Case Analysis: Campbell: How To Keep The Soup Simmering
Abstract
Competitive advantage is sustained with properly executed strategies put forth by the firm to make decisions about what business the corporation should compete in and how growth should be accomplished. The purpose of this paper is to illustrate how Campbell’s Soup uses industry analysis to formulate a strategic response. In addition, this paper presents a strategic analysis and conclusion of evidence in response to an increased threat posed by industry competitors and rapidly changing consumer tastes.
Brief Introduction
The year is 2017 and the future is now. Different industries within the United States as well as the globe are beginning to shift. The Global Great Recession had balanced the playing field and companies need to compete in order for growth to be accomplished. The world is shifting from the old and beginning to adapt to the new. Pre-Global Recession dominance is no longer certain due to major changes to major players globally. For example, the fact that major banks & financial institutions needed to get bailed out to avoid collapse increased the amount of risk for capital and global economic outlook became uncertain. This turn of events caused the global economic outlook to remain stagnant due to high risk and large amounts of uncertainty. As Global industries began to reshape, major players need to adapt using external environmental factors such as demographics, sociocultural, economic, political-legal, technological, etc. , to improve their ability to deliver products, sustain business and outgrow the competition. Campbell Soup Company is experiencing slow growth for many years within The Global Food Products industry. Industry analysis is needed to make decisions about what business the corporation should compete in and how growth should be accomplished.
Campbell’s SWOT Analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
Campbell Soup Company has a strong market position and North American presence. The company recorded revenues of $7, 343 million during the fiscal year ended July 2006 for the Global Food Products Industry in 2006. Globally, Campbell had the 4th highest market share with. 05% when the global food products industry report was published.
Campbell manufactures and markets foods and simple meals, including soups and sauces, baked snacks, and healthy beverages. The company has a market share of 60% in the US wet soup market. Campbell North America's portfolio includes well-known retail and food service brands such as Campbell's, Pace, Pepperidge Farm, Prego, Swanson, V8, Plum and Bolthouse Farms, among others.
In FY2016, Sales to Wal-Mart was almost 20% of tot net revenue. High dependence upon a single customer reduces the bargaining power of the Campbells. By having high dependence on Wal-Mart, Campbells is subject to Wal-Mart's policies therefor weakening Campbells overall position.
In 2016, Campbells plans to focus on expanding into emerging markets. Also Campbell’s plans to build and focus on the branding of ecommerce capabilities. Campbell also sees increasing health and wellness concerns by focus on fresh and healthy foods. Campbells sees these as opportunity to tap into people's growth. The improving US economy will boost the growth of health and wellness products as higher disposable incomes allow for greater spending on health and wellness categories. With a strong investment in external markets and a focus on wellness products, the company is in a strong position to capitalize on the upward trend demand for healthy food.
Intense Competition, Rising Labor Wages in the US, and Stringent Regulations pose threats to Campbell’s soup. The U. S. is Campbell’s Soup largest market and any threat to their profitability would be a thorn Campbell’s does not want to deal with. Also regulations throughout the globe regarding export and import can also deter Campbell's strategy. These threats along with the increase in competition threaten Campbells profitability, Market share, and global dominance.
General Mills SWOT Analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
General Mills, Inc. (General Mills) also has a strong market position and global presence. During FY2016, GM product portfolio includes ready-to eat cereals, convenient meals, snacks, yogurt and ice cream. The company operates in Asia, the Middle East, Africa, Europe, North America and Latin America. General Mills is headquartered in Minneapolis, Minnesota, the US. The company reported revenues of (US Dollars) US$15, 740. 4 million for the fiscal year ended May 2018.
General Mills "debt and capital lease obligations" had a 37. 7% increase in total current liabilities from US$5, 330. 8 million in FY2017 to US$7, 341. 9 million in FY2018, due to increase in accounts payable. This has and adverse effect on the current ratio as Current liabilities increased. The company's current ratio was below the competition such as ConAgra Brands Inc. Due to the increase of current liabilities.
General Mills sees a positive outlook for the US market as well as Global Bakery and Cereals Market. The US market is projected to grow at a CAGR of 4. 9% during 2017-2022 to reach a value of US$45, 014. 2 million by 2022.
Intense competition may increase due to mergers and acquisitions being made by competitors within the industry. In January 2018, Post Holding acquired Bob Evans Farms, Inc. , that produces refrigerated potato, pasta and vegetable-based side dishes, pork sausage, and a variety of refrigerated and frozen convenience foods. This acquisition will strengthen Post’s position to create a dominant position in the commercial food service and refrigerated side dish market therefore threatening General Mills MarketShare.
Nestle SWOT Analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
Nestle also has a strong market position and global presence. Nestle manufactures and markets branded food and beverage products across the world. The company conducts business operations in 189 countries across Europe, the Americas, Asia, Oceania and Africa. The company reported revenues of (Swiss Francs) CHF89, 791 million for the fiscal year ended December 2017.
Product recalls effects profitability because of the revenue lost and costs incurred. Declining profitability within Nestle is a problem because shareholders lose confidence no longer being able to take the opportunities available.
Nestle sees a positive outlook for the US market as well as Global Bakery and Cereals Market. The US market is projected to grow at a CAGR of 4. 9% during 2017-2022 to reach a value of US$45, 014. 2 million by 2022.
Intense competition may increase due to mergers and acquisitions being made by competitors within the industry. In January 2018, Post Holding acquired Bob Evans Farms, This acquisition will strengthen Post’s position to create a dominant position in the commercial food service and refrigerated side dish market therefore threatening Nestle MarketShare.
