Sara Lee Case Study Essay Example
Synopsis
As Sara Lee Corporation’s CEO announced a multiyear strategic plan to transform the company into a leaner and more tightly focused food & beverage company, the central component of the company’s corporate restructuring plan was the divestiture of weak-performing business units and product categories accounting for $7.2 billion in sales (37% of Sara Lee’s sales).
By divesting the company of poorly performing business units, and retrenching to a narrower diversification, Barnes envisioned that concentrating financial & managerial resources on a smaller number of financially promising business segments, in which Sara Lee’s brand was well positioned, would increase the company’s competitive advantage over the long term.
Following retrenchment, the second phase of Barnes’s plan was to drive the company’s growth through programs aimed at reducing overhead, increasing value chain activities; and boosting the company’s sales, market shares, and profitability of core businesses & key brands.
While it was believed that the retrenchment & post-retrenchment strategies would enable revenues to $14 billion by FY 2010, and operating profit margins to increase by 12%, the problem that Sara Lee encountered was that it missed both its revenue and operating profit margin projections for FY 2010, as revenue’s increased only to $10.8 billion, while profit margin’s only had improved to only 8.5%.
Considering the company’s failure to meet its 2010 profitability projections, it remained unclear whether or not the retrenchment strategy had worked. Therefore, management should assume a worst-case scenario, and devise a plan to implement a second retrenchment strategy, and further restructure the company in order to realize its profitability goals. Strategic Analysis
At the outset, Sara Lee’s corporate strategy was to divest itself of non-key businesses, and focus on core business markets where growth was steady or strong. Sara Lee would focus
As Sara Lee Corporation’s CEO announced a multiyear strategic plan to transform the company into a leaner and more tightly focused food & beverage company, the central component of the company’s corporate restructuring plan was the divestiture of weak-performing business units and product categories accounting for $7.2 billion in sales (37% of Sara Lee’s sales).
By divesting the company of poorly performing business units, and retrenching to a narrower diversification, Barnes envisioned that concentrating financial & managerial resources on a smaller number of financially promising business segments, in which Sara Lee’s brand was well positioned, would increase the company’s competitive advantage over the long term.
Following retrenchment, the second phase of Barnes’s plan was to drive the company’s growth through programs aimed at reducing overhead, increasing value chain activities; and boosting the company’s sales, market shares, and profitability of core businesses & key brands.
While it was believed that the retrenchment & post-retrenchment strategies would enable revenues to $14 billion by FY 2010, and operating profit margins to increase by 12%, the problem that Sara Lee encountered was that it missed both its revenue and operating profit margin projections for FY 2010, as revenue’s increased only to $10.8 billion, while profit margin’s only had improved to only 8.5%.
Considering the company’s failure to meet its 2010 profitability projections, it remained unclear whether or not the retrenchment strategy had worked. Therefore, management should assume a worst-case scenario, and devise a plan to implement a second retrenchment strategy, and further restructure the company in order to realize its profitability goals. Strategic Analysis
At the outset, Sara Lee’s corporate strategy was to divest itself of non-key businesses, and focus on core business markets where growth was steady or strong. Sara Lee would focus