‘United Cereal: Lora Brill’s Eurobrand Challenge’ case analysis
Question 1. As Lora Brill, United Cereal European VP, would you authorize Jean-Luc Michel’s request to launch of Healthy Berry Crunch in France? Be sure to analyze both sides: Launch and Delay Launch (summarize in a table format and then discuss).
Question 2. Does United Cereal represent an example of centralized or decentralized international management?
Question 3. What do you think of Brill’s Eurobrand proposals? Should she authorize the launch of Healthy Berry Crunch as the Eurobrand? What concerns do you have? How do you resolve them? Be sure to analyze both sides: Launch and Delay Launch (summarize in a table format and then discuss).
Question 4.a. How might United Cereal implement your recommendations? 4.b. What do you think of the Eurobrand Team proposal? 4.c. How can you make the Team work?
Introduction
The case gives a brief idea about the company’s confusion over a new product launch in Europe. United Cereal was first established in the year 1910 in Kalamazoo, Michigan, It also stepped in to the market of other markets such as beverages, frozen food, and baked food. But the breakfast cereal trend soon set in. And it was very necessary for the company to do a full research before launching a new product. The company had strong values and policies, which it needed for its managers to follow. Breakfast cereal market was a potential market and there was only one major competitor, Kellog. With the growing demand of the ready to eat cereals, the company was now in a highly competitive industry.
To develop a new brand, was both expensive and time taking. The company had now stepped into European market after 30 years in the business. It first acquired the local market distribution, and then grew it by introducing American products. European market was becoming a complex market to handle.
The market varied to a great extent in each of these countries. There were a variety of breakfast traditions and national tastes that differed from each other. Distribution channels were also different for these countries. Over the time the margins came under pressure due to recession. This led to achieve lower prices with more efficient processes. Lora Brill faces a challenge in launching a new product for the European market.
Question 1. As Lora Brill, United Cereal European VP, would you authorize Jean-Luc Michel’s request to launch of Healthy Berry Crunch in France? Be sure to analyze both sides: Launch and Delay Launch (summarize in a table format and then discuss).
Answer 1.
Launch Healthy Berry Crunch
Delay Launch
Pros:- Customers’ interest in healthy breakfast foods growing in France;- The test results for Healthy Berry Crunch blueberry version has shown: 64% intention to repurchase which was very promising, shipments exceeded target and average share was over target;- The consumer panel results in Germany and Benelux are also in favor of Healthy Berry Crunch;- There is an opportunity for UC since EU has loosened the regulation of labeling, advertising and marketing practices;
- As there is only one competitive product in France (The Kellogg’s Special K), it is a second mover/fast follower advantage for UC;
- Potential to preempt Cereal Partners, if they also plan to introduce Berry Burst Cheerios in France;
- The launch clearly follows ‘The UC way’ (‘Listen to the customer’ and ‘Continuous innovation’).
Cons:
- Stiff competition with Kellogg (and maybe Cereal Partners, too);
- Market growth of cereal industry less than 1%, which makes UC’s margin growth under pressure;
- Cost and risk of the new product launch ($20 million in France *€“ over their budget);
- Unclear about the market size and potential (lacked the validated full test-market data UC policy required).
Pros:- Giving the company more time to research on the market due to the unclearness of market size and potential;- There is a lack of validated full test-market data that ‘UC Way’ policy required.- The cost and risk of new product launch is over the budget.Cons:
- The company can’t wait more time for any full-scale test and the budget can’t support $2 million of testing costs;
- One of the company’s policy is ‘continuous innovation’, so it is the right time to renew its brand image;
- Loosing opportunity to gain market share for organic fruit-based cereal, since there are rumors that Cereal Partners are planning to introduce Berry Burst Cheerios in France.
Yes, we would authorize Jean-Luc Micheal’s request to launch of Healthy Berry Crunch in France. Based on our analysis of the pros and cons of launch and delay launch above, [private_membership]we think that the opportunities are higher than threats of launching Healthy Berry Crunch and there is a high percentage of success in French market. The following facts also support our decision.
