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GROUP 11 | SECTION 2Keerthi P.DM 15267Rachit Bhatnagar DM 15244Sarvagya NayakDM 15250Seerat Ghuman DM 15251Vaibhav AgnihotriDM 15262Sara Lee: A tale of another turnaroundCase Analysis | Strategic ManagementIntroductionFounded in 1939 by Nathan Cummings with the acquisition of C.D. Kenny CompanyStarted working as a wholesale distributor of sugar, coffee and teaPurchased close to 100 family owned businesses by 1970 Sales doubled to $2 billionBy 1975, small acquisitions were sold off and despite some performance issues, the company did well towards the end of the 1970sFrom 1970-1980, non food products contributed to 50% of the income and 30% of the salesPost 1980s, the focus shifted to production of durable goodsFrom 1985 to 2000, sales grew from $9 billion to $20 billionTowards the end of the 1990s, the company identified its structural problems and sought to resolve themWhat went wrong?Internal:Portfolio of businesses due to continuous acquisitionsHighly bureaucratic and Decentralized management led to redundant costsIncreased competition among the different brands and divisionsComplex organization structure led to deteriorating relationship with the retailers no single point of contactLost touch with the preferences of consumersUnable to manage risk increased commodity and energy costs

External:Recession in 2001 affected the key markets of Sara LeeLack of innovation led to loss of market shareIncreased bargaining power of the customers - forced to lower the pricesUnable to identify the change or trends in consumer preferences and choicesConsolidation of retailers led to low pricing power

Turnaround September 1997PositivesDeverticalization reducing the degree of vertical integrationShifting from manufacturing and sales orientation to marketing the firms top brands$3 billion shares were repurchased by the sale of manufacturing facilitiesOutsourcing activitiesThe stock prices went up by $6 when this turnaround was announced

NegativesDecember 1998 Contaminated meat caused widespread illness.Sara lee had to recall 35 million pounds of contaminated meat food Settlement of lawsuitsThe stock prices fell and the growth from 1996-2000 was only 2.2%Turnaround May 2000PositivesReshaping focus on branded consumer packaged goods segments in which the company can enjoy leading category positions around the world Streamline company structure and increased value for shareholders IPO for Coach, sold Champion atlectic apparel and International Fabrics division of Courtaulds Cost cutting efforts layoffs (10% of the total employees) and elimination of non performing brandsBy 2003, the number of regional brands was reduced to half

Negatives Unable to manage the investments in its non core competency areasNon centralized approach led to inefficiencies and decline in the market share unlike P&G which had a highly centralised corporate structureNo increase in the stock pricesLack of product innovationUnable to focus on the key brands to facilitate growthWay ahead Transformation Plan (2005)New Organization structureNorth American Retail bakery, packaged meats and coffee retail businessNorth American Foodservice bakery, coffee and meats foodserviceSara Lee International bakery and beverage business outside North AmericaNorth American food and beverages businesses to be located with corporate staff and headquartered in Chicago share best practices and pursue growth along with development opportunities for the employees

Changes in the PortfolioDisposition of almost 40% of company revenuesSale of Branded Apparel, European Apparel business; Meats Europe; Direct Selling and US Retail CoffeeConcentrating on small businesses that can result in growth

Operational EfficiencyReduce the cost structureIncrease R&D and Marketing spend for small brandsImproving the IT and processesReduction of manufacturing capacity in North America retail businessCost saving can be used for increasing the marketing spend