Strategic Analysis - Free Essay Example

STRATEGIC ANALYSIS 2.0- External Analysis- Scanning Competitive Environment Conducting an external analysis to scan the company competitive environment which focused on predicting the dynamics of competitors actions, responses and intention, can help a business in understanding the dynamics of its industries and markets in order to compete effectively with its rivals in the marketplace. 2.1-Porter 5 Forces Model Porters 5 forces analysis which deals with microenvironment and related to the competitiveness of an industry has been conducted to find out five featured competitiveness of an industry. The factors that are considered in this model are given below according to the analysis of The Campbell Soup food processing industry. 2.1.1-Rivalry among existing soup sellers in the market The rivalry among competing sellers in the food processing industry was high because there were so many food processors competing to be #1. These companies were all competing on price, quality, taste, health factors, product innovation, and product benefits. Campbells major rivals are General Millis Progresso, Heinz and Kraft Foods. As a multinational food processing company, Campbells faces an extremely competitive market in internationally, nationally and locally due to the similarities between each soup producer and wider selection of products provided by other food processing company. On the other hand, various types of generic soup brands in the existing market which offer products in lower price have raised the competitive pressure. However, the Campbells high quality of soup products and the ability to keep low production costs weaken the rivalry of the generic soup brands. For example, Campbells price their soup products only 20 to 25% higher than generic brands while maintaining a level high quality. Campbells would have to continue developing new products to distinguish itself from Progresso and smaller soup maker companies. 2.1.2 Threat of New Entrants New entrants to a food processing industry typically bring to it new capacity and a desire to gain market share and the threat of entry depends on the presence of entry barriers and the reaction that can be expected from existing competitors. The majority of the companies in the food processing industry are large, profitable, money making companies that are well known and had taken up shelf space in supermarkets. For examples, Campbells major rival- Kraft foods and General Mills, create high entry barriers in food processing industry through their high levels of advertising and promotion. The intense competition in the food processing industry makes it hard to access in the market. Smaller food processing companies often have difficulty obtaining supermarket shelf space for their products as large retailers charge for space on their shelves and give priority to the established companies who can pay for the advertising needed to generate high customer demand. In this case, the economy is a major factor as if the company wants to be a part in this food processing industry it must be able to face high costs for strong competition. Besides, the slow market growth rate for the food processing industry causes acquisition between companies, resulted the barriers to entry are high with so many food processing companies and little to zero capacity remaining for any more companies Legal issue is also an important factor in the international food processing industry. Many countries follow strong restriction in marketing the product as well as best way for safety stock and inventories. 2.1.3-The Threat of Substitutes Products The rivalry from firms in other industries offering substitute products is intense as there are many firms of other industries producing, supplying and serving the same food products that the food processing companies are. For example, Dunkin Donuts is in the foodservice industry and Campbell Soup Co. is in the food processing industry, yet Dunkin Donuts serves soup and Campbell Soup sells soup. Consumers can still go to Dunkin Donuts and get the very same soups that Campbell sells. 2.1.4- Bargaining power of buyers Buyers affect the food processing industry through their ability to force down prices, bargain for higher products quality and services, and play competitors against each other. The bargaining power of buyers is high as there are huge tendency of new entrance with new and variety of products. Besides, buyers prefer choosing products which offer lower prices. For example, Campbells soup products price is relatively 20 to 25% higher than generic brands in grocery stores, hence some consumers would choose generic brand products in the market rather than Campbells. Buyers determine the profitability of the industry. Food processing companies would be forced to lower prices if buyers felt that the prices were too expensive and stopped buying their products and switch to supplements easily. 2.1.5- Bargaining power of suppliers Suppliers can affect the food processing industry through their ability to raise prices or reduce the quality of purchased goods and services. In case quality products the suppliers face an important factor. Due to the inflation the overall price of materials has been significantly increased. So for Campbells, there is also a cost exists to get the reliable customer. There is a tendency the world now a day makes a backward integration and wants to minimize the cost of suppliers. 2.2.0- Swot analysis A swot analysis allows the Campbell Soup Company to determine the extent of the strategic fit between its capabilities and the needs of its external environment. Therefore, the company can seek to match its strengths and weaknesses to the opportunities and treats it faces in current competitive food processing industry. The Campbells products portfolio includes soups, sauces, biscuits and chocolates and has a strong research function with high capabilities in new products development. 