Globalization, international trade, and growth in international relations have resulted to growth of multinationals; the growth has made business environments more competitive calling for leaders to develop appropriate strategies to deal with challenges in the markets.
The food industry is the backbone of live hood in human beings; it has a number of competitors willing to make business with the world increasing population. In the United States of America, there are a number of domestic and international companies in the sector offering a variety of food products.
In more than a century and a half now, Campbell Soup Company has been in the business of canning soups and other food products.
To peddle successfully across the generations, the company strength lies in its well-informed leaders who make strategic decisions when called for; secondly the company has a strong human resources team with job succession as one of the strongest attribute in the company’s human resource management policies1.
This paper undertakes an analysis of Campbell Soup Company; it will concentrate of its business strategy, corporate strategy, and its risk management.
Organizational Overview
At Camden, New Jersey, U.S. stand is the headquarters of an international company that was started in 1869 by Joseph A. Campbell and Abraham Anderson; they were fruit merchant and icebox manufacture respectively. At its incorporation, they traded in canned foods like tomatoes, potatoes and meat that they produced in small scale.
After eight years of struggle, Anderson decided to leave the company but Joseph was willing to continue with the trade, he named the business “Joseph A. Campbell Preserve Company”; since then the company has grown from strength to strength.
The company has made some strong brands in the world which include Royco, Pace, Pepperidge Farm, Campbell’s, Erasco, StockPot, Liebig, Arnott’s, and V8; the company has its presence in more than 120 countries2.
Strategic Assessment
External Analysis
Global crisis spawned the cohesion among countries; the mutual trust that seemed to last for the good of international trade and growth in multinationals have become a challenge, Campbell Soup Company faces hostility in countries different from the unites states as the countries seek to develop their own products in the efforts to recover from global crisis.
There have been calls by domestic governments to business people to shy off from importation, as it is likely to injure an economy; the moves have facilitated the growth of domestic food canning companies increasing the competition that Campbell Soup Company gets in different countries.
Another issue related to globalization that is affecting the company negatively is the growth of trading blocks, for example the growth of East African community deliberated on the way they can be producing local canned foods, they decided to enforce local companies.
For example, Njoro Canning Company in Kenya, they also joined efforts to give their universities the capacity and resources to come up with such product, such moves are creating a high competition to the business.
Another problem facing the company is massive campaigns by health officials at national and international level, some programs are supported by world food programs and world health organization, that teaches people on healthy eating; they are of the opinion that eating health will call for shying off from taking “chemical” mixed foods and instead take much use of organic foods.
The moves have made the company lose some business, as people believe one of the companies that make the foods that are prohibited. Another problem facing the company is current standoff among countries on whether genetically modified foods should be allowed to be sold or not, the United States is in the forefront advocating for its production while some other countries are of the opposite.
Any food company from the United States is likely to look questionable in the eyes of those countries that do not support the production of genetically modified foods. This has made the company to struggle in creating a strong brand name and look ethical.
In the domestic market, the company is facing challenge from current campaigns against obesity in the country, some of its products have been classified as junk foods, thus even marketing the products have become an issue3.
Corporate Level Strategy
The issues facing Campbell Soup Company differ in different places, different continents, countries and communities have their believe about the company thus the management have the task of maintaining a diverse population and business environment.
To ensure that the company has successful traded, the management has embarked on either franchising its brand names or having some international branches. At the country of operation level, managers are expected to analyze the situation and the needs of the market and then advice the company accordingly on those products that seem to be of interest in the country.
Though products have much similarity, there are some differences created to ensure that every markets get what it really want and can connect more easily. For example in countries that do not support the (genetically modified foods) GMF’s, the company cans organic foods and will engage in massive campaigns to sell the products letting people believe they are organic and no adhesives or preservatives added. This makes people to have confidence it the products.
Another move that the company has embarked on is creating of good customer retaliations; the company is one of the world-respected companies with effective corporate social responsibility activities.
It so evident in societies in the wake of proving them with societal improving services; some of the programs that the company has embarked on include sponsoring of sporting activities, food aids, disaster managements, fair trading and environmental conservation policies.
