The Pillsbury Company

STRATEGY SHIFT IN PILLSBURY

1. Introduction

The Pillsbury Company, once a Minnesota-based flour milling firm has developed to be one of the top branded food companies. It was then acquired by Grand Metropolitan (GrandMet), a diversified consumer products and retailing organisation based in UK, at the price of $5.8 billion, which subsequently leads to large improvement in its sales and net income.

Staying level-headed in the strong competitive food environment with many other leading brands like Nestle, General Mills and so on is no easy task for Pillsbury.

This report aims to identify strategies taken by Pillsbury to gain competitive advantage over its strong rivals and also the reasons behind moving its strategy focus towards customer driven reengineering. Two main important tools such as value chain and activity based costing analysis, will be used throughout the report to assess the new strategy.

2. Strategic Positioning

2.1 Old competitive environment is not sustainable

As the majority of customers are shifting their preferences from focusing on brand images to price and shelf availability, Pillsbury recognises the importance of adapting to the changes by building a strong collaboration with customers to understand their spending patterns and behaviours on food products. Besides, competitive pressure has triggered food manufacturers to revise and consider partnership with retailers to formulate joint strategies. It is no longer sustainable for Pillsbury to just rely on strong brands but with low innovation to survive in competitive environment as identified by Larry McWilliams, Vice President of Frozen Sales.

The stumbling block behind Pillsbury’s growth includes functional silos within the organisation, meaning that a single functional line specialises alone without interacting with other lines. The current performance measurements adopted by Pillsbury has abetted the local optimisation of every department. To cut across the long-existing functional silos, two top executives in Pillsbury, Slocumb and Crowley, unanimously decide to introduce customer driven reengineering program, subsequently achieving minimum total system cost.

2.2 Launching Reengineering Project

Both Slocumb and Crowley, sharing the same vision of attaining 15% cost improvement have identified the most critical business process. The initial target of $100 million saving initiatives is achieved via reengineering around customer and consumer values as well as entire supply chain after understanding existing business processes to create competitive advantage. Setting a higher benchmark at $300 million motivates stronger collaboration between Pillsbury and retailers using information technology to