Campbell’s Soup Company Case
Mgt 5320 Organizational Theory & Behavior
Dr. Ron Stephens
April 11, 2001
The Campbell’s Soup case covers a period of time from 1980 through approximately 1994. During this time two CEO’s with differing business strategies and organizational structures led the company. In the case and under the direction of the first CEO Gordon McGovern, the most important problem was his over-diversification of the company that led them away from their core competencies. McGovern created a complicated hybrid organizational structure that resulted in a lack of inter-divisional communication, increased conflict and competition for limited resources. Although the direction under the next CEO David Johnson began to refocus the company on its core competencies, his organizational restructure did not fully support the international growth strategy across all product lines or divisions.
DATA AND ANALYSIS SUMMARY
Across the globe Campbell Soup Company sells more than 2,000 products and manufactures in more than 40 nations. The flagship of the company is the red-and-white label on its canned soups. Its corporate strategy has evolved with each change in leadership and its diversification strategy has shifted as each new CEO pursued a different course. To succeed completely in the marketplace, a company must realize that the overall environment and customer preferences are not static, but constantly changing. How can a company survive in this versatile business world? How can it meet the demand in the marketplace? Any company must understand and analyze the whole environment in order to find the right direction to effectively and efficiently utilize the company’s limited resources. In 1980 when Gordon McGovern took over, Campbell’s Soup Co. was organized into six divisions; Campbell’s U.S., Pepperidge Farm, Vlasic Foods, Mrs. Paul’s Kitchens, Other U.S. Business and International divisions. Each unit was widely diversified with several having similar, if not competing, products. Campbell’s U.S. accounted for 50% of corporate revenues and was divided into eight profit centers, while the majority of other business units also maintained a high market share of their own products. The Other U.S. division consisted of several unrelated, unfamiliar businesses compared to the core food products units, including restaurants and fitness equipment. Under the umbrella of the six divisions, McGovern restructured the company into 50 autonomous strategic business units (SBU’s). This decentralization facilitated entrepreneurial risk-taking and new product development. He gave each manager leeway to develop any new products to grow the unit, even if the new products were closely related to another business unit’s products. McGovern believed that managers would be more creative and venturesome in developing profitable new products using this approach. He supported this with a compensation plan to reward these efforts. From a marketing aspect, McGovern’s strategic focus was on the consumer. Consumer hot buttons such as nutrition, convenience, price, quality and uniqueness were identified, and responses to consumer perceptions were promoted. He developed several key business unit strategies to support his focus on the consumer: □ Improve operating efficiencies
□ Develop new products to capitalize on consumer trends
□ Update advertising for new and established products
□ Continue emphasis on high production standards and premium quality products. Finally, the production aspects under McGovern stressed the importance of high quality. He believed that if Campbell’s couldn’t produce quality, they should get out of the business. This concept was instilled in every employee at every operation. Market considerations and consumer trends governed machinery and production capabilities. The David Johnson Era began in 1990....
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