The case United Cereal, one of the leaders in breakfast cereals, is trying to increase its share in the worldwide 21 billion Dollar market.
Because it’s time to change something, to keep up with the market rivals and due to other different issues Ms. Laura Brill now challenges whether she should proceed with a “Eurobrand” strategy, which is an single model for whole Europe, or remain with the subsidiary-led country-by-country model.The two opportunities If Ms. Laura Bill could develop and apply a single model for whole Europe, she could reduce the expenditure and as a consequence the costs significantly.
The focus on local products and markets, with its need for significant marketing and product development teams in each country, had led to a situation where general and administrative expenses were 25% higher than in the U.S. operations. In the same time she could increase the effectiveness of United Cereal by reducing the staff, straighten up the hierarchy and gain advantages towards their biggest competitor Kellogg.
With these savings she could effort, for example, more proceedings in the Research & Development division, invent new cereal flavors and speed up the purse in publishing new products.Based on melting boarders, conglomeration of cultures and their eating behaviors, it will become easier to establish single products for a wider potential target audience. Good examples are several Fast Food companies like Burger King and MC Donald who offer almost the same product in the whole world. Compared to them the expectations for this model should be good as well and recommend its bringing onto the market.The downside of a single model is the leak of individual products for each country so you have to envisage with a weakening demand. Different countries with their own cultures in habits of eating prefer different flavors and tastes.
With a smaller product diversity people will change over to other products, but also new customers can be convinced. A result which can be already used as comparison is the “Europeanization Initiative” with UC’s frozen fruit juice line. Therefore higher costs in marketing can be expected in consequence of more difficulties presenting one single product to several countries. Also the changes in the command staff would require additional investments, which will lead to an unnecessary loss. (For example indemnity payments) And as the experiment already showed it won’t work without a change in the way of an effective implementation including the local country managers and their behavior.
Now Ms. Laura Bill should find out how far these changes will in- or decrease their sales and profits. All in one it’s a completely new model and offers high risks as well as high opportunities.The other possible model would be the original subsidiary-led country-by-country one.
In contrary to the single model you can expect advantages as probable higher sales and profits due to the adjusted products. You can react on local changes faster and make the necessary reassimilation if needed. With a single model it would be much harder to adjust the product to satisfy the customers without exasperate others. Also all the steps of a procedure are well known, the staff of United Cereals is operating well together and possible risks can be lowered as far as possible. Disadvantages are still the additional expenditures in the general and administrative due to a higher hierarchy.
So, too, were higher necessary expenditures in Research & Development due to higher product diversity, higher costs in advertising due to different products and slower purse in publishing new products. All in one the risks should be lower compared to a single model, but also the growth expectations won’t be high enough without extensive economies which are needed.Conclusion / My own opinion I think United Cereals and Ms. Laura Bill should develop and apply the new single model for Europe.
As I already mentioned the globalization will eliminate big differences in cultures, so a melting of country divisions should work very well. For the two or three most worthwhile countries United Cereals should think about remaining with the subsidiary-led country-by-country model to keep up the good sales and profits. These countries can also be used as indicator for other products development. A company should always develop itself to be state of play.
Cereal Partners is planning to launch Berry Burst Cheerios in France, so United Cereals should try to steal a march on them with launching their Healthy Berry Crunch.There is the quote of the senior executive "The competitors can see us coming months ahead and miles away, but they know that when we get there, we'll bet the farm." But I think in this situation they should be the first company publishing such a cereal flavor. Furthermore in the view of the customers it also matters if you are the originator of a product or just kind of a copy. Additionally for the customer it is easier to identify with a company’s product if it’s available everywhere.
It would be remiss not to tell you that in combination with the single model there’s also the need of reorganizing and reducing the staff. Such obstacles as the country managers caused at the mentioned experiment can’t be tolerated while trying to improve the trading results. Ms. Laura Bill and the executive board would receive a better overview and will be more able to arrive at a decision.
