Case Study on "JM Smuckers Strategic Choices"

Quoted Instructions for "JM Smuckers Strategic Choices" Assignment:

For this case, you will be identifying the primary business strategy employed by Smuckers, or the division of Smuckers you have been studying. You will also be providing a critical analysis evaluating that strategy in the light of the strengths, weaknesses, opportunities and threats you identified in Modules 2 and three.

Step One: Which of the four strategies discussed in this course does Smuckers follow? How do you know?

Step Two: Using the process you learned in the SLP, integrate this strategy with the strengths, weaknesses, opportunities, and threats you identified in modules 2 and 3. This should give you some specific actions the company is taking relative to their strengths, weaknesses, opportunities and threats. These actions are referred to as *****"strategic choices*****". Do the strategic choices taken by Smuckers align with the firm*****'s generic strategy? What are the points of disconnection? You need to think critically about this step. NO company achieves perfect alignment with its strengths, weaknesses, opportunites and threats, and its chosen strategy. It is your job to uncover the discrepancies and problems.

Step Three: Identify any specific sustained competitive advantages conferred on Smuckers by virtue of its strategic choices.

BACKGROUND READINGS

Competitive Advantage

For this module, we will focus on the strategic options available for companies at the level of business strategy. Companies select business strategies to obtain sustained competitive advantage (SCA) against competitors. SCA*****'s are advantages that can not be easily copied or imitated by competitors. A few years ago, strategist talked in terms of Porter*****'s generic strategies (basically cost and differentiation). Today, we have four distinct strategies we use to analyze strategic options, although there are various approaches to achieving these strategies employed by different firms.

cost leadership

differentiation

niche focus

pre-emptive move (or first-mover advantage)

Cost leadership

Most people think of economies of scale when they think of low cost strategies. McDonalds and Wal-Mart not withstanding, high volume is not the only way to achieve low prices. Here are some other approaches to implementing a low cost strategy:

No frills. Southwest Airlines eschewed big airports and cut costs by flying in to smaller fields. Competitors such as Delta and American were too heavily invested in the hub business model to change.

Product design. Masonite developed an alternative to expensive wood products by using sawdust and woodchips. Some telecommunications companies *****"bundle*****" products offering cable/satellite TV, high speed internet and telephone service for one low price. Hershey*****'s shrank the chocolate bar to keep from raising their low price.

Operational economies. Firms can save money by eliminating high costs in the value chain. Amazon was able to significantly cut costs by eliminating physical stores, inventories, and cutting the 30% return rate of bookstores to just 3%.

Experience. Costs decline at a predictable rate with a firms accumulated experience. Such declines are attributed to the learning curve, technological improvements, and product redesign resulting in product and process efficiencies.

Economies of Scale. With higher sales, fixed costs such as R&D, overhead, advertising, even legal support, can be spread over a larger revenue base.

Here is another way of looking at low-cost strategies:

Algasae (n.d.) Promoting thought leadership...Customer focused low-cost strategy. Retrieved from http://www.alagse.com/strategy/s10.php

Differentiation Strategies

If a company positions itself as offering a product or service that is different from its competitors in a way that customers value, it is following a differentiation strategy.

A successful differentiation strategy will create customer value that is PERCEIVED as such by the customer. Many so-called *****"new-and-improved*****" products have fallen flat because the customer simply didn*****'t care! In addition, a successful differentiation strategy will only build a sustained competitive advantage to the degree that it is difficult to copy.

There are many ways to add value to any aspect of a business through differentiation:

Ingredients/components: Healthier, *****"greener*****", more lasting ingredients/materials. (Maytag, Healthy Choice frozen dinners)

Product offering: Better designed products (Blackberry touch screen, Dell *****'ultra thin*****" notebooks)

Combining products: Two is better than 1! (Colgate 2 in 1 toothpaste with mouthwash)

Added services: Extra services beyond the basic purpose of the product or service (Concierge service with American Express Cards)

Breadth of Product Line: Extra convenience in dealing with fewer vendors. (Wal-Mart super stores offer one stop shopping, eliminating the need to go to multiple stores.)

Channel: Offering items or services through a medium or channel unavailable in that form anywhere else. (E-bay offers instant access to hundreds of individuals located worldwide simultaneously - asynchronously.)

Design: Product or service is unique, (Bed-and-breakfasts offer a *****'*****'homey*****" alternative to standardized hotel rooms).

In general, there are two ways to build SCA through differentiation strategies. Most of the methods of adding value mentioned above can be related to either quality or brand recognition.

Quality Strategy. In this type of differentiation, a company tries to set it*****'s product/service appart on the basis of superior quality It is probably the most widely used method of attaining sustained competitive advantage. Usually, quality means superior performance, and a primium brand as opposed to discount or economy brands. These top of the line offerings command a high price tag. However, quality does not always mean pricey. Both Mercedes and VW connote high quality German engineering.

Branding. Brands build SCA through customer familiarity, loyalty, and trust. Aspirin is aspirin, but Bayer continues to trive against low-priced generics due to the power of the brand.

Blue Ocean: An Alternative Approach

A combination of low cost and differentiation strategies has created a buzz in the recent business press. Known as *****"Blue Ocean*****" strategy, it is an interesting new idea that challenges the standard classifications of strategy.

