Anderson School of Management Theses & Dissertations

Publication Date



The purposes of this study were: (a) to explain the nature of the existing bilateral oligapolistic situation in the ready-to-eat (RTE) breakfast cereal industry; (b) to clarify the role of marketing as an instrument in the product and service competition within the industry; and (c) to develop an explanatory framework which describes the causal relationships among the possible marketing barriers as well as the attendant risk and uncertainty in new cereal investment.

Although the rate of return on cereal investment appears to be relatively high and attractive, there are substantial barriers to entry. Industrial organization theory (i.e .. scale economy, product differentiation, and absolute superiority), though useful as theoretical consideration. was not totally satisfactory for explain­ing the conditions of entry into the RTE cereal industry. Consequently, the role of marketing and the marketing sophistication together with risk and uncertainty associ­ated with cereal investment were introduced, carefully

examined and analyzed. Major findings include the following:

(a)Each possible barrier to entry examined reveals a varying degree of financial investment,

which is usually beyond the capability of a small potential entrant;

(b) In each element of the marketing mix, there

is a high degree of marketing sophistication by the leading cereal producers which effec­tively discourages most, if not all, potential entrants; and

(c) The principal barrier to entry is the risk and uncertainty associated with the large outlays required for developing and marketing new cereal products. This is also increased by the long payout period.

All of these factors, when reinforced with each other (negative synergy) make a substantial impact on marketing barriers to entry. As hypothesized, the major marketing barriers to entry into the RTE cereal industry have thus resulted from {a) the extensive use of the marketing concept coupled with the use of very sophisticated marketing techniques by the leading cereal producers, and (b)the attendant risk and uncertainty associated with new cereal investment.



Document Type


Degree Name

Master of Business Administration (MBA)

Level of Degree


Department Name

Anderson School of Management

First Committee Member

Daniel M. slate

Second Committee Member

Edward H. Caplan

Third Committee Member

Ralph L. Edgel