First, there is customers’ interest in healthy breakfast foods growing in France. The test results for Healthy Berry Crunch blueberry in 6 French cities had 64% intention to buy which is an exceptional number considering this as a new product. Besides, the consumer panel results in Benelux and Germany are also in favor of Healthy Berry Crunch. The trend of the industry is moving to more healthy food, which gives an opportunity to UC. Moreover, EU has loosened its regulations of labeling, marketing practicing, which is also another opportunity to UC.
Second, as there is only one competitive product in France (The Kellogg’s Special K), it is a second mover/fast follower advantage for UC meanwhile there are rumors about the launch of Berry Burst Cheerios in France by Cereal Partners, another competitor. Thus, the product should be launched in France first.
Considering the savings of 10-15% in the overall costs of all Europe, the launch of Healthy Berries Crunch would also compensate the launch cost in France, which is $20 million (Since the cost in Europe is 23% of sales, which is 1,850,866,000 * 0.23 =425,699,180$, this launch would save 15% of total cost, which is 425,699,180 * 0.15 = 63,854,877$). In addition, innovation in has been at the core of ‘UC Way’ policy and the launch of Healthy Berry Crunch will follow this core value.
Lastly, the company can’t wait more time for any full-scale test and the budget can’t support $2 million of testing costs and it will loose opportunity to gain market share for organic fruit-based cereal if it decides to delay the launch.
Question 2. Does United Cereal represent an example of centralized or decentralized international management?
Answer 2.United Cereal organizational structure follows the centralized international management model in which, although divided by market region but was controlled by the top parent company. The particular UC country division was in highly in charge for their usual local market decisions, but the important one have to pass through the ‘UC way’ in which includes a number of sign-offs from the top executives.
For example,European market was split by countries; each country was a small version of United Cereal organizational structure and independently leaded by one country manager (CM). The national subsidiaries are responsible for majority decisions in that area. The figure bellow shows the UC organization process:
The values which the company has been created upon are commitment, loyalty, and diligence. UC has always focused on customer needs; listen to the customer. Commitment, diligence and loyalty are the values that the company adheres to. Spot the trend and make the market. Honoring the past while embracing the future, is another policy that the company follows. Managers have always been taught the same policies and processes that managers earlier have followed which were shown in figure bellow:
Brands do not have fixed cycling, but instead marketing and product development, product can remain leaders for many years. UC has focused a lot on R&D. The company’s history has most products secured as compared to the competitors for their patent. How important innovation is to the company. The company is successful because of its thorough consumer and market research. It has taken consistent and safe decisions, without too much risk. If the company short cuts these values, then the product launch will fail. Long authorization channel has avoided this in the past and protected brand equity. The organizational process has to be unified from top to bottom, by following the shared values throughout. It is important for the top managers to focus on team work and communication to avoid what happened with the fruit juice line, mentioned in the case. Since the values are followed religiously in the past, it is important that it is followed by all the foreign subsidiaries.
Question 3. What do you think of Brill’s Eurobrand proposals? Should she authorize the launch of Healthy Berry Crunch as the Eurobrand? What concerns do you have? How do you resolve them? Be sure to analyze both sides: Launch and Delay Launch (summarize in a table format and then discuss).
Answer 3.
Healthy Berry Crunch as a Eurobrand
Delay Eurobrand launch
Pros: – By launching Eurobrand, UC will be able to cut their product development and marketing costs by 10% to 15% over 3 years;- By being the first one to introduce such an idea, it will give UC a strong market penetration if the idea turns out to be successful.- Expanding responsibilities of country managers as a lot of cross-country interaction will be required, making UC employees much closer and make it a true European entity.
Cons:- Variance of per capita consumption of cereal throughout Europe (ex 8kg a year in the UK to 0.5 a year in Italy);- Local customization caused differences in product profiles and market strategies;- Maybe Europe is rushing into this launch, shortcutting the product, consumer and market research that had ensured UC’s past successes.- High costs associated with launching new products in other countries (at least $20 million as in France);- Difference in opinions across UC over this strategy.- The current organization structure doesn’t fit for Eurobrand. Pros:- It can spend more time for a future research on the Europe that if the Healthy Berry Crunch fit to every European countries;- Other countries might not be able to launch the new product in all Europe due to the recession, such as Spain.- It will have more time to adjust the company organizational structure;- It may not have the self space for a specialty cereal at the moment;- The company’s vice president thinks that the project is not ready to be launched.Cons:- There is a stiff competition in Europe, if the company delays this launch it might loose the chance to enlarge the market share, before other competitors enter the market.
