Pillsbury Development

Topics: Costs, Cost, Value added Pages: 6 (2163 words) Published: May 3, 2013

From flour milling, to branded bakery goods and then becoming a subsidary of Grand Met, Pillsbury has shown they are capable of adapting to new circumstances. However these changes have affected the environment that Pillsbury must compete in, forcing them to find new ways to achieve competitive adavantage. Pillsbury must altar their strategic focus to ensure compertitve sucsess. They need to eliminate inefficiency to ensure all activity is adding value to their products . Pillsbury needs to be sure they are costing their entire process effectivley. By understanding their environment, knowing their strategy, leveraging opportunities across their value chain and using Activity Based Costing (ABC) Pillsbury will see bottom line results. This report will discuss how to put this alltogether to ensure Pilisbury dominate their industry.

Strategic Focus

Pillsbury's parent Grand Met had made it their goal to become the world leader in branded foods and drinks. Pillsbury fit well into this scheme as their brand was already well identified in the market. Pillsbury was operating in a highly competitive environment with other well known brands fighting for market share. Because Pillsbury was a flour milling firm as well, they were also competing with other milling firms. They needed to be producing flour for cheaper than they could get else where to make it worth while. Pillsbury had a well established brand that could be marketed to consumers directly, they were relying on this for competitive advantage and were succsessful in that. This was also a convienent focus for Pillsbury, as this way they did not have to worry about relationships with their customers as the consumers of the product were only concerned with what brand they purchassed from the retailer.

Pillsbury had thought that a strong brand image was enough for them to competively strive in the industry. However it was becoming apparent that brand images were not as important as they hoped. More than 50% of purchase decisions were made in store, so shelf avaiablity and price were more influential on consumer purchase decisions. That was a lot of 'purchase decsiosns' Pillsbury were missing out on due to their strategy. Up and till this moment Pillsbury had not been concerned with forging relationships with the retailers of their product, this was now essential for Pillsbury if they wanted competitive sucsess. They needed to altar their strategy to focus on alliances with their customers. Pillsbury realised that their cutomers were operating in a competitive industry as well. They could use this to their advantage and create relationships that would help both of them get ahead. In order to form these alliances with their customers, they needed to produce better products than their competitos and they needed to do it at the cheapest price. To achieve this Pillsbury had to elimante any inefficiency across their entire process and focus on core businesses. But of course it wasnt going to be that simple. Compettive pressures had caused other companies to take a look at their entire food chain. Across industries the ECR project errupted, every one was trying to reduce cost and inventory levels and still meeting consumer needs. Everyone was focussing on eliminating inefiiciency throughout their organization. Pillsbury needed to be prepared for this evolving never ending competitive environment, they needed to look at their value chain to see where they could improve competiveness.

Value Chain Analysis

Pillsbury were producing cost savings in iscolated processes but not through out the entire process. Research has indicated that focussing on areas independtlydoes not bring bottom line benefits. As the product moves through the chain, value must be added to it. If value is not being added to the product, then it is pointless. When it became apparent that they were not the low cost producer of flour, they chose to focus their assets on more...
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