Internal environmental analysis
Overview of Sara Lee’s market performance and developments
Every business is driven by key objectives that it uses to evaluate the extent to which it has progressed since its inception. These key factors are Market share, profitability and value of a share. Sara Lee Corporation‘s management used these key indicators to assess its progress until they resolved to strategize its business segments to manageable sectors. (Thompson & Gamble,2010).
Sara Lee has extended its growth over the last 70 years through acquisition of different enterprises to increase its pool of risk and projected revenue basket. Appointment of Brenda Barnes to the chief executive officer’s position in 2005 brought a new dawn for the company. She utilized her strategic skills to retrench sluggish business units and concentrated on manageable units. She projected a reduction in sales revenue from 19.6 to 12.3 billion. Additionally, her anticipation was that the strategy would revamp the company’s revenue to a high of $14billion and increase the profit margin to 12 percent at the end of financial year 2010. However, the realized revenue and profit folds fell short of the expected targets.
They key sectors whose operations were sold –off to other companies with intent to salvage the recurrent losses in the sectors include Direct selling, Us Retail coffee, European apparel, European nuts and snacks, European rice, US meat snacks, European meats and Sara Lee branded apparel.
COMPANY FINANCIAL POSITION
Income statement depicts the capability of a company to sustain its going concern concept by catering for its daily operations and retaining a sustainable operation profit. Income statement is concerned with the sales earnings against the company’s expenses.
In exhibit 1, the company’s divested business indicate positive growth with an overall After tax income of $221 in the financial year 2004.However, the company continued to record losses the following year prompting Brenda to adopt retrenchment strategy. The revenue from the sale of business units amounted to $441 million, which accumulated to approximately $1.3billion after deducting payments of unfunded pension liabilities at Sara Lee Contraulds. This was far short of the expected $ 3 billion income generated from the sale of business units. (Thompson & Gamble,2010).
The company has continued to record a progressive increase in net income despite the global economic conditions. It recorded a net income of $527, an increase from $324 from the previous year. This indicates that the operation expenses were stabilizing form the sale of business units that saved the company from escalating external diseconomy of scale.
After Brenda implemented her strategy, Non –current liabilities had reduced to approximately $49987, an indication that non-performing business units that had been sold off had reduced the financial liability. (Thompson & Gamble,2010).
Consequently, total equity investment increased to $ 3,229,134. Brenda’s strategy to boost sales and profitability after the loss of business units yielded positive results by reducing the total value of debt to $2781, an indication that Long-term and short -term debt that had accrued due to excessive borrowing to sponsor operations of non-performing units had reduced.
In 2008, Operating income before tax was $85million and progressively increased to $614 and $1093 in the subsequent years of 2009 and 2010. Profitability is an indicator of a company’s sustainability and, therefore; this company is not susceptible form liquidation.
Industry Financial numbers and explanation
Total assets: $8836 This value indicates the value of the company fixed and current assets as at June 2010.These are resources owned by the company.
Total debt: $2781 This is the amount that the company is owed by creditors and other interested parties
Dividend per share: $0.44 This indicates the company's value in the stock market
Net operating income: $642 This is the income that sustains the company’s daily operations as at June 2010
Financial problems or Success statements
The major financial concern is the inability to achieve the projected $3billion savings on the cost and attain a revenue amount of $14billion. However, the management succeeded in saving cost and service delivery through Project Accelerate. The project accumulating an amount of $180 million and is projected to rise to $360million in the future. (Thompson & Gamble,2010).
Sales/ Company and Industry growth Including regression
Net sales reduced from $1723 to $1123 between 2004 and 2005.This decrease resulted from a retrenchment of departments that led to decrease inventory and sales .Net sales have since been fluctuating due to the strategic approach by Brenda Bardes to save on cost by regulating the inventory.
