Sara Lee's Perspectives in Europe - Case Study Example

Running Head: Sara Lee Corporation Global organization in Europe Faraz Saeed Academia Research The global organization that is going to be discussed is a very established one, Sara lee corporation is having headquarters in Chicago and it is having operations in 58 countries and nearly around 200 nations with having 150,400 employees all around the world, the company is having groups such as food and beverages, body care, house hold products and branded apparel. In food and beverages, Sara lee has a strong hold in the market, it provides packaged meat, coffee, tea and also beaked goods, they are having strong market position at various points in Europe. In frozen food, the company is at the top in U.S with fair market positions in Europe and Brazil, while it is one of the largest producers of tea and coffee. In the body care section the company holds the top position in the European bath and shower market, in households side they are having one of the world famous shoe polishes named Kiwi. The company is trying to settle the market of branded apparel, which includes men's and boy's wear, also sports wear. The Impact of European Economics on Sara Lee The thing that should be kept in mind at this stage is that the Sara Lee is making most of those products in which brand switching is common, and there are relatively very few differences between the competitor's products and the company's products, for example the shoe polish Kiwi is having competition with Cherry Blossom, if a consumer would go to buy Kiwi and would not find it in a shop, he would buy cherry blossom rather than going to an other shop and look for Kiwi, this brings us to Imperfect Competition, according to Lipsey (1997): This is the commonest characterization of real markets. Imperfectly competitive markets often involve products that are similar but not identical and for which there are a finite number of potential producers, each of which can influence the others by its own behavior. (p. 11) So this implies that the competitors do the first impact on trade, it means that the company has now to think about the sales quotas and forecasts, more specifically how much would they produce in the future so that there is also the minimum level of goods return and maximum levels of profit can be achieved, the next most important thing is the structure, nowadays the companies are having multiple products, so what they should know is how to maintain the product line and length as a product can damage the other products of the same firm in terms of sales and value. "Firms are trying to make the best use of available resources and this is an optimization problem familiar in economics. Issues of optimal employment, investment, and structure are all susceptible to economic analysis"(Lipsey, 1997). After wards there are more things to worry about, like the growth rate of GDP should be kept in mind as if any company that is low in demand or even having an exceeding demand can put some impact on GDP, Like in case of Sara lee the food production depends on the past sales records, else at times the senior executives take decision when they have to enter in some new market, specially it creates a lot of fuss when new product is to be launched in some area, it has a lot to do with investment not only in production but also in conducting research so that the chances of product failure can me minimized. The biggest advantage of having such operating organization in UK is that the local goods are promoted, it means that more the local goods are used the less the country relies on import, reminding that the company is still local, and the goods are not imported in the case of Sara Lee, the production of goods is done by the firms that are being operated with in UK by taking the license from the main Sara Lee Corp. Another good advantage of this organization is that the competition between Sara Lee and other firms is maintained, reminding that competition is something in which the customers get the benefit as an outcome, a good example is if a firm is in competition with Sara Lee and suddenly Sara Lee starts sales promotion in relation to offering discounts to customers than the customers would be more beneficial. As we know that Sara Lee is a very giant organization therefore it gives employment to millions of people and so it reduces the rate of unemployment. More Advantages can be seen in terms that the company is putting more money in rolling as the company has to put on expenditures such as sales promotion, public relations, personal selling and specially advertising which the company has done with full concentration by keeping it's target audience in mind, William said in 1992, "There is nothing morally wrong, then, with the practice of advertising in itself, but how managers advertise may generate moral problems. These problems usually center around the use of persuasion and the creation of consumer demands"(p. 117). The more advantages include the up gradation of technology that the Sara Lee has brought in terms of their packaging and printing, the manufacturing technology which is very high, as the firm has to be in contact with the U.S. where its main headquarters are. One of the biggest advantages in one's view can be that Sara Lee is bringing innovation in tastes, cultures, and lifestyles of people in Europe, although this point is not greatly noticed but still it is happening. Another good advantage is that Sara Lee in UK is responsible for exporting its products to the small near by countries, which is again a good sign. Now lets talk about few disadvantages that Sara Lee is showing to be operated in Europe effectively. The first and major disadvantage that one can easily see is that as the firm is so big, it has put barriers to the entry of small firms that are making more or less the similar sort of products that Sara Lee is making1. The other disadvantages of Sara Lee can be the percentage amount that it would have to give to the main company in Chicago. One more disadvantage that one can see in Sara Lee's case is that it is manufacturing products like foods and beverages thus it has to maintain the quality either way, this require more concerns on quality and control, if the customer would feel difference in the taste he may get disappointed which can result in sudden loss in sales and also food is a perishable good, so if proper planning would not be done, there would be high levels of sales return, also due to the exporting of food products to the near by countries, food is likely to get rotten if not taken good care of, and it would again result in high level of sales return, James and M. Weidenbaum said in a 1993: As the intensity of global competition increases, many companies are forced to reevaluate their niche in the world marketplace. For some companies this entails strengthening their domestic position against competing foreign products. Other firms respond by aggressively expanding their operations into foreign markets. (p.1) So first of all these lines stated above are the first directions according to which the company should work, and all the above stated can be responsible for effective operation of the Sara