Kelloggs Microenvironment

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. The UK breakfast cereal market is vast accounting for 1.45 billion in 2006. It is divided into hot and cold cereal and the current value growth is 3%. The biggest performer is hot cereal with a 123% value growth between 2002 and 2007. Kellogg’s is the market leader but although it has a lot of power it still has to compete fiercely against many rivals which are looking for a bigger share of the market. The suppliers to Kellogg’s are relatively small independent farms which have very limited buyer power. On the contrary Kellogg’s has a high level of power due to the size of the organization but chooses not to abuse it. The threat of entry is relatively low due to various barriers to entry which include large advertising campaigns of…show more content…
The rivalry within the industry can be seen from different angles and there are many aspects that prove it to be highly competitive and other that show the opposite.
The market can be considered competitive because although growth is constant, it is still slow and hence growth isn’t enough to improve the revenues of the firms. What makes the rivalry even fiercer is that if the companies don’t succeed in growing their market share and become more powerful they will eventually be kicked out of the market. In the breakfast cereal market companies will fight hard to stay in as the exit costs are high due to the specialised equipment that cannot be sold in other industries, therefore incurring in huge losses for the company.
Another reason is that storage costs in this market are high due to the small amount of revenue brought forward by each cereal box in relation to its size. This means that storing too many of the products or storing them for too long could cut deeply into profits hence leading to a battle for sales which results in higher rivalry between competitors. Obviously breakfast cereal is food which means that it can’t be stored for too long or it will become obsolete giving the manufacturers an even bigger reason to shift their products as quickly as possible.
The last reason for high rivalry would be the lack of monetary switching costs e.g. it doesn’t cost consumers any money to switch from Kellogg’s to Nestle. However
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