Of late, strategic management has been adopted by business leaders to develop competitiveness in their organization; it entails looking into all segments of an organization, which include human resources management, supply chain management, information technology management, and manufacturing costs and processes management. J. M. Smucker is an international food retail chain company that has been affected by current business arenas; in the first decade of 21st century, the company was the leading marketer of berries, jam, and preserves in Australia, Canada, and the United States.
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However, since 2001, the company has been experiencing a decline in its product demand; the decline in business for the company can be attributed to changing market situations and lack of effective decisions by leaders. In 2001, for instance, the company’s profits decline drastically to $0.651 billion, when its competitors were making much more (Nestle made $84.7 billion, Kraft made 33.8 billion, and Unilever made 51.5 billion).
The above-mentioned competitors had one common feature; they were trading with grocery products, while J.M. Smucker stuck to its products, which include ice cream toppings, fruit spreads, and natural peanuts butter. After realizing the deteriorating business trend, the company has embarked on an aggressive expansion strategy where it targets to regain its competitiveness in the food market (Aguayo 23). This paper explores the expansion strategy of the company; it will discuss the pillars that the company needs to use for successful expansion.
A brief history of the company
J. M. Smucker was founded by Jerome Monroe Smucker in 1897, the company started as a steam-powered cider mill in the Ohio State of Orville; with the business, the entrepreneur was surprised to realize that his state of work could produce more than he could sell. With the realization, he decided to use a home recipe to develop apple butter, which hit the market in the year 1920. In the 1920s, the company concentrated on the production of jam, jellies, and preserves; in 1942, the management decided to expand to the production of ice toppings. J. M. Smucker was listed for public trading in 1959 and grew rapidly to introduce other products like reduced-calorie fruit spread and tomato ketchup in 1963.
The company sales deteriorate in 2001 compared to other players in the sectors; to change the structure, the management has developed new management policies and approaches, one of the approaches developed is the use of acquisition and merger.
J. M. Smucker Expansion plan
To attain competitiveness amidst modern changing business environments, an organization’s leadership team needs to implement the operational, project, and strategic management strategies that are responsive to the needs of the particular market the company is trading. With effective strategies, a company is able to resolve problems and conflicts that are likely to create a weak link in the company’s operations.
Modern contemporary business environments are also posing some dangers to organizations as leaders are finding their old policies and business approached being challenged by the environment prevailing. With the challenging business environment as experienced by Smucker, the management decided the best strategy expand its business and remain competitive is through mergers and acquisitions.
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In 2001, the management identified two business slated by Porter and Gamble for its diversity strategy, the companies were Jif and Crisco. The company did not waste time, but it immediately acquired the two companies in 2002 at the cost of $786 million stock swap. With the new acquisition, the management was optimistic that the company would ride on a three-level expansion, which was the expansion of its organic sales growth of existing products, innovating and inventing new products, and further development of strategic mergers and acquisitions.
Leaders have the role of creating orchestrate teams and developing the right combination of the available resources for the benefit of the entire organization. Management gurus have agreed that the success of an organization is dependent on the quality of its managerial decisions; when decisions address issues facing the organization optimally, then the chances of success are higher. Quality and timely decisions assist a company takes advantage of business opportunities in its area of operation as it militates against industrial risks and threats. Smugger management was optimistic that it has the right combination of leaders who would see it succeed in the competitive business environment.
The contemporary business environment involves management thinking not only about the domestic market (commodity, raw material, factors of production, and labor markets) but also considers international markets. There are various products that can be available in the international markets however, to be able to benefit from the perceived advantage, organizations need to have effective international strategies. Globalization has opened the world thus selling and buying from different nations has been facilitated.
The acquisition plan did not end in 2002, the company acquired International Multifoods company at a cost of $840 million plus giving away two of its additional center of the store foods brand called Pillsbury and Hungry Jack; this acquisition took place in 2004. In 2008, the company acquired Folgers from P&G at the cost of $3.7 billion; with the acquisition, the company managed to become the leading producer in coffee, peanut butter, cooking oil, jams and jellies in North America.
Acquisition and mergers have become the new system through which organizations enlarge their market base and get to foreign markets. The challenge that organizations have is how to manage the larger business as well as knowing the right policies and approaches that needs to be implemented. In all the occasions that Smucker has had, it has been the acquiring company; this means it has to deal with other shareholders and stakeholders in the larger business than it was previously doing.
