978-1259278211 Case 17 Solution Manual Part 1

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Teaching Note: Case 17 – Campbell: How to Keep the Soup Simmering

Case Objectives

1. To help students understand how a firm makes decisions about what business the

corporation should compete in and how growth should be accomplished.

See the table below to determine where to use this case:

NOTE: Although the case is primarily indicated for Chapters 5 and 6, instructors can build up to

Chapter Use Key Concepts Additional Reading

and/or Exercises

1: Strategy Concept Strategic management

2: External

Industry competition five forces; general

NOTE financial info

3: Internal Analysis Value-chain analysis; resource-based view

5: Business-Level

Strategy

Competitive strategy; generic strategies

6: Corporate-Level

Diversification; synergy; core

NOTE web articles, and

7: International

International strategies: multi-domestic vs.

NOTE web articles

Case Synopsis

Change was stirring at Campbell Soup. Denise Morrison, who formerly headed the company’s

North American soup business, had taken over as CEO in 2011. The change at the top for the

The soup business had been stagnant or slow growing for many years. Consumer preference had

moved away from soup to frozen pizzas and microwave meals. Campbell had struggled in the

face of this decline. First it had diversified its products, and then it had consolidated tangible

International expansion of the soup products into Russia had not worked, and the effects of

efforts to make inroads into the Chinese market were still uncertain. In the U.S. market,

competition and general environmental factors had pushed the company to create a healthier

product line, but the reduced sodium levels had also negatively affected product taste. The ready-

to-serve soup business had not gained any traction against competition, especially from

Progresso. Should Campbell keep to its tried-and-true condensed soup formula, or was more

innovation necessary to revitalize the company?

Teaching Plan

The primary subject matter of this case concerns the importance of doing an external and an

internal analysis before selecting a business unit strategy. Therefore, this is a case that is well

suited for a full investigation of strategic analysis and formulation. An analysis of Porter’s five

forces can be used to analyze the environment in the packaged food industry. By building a

sound foundation in external and internal environmental analysis, and identifying possible

business, corporate-level and international strategies, students can evaluate Campbell’s progress

in implementing them. As such, this case is best positioned mid-way through the course, after

students have had an introduction to the concepts of strategy analysis and formulation.

Icebreaker

This case can start with an icebreaker. Starting from the perspective of a customer may make it

easier for students to transition to a strategic analysis.

Did you have soup this week, month, year? Was it homemade or canned?

Have you ever tried Campbell’s products? Over the last few years have you seen any changes in

the taste or look? What do you think about these changes?

Since Campbell is present in about 85 percent of U.S. households, a great many of the students

should be familiar with the product. Also, you can discuss the soup culture in U.S. Who still eats

soup, and why?

Before engaging in discussion, you might want to test students’ basic knowledge regarding the

Which statement is most true?

a. More soup is consumed in China than in the U.S.

b. Campbell Soup products are in approximately 9 out of 10 U.S. households.

c. Campbell brands include Pace Salsa,V8 juice, and Pepperidge Farm cookies.

d. Russians eat soup more than 5 times a week, on average, compared with once a week

among Americans.

e. All statements are true.

ANSWER: e. ALL these statements are true!

Campbell has higher net income than its rival Kraft Foods.

a. Yes

b. No

ANSWER: b. Of the major competitors listed in the case: General Mills, Heinz, and

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

back to the Case Objectives Table to identify any additional readings and/or exercises so they can

be assigned in advance.

1. What are key forces in the general and industry environment that affect Campbell’s

choice of strategy?

2. What internal resources does Campbell have that may give it a competitive advantage?

3. What do you think Campbell should do to counter the competition and remain in the top

of the soup business?

Discussion Questions and Responses

Prior to answering the specific case questions, the instructor might want to position the

discussion by reviewing what strategic management really is:

Referencing Chapter 1: Strategic Management

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter

1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an

organization undertakes in order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

●includes multiple stakeholders in decision making;

Leaders face a large number of complex challenges. Leaders must be proactive, anticipate

change and continually refine changes to their strategies. This requires a certain level of

“ambidextrous behavior,” where leaders are alert to opportunities beyond the confines of their

During strategic analysis, the leader does “advance work” to anticipate unforeseen

environmental developments, identify unanticipated resource constraints, assess changes in his or

her preferences for how to manage. During strategy formulation, the organization addresses the

In strategy implementation, depending on the type of organization structure, the leader might

include key individuals in a discussion around selecting which strategies might be best to

implement at which level within the organization. The leader must ensure proper strategic

The basic question strategic management tries to answer is: How can we create competitive

advantages in the marketplace that are not only unique and valuable but also difficult for

competitors to copy or substitute?

