This paper will discuss the Sara Lee Case Study. It will identify how diversification is used by Sara Lee in its business strategy. It will evaluate how effectively it is being implemented in general and as it impacts shareholder wealth and risk management. Finally, it will provide recommendations for improvement of diversification based on your evaluation. Sara Lee
Established in 1942, Sara Lee has had a history of acquisitions. ("Sara Lee," 2012). Before their decision to bring Brenda Barnes on board as CEO, Sara Lee was a company that “bought anything they thought they could make money in” (Warner, 2005). When Barnes joined the company in 2005 she led the company in their biggest reorganization to date. How Diversification is Used by Sara Lee
Brenda Barnes announced that she would lead the company in a new direction when she came on board. This bold new plan was to better align Sara Lee’s multiple business and to sell off any business that did not fit into their new corporate structure. From this point forward, officials decided that they would focus on foods, beverages and household goods. This plan was risky because Sara Lee determined that they would get rid of their businesses that showed a weak performance or that did not fit into one of the new focus groups. (Thompson, Strickland, & Gamble, 2010). This type of diversification is called related diversification. Related diversification is “A process that takes place when a business expands its activities into product lines that are similar to those it currently offers.” ("Business Dictionary," 2012) This is related diversification because the businesses are all concerned with foods and beverages. There is also a similar type of value chain for these products. The methods of producing, marketing and distributing these products are very similar. Evaluation of Strategy
It would be difficult to say that the efforts of Sara Lee to use this diversification strategy have been a...