Sara Lee Corp. in 2011:
Has Its Retrenchment Strategy
1. What is Sara Lee’s corporate strategy? How has its retrenchment strategy changed the nature of its business lineup? Sara Lee corporate strategy was to implement acquisition strategies which would enlarge their geographical coverage in order to expand into new business classes. When the company started it was a small wholesale distributor of several items: coffee, tea and sugar and over time Sarah Lee acquired food processing, packaging, distribution and the retail food business. Over 40 years, the Sarah Lee Company acquired related and non-related business. Sarah Lee sold 8 businesses that were looked upon as non-strategic. This initiative was expected to generate combined net after tax proceeds in excess of $3B. The leaders of Sarah struggled over time to manage broadly diversified and geographically operations. So it was decided in order for the company to stay focus it would concentrate on the grocery portion and the upcoming trend of the single serve coffee machines. Therefore, Sarah would also focus on the single serve coffee line business, which they believed would be profitable for the company and shareholders.
The retrenchment strategy changed the nature of its business lineup from a small wholesale distributor to acquiring retail food business. The retrenchment strategy would allow Sarah Lee to focus even more closely on the food, beverage, and household products. Management believed in order to save cost and to be more profitable they would concentrate its financial and managerial resources on a smaller number of business segments in which market prospects were promising and by Sara Lee’s brands being well known and well positioned would help them to stay in alignment with the strategy. Sarah Lee also executed an outsourcing strategy known as Project Accelerate. It’s a company-wide cost saving and productivity project that focused on outsourcing, supply chain efficiencies, and overhead reduction.
2. What is your assessment of the long-term attractiveness of the industries represented in Sara Lee Corp.’s business portfolio? In 2008 100M revenue, with 10-12 core products was recorded as showing an increase in market share in 2010. However, in between 2008-2010, divisional sales had grown faster than any other food processing company; Sarah Lee’s market share had increased from 9.2% in 2009 to 12.3 in 2010. Keeping in mind, the state of the economy along with the size of the household’s, it usually cheaper for people to eat their meals at home and bring their lunches to work. By consumers purchasing lunch meats and other foods products of the well know brand - Sarah Lee products would mostly remain high. Therefore the retail, foodservice, and other related industries represent the most attractive long-term business portfolio growth for the Sarah Lee Corporation.
3. What is your assessment of the competitive strength of Sara Lee Corp.’s different business units? By Sarah Lee staying focus in the food industry and having less or in some cases no focus on non-fitting industries allowed for value chain match-ups in the form of production technology, shipping logistics and customers. This direction offers opportunities for skills to be transferred, cost and brand sharing including the production of bakery, retail and foodservice goods because many of these are products are similar or the same products. By having product similarity the Sarah Lee Company can manufacturer a large batch of the same product, costing less than having to set up and run a separate product line. North American Retail: market-leading brands
30% market share in smoked sausage
23% market share in hot dogs
14% market share in lunch meat
58% market share in breakfast sausage
22% in frozen desserts
55% in single-serve coffee
North American Fresh Bakery:
Sales increased from $91 million in 2003 to $2.1 billion in 2009...
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