The following is the official Blue Ocean website, Be sure to check out some of the links to view the tools and frameworks for Blue Ocean strategic planning:

Kim, W.C. and Mauborgne, R. (2009), What is BOS? Nine key points of Blue Ocean Strategy. Retrieved from http://www.blueoceanstrategy.com/about/whatis.html

Niche Focus Strategies

Niche or Focus strategies are really variations of a cost or differentiation (or both!) strategy, only concentrating the company*****'s efforts on a single or limited product or market. By focusing its efforts, the firm is able to realize the following advantages:

Avoid distraction or dilution: All the firms efforts are directed toward a single end and competitive pressures are diminished. All company resources and capabilities are matched to the market needs - creating a SCA (remember RBV?)

Maximize limited resources: When resources are tight, they will go father and create a greater impact when the target is limited.

Circumvent competitors resources and capabilities: By operating in a niche market, say, private-label manufacturing, a firm does not have to contend with the big advertising and distribution capacities of the brand names. Competitive pressure are dimished overall as there are likely to be fewer competitors.

Establish a unique identity: Offering a narrow product line, or operating in a limited geographic area can confer a certain cachet. In-and-Out Burgers, for example competes successfully with the huge fast food franchises by refusing to offer anything but hamburgers, made with the freshest site-prepared ingredients, in California, Nevada and Arizona only.

There are basically three ways a firm can establish a focus strategy. It can concentrate on one of these approaches, or a combination.

Focusing the product line. Firms that focus their product line often do so because they possess some expertise and special interest that often translates into technical superiority. These products excite and electrify. Take Bose Corporation, for example. It manufactures a very small line of exceedingly high quality audio products that are based on astonishing technology. If Bose broadened its offerings to all kinds of consumer electronics, it would run the risk of sliding into mediocrity with ho-hum products.

Targeting market segments. This is essentially *****"snob-appeal*****", broadly defined. Gucci handbags target high-end fashionistas, Harley Davidson targets rebellious non-conformists (at least in their own minds!), and Castrol motor oil, which is not even sold in service stations, targets independent male do-it-yourselfers.

Limited geographic area. We have already considered In and Out Burger, but many other products are conferred a kind of cachet because you can*****'t get them just anywhere. Other examples include small breweries (Shiner in Texas), coffee shops (independent and locally owned), or bakeries (Tim Horton donuts in Canada and the NE United States)

For another take on Niche strategies, including some important caveats and warnings about potential pitfalls, read:

Iansiti, M. and Levien, R. (2004). Strategy for small fish. Harvard Business School Working Knowledge. Retrieved from http://hbswk.hbs.edu/item/4331.html

Pre-emptive Strategy

By being the first entrant into a new market or business area, a firm can establish competencies or assets that competitors are not able to copy or develop on their own. The first-mover advantage can create high switching costs for customers, erect high barriers to entrance for competitors, and tie up contracts with suppliers. Thus, a pre-emptive strategy can confer SCA*****'s from both internal and external sources.

Pre-emptive startegies usually are implemented in one of three ways:

Product opportunities. The first product offered in a new market can generate advantages in terms of dominant position that can be hard for competitors to later dislodge or overcome. They can establish the *****"standard*****" for an industry, such as Intel did with microprocessors and Microsoft with operating systems. Of course, firms must continue investment in improvements lest an upstart come up with a *****"better mousetrap*****".

Production systems. When a firm invents a better or more efficient production system that expands capacity, reduces cost and/or improves quality, they have created an SCA.

Customer advantages. First movers have an advantage with customers - creating brand loyalty and increasing switching costs. Customers become used to a familiar product or brand and see no reason to switch. Some companies get customers to make ling term commitments - as in long contracts for the latest in i phone or blackberry technology. Banks may vie to get first mover advantage in online banking because such systems involve substantial switching costs for customers who pay all their bills online.

Take a minute to watch this interesting video featuring Jay Walker, founder of Priceline, talk about first movers and the ability to sustain competitive advantage. Business Strategy: The Difficulty of Dislodging a First Mover Retrieved at http://www.allbusiness.com/lecture/11802832-1.html



Required Readings

Algasae (n.d.) Promoting thought leadership...Customer focused low-cost strategy. Retrieved from http://www.alagse.com/strategy/s10.php

Business Strategy: The Difficulty of Dislodging a First Mover Retrieved at http://www.allbusiness.com/lecture/11802832-1.html

Kim, W.C. and Mauborgne, R. (2009), What is BOS? Nine key points of Blue Ocean Strategy. Retrieved from http://www.blueoceanstrategy.com/about/whatis.html

Iansiti, M. and Levien, R. (2004). Strategy for small fish, Harvard Business School Working Knowledge. Retrieved from http://hbswk.hbs.edu/item/4331.html

Step Three: In a 4-5 page paper,

Discuss the effectiveness of Smuckers*****' strategy in the light of its internal strengths and weaknesses, and external threats and opportunities.

Has it created any sustained competitive advantages?

Identify any unaddressed threats or missed opportunities.

What can Smuckers do to build on its strengths and shore up its weaknesses by altering its strategic choices?

Finish the paper by commenting on how your view of Smuckers*****' vision and mission has changed or been reconfirmed by this process of strategic analysis.

Would you make any suggestions to revise the strategy, mission or vision?

Case Expectations:

As was the requirement with the previous cases, consider this paper a formal report and follow the conventions outlined in the previous modules. Support your analysis with facts and data from your research in previous modules, and suppliment with additional research if you find gaps. Be sure to properly cite sources in the text and provide a complete reference list - or footnotes.

Executive summary:

Introduction:

Main Body:

Conclusion: