The Impact of Regulation on Strategic Positioning: Self-Regulation in the RTE Cereal Industry

In this paper we exploit a natural experiment resulting from self-regulation adopted in the ready-to-eat (RTE) breakfast cereal industry. This event induced product repositioning which compressed the relevant product space and increased competition. Through this lens, we assess specific performance impacts associated with the regulation and develop links between product positioning and product brand equity resources. The latter results provide dynamic connections between positioning choices and the value of resources as determined by consumer demand and market competition. As a group, products constrained by regulation perform relatively poorer than unconstrained products, though unconstrained products are also negatively affected by the increased competition caused by the regulation-induced compression. Among other results, we also find that higher brand equity is not always relatively more valuable than lower brand equity when products are forced to reposition.