Wednesday, April 20, 2011

Strategy Statements in the Cereal and Snacks Market


As a bit of an experiment, I typed “company strategy” in Google search. The first company to be listed in the search results? Kellogg Company, which explicitly states its two-pronged strategy under “Investor Relations” on its website (www.investor.kelloggs.com). Their strategy is simple: Grow Cereal. Expand Snacks. In the article “Can You Say What Your Strategy Is?” Collis and Rukstad claim that a widely held, clearly understood strategy helps companies to better implement processes that support their mission and goals. They recommend that a strategy statement include an objective, scope, and advantage. Although Kellogg’s strategy statement contains only four words, it seems to encompass these three elements—Kellogg is looking to grow and expand in order to achieve financial dominance. Kellogg is already widely recognized as the number one category share position in the U.S., so their strategy statement encourages continued growth of the cereal and snack markets.

Another assumption of Collis and Rukstad’s article is that companies with effective strategy statements will be more successful than companies who do not have a clear strategy statement. According to Yahoo Finance, General Mills and Nestle are Kellogg’s closest competitors. I searched through General Mills website and was unable to find their strategy posted. It should be noted that although their strategy is not posted on their website, we cannot simply assume that General Mills does not have one. The strategy may be contained in internal documents, for example.

In contrast, on Nestle’s website under “strategy,” the company outlines their detailed strategy of “creating shared value” using the “Nestle Roadmap to Good Food and Good Life.” Their strategy statement is far longer than 35 words, though the core of their strategy is not as readily apparent as Kellogg’s.

A comparison of stock prices (from ycharts.com) between Kellogg and General Mills shows that, in terms of price metric, Kellogg is outperforming General Mills (see chart above).

Is Kellogg’s success solely based on the strength of its strategy statement? No. But does having a strategy statement to help align company behavior with short-term goals give the company a competitive advantage? Yes, it seems so. Since Kellogg’s main strategy is growth and gaining market share, it appears that their strategy has proved successful.

Question:
Do you believe that a strategy statement impacts company performance to the extent outlined in the article “Can You Say What Your Strategy Is?”

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