Question

Sunflower Incorporated Case study

S unflower Incorporated is a large distribution company with over 5,000 employees and gross sales of over $700 million (1991). The company purchases and distributes salty snack foods and liquor to independent retail stores throughout the United States and Canada. Salty snack foods include corn chips, potato chips, cheese curls, tortilla chips, and peanuts. The United States and Canada are divided into 22 regions, each with its own cen-tral warehouse, salespeople, finance depart-ment, and purchasing department. The company distributes national as well as local brands and packages some items under private labels. The head office encourages each region to be autonomous because of local tastes and prac-tices. The northeast United States, for example, consumes a greater percentage of Canadian whisky and American bourbon, while the West consumes more light liquors, such as vodka, gin, and rum. Snack foods in the Southwest are often seasoned to reflect Mexican tastes. Early in 1989, Sunflower began using a financial reporting system that compared sales, costs, and profits across regions. Management was surprised to learn that prof-its varied widely. By 1990, the differences were so great that management decided some standardization was necessary. They believed that highly profitable regions were sometimes using lower-quality items, even seconds, to boost profit margins. This practice could hurt Sunflower’s image. Other regions were facing intense price competition in order to hold mar-ket share. National distributors were pushing hard to increase their market share. Frito-Lay, Bordens, Nabisco, Procter & Gamble (Pringles), and Standard Brands (Planter’s peanuts) were pushing hard to increase market share by cut-ting prices and launching new products. As these problems accumulated, Mr. Steelman, president of Sunflower, decided to create a new position to monitor pricing and purchasing practices. Agnes Albanese was *Adapted from R. Daft, Organization Theory and Design decision (St. Paul: West, 1983), pp. 334–36. hired from the finance department of a com-peting organization. Her new title was director of pricing and purchasing, and she reported to the vice president of finance, Mr. Mobley. Steelman and Mobley gave Albanese great lati-tude in organizing her job and encouraged her to establish whatever rules and procedures were necessary. She was also encouraged to gather information from each region. Each region was notified of her appointment by an official memo sent to the regional managers. A copy of the memo was posted on each warehouse bulletin board. The announcement was also made in the company newspaper. After three weeks on the job, Albanese decided that pricing and purchasing decisions should be standardized across regions. As a first step, she wanted the financial executive in each region to notify her of any change in local prices of more than 3 percent. She also decided that all new contracts for local purchases of more than $5,000 should be cleared through her office. (Approximately 60 percent of items distributed in the regions was purchased in large quantities and supplied from the home office. The other 40 percent was purchased and distributed within the region.) Albanese believed that the only way to standardize operations was for each region to notify the home office in advance of any change in prices or purchases. Albanese discussed the proposed policy with Mobley. He agreed, so they submitted a formal proposal to the presi-dent and board of directors, who approved the plan. Sunflower was moving into the peak holi-day season, so Albanese wanted to implement the new procedures right away. She decided to send an e-mail to the financial and purchasing executives in each region notifying them of the new procedures. The change would be inserted in all policy and procedure manuals throughout Sunflower within four months. Albanese showed a draft of the e-mail to Mobley and invited his comments. Mobley said the Internet was an excellent idea but wondered if it was sufficient. The regions handle hundreds of items and were used to decentralized deci-sion making. Mobley suggested that Albanes ought to visit the regions and discuss purchasing and pricing policies with the executives. Albanese refused, saying that the trips would be expensive and time-consuming. She had so many things to do at headquarters that a trip was impossible. Mobley also suggested waiting to implement the procedures until after the annual company meeting in three months. Albanese said this would take too long because the procedures would not take effect until after the peak sales season. She believed the procedures were needed now. The e-mail went out the next day. During the next few days, replies came in from most of the regions. The executives were in agree-ment with the e-mail and said they would be happy to cooperate.
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Eight weeks later, Albanese had not received notices from any regions about local price or pur-chase changes. Other executives who had visited regional warehouses indicated to her that the regions were busy as usual. Regional executives seemed to be following usual procedures for that time of year.

