Smucker's in 2011: Administrative Policy - Case Study Example

 Smucker's in 2011: Administrative Policy Introduction The J.M. Smucker Company got founded in 1897 by Jerome Monroe Smucker. Jerome started by selling apple butter as his first product, which he created out of a family recipe. The company’s headquarter gets located in Orville, Ohio. The company has been run by family generations over the years. The company focuses on manufacturing and producing jellies, jams, and preserves. The company’s corporate strategy is to own and market the leading food brands in North America (Adrian & Rieple, 2007). The company aims at achieving its corporate strategy by making strategic acquisitions, introducing new product lines, and growing the company’s existing brands. Through acquisitions and expansion of the company’s product lines, Smucker’s has attained to increase its size and cash flows. However, as late as 2011, a section of analysts still remain apprehensive over the size and market contribution in the processed foods industry. This paper aims at analyzing the key issues regarding the Smucker company, and providing recommendations. Issues Smucker has faced an increase in price competition in the processed food industry. Branded manufactures such as Smucker experience pressure in agreeing with rival brands and retailers over profit margins (Adrian & Rieple, 2007). The slow growth rate the food sector coupled with the speedy consolidation of retail chains enhances the buying power and shelf space allocation by supermarkets. Supermarkets have achieved to provide effective market and attractive prices for their product brands. As private label goods increase their market share, the competition on product price and cost increases for branded manufacturers. The Smucker Company appears to limits its target market and has not focused on expanding globally. The company focuses majorly on its markets in America and Canada. Limiting the company’s trading potential to North America could prove detrimental to the company’s overall business objective. For instance, the economic downturn of 2008 profoundly affected the US compared to other parts of the globe (Adrian & Rieple, 2007). This provided a vast dent on the company’s finances since it does not have a higher market share outside North America. It is vital for the company to avert such risks by looking at markets and resource outside North America. Another issue arises from the acquisitions carried out by the company in its objective to become the leading brand in the market. Smucker has acquired a variety of companies over the last decade in the 21st century (Adrian & Rieple, 2007). Acquisitions pose problems when it comes to employee integration and culture issues. Smucker must be keen on the transition process to check that employee productivity does not reduce. Reduction in employee productivity coupled with a high employee turnover may result to increased operation costs for the company. The transition process during acquisitions may also affect the company’s organizational culture. Organizational culture plays a crucial role in company development. The company must focus on inculcating its organizational culture into the employees from the acquired companies. This will assist to uphold and promote the company’s reputation as well as ensure the sustainable development of the organization. Strategic analysis This paper will provide analysis of the Smucker Company based on Porter’s five force and SWOT analysis. Five force analysis Threat of new entrants: the processed foods industry is in its mature stage thus implying that the threat of new entrants in the industry is extremely low. The consolidation of many companies in the industry through mergers and acquisitions also makes it difficult for new entrants in the industry. The Smucker Company faces limited threat from new entrants as it is also successful at differentiating its products. Rivalry among competitors: since the processed foods industry is in its mature stage, competition is quite high (Adrian & Rieple, 2007). The nature of the consolidated firms implies that few and large firms exist in the industry. This further increases competition as few large firms compete for the market share. Bargaining power of buyers: in the processed foods industry, supermarkets enjoy a high buyers bargaining power. Supermarkets have increased their manufacturer demands, and also receive fees towards allocating shelf space for manufacturers. Bargaining power of suppliers: the industry also experiences a high suppliers bargaining power. This is advanced by the commodity nature of inputs, and the force of a poor growing season due to input price. The Smucker Company lacks its own suppliers and distributors. The company does not produce its own fruit or prepare its own containers and labels (Adrian & Rieple, 2007). Smucker, as a result, gets directly affected by its suppliers. If raw materials experience a shift in prices, Smucker will have to adjust their prices accordingly to cover the change. Threats of substitutes: The Smucker Company faces a high threat of substitutes in the processed foods industry. There are many alternatives for the company’s products in the industry. Many food companies continuously seek to improve and develop new product, which meet consumer expectation. For example, there exist various substitutes for fruit spreads such as cream cheese, butter, and peanut butter. SWOT analysis Strengths: The Smucker Company thrives from its ability to keep pace with the industry through acquisitions. The company has managed to acquire different food companies that specialize in different production lines (Adrian & Rieple, 2007). This has allowed the company to become flexible and offer a variety of products to meet their customer requirements. Acquisitions have also allowed the company to regulate its start up costs. It is cheaper to buy a company than build a brand from scratch. Weaknesses: the company has access to a limited market globally. Smucker majorly concentrates on its North American market. It faces a competitive disadvantage in the global market. Opportunities: the company has managed to increase its market share following the buyout of Multifoods international. The company has an opportunity to increase its profitability by targeting baby boomers that look for sugar free jelly and peanut butter substitutes. Threats: the company faces increased competition from industry players such as Kraft and Nestle. The company also experiences a weak bargaining power that arises from supermarket chains that take up 40% of total grocery sales. Recommendations As part of their corporate strategy to own and market the number one food brands, the Smucker Company should give attention to the following recommendations: The company should continue its strategic acquisitions and look at expanding globally. Smucker has been successful at acquiring businesses and expanding in North America. The company should continue in the same mould and look to develop its global market. The company can develop new acquisitions and develop factories in markets such as Europe. Widening the company’s market can help to improve the company’s profitability (Adrian & Rieple, 2007). Smucker must focus on employee education programs. Since the company keeps acquiring new businesses, it has to focus on employee training to ensure it maintains a high level of productivity. Through employee education programs, the company must inject its organization culture into the newly acquired employees. This will ensure that the company maintains its levels of quality and productivity. Smucker should focus on undertaking research and development to come up with new products for their markets (Adrian & Rieple, 2007). There has been a shift in consumer tastes as people become health conscious. For example, there has been an increased demand for low carbohydrate products. Smucker can dedicate its efforts towards developing products in this line of demand. This will help the firm to increase its customer base and remain relevant in the marketplace. Smucker should aim at manufacturing house brand products to ensure they enjoy scales of economies. The company should manufacture some supermarket brands that they too can produce. This will ensure they get to acquire potential market share. Reference Read More