BTEC HIGHER NATIONALS CERTIFICATE AND DIPLOMA IN BUSINESS Unit Title : Business Strategy Unit Code: Y/601/0546 Lecturer: Mark Pemberton Assignment No: 1 Assignment Title: Business Strategy Premier Foods Plc. Principle Outcomes Assessed: • Understand the process of strategic planning. • Be able to formulate a new strategy • Understand approaches to strategy evaluation and selection • Understand how to implement a chosen strategy Date Set: Date Due: ASSIGNMENT INTRODUCTION In this unit you will learn that one of the aims of this unit is to build on learners’ existing knowledge of the basic tools of business analysis such as PESTLE and draw it together so that the learners think strategically. You will be introduced to further analysis tools needed for the process of strategic planning. You will be able to explain the significance of stakeholder analysis and carry out an Environmental and organisational audit of a given organisation. You will also learn how to apply strategic positioning techniques to the analysis of a given Organisation and prepare a strategic plan based on previous analysis. You will also learn how to evaluate possible alternative strategies (such as substantive growth, limited growth or Retrenchment) and then select an appropriate future strategy for a given organisation. Finally, you will compare the roles and responsibilities for strategy implementation and evaluate resource requirements for the implementation of a new strategy for a given Organisation. You will then be able to propose targets and timescales for implementation and monitoring of the strategy in a given organisation. Case Study Assignment Premier Foods Premier Foods plc (Premier Foods or “the company”) is engaged in the manufacture of retail branded and own-label food products and is one of the leading suppliers of foods and beverages to the UK retail grocery and foodservice markets. The company primarily operates in the UK. It is headquartered in St. Albans, the UK and employs 20,000 people. In July 2011 Michael Clarke was appointed Chief Executive following the retirement of Robert Schfield. He was previously president of Kraft Foods European Operations. Clarke took over from Robert Schofield whose 10-year buying spree made Premier Britain’s biggest food producer, but so bloated with debt, while trading poorly, analysts derided it as a basket case. The company recorded a pre tax loss of £259million in 2011, compared to a £28.5 profit for 2010, and £25.2 million in 2009. He has been followed by the appointment of Mark Moran former Finance Director of SSL, and from 2013 Gavin Darby,where profits increased to £97m, mainly due to the sale of some of its leading brands. Premier Foods is Britain’s biggest branded food producer with revenue of £2.0 billion. We manufacture, distribute and sell a wide range of branded and non-branded foods. The business employs around 12,000 people and operates from over 40 sites across the UK and Ireland. The new chief executive offcier said: “We tried to be all things to all people. We tried to chase scale for scale’s sake. After the disposals we’ll be a smaller business in terms of turnover, but a bigger business in terms of profitability.” He has a long way to go: the group slumped to a £259m pretax loss in 2011, from profits of £28.5m the year before. Bread profits crashed 90% after Premier fell out with several retailers, including Tesco. The supermarket temporarily took Premier products off its shelves after it tried to increase prices to cover the spiralling cost of wheat and other commodities. Darby wants to “draw a line under the performance of 2011” and said lessons had been learned from past mistakes, in particular under-investment in household names. Premier is ploughing £50m, double last year’s marketing spending, into eight “power brands” – including Oxo, Batchelor’s, Bisto, Ambrosia and Mr Kipling – with seven featuring in TV ads this spring. He claims to have improved relationships with retailers including Tesco, Morrison’s and Sainsbury’s using, for the first time, an integrated business plan (rather than separate relationships for the cake, bread and other divisions). Under the refinancing package with 28 lenders, led by Royal Bank of Scotland, Premier has to raise £330m from asset sales by mid-2014 and make half-yearly amortisation payments after that date. It will have to hand over a “cash sweep” – excess cash above a certain level – to its lenders, and cannot pay dividends to shareholders. Borrowing costs will rise in 2014. “The saga continues,” said Investec analyst Martin Deboo. “The refinancing will be coming at a cost. After a couple of years breathing space, the financing costs start to ratchet up and Premier will be under bank imposed pressure to realise disposals. So CEO Darby