Retrenchment Strategy Assessment - Sara Lee - Coursework Example

?Case Study - Sara Lee Affiliation with more information about affiliation, research grants, conflictof interest and how to contact Case Study - Sara Lee Introduction: Sara Lee is one of the worldwide marketer and manufacturers of numerous famous brands of high quality personal care item and food products. Just from the bakery division in North America 17 % of the overall sales comes to Sara Lee. The business has functions in 58 nations, and markets various recognized and branded products in almost 200 languages. Sara Lee also employs 137,000 persons worldwide. Key initiatives regarding manufacturing and quality processes need a higher level of reliability across every bakery, whereas an apparent business objective, constancy across each field operation brings considerable challenges.  Challenges: “In The Netherlands, the Shop Account Managers of Sara Lee International keep in close contact with their retail channels. Due to the competitive nature of the retail market, it is of the utmost importance that the sales force is supported with a customer relationship management solution which is agile and responds to their requirements” (Lee, 2007). Retrenchment Strategy Assessment: Subsequent to Sara Lee’s retrenchment, the business is capable to give attention to its food service, food and beverage and worldwide businesses. Sara Lee’s key aims for its remaining business are to give attention to customer requirements and operating excellence, and at the same time in generating a physically powerful brand through wide modernizations and competitive pricing. The business successfully employs its retail meats, by selling them to its foodservice clientele. Its meat business has enlarged in sales and operating revenue, while professionally it has benefited by modernizations in grocery items. These modernizations boosted sales over $100 million, even while its core products’ sales were flat. The business holds 20% market share in a rising industry of approximately $10 billion. Sara Lee is one of the most significant market leaders in North America in retail breads. Sara Lee has positioned itself in mounting divisions and stalling unconnected segments in its body care product and household lines. These divisions function separately from core food items of Sara Lee’s businesses. The products of Sara Lee comprise bakery, household items, and beverage body care brands etc. Majority of the sales segment of sales is made in the western part of Europe. Sara Lee has a 9%market share of coffee, making it the second highest on earth. Its sales are exceed $1.7 billion, with the introduction of the most excellent selling coffee invention in Europe. While the continent has very strong needs for specialty coffees in that area, Sara Lee altered its most excellent selling coffee pans to dish up espresso and cappuccino drinks. The bakery line for the business has not been as flourishing throughout Europe. Customers choose extremely fresh-baked bread; on the other hand, Sara Lee can only offer packaged bread. While packaged bread merely creates 12% of the bread in market situation, it is expected to enlarge to 25% by 2015. Sara Lee’s bread also has been flourishing in Spain, while, where it dominates the nations with a 54 % market share. Sara Lee is at present not in an attractive market situation but if increase the packaged bread it may be capable to capture a huge market share. While it offers low-calorie food and desserts to its clientele, Sara Lee has met the requirements of its clientele and captured a bigger market share. Sara Lee’s holds the number one brand name of product Kiwi, shoe polish, which accumulates a worldwide market share of around 63%. And also its shoe polish reports for approximately 16% of the unit’s sales. Although Sara Lee’s has the leading brand of shower, the market is gradually rising at 1%. This averts the business from taking benefit of potential incomes in the market. The company possess almost 28% market share in the production of insecticide brands that give attention to its future development in Asia. The business looks to carry on while innovating goods to capture considerable market share in that market. While Sara Lee’s has the third biggest brand in Europe of air fresheners, the marketplace has decline by above 1%. The segment has managed to accumulate 25% of the market share in numerous western European state, where it is positioned to seize share in market with its modern Ambi Pur product .Sara Lee has productively revamped its policy, focusing on modern goods and in meeting consumer demand. The positive facets fiscal to the restructuring were that sales per worker enlarged by $60, 000, whereas turned of inventory in excess of 3 additional times. With the intention of grow its profits and incomes; the company has to focus on its key businesses. Recommendations: Sara Lee has numerous positions that it can achieve by tactically increasing its productivity. The company, at present, has limited margins on its products in bakery line, particularly from its dessert stuff. Since it has considerable marketplace share from its packaged bread in North America, it should stop its dessert sales, and also the single-serving coffee producer’s sale. Development in this sector is very slow, and is not rising in the foodservice business either. By selling off its products like dessert brands, Sara Lee can invest the income of the sale in modernizing its other units. Sara Lee International must build up its body care and household brands in the US. Its air freshener brand holds considerable market share in Europe, which could be employed in North America. Sara Lee’s modernizations would be extremely successful in the growing marketplace across the Atlantic. The business can also put up for sale more of its insecticides in