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module 2 week 1 discussion and responses

In Module 2, we focus on SWOT. In order to complete a SWOT, we are required to identify and analyze the key opportunities and threats in the external environment. Then, we need to identify and analyze the company’s key strengths and weaknesses (internal analysis).

WEEK 1:

During Week 1, you are asked to address the following:

a) Evaluate the operating industry of General Mills using a minimum of two forces included within Porter’s Five Forces model.

b) Using PEST, assess General Mills’ remote environment using a minimum of two PEST forces.

c) Conclude your assessment about the overall environment. Is it more or less favorable for General Mills? Give your ranking from 1-10 (in which 1 = vast gloom and doom for this company; 10 = huge bonus this year!). Where do you think General Mills fits on this 1-10 scale?

Response #1

Module 2 Week 1

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posted May 12, 2019 6:35 PM



General Mills is a major player in various industries such as cereal production, yogurt production, canned fruit & vegetable processing, frozen pizza production, stock & broth production, desserts production, and snacks & baking mixes. General Mills has manufacturing plants in 15 countries worldwide and employs over 40,000 workers globally. General Mills is deeply invested in research and development in research and development to boost new product lines and increase value to existing products, such as offering gluten-free products (Smith IV, 2018). To simplify the market analysis, I will concentrate on cereal production to obtain an external environment analysis and SWOT analysis.

General Mills market strength is their diverse product portfolio. With popular cereal products such as (Cheerios, Chex, Fiber One, Lucky Charms, Total, Wheaties), baking (Pillsbury, Bisquick, Betty Crocker), meals (El Paso, hamburger helper), Blue Buffalo, and Haagen-Diaz cream ice to name a few of their more than 100 brands. General Mills reputation and brands have allowed General Mills to obtain a distinctive capability (Henry, 2007). The IBISWorld major companies research shows General Mills current market shares at 23.4% the second largest major player compared to Kellogg Company market share of 28% (Smith IV, 2018). The cereal market industry has seen a decline in revenue in the past five years, as consumers disposable incomes have risen and consumers desire for low-carb products. The industry structure is characterized as a mature life cycle, medium revenue volatility, high concentration level, high barriers to entry, and high competition level (Smith IV, 2018). Hence, translates to a high degree of rivals within the market.

As previously stated, consumers desire to live a healthier lifestyle, or convenient higher-end breakfast food has changed consumers eating preferences creating a mix-demand for cereal or alternatives to cereal. Consumers whose disposable income is higher opt for expensive breakfast outside of the home as time-constraints direct purchases. While, consumers who have adopted a healthy lifestyle search for product items such as gluten-free, low carb breakfast items, such as fruit, gluten-free cereal, or oatmeal. General Mills has invested in producing healthier alternatives such as gluten-free products (Smith IV, 2018).

Buyers of cereal products have a considerable amount of purchase power. When the economy is good more consumers eat out or buying healthier breakfast items, which equate to higher profit margins. However, when the economy is terrible, the demand for brand names products decrease as consumers opt for generic brands which equate to lower profit margins. Thus, supermarkets increase or decrease their product portfolio available to consumers based on economy and trends. As new products become available the supermarkets, discount stores, and grocery wholesalers have a significant buying power as they negotiate price margins resulting in high barrier to entry and high competition (Smith IV, 2018).

Based on the information in IBISWorld report General Mills scores a seven on their overall environment. General Mills is not losing or gaining in market growth; they are close behind Kellogg’s in market shares, however. General Mills is performing well even though there is a strong rival among competitors, high barriers to entry, and a low threat for increased competitors. The variety of General Mills breakfast products increase consumers availability to select a product if their tasting or needs.

References:

Henry, A. (2007). The internal environment: A resource-based view of strategy. In Understanding Strategic Management. Retrieved May 12, 2019, from:https://fba.aiub.edu/Files/Uploads/MGT110043.pdf







Smith IV, S. (2018, Nov). IBISWorld Industry Report 31123 Cereal production in the US. IBISWorld. Retrieved May 12, 2019, from: file:///Users/user/Downloads/31123%20Cereal%20Production%20in%20the%20US%20Industry%20Report.pdf

Mod 2 Week 1

Contains unread posts

posted May 13, 2019 3:36 AM



The operating industry of General Mills is difficult to evaluate considering that there are six global categories the company operates in ranging from cereals, to pet food, to yogurt (2018 Annual Report, 2019). Therefore, to evaluate the operating industry of General Mills relative to Porter’s Five Forces it is helpful to look at only one of General Mills’ global categories of cereal production to provide more detail (2018 Annual Report, 2019). Through examining Porter’s forces of rivalry and the threat of new entrants, key factors can be evaluated to determine the favorableness of General Mills’ operating industry.