Market share Vs Industry and competitors for five years
North American food service division had a market share of 65%in liquid coffee and tea, 52% in pies and 19% market share in cakes for food service customers. In2010, Sara Lee’s Senseo single- serving coffee makers were the second-best sellers in Europe, accounting for a 40% market share. International Household and body care division dealt with Kiwi brand that had a 30% global market share. In addition, Sanex was the leading shower product in Spain, Denmark and France. Analyst project an income of approximately $300million in 2011. However, this trend of market dominance is likely to reduce due to the increased number of innovators in these industries. (Thompson & Gamble,2010).
One of the major successful marketing strategies was customization of coffee brands in different markets especially in its Leading European market. In addition, the international Bakery division had adopted a strategy of selling packaged and branded breads in Spain, a decision that is projected to yield positively despite the initial impediment by recession during its inauguration.
Marketing problem or success statements
The major marketing problem that Sara Lee is facing is price strategy to maintain its customers and also tap new brands of customers who prefer their products to their competitors. Another challenge arose when the Sara lee management publicized the company and rebranded to Hanes Brands Inc. It was difficult to convince the customers of the new development, an issue that has haunted the company since then .However; the customers are projected to acclimatize with the new change within the next one year.
Identification of structure and top management
Sara Lee Company is divided into the executive body led by Chief executive officer and other departmental divisions that specialized in different products. In addition, the company had a strategy of appointing an interim Chief executive officer. Sara Lee was the C.E.O while Smits would be the Chief Executive. The departments are International bakery, North American Foodservice, International beverage, International household and body care, North American retail North American Bakery. In addition, The management established Project Accelerate in 2008 that amounting to $180 million, to enhance attainment of set objectives. (Thompson & Gamble,2010).
Evaluation of mission, Vision or Corporate goal
Sara Lee has acted within its mission to deliver quality products to the clients and equal to their tastes and preferences. Additionally, Brenda and the top management re-strategized its mission into three key elements; Profitability, market share, sales. These elements rhyme with the corporate goal to enhance efficiency at all quarters by reorganizing the departments to manageable and cost efficient magnitudes.
Management performance Assessment
The management rating was characterized by its strategy to re-organize the departments into six divisions of work. This approach has saved cost and enhanced efficiency. In addition, the Project Accelerate is a milestone to the management.
Management problem or success statement
A major challenge to the management is the inability to achieve the set revenue targets. This goal has been hampered by the cost of selling and marketing different products in different parts of the country.
The management also faces a challenge to coordinate the six departments to ensure that they work and achieve equal goals.
One of the major key competencies is innovation. For instance, The Company has invested in customizing coffee machines and branded them to the customer’s preference.
Long-term strategies and tactics
The company plans to boost its premium brands such as Espresso and Senseo to be the driving forces of the company’s reputation and revenue. Additionally, the management is strategizing in regulating inventories in its vast markets to enhance efficiency in the company delivery. Smith plans to repurchase $360,000,000 shares of common stock form Household and body care business to increase shareholder value.
Short-term strategies and tactics
One of the major short-term approaches is the consumer satisfaction goal. This goal is short-staged because it is a pillar to the posterity of the company. Additionally, pricing policy and health safety of products is essential to retain and attract existing and new customers.
Identification of top Key Performance Indicators (KPIs)
Profitability: The company has been on positive trend in profits having recorded $642million; arise from $225million the previous year
Efficiency: Establishment of Project Accelerate is an indication of performance enhancement.
Market share: This is the proportion of consumers that a company serves. For instance, North American Foodservice accounted for 65% of the market share in supplying liquid coffee and tea and 52% in serving pies.
Consumer satisfaction: If consumers are satisfied by the products of the company, compliments and sentiments can be used to assess the excellence of the products) of a company.
Wild, J. J., Bernstein, L. A., & Subramanyam, K. R. (2001). Financial statement analysis. Boston, Mass: McGraw-Hill.
Thompson, A. A., & Gamble, J. E. (2010). Sara Lee corporation in 2011:Has its retrenchment strategy been successful?
Peri, G. (2012). The Effect Of Immigration On Productivity: Evidence From U.S. States.Review of Economics and Statistics. doi:10.1162/REST_a_00137