2.2.4 Core competencies and sustainable advantages
2.2.5 Summary of firm's resources
2.3.0 Analysis of objectives
2.3.1 Short-term objectives
2.3.2 Long-term objectives
2.3.3 Financial objectives
2.4.0 Financial analysis
2.4.1 Valuation analysis
2.4.2 Growth analysis
2.4.3 Profitability analysis
2.4.4 Financial strength analysis
2.4.5 Dividend analysis
2.4.6 Management efficiency analysis
2.4.7 Stock price analysis
2.4.8 Summary of financial analysis
2.5.0 Strategic analysis
2.5.1 Corporate level strategy and international strategy
2.5.2 Business level strategy
2.5.3 Value chain analysis
2.5.4 Summary of strategic analysis
2.6.0 SWOT Analysis
2.6.5 Summary of SWOT analysis
1.0.0 External Environmental analysis
1.1.0 General Environmental Analysis. Even though everyone has to eat, consumers enjoy a broad-based selection of food choices from around the world today thanks to mature distribution systems and efficient supply chain networks that create a highly competitive environment. In this regard, Sills and Novosel (2012) emphasize that, "Food companies face a challenging and volatile environment. The need to understand changing consumer needs, innovate effectively and put goods on the shelf at a price that works for manufacturer, customer and consumer continues" (p. 3). The wholesale food industry has also relied on thin profit margins and high volume, but the current competitive environment is going to require even more efficiencies to remain competitive. As Sills and Novosel point out, "As emerging markets players take their place on the global stage and start challenging for share in both developed and developing markets, food manufacturers are focusing more closely than ever on the need to maximize volume to maintain growth" (2012, p. 3).
Despite the constraints to growth noted above, the wholesale food industry is expected to grow commensurate with population growth patterns in the regions companies compete (Sysco annual report, 2013). Other factors, though, including the prevailing economic conditions and consumer confidence can also influence the demand elasticity for purchases and amounts consumers spend on food outside the home which can affect food wholesalers' revenues (Sysco annual report, 2013). At present, consumer confidence in the foodservice market remains lower than normal because of unemployment issues and stagnant personal income growth (Sysco annual report, 2013). Current estimates concerning the total foodservice market in the United States indicate a real sales increase of about 1.3% during 2012 following a decline of 0.1% the year before (Sysco annual report, 2013). These changes in real sales estimates, though, do not take into account the effects of inflation or deflation (Sysco annual report, 2012).
1.1.1 Demographic Segment. Although lingering issues concerning unemployment and a stagnated economy have affected consumer confidence, there have been other factors involved as well that have contributed to a recovery rate in the foodservice sector that has been slower than anticipated (Sysco annual report, 2013). Although these types of trends are typically cyclical in nature, industry analysts believe that improved consumer confidence will be need in order to make any substantive reversals to these trends (Sysco annual report, 2013).
1.1.2. Economic Segment. Industry analysts also project real sales growth for the total foodservice market in the United States to be modest over the long-term (Sysco annual report, 2013).
1.1.3 Political/Legal Segment. Wholesale food companies must comply with a wide range of laws and regulations in the United States (Parker, 2001). These laws and regulations are subject to changes from federal agencies including the U.S. Census Bureau which is responsible for industry classifications and periodically changes those classifications affecting the company's product lines (Parker, 2001).
1.1.4 Socio-Cultural Segment. Increasing numbers of American consumers are eating outside the home as the result of busier lifestyles and the competitive prices of these food products (Shields, 2009). Higher disposable income levels in many of the company's market regions have contributed to Sysco's faster-than-expected recovery from the 2009 economic downturn (Shields, 2009).
1.1.5 Technological Segment. A number of innovations in transportation and food service technologies have made the industry more efficient in recent years (Kudo & Kipping, 2009), including industry-specific software applications that facilitate inventory, transport and marketing (Sysco annual report, 2013).