2.2.1-Internal Analysis Strengths Innovative Campbell has always applied the spirit of innovation in every aspect of its business. At Campbells manufacturing plants in Napoleon, Ohio, and Paris, Texas, an innovative method called overland flow is used to treat wastewater. In terms of products introduction, the company has been consistently quick to come up with new products in the market. For example, the first portable soup product, Soup at Hand, the new microwaveable products such as Chunky and Select. Besides, Campbell frequent updates the products appearance with more contemporary design and new photography. Its popular gravity fed shelving system have been installed at 24,000 retailers nationally and credited for rejuvenating the soup aisle, expanding the category and vastly improving the shopping experience. Campbell is innovative to gauge consumer satisfaction and expectation. 2.2.2-Weaknesses Declining Market Share The Campbells market share in soup drop from 60% in 2007 to 49% as of October 2009. This is due to more and more private labels continue to enter the market by providing quality products in lower price. Some consumers have switched to try private labels and resulted private labels have gained 11%of the market share. On the other hand, Campbell has also faced stiff competition from brands such as General Mills Progresso and Nestle. 2.2.3-External Analysis-Opportunities Demand for Wellness Products In recent years, the trend towards being more health-conscious has arisen from two main consumer groups. The younger generations currently focus more on low calorie content and on the go meals. For the more mature age group, their diets require health-consciousness in terms of limiting their sodium intake due to increased risk of ailments. Campbells Soups core product categories, notably soup and bakery products, are widely perceived as healthy and are compatible with the further development of health-oriented products, such as the existing and expanding line of Select Harvest and Healthy Request soups. In conjunction with the product improvement, Campbell has announced to expand its industry-leading sodium reduction program and to reduce the sodium content in 23 of its condensed soups by up to 45 percent in fiscal 2011. 2.2.4-Threats Intense Competition Campbells main profitable core soup category has been facing intense competition and also been losing market share to its strong competitors, particularly General Mills Progresso and private label brands produced by companies such as Wal-Mart. Moreover, Campbells other segments have not produced consistent profits. Shifting consumer habits and preferences indicate the need to constantly innovate their products and minimize costs, in order to retain loyal consumers and keep up with the fast-changing consumer environment. In addition, promotional and advertisement spending have been increased to outwit its rivals. Extensive Laws The company is governed by a multitude of local and international laws and regulations with regards to food safety and environmental standards. For instance, in accordance with the Federal Food, Drug and Cosmetic Act, Campbells food products must be inspected before they can be marketed. The company faces the risk of fines, injunctions, recalls or asset seizures, and criminal sanctions if it violates these laws and regulations. 2.3- Benchmarking The Campbells understands the importance of using benchmarking to evaluate performance. Hence, the company analyzed few top companies which mainly involved in food and beverage processing manufacturing company in a few aspects such as sustainability, supply chain, consumers, community and workplace. Campbells focus of the analysis was on looking for specific targets and goals that the companies are setting for them as any metrics they are disclosing to track their progress. Moreover, Campbells have also highlighted the primary ways that companies are implementing their goals as well as select initiatives and key past achievements. In terms of community, the Campbells have chosen to focus on nutritional and environmental programs by partnering with nonprofit organizations, universities and Think Tanks to conduct RD for new products. Besides, it also partnered with environmental experts to develop innovative solutions to protect the environment. For instance, Nestle has been launching malnutrition and obesity programs targeting children and adolescents of lower-income families while General Mills has been contributing 5% of pretax profits to charitable causes. The Campbells benchmarked the best practices by promoting nutritional and hunger elimination programs. Besides, Campbells also promote micronutrient products to attend lower income families and develop environmental initiatives. In terms of workplace related programs, Nestle, Coca Cola, Pepsi.co, General Mills, have done excellent job. For instance, Pepsi CO has been providing job opportunities for people with disabilities while the Heinz Company helps employees to improve diets, increase physical activity, quit cigarette smoking, and limit alcohol consumption. As for General Mills, the company has reduced lost-time injury rate by 25% over five years. Hence, The Campbells benchmarked and developed workplace programs by focusing four key areas: Ensuring diversity of the workforce thereby bringing a broad range of talents and perspectives to the business Helping employees achieve both personal and professional development Ensuring the health and safety of employees both at home and at work Ensuring that employees have a fair work environment Campbells has increased workplace diversity through increasing the number of women and minorities in management and developed Employee Right Policies to ensure employees health and rights are guaranteed. Besides, Campbells strived for an injury-free workplace through a strong health and safety program supported by high employee engagement. They train their employees to conduct their activities in a safe and environmentally responsible manner. (Campbells_CSR08)