Considering Porter’s force of rivalry, this factor can be measured by indicators of industry concentration by looking at the concentration ratio which is the market share held by the largest four firms in the industry (“Porter’s Five Forces”, 2007). Sanders (2018) reports in the IBISWorld Cereal Production report that market concentration is over 80% in this industry. This high ratio indicates that the market is very concentrated and therefore competition may not be as high so supplier and buyer may not have significant alternatives (“Porter’s Five Forces”, 2009). Considering Porter’s force of threat of new entrants, Sanders (2018) found “high barriers to entry limit the ability of new players to enter and compete effectively” (p. 20). This can be linked to access to inputs, economies of scale, capital requirements, and brand identity (“Porter’s Five Forces”, 2007). In evaluating access to inputs, purchases of grains and other materials made up the largest cost category in this industry at 56.9% of revenue that is managed by companies holding “supply contracts with upstream farmers and wholesalers” that may limit new business gaining such favorable contracts (Sanders, 2018, p. 21). Economies of scale prevent new entrants because “incumbent operators experience lower per unit costs because they are able to spread out production costs over a large volume of products” (Sanders, 2018, p. 23). This industry also demands large capital requirements as “cereal production is capital intensive” using expensive machinery and equipment which is “the most significant barrier to entry” required to start a new company (Sanders, 2018, p. 23). Finally, brand identity benefits this industry because “brand-loyal customers are not very sensitive to changes in price because of the associated perceptions of quality” (Sanders, 2018, p. 22).

General Mills’ remote environment can also be evaluated by looking at PEST forces relative to cereal production. These PEST forces include the political, economic, social, and technological factors in which a company’s industry operates (“PEST analysis”, 2007). Looking at the political factors surrounding General Mills, factors can include, tax policy, regulations, and trade restrictions that restrict and protect commercial operations (“Carrying out a PEST analysis”, 2005). In this industry “the level of regulation is heavy” and is subject to the Food and Drug Administration, Nutrition Labeling and Education Act, Clean Water Act, Clean Air Act, Pollution Prevention Act, the Resource Conservation and Recovery Act, and the Environmental Protection Agency (Sanders, 2018, p. 32). In which, failure to follow these laws and agencies “can seriously impair a producer’s credibility, result in expensive product recalls and create liability to civil or criminal penalties” (Sanders, 2018, p. 32). A second aspect of PEST in General Mills’ industry is the societal factors that include health consciousness, emphasis on safety, and population growth rates (“PEST analysis”, 2007). For example, this industry is experiencing a trend toward healthier option in which consumer preferences are shifting “as more Americans become health-conscious” and demand different products (Sanders, 2018, p. 7.). As an incumbent, General Mills is well positioned to meet these trends by adjusting production and product offering.

Considering General Mills global category of cereal production relative to Porter’s forces of rivalry and threats of new entrants along with the company’s remote environment, it would appear that there is a very favorable overall environment for this company. There is deep market concentration and significant barriers to entry that not just limit production but also ensuring compliance with laws and regulations in the remote environment. Assuming companies can continue to respond to consumer demands such as with healthier options, it would appear that overall environment would equate to a 10 or “huge bonus this year”. However, this analysis only looked at two of Porter’s five forces and two of the four aspects of PEST so it is difficult to fully back this decision without full analysis.

References

2018 Annual Report. (2019). General Mills. Retrieved from https://s22.q4cdn.com/584207745 /files/doc_financials/2018/annual/FINAL-2018-Annual-Report.pdf

Carrying out a PEST analysis. (2005). The Free Library. Retrieved on August 28, 2014, from http://www.thefreelibrary.com/Carrying+out+a+PEST+…

PEST analysis. (2007). Quick MBA. Retrieved on August 28, 2014, from http://www.quickmba.com/strategy/pest/

Porter’s Five Forces: A model for industry analysis. (2007). Retrieved on August 28, 2014, from http://www.quickmba.com/strategy/porter.shtml

Porter’s Five Forces. (2009). Mind Tools. Retrieved on August 28, 2014, from http://www.mindtools.com/pages/article/newTMC_08.h…







Sander, S. (2018). Imbalanced breakfast: Increased disposable income will result in mixed demand. IBISWorld Report. Retrieved from https://clients1-ibisworld-com.ezproxy.trident.edu…

Module 2 – Background

THE EXTERNAL ENVIRONMENT, INTERNAL PROFILE, AND SWOT

Part 1: External Environment Analysis

SWOT is an acronym for: Strengths, Weaknesses, Opportunities, and Threats. The first two variables (strengths and weaknesses) relate to the internal organization, while the last two variables (opportunities and threats) relate to the organization’s external environment.

