Smucker’s: Strategic Management

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Table of Contents

Executive Summary
Introduction
Analysis
Conclusion
References

Executive Summary

J.M. Smucker (“Smucker’s”) is one of the most respected companies in the United States and the world when it comes to food and consumer products.

Based on the annual reports that were made available to the public, the information released on their official website as well as information released by independent researchers who had taken interest in the company, one can argue that company is greatly affected by the utilization of the highest levels of strategy which is corporate strategy.

This can be seen in their vision and mission statement as well as recent acquisitions made to diversity its portfolio even further. However, the company must determine if their current strategy of acquisition and improving manufacturing facilities is the long-term answer to competitors that can deliver cheap but quality products.

Introduction

The importance and influence of the Smucker’s brand goes beyond the financial reports it must be seen through the impact of the brands under its umbrella such as: Crisco, Dunkin Donuts, Folgers, Hungry Jack, Knott’s Berry Farm, Pillsbury and so much more. The company is profitable and enjoys a great reputation because of the way it understands and executes its corporate strategy.

By doing so, Smucker’s was able to grow from strength to strength through the years. Its corporate strategy was built on five basic beliefs laid down by the founder and these are: quality, people, ethics, growth, and independence.

Their corporate strategies were based on the company’s vision and mission statement; this was simplified by the founder and written down as their basic beliefs: quality, people, ethics, growth, and independence (Smuckers, 2010, p.1). All these five basic beliefs were the backbone for their corporate strategy.

Every acquisition and every investment were made on facilities or their workforce took place because they want to produce the highest quality products, to train and develop a skilled and happy workforce, to adhere to standards of safety and product quality, to grow the company financially and to always have the independence to manufacture products based on their basic beliefs and not as dictated by outside forces.

This is also seen in their major decisions with regards to the location of their manufacturing facilities, how they would improve the quality of their products and how they would deal with their work force. Everything was for the long-term growth and success of the company.

Nevertheless, there is a need to carefully analyze the recent decisions made such as the investment of hundreds of millions of dollars in new facilities while being forced to lay-off workers seems to be a departure from their tried and tested strategy of building people first. The company must quickly realize if the best move is to relocate their facilities outside the U.S. mainland in order to compete with cheap yet quality products.

Analysis

The success of Smucker’s can be viewed as the result of the almost perfect alignment of their corporate strategy and strategic choices. The simplest way to describe a major component of their corporate strategy is the acquisition of different and yet related brands like Pillsbury, Robin Hood, and Dunkin Donuts (Annual Report, 2009).

It does not require a financial expert to see that Pillsbury and Dunkin Donuts has a common denominator which is flour. Therefore, the company has not only increased its market offering, diversification of product lines, economies of scale and consequently operational efficiency.

Strengths

The major strength of the Smucker’s brand is its ability to capture four different American markets namely: US retail consumer market; US retail coffee market; US retail oil and baking market; and Special market. As a result it is easy for the company to create efficient operations and to lower their costs because these products complement each other.

A good example is the is the acquisition of Folgers Coffee can be appreciated in the light of the fact that Smucker’s also owns Dunkin Donuts. This allowed the company not only to increase its revenue by as much as 52% but also to increase its market offering. Once again the company enjoyed the benefits of economies of scale (RTTNews, 2010).

Aside from that the company is strengthening its position by investing in a food manufacturing facility in Orrville, Ohio (Smucker’s, 2010).

This new facility will allow the company to produce fruit spreads, syrups, and ice cream toppings for its foodservice business in the United States and Canada (Smuckers, 2010, p.1). In other words the company will be able to achieve efficiency in the long run by concentrating a major portion of their manufacturing requirement in one area.

Their corporate strategy can also be seen with the way the company gives importance to ethics and the way they value their people. For instance there is a company rule that prohibits employees from accepting money from any customer, competitor or supplier that does business with Smucker’s (Smucker’s, 2010). These high ethical standards are balanced by the manner that the company treats its employees.

It begins with the hiring process wherein eight to ten people will interview a job applicant but once a person is hired he or she will take comfort in knowing that Smucker’s prides itself in having a low employee turn-over rate (CNNMoney.com, 2008). This is perhaps the reason why Smucker’s took the 47^th spot in CNN’s list of the 100 Best Companies to Work for (CNNMoney.com, 2008).

Weakness

However, there is no organization that can perfectly align its corporate strategy and strategic choices. It was reported early this year that Smucker’s experienced difficulties particularly when it comes to products related to baking, oil, and coffee and that sales declined by as much as 12% (Lunar, 2010). This means that brands like Pillsbury, Crisco and Folgers were affected.

The company is expected to make changes so as to reverse the trend and one of the choices made was to shut down old facilities and build new ones as well as the consolidation of operations. As mentioned earlier a new facility will be opened at Orrville, Ohio as well as the consolidation of coffee operations in their New Orleans coffee facilities (ABC-Directory.com, 2010).

However, changes will result in shutting down facilities in Memphis, Ste. Marie, Sherman and Kansas City (ABC-Directory, 2010) This would mean the loss of 700 full-time positions. It goes against their corporate strategy of ensuring low employee turn-over rate.

Opportunities

The company has diversified market offerings wherein they have 33 brands and 11 product categories and owns manufacturing facilities in 19 different locations in the United States and 4 in Canada (Annual Report, 2009). The company can leverage all their resources to create more effective means of producing high quality but less expensive products.

For example the coffee that will be served in Dunkin Donuts will no longer be ordinary coffee but one that is made from Folgers. The can also offer regular coffee and then a special blend from Folgers. There is no other donut store that can compete with them because they can get freshly brewed coffee at a relatively low price.

In addition they are developing facilities that will allow them easy access and suppliers. When it comes to asset management the company also shows competitive advantage because it was able to grow the company and it has an enviable capital structure comprising of 40% debt and 60% equity (Annual Report, 2009).

Threats

Smucker’s must pay careful attention to the effects of globalization. They have succeeded in consolidating their facilities but it has become more and more difficult to compete with low cost production facilities in China or even Mexico.

Consumers can easily switch to other products especially when they believe that it is much healthier and cheaper. Smucker’s must watch out for new players and new companies that will offer better products than them. They must always try to improve quality but mindful of the costs.

Conclusion

This study has reconfirmed the view that Smucker’s is gaining strength because of their vision and mission statement, specifically by building their corporate strategy on the basic beliefs laid down by their founder.

By focusing on quality, people, ethics, growth, and independence the company has made wise strategic choices like expanding its capabilities while improving their facilities and their workforce in order to achieve a sustained competitive advantage over others. Nevertheless, there is still room for growth.

The company must be wary of the effect of globalization wherein competitors are building factories in China, India, and Mexico to reduce their operating expense. Smucker’s must carefully analyze if the answer to their problems is to big bigger and more expensive factories or to relocate somewhere where it is more cost-effective to produce their products.

References

Abc directory.com (2010). “The J. M. Smucker Company.” Web.

Annual report (2009). “The J.M. Smucker’s Company.” Web.

CNNmoney.com. (2008). 100 best companies to work for 2008. Web.

Henry, A. (2007). The Internal Environment: A Resource Based View of Strategy. Understanding Strategic Management. Oxford University Press. Web.

Lunar (2010). “The J. M. Smucker Company Announces Record Fourth Quarter and Full Year Results.” Web.

Staff. (2009). “JM Smucker Q2 Profit More Than Doubles On Folgers Acquisition; Raises FY10 Adj. EPS View.” Web.

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