Case Study #4, “Sara Lee Corporation In 2011: Has Its Retrenchment Strategy Been Successful?”

1091 words - 5 pages

When Brenda Barnes took the helm as the president and CEO of Sara Lee Corporation, she enacted a plan to totally revamp the business. Her plan of retrenchment included divesting itself of business units that were lower performers, and concentrating their resources in the areas where they were already doing well.
Sara Lee’s retrenchment growth strategy was built around three main core competencies: “competitive pricing, innovative new products, and brand-building capabilities”. (Thompson, Peteraf, Gamble, & Strickland, III, 2012, p. C250) In 2008 they added another initiative, Project Accelerate, whose goal was to focus on cost savings throughout their value chain. This would support the ...view middle of the document...

” (Thompson, et al, 2012, p. C250)
How is Sara Lee determining what units to retrench?
Each company within the corporation was analyzed to determine market trends, potential growth in that area, and potential to realize profit. The Hanesbrand was separated into a spinoff company, and strategic decisions were made to divest the other companies that did not offer a strategic advantage to the corporation’s value chain. One example is the International Bakery, spread out in too many countries with too many different products, and it’s lowest performing operation overseas.
Financial Reports
Based on the financial reports in our case study, the entrenchment strategy did not produce the results they had envisioned by 2010. The company’s performance fell short of expectations, missing their 12% operating profit margin goal by 3.5%. By all accounts, the retrenchment strategy had not worked as planned.
Profitability
While profit margins and return on assets did improve from 2008 to 2010, the progress was not what was expected.
FY Operating Profit Margin Return on Assets
2010 8.5% 5.96%
2009 5.5% 3.87%
2008 1.96% -7.29%

Liquidity
Google’s current ratio is 4.8, showing an excellent ability to pay current liabilities using assets that can be converted to cash in the near term. Google’s current assets as of 3rd Qtr, 2013: $54,383B, close to double their current assets as of Dec 2009: $29,167B.
Leverage
Google’s long-term debt-to-capital ratio is a low 3% in 3rd Qtr 2013, showing that the capital investment in the company financed by long-term lenders and stockholders is low, and they have good creditworthiness.
Activity Ratios
Google’s long-term debt-to-capital ratio is a low 3% in 3rd Qtr 2013, showing that the capital investment in the company financed by long-term lenders and stockholders is low, and they have good creditworthiness.
Brand Strategies – which of the five generic strategies have been used?
Hanesbrands
After the spin-off into a separate entity, Hanesbrands planned a broad differentiation strategy. Their goals were to research customer needs, and develop or modify products to make them more desirable to the customer. Tagless t-shirts are an example of this successful strategy. (Hanesbrands, 2006)
North American Foodservice
This division of Sara Lee uses a best-cost provider strategy. They employ a hybrid strategy that blends brand recognition, convenience, and quality products with cost strategies to provide a value product...

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