Business Strategy for Campbell Soup Essay Example

Exchange under the symbol “CPB. ” The company is also listed in the Domini 400 Socially Responsible Investment Index.

Currently, Campbell has more than 29,000 shareowners of record.

Strategic Profile

Case Analysis Purpose

In analyzing and determining the Strategic Profile and Case Analysis Portion, I have studied and observed Campbell’s financial statements (Balance Sheets and Income Statement) over the last three years. All though Campbell’s Soup Company is not at the top for the soup segment, I have observed this company is doing well financially for the processed; packaged industry. In this case study, I will examine the situation analysis, SWOT analysis, strategy formulation, as well as the strategic alternative implementation.

Situational Analysis

General Environment Analysis First let us take a glance at the general environment analysis which includes the Technological trends, Demographic trends, Economic trends, Political; Legal trends, Sociocultural, as well as Global trends. Throughout much of the world, technology has revolutionized the way that we grow food, as well as the way that we transport, process, package, purchase and cook our food. The types of technologies affecting the food industry have evolved over time. From mechanical tractors and implements to diesel trucks to flash freezing, food technology has moved on to become high-tech.

Today, computerization also has made marked changes in the food industry: Electronic data interchange ensures that inventories and shipments are well managed so your local grocer doesn’t run out of the products that are selling quickly. Point-of-sale systems at the cash register capture minute-by-minute sales data. Biotechnology is making sweeping changes at the ground level—in seed stocks and agricultural animal health. In fact, gradual genetic improvement of grain seeds like rice and wheat, combined with better fertilizers

and other technologies, to create what we call a “green revolution,”.

Now, genetically modified seeds are gaining ground with the promise of crops that not only resist insects and have extremely high yields per acre, but also produce high levels of desirable nutrients and vitamins for the consumer. As Campbell’s soup strives to advance its mark in the soup industry, the Camden-based food conglomerate is adding asterisks and something like footnotes to its labeling. The assortment of soups where reformulated to enhance the knowledge of the growing number of careful label-readers among grocery shoppers.

Have you ever turned to a product and wondered what is Thiamin or Riboflavin? These types of words baffle the average consumer. By providing a user friendly foot notes, it allows for a small description of the ingredient that is actually processed into the product. While being the world's largest soup manufacturer, Campbell’s turns to QlikTech forEnhanced Logistics Management, Accounting Accuracy And Supply Chain Efficiency. QlikTech,’flagship business intelligence software solution will help to improve the firms supply chain management.

QlikView is enabling Campbell's employees to analyze corporate data in innovative ways to improve inventory control and ensure the right product mix is available to customers at the right time. In order to streamline operations and increase production efficiency, Campbell's supply chain team enlisted Terra Technology to deploy the program. QlikTech and Terra Technology provide Campbell with the necessary tools to improve inventory analysis management and projections, sales and long-term forecasting analysis; demand planning, schedule compliance, transportation and warehouse scheduling.

Today, members of the company's plant production, finance, and logistics departments use QlikView to make educated business decisions on a daily basis. The demographics in the

soup industry reveal that the market has begun to focus on all races, ages, and wages of today’s consumer. Most consumers have been introduced to soup sometime in their lives, and now their perception depends on their lifestyle. Campbell’s soup markets to twenty –one different regions and segments all ages ranging from 1-100yrs old. In the early 1990’s the firm segmented the market and found a void in the children’s line of food.

They introduced a line full of Soup Stars and Curly noodles. This innovation allowed for cartoon characters like Mickey Mouse, Dora the Explorer, and Bob the Builder to make eating fun. The shift to healthy living in recent years has affected Campbell's in two different consumer groups. The younger consumer group has been shifting towards soup because of its lower calorie content which qualifies it has a healthy meal alternative. The younger, "on-the-go", low-calorie conscious consumers have helped Campbell's gain a percentage of the microwaveable, ready-to-serve soup category.

On the other hand, baby boomers are more concerned with sodium content because of blood pressure. Baby boomers make up the majority of Campbell's consumer base and because of the baby boomers' dieting trends, Campbell's, as well as other food companies, have had to adjust its product line in order to adapt to the health conscious, lower-sodium diets. Campbell's has developed Healthy Request soups which include the condensed, select and Chunky style soups in order to try and win over the more mature age group.