developing countries, where only less treatment is obtained bacteria. The business has already begun in selling beverages in retail operations, and with the recent knowledge and contacts of the food service business sector, income could easily be generated. This strategy lets the company to build up larger earnings by selling its coffee and tea in local businesses throughout Europe. If Sara Lee pursues these strategies, the business will be capable to mass revenue similar to what it had previous to its divestures. SWOT Analysis of Sara Lee: SWOT Analysis is a helpful technique for understanding the Strengths, Weaknesses, and for the identification of Opportunities and threats that an organization faces. An examination of the external and internal environment forms an important element of the process of strategic planning. Internal environmental factors to the businesses usually can be classified as strengths (S) or weaknesses (W), and the external environmental factors to the firm can be grouped as opportunities (O) or threats (T). This strategic analysis of the environment is termed as SWOT analysis. “SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors” (SWOT Analysis, 2000). Strengths of Sara Lee Corporation: One of the main strengths of Sara Lee Corporation is their strong brand equity. It is the world class manufacturer of a wide range of products, with the brand name of the company. The brand portfolio of Sara Lee includes Ball Park, Hillshire Farms, Bryan, Hanes, Kiwi, Raydox, and Playtex. The committed decentralized management of the company has efficiently carried out its corporate mission to build a brand leadership in the world of consumer packaged goods. The main strength of the company includes it broad operations of business. It has built-in a number of ways to produce and market its products. They are the market leader of the packaged meat in the industry. The company expands its business by way of acquisition in its more profitable segments. The firm has developed its fixed assets across the globe in the form of production plant. In order to expand its business and to confirm its presence globally, Sara Lee’s acquisitions are on an international level. The production plant capacity of Sara Lee is large enough to meet the demands from the consumers. Its outsourcing strategy helps them in meeting those demands effectively. The strong and healthy relation with the logistic contractors has helped them in efficient cold storage and distribution of food products. The marketing resources also contribute for the strength of the company. The success of the company clearly depends on its marketing resources. The products of the company are of superior quality. This has helped the company to grow and to gain a major market share in the industry. Its strong financial position and management resources have strengthened for the company. The company through their acquisition strategy has gained a strong position in all its businesses. 2. Weaknesses of Sara Lee Corporation: The main weaknesses of Sara Lee lie with the safety of food at its meat production plant. Sara Lee used to recall the food products like hot dogs due to the outbreak of bacteria in the plant. The recall has paved way for decrease in the stock price of the company. The lawsuit of recall has affected the company’s brand image as well as the reputation slightly. The significant obligations of debt have affected the company’s financial performance negatively. The company’s failure to live up to the mission of building long term equity to the share holders compared to that of competitors has weakened the company name. Sara Lee used to be over-dependent on few customers. This affects the long term operations as well as the turn over and earning capacity of the company. The company’s concentration of revenue on the US market is also the weakness of the company. The net sales of the company are lower than Kraft but remains double than that of Nestle. The company’s pricing strategy is heavily dependent on the pricing strategy of Wal-Mart. 3. Opportunities of Sara Lee Corporation: Sara Lee operates as a matured food industry which is diversified and which operates internationally with a restricted potential for growth of the domestic market, particularly in the event of tight competition from major players in the industry. International market always provides new opportunities for business firms. The Sara Lee has penetrated into the Latin America and Europe market in order to take advantage of the opportunities in those markets. The Uruguay Trade Agreement has provided a greater opportunity for more penetration into the global market. The other opportunity for the company is their product innovation. The advancement of the computer technology and e-commerce provided a lot of opportunities in the product sales through internet. Sara’s Hanes products are available on online for the customers. The tie up with an online company, Priceline.com, has provided an opportunity for offering grocery shopping services to customers through online. This agreement has also given it the opportunity to advertise its food products on their website. The coupon offerings through online is also a greater opportunity. The reduction in the prices of turkey meat helped the company to lower its production costs. This has helped the company to maximize its resources. The misfortune related to the food safety provided an opportunity to become the leader in research of food safety, education and technology. 