Brand Equity in American Business: The Pressure to Produce Short Run Success and Its Impact on Growth and Maintenance of Brand Equity and Kellogg company Global Marketing Department

Abstract

Kellogg is the number one cereal company in the world and is also number one in other categories: in the frozen pie industry, and convenience foods. My internship with the Kellogg Company began on September 8th, 1992 and ended on March 26th, 1993. I assisted the Director of Global Marketing/Assistant to the Chairman as a project manager. What Kellogg does to maintain their superior status is research the markets, brands and products. As a part of the Global Marketing team, I was introduced to the topic of brand equity. Brand equity has been given more attention today because of the mergers and acquisitions of the 1980's and by the firms desire to increase market share and sales in a mature, competitive market. I also witnessed first hand the stress and pressures put on the Kellogg Company to produce short term results for quarterly financial evaluations. This led me to observe how the pressure on a company to produce short term gains in sales and profit can often lead to the mismanagement of brand equity and the loss of benefits which come from maintaining and growing brand equity. Brand equity is difficult to define and manage because of its intangible qualities. Professionals in the business world, especially marketing and accounting professionals, often disagree on a definition of brand equity which leads to the argument of its value on financial statements. However, there is one common fact and that is; that companies are willing to pay a lot more than book value to acquire brands that have equity. The benefits of owning a brand with equity are enormous, it provides more financial diversity by offering options such as brand and line extensions. New target groups and markets are also easier to enter. Acquiring a brand with equity reduces the high cost and risk of introducing a new product. These options can increase market share, sales and profits in a mature and competitive market when managed properly. This paper is structured to: introduce brand equity and its relationship to Kellogg, show the benefits of brand equity, explain its attractiveness to acquiring companies, introduce the methods and problems of its valuation, present the tools necessary to achieve and maintain it, demonstrate how the heavy pressures for short term success in American companies can led to the deterioration of an essential asset, brand equity, in the long run and finally compare the management of Kellogg's Brand X and Ralston's Brand Y in a case study.