Questions

1) CORPORATE & BUSINESS STRATEGY                                                                                       

Identify known or perceived strategies (corporate-level, business-level, competitive, functional).

2)  

SWOT                             

Conduct a SWOT analysis. Identify internal strengths and weaknesses and external threats and opportunities.                                                                                         

                              Strengths                                    Weaknesses                                                  

                                                 

                                                                                         

                                                                                         

                                                                                         

                              Opportunities                              Threats        

3.)

STRUCTURE & CONTROL SYSTEMS                                                                                 

Analyze structure and control systems and determine the degree of fit between the company's strategy (strategies) and structure.

Answer 1

1. Corporate-level strategies are implemented throughout the entire organizational structure.Their objective is to increase overall profitability.The corporate strategy that the company has used is - stability strategy - this strategy is used by firms that are doing well and are not planning to diversify their product or service line and do not change the goals or objectives of the organisation but carries out deviation from existing strategy. Sunflower has not introduced any product line for expansion but has only introduced some new strategies to change the existing policies and procedure.It has adopted a proper profit stratey.

Business-level strategy is concerned with a firm's position in an industry.They detail actions taken to provide value to customers and gain a competitive advantage.Sunflower has adopted differentiation strategy at the business level as it provides different products in different regions which has increased its demand in those varied regions.It has focussed on segmenting its market across regions.It has also adopted Focus strategies to focus on reducing cost by focussing on purchasing and pricing of products.

Functional strategies are those who focus mainly on key-functional areas to achieve corporate and business objectives. It is adopted by Sunflower as it analysed the performance of its functional areas and created a plan of action to strengthen its functional regions. Sunflower has followed finacial strategy at the functional level and has focussed on the alignment of financial management with the corporate and business objectives of an organization to gain strategic advantage.

2.SWOT analysis of Sunflower-

Strenghts of the company are that it has a strong dealer community across many regions of the country. Its outlets are present in wide areas of the US. it has a strong distribution network.It has a high skilled workforce and co-operative distributries and employees.It also has a diversified product line. Weakness are that investment in research and development is very less and not highly successful in integrating its outlets early.

Oppurtunities are new customers from online platform. the company should and can increase its investment in e-commerce. Threats in the external factors can be increasing pay level to workers and employees and low quality products supplied by its outlets can be a major thrate to its name.

3.Organization structure refers to the role-responsibility relationships of different employees in an organization along with their pre-defined interaction patterns.Sunflower is structured in a way which enable it to maximize performance levels and effectiveness of operations. Its structure encourages participation and innovation throughout the organization.The structure of Sunflower is multidivisional structure. as it compose of operating divisions where each division represents a separate business or profit center and the top corporate officer of Sunflower delegates responsibility for day-to-day operations and business-unit strategy to division managers.It is seen by the fact that the managers are habitual of a decentralized structure.

Control systems consist of procedures and processes, which help an organization achieve its mission and objectives. It describes how activities and operations go on in the company.There are three basic types of control systems available to executives and top officers: (1) output control, (2) behavioral control, and (3) clan control. Sunflower is excercising output control by deciding the accepted performance level from its divisions and  tracking whether the performance values meet the expectations and correcting deviations, if any. Sunflower excercises behavioural control by controlling the performance of its divisions and helping them to meet the desired quality of the products and clan control by following procedures and policies. Its control system is effective as it controls all areas and even the purchasing and pricing of products in its division centres.

A company's structure is always related to its structure. It is same in the case of Sunflower. The proper implementation of a strategy is done because of its structure.The multidivisional structure of Sunflower supports its strategy. However, it can also cause problems as the structure of sunflower is decentralized and the decisions made are centralized and taken by top officers as we saw in the situation where Agnes wanted to implement decision of pricing and purchasing throughout the company but the decentralized structure of sunflower acted as a constratint in that. The degree of fit between their strategies and structure is that there should ne some centralized control at the top authorities which would enable them to properly implement their strategies and they would not have to go at every division and state the managers and request them to coperate with the firm's objective. The objectives at the corporate, business and functional levels should be aligned by Sunflower.