|Essay type:||Critical analysis essays|
|Categories:||Company Analysis Strategic management Strategic marketing|
Investors face many challenges in their efforts to establish market dominance. Most companies create a policy framework to guide the growth strategy. However, the market in unpredictable and often, organization initiate contingency plans to adapt to the emerging changes. In a bid to grow sales and market dominance, investors acquire other companies intending to gain valuable synergies. The outcome of this venture is not guaranteed and hence, vulnerable to changing market forces. General Mills case represents an excellent illustration of a situation where hasty decision leads into catastrophic blow on investments. The problem exists consistently in the food processing industry. The strategy plan examines to formulate a plan for adding value to increase the company's returns on capital.
General Mills is a food company and specializes in numerous products. Recently, the company acquired Blue Pet Inc. at a value of $8 billion. Blue Buffalo is a valuable market potential with a fast growing rate. Based on the valuation of $8 billion paid to acquire the firm, General Mills stock fell by a $3 billion margin. Blue Buffalo has many attractive traits which place it at a strategic position to enhance the company growth. CEO Jeff Harmening needs to develop a framework to generate sufficient funds to justify the acquisition value.
General Mills lost $3 Billion through incinerating market capitalization following the hasty acquisition of Blue Buffalo.
One of the most crucial factors to note is the fact that consumers have turned away from carbs. The shift in preferences reveals that consumer's needs are changing. Therefore, the first alternative should include the introduction of a new line of product to meet consumer needs (Yang, Jun & Peterson, 2004). The CEO should constitute a team of product developers to produce food that meets overall consumer needs. The new product line attracts new customers and a source of revenue for Mills.
The second proposal that pertains to a strategic alliance with supply chain members is the food processing industry is demand driven. An example of this partnership includes collaborating with health regulators to ensure that the company provides the safest meals for pets. Strategic partnering offers numerous benefits which replicate on sales and revenue. Sharing vital information with suppliers, regulators, and consumers help in understanding customer needs (Kuhne, Gellynck & Weaver, 2014). The company popularizes the brand name, consequently attracting more customers. Blue Buffalo is trendy, well-positioned, and understandably attractive to create new sources of revenue.
Finally, Blue Buffalo may enter into a horizontal alliance to gain more control over the market forces. General Mills is not the only entity facing problems in the industry, but other firms in the sector suffer the same fate. Therefore, horizontal alliance involves partnering between firms in the same industry to share their market niches. This strategy should prove to be mutually beneficial to both parties (Kotzab & Teller, 2003). However, this alternative follows a series of legal processes which may be costly in the long run.
Evaluation of the progress made towards achieving a specific goal reveals the effectiveness of the strategy to solve the underlying problem (Hertenstein, Platt & Veryzer, 2005). Therefore, the first measure to be used in evaluating the effectiveness of plans would be the use of financial statistics. The sales, revenue, and profit are best illustrated using numerical data. The periodic reports on sales and revenue reveal essential information about the performance of the firm. Therefore, the story shall be compared with the set target to ensure that the outcome meets the projected figures.
The second measure to evaluate the effectiveness of the strategy shall be ratio and year-over-year metrics to determine the performance. Ratios are essential metrics which act as an indicator of the health of the organization. In essence, they help the management to understand the viability of the company (Hertenstein et al., 2005). The comparative analysis demonstrates the trends and movement in key performance indicators.
The last, measure to be adopted in the study shall be a customer satisfaction survey. The ability of a company to meet the needs of its customers determines its success. Therefore, General Mills should conduct an online review to understand the perception of the consumers towards their products. This information shall be helpful because it reveals the areas of proficiency and where the company needs improvement (Yang et al., 2004). An online market survey is cheap because most people have access to the internet.
Based on the analysis of the case, there are many lessons which emerge. Management of crisis is a difficult undertaking which requires careful analysis of the market to ensure that the company gets value on any investment (Porter & Kramer, 2018). However, that is not the case in most cases because the market is uncertain. However, the case acts as a reminder that firms should focus on their areas of competence to continue market share instead of unjustified acquisition. Based on these reasons, the analysis reminds organizations on the needs for due diligence but also challenges them to seize opportunities to gain new market for their product through creativity, collaboration, and diversity.
General Mills explains how hasty acquisition decision may result in devastating financial losses because of poor risk analysis. Blue Buffalo is a profitable company, but its purchase value was way higher. The problem persists across the industry. However, the company may introduce new products, or enter into a horizontal or vertical partnership to expand the market share. In this manner, the company generates more income to justify the $8 billion investment.
Hertenstein, J., Platt, M., & Veryzer, R., (2005). The impact of industrial design effectiveness on corporate financial performance. Journal of Product Innovation Management, 22(1), 3-21. doi: doi.org/10.1111/j.0737-6782.2005.00100.x
Kotzab, H., & Teller, C., (2003). Value-adding partnerships and coopetition models in the grocery industry. International Journal of Physical Distribution & Logistics Management, 33(3), 268-281. doi: doi.org/10.1108/09600030310472005
Kuhne, B., Gellynck, X., & Weaver, R. (2014). Enhancing Innovation Capacity Through Vertical, Horizontal, and Third-Party Networks for Traditional Foods. Agribusiness, 31(3), 294-313. doi: doi.org/10.1002/agr.21408
Porter, M., & Kramer, M., (2018). Creating shared value. Managing Sustainable Business, 323-346. doi: doi.org/10.1007/978-94-024-1144-7_16
Yang, Z., Jun, M., & Peterson, R. (2004). Measuring customer perceived online service quality. International Journal of Operations & Production Management, 24(11), 1149-1174. doi: doi.org/10.1108/01443570410563278
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