Sysco Corporation business operations and market overview

¶ … Sysco Corporation's Competitive Position Today

External Environmental analysis

General Environmental Analysis

Demographic Segment

Economic Segment

Political/Legal Segment

Socio-Cultural Segment

Technological Segment

Global Segment

Summary of General Environment Analysis

Driving forces

Industry Analysis

Description of the industry

Industry dominant economic factors

Market Size

Market Growth Rate

Industry Trends

Summary of industry analysis

Five Forces competitive analysis

Threat of new entrants

Power of Buyers

Power of suppliers

Threat of substitutes

Intensity of rivalry

Summary of five forces competitive analysis

Competitive analysis

Industry competitors

Rivals anticipated strategic moves

Summary of competitive analysis

Key Success factors

Internal analysis

Organizational Analysis

Corporate Mission

Products and services

Leadership

Organizational culture

Organizational structure

2.1.6 Summary of Organizational Analysis

2.2.0 Analysis of firm's resources

2.2.1 Tangible resources

2.2.2 Intangible resources

2.2.3 Capabilities

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

2.6.1 Strengths

2.6.2 Weakness

2.6.3 Opportunities

2.6.4 Strengths

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

31212 Breweries

31214 Distilleries

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, looking for new business opportunities abroad.

1.4.0. Five Forces competitive analysis.

1.4.1. Threat of new entrants. Because the company competes in the entire constellation of food service sectors, the threat of new entrants in any one of them at a given point in time as the result in changes in demographic patterns, economic conditions or other factors can introduce new entrants or eliminate existing players. For instance, the company's most recent annual report notes that, "Non-traditional competitors are becoming more of a factor in terms of competition within our industry, and consumer spending trends are gradually shifting more to fresh, natural and sustainably-produced products" (Sysco annual report, 2013).

1.4.2. Power of buyers. Increasing competition in the wholesale foodservice industry has amplified the power of buyers in the company's North American and Irish markets, thereby serving to keep prices highly competitive and profit margins razor thin (Sysco annual report, 2013).

1.4.3. Power of suppliers. As the largest wholesale foodservice company in the United States today, Sysco enjoys a competitive advantage by virtue of its far-flung network of thousands of subsidiaries (exact numbers varied according to the sources consulted), its enormous economies of scale in purchasing and distribution as well as the efficient value chain the company has established that eliminates waste at every opportunity while adding value whenever possible (Sysco annual report, 2013).

1.4.4. Threat of substitutes. There are lower cost substitutes available for virtually all of the company's products (Yeboah, Shaik & Quaicoe, 2012).

1.4.5. Intensity of rivalry. The wholesale foodservice industry is highly fragmented, competitive, and recent economic conditions have contributed to less-than-optimal sales for many competitors. For instance, the company's most recent annual report states "We believe the current general economic conditions, including pressure on consumer disposable income, have contributed to a decline in the foodservice market" (Sysco annual report, 2013, p. 3).

1.4.6. Summary of five forces competitive analysis. The company is faced with some profound constraints to growth, including a decline in the foodservice market, changing consumer preferences and the need to formulate an overarching corporate strategy that can effectively manage its far-flung business operations.

1.5.0 Competitive analysis

1.5.1 Industry competitors. The company's main competitors include privately held Meadowbrook Meat Company, Inc., Performance Food Group Company and S. Foods, Inc. (Sysco competitors, 2013).

1.5.2 Rivals anticipated strategic moves. A summary of Sysco's main competitors' strategic moves is provided in Table 1 below.

Table 1

Summary of Anticipated Moves by Sysco's Main Competitors

Competitor

Summary of Anticipated Moves

Meadowbrook Meat Company (MBM), Inc.