The success of Campbell's low-sodium soups will be important to Campbell's in order to hold on to the majority of the soup market. Economic Trends have and will play a major role

to the soup companies, such a Campbell’s soup. Currrent economic trends will be detrimental and hard on companies if prices of soup begin to fluctuate. With the economy today, facing a recession, fewer discretionary dollars are left for consumers, after facing challenges such as high prices for energy, insurance, health care, mortgage rates, and food. Since February 2009 the unemployment rate has risen from 7. to 8. 1% in the last month according to the bureau of labor statistics. Although a recession has occurred, Campbell’s soup has been able to maintain there same clientele through brand loyalty. The political attribute to the food industry are the rules and regulations a firm must follow. Some of the legal aspects revolve around agencies that aid in the protection of the consumer. A consumer is the end user of a product, and it may be a child, adult, or a host country. These agencies help with safety of products, the right for healthy competition, and the monitoring of alliances.

Each individual agency can hinder the company, if the company does not follow the guidelines set out to protect the end user. Most agencies will file an affidavit that will penalize the firm, and possibly shut down the company. The Federal Trade Commission, is one the nation's consumer protection agencies, it collects complaints about companies, business practices, identity theft, and episodes of violence in the media. The Food & Drug Administration, is Americas Health and Human Services sector and is responsible for regulating and supervising the safety of foods, dietary supplements, drugs, vaccines, biological medical products.

Also, the Federal Trade Commission (FTC) is an independent agency of the United States government,

established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of "consumer protection" and the elimination and prevention of what regulators perceive to be harmfully "anti-competitive" business practices, such as coercive monopoly. There are many other agencies that affect the industry, and without them there would be no structure. Let’s take a quick view of some of Campbell’s Socio-cultural trends.

In order to stay abreast of the today’s society, the firm has positioned its self to be involved with major health awareness projects. Campbell’s has focused its culture on providing safe & healthy products, and the general welfare of their employees. Campbell is committed to providing food products that are wholesome, safe and affordable. Many of the consumers enjoyed the brands as children and remember them as flavorful foods that are good to eat. To continue to earn their consumers’ trust, they continuously improved quality control processes.

The Firm's procedures are designed to ensure that the products meet quality specifications and regulatory standards, are safe to eat, are accurately labeled and deliver excellent value. Campbell’s Worldwide Quality Standards define our requirements for food safety and quality. All Campbell businesses, as well as all of its suppliers and co-packers, are required to meet these standards. Their Quality Standards extend from test laboratories to store shelves. Inspiring their employees about their work and their company is a priority at Campbell’s.

They believe that employees who feel that they are valued are more likely to be fully engaged in the company’s success. For the past six years, the dual concepts of “Winning in the Workplace” and “Winning in the Marketplace” have been the driving principles. To

help employees advance their careers and attain their professional goals, Campbell provides a variety of programs to support their individual development. Most salaried employees participate in an annual Organizational Resource Planning (ORP) process, which provides feedback and guidance on their strengths, development needs and career advancement opportunities.

Campbell guides their employee’s careers, because without them the firm would not be able to survive. When it comes to Global Trends and its major developments in the soup industry Campbell’s soup fall short. In terms of the global market, Campbell's is at a disadvantage. Campbell's has the lowest international exposure, which has led to slow growth and a loss in international market share. Campbell's is relying on organic growth to build its business in Russian and Eastern European markets. According to www. Wikipedia. com in 2004, General Mills (GIS) had 10% more sales abroad than Campbell's meager 1%.

Organic growth will not have much of an effect in the short run, and only may have an effect in the very long run. Within each product category the industry differs. International Soup, Sauces and Beverages segment includes the soup, sauce and beverage businesses outside of the United States, including Europe, Mexico, Latin America, the Asia Pacific region and the retail business in Canada. The segment’s operations include Erasco and Heisse Tasse soups in Germany, Liebig and Royco soups in France, Devos Lemmens mayonnaise and cold sauces and Campbell’s and Royco soups in Belgium, and Bla Band soups and sauces in Sweden.

In Asia Pacific, operations include Campbell’s soup and stock, Swanson broths and V8 beverages. In Canada, operations include Habitant and Campbell’s soups, Prego pasta sauce, V8 beverages and certain Pepperidge

Farm products. B. Industry Analysis Food Processing ; Packaging is a distinct industry to be invo9lved in. the whole food industry goes from farming and food production, to packaging and distribution, to retail and catering. The U. S. food system is a complex network of farmers and the industries that link to them.

