Pillsbury: a Tale in Management

Topics: Cost, Supply chain, Value Pages: 8 (2505 words) Published: May 19, 2013
Pillsbury: A Revolutionary Tale In Management

Written by: Louis Maatiaha Tangiia
Pillsbury: A Revolutionary Tale In Management
Assignment: Pillsbury Customer Driven Reengineering
Date: 28/04/2013
Student Name: Louis Maatiaha Tangiia
Student ID: 4594096

This report discusses the Pillsbury Company's reasons for changing their strategy and assessment of the new strategy using Value Chain Analysis and Activity Based Costing . A brief history of Pillsbury and its old strategy is outlined initially. The discussion then focuses on their new strategic focus with emphasis on the how and why of this change. The performance of Pillsbury is assessed using Value Chain Analysis with an explanation on how Pillsbury leverages primary and supporting activities to decrease cost and add value across the chain. Activity Based Costing analysis is used to gain insight into the cost structure of Pillsbury's supply chain. Finally these insights gained from Activity Based Costing analysis will be explored by assessing Pillsbury's ability to influence future decision-making.

Table of Contents
1.0 Introduction
2.0 New Strategic Focus
3.0 Pillsbury Leveraging its' Activities
3.1 Primary activity improvements
3.2 Supporting activity improvements
4.0 Activity Based Costing Analysis
4.1 Cost structure of supply chain
4.2 Influence on future decision-making
5.0 Conclusion
6.0 Reference List
7.0 Appendicies
Appendice 1 New Value chain

1. Introduction
Founded in 1869 The Pillsbury Company began as a flour milling firm in Minnesota. This company was then bought by Grand Metropolitan (GrandMet) in 1989, a UK-based consumer goods and retail corporation who sought to become a world leader in branded food and drinks businesses. In 1994 Pillsbury - North America sector created 50% of GrandMet's 1993 sales of 8 billion dollars due to their 75% market share of refrigerated dough. A choice was made by CEO of Pillsbury Paul S Walsh to focus on core businesses, to consolidate the parts of Pillsbury that add value thus from 1991 to 1993 they sold all their flour mills but retained their procurements with long-term supply agreements. These asset sales were the beginning of many changes to come in their activities as they realised the competitive pressures, technology advances and demanding consumer preferences which were taking its toll on The Pillsbury Company achieving a sustainable profit in the future.

2.0 New Strategic Focus
Pillsbury's top level managements realised that changes needed to be made if they were to compete in the current competitive environment. Although a 75% share was held on refrigerated dough products the company as a whole was subpar in relation to its competitors. As a result, the new strategy focus would be to work on improving relationships and activities throughout the customer supply chain rather than relying on their strong brands. Thus looking at Appendix A we can see that there is a priority on Research and Development. This is because original ideas were being researched into product mixes and customer preferences but more importantly costs were being allocated using Activity Based Costing (ABC) in order to single out certain product lines and their profitability. Pillsbury realised a competitive advantage by collaborating with their customers and suppliers. With a collaboration in place between Pillsbury and its customers, shelf space and choices of shelves could be negotiated. Since customers are now basing their choices more upon price and eye-line shelving the choice of shelves and the size of shelves are important factors in the selling of Pillsbury's product. Realisation of consumer's prioritising on pricing made Pillsbury concentrate on their costs within operations, their suppliers and their customers in that decreases of costs in one part will decrease the cost to the consumer. The management tools, Value Chain Analysis (VCA) which is explained in...
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