Lee in Europe. Now lets have some discussion on the internal and external environment that might be confining or more specifically affecting the Sara Lee corp. Internal environment Internal factors are probably those that are happening and confining Sara Lee from with in the organization, internal factors are not that big as a problem because the organization is having some control on them, in the case of Sara Lee, the company is having fair control on its resources utilization, as the company has issued its trade name to many firms they have to be operated by the Sara Lee's commands, other factors affecting the Sara Lee are its employees, who are compensated well, as they are having a big number of workers, the company tends to maintain good relations with them, another one is the control over the norms that are followed like the company is working hard to maintain its traditions that were actually from the U.S. as the company is an American. Overall internal factors have no such big impact on the Sara Lee as they are maintained from years. External Environment The External factors affecting Sara Lee are worthy to be discussed, there are numerous of them, first lets have a look on Mega Environment2. The technological elements are the first to be discussed, Sara Lee is commanded to use the latest technology in printing and manufacturing, that is acceptable to the people of European society, than comes the economic element according to which Sara Lee follows capitalist economy3, it means that Sara Lee's operations are not confined by the government of UK by owning its assets, the company is having its own assets, so that there is less fuss and confusion in trading with near by European countries, than comes the legal-political elements, these factors have the most impact on the Sara Lee corp., this is a great responsibility on the company as any broken law can have severe outcomes, it involves following the fiscal and monetary policy, Hansen said in 1949 that "It is the job of monetary and fiscal policy to control the quantity of liquid assets; and it is the job of monetary theory to set up criteria for the guidance of policy". (p. 38) it also includes the trading restrictions that Sara Lee is strictly required to follow, so that any trade surplus is avoided. The next constraint is sociocultural elements, these are the restrictions by the society of Europe on Sara Lee, a good example is that due to the prevailing culture of Muslims in Europe, the company had to launch a precautionary meet caution in their foods so that people of the society don't find the food to be unhealthy. The next external environment factor is perhaps the most prevailing one these days it is the International elements, one can find that there are similar companies that are now being operated outside UK in the near by countries, the people are now more conscious about their own country's product usage rather than a UK company's product, so over the past few years Sara Lee's sales are affected which resulted in preplanning of forecasted sales and settlement of sales quotas, as both, Sara Lee and other similar European companies are threat for each other. The next external environmental constraint is Task environments4, it includes customers and clients, competitors, suppliers and labor supply. Of course customers are effecting Sara Lee as the example of Muslim culture is already given where the company has to fulfill specific requirements of the customer, competitors which are in the form of other companies weather neighboring or global are affecting Sara Lee as the manufacturers of Kellogg's are competitors to Sara Lee, both are working to attain greater market share, suppliers are also effecting Sara Lee as there are the quality requirements for raw materials, specially when food is a major product of a company like Sara Lee, else the variation in the raw materials prices also disturbs the Sara Lee planning, like prices were increased after 9/11 event and the quality was slightly more decreased, labor supply has not damaged Sara Lee much, because of its good relations with the labor, though at numerous occasions it has happened that previously skilled labor was hired by newly developed companies, but it didn't trouble much to Sara Lee. Global Economy Impact The global economy has an impact on Sara Lee, but what the people working at numerous companies say is that these are just the conditions under which they have to work if they won't work, they won't be able to live, so this problem is not seriously taken by the company, however few global impacts are due to the pressure of WTO and GATT, according to Hoekman and M. Kostecki (1995), "The GATT essentially regulates trade policies. It does not address the basic question whether governments should use domestic or trade policies to achieve particular objectives. That is, the issue of efficiency is not addressed directly"(p. 87), however trade policies are now made by WTO, it is clearly specifying that the government makes such policies without knowing that it could also be questioning the country's own economy, Sara Lee has somewhat been affected by such policies in the past, however due to modernization, the company has made fairly lucrative business in different areas of Europe and UK it self, big disturbances in the sales were also seen at the 9/11 event, at that point it was disturbance in every part of the country which also include the areas where Sara Lee has operations, however the big amount of share holders have also influenced company at few occasions, but not severely. SWOT Analysis Strengths The company is having operations in 58 countries, 200 nations, and has 150,400 employees. One of the few companies that are so diversified and versatile in identifying the needs and wants of society. They are among top in international ratings. Weaknesses They are having limited working capital and also influenced by trade organizations. They are having extremely complex network with a lot of fuss. Most of their products are vulnerable to the climatic conditions. Opportunities A lot of segments in the society are un-served and sales promotion and increased advertisement can create need in people. Has more potential of improving the products according to the growing competition and can also launch more new products. Threats Local companies, especially small firms, putting damage on numerous areas. Restrictions in the form of trade and quotas. The new business ventures of big groups. References Bartol K., D. Martin, "Management", (n.p.): McGraw-Hill Books, 1994. Chrystal A., G. Lipsey, " Economics for Business and Management", Oxford: Oxford University press, 1997. Hansen A.H., "Monetary Theory and Fiscal Policy", New York: McGraw-Hill Books, 1949. Hoekman B.M., M. Kostecki, "The Political Economy of the World Trading System: from GATT to WTO", Oxford: Oxford University press, 1995. James H.S., M. Weidenbaum, "When Businesses Cross International Borders: Strategic Alliance and Their Alternatives", Westport, CT: Praeger, 1993. Samuelson P.A., W.D. Nordhaus, "Economics", (n.p.): McGraw-Hill, 1998. Williams G.J., " Ethics in Modern Management", New York: Ourum Books, 1992. Other Data sources Sara Lee Corporation, Read More