and his team have precious little time to turn around this business.” They have a wide portfolio of great British brands, many of which are market leaders and household favourites. Our business is focused behind eight Power Brands: Hovis, Mr. Kipling, Ambrosia, Sherwood’s, Loyd Grossman, Bisto, OXO and Batchelors. In addition, we have a portfolio of many other iconic British food brands and also an extensive non-branded food business which manufactures food in partnership with many of the UK’s leading food retailers. Over 90 % of households buy a product from Premier foods. As part of there strategy to focus investment behind our eight Power Brands they have already undertaken a number of business disposals in 2011. During the year they have disposed of there Meat-free, East Anglian canned grocery and Brookes Avana businesses. In addition, it was announced the sale of four Irish brands which completed in January 2012.n October 2011 we announced our five priorities to help stabilise the business: Last October 2014, they announced five priorities to help stabilise the business and we are gaining momentum against each of these: • Invest behind eight Power Brands — seven of our Power Brands will be back on TV with advertising in the first half of 2012 and we will invest significant promotional spend behind the eighth; • Strengthen capabilities, particularly sales and marketing — new leadership is now in place and we are reorganising to improve effectiveness; • Divest selected businesses to sharpen focus — the Brookes Avana and Irish Brands disposals have been completed; • Right-size and reduce the Group’s cost base — we have announced a doubling of previous overhead cost reduction programmes to achieve more than £40m savings by 2013; • Agree a re-financing package with the banks — we have obtained consent to an extended re-financing package. The four Strategic pillars for Premier are:- Brands They have a great portfolio of brands, many of which hold leading positions in their categories. They are focusing on those that have the best growth prospects. • Invest and grow the Power Brands They have selected Power Brands that we will focus our resources behind to drive growth: Mr. Kipling, Ambrosia, Sherwood’s, Lloyd Grossman, Bisto, OXO and Bachelors. • Support brands Our support brands and customer brands have an important role to play. They can help build category share and help utilise our existing asset base. • Focused disposals We will actively seek to dispose of selected non-core businesses to deleverage the business and align our portfolio behind our key focus areas. Partners They are developing a strong long-term relationship with all their partners. These relationships must be sustainable and offer value to both sides. • Engage our employees. They has a new management team in place and will increase focus on employee engagement at all levels, remove organisational complexity and simplify the reward structure to drive the delivery of our strategy. • Connect with consumers. They are going to connect with consumers by producing products that taste great, are relevant to today’s eating habits, are convenient, have innovati
ve packaging and address consumer concerns around health and wellness. • Win with customers. There focus going forward will be to move from a transactional approach to developing long-term sustainable relationships with customers. • Collaborate with stakeholders. They will continue to collaborate and develop strong relationships with a wide range of other stakeholders including suppliers and investors. Focus The business has a good track record of increasing manufacturing efficiency and cost cutting. They hope to continue our efforts to simplify our structure and processes. This will further reduce there cost base, increase efficiency and make us more competitive. • Lean structure. As they resize the business following the rationalisation of our portfolio we will also reduce our cost base to reflect the smaller size of the business. • Simple processes. Continue to target simplification across the business. • Quality, Health & Safety .As they target cost savings it is vital that they remain totally focused and committed to food quality and health & safety. • Drive efficiency and effectiveness through productivity and service. Cost savings through manufacturing controllable costs and procurement will be invested to support growth Sustainability Ultimately their vision is to be a sustainable business in everything they do. • Results (financial and productivity metrics) they believe their strategy will return us to profitable growth. Equally important it will lay the foundations for a more stable, sustainable business which will deliver shareholder value. • Better choice portfolio and innovation The hope