Case Study 3 Sara Lee Corporation

Jack Marchant

300617990

Strategic Management

Roger Watson

Case Study 3 - Sara Lee Corporation in 2011: Has Its Retrenchment Strategy Been Successful?

1. What is Sara Lee's corporate strategy? How has its retrenchment strategy changed the nature of its business lineup?

Sara Lee's strategy is to provide more value for its shareholders and to streamline their operations. They planned to, and accomplished the split into two separate entities, which was the logical step for their shareholders, customers, consumers and employees. This way they could focus more of providing more value for their shareholders by utilizing ‘pure play' and do this by reducing overlap between the two separate entities, this provides a lot more value for shareholders.

Retrenchment is the act of reducing expenditure in order to improve financial stability, and the implementation of it into Sara Lee's strategy reduced costs dramatically and improved shareholder value drastically. Sara Lee's main goal is to give back to their shareholders and have a two year plan to return over $3.5 billion back to their shareholders. The retrenchment strategy has led them to being more cost effect in the production areas of their operations. They have opened numerous brand new facilities that aim to cut production greatly, by implementing state of the art technology and robotics in their production processes.

Retrenchment has also led Sara Lee to split up into two different entities, in order to spread costs across two companies. They did this so they can focus more on certain products instead of having a wide range of products. So they sold off the household and body care business and retained the North American Meats and International Tea and Coffee businesses.

2. What is your assessment of the long-term attractiveness of the industries represented in Sara Lee Corp.'s business portfolio?

The attractiveness of the industry that Sara Lee resides within is very good. All companies with the industry are showing growth and healthy stock prices. Sara Lee is by no means the market leader, but it is a very competitive industry with a lot of huge corporations such as General Mills, Unilever and Kellogg's all working within it. All companies are showing PE ratios of above 15, which shows that all are stable companies. Sara Lee currently has the highest PE ration at 25.30 among its competitors, which shows good things for them in the future. The retrenchment strategy they implemented in 2011 has definitely had a positive effect on the company financially as they are showing reductions in theirs costs and they show healthy net income and steady stock price.

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