We think that Eurobrand launch is a really good idea for the company as will give UC a first mover advantage over its competitors, which is really important in the competitive European market. [private_membership]Moreover, by launching Eurobrand, UC will be able to cut its marketing and product development costs by 10% to 15% over 3 years, which is a step ahead of their competition.
This launch will also expand responsibilities of country managers as a lot of cross-country interaction will be required, making UC employees much closer and make it a united European entity. However, this idea would lead to a change in existing structure at the company, which is a vertical structure with a long authorization channel. Another disadvantage of launching Eurobrand could also lead to a potential loss of UC way, which is ‘Listen to customer’ policy. United Cereal need to test Healthy Berry Crunch across Europe first, if not, it would never know if the customers across Europe want it or not. Launching Healthy Berry Crunch in France alone will cost at least $20 million, which is over the company’s budget. In addition, there is difference in opinions across the company’s managers over this strategy.
We would suggest that Brill should choose to lunch the Europebrand plan, because it will help UC not only earn more money but also helps European countries become closer. We recommend UC to launch the Healthy Berry Crunch in France first as a test market for the Eurobrand approach as well as to compete with Cheerio’s Berry Burst in this country. Then, after it succeeds, launch the Healthy Berry Crunch in other European markets with the Eurobrand approach, continuing with Germany and Benelux, as those countries are also in favor of Healthy Berry Crunch. At the same time the company would do the further research on other European countries and choose the countries that test results show well to launch the next. Paying attention on the recovery in Spain, when it is getting ready and if the product test results show well, the product can also be launched in Spain next.
For the issue of too much cost ($20 million), as mentioned above, the savings over three years would compensate the cost associated with the launch. Also, the issue with local customization causing differences in product profiles and market strategies would be solved as the consumer tastes in Europe are converging as market differences are eroding. Hence, it is not too unrealistic to say that Healthy Berry Crunch will be well received across Europe.[/private_membership] And lastly, although the current organization structure doesn’t fit for Eurobrand, but changing the organizational structure to support Eurobrand strategy will definitely lead the company’s success as well as help European countries work together, understands each other more and become closer.
Question 4.a. How might United Cereal implement your recommendations? 4.b. What do you think of the Eurobrand Team proposal? 4.c. How can you make the Team work?
Answer 4.a.
Implementation steps:
1) Remind all staff in the company of the failure that resulted from only having one person in charge of the ‘frozen juice product launch’, which was called a ‘disaster’.
2) Convince all country managers that their input will be considered in the Eurobrand teams and that this is not a challenge to their authority. This is really important to consider because the failure of the previous standardized European product launches was a result of the lack of support provided by the country managers.
3) Create ‘Eurobrand Teams’, expanding responsibilities of Crunch in other European markets with the Eurobrand approach, continuing with Germany and Benelux, as those countries are also in favor of Healthy Berry Crunch. At the same time the company would do the further research on other European countries and choose the countries that test results show well to launch the next. Paying attention on the recovery in Spain, when it is getting ready and if the product test results show well, the product can also be launched in Spain next.
For the issue of too much cost ($20 million), as mentioned above, the savings over three years would compensate the cost associated with the launch. Also, the issue with local customization causing differences in product profiles and market strategies would be solved as the consumer tastes in Europe are converging as market differences are eroding. Hence, it is not too unrealistic to say that Healthy Berry Crunch will be well received across Europe.[/private_membership] And lastly, although the current organization structure doesn’t fit for Eurobrand, but changing the organizational structure to support Eurobrand strategy will definitely lead the company’s success as well as help European countries work together, understands each other more and become closer.