1.1.6 Global Segment. Wholesale food companies are experiencing slow rates of recovery following the global economic downturn, but are recovering to pre-crisis levels (Sysco annual report, 2013).
1.1.7 Summary of General Environment Analysis. The global wholesale food industry was not immune to the effects of the Great Recession of 2009, and many competitors have been slow to recover to their pre-recession profitability levels.
1.2.0. Driving forces. The driving forces for the company's products differ according to market sector. For instance, according to the company's most recent annual report, "The food processing industry sells its products to groceries, restaurants or specialty stores (e.g. liquor stores), and the importance of each avenue for sales can vary by product" (Sysco annual report, 2013, p. 4). As a result, the respective driving forces for each of the market segments will be different. In this regard, Sysco reports that, "Within a sector, individual firms may pursue different strategies" (Sysco annual report, 2013, p. 4).
1.3.0. Industry Analysis
1.3.1. Description of the industry. The wholesale food industry in North America has distribution networks that have existed for centuries, but despite innovations in telecommunications and transportation, competition in many of the NCAIS categories in which Sysco competes is high. For example, according to the IRS' "Food Service Overview" (2013), "As it exists today, the domestic food and beverage industry is a very competitive and mature industry with little domestic growth" (para. 3). The major current NAICS categories for the Food Industry are as follows:
311 Food Manufacturing
312 Beverage Manufacturing
445 Food and Beverage Stores
722 Food Services and Drinking Places (Food Service Overview, 2013).
The Food Industry is also comprised of a number of sub-industries in which Sysco competes, including the following representative sample:
31123 Breakfast Cereal Manufacturing
31141 Frozen Food Manufacturing
31151 Dairy Product (except Frozen) Manufacturing
31181 Bread and Bakery Product Manufacturing
31211 Soft Drink and Ice Manufacturing
44511 Supermarkets and Other Grocery (except Convenience) Stores
72211 Full-Service Restaurants
72221 Limited-Service Eating Places
72241 Drinking Places (Alcoholic Beverages) (Food Service Overview, 2013).
1.3.2. Industry dominant economic factors. The industry-dominate economic factors affecting Sysco include the saturation of the domestic market and the need to expand its operations beyond its current Ireland presence. In this regard, the IRS emphasizes that, "Overall most growth comes from international expansion. With the passage of NAFTA and GATT, many domestic companies are either entering into alliances with foreign entities, or acquiring them" (Food Industry Overview, 2013, para. 6). These dominant factors are attributable to a number of factors, including the fact that many companies competing in this industry want to exploit existing distribution networks or any plant capacity that may be underutilized (Food Industry Overview, 2013). In addition, some acquisitions, such as Sysco's 14 new companies in Fiscal Year 2012, may be the result of federal income tax considerations (Food Industry Overview, 2013).
1.3.3. Market Size. Industry analysts estimate that the market size of the foodservice, or food-away-from-home, sector accounts for nearly half (48%) of the total dollars spent on food purchases made at the consumer level in the United States annually (Sysco annual report, 2013).
1.3.4. Market Growth Rate. Most competitors in the wholesale foodservice market have experienced sluggish growth following the global economic downturn of 2009 (Sysco annual report, 2013). Because the market size is finite, competition is fierce and any gains achieved by one competitor inevitably result in losses for others rather than more consumer demand. In this regard, the IRS emphasizes that, "Increases in a company's market share usually come at the expense of a competitor's loss of market share (cannibalization)" (Food Industry Overview, 2013, para. 5).
1.3.5. Industry Trends. Industry sources estimate the total foodservice market in the United States experienced a real sales increase of approximately 1.3% in calendar year 2012 and a decline of 0.1% in calendar year 2011. Real sales changes do not include the impact of inflation or deflation (Sysco annual report, 2013, p. 2).
1.3.6. Summary of industry analysis. There is not much more room for growth in the North American food industry, and capturing additional market share requires taking it from competitors rather than encouraging additional consumer demand. These limitations have resulted in growing number of competitors in the food industry, including Sysco Corporation,…