In some countries, especially in developing countries, the company has embarked on good suppliers relation creation; this is where it offers a reliable market to food produce in those countries and supports programs that will facilitate the production of the foods.
For example in Africa, when the company needs some produce, it looks for farmers, finances them with seeds, fertilizers and farming education; when the foods are mature, the company comeback and buys the products. This move is seen to ensure that it has a constant supply of food products and materials; it also creates a good relation with the people.
Business level strategy
At business level, the company understands that the quality of leaders that it maintains determines the success that it will have in the international arenas; despite having a head quarter at Camden, New Jersey, the company has some regional and national offices in different areas that are facing similar business environment.
At the head office level, the company’s leaders have the role of developing their organization’s operating strategies, mission, vision, and corporate objectives; they make the structure of the global business and have the right positions and people placed where they most quality.
The company understands that leadership is an art of managing and developing strategies to be followed in an organization: the success of an organization depends on the quality of leaders; managerial decisions are the driving force of an organization; the skills can be improved further through education, training and mentorship.
The success that the company has had over a decade of different economic situation as well as in countries that have different culture, background, politics, and social-economic environments has been attributed to the company’s effective leadership roles.
Leaders have the role of shaping and guiding an organization to its path to success. The structure of the organization has leadership at different levels, from the chief executive officer (Douglas R. Conant ) and chairperson (Paul R. Charron) who can be seen as the entire organizational leader to micro teams leaders.
The leaders are given different mandates and powers to execute some policies and see the company grow to higher heights. At all these levels, leaders need to make decisions that are responsive to the situation that the organization is going through. Their decisions must be timely and effective.
Other than making business decisions, leaders have the task of managing their team members to the attainment of the set team goals and objectives.
To ensure that the business has well structures that can allow management and control of activities, it is divided into three main divisions as Simple Meals division, the Baked Snacks division, and the Health Beverage Division that includes V8 juices; experts and professionals lead all these division.
The main reason why the company is divided into the three main divisions is to ensure that each section concentrates on its products that might have different shape and market share than the other. Each division has its own budget, marketing team, and it is expected to connect with the situation on the ground and advise the company effectively.
Although there are some corporate structures, each department is expected to forge their own way of doing business and advice business development committee on what they think would assist them develop in their line of business4.
Financials
Financial Analysis
Save to 2009, the company’s revenue has been on an upward rise since 2006; the following are the revenue results for the five years
The improved growth in revenue is amidst growing competition hostile market environments; it has also made improved sales when the world was facing the hardest economic times since the great depression of the 1930s.
The revenue growth has also shaped the growth of the company’s net operating gains; operating profits have been on the increase for the last five years as follows
The above is show of a business that has a promising future, the growth in sales and profits shows that the business will be sustainable in the future as it offers its services and products amidst competition and negative marketing from anti-GMF campaigners.
According to the financial accounts, the company is able to manage its debt v/s equity, it is not highly geared and compared to the expectations in the industry, and it has less long-term financial obligations.
On the other hand, the company seems to be lagging behind of the industry in its affordability to cover short-term financial obligations as it has a quick ratio of 0.5 compared to the industry’s expected rate of 0.8. The following chart shows the situation in the company:
The above shows some mixed reaction about the company; it shows a company that opts to manage minimal finances at the expense of having large sums of short term assets. The little borrowed finance that the company has is a show that the economy has a potential of growing even further if the management can utilize the available financing options.
The company has been having a steadily growing investment in fixed assets, this shows a company that has little investments in the sector.
In this time of global financial crisis and increasing prices of oil, the company can be seen to be taking strategic moves not to increase its budget on fixed assets for the benefit of the future trade when the world regains its stability. The following table shows the growth of assets in the company for the last five years:
A similar trend can be seen be with the trend that total liabilities and shareholders’ equity are having, they seem to grow marginally and have not changed substantially in the last five years. They are as follows:
Corporate Forecast
The company has some shares outstanding, the following tables shows the outstanding and the rate of ownership that the company has:
The above statistics shows that the company does not have a majority shareholding that can influence decisions in one line. The fact that there is a high insider ownership is an advantage that the owners of the business are involved in day-to-day management of the business, this enhances efficiency and the degree to have high returns in the business; to an investor, this is a good business to invest.