Question 4.a. How might United Cereal implement your recommendations? 4.b. What do you think of the Eurobrand Team proposal? 4.c. How can you make the Team work?
Answer 4.a.
Implementation steps:
1) Remind all staff in the company of the failure that resulted from only having one person in charge of the ‘frozen juice product launch’, which was called a ‘disaster’.
2) Convince all country managers that their input will be considered in the Eurobrand teams and that this is not a challenge to their authority. This is really important to consider because the failure of the previous standardized European product launches was a result of the lack of support provided by the country managers.
3) Create ‘Eurobrand Teams’, expanding responsibilities of country managers with a lot of cross-country interaction will bring UC employees much closer and make it a true European entity, also enabling them to learn more about other aspects of business.
5) Launch the Healthy Berry Crunch product in France as a test market for the Eurobrand approach as well as to compete with Cheerio’s Berry Burst in this country.
6) After it succeeds, launch the Healthy Berry Crunch in other European markets with the Eurobrand approach, continuing with Germany and Benelux, as those countries are also in favor of Healthy Berry Crunch. At the same time the company would do the further research on other European countries and choose the countries that test results show well to launch the next.
7) If the product and approach appears to be successful, launch the Healthy Berry Crunch in other European markets with the Eurobrand approach.
Answer 4.b. According to Lora Brill’s concept, the UC Europe will create ‘Eurobrand Teams’ which are composed of brand managers from each country subsidiary, delegates from each functional group such as logistics, engineering, R&D and so on, and one representative from the appropriate regional division VP’s office. These teams would decide product formulation, market positioning, packaging, advertising, pricing and promotions, as well as finding the ways to reduce costs and increase profitability. In my opinion, this proposal has the following advantages:
- Eurobrand Teams modeled on the European Technical Teams that had proved so effective in the past.
- Brill’s concept can make the best use of significant resources like marketing and R&D; it can also earn coordination, control and overview of the UC’s whole business in Europe, thus solving the difficulties of UC in Europe (increasing price and profit pressure due to high expenses of marketing and product development teams in each country)
- Brill’s proposal structure integrates the marketing and development teams of specific kind of product, which may cut off the cost in accordance with cost focus strategy.
- Expanding responsibilities of country managers with a lot of cross-country interaction will bring UC employees much closer and make it a true European entity, also enabling them to learn more about other aspects of business.
However, Brill’s proposed new organizational structure is quite complex and doesn’t suit to any traditional structures’ form strictly. For example, it does look like matrix structure. However, when each of the Division VPs is also responsible for each of those product groups, this looks like a product team structure. In addition, there are some criticisms and concerns, such as whether the CMs might see this as a challenge to their local authority or whether teams with more than dozen members could function effectively.
I would see this proposal as a good alternative for UC to support effective implementation of Euroband. Based on the fact with the ‘fruit juice failure’ that resulted from only having one person in charge of the frozen juice product launch, creating such teams would definitely help the company succeed in the European market.
Answer 4.c. Although Lora’s proposal structure is appropriate in some sense for both UC’s generic and Eurobrand strategy, the organizational structure can be improved in term of teamwork. For example, the implementation of new strategy can be effective only if employees and managers within the structure are able to work together and communicate easily. When restructured, the organization should focus on lines of communication.
Moreover, as division VP is also involved in brand management, the structure of the company will become more complex, so Lora should make sure that organizational structure is clear and efficient, and that every employee participate in the process of decision making.
Conclusion
In conclusion, again, I would recommend Lora Brill to authorize Jean-Luc Micheal’s request to launch of Healthy Berry Crunch in France. Based on our analysis of the pros and cons of launch and delay launch above, we think that the opportunities are higher than threats of launching Healthy Berry Crunch and there is a high percentage of success in French market. Moreover, we think that Eurobrand launch is a really good idea for the company as will give UC a first mover advantage over its competitors, which is really important in the competitive European market. Moreover, by launching Eurobrand, UC will be able to cut its marketing and product development costs by 10% to 15% over 3 years, which is a step ahead of their competition.
Reference
‘United Cereal: Lora Brill’s Eurobrand Challenge’ case