Category Archives: Strategic Management

Redbox’s Unique Strategy

What makes Redbox’s best-cost provider strategy unique? Although best-cost provider strategies utilize concepts of both a differentiation strategy and a low cost strategy, Redbox had a unique advantage in knowing where to place their kiosks. This is due to the knowledge of their parent company, Coinstar.

The two aspects of Redbox’s strategy consisted of 1)drawing in customers with both convenience and low prices and 2)increasing the number of customers they reach by rapidly expanding the number of strategic locations they place their DVD kiosks. Their kiosks are more of a unique quality for reaching its customer base than a niche.

Creating kiosks and placing them in locations that already attract many customers has been even more beneficial because of Coinstar. The idea is to make renting a movie more convenient, instead of traveling to a movie rental store, the kiosks are strategically placed so that customers walk by them in places they frequent more often; such as grocery stores, convenient stores, and fast food restaurants. Coinstar collected statistical data from their kiosks they had around the country to generate ideas on which stores and/or areas to place Redbox kiosks. Some stores that wanted a Redbox kiosk were denied one because the store was not believed to be in a good position to generate rental sales for Redbox.

Redbox was able to offer their customers a low price of one dollar a night per rental. This price was significantly cheaper than rental stores who charged a fixed price for a given number of days. Therefore, if a Redbox customer rented a movie they could hold onto as long as they wanted knowing it was only going to cost them one dollar per night. Even though the price of the rental increased by day, Redbox did not have a return deadline or “late fees”. Also, with the convenient locations, and the ability to return DVD’s to any Redbox kiosk, customers could return their movie in locations they visited more often.

The company’s use and unique best-cost-provider strategy has helped them growth and gain market share in the DVD rental market. Coinstar’s influence and knowledge of kiosk locations worked as a huge benefit.

Sara Lee’s Financials After Retrenchment Plan

My assessment of Sara Lee’s Financials from 2008-2010 are as follows:

-Overall, the company’s net sales have decreased, but this is reasonable due to loss of revenues from operations of those businesses divested.

-In terms of net sales solely from business that have continued to operate, 2008 -2010 showed an increase in net sales over the two prior years, however slight decline in net sales occurred from 2008 to 2009 and from 2009 to 2010.

-While this decline in net sales from continued operations is somewhat of a concern, Sara Lee was able to significantly improve both their operating and net income each year from 2008 through 2010.

-Sara Lee has decreased their total debt carried on the Balance Sheet from year to year.

– The companies net cash flow from operating activities have significantly increased since 2008.

In my opinion, the company seems to be in good financial position after divesting business not believed to be a significant part of their strategic operating segments. They continue to improve their net income and they have many brands within their business units that have gained market share.

Competitive Strenghts of Sara Lee’s Business Units

Each of Sara Lee’s business units have their own competitive strengths that help them compete and/or out perform competitors. One business unit in particular that has many strengths is the North American Retail unit.

The competitive strengths of their North American Retail segments includes:

-High margins

-Fast Growth

-Consumer Preferences

-High market shares

-Market Leading Brands

This business unit sold processed food brands to retail stores. 10 of the 12 main product lines were able to increase their market share. This is one positive result that came from their retrenchment plan.

Sara Lee Corporate Strategy

Sara Lee’s Corporate Strategy before their retrenchment initiatives involved acquiring various businesses in the food processing, packaging, and distribution industries. Operating with multiple businesses in several markets would help them grow in their various markets and create competitive advantages by utilizing specific techniques and knowledge gained from their acquisitions, thus providing opportunities for greater synergies within Sara Lee’s processing, packaging, and distribution operations. However, some of their acquisitions did not fit the mold president and COO Barnes believed to be strategic for the future of the company. For this reason Sara Lee announced it would divest certain businesses not viewed as strategic and instead focus on increasing market share and profitability in strategic business units pertaining to their value chain and geographic reach. After the retrenchment initiatives, Sara Lee’s business segments narrowed to:

-North American Retail

-North American Fresh Bakery

-North American Foodservice

-International Beverage

-International Bakery

-International Household & Body Care (Until 2010 when this segment was also divested)

Due to the retrenchment initiatives, Sara Lee was able to focus on these business segments, eliminating the time and effort spent in building sales in small, more diverse businesses.

Starbucks Discussion

Our class discussion question was as follows:

What is your evaluation of Starbucks social responsibility strategy? Is it sincere or just something the company does and talks about to create a good public image?

I believe Starbucks has a great social responsibility strategy that they continue to improve on. I do believe their strategy is sincere and not meant to solely create a good public image. For example, 2010 marked the tenth time that Starbucks had been named to Corporate Responsibility Magazine’s “The 100 Best Corporate Citizens” list. Starbucks had been named to this list several times before their commitment to continually strive to open all new company-owned stores under Leadership in Energy and Environmental Design (LEED) certification. They continue to strive and promote greater social responsibility in many aspects of business. This aspect of their social responsibility strategy is achievable by using environmentally friendly building materials, reducing energy consumption, purchasing renewable energy and using renewable energy sources, building stores using energy efficient designs, and reducing waste among other things. Achieving LEED certification in newly opened stores operations, Starbucks is successfully reducing their environmental footprint.

In addition to the company’s strategy to open environmentally friendly stores, Starbucks pays their coffee suppliers greater rates than other companies to support their farming needs, as well as the farmer’s family. The goal of the company is to obtain 100% of their coffee products through sources meeting their Coffee and Farmer Equity (C.A.F.E.) practices or that are Fair Trade Certified. By supporting their suppliers in this way, Starbucks is promoting their social responsibility strategy of ethically sourcing of their products. Therefore Starbucks in trying to improve the quality of life for their suppliers in foreign countries.

Another aspect of Starbucks’ social responsibility strategy that supports the sincerity of helping the communities in which the company is operates is evidences by various programs that give back to local communities. Starbucks has donated money and community service hours to multiple causes in the United States, as well as in foreign countries. Causes supported in the united states include helping victims of Hurricane Rita and Hurricane Katrina by donating millions of dollars.

All of these elements are part of the broad social responsibility strategy Starbucks continually strives to improve. I believe Starbucks’ strategy is not only sincere, but unique to their industry. The focus of their strategy supports ethical and environmentally friendly practices throughout their supply chain; from their suppliers to their customers and communities they serve.