Such larger business creates some sort of decision making dilution creating chances of decision friction and challenges associated. International Multifoods had much concentration in the local market thus it will bring into the company some domestic markets and undertakings. Charity begins at home, with a strong home market, the management can b enable to have international diversity programs to assist the company get more market and cheaper raw materials.
With the acquisition, the management should take time and blend the two companies together; there should be a system of effective transition where the management, employees, customer and stakeholders, of the companies are considered. When managing an acquisition in the diverse global markets, leaders at J. M. Smucker should understand that they have acquired companies with different organizational culture and philosophy than the original organization.
Organizational culture have an effect on the performance of an organization, organizations with positive culture are more likely to be successful than those organizations whose culture fails to support positive growth. The cost of acquisition is likely to affect the capital and cash flow within the business; although acquisition might not involve actual exchange of money, there is some net effect from the acquiring company that is compensated by the assets, both physical and intangible that the company will acquire. With such an understanding, the cost of acquisition that J. M. Smucker should be accepting should be the best attainable cost; it should consider the expected gain verses the cost of the acquisition.
In the larger business, the management has the role of enacting internationally recognized human resources management structures; these are management policies that will enhance nurturing, developing and benefiting from talents from the diverse global labor markets. Other than the global market, the management should understand that the acquired companies had their organizational culture and personnel that now need to be integrated in the new undertaking.
From either side, the management should take their time and explain to the personnel on the effect that the acquisition will have on their careers and working life.. M. Smucker Company Limited has the major role of change management and ensuring the new larger personnel have been blend well with potentials from either side considered when making teams combination decisions. When combining teams, the management should ensure it taps potential in the parent company as well as the potential that the new acquired have come with; with such policies the company will be stronger and more competitive.
The state of contemporary business environment calls for managers to make decisions that will outdo their competitors; the best policy for J. M. Smucker Company Limited is “Use of strategic marketing strategy combined with Blue Ocean management system”. The policy should be adopted alongside the acquisitions that the company has made; the blue ocean policy will be possible with the acquisition of the new businesses that have their own market.
The food industry in the world has elements of “red Business” strategy, under the strategy, companies make policies in the efforts to outsmart their competitors and ensure they have a large command of the market. Such polices have to follow certain presumed set rules and regulations as well as some that have been documented.
With the rise in competition, J. M. Smucker Company Limited should invest in strategies that make competition irrelevant to its business despite its existence; Blue Ocean strategy is a management tool that invests in attaining simultaneous achievements through service differentiation and establishing of new market. Although J. M. Smucker limited management structure has assisted the company to attain great success, its declined profits proves that much more needs to be done to make the situation better.
Acquisition and mergers will only lead to good business is if the management can have the skills, experience and guts to tap the potential that has been brought up by the acquisition. The company should further empower the research and development departments; the role of research and development strategy should be more reinforced to offer the much needed quality information that can assist the management make strategic decisions.
Blue Ocean management approaches believes that a company can be able to command growing incomes, revenues and profits if it is able to tap uncontested market places or offer services that are high competitive compared with those offered by their competitors. The method takes the form of refocusing the direction of a company and move from strategies that move from head-to-head competition (Hutchins 56)
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With current globalization, there are some countries that have not been fully tapped; they include developing countries as well as some developed countries where demand is high with low players. Some of the countries that the countries should look into include Southern Sudan, Afghanistan, Kenya, and Rwanda; the above countries are restructuring their economies and have potential of growing the company’s business further. To be able to attain success in the business environment, the company should learn the mechanisms of Blue Ocean strategy; the first strategy that the company should use is value innovation through service differentiation and low cost.
Under the Blue Ocean policy, J. M. Smucker Company Limited should ensure that its operations fall in the strategy canvas of Blue Ocean; the canvas has four main corners: elimination-reduction-rises- and creates. Under the framework of elimination, the company should analyze the available routes and ensure that every route has been utilized maximally; in the case there are some areas that are not profitable, the company can as well stop operating in the areas.
Some of the areas that J. M. Smucker Company Limited should reduce business are in those areas that have head-to-head competition. Under the framework of reduction, J. M. Smucker Company Limited should undertake an analysis of the benefits it delivers from a certain area; the company should ensure that any additional business in the area does not lead to marginal cost to the company.
