Cereal Industry the Rte Breakfast Research Proposal

Despite the limited number of players, the degree of rivalry was low, in part due to the proliferation of brands and in part to maintain healthy profit margins for all competitors. This did not preclude healthy rivalry, as evidenced by high advertising spending, but the total market was large enough that the established players could maintain healthy margins despite this spending. This created a favorable competitive environment for the established RTE manufacturers.

2) The private labels have been able to enter the industry for a couple of reasons. The first is that they were able to find manufacturers with excess capacity to provide them with product.These manufacturers were able to provide the product at a price point that allowed the private labels to undercut the major brands. In essence, the relative lack of competition had allowed the major brands to set high margins based on high price points. They spent heavily on advertising, which was then built into the retail prices. The private labels adopted a low-cost strategy rather than the differentiation strategy pursued by the major brands. The excessive margins gave the private labels an entry point once they were able to secure a reliable supply of….....