Tag Archives: competition

Kellogg Splits into Three Companies

Organizations never sit still for very long. Before you know it, there is a new product/service rival, or new company, or change in supply chain, or change in consumer demands. Since we know change is inevitable, the challenge for marketers is to be aware of the environment and know where their company is strong and weak. Where are the opportunities? What are the threats? What companies want to take their market share?

Often these environmental changes, combined with revised corporate strategies, cause an old, established company to split into separate entities in order to better serve the market and shareholders. For example, last year, Johnson & Johnson announced it will break into two companies serving (1) consumer health products and (2) pharmaceuticals. General Electric will split into three companies to serve (1) healthcare, (2) power, and (3) aviation. 

The most recent example of a large conglomerate breaking into separate companies is Kellogg. Kellogg is the latest large company to announce it is splitting businesses into separate entities. The North America cereal business will be around $2.4 billion in sales; the plant-based foods business at $340 million in sales; the global snacks business is the largest at $11.4 billion (and was 80% of Kellogg’s sales last year).

Each of these businesses faces different environmental factors, and of course markets its products to different segments. In this case, cereal is stable, plant-based is growing but with increasing competition, leaving snacks as a large and growing segment.

Breaking Kellogg into independent companies will help it focus on distinct strategic priorities and opportunities in each of the three markets. Snacking is a higher-growth market than is cereal. Plant-based foods are growing overall, but need attention. And all three companies face increasing competition not only from established companies such as General Mills and Mondelez, but also new companies building more plant-based and natural food products.

What would you do?

Group Activities and Discussion Questions:

  1. Show WSJ video on why companies split up: https://www.wsj.com/video/series/news-explainers/why-conglomerates-split-up/F7EF3E9D-2D5D-4732-AA79-F41889C7D039
  2. Discuss when breaking up a conglomerate makes good business sense.
  3. Review Kellogg’s products and overall company: https://www.kelloggs.com/en_US/home.html
  4. Show the company announcement of the split: https://investor.kelloggs.com/news-and-events/press-releases/news-details/2022/KELLOGG-COMPANY-ANNOUNCES-SEPARATION-OF-TWO-BUSINESSES-AS-BOLD-NEXT-STEPS-IN-PORTFOLIO-TRANSFORMATION/default.aspx
  5. Discuss the components of a situation analysis: company, general industry, trends, key competitors, technology, legal, etc.
  6. Ask students what data they would want in order to make a marketing decision for dividing Kellogg into separate companies.
  7. Divide students into teams. Have each team use laptops to do general research to answer the questions above. (ex: overview of industry, size, growth, new technologies, environmental impact, etc.)
  8. Debrief the exercise by compiling information on the white board. Does this give a good picture of the situation faced by Kellogg?

Sources:  Gasparro, A. (21 June 2022). Kellogg splitting into three companies as it shifts focus to global snacks. Wall Street Journal.  

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Electric Bikes Take Off

The pandemic created a great deal of pain and turmoil for people as they worried about health and jobs. And, people made a lot of adjustments in their daily lives during, and now after, the pandemic. There have been supply chain disruptions in all industries, making it hard to get inventory to the customer.

Despite all the strain, one of the positive impacts in the past two years has been the uptick in sales of electric-bikes. In 2021, more than 880,000 e-bikes were sold, far surpassing the units sold of electric cars and trucks (at 608,000). Industry experts predict that more than one million e-bikes will be sold in the U.S. in 2022.

And why not. E-bikes are easy to use and greatly increase the speed of regular bike trips. No more huffing and puffing up a hill, only to arrive sweaty at a destination. And instead of driving, the e-cargo bikes can make the trip and haul groceries as well as the kids. Finally, let’s not forget about rising gas prices! (The more expensive gas gets, the better my e-bike looks.)

Many new e-bike firms are taking to the road by selling only online. However, buying online has one big flaw – the inability to touch and test the product before buying. There are plenty of testimonials and videos, but nothing beats actually experiencing an e-bike.

One solution from Belgian e-bike company Cowboy, is to take the bikes to the prospective customer. In ten cities in the U.S., prospects can request Cowboy ‘ambassadors’ to bring the bikes to them for a trial ride. A similar approach is being used by Rad Power Bikes. In addition to several stores, pop-up events and test rides bring the e-bikes to more places. Pedego e-bikes uses a different model and has more than 200 distributors where riders can try the e-bikes before they buy.

Ready to ride?

Group Activities and Discussion Questions:

  1. Poll students: Have they ridden electric bikes? Where and how?
  2. View Cowboy bikes: https://us.cowboy.com/
  3. View Rad Power bikes: https://www.radpowerbikes.com/
  4. View Pedego bikes: https://pedegoelectricbikes.com/
  5. In order to be successful, companies must be able to physically get a product into the hands of the customers. Discuss how a distribution channel works.
  6. For Internet-based e-bike companies, what distribution channels are used now?
  7. How can the channel be expanded? What approach could be used?
  8. Divide students into teams. Have each team draw a flow chart for the distribution of the product.

Sources:  Boudway, I. (18 April 2022). E-bike online startup lets you ride before you buy.  Bloomberg News.; Hurford, M. (27 April 2022). New research shows that e-bikes are outpacing electric car sales in the U.S. Bicycling.com.

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Stolen Secrets: Trade Secrets and Corporate Espionage

Many students are surprised to find out that there is significant corporate espionage in America. Corporate espionage (aka corporate spying or industrial espionage) is the use of espionage techniques to steal trade secrets, intellectual property, proprietary information, marketing strategies and the like.

While students may think of corporations as stuffy places only filled with paper and computers, they neglect to consider the enormous costs (including time-to-market) that it takes to arrive at a unique product or service. And how much is customer information and sales worth? Plus, research and technology are serious expenditures and organizations pay hefty fees to protect their institutional knowledge.

One example is a chemist employed at Coca-Cola. She was recently sentenced to 14 years in prison for stealing trade secrets related to a BPA-free coating for the inside of cans and selling them to a Chinese company. Were the secrets a big deal? Yes. The trade secrets in this case collectively cost about $120 million to develop.

Other cases include trade secret thefts worth an estimated $1 billion from a petroleum company, a securities firm robbed of $4.1 million, and lawsuits of trade secret thefts between multiple companies in the technology, beauty, and chemical industries.

Not all corporate espionage is as dramatic or damaging as this example. Many employees or former employees leave companies with proprietary information or customer data. And, as might be expected, Silicon Valley is one of the world’s most targeted areas for espionage. High tech industries in computer software, hardware, automobiles, energy, biotechnology, and more are frequently targeted by thieves.

How much is lost to corporate espionage? Well, estimates vary (and not all thefts are reported) but G4S, a British multinational security services company, estimates it in the trillions of dollars each year.

Watch out!

Group Activities and Discussion Questions:

  1. Discuss the difference between laws and ethics.
  2. Ask students to define corporate espionage.
  3. What examples might students know about?
  4. What can be stolen from corporations that might be valuable? How much is that worth?
  5. Show video about corporate espionage: https://youtu.be/nwvwhM54uus
  6. Divide students into teams. Have each team do an internet search for corporate espionage examples. What happened, when, stolen, results, etc.?
  7. Have each team present their example.

Sources:  Ex-Coca-Cola engineer sentenced in trade secrets case. (10 May 2022). Associated Press.; Bloomberg News; other news sources.

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