Southcorp Case Study
What is your assessment of the takeover of Southcorp by Foster's? What is the strategic logic of this acquisition? Is it likely that Foster's will be a good corporate parent for Southcorp? How will value be added at the corporate level?
Identification of issues
Analysis and assessment
Issues in implementation
...wine collection so that it is simpler for consumers to select and change their even as their tastes change (Patterson 2006). Additionally Foster's has used more sustainable fuels (bio-diesel) to adapt to the concerns over the climate change (Beer power: Foster's scientists to generate clean energy from brewing process 2007). In fact, the group's environmental initiatives cross every aspect of its business, from procurement to production, logistics, re-use, recycling and waste (Hey 2007). Such strategic planning however would not include determining exactly how the firm would go about executing the details of their takeover plan for Southcorp Limited.
The organizing function of management involves creating the internal organizational structure of the business. The focus of this function is on division, coordination, control of tasks and the flow of information within the organization. This function allows managers to distribute authority to job holders (Erven, nd). Strategic planning would involve this function but only in its broader sense especially within larger organizations. A strategic plan for a larger organization would specify overall strategic goals for divisions or departments within the company while in a small financial planning firm such a plan would identify and assign overall strategic goals for each consultant in the firm.
In the years since the acquisition, it has become apparent that Foster's did not perform the organizing function within its strategic plan as well as it might. Even though Foster's restructured its business and freed up funds by selling off weaker brands, the company did not achieve a profitable integration with Southcorp. According to Datamonitor's SWOT analysis of Foster's Group's weaknesses include inefficient operations and weak revenue per employee, two factors which indicate that the company has not integrated its acquisitions into overall operations efficiently (Datamonitor: Foster's Group Ltd. 2008).
The directing or leading function of management encompasses motivating people to follow direction toward achieving the organization's vision (McNamara, 2008). This function is also included in strategic planning in that strategic management recognizes that qualified, motivated and loyal employees play a vital role in the achievement of strategic goals for the organization. The focus of strategic management is to make certain that motivated, informed and empowered employees are in place to support the desired strategic goals for Foster's Group's takeover of Southcorp this will mean having and keeping highly qualified and motivated staff with specialties in the areas that best serve the firm's strategic objectives.
The weak revenue per employee continues to plague Foster's Group into 2009 according to Datamonitor. The weak revenue per employee of the group relative to its competitors indicates its weaker productivity and operational inefficiency, one of which is hiring and retaining excellent talent (Datamonitor: Foster's Group Limited 2009). Another important way to evaluate Foster's Group's takeover of Southcorp Limited is to perform an environmental analysis for the company.
Environmental Analysis for Foster's Group Limited
In today's increasingly competitive global marketplace it is imperative for businesses to be aware of the environment in which they operate and the external factors that influence them. These factors can affect the firm's main internal factors as well as its short and long term strategies. Furthermore, the external environment is often unstable and many of the external forces can change quickly and dramatically and are usually beyond a firm's control. Different external factors affect different strategies at different times and with varying force. The only certainty is that the effect of the remote and operating environments will be uncertain until the firm implements a strategy. Ignoring the importance of long-term planning reduces the firm to only reacting and adapting to new pressures from the environment. Absence of strong resources and psychological commitment to a proactive strategy effectively bars a firm from assuming a leadership role in its market (Pearce & Robinson, 2005).
The Internal Environment
Foster's Group is a publicly traded company which makes it publicly owned. A direct consequence of this is being accountable to shareholders. As a natural result of this accountability Foster's Group strives to effect and maintain profitability for itself and its stockholders. While the company attempted to achieve additional profits through the Southcorp acquisition, it failed to achieve operational efficiency with the integration of Southcorp.
This shows that the company's internal culture was not resilient enough to embrace change, and thus Foster's Group was not successful in producing as much profit as it could have from the takeover of Southcorp Limited. Such strategic goals and their implementation involve a great deal of change. Thus the successful execution of the takeover plan required deep and wide buy-in from the company's stakeholders, a dynamic that Foster's Group was not readily able to deliver. While the company's internal environment did not perform well in the takeover, Foster's performed much better in its external environment despite this shortcoming.
The External Environment
The Remote Environment
The remote environment includes factors that begin outside and usually regardless of, any single firm's operating situation. Macroeconomic factors, a subset of the remote environment, can have a significant effect on a company's financials and hence on its prospects for the successful execution of long term strategies. Macroeconomic factors affect the nature and direction of the economy in which a firm operates. These factors include the general availability of credit, level of disposable income, propensity of people to spend, prime interest rates, inflation rates, and trends in growth of gross national product. Foster's Group's overall grand strategy is market focus, meaning the company strives to have special appeal to one or more groups of consumers, focusing on their cost or differentiation concerns. Since the group's markets its products globally, the company must consider the level of disposable income, the willingness of potential customers to spend it, and the monetary exchange rate between each target country and Australia (Pearce & Robinson 2005). The takeover of Southcorp created new challenges in terms of global marketing and differentiation, but Foster's met these challenges through accurate market research and adapting Southcorp products to the needs of its customers by labeling and even some reformulation of its wines (Charles 2007). The current global economic downturn is a large remote environment factor which threatens the company's sales and profits, but Foster's Group's product diversity, some of which it gained through acquiring Southcorp, will help the company spread and thus mitigate its risks (Foster's to keep wine business 2009). In fact the company announced that it has decided to retain and reshape its wine business, and implement significant organizational and operational changes to improve performance (Industry Update 2009).
The Remote environment also comprises non-economic factors which can be broken down into the four major groups of social and cultural, political, technological, and demographic factors. Social ...