Reference no: EM131520857

Apply appropriately Strategic Management concepts and frameworks in order to address the areas specified in the assignment. There should be also a clear evidence of research and reading, with reference to appropriate sources.

This assignment will assess learning outcomes

1. Demonstrate a systematic understanding and critical evaluation of the key aspects of the strategic management process;

2. Demonstrate the ability to compare different theories and perspectives of strategic management and use and appraise them appropriately;

3. Critically evaluate theories and concepts of strategic management. Analyse and apply appropriate problem solving techniques plus knowledge learned to solving complex business problems;

4. Demonstrate the ability to communicate complex issues.

Case Study: Sara Lee's Retrenchment Strategy

Introduction

Sara Lee started out as a small company in wholesale distribution that gradually grew to a series of related and unrelated businesses. For the next 40 years, the company expanded to food processing, retail food, and household products to more than 40 countries. Their broad differentiation strategy and geographically spread operation has management struggling to operate efficiently. Even the vast company's portfolio cid not here with building shareholder value. With the declining profits worldwide, Sara Lee's retrenchment initiative is to divest eight of its business units in order to raise profitability through operating profit and sales.

Strategies

Sara Lee's retrenchment strategy is required in order to focus its resources on more profitable industries such as the beverage, food, and household products company. Their plan on separating themselves from weak performing business units and product categories will put the company in a better financial position. Management will be able to focus their resources to boost their profitability, sales, and market shares on the remaining products.

The spin-off of Hanes brands was a smart move even though the operating profit margin was still a moneymaker. The cash payment needed to eliminate the note payable to Hanes brand from Sara Lee did not strategically fit with their new core businesses. However, their retrenchment plan fell short of their bottom line in 2010. There is still not enough cash flow for the company to expand and grow through acquisitions of rapidly emerging new food and beverage trends from other companies.

Attractiveness

The company's retrenchment strategy placed it in moderately attractive industries at best. Sara Lee has developed into a well-known name within the retail industry, as a value-conscious brand with quality products. The food service industry will no doubt continue to be attractive, as consumers will turn to purchasing meats and other foods rather than eating out in this slumping economy. As for the retail meats, bakery, frozen desserts, and coffee are all just around the average attractiveness range. The growth potentials are very strong, but it does have a lot of competition following suit.

Strength
The competitive strength of Sara Lee business units is rather strong in their particular segments. Strength includes brand recognition and the ability to offer a wide range of products in the marketplace. The potential for skills transfer and cost saving in the production process due to the similarity of the products will be advantageous for the operating profit margin. The shipping logistics and production technology when focusing on the food industry will result in high-quality products with great value. The other strength is their aggressive approach to educating the public on the nutritional value of their products through their advertisement.

Resource fit
It does appear that Sara Lee has adequate strategic and resource to fit contribute increase shareholder value. The product line does relate to one another and support each other which suggest substantial cost sharing opportunities. The production, distribution, and purchasing processed frozen desserts, meat, and bakery segment are other related items. The retail and bakery division is strategically In line with their growing food service division resulting in significant saving in operations activities and purchasing. There will be skills transfer, cost sharing, and brand sharing opportunities in store for each business unit causing docent increase in shareholder value.