4. Threats to Sara Lee Corporation: The company has lost its market share due to the issue of food safety, and lawsuit of its recall. This has become a threat to Sara’s future sales and relationship with the customers. The stock price of the company has also diminished as a result of this issue. The other threat that the company faces is regarding Government regulations. The outsourcing strategy of the company related to its production, has given bargaining power to the suppliers. This may give them an opportunity to identify the product differentiation strategy and there is a chance for these suppliers to come into the industry as Sara’s competitors. The changing preferences of the consumers also arise as a threat for the Sara Lee. The company has to identify the consumer needs and constant monitoring of the consumer need is essential. It has to meet the challenges in the market. The key competitors of Sara Lee Corporation are Nestle, Paperkraft, ConAgra, Campbell Soup etc. Porter Five Forces Model: The use of Five Forces models is to analyse the environment of the business. A marketplace can be an unbalanced environment. An organizations capability to turn earnings is determined by Porter's Five Forces of business analusis. The Porters Five forces include: Power of supplier Power of Buyer Competitive rivalry Threat of substitutions Threat of new entry “The potential of these forces differs from industry to industry. These forces jointly determine the profitability of industry because they shape the prices which can be charged, the costs which can be borne, and the investment required to compete in the industry. Before making strategic decisions, the managers should use the five forces framework to determine the competitive structure of industry” (Porter’s Five Forces Model of Competition, 2008). .   These forces contrast and compare side by side, they establish the value for the product or the service of the business. It represents suppliers, customers, distributors, substitutes, and new entrants. Besides looking at the five forces in detail, it is essential to allow one to close to the factors that encourage an industry, its present profit levels and the business future successes.  The Porter's five forces permit for probable changes in the future such as different suppliers, substitutes, channels or competitors.  Analysis of Five Forces Model: Power of the Buyer: The power of buyers is stronger in a retail industry. The profitability is more in buyers being able to compel down the prices of products and thereby decreasing the profits of business firms that supply the product. The power of the buyer will be higher in the market. As there are many, large buyers each and every one is very vital to the firm. The buyers can simply switch over to other providers, and this phenomenon brings to focus the fact that supplier needs to provide a high quality product or service at a reasonable price so that buyers are in a position to take more from the firm. Sara Lee Corporation mainly focuses on bakery, beverage and meet industry. Power of the Supplier: The suppliers’ power in bakery, beverage and meet industries are more flexible. The company businesses in that sector make earnings because the suppliers can determine the rules and a regulation on the type of business is done. The suppliers will be more potential in the market  because the suppliers are comparatively  few of them, buyer have less  alternatives for buying the product,  or changing  to another supplier which may be very difficult and expensive. The supplier can threaten to buy the dynamic firms so it is strong bargaining position Competitive Rivalry: There are a number of competitors in the market. The main competitors of Sara Lee Corporation are Wallmart, Nestle etc. There are a large number of similar firms competing in the market. The rivalry in competition measures the existing degree of competition among the firms.   Sara Lee Corporation supplies the beverages, bakery and meet products to customers; it is food chain business and major competitors are there. When competitions become the company invests huge amounts for their advertisement and prepare strategic decisions. At that time the capability level of the organization is highly utilized. The existing firm will be competitive, and will try to increase the demand for the product also boosting the sales. The higher the degree of competition rivalry more difficult for the existing firms to create huge profit. Threat of Substitutions: The threat of substitutions is measured easily by way of keeping track of buyers changing to another product that the similar thing. In certain cases the threat generates high profit of the organization. In Porter's five force model, the substitute goods refer to products in other industry. The threat of substitutes exists the demand for the product is affected by the changes in prices substitute product. A product's price changes is affect by the substitute products as additional substitutes becomes accessible, the demand of the product becomes elastic since the consumers have more alternative choices. A close substitute of the product constrain the capability of the firms in an business to raise prices Threat of New Entry: Porters five forces model, the threat of new entries is only current rivals that create a threat to firms in a business; the opportunity that the new firms can enter the business also affects the competition of those firms. In porter’s model, any firm has to be capable to enter and quit a market, and free entrance and exit exist, then profits of the company always nominal. The reality, industries enjoy the characteristics that keep the huge profit levels of the firms in the market and reduce additional rivals from enter the market. Reference List Lee, S. (2007). Case Study: Sara Lee. mThink LLC. Retrieved from http://mthink.com/revenue/content/case-study-sara-lee Porter’s Five Forces Model of Competition, (2008). Management Study Guide. Retrieved from http://www.managementstudyguide.com/porters-model-of-competetion.htm SWOT Analysis, (2000). Marketing Teacher.com. Retrieved from http://www.marketingteacher.com/lesson-store/lesson-swot.html#       Read More