Those links include makers of farm equipment and chemicals as well as firms that provide services to agribusinesses, such as providers of transportation and financial services. The system also includes the food marketing industries that link farms to consumers and which include food and fiber processors, wholesalers, retailers, and foodservice establishments. Processed food sales account worldwide for approximately US$3. 2 trillion (2004) according to (www. Wikipedia. com). In the U. S. , consumers spend approximately US$1 trillion annually for food, or nearly 10 percent of the Gross Domestic Product (GDP). Over 16. million people are employed in the food industry. Mass production is Campbell’s focal point of getting ready made meals to its consumers. This method is used when there is a mass market for a large number of identical products, for example, chocolate bars, ready meals and canned food. The product passes from one stage of production to another along a production line. C. Competitor Analysis Campbell's main competitor is General Mills (GIS) Progresso. Progresso has low-sodium, Ready-to-Serve and Rich and Hearty soups, which directly mirror Campbell's Healthy Request, microwaveable/Soup at Hand and Chunky soups.

Progresso's low-sodium soups were released shortly before Campbell's and have been successful, which poses a challenge for Campbell's marketing team. Campbell Soup Company can stay ahead of competitors if it can correctly adjust with new consumer trends, such

as healthy eating. The firm faces an extremely competitive market because of the similarities between each soup producer. Campbell's will have to maintain its gourmet soup reputation, as well as continue to develop new soups to distinguish itself from Progresso and other smaller soup makers.

Generic soup brands are not a pressing threat to Campbell's because of their ability to keep production costs very low. This allows Campbell's to price their soup products only 20 to 25% higher than generic brands while maintaining a level high quality. Campbell's production costs would be affected by a rise in produce costs, as well as volatile gas prices. If those prices dramatically rise, then generic soup brands would add another fierce competitor to the already extremely competitive soup market. The firm has recently incorporated a new gravity fed shelving system that allows Campbell's to stock 15% more inventory on shelves.

They hope that this new tool will boost sales because it will help defeat "out of stock" problems. Progresso will most likely also take advantage of this new shelving device in order to help overcome Campbell's new advantage. If Progresso uses the gravity fed shelving system, it will cut down on the sales that Campbell's hopes to generate. D. Internal Analysis a. Financial Analysis Fascinated with Campbell’s Soup’s drive to push the envelope? By re -engineering its focus, Campbell’s soup has captured its consumers by allowing them to trade up to higher levels of satisfaction.

While market share is important to the company, high profitability and strong shareholders returns are the centers of the company’s aspirations. Campbell’s Soup’s current assets totaled $2,112. 0 million in 2006, $1,578. 0 million in 2007,

and $1,693. 0 million in 2008. The current liabilities totaled $2,881. 0 million in 2006, $2,030. 0 million in 2007, and 2,403. 0 in 2008. The company’s current assets and current liabilities provide us with the firm’s ability to meet current financial obligations. This also helps to identify the efficiency of the company’s operating cycle. In 2008 the ratio showed that there was a significant decrease from 2007 and 2006. This means that the company was able to meet its short term liabilities with its short term assets. Another liquidity ratio is the Quick Ratio, also known as the Acid-Test Ratio. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.

A company is considered to have more strengths than weakness if the ratio is higher in the following years. The quick ratio has become a more traditional measure of calculating liquidity due to the fact that it separates inventory from its current assets. Inventory does not become a factor in this ratio because some firms have a difficulty converting their inventory into cash.

The main goal for company is to strive to have a high quick ratio, so they will be financially stable. Campbell’s Soups ratio has continued to decline since 2006, and makes them less likely to pay off their debts. The last liquidity ratio I would like to examine is the Inventory to net Working Capital Ratio. This ratio identifies what working capital is tied up in inventory. The results can be either negative or positive, depending on the industry’s standards your company falls in. This ratio is calculated by dividing inventory into current assets minus current

liabilities.

The ratio determines if a high amount of current working capital is in inventory. An extreme level of inventory may indicate that there was failure to turn working capital into cash to meet short- term obligations. In 2008 the Campbell’s Soup Company was able to lessen their inventory by using the First in, First out (FIFO) method.

Thus, giving Campbell’s the advantage to gross a significant amount of revenue. As a means of evaluating the financial analysis, I would like to include the other classes of ratios that are viewed by other investors, analysts, and competitors. In order to find out the company’s financial standpoint, you must take a look at the company’s: Profitability, Leverage, Activity, and the Shareholders Return Ratios. Profitability ratios are measures that indicate how well a firm is performing in terms of its ability to generate profit. Let’s take a look at the Return on Total Assets (ROA) ratio.

This ratio is calculated by dividing the company’s annual earnings after tax, by its total assets. Return on Assets is displayed as a percentage, and can also be called “Return on Investments”. In 2008 Campbell’s soup was most efficient in allocating its corporate dollars. The company made 0. 18 cent off of every dollar invested. Compared to previous years Campbell’s was able to increase their dollar value by 8%.

