Sarah Lee's Retrenchment Strategy Case Study

Sara Lee Case

Challenge Statement

By 2006 it was apparent that Sara Lee would be unable to reach its target of $3 Billion in after tax margins and as a consequence Hanesbrands Inc. was created as an independent entity that gave a one off dividend payment of $2.4 Billion to Sara Lee. This illustrates an overambitious management, a lack of business focus and what lead to missing the 2010 company projections.

With the CEO’s position still vacant, the challenge for Sara Lee Corporation is to boost shareholders’ value by reaching 12% average of profit margin for the next 4 years as a priority and increase its overall sales to 14$ billion by 2015. To follow up the strategic focus from 2005, a reconvergence is needed on core businesses and competences such as the North American Retail division, North American Food Services, International Beverage, International Bakery and the North American Fresh Bakery division which lead their own markets.

Alternatives:

(A) Low-cost strategy efforts - Divest Distressed assets that do not offer any profit margins or growth opportunities. Focus on cost-performing businesses and deliver competitive and lower prices to customers to increase sales. Enhance low-saving programs (project accelerate) in order to support the competitive pricing focus and focus on operational effectiveness.

(B) Leaner business model (broad differentiation strategy) - Focus on premium/inimitable brands, (divest “superfluous” businesses and weaker performing products, cf. financial performance). Restructure and find synergies within the corporation’s units (such as in the beverage and the bakery business) and maintain current cost-saving programs (project accelerate), support corporate strategy (by installing a global information system). Cutting down on duplicating systems and departments such as HR, IT, Logistics, Finance etc. Which might also be achieved by Disintegrating the Sara Lee group into 2 companies (such as edibles and non edibles).

(C) Innovation (focused differentiation strategy) - Emphasis on Wellness & Nutrition for the meat and bakery international businesses, focus on innovation of products and brand building. Leverage size though new acquisitions/mergers in order to gain bargaining power to win on supermarket and discount stores customers, and expand internationally.

Recommendation/Solution

The alternative that we choose is B.

Leaner business model -

Restructure and find synergies within the corporation’s units (such as in the beverage and the bakery business) and maintain current cost-saving programs, which may