Retired CEO Conant’s mission for Campbell was “together we will build the world’s most

extraordinary food company by nourishing people’s lives everywhere, every day.” On her first

day as CEO in August 2011 new CEO Morrison was set on employing a new vision for the

1. What are key forces in the general and industry environment that affect Campbell’s

choice of strategy?

Referencing Chapter 2: Analyzing the External Environment of the Firm

Organizational leaders must become aware of factors in the overall environment that might affect

their ability to create a competitive advantage. So how do managers become environmentally

aware? By doing scanning, monitoring, and gathering competitive intelligence, and using these

Environmental scanning involves surveillance of a firm’s external environment to predict

environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint

Environmental monitoring is a firm’s analysis of the external environment that tracks the

evolution of environmental trends, sequences of events, or streams of activities. Leaders need to

What factors or trends might be most important to Campbell Soup? To assess how the external

environment might affect the firm’s strategy, it’s necessary to take a look at the factors in the

general external environment. Campbell Soup must consider the political/legal, economic and

Political-Legal: all food producers need to follow relevant laws in each country where they do

Economic: an economic downturn can make customers more reluctant to eat out, so cheap,

Demographic: in the U.S. customers were younger, so staying in touch with the tastes and needs

Sociocultural: tastes had changed, at least in the U.S., with customers looking for more

convenient meal options, such as ready meals. Both quality and convenience are key. Soup is no

Technological: as consumers became more “wired”, finding opportunities to reach these

consumers, for instance with iPhone recipe apps, became more important. Technology is also a

Based on the general environmental forces, the industry faced challenges. Things were changing,

It’s also necessary to assess the segments of the external competitive environment that include

competitors, customers, and suppliers, substitutes and new entrants. Porter’s five forces model

allows strategists to anticipate where the industry might be most vulnerable. See Exhibit 2.7.

Campbell Soup, like other packaged food companies, was confronting two key threats:

●One was from the high levels of rivalry, especially given the perpetual threat from

●The second was the growing power of buyers such as discount chains.

Clearly, there were a few large and equally balanced firms that were pitched in a battle for a

greater share of the global market. Changing customer tastes and the threat of substitutes were

resulting in an increase in this rivalry. In addition, although supermarkets had been the main

Suppliers – Low Threat: The suppliers in the packaged food industry have low bargaining

power. The distribution channels are easily accessible and the various companies have the ease of

interchange between the suppliers if they consider doing so necessary. As far as Campbell the

ingredients required for the manufacture of the company’s food products are purchased from

Suppliers’

Suggested: Products are

Suggested: The threat of entry

is medium. There are low entry

barriers, such as low capital

requirements, easy learning

Suggested: There is a high

threat from substitute

products. Consumers have a

Buyers – High Threat: In most of the company’s markets, sales activities are conducted by the

company’s own sales force and through broker and distributor arrangements. The company’s

The ultimate buyers of Campbell products do not have any significant bargaining power. They

do have the choice to switch to another retailer, but their actual power to affect prices is very

Campbell may be adversely impacted by the increased significance of some of its customers. The

disruption of supply to any of the company’s large customers, such as Wal-Mart Stores, Inc., for

an extended period of time could adversely affect the company’s business or financial results. In

addition, the retail grocery trade continues to consolidate, and mass-market retailers continue to

Industry Rivalry – High Threat. The food and beverage industry is characterized by intense

rivalry. The company experiences worldwide competition in all of its principal products. This

competition arises from numerous competitors of varying sizes, including producers of generic

and private label products, as well as from manufacturers of other branded food products, which

Barriers to Entry – Medium Threat: The threat of entry is medium. There are low entry

Substitutes – High Threat: There is a high threat from substitute products. Consumers have a

variety of choices, such as dining out to a restaurant or a fast-food place. At the same time the