly contributed to the case of development of the root cause is the issue of declining market share of some of the brands of Kellogg Company. The decline in market share of the global company’s some of the most popular brand like Nutri-Grain etc, have resulted in the fact of the decline of product sale of those brands. Also, this fall in product sales of those brands has simply contributed to the decline in profit generation for the company. However, though this issue is not directly related to the root cause regarding the inefficiency in production and supply chain, yet it can be said that the issues has indirect linkage with the current problem of the Kellogg Company. v. The fifth factor that can be significantly taken into consideration while evaluating the sub causes contributing to the main cause is the case of inability to find suitable substitute products. It can be said that though the company has been successful in finding alternatives for sugar requirements for its product manufacturing, yet they are unable find some significant alternative for salt. The only alternative that the company could develop was in relation to peanuts which have its own set of problems regarding supply and demand, thereby indirectly creating a problem in the supply chain regarding smooth flow of demand of desired raw materials. (Business Ethics, p.1). b. Though there are multiple sub factors that are contributing to the root cause in a direct or indirect manner yet it can be said that there can be a few solutions that will be instrumental in tackling the various sub problems. i. Implementation of Quality Processes: A mode of tackling the issue in regards to the glitch in manufacturing facility is the process of implementation of significant quality processes. This will enable the company to directly tackle the most critical issue that is highly responsible for the development of the root cause regarding the inefficiency in the production and supply chain. The process of implementation of the various quality processes like Six Sigma, ISO standards at the various production facilities of the country will enable the company to handle the company’s most critical pain point, thereby effectively leading to a significant solution to the root cause of the problem. ii. Introduction of New Variants: A very effective solution for the company in regards to the problems of small and shorter lifecycle for its product brands is the process of introducing new variants. The process of introducing new flavors for a particular brand of food product will play a significant role in the process of increasing the lifecycle for its product brands, while also providing line extension of the popular brands. This will lead to a lesser amount of investment in terms of new product development. Significant reduction in branding and promotion expenses can also be achieved by this process since the product is already existent and popular in the market and just a small amount of awareness to the target consumers will help to augment the sales of the new product variants. iii. Finding New Alternatives: A way of tackling the company’s currently existing problems in regards to the problems of cost inflation is by the process of switching to alternatives of highly expensive commodities. Switching to new alternatives will enable the company’s ability to tackle this issue of macroeconomic nature, besides providing a reduction in cost expenses for the company. This will enable the company to achieve a significant increase in earnings and operating profit. Also, while focusing on finding new commodity alternative, the company should also look for various optional modes of sourcing of the alternative commodities from various regions and countries around the globe. This will simply help the company to tackle the supply and demand issues of the commodities that may evolve over time. Finding alternative locations for the purpose of sourcing the alternative commodities, will also in some way contribute to the process of evolving of a solution of the current issues of inability to find a proper alternative to salt and relevant sourcing of peanut supplies. 5.) Solve a. On the basis of evaluation of the recommended solutions, it can be said that in an attempt to tackle the most important sub factor which is contributing to the main root cause of the problem, the solution regarding the implementation of the quality processes is the most effective scenario in this case. i. The reason of selecting this particular solution is because the implementation of the quality process will ensure proper quality control and thereby reduce wastage, which will significantly lead to increase in efficiency in production as well as operating profits. In short, this solution will result in value addition for the global food company. 6.) Build a. Talking in lines of cost benefit analysis, it can be said that the product recall by the company has resulted in losses of over $30 million (Business Standard, p.1). i. However, installing the quality processes will lead to a fall in expenses in regards to transportation and logistics movement of faulty products. This will lead to increase in operating profits. ii. Also, the process of investing in research and development for quality purposes will provide greater return of investments as compared to the investment involved in promotion, and building of brand equity among the consumers after the process of recall of faulty products by the company. b. The quality investments will provide a return in the long term for the company. On the ethical point, it will improve efficiency in the production processes by achieving optimum utilization of resources, and reducing resource wastage. 6.) Achieve a. The process of implementation of the quality processes in the manufacturing facilities of the company all over the world will have significant amount of time lag and has to be done in a systematic manner. i. Hence, the first phase for the implementation will comprise of hiring a quality audit team to evaluate the quality processes that are existing in the company’s multiple manufacturing locations. ii. The next step will involve the creation of rules, guidelines and frameworks for implementation of relevant quality processes and practices for the company. iii. The third step regarding the implementation of the quality process will comprise of setting up of significant quality standards and measurement standards for checking the effectiveness and compliance of the product with regards to its standard quality benchmark. iv. The fourth step will comprise of setting up of various quality control teams in various manufacturing facilities of the company all around the world, who will be responsible for effective implementation and evaluation of the quality processes in the various manufacturing and production units. v. The final step will be the process of designing of significant corrective measures which will therefore lead to the process of the efficient maintenance and implementation of the quality processes for the company’s product offerings, thereby leading to a long term benefit for the company. Work Cited Business Ethics. Kellogg’s Corporate Responsibility Report: “Watch the Salt!”. 2010. Web. October 26, 2012. . Business Standard. Kellogg’s goes snacking. 2010. Web. October 26, 2012. . CGMP Coalition. Current Food Industry Good Manufacturing Practices. American Frozen Food Institute, 27 August. 2011. Web. 17 October. 2012. < http://www.affi.org/assets/resources/public/cgmp-coalition-principles-practicesaug-22-2011.pdf>. Dow Jones & Company Inc. Kellogg Recalls Mini-Wheats. 2012. Web. October 26, 2012. . General Mills 1. 2009 Form 10-K. 2009. Web. October 26, 2012. < http://phx.corporate-ir.net/phoenix.zhtml?c=74271&p=quarterlyearnings>. General Mills. Fiscal 2011 Form 10-K. 2011. Web. October 26, 2012. < http://phx.corporate-ir.net/phoenix.zhtml?c=74271&p=quarterlyearnings>. Kellog’s. Global Code of Ethics. 2008. Web. October 26, 2012. < http://files.shareholder.com/downloads/K/0x0x196418/ec25a03a-7081-450d-a942-16ee7ad2ee1b/...>. Kellogg Co 1. Annual Report 2009. 2010. Web. October 26, 2012. < http://files.shareholder.com/downloads/K/2123101416x0x357380/732ed57c-9e85-4269-a18b-ce285df7f655/Kellogg_Company_Full_AR_and_10K.pdf>. Kellogg Co 2. Our Vision & Purpose. 2012. Web. October 26, 2012. . Kellogg Co. Annual Report 2011. 2012. Web. October 26, 2012. < http://files.shareholder.com/downloads/K/2123098594x0xS1193125-12-85976/55067/filing.pdf>. Patch. 2.8 Million Boxes of Kelloggs Mini-Wheats Recalled for Metal Fragments. 2012. Web. October 26, 2012. . The Times 100. Extending the product life cycle. 2012. Web. October 26, 2012. . Read More