Blue strategy implementation is the process through which organizations plan, organize, and manage its resources; resources are classified as physical, human, and financial. Strategy implementations process starts with development of attainable corporate goals and objectives. Adopting “blue Ocean” policies is the end result of effective internal and external procedures thus J. M. Smucker Company Limited should be sensitive of how other areas of the company has been managed.
Some of the systems that can give the company an upper hand include an effective global organizational structure, integrated global supply chain management, international marketing strategy, international Human resources management approach or Diversity management, information systems, knowledge management, and Total quality management (TQM) strategies.
Alongside competitive policies that the company with the acquired companies will have, the management needs to develop policies of efficiency, creativity, invention and innovation. One policy that has been working well for large businesses is the use of total quality management approaches. Total Quality Management (TQM) is a strategic management tool that focuses on delivering quality products and services; the policy aims at improving current products to state of high competitiveness. J. M. Smucker Company Limited should get to details on similar projects that its acquired companies have made, with the understanding the management should develop a central point through which such programs will be managed and implemented.
The management tool, total quality management, operates through the frameworks of quality control, quality planning, quality standard measurement, and continuous quality improvement. It aims at improving production efficiency, output quality, customer satisfaction, and internal processes effectiveness.
Looking and analyzing the performance of the company in 2001, it has become clear that the poor performance has been in part caused by lack of innovative and creative ideas. The management who comes from the same line of family might have run short of creativity, the management should understand that the changing world environment needs business leaders who can make fast and current situation responsive decisions.
J. M. Smucker can take the option of brand extension; brand extension is a marketing tool used to market products using the strength of an existing brand (Haller 12). The method of management involves the company noting and coming up with the right management policies that will enhance the growth of customer loyalty and confidence with the company’s products. The management should also note that it has acquired some new companies that had their system of operation; there might have been some policies that these companies had invested in to develop and improve their operations.
Before taking a complete turn and changing the structure of the company, the management should determine the reasons behind the structures, in the even the structures are still applicable in the larger business, then there will be no crime using them. Again products made by an acquired company can be managed like a department; the structure of management will ensure that previous policies by the acquired companies have been given a chance and any success attributed to them have been shared by the larger group of company.
The supply and logistics chains of the company should be checked, since the company has acquired others, there is a high chance that operating standards of supply chain might not link effectively. Again the business has accrued much business thus the existing system might become overburdened by the structure.
In modern business environment, management gurus have advocated for the use of integrated supply chain management structures; the management approach will assist J. M. Smucker get raw materials from the global market. When materials are fetched all over the world, the company will have the variety of sales and diversifying its products is easier (Creech 89). The food market is tricky; the management of J. M. Smucker should appreciate the fact and come up with products that are attractive to their end-users.
Satisfactory products should have some nutritional benefit to consumers. With new advocacy of eating organic foods, there has been reduced business of chemical food manufacturers, the use of natural foods has taken center stage; this explains why companies in similar industry but making organic foods are doing better than J. M. Smucker.
Looking forward to the way the company should manage the larger business, the management should ensure that its research teams remain aggressive and have an understanding of the changes happening in the global environments. It is through such understandings that the company can benefit. Research and development department have the role of developing new products and advising the management on the right management path to follow considering the prevailing business environment prevailing in the global market (Ahire 34-89).
Global food manufacturing industry has become competitive with multinational companies enjoying the greatest percentage of the market. J. M. Smucker has embarked on strategic alliances, acquisitions, and mergers in the efforts of enhancing its competitiveness. The strategy undertaken by the company calls for management to implement strategic management strategies in different areas of the company; some strategies that the company can implement include total quality management, six-sigma, integrated supply chain management, and international human resources management policy.
Ahire, Sanjay. Management Science, Total Quality Management interfaces: An integrative framework. New Jersey: Wisley, 2006. Print.
Aguayo, Rafael. Dr. Deming: The American Who Taught the Japanese About Quality. New York: Wiley, 1991. Print.
Creech, Bill. The Five Pillars of TQM. New York: Truman Talley Books, 1994.
Haller, Harold. Managing with profound knowledge: A management process based on the Deming management theory. New Jersey: Harold S. Haller & Company, 1993. Print.
Hutchins, Greg. The Quality Book. Portland. QPE Books, 1996. Print.