Kraft/Heinz SWOT Analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
Kraft/Heinz also has a strong market position and global presence. Kraft/Heinz manufactures and markets branded food and beverage products across the world. The company operates in North America, Europe, Asia Pacific, Latin America, Russia, India, the Middle East, and Africa. It is co-headquartered in Pittsburgh, Pennsylvania, and Chicago, Illinois. The company reported revenues of $29, 122 million in the financial year ended December 2014.
Product recalls effects profitability because of the revenue lost and costs incurred. Declining profitability within Kraft/Heinz is a problem because shareholders lose confidence no longer being able to take the opportunities available.
Kraft/Heinz sees a positive outlook for the US market as well as Global Bakery and Cereals Market. The US market is projected to grow at a CAGR of 4. 9% during 2017-2022 to reach a value of US$45, 014. 2 million by 2022.
Intense competition may increase due to mergers and acquisitions being made by competitors within the industry. In January 2018, Post Holding acquired Bob Evans Farms, This acquisition will strengthen Post’s position to create a dominant position in the commercial food service and refrigerated side dish market therefore threatening Kraft/Heinz MarketShare.
The PESTEL Framework
- Political Factors
- Economic Factors
- Sociocultural Factors
- Technological Factors
- Ecological Factors
- Legal Factors
The political environment that makes up the Food Products industry is very volatile. From domestic production to international there is always a rule of law that governs the way an industry operates. Companies within the industry need to be aware of the different political landscapes that they encounter that determines the way firms within the industry operate.
We are living through a time of uncertainty throughout the United States and the world. Food Products Industry players determine their short-term and long-term strategies based on stability. Due to unstable times in the global environment Food Products Manufacturers need to understand economic factors regarding the industry.
Social media has changed the way industry operates. The Food Product industry is no different. Players within the industry need to consider sociocultural factors when determining strategy and consumer interaction. Also, terrorism is a large factor as well. Between terrorism and social media manufacturers need to consider socio cultural factor now more than ever.
Technology has become a medium for ecommerce as well as upgrades to existing firms current inventory. Technological factors throughout the Food Product industry include but are not limited to, " Product Customization, platforms for e-commerce, as well as social media.
Companies within the global environment are now getting fined and monetary compensation for not adhering to global emission standards. Food Product Manufacturing ecological factors are becoming more prevalent as it is becoming imposed by regulators as well as an awakened society.
Legal factors for the Food Product industry are almost crippling and need to be taken into consideration. In 2018, there were multiple lawsuits regarding Food Product mishandling of customers. Food Product Makers need to be aware of these determinates because of financial loss as well as damage to the Food Products brands image.
Porters Five Forces
- Threat of new entrants
- Threat Moderate Threat of substitutes
- Threat Moderately High Bargaining power of customers
- Bargaining power of suppliers
- Industry rivalry
Threat of new entrants within the Food Product industry is relatively weak because of the high costs associated with entering the Food Product industry. Cost include inventory that includes equipment, Fees, taxes etc. . . All costs are quit inhibiting considering the amount of competitors and competition although e-commerce remains a threat.
Threat of substitutes is considerably moderate considering there are other methods of eating. As economic uncertainty begins to develop substitutes will be more prevalent as consumers will choose less expensive ways of eating.
Bargaining power of customers is somewhat high due to the amount of competition. Bargaining power goes down on an international scale due to less amount of competition versus the domestic market.
Suppliers hold a moderate amount of bargaining power due to the specialization of the ingredients required by firms. This can be negated to some extent due to the amount of suppliers throughout the industry.
The threat of rivalry within the food product industry is very high due to the high cost of new entrants as well as dwindling profit margins. As you can tell in the SWOT analysis, throughout the industry, profit margins are dwindling as well as mergers and acquisitions taking effect. All in all the Food product industry is highly competitive.
VRIO Framework
- Valuable
- Rare
- Is costly to Imitate.
- Organizational Structure
Campbells is a large company and as you can tell in the SWOT analysis it is a valuable company. One of Campbells greatest strengths is its economies of scale. Campbells records revenues in the billions of dollars and has billions more in assets and global ventures making its value one of its strengths.
The size of Campbells company is almost impossible to replicate only by a select few. Campbells is the top 3 Global Food Products in the industry. Few have the strength that Campbell’s has acquired. The size as well as its economies of scale are difficult to duplicate making the value of its strength rare.
Last time I checked it was almost impossible for any company to generate billions of dollars in sales. Although few in its class can generate the cashflow Campbell’s can, the global and international ventures that are in Campbell’s Portfolio are costly to imitate.
Campbell’s organizational structure had been shaky due to unforeseen issues with increase in wage employment. Campbell’s restructured and is poised to maintain a sustainable competitive advantage. With the increase wages in employment Campbell’s can maintain a serious competitive advantage within the industry due to turning a weakness into a core competency. With the combination of having a valuable organization along with rare and costly to imitate processes. Campbell’s can and will be able to maintain a serious competitive advantage when attempting to maintain Global Food Product superiority.
Conclusion
There are multiple similarities within the competitors of the Food Product industry. Some include the amount of debt firms take on, others include the size of the company. As shown in the analysis when they are combined together the implication for competitiveness skyrockets giving the one who can maintain all together a competitive advantage. The data above within the analysis separates each of the Food companies giving each one a different set of uniqueness. For example, although one might have a significant amount of debt, the opportunity remains for them to enter new markets. To sum it all up, the Food Product industry is extremely competitive. Although it may seem very similar the competitive advantage will come to whoever can maintain organizational structure and combine the strengths their company possess to overcome the obstacles and sustain a competitive advantage. Campbell’s Soup Company is well positioned to possess a competitive advantage amongst the threat of intense rivalry. Although there are factors involved amongst competitive rivals. Campbell’s has shown that with its strength size and the ability to be able to maintain global ventures, the Food Product industry if up for grabs.
