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Sara Lee Corporation - Case Study Example

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Sara Lee Corporation

The strategy was also developed so as to allow the company to primarily focus its vital resources on the currently more profitable household products, beverages and foods industries with the aim of strengthening the company’s financial position. By the year 2007, Sara Lee’s Operating Excellence was seen not to be progressing as expected and hence the management introduced a new policy to help optimize the company’s overall productivity by initiating Project Accelerate (Thompson, et al., 243-256). Issues and Problems The seven units that Sara Lee divested generally included European nuts and snacks, direct sales, European and U.S. meats, U.S. retail coffee, European apparel, European Rice and Sara Lee branded apparel. By exiting from the operations of these eight businesses that the company perceived as being mainly nonstrategic, the company essentially followed a strategy that allowed it to increase its share of the corporate profits, due to the fact that most of the business units that the company retrenched were deemed as being unprofitable. By the year 2006, about five of these business units were seen to have negative net profit margins as well as negative operating margins. The European nuts and snacks, and the direct selling unit were essentially the only units that were generally profitable. These two units were experiencing declining operating margins and revenues apart from the increase in margins that they experienced in 2006 (Thompson, et al., 254). The decision to divest the company’s snack operations can be deemed as having been the correct one as the division was only able to produce net profits of about $3 million an amount which would not have resulted in considerably increasing the wealth of the company’s shareholders. In the deal to sell the unit, the company managed to receive about $70 million after taxes, this was a positive development as it was about 22 times the current net profit (Thompson, et al., 248). The decision to spin off Hanesbrands can essentially be seen to have resulted in seriously crippling Hanesbrands as it incurred a huge long-term debt that can potentially seriously affect its ability to turn considerable profits in the future (Thompson, et al., 248-249). The decision to sell its direct sales units can generally be regarded as having been a bad decision as the unit was drawing a profit margin of about 27% with an estimated income of about $54 million (Thompson, et al., 247). The direct sales division also served to expose Sara Lee corporation to other markets a factor which could have served to allow the company to potentially find new markets for some of its other products. However, by selling the unit, Sara Lee managed to receive a net gain of about 4 times of the unit’s current profits. An Analysis of Sara Lee Corporation’s Macro-Environment Pestle Analysis of Sara Lee Corporation There are various key factors that can be seen to be affecting Sara Lee’s Corporation’s external environment. Some of these factors include: Political Factors: Some of the main political factors affecting Sara Lee include the various political issues surrounding the company’s strategy of divesting its business operations. Economic Factors: The impact of the recent global recession was seen to have an effect on a number of industries across the world and was seen to also affect the operations of Sara Lee corporation. The company’s bimbo brand of fresh bread that was seen to be the market leader in packaged bread that was sold in Spain with an impressive market share of about 37 percent and was subsequently ranked as being the second-best-selling packaged bread in Spain happened to be rather severely affected by ...Show more

Summary

In a strategy designed to try and boost the company’s profit margin by an approximated amount of 12% by the year 2010, Sara Lee Corporation developed a strategy that saw it retrench eight of its business units in the year 2006. …
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