IBUS90003: Managing the Multinational
Case Analysis Report
United Cereal: Lora Brill’s Eurobrand Challenge
Prepared for
Sachiko Yamao
Department of Management and Marketing
Faculty of Economics
University of Melbourne
Prepared by
Christopher Wood 685936
Student – Master of International Business
IBUS90003 – Managing the Multinational
Christopher Wood – 685936
1. Introduction
In the breakfast cereal segment, trends showing increased interest in natural and
healthy products have emerged for baby boomers in both US and European
markets. This trend presents a problem for traditional highly processed cereal
products that are typically high in sugar. Jean-Luc Michel the French country
manager (CM) of United Cereals (UC) has identified opportunities for a UC
product that satisfies the needs of this growing market. By using freeze-dried
blueberries that hold both shape and colour in a cereal mix, Michel believes he has
found a solution to the problem of fruit degradation in healthy cereals, thereby
creating a “halo of health” in the product mix. However, corporate structures in
place at UC have been heavily developed to guard a strong brand image of quality.
These structures strictly regulate new product development (NPD), in turn
creating barriers to fast identification and reaction for new product segments at
UC. This report will identify the problems that face European VP Lora Brill in
her decision of how to best approach a rapidly growing market segment that exists
regionally across Europe, in a way that does not neglect these strict corporate
policies. The report will then critically analyse a number of alternatives available
to Brill, before suggesting a recommended course of action for the development of
strategies that address these problems. Finally, this report will present an
implementation plan that aims to deliver consumers a UC product satisfying the
needs of this market segment whilst delivering value to stakeholders in the
organization.
1
IBUS90003 – Managing the Multinational
Christopher Wood – 685936
2. Problem Analysis
2.1 Single country management built on foreign corporate values
The foremost consideration in making this managerial decision is whether
or not the product launch conforms to or rebels against highly developed
corporate values at UC. It is important in the eyes of senior management
that subsidiaries act with the corporate values of commitment, diligence,
and loyalty at heart. Subsidiaries are also held to strongly developed
mantras such as “spot the trend, make the market”; whereby extensive
product testing and market research is mandatory for NPD to control
reactionary responses to competitors, and “honoring the past whilst
embracing the future”. Consequently, European subsidiaries have been set
up as ‘mini UC’s’, with the expectation country managers embrace these
embedded values, policies, and procedures established by the UC HQ.
This in turn has created subsidiaries that are theoretically exact replicas of
their parent organization. The result of this strategy in Europe has allowed
CMs the freedom to customize products, adjust manufacturing processes,
and adapt promotional strategies to their local market so long as the ‘UC
way’ is respected. This method has released entrepreneurial instincts in
CMs, leading to strong market penetration in most national markets.
However, this has created differences in product profiles and marketing
strategies that have since proved problematic.
As a result of the 2008-2009 global recession, all manufacturers in the
breakfast cereal industry saw product mixes shift toward low-priced
2
IBUS90003 – Managing the Multinational
Christopher Wood – 685936
offerings, increasing pressures on pricing. This contributes to low profits
and an annual market growth of 1% creating a squeeze on profit margins.
This environmental change in Europe has brought the historical policies of
UC under the microscope, where the capacity for extensive product testing
and large investments in NPD is not viable, resulting in low rates of
product innovation. The need for marketing and product development
teams in each country has driven SG&A expenses 25% higher than that of
US operations. CMs have responded to this environmental change by
favoring product line extensions in place of NPD.
However, these environmental changes have not swayed the mindsets of
traditionalists in corporate HQ. There exist executives who feel the
product launch is being rushed, as a result shortcutting product, customer
and market research that are at the heart of UC corporate policy.
2.2 Validity of Test Results
There are concerns that Michel’s test results do not necessarily show a
positive correlation between consumer preferences and the Healthy Berry
Crunch product. Initial full-scale market testing undertaken in Lyon by the
French subsidiary returned results that suggested consumers had only a
56% ‘intent to repurchase’ the product within the next three months. The
major reason cited by consumers for this stance was that the berries used
in Healthy Berry Crunch were too tart. This result falls below UC’s 60%
minimum intent to repurchase measure, suggesting the product is not one
to be pursued by UC. Subsequently, this led Michel to develop a sweeter
version of the product, for which focus group testing was carried out in six
3
IBUS90003 – Managing the Multinational
Christopher Wood – 685936
French cities. These tests, not in line with UC’s corporate policy, returned
results that indicated a promising 64% intent for repurchase, above this
standard. It is the validity surrounding the secondary testing results that
creates the basis for concern. Michel has not satisfied strict corporate
guidelines that the corporation has valued so highly for so long. With this
consideration in mind, would it be wise for Brill to pursue this product, or
would such action be considered an attack on the core values held by UC
executives?
2.3 Untried ‘Eurobrand’ strategy and budget restrictions
The final consideration for this managerial decision is whether the time is
right to pursue an untried regional product strategy. Predecessor Arne