Another Profitability ratio is the Net Profit Margin. Net Profit Margin is calculated by dividing net income into sales, often expressed as a percentage. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual

profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions.

As of 2008 the company was able to increase its Net Profit Margin from 2006 by exactly 4%. This illustrates that Campbell’s monitored their pricing cost policies by eliminating the cost to create the product. Leverage ratios are used to calculate the financial leverage of a company. If you have a substantial amount of leverage, it allows a firm to gain purchasing power. There are several different methods to calculating leverage, but the main factors to look at include debt, equity, assets and interest expenses.

The two I am going to focus on are Debt-to-Assets and Long-Term Debt-to-Equity Ratios. The Debt- to- Asset Ratio measure the percentage of the company’s total assets that are financed with some type of liability. The ratio looks at what debt the company owes, and compares that to the assets that the company posses.

If a company’s ratio is low it allows for low risk. Depending on the industry, a company should have a generous amount of assets to its liabilities. The Debt- to- Equity Ratio compares the company’s ability to pay off its debt. A company becomes more risky if their liabilities begin to exceed its assets and equity. By paying off fixed assets, you reduce the debt owed to creditors. Paying off Creditors help companies become more attractive to strategic alliances and acquisitions. Activity Ratios consist of Fixed- Asset Turnover Ratios, and Total Asset Turnover ratios.

They usually consist of the sales figures in the numerator and the balance of an asset in the denominator. Total

Assets Turnover is the ratio that measures the firm's ability to generate sales through the use of its assets, while Fixed Assets Turnover measures how well they utilize plant and equipment assets.

SWOT Analysis

Strengths:

• Name recognition
• Diversification World class manufacturing and Development techniques
• Financially stable
• Use of IS systems to reduce inefficiencies
• Innovative and creative "brand" success

Dedicated Management Team Weaknesses:

• Rising marketing expenditures
• Low adoption rates for new products

Opportunities: 

• Exploitations on new markets
• Campbell’s found in 93% of American Households
• Increased interest in prepared foods.
• Expand global distribution
• Soup industry represents greatest strength and biggest global opportunity

Threats:

• Competition for brand exposure
• Price wars within frozen foods Slow growth in wet soup industry for U. S. economy
• Market risk sensitivity
• Global economics (inflation, currency, market risks)

A. Porter’s Five Forces Threat of Rivalry: Campbell’s soup faces competition from the major l soup company’s like: ConAgra Foods, Inc. Flowers Foods, Inc. H. J. Heinz Company Hershey Foods Corporation Mars, Inc. General Mills, Inc. Nestle S. A. PepsiCo, Inc. Sara Lee Corporation Hormel Foods Del Monte Foods Company Ralcorp Holdings, Inc. Campbell’s also face small independent companies like Amy soup, a vegetarian based Food Company.

The company’s competition thrives from its ability to manufacture and process its own products. Campbell’s soup company exudes the meaning of vertical integration. Competition between the existing companies is likely to be high when there are many players that are relevant in size, and when there is not much differentiation between the products. Like General Mills, the parent company of Progresso Soup, the same featured product is being introduced to the consumer (i. e. tomato, minestrone, and chicken noodle soup). In essence the threat of

rivalry is very high in this industry when the barriers for exit are high.

Meaning the equipment used to process these products would be extremely expensive to just fold up the operations. Threat of Entry: The threat of entry is considered to be low in this industry because it requires considerable resources to launch, market, and distribute products. In order for a new company to come in and establish themselves, they would nee access to distribution channels and the ability to negotiate with the retailers to shelve there products. Threat of Substitutes: The threat of substitutes exists if there are alternative products with lower prices of better performance for the same purpose.

The substitute could potentially attract a significant proportion of the market and reduce the potential sales volume for existing players. Within this industry the threat of substitutes is high. There are products like greater value that are lower than the Campbell’s soup line and serve the same general purpose. Brand loyalty, close customer relationships, and current trends allow the company to stay amidst the competition. Though customers can switch brands accessibly, most brand loyal customers don’t mind spending the extra cents to uphold the company’s position.

Threat of Suppliers: Threat of Buyers

Threat of customers determines how much customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high in this industry as customers become price sensitive, are able to switch products easily and when the product is not a strategical importance.

Strategy Formulation

Strategy Alternatives

• `After carefully evaluating the company’s annual report, I believe that the company could maximize its profits by bringing other global products to the U.S, change the layout at
  

the stores locations and provide more heavy advertising towards the younger generation

Heavy advertisement would definitely increase this company’s profits. This company should try to do more advertisement through rebates, commercials, and through their already established store locations.