According to the next five years projections, the company is expected to be operating below what other traders in the industry will be operating, the graph below shows the expected rate of trading;
Although the trading is positive and there can be seen to have some expected growth, in case an investor has an option of investing in another company in the industry, it is more advisable to get to the other company as Campbell Soup Company seems to be having some slowed expansion and growth rate.
The company share price remains relatively stable, it shows a company that have sustained share prices and strong in the changes economic situations. The following table shows 52 weeks high and low of the company’s shares:
Stock Activity
The volatility (beta) figure illustrates that the paper is not very volatile and thus a speculator should not think of using the share for making financial gains5.
Long-term investors should invest in the company’s share the trend of dividend growth in the last five years has been positive, the table below shows the dividend per share growth:
Risk analysis
Businesses operate in an environment of uncertainty and thus there is the possibility of an occurrence that had not been expected; this results in a loss to the business. In this case, there is the injury to the systems of the business; Campbell Soup Company faces some risks in the domestic and international markets; the following are the main risks that the company faces:
Strategic risk
This is the risk that the company will venture in a country that has high competition or where American foods are not appreciated; again the risk can come when the after an establishment, another similar company decides to keep a similar business to the disadvantage of the Campbell Soup Company.
To mitigate this risk, the company embarks on massive country analysis before a venture has been made, again the use of franchising method of business growth can be interpolated as a move to mitigate strategic risk.
Financial and foreign exchange risks
The company faces a risk of losing income when dealing with currencies of different countries; fluctuations of currencies offers the company a challenge however the company has hedging and options financial method to mitigate against the losses.
Competition has resulted to price wars making the company slice its products prices; this leads to a reduced profit margin, to mitigate this, the company has embarked on cost reduction methods and improving efficiency.
The following are the ways that the company uses to identify a risk in its business:
- Objective based risk identification- this is based on analysis the level that the risk will have on the overall objectives.
- Scenario-based risk identification- the situation that a certain marketing strategy is going to be undertaken has its own special category of risks that can be interpolated. These involve the risk that a marketing plan will not be acceptable in a certain area because of language barrier
- Taxonomy based risk identification- this is interpolating the risk in the terms of the possible risks that are known
- Common risk identification- this is basing the level of risk from the experiences and treads in business, it assumes that the risk areas have been identified and thus the possibility of risk can be estimated with certainty.
- Risk charting- this is a method that combines all the above ways to mitigate the occurrence of a loss6.
Conclusion
The success of Campbell Soup Company in American food industry as well as in the global environment can be attributed to its effective and efficient managers who are able to make quality, acceptable, and problem responsive decisions.
The philosophy of the company’s management is to organize the available human and physical resources in a way that they can gain maximum gains from opportunities in global and local market as they neutralize weakness and threats in the markets. The philosophy has seen the company remain strong for more than one and half a century and diversify its businesses in more than 120 countries.
Bibliography
Campbell Soup Company Official Website. Campbell Soup Company. Available from https://www.campbellsoupcompany.com/.
Fred, David. 2008. Strategic Management: Concepts and Cases. New Jersey: Pearson Education.
Kotabe, Masaki, and Helsen Kristiaan. 2004. Global Marketing Management. New York: John Wiley & Sons.
Paley, Norton. 1999. The manager’s guide to competitive marketing strategies. London: CRC Press.
Footnotes
1 Kotabe, Masaki, and Helsen Kristiaan. 2004.Global Marketing Management. New York: John Wiley & Sons.
2 Campbell Soup Company Official Website. Campbell Soup Company.
3 Kotabe, Masaki, and Helsen Kristiaan. 2004.Global Marketing Management. New York: John Wiley & Sons.
4 Paley, Norton. 1999. The manager’s guide to competitive marketing strategies. London: CRC Press.
5 Campbell Soup Company Official Website. Campbell Soup Company.
6 Fred, David. 2008. Strategic Management: Concepts and Cases. New Jersey: Pearson Education.