In general, every firm is confronted with some basic issues such as. ; – in which markets to operate what products to offer and – how to distribute these products The “standard way” united Cereal used to enter the European market consisted of three main steps, namely acquisitions of companies in deferent European countries (1), introduction of products from the United Cereal US product line (2) and promoting organic growth through the adoption of these products to local market conditions by a respective country manager In charge (3).
The advantages of establishing national subsidiaries by acquiring laid primarily In an effective and fast way of gaining market share in a particular market. Thus, in 2009 the market share of US in Europe amounted to 20%, only 6% below the market share of its main competitor Kellogg. Considerable benefits could also be achieved due to local expertise and reputation of the established companies in respective countries in terms of marketing focus, local tastes, targets, competitors, brand loyalty as well as legal framework.
Other advantages were realized from already existing distribution networks, providing access to local logistics companies as well as cooperation with local retailers and wholesalers. However, there also were certain risks concerning the suitability of the distribution partner to the Introduced products as the exploitation of particular sales channels varied considerably across countries (e. G. Germany with 80% vs.. Italy with 17% as mentioned above).
Further rolls/dilettantes of this strategy (although not stated in the text explicitly) might be associated with the integration and implementation costs, caused by adoption of the foreign business to the united Cereals business and its values concerning the “US Way”. The next step of he United Cereals’ standard way was the introduction of products from the existing product line, which comprised more than 100 brands. Thus, the company profited from the possibility to launch its successful US brands also in the European market.
This strategy was enforced especially by high demand for US products which were very much in vogue at that time, especially in ass and ass. Furthermore, as there was no need In developing a completely new product line this fast and cheap access Into local competition enabled united Cereals to achieve a solid organic growth. However, due to differences across European markets there still were costs, associated with customization of products and adjustment of manufacturing processes when US brands did not correspond to the local market tastes.
Introduction of US line in each decisions and determining, which products from United Cereals could succeed and make profit in that country. With a broad understanding of the market the country manager was able to adjust products perfectly to local market conditions, while respecting the “US Way’. Such country level approach coupled with high susceptibility and flexibility led to a very high motivation of country managers as well as profit minimization in most national markets. However, over time inconsistency in positioning the products, e. . Positioning a product as high-end in Germany, but as a low-end in I-J, became a matter of concern. Redundancies due to individual marketing campaigns in separate countries for different products led to expenses 25% higher than in the U. S. Operations. Especially, in the light of a global recession in 2008-09 and more competitive markets, forcing market participants to provide lower- ricer products cost reductions and cost efficiency, became a major focus of United Cereals.
Further risks were associated with country managers, preferring product extensions rather than new product introductions in order to reduce costs and maintain profits in their country. Reasons for this behavior were above all lack of resources and too high costs of launching and developing new products. Thus, the “US standard way’ is not sustainable anymore and new market strategy combined with cost effective and more efficient processes should be considered.