Corporate Strategy of Smucker Company - Case Study Example

?Smucker's Case Table of Contents Question One 3 Question Two 5 Question Three 6 Question Four 6 Question Five 10 Question Six 11 Works Cited 12 Question One J. M. Smucker Company’s corporate strategy consisted of three main components. They are: a) developing the market share of its existing brands, (b) launching new products and (c) building strategic acquisitions. It can be stated that all these three goals are generally focused upon the market of North America. Smucker’s common business-level strategy components shared among the brands of the company are to offer ideal products in all categories of its business units that it competes in. It expanded itself beyond jams and jellies so that it can shield itself from becoming an acquisition of any of the larger firm. The company has been successful at expanding its operations, enhancing its sales and revenues by greater margins and increasing the price of the stock (Gamble, J. E., “Smucker’s in 2011: Expanding the Business Lineup”). The products of J. M. Smucker Company helped it to achieve its long-term goals. The company’s brand demonstrates strategic fit in the sense that all its brands are performing quite well. Smucker’s expected its net sales to augment by 6 percent annually by increasing the sales growth to 2-3 percent resulting from future acquisitions, and increase in sales by 1 percent from the introduction of the new product. It is identified that in the year 2010, the company was capable of becoming the market leader in 11 of its food categories such as fruit spreads as well as dessert toppings, roasted and ground coffee, health and natural beverages, peanut butter, cooking oil and condensed and evaporated milk. It can be stated that it is feasible for the company to expand its operations beyond its core competencies in order to fight the competition that it confronts from its rivals. This will help the company to generate high sales and revenues, along with that it will also assist the company to increase substantial market share. Question Two One of the factors impacting the successful operations of Smucker’s is taxation. Changes in the tax rates and laws have a significant influence upon the company. Competition is the other macro environmental factor which hampers the sales and profitability of the company. Nestle and Kraft Foods are the main competitors of the Smucker’s in United States. Economic slowdown and recession in the USA has an impact upon the operations of the firm. It is observed that the first three months of the year 2011 seemed to be promising despite the persistent impacts of economic downturn in the United States. The revenues of the company were same for the period i.e. first three months in the fiscal year 2010. However, there was rise in the operating income by 5 percent in the first quarter from $185 million of the year 2010 to $195 million in the very first quarter of the year 2011. When the USA faces with the issues related to currency and interest rates fluctuations, the companies like Smucker’s may have to face significant problems since these companies have its branches in many of the foreign nations. There has been change in the consumption pattern of the people of the USA during the period of recession and as a result the organization had to focus upon the budget cuts and concentrate more upon the home made meals rather than readymade meal as sold by Smucker’s. Sudden change in the consumption habit has a significant impact upon the company. Therefore, it is quite significant for the company to take certain initiatives so that it can minimize the negative impacts of such threats and help in the enhancement of the sales and revenues of the company. If such issues are not paid due attention, then the company’s profitability will be hampered to a great extent. Question Three There are many subsectors of processed food industry and each subsector has different growth expectations, competitive intensity, profit margins and business risks. The industry can be identified as attractive in the sense that the participants in this industry are challenged on a continuous basis to respond effectively to the needs and the demands of the customers. The food processed industry experienced consolidation and the reasons behind the consolidation have been slower growth rates in the food industry, rapid consolidation in the retail grocery chains and stiff competition between food manufacturers as well as private-label manufacturers. The industry can be considered as attractive since there has been significant improvement in the earnings growth despite harsh economic conditions. Along with these there has been rise in the demand for in-home food in the USA and other countries which demonstrates a positive sign for most of the companies into processed food industry. When the demand for a product is generally higher, then the companies can expect significantly higher level of profitability by trading in such industries. Question Four J. M. Smucker Company has always been careful while buying well established and successful brands and has paid due attention on leading brand names. The company believes upon the notion that it’s better to acquire those brands that have been well developed rather than developing a new brand from scratch. It is worthy of mentioning the fact that most of the company’s products have been positioned as one of the leading brands in the food processing segment which it tends to compete in. The company seems to be strongly positioned in the retail coffee sector. The company generates huge sales from this sector. It has been observed that the sales contribution by coffee in the year 2010 has been 40% among all the product lines. In the year 2009, this sector contributed 25% of the entire sales. Though other products are also equally significant for the company and help the company to derive greater profits, they do not contribute to as much revenues as generated by the retail coffee sector. The reason behind placing the retail coffee in the cell 1 of the nine-cell GE stoplight matrix is that it has been the leader among all the segments of the company. It has a strong competitive position and therefore, it can be analyzed that the company can invest into this sector for the purpose of growth. The reason behind placing the retail consumer market and special market (US Food Service) in cell 2 is that it is in average competitive position and therefore, the strategic advice for this sector of the company would be to invest for growth. Retail oil and banking sector and special market (Knudsen Natural Beverage) seem to be having medium attractiveness, however with strong competitive position, and therefore, have been placed in cell 4 of the GE nine cell matrix. The strategic advice for this sector would be to selectively invest for the purpose of attaining growth. The special markets (Canada) of the company have been in cell 5 because it possesses medium attractiveness and average competitive position. It is highly recommendable for the company to selectively invest for the purpose of their earnings. The company can make contingency plans so that it can protect its vulnerable position (Oxford University Press, “Introduction”). Industry Attractiveness Business Unit Strength High Medium Low High 1 Retail Coffee 2 Retail Consumer Market Special Markets (Food Service) 3 Medium 4 Retail Oil and Banking Special market (Knudsen Natural Beverage) 5 Special Markets (Canada) 6 Low 7 8 9 Question Five In this section of the report, the ratio analysis will be conducted in order to gauge the financial position of J. M. Smucker Company. It is to be stated that all the figures are in $ thousands. Current ratio = Current assets / Current liabilities From the case study, it has been noted that the current assets of the company for the year ended 2010 is 1,223,630 and the current liabilities for the company is 478897. Therefore, the current ratio is 2.55. Quick ratio = Current assets – inventories / Current liabilities From the case study, it has been observed that the current assets of the company are 1223630. The inventories amount has been 1309878 and the current liabilities for the company are 478897. Therefore, quick assets ratio is 0.18. Debt-to-equity ratio = long-term debts/shareholders equity From the case study, it has been evident that the total liabilities are 2648533 and the total shareholders’ equity is 5326320. The debt-to-equity ratio calculated is 0.4. It can be interpreted that the company’s assets are financed through equity. It can be analyzed that the company has financed its operation through equity and it is in profitable position. The liquidity position of the company seems to be weaker. Therefore, this ratio depicts that the company must not undertake any decision to expand its business operations until and unless it has improved its financial position within the pace of time. Question Six It has been identified from the above financial analysis that J. M. Smucker Company is not in a strong position and therefore, it must try to make its financial position sturdy in order to undertake any more expansion plans in the near future. It must attempt to focus upon its liquidity position as well in order to enhance the operational efficiency, because if the company does not pay attention towards its financial performance then it may be soon in insolvent position. Instead of focusing only upon the coffee segment, it also needs to focus upon other segments so as to increase the profits in certain stipulated period of time. The sectors which are not in the ‘leader’ position of the nine cell GE stoplight matrix need to strengthen their positions so that the company can generate funds from those sectors as well. Its special markets segment seems to be possessing medium attractiveness. Therefore, it is significant for the company to focus its major attention towards these segments. Works Cited Gamble, John E. Smucker’s in 2011: Expanding the Business Lineup University of South Alabama, 2011. Oxford University Press. “Introduction”. January 19, 2012. Strategic Marketing Decisions, Choices and Mistakes, 2012. Read More