The purpose of an external analysis is to scan the outside environment for factors that might open up new opportunities for the business—or that may present threats to the survival of the organization. Then company managers and executives can formulate plans to take advantage of the opportunities and respond to external threats. Optimally, the organization wishes to altogether eliminate (and if this is not possible, to ameliorate to the greatest extent possible) those threats that exist in the external environment.

There are endless numbers and kinds of external factors that can have an effect on a company’s sustainability. Customers, competitors, and suppliers are all pretty obvious entities that can affect profitability. If we think a little more deeply, however, we can see that current as well as potential customers should be considered in an assessment of opportunities and threats (e.g., in terms of changing consumer tastes and preferences). Any such threats or opportunities will affect strategic choices that will (or that can) be made concerning products and services.

What about technology? Advances in technology can affect all three of our “obvious” external concerns (customers, competitors, and suppliers) with changes in product features, how products are made and sold, what services are offered and how they are delivered, supply chains, inventory controls, and so on. The failure to monitor the technological environment can spell obsolescence for a business in no time.

Ease of substitution is something we always think of when considering competitors. How easy would it be to switch from flying on one airline to flying on another, for example? But thinking more creatively about substitution, we can see that teleconferencing and video conferencing can eliminate the need for much business travel—thus acting as a substitute to airline tickets. Failure to think broadly enough will cause a planner to completely miss a major threat just over the horizon. For example, consider the immeasurable impact that Internet sites such as eBay and Amazon have had on the sales of “brick-and-mortar” operations. Or consider how online video availability has adversely affected companies that sell or rent DVDs, such as Blockbuster.

The sheer number of possible external influences creating opportunities and threats is mind-boggling. This is why most strategic planners use analytic models to structure their thinking and help avoid perceptual biases that might interfere with a clear and objective identification of opportunities and threats.

In this course, we will be using two different models that approach the external environment from two different perspectives:

  1. Industry environment – Porter’s Five Forces Model
  2. Macro environment – PEST analysis

Industry Environment

Porter’s Model of Five Forces is one of the most versatile frameworks for analyzing the industry (or operating) external environment. Employed by a variety of academics and business practitioners for more than three decades, the Five Forces Model has proved its usefulness in a variety of arenas. The Porter model helps the user get a handle on the competitive and market characteristics of a specific industry. The factors covered by the Five Forces Model are:

  1. Threat of new entrants
  2. Bargaining power of suppliers
  3. Bargaining power of customers
  4. Availability of substitutes
  5. Degree of rivalry among competitors

Macro Environment

While the Porter analysis looks at the conditions in a specific industry, the PEST analysis looks at factors that affect the greater business environment. The sub-environments addressed by this model include:

  1. Political (including regulatory)
  2. Economic
  3. Socio-cultural
  4. Technical

Required Reading

For a general introduction to the Five Forces Model, the following video interview with Michael Porter is helpful for putting the external analysis into perspective:

The five competitive forces that shape strategy. (2008). Harvard Business Publishing. Podcast retrieved on August 28, 2014, from http://www.youtube.com/watch?v=mYF2_FBCvXw

The following site is an excellent introduction to the industry (operating) and remote (macro) environments. This site is a very good overview of Porter’s Five Forces and PEST: http://web.missouri.edu/cookml/AE4972/Industry%20Analysis.pdf

Connelley, D. (2005). Strategy for the External Environment. Power Point Presentation.

PEST analysis. (2009). Retrieved on August 28, 2014, from http://www.valuebasedmanagement.net/methods_PEST_analysis.html

Porter’s Five Forces: A model for industry analysis. (2007). Retrieved on August 28, 2014, from http://www.quickmba.com/strategy/porter.shtml

SWOT analysis: Lesson. (2009). Marketing Teacher. Retrieved

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