United Cereal Case Study
(d) Do an analysis of UC´s environment in Europe by following the information given in the case! Use Porter´s 5 Forces as well as a SWOT analysis!
The multinational breakfast foods company United Cereal entered European markets in 1952. By the year 2010 Europe´s breakfast cereal market has grown to a $7 billion business which has proven to be a profitable market segment and therefore attracted various competitors. Only four actors account for 70% of market share in the European markets. Among them are Kellogg which is regarded as UC´s strongest competitor, ranked first with a 26% share, Cereal Partners, a joint venture between General Mills and Nestlé, with a 17%, and Weetabix with a 7% share in the market. …show more content…
These market-generated numbers imply that consumers view products very differently from one European country to another.
By analyzing all five competitive forces, a complete picture of what is influencing profitability in the industry can be gained .
Rivalry among existing competitors:
Competing for position and consumer loyalty is usually the strongest of the five competitive forces . According to Porter, “The intensity of rivalry is greatest if competitors […] are roughly equal in size and power” . That is the case in the breakfast cereal market between Kellogg and United Cereal, the two largest competitors in the European market. This situation makes it even harder for both to win the competitive battle and therefore dominate the market . A second indicator of active rivalry is cost competition that pressurizes industry members to drive costs down and threatens the survival of high-cost companies. United Cereal´s high SG&A costs within Europe decrease the profitability of the business giving competitors the chance to outrun UC. Additionally the slow market growth (1% annually) caters for a strong rivalry and precipitates ﬁghts for market share .
Buyers in the market are powerful, especially because they are price sensitive and make use of their impact primarily to pressure price reductions .
(e) Which was the standard way UC did expand its business in Europe? What were advantages/risks associated with this approach?