This company is one of the largest privately owned foodservice distributors in the nation. Meadowbrook specializes in providing food to more than 25,000 nationally franchised restaurants, including Arby's, Burger King, Captain D's, Chick-fil-A, and Darden Restaurants (Red Lobster, Olive Garden). Meadowbrook fills domestic and overseas customer orders through a nationwide network of more than 30 distribution centers J.R. Wordsworth founded MBM in 1947 as a retail food distributor. In 2012 the company announced it was being acquired by Texas-based and rival McLane for an undisclosed price (Meadowbrook corporate profile, 2013, p. 1). A press release from Meadowbrook preparatory to the acquisition insisted that, "MBM will continue to be run in the same prudent and professional manner as it has been for the past 65 years, led by the current executive management team, and operating out of its existing facilities in the same markets. The only change to MBM's business will be new access to enhanced resources, operational best practices and intellectual capital that will provide significant upside and opportunity for increased levels of success for MBM, McLane and the customers both companies serve" (McLane Company to Acquire Meadowbrook Meat Company, 2013, para. 1).

Performance Food Group Company

This company's (PFGC) corporate Web site states that, "As the parent company to a leading family of foodservice distributors, Performance Food Group delivers food and food-related products to more than 130,000 independent and national chain restaurants, quick-service eateries, pizzerias, theaters, schools, hotels, healthcare facilities and other institutions across the United States through its four business divisions -PERFORMANCE Foodservice, ROMA Food, Vistar and Customized" (About PFGC, 2013, para. 1). The company's Web site consistently stresses its triple-bottom line approach to growth and notes a current acquisition underway.

S Foods, Inc.

This Japanese competitor states that its current initiatives include: "Developing various meat products for professionals to make our customers realize and enjoy the high nutritional value and unique flavor of variety meat. We rapidly respond to the ever-changing preferences of customers by complying in detail with their demands, which vary according to their industry such as retailers, lunch box makers and restaurants and according to their menus; and develop revolutionary solutions such as improved package design and enhanced food safety" (Management philosophy, 2013)..

1.5.3 Summary of competitive analysis. The research showed that the environment in which Sysco competes is highly fragmented, fiercely competitive, with major actors such as Meadowbrook and S. Foods consistently threatening to encroach on Sysco's market share. In this environment, identifying key success factors also represents a timely and valuable enterprise, and these issues are discussed further below.

1.6.0 Key Success factors. Just as the company's drivers depend on the market and demographics of the environment in which it competes, the respective key success factors depend on what type of product line is involved as well as the types of retailers purchasing these products. According to Sills and Novosel (2012), "Companies that have responded proactively to a tougher market environment maximizing volume to maintain growth; optimizing the potential in emerging markets and looking for appropriate transaction opportunities as consolidation in the sector continues" (p. 7). Some of the general key success factors identified for the wholesale food industry include the following:

1. Identify new routes to growth. Prioritizing the right markets and making the right deals.

2. Increase adaptability and responsiveness. This requires innovation in supply chain management and the elimination of waste at every opportunity.

3. Deliver margin improvement. This means improving performance across all business functions.

4. Sharpen execution. This requires better awareness of what consumers are thinking about the brand.

5. Embrace sustainability. This requires implementing and supporting authentic corporate social responsibilities programs and initiatives (Sills & Novosel, 2012, p. 5).

2.0.0 Internal analysis

2.1.0 Organizational Analysis

2.1.1 Corporate Mission. The company 2013 annual report specifically states that, "Day-to-day, [Sysco's] business decisions are driven by the company's mission to market and deliver great products to our customers with exceptional service, with the aspirational vision of becoming each of our customers' most valued and trusted business partner" (p. 3).

2.1.2. Products and services. Sysco is the largest wholesale food distribution company in the U.S. with almost 400,000 restaurants and food service operators as part of it distribution network (Hess, 2012). Today, Sysco markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry through its subsidiaries, including SYGMA (the company's chain restaurant distribution subsidiary), specialty produce companies, hotel supply operations, a company that distributes specialty imported products and a company that distributes to international customers. The company has its headquarters in Houston, Texas and was founded in 1969 (Company profile, 2013).

