ANALYSIS OF THE CASE
Sara Lee retrenched seven of its business units in 2006 in order to focus its resources on its more profitable industries. The company’s goal is to boost its sales lines by at least 2 percent and increase its profit margin to 12% by 2010. By developing three competitive capabilities in each of its remaining business units, Sara Lee looks to improve its net profits within the next few years. Summary of the case
This case study provides an evaluation of Sara Lee Corporation and particularly its operations of product lines available through the Wal-Mart stores. To begin with, an effective SWOT analysis of the company was conducted where strengths and opportunities are identified while addressing possible threats and improving its weaknesses to avoid giving the competition an aggressive advantage. Marketing requires effective identification of issues as a key factor in devising the best methods of addressing them. Therefore, Kirk Nelson identifies the Basic Hipster style to be a major problem in the market because it was not doing well. Effective establishment of the best possible solution is therefore critical to maintain the corporation’s market share for the Wal-Mart Account. This analysis generates key alternatives that Kirk Nelson as the Sara Lee Wal-Mart Girl’s Panty analyst should consider in getting out of the current deadlock.
Sara Lee Corporation is a fortune 500 company listed on the NYSE. They mainly mass market their diverse product lines of food and beverages, branded apparel, and household products through large retailers like Wal-Mart and Target, but also smaller store as well. Sara Lee, under the Hanes branded apparel operates a product line of underwear called Girls Panty (GP) targeted girls ages 4-12 that include 3 cuts or styles: FashionBrief, FashionBikini and the BasicHipster. The Girl Panty line in Wal-Mart had to meet its sales and supply standards. Sara Lee Corporation maintained high sales due its ability to analyze its products on the basis of the market demand and thereby maintaining the customer’s preference. Divested Businesses Analysis
Sara Lee divested seven of its units, including: direct sales, U.S. retail coffee, European apparel, European snacks, and U.S. and European meats. The company followed a strategy which allowed it to increase its corporate profits, since most of its business units it retrenched were unprofitable. By 2006, five business units had negative net profit margins and negative operating margins. Four of those units had negative margins of more than 10%, with different units seeing steady or sharp declines in revenues in profits since 2004. The only two profitable units were the direct selling unit and the European snack lines. These two lines were seeing declining revenues and operating margins, except in 2006, when both lines increased their margins. Divesting the snack business was a correct decision, since it was only producing net profits of $3 million, which would not help the business to increase its shareholders’ wealth. Plus, the company received a $70 million after-tax gain, more than 22 times the current net profit. Selling its direct sales business was not a good decision, since it was still drawing a 27% profit margin and income of $54 million. The business compliments its current household and body care line within Sara Lee International. The unit exposed the company to other markets, while it could have allowed the company to find potentials for its other products in those markets. Though the direct selling line was still profitable for the company, Sara Lee received a net gain which was 4 times the unit’s current profits. After divesting these seven units, Sara Lee gained $440 million, a $700 million increase from its total losses in 2006. Sara Lee’s decision to spin-off Hanesbrands is questionable. This sector of Sara Lee did not correlate with its other North American business, which...
Please join StudyMode to read the full document