to offer a wider choice of products to meet consumers’ requirements for healthier options and different portion sizes. • Environmental programmes Hopefully they will build on the strong track record of environmental improvement and ethical sourcing. • Scale They will lever the breadth and scale of our portfolio with our customers, our suppliers and other business partners. Premier recognise that there employees are their most valuable asset, having high expectations of all staff and everyone is required to perform and deliver value. This creates an environment that is both challenging and rewarding, thus enabling employees to develop quickly and pursue exciting opportunities. Premier Foods strives to be the employer of choice in the areas in which it operates. We are committed to equal opportunities in all areas of business, with employees gaining promotion on merit. In order to promote career development, the Company provides its employees with access to relevant training and development schemes through in-house training, educational assistance, participation in National Vocational Qualification Schemes and encouraging professional memberships, the aim being to ensure we have a highly trained and motivated workforce, capable of meeting the highest standards required by customers and investors. Unlike many companies in the UK, Premier Foods continues to operate, for both existing and new employees, a defined benefit pension scheme in which many employees in the Group participate. Some parts of our business operate Stakeholder Pension Schemes for employees. An all-employee share save scheme ensures that an element of employee reward is closely aligned to business value enhancement. The challenge for Premier Foods is to lead and transform a previously profitable company. “This is not a fundamentally broken company,” said Mr Murray. the recently appointed Finance Director stated”It has issues, sure, but with the right people in place I think we can turn it around.” Mr Murray said that many people would have concluded “you shouldn’t touch it with a barge pole” but that he had taken a different view having met Mr Darby the CEO. Only time will tell. References Premier Foods Annual Report 2011 Guardian March 19, 2012-07-1T www.premier foods. co uk Daily Telegraph November 25Th 2011 TASK ONE Understand the process of strategic planning. (LO1). Produce a report up to 2500 to:- o Assess how business missions, visions,objectives, goals and core competencies inform strategic planning . Compare Premier Foods plc with other businesses. (1.1) o Analyse the factors that have to be considered when formulating strategic plans. Using examples from business, you need to consider the impact on managers, role of planning, when to plan, targets and who to involve. (1.2) o Evaluate the effectiveness of techniques used when developing strategic business . You should include from BCG growth share matrix ,PIMS, SPACE, and directional policy matrix., (1.3) TASK TWO Be able to formulate a new strategy. (LO2). o Analyse the strategic positioning of a given organisation by carrying out an organisational audit for Premier Foods Plc. (2.1) o Prepare a PowerPoint presentation on an environmental audit for Premier Foods plc, which should include SWOT, benchmarking, demographic influences, synergy culture and values. (2.2) o Assess the significance of stakeholder analysis when formulating new strategy.(2.3) o Present a new strategy for a given organisation .2.4) TASK THREE Understand approaches to strategy evaluation and selection.(L03) Produce a report up to 2500 words o Analyse the appropriateness of alternative strategies relating to market entry,substantive growth, limited growth or retrenchment for to Premier Foods Plc ..(3.1) o Justify the selection of a strategy.Select an appropriate future strategy for Premier Foods Plc to regain its profitability.(3.2) TASK FOUR Understand how to implement a chosen strategy.(L04) o In a report, Assess the roles and responsibilities of personnel who are charged with strategy implementation compare the roles and responsibilities for strategy implementation. You could use your own organisation or Premier Foods Plc.(4.1) Analyse the estimated resource requirements for implementing a new strategy for a given organisation. a new strategy for a given Organisation for Premier Foods Plc. (4.2). o Write a memorandum to the Chief Executive of Premier Foods Plc or your chosen organisation evaluating the contribution of SMART targets to the achievement of strategy implementation .