According to Sysco's corporate profile (2013), the company distributes:

1. A line of frozen foods (including meats),

2. Seafood,

3. Fully prepared entrees, fruits, vegetables, and desserts;

4. A line of canned and dry foods;

5. Fresh meats;

6. Dairy products;

7. Beverage products;

8. Imported specialties;

9. Fresh produce.

10. Various non-food items (including paper products such as disposable napkins, plates, and cups);

11. Tableware (including china and flatware);

12. Cookware (including pots, pans, and utensils);

13. Restaurant and kitchen equipment and supplies; and,

14. Cleaning supplies.

Besides its exhaustive list of commercial food and products, the company also offers personal care guest amenities, housekeeping supplies and equipment, room accessories, and textiles for hospitality industry as well as a range of products targeted to restaurants, healthcare providers and long-term care facilities, educational institutions, motels and hotels, industrial caterers, lodging establishments, as well as other foodservice customers through its far-flung distribution facilities (Corporate profile, 2013). The company reports that it regards its primary market to be foodservice in North America and estimates that Sysco has an18% annual share of this approximately $235 billion market (Sysco annual report, 2013).

2.1.3 Leadership. The company enjoys a strong leadership team that provides a coherent sense of vision and direction for Sysco employees. For instance, Kiger (2009) reports that, "Jim Hope, president of a Kansas City subsidiary of Sysco, station[ed] himself in the warehouse one morning before dawn, so that he could give a presentation on stock options to the company's truck drivers. 'We did a workplace-- climate survey,' Hope says, 'and one of the things it showed was that employees wanted to see top management in person more'" (p. 29). In response, the company ensured that its management teams conducted for management by walking around than in the past, but to avoid merely presenting a superficial interest in their employees and to take the time needed to learn what is bothering them and what they like best about the company (Kiger, 2009).

2.1.4 Organizational culture. According the Sysco's former chairman and CEO, rewarding sustained employee performance was a pragmatic decision that was based on what really motivates people to work harder -- ownership in the company and regular monetary rewards (Hess & Liedtka, 2012). In this regard, Rick Schnieders, the former chairman and CEO of Sysco, emphasized that, "[Our] culture was self-replicating. Our people feel good because many own stock, and they see results when everyone works hard and performs" (cited in Hess & Liedtka, 2012, p. 55). In an economy when many people live paycheck to paycheck, Sysco's HR practices are truly enlightened because they reward their employees almost immediately for the work they did the previous week. Not surprisingly, Sysco received the Workforce Optimas Award for General Excellence in 2002 (Workforce Optimas Awards, 2002).

2.1.5 Organizational structure. Despite the company's vast geographic operating area, the company's leadership has developed an organizational structure that provides ongoing feedback concerning subsidiary operations and the effectiveness of various management initiatives using a balanced scorecard approach. For instance, Ron Whitebread, program manager for Sysco's IT and supply chain projects at its headquarters in Houston, Texas, reports that, "I've used Kanban in a supply-chain optimization project. Each 'card' was a supplier that we tracked through the process steps: from data collection to analysis to implementation review to approval to execution to post-execution monitoring" (cited in Lazarus, 2012, p. 20). This approach has been highly effective in managing the company's far-flung operations. According to Whitebread, "These cards gave everyone a good visual on how many tasks and which suppliers were in progress, where the bottlenecks and gaps were, and where resource constraints might restrict the flow through the process" (cited in Lazarus, 2012, p. 20). Especially noteworthy was Sysco's use of its existing telecommunications network to facilitate the collection and dissemination of information. In this regard Whitebread emphasized that, "We also used an online Kanban tool to keep our remote team members up-to-date, and exchanged information in real time as if they were all in the same location" (cited in Lazarus, 2012, p. 21).

2.1.6 Summary of Organizational Analysis.

2.2.0 Analysis of Firm's Resources

2.2.1 Tangible resources. The company's tangible resources includes it distribution facilities that provide Sysco products to restaurants, tertiary health care facilities, elderly residential facilities, schools, colleges, hotels and motels, industrial caterers, lodging establishments, and other foodservice customers (Company profile,2013). The company's profile (2013) notes that as of June 29, 2013, Sysco operated 193 distribution facilities in the United States, Bahamas, Canada, Ireland, and Northern Ireland.

