The Ready to Eat Breakfast

447 Words2 Pages
The ready-to-eat breakfast cereal in 1994 1. Why was the RTE cereal industry so profitable for so many decades? Personally, I think the main reason why the RTE cereal industry was so profitable for so many decades is because it was difficult for the new entrants to succeed in this industry because of several important entry barriers. Firstly, these kinds of factories cost over a hundred million dollars, so it is very expensive, and also it does not guarantee that the entrants can make a profit. Furthermore, if the new entrants want to succeed in this industry, they have to spend almost one fifth of sales on advertising and promotions for introducing a new product. 2. Why have private labels been able to enter this industry successfully? In cases of private labels, I believe they have been able to enter this industry successfully due to numerous reasons. First of all, private labels provide more profit from margins to retailers, meaning sellers want to promote private labels more than others. Next, when private labels have the lower price than others, most customers absolutely choose the lower one because the quality is not so much different, and it is also cheaper. Third, coupon promotions normally are great, and a lot of companies use it. But, the coin has two sides, meaning there is a negative aspect as well. 3. What does General Mills hope to accomplish with its April 1994 reduction in trade promotions and prices? Regarding General Mills’ April 1994 reduction in trade promotions and prices, they hope to accomplish some benefits from this, e.g. increasing the profit and reducing the cost. Concerning increasing the profit, if they can reduce in trade promotions and prices, normally the market share and the profit will be increased. In terms of reducing cost, when they reduce in trade promotions, cost will be decreased because
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