essaynest EssayNest

Case Study Attacking a dominant competitor: a joint venture strategy by Nestlé and General Mills…

Get your original paper written from scratch starting at just $10 per page with a plagiarism report and free revisions included!









Hire A Writer

Case Study

Attacking a dominant competitor: a joint venture strategy by Nestlé and General Mills


In 1997, Kellogg was the breakfast cereal market leader in the USA with around 32 per cent share in a market worth $9 billion at retail selling prices. By 2002, the company was no longer market leader. Its great rival, General Mills (GM), had finally taken over with a share of 33 per cent while Kellogg’s share dropped to 30 per cent. GM had achieved this important strategic breakthrough by a series of product launches over a 15-year period in a market that was growing around 2 per cent per annum. However, by 2004, Kellogg had regained market leadership again by one percentage share point. This reversal was the outcome of some clever marketing by Kellogg coupled with GM being distracted by the consequences of its acquisition of another American food company, Pillsbury, in 2003. Outside the USA, the global market was worth around $8–10 billion and growing in some countries by up to 10 per cent per annum. However, this was from a base of much smaller consumption per head than in the USA. Nevertheless, Kellogg still had over 40 per cent market share of the non-US market. It had gained this through a vigorous strategy of international market launches for over 40 years in many markets. Up to 1990, no other company had a significant share internationally, but then along came the new partnership.

Development of Cereal Partners

After several abortive attempts to develop internationally by itself, General Mills (GM) approached Nestlé about a joint venture in 1989. (A joint venture is a separate company, with each parent holding an equal share and contributing according to its resources and skills; the joint venture then has its own management and can develop its own strategy within limits set by the parents.) Nestlé had also been attempting to launch its own breakfast cereal range without much success. Both companies were attracted by the high value added in this branded, heavily advertised consumer market.
GM’s proposal to Nestlé was to develop a new 50/50 joint company. GM would contribute its products, technology and manufacturing expertise – for example, it made ‘Golden Grahams’ and ‘Cheerios’ in the USA. Nestlé would give its brand name, several under-utilised factories and its major strengths in global marketing and distribution – for example, it made ‘Nestlé’ cream products. Both parties found the deal so attractive that they agreed it in only three weeks. The joint venture was called Cereal Partners (CP) and operated outside North America, where GM remained independent. Over the next 15 years, CP was launched in 70 countries around the world. Products such as ‘Golden Grahams’, ‘Cheerios’ and ‘Fibre 1’ appeared on grocery supermarket shelves. CP used a mixture of launch strategies, depending on the market circumstances: acquisitions were used in the UK and Poland, new product launches in the rest of Europe, South and Central America and South Africa, and existing Nestlé cereal products were taken over in South-East Asia. To keep Kellogg guessing about its next market moves and to satisfy local taste variations, CP also varied the product range launched in each country. By contrast with Kellogg, CP also agreed to make cereals for supermarket chains, which they would sell as their own brands.

By 2004, CP had reached its targets of $1 billion profitable sales and 20 per cent of European markets. Kellogg was responding aggressively, especially in the USA, where it had regained market leadership. CP was beginning to think that its innovative strategies would repeat US experience: it was beginning to attack a dominant competitor, Kellogg, worldwide.

Case question

Using the description of prescriptive and emergent strategies from Chapter 1 (and this chapter if you need it), decide the following: was CP pursuing a prescriptive strategy, an emergent strategy, or both?

Get your paper done by an expert.