2.2.2 Intangible resources. The company's intangible resources include the immeasurable tacit knowledge possessed by its tens of thousands of employees and subsidiaries.

2.2.3 Capabilities. The company's proven track record of performance demonstrates a high degree of capability in ways that contribute to its core competencies and sustainable advantages as discussed further below.

2.2.4 Core competencies and sustainable advantages. According to Hess and Liedtka (2012), "Sysco has been the market-leading wholesale food distribution company in the United States for years. It delivers over four million cases of food daily to over 390,000 customers 99% on time and defect-free" (p. 54). This level of performance is the benchmark for management tools such as the balanced scorecard, and this exemplary performance is all the more noteworthy because of the company's size and the industry in which it competes. In this regard, Hess and Liedtka (2012) point out that "[Sysco] employs over 45,000 employees, over 50% of whom are hourly warehouse and delivery personnel. Its market share and profit margins are significantly higher than those of its competition, yet it basically sells commodity products" (p. 53). This impressive and enlightened performance is attributed to the company's underlying business philosophy: "It's the Sysco System that enables, promotes, and rewards execution excellence and entrepreneurial behavior at the customer-facing positions: truck drivers, salespeople, and restaurant business review consultants" (Hess & Liedtka, 2012, p. 54).

Sysco thinks that they are having over 65% of employees owning stock in the company and the promotion of people from within to fill open positions 95% of the time. Many of Sysco's hourly workers are paid weekly incentive bonuses, which rewards them frequently and close in time to good behaviors.

Indeed, Hess and Liedtka (2012) point out that many Sysco employees, including its truck drivers, enjoy generous incentive programs that provide bonuses for extra performance in the workplace that results in exceeding specific quantifiable goals. In fact, many of these employees are paid their incentive bonuses every week, and it is little wonder that this powerful combination of ownership in the company and maintaining a strong work ethic in the Sysco workplace has paid major dividends in their return on the company's investment in this HR strategy. According to Schneiders, former Sysco chairman and CEO, this is just good business sense: "All of this makes people work harder -- they feel good about the results in which they share, and they feel good about working hard tomorrow, etc." (cited in Hess & Liedtka, 2012, p. 55).

2.2.5 Summary of firm's resources. The company possesses an impressive array of tangible and intangible resources, most especially its international distribution network with thousands of subsidiaries, an efficient supply chain and a dedicated workforce committed to Sysco's success because they share in the company's profits.

2.3.0 Analysis of objectives.

2.3.1 Short-term objectives. The company's short-term objectives include:

The design and deployment of an ERP system to implement an integrated software system to support a majority of the company's business processes and further streamline Sysco's operations;

A cost transformation initiative to lower its cost structure;

A product-cost reduction and category-management initiative designed to use market data and customer insights to make changes to product pricing and product assortment; and,

Several other unspecified initiatives (Sysco annual report, 2013, p. 4).

2.3.2 Long-term objectives. The company's stated long-term objectives include improving the efficiency of its existing business systems, identifying transferable best practices and improving its supply chain management through the implementation of the short-term objectives outlined above.

2.3.3 Financial objectives

2.4.0 Financial analysis

2.4.1 Valuation analysis. The company's most recent valuation measures are presented in Table 2 and 3 below.

Table 2

Sysco Corporation: Most Recent Valuation Measures

Category

Amount

Market Cap (intraday)5:

18.87B

Enterprise Value (Oct 21, 2013)3:

21.34B

Trailing P/E (ttm, intraday):

19.20

Forward P/E (fye Jun 29, 2015)1:

15.34

PEG Ratio (5 yr expected) 1:

2.21

Price/Sales (ttm):

0.42

Price/Book (mrq):

3.62

Enterprise Value/Revenue (ttm)3:

0.48

Enterprise Value/EBITDA (ttm)6:

8.61

Table 3

Sysco Corporation's Most Recent Financial Highlights (Fiscal Year ending June 29, 2013, most recent quarter June 29, 2013).

