Sara Lee’s planned and executed an exit of businesses they deemed to be nonstrategic. 2. What is your assessment of the long-term attractiveness of the industries represented in Sara Lee Corp. ’s business portfolio? Each industry that Sara Lee executives chose to remain within their portfolio of products is consistently a top producer with several brands that are number one in their category and others that have significant increasing revenues so the long term outlook is better with the remaining businesses. 3.
What is your assessment of the competitive strength of Sara Lee Corp. ’s different business units? The competitive strengths will be in the narrow focus on food products and not trying to run a business with many different units in several industries. With the narrow focus of food products Sara Lee can look for opportunities to reduce cost and improve margins along the primary and secondary activities of the value chain. 4. What does a 9-cell industry attractiveness/business strength matrix displaying Sara Lee’s business units look like?5. Does Sara Lee’s portfolio exhibit good strategic ? t? What value-chain match-ups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see? Yes, the retrenchment strategy has allowed Sara Lee to return to its core expertise, the food industry. There are several possible value chain match-ups from using the same facilities to produce multiple lines of similar products to skill transfer of workers within different but similar production facilities.
There are also opportunities in the operations as well as the distribution sections of the value chain to supply the materials for the finished products as well as using the same distribution methods to deliver multiple product lines. 6. What is your assessment of Sara Lee’s ? nancial and operating performance in ?scal years 2008-2010, the period following the divestitures that were the core of Sara Lee’s retrenchment strategy? The overall performance could be characterized as weak; operating profit margin was expected to reach 12 percent but only increased to 8.5 percent. Although operating income increased for the period, the loss from discontinued operations grew significantly. Also Project Accelerate was started in 2008 to jump start the retrenchment initiatives and did save considerable money to help offset the losses. 7. What is your overall evaluation of Sara Lee’s retrenchment plan? What evidence and/or reasons support a conclusion that Sara Lee’s shareholders have or have not benefited from the company’s retrenchment strategy? The retrenchment plan did not work as expected.
It appears from reading the case that a thorough evaluation of existing businesses that Sara Lee executives were planning to divest was not undertaken. Possibly if the executives would have considered the economic environment at the time, more accurate sale projections would have been created so not to burden Hanes with so much debt as the division split from the company. Also management’s estimation of reaching $14 billion in revenues by 2010 was considerably off target, only achieving $10. 8 billion in 2010.
Sara Lee executives did create a more food, original core business line up of products divesting of non-core unrelated businesses which were successful as the remaining products received more planning attention. The remaining divisions were also top or number one products in their respective categories though. Sara Lee did create a much more focused business but at the expense of approximately $3 billion in revenue and nowhere near the $14 billion expected or heading toward the $19 billion in revenue in 2004. 8.
What actions do you recommend that Sara Lee management take to improve the company’s performance and boost shareholder value? Your recommended actions must be supported with convincing, analysis-based arguments. I agree with the divesting of non-core businesses to create a more singular, less confusing focus for the business. The problem with this strategy is that it is at significant expense to the top and bottom line and devalues shareholders stock value. After the retrenchment and a divesting of non-core businesses were completed Sara Lee should have and should now look at acquiring businesses again.
Businesses that are relational to the core food businesses in the Sara Lee portfolio. Now that Sara Lee has consolidated its operations it needs to go into expansion mode; mergers and acquisitions to grow shareholder value. Another way to grow shareholder value would be for Sara Lee to expand current product lines and also bring existing and new lines into new markets. The case study mentioned several global markets not covered by Sara Lee products. There is a significant amount of new market opportunity to increase revenues and ultimately shareholder value.