(4.3). Essential Reading:- Johnson G. et al Exploring Corporate Strategy 2007. Grant M.R. Contemporary Strategy Analysis 2007. Websites: www.Premier Foods .com www.Biz ed www.Tutor 2 u Tutor Signature: Mark Pemberton Student Name………………………… Date…………………… Assessor Signature……………………… Date…………………… LEARNING OUTCOMES AND ASSESSMENT CRITERIA Learning Outcomes Assessment criteria for Pass LO1 LO1 Understand the process of strategic planning 1.1 Assess how business missions, visions,objectives, goals and core competencies inform strategic planning 1.2 Analyse the factors that have to be considered when formulating strategic plans 1.3 Evaluate the effectiveness of techniques used when developing strategic business LO2 Be able to formulate a new strategy 2.1 Analyse the strategic positioning of a given organisation by carrying out an organisational audit. 2.2 Carry out an environmental audit for a given organisation. 2.3 Assess the significance of stakeholder analysis when formulating new strategy 2.4 Present a new strategy for a given organisation. . LO3 Understand approaches to strategy evaluation and selection 3.1 Analyse the appropriateness of alternative strategies relating to market entry, substantive growth, limited growth or retrenchment for a given organisation 3.2 Justify the selection of a strategy. . LO4 Understand how to implement a chosen strategy 4.1 Assess the roles and responsibilities of personnel who are charged with strategy implementation 4.2 Analyse the estimated resource requirements for implementing a new strategy for a given organisation. 4.3 Evaluate the contribution of SMART targets to the achievement of strategy implementation in a given organisation. In addition to The above PASS
criteria, this assignment gives you the opportunity to submit evidence in order to achieve the following MERIT and DISTINCTION grades Grade Descriptor Indicative characteristic/s Contextualisation M1 Identify and apply strategies to find appropriate solutions Effective judgements have been made. To achieve M1, you will make effective judgements about the comparison of Premier Foods plc with other businesses objectives, missions and competencies, which could include their own organisation. (Task 1.1) To achieve M1 you will make effective judgement on the relevant stakeholders to involve in the strategic planning process(task1.2) To achieve M1 you will make the effective judgement of the outcome of your SWOT/ or PESTEL analysis.(task 2.1/2,2) To achieve M1, you will judge the main roles and responsibilities for the strategic implementation of a new strategy.(4.1) M2 Select / design and apply appropriate methods / techniques Appropriate learning methods/techniques have been applied. Relevant theories have been applied To achieve M2, you should apply one of the strategic planning techniques.(Task 1.3) To achieve M2 you should undertake an organisational audit approach using a SWOT approach of Premier Foods plc. (task 2.1). To achieve M2 choose three elements of PESTEL/ Porters analysis of Premier foods plc when formulating a new strategy(Task 2.2) Communication is appropriate for familiar and unfamiliar audiences and appropriate media have been used. To achieve M3 the work you present will be presented in suitable business formats such as reports, memorandums, presentations, diagrams, and will use business terminology and referencing accurately. (Tasks 1,2,3,4) D1 Use critical reflection to evaluate own work and justify valid conclusions Conclusions have been arrived at through synthesis of ideas and have been justified. Realistic improvements have been proposed against defined characteristics for success. To achieve D1, You have to consider and conclude the impact on managers when reviewing the strategic planning process. (task1.2) To achieve D1 you will have drawn conclusions of the significance of stakeholders when formulating a new strategy for Premier Foods plc.. (task2.3) To achieve D1.you will conclude of the most appropriate strategy for Premier foods plc to regain its profitability.(task 3.3) To achieve D1 you will conclude what additional resources required for Premier Foods will require to implement its new strategy.(task4.2) D2 Take responsibility for managing and organising activities Activities have been managed. To achieve D2 you will have demonstrated an effective approach to independent research and study and will have met the deadline to submit the tasks and achieve the unit assessment criteria. (Tasks 1 ,2,3,4) D3 Demonstrate convergent /lateral / creative thinking Convergent and lateral thinking have been applied. Problems have been solved Ideas have been generated and decisions taken To achieve D3 you will have assessed the rationale for choosing an alternative strategy to regain its profitability (Task3.2) To achieve D3 you will have to demonstrate how current external influences could affect the implementation of an organisation or Premier Foods strategy such as finance, regulation, changing environmental impact, commodity prices) .(Task4.3) .