Lester Electronics

Derrick bobo

MBA 540 week 5

University of Phoenix

With competitive pressure rising, Lester Electronics, Inc has important choices to make- processes, technologies, strategies, suppliers as well as the decision on whether to take on partners or to sell. One poor choice can lead to long, expensive product and plan development cycles and lower quality. The decisions may entail changes to pay structure, benefits, location of facilities and the size of their workforce. The parties involved in implementing the new strategies must come together cohesively to look at the alternatives and risk of their possible decisions. By involving the people who the decision affects, it decreases the chances of detrimental consequences and makes the transition easier to the employees, upper-level management and shareholders. Long-term goals for the benefit of all are established. Lester Electronics, Inc. is facing times in which they feel necessary to adapt to new ideas and business ventures as well as innovate and implement new strategies to exceed industry standard. The Campbell Soup Company faced many similar problems, but eventually overcame all obstacles to become a successful company.

Joseph Campbell founded Campbell Soup Company in 1869. They are considered a leader in their industry. They employ over 24,500 people and have revenues around 6 billion. Currently they have over 2000 products on the market. Over the years they have diversified into a number of businesses; however soup has been its core business. Since 1980, Campbell Soup Company has undergone three different strategies under three different CEOs who brought their own agenda in order to build value for the company and its shareholders.

Gordon McGovern took over as CEO in 1980. Immediately upon assuming his new position he began initiating changes in the century-old company. Under McGovern, Campbell's strategic focus was on developing and introducing new products, and expansion of the business portfolio through acquisitions. He wanted his employees to be creative and have a willingness to experiment. He encouraged entrepreneurial risk, by decentralizing Campbell's management and rewarding employees who showed these traits. He also had a strong focus on the consumer. He expected his employees be knowledgeable in the areas that were important to the consumer.

McGovern organized the business into six different divisions. They were Campbell U.S., Pepperidge Farm, Vlasic Foods, Mrs. Paul's Kitchens, Other United States, and International. He set 4 specific key performance targets that he wanted to reach - a 15 percent annual increase in earnings, a 5 percent increase in volume, a 5 percent increase in sales revenue, and an 18 percent return on equity. Unfortunately for McGovern his strategy had flaws, and he did not meet his performance targets. McGovern was experiencing a lot of pressure to resign and eventually did in 1989.

Campbell's new CEO David Johnson took office in January of 1990 and took a different approach then Gordon McGovern. Gordon McGoverns first priority was crafting a new strategy for Campbell that would grow earnings and win the confidence of the Dorrance heirs. He wanted to boost the company's performance quickly to discourage a takeover. He set new key performance targets - 20 percent earnings growth, 20 percent return on investments, and 20 percent return on assets. Johnson disagreed with McGovern's view that Campbell's growth should come primarily from the acquisitions of small, fast-growing food companies and from the introduction of new products that served some niche of the food industry. He believed that it would be more beneficial to concentrate on their best know brands and grow sales that way. He reorganized Campbell's business strategy for the better.

He restructured McGovern's 6 business units into three. The new divisions were U.S.A., Bakery and Confectionary, and International Grocery. Johnson put more emphasis on cost reduction and wanted better use of existing assets. He sold 8 plants, shut down 12 plants, and reduced the workforce by 8000 people during his first 18 months as CEO. He divested 26 unprofitable and slow-selling product lines, and took a more cautious approach to new product development. Johnson also saw the importance of the foreign market. He believed that Campbell's need a stronger presence in the global market and wanted at least one-third of its sales to come from there. With this new strategy Campbell's was more profitable and Johnson had revitalized the company. In July 1997, Johnson stepped aside as CEO when his contract expired.

When Dale Morrison took over Campbell Soup as CEO, his goal was to enhance David Johnson's plan. Campbell's strategic focus continued to be about increasing sales growth, increasing market share, and share holder value. He focused on the more profitable businesses with the highest growth potential and continued to divest the non-strategic businesses. He also wanted to penetrate the international markets. Morrison believed he could do this by making profitable acquisitions overseas. He was committed to boosting performance of the company and hoped to achieve this by increasing advertising from 3.5 percent to 8 percent of sales. He set forth a buyback plan to repurchase common stock to boost EPS and ROE. Morrison, like the previous CEO's, also realigned the business units. The new divisions were Soups and Sauces, Biscuit and Confectionary, and Away from Home. His portfolio restructuring effort had little effect on Campbell Soup Company's financial performance though. By the end of 2000, stock price declined to its lowest point since 1995, and Morrison resigned as CEO.

When Gordon McGovern took over as Campbell's CEO in 1980 he put a lot of emphasis on new product development to capitalize on consumer trends. At first he saw a lot of success with this strategy but by 1985 the success had slowed. For the first nine months of that fiscal year, net income grew by less than 6 percent. Meanwhile marketing expenditures continued to expand, compromising over 12 percent of total sales. The performance of new product entrants did not live up to expectations, but McGovern continued to spend a lot of money on them anyways. High failure rates were common, but only 12.5 percent of new products made it, which is lower than the industry average of 20 percent. At this point someone should have recognized that it was time for a change. Unfortunately Campbell's managers got to deeply involved in new-product

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