Newell Company: Corporate Strategy

CASE WRITE-UP

Name:         SUMIT SAURAV                                                Roll#: 1710056

Section:                                                                 Date: 17/01/18

Case title: Birds Eye and the UK Frozen Foods Industry (A)

Birds Eye’s Food Ltd was one of the first movers in the UK’s Frozen Food Industry, following were the reasons and rationale behind the development of Birds Eye as a vertically integrated company across its value chains:

1. The Frozen Foods are costly, so the company sells it at a higher price to make a profit out of it, and only high-quality food can be sold at high price. Therefore Frozen Food companies require high-quality raw material to produce high-quality frozen food. That’s why Birds Eye integrated this stage of the value chain, to ensure availability of high-quality raw material.
2. Since Frozen Food Industry was young during 50 and early 60’s, distributors, retailers, and suppliers lack the required infrastructure for the market to develop. Therefore, it makes sense for Birds Eye to do Forward and Backward integration to develop the market for frozen foods and to manage the entire supply chain of its product.
3. In manufacturing, the frozen food companies face the problem of availability of short time for processing, the lack of skilled labor and the unreliability of machines. These problems have made the outsourcing of manufacturing less feasible. Therefore Birds Eye has integrated this stage of the value chain.
4. Vertical Integration of entire value change increases the entry barrier, so by doing the vertical integration of entire value chain Birds Eye, has prevented new competition.

Following were the competitive advantage The Birds Eye had over its closest competitors:

1. The capability of the Birds Eye to introduce new products, because it has established a national, integrated organization.
2. Birds Eye had a strong brand image in the marketplace, which provides it a competitive advantage over its competitors.
3. Because of its strong brand image, it enjoys the power of pricing its product independently, and its competitors follow its leadership.
4. It also enjoys the disproportionately large space in retailor’s cabinets for its products.
5. Since Birds Eye was a vertically integrated firm, so it has better control over the quality of the finished product.

Following are the things Birds Eye did to sustain its competitive advantage initially:

1. It developed its strategy more marketing orientated, which resulted in better understanding of the market.
2. Till 1958, Birds Eye was the only firm in the industry who spend over advertising, which resulted in better brand value of its product.
3. It developed itself as a vertically integrated corporation, which provides it sustained competitive advantage over its competitors.

Following are the problems/challenges, Birds Eye is facing in the 1970’s and reasons why it was unable to maintain its advantage during this period:

1. The development that took place in retail sectors like the emergence of supermarkets, home freezer center, and catering sector, has created challenges for Birds Eye because it was poorly represented in these areas.
2. The second challenge in front of Birds Eye was to maintain its sales growth by extending its product range.
3. The third challenge was to change its marketing strategy from consumer marketing to trade marketing, because of the emergence of large retail chains in the retail sector.
4. The fourth challenge was to manage the advertisement policy because it's difficult to design an advertisement policy suiting both the increased rate of new product launches and the new marketing policy.
5. The fifth challenge was to incorporate the effect of prices and availability of raw materials in the product and marketing policy, which was not the case in the preceding years.
6. The sixth challenge was to increase the production efficiency by investing in modernization and automation program. Because of the rise of the specialist producers and their high level of automation, which cause high efficiency, it became imperative for Birds Eye to invest in modernization to compete with them.

Following are recommendations for Birds Eye:

1. It should have considered selling or spinning off its procurement and distribution business. It could have helped it in reducing the overhead cost and at the same time made it nimble/agile to respond quickly to changes in the industry’s environment.
2. It should have considered selling its product to the private labels, despite the fact that they may have made less profit, but as their market share is increasing very rapidly, it would have helped them to at least retain the market share.
3. As their brand image is very good, they would have licensed the less profitable products and concentrated on promoting only high-profit margin product. This step would have solved two problems. First, it would have decreased the business risk and secondly with the narrow product, but profitable product portfolio, the marketing, and advertising policy designing could have become much easier.