Category

Amount

Profitability

Profit Margin (ttm):

2.24%

Operating Margin (ttm):

4.60%

Management Effectiveness

Return on Assets (ttm):

10.29%

Return on Equity (ttm):

20.10%

Income Statement

Revenue (ttm):

44.41B

Revenue Per Share (ttm):

75.35

Qtrly Revenue Growth (yoy):

5.00%

Gross Profit (ttm):

7.87B

EBITDA (ttm)6:

2.48B

Net Income Avl to Common (ttm):

Diluted EPS (ttm):

1.67

Qtrly Earnings Growth (yoy):

-8.50%

Balance Sheet

Total Cash (mrq):

Total Cash Per Share (mrq):

0.71

Total Debt (mrq):

2.89B

Total Debt/Equity (mrq):

55.64

Current Ratio (mrq):

1.66

Book Value Per Share (mrq):

8.86

Cash Flow Statement

Operating Cash Flow (ttm):

1.51B

Levered Free Cash Flow (ttm):

1.20B

Source: http://finance.yahoo.com/q/ks?s=SYY+Key+Statistics

2.4.2 Growth analysis. Across-the-board comparisons with the company's main competitors are difficult because these enterprises are privately held. Nevertheless, Sysco's leadership emphasizes that, "Historically, we have grown at a faster rate than the overall industry and believe we have continued to grow our market share in this fragmented industry" (Sysco annual report, 2013, p. 4).

2.4.3 Profitability analysis. Fiscal 2013 was profitable for Sysco, with the company realizing gains despite significant investments in its business transformation initiative and the acquisition of 14 new companies during fiscal 2013 that combined account for more than $1 billion in annualized sales (Sysco annual report, 2013). According to Sysco, "We expect these acquisitions will contribute to our sales growth, enhance our international market presence and product assortment" (Sysco annual report, 2013, p. 4). Key highlights of a year-to-year comparison of Sysco's profitability results from fiscal 2013 to fiscal 2012 include the following:

1. Sales increased 4.8%, or $2.0 billion to $44.4 billion;

2. Operating income decreased 12.3%, or $232.2 million, to $1.7 billion;

3. Adjusted operating income decreased 1.7%, or $36.4 million, to $2.1 billion;

4. Net earnings decreased 11.5%, or $129.2 million, to $1.0 billion;

5. Adjusted net earnings increased 0.1%, or $1.4 million, to $1.3 billion;

6. Basic earnings per share in fiscal 2013 was $1.68, a 12.0% decrease from the comparable prior year period amount of $1.91 per share;

7. Diluted earnings per share in fiscal 2013 was $1.67, a 12.1% decrease from the comparable prior year period amount of $1.90 per share; and,

8. Adjusted diluted earnings per share was $2.14 in fiscal 2013, a 0.5% decrease from the comparable prior year amount of $2.15 per share (Sysco annual report, 2013, p. 5).

2.4.4 Financial strength analysis. The company attributes is gross margin performance to a number of influence, mostly regionalized issues. For instance, Sysco's most recent annual report notes that, "Our sales growth in fiscal 2013 was greater with our large regional and national customers. Gross margin from these types of customers is generally lower than our independent restaurant customers" (Sysco annual report, 2013, p. 3). The company's sales may decline in the event sales estimates from the company's independent restaurant customers fail to materialize at the same or greater rates than sales from these large regional and national customers (Sysco annual report, 2013). The company adds that, "Additional pressure exists on our gross margin from competitive pricing pressures. Low growth in the foodservice market is contributing to increased competition which is in turn pressuring gross profits" (Sysco annual report, 2013, p. 3).

Finally, the company projects continued pressure on pricing, and notes that inflationary pressures also represent a threat to its profitability in the future despite current stable levels (Sysco annual report, 2013). As noted above, drivers differ in the various regions as well as for the different product lines provided by Sysco, and the vagaries of future economic conditions cause the company to caution that:

While we cannot predict whether inflation will continue at current levels, periods of high inflation, either overall or in certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our sales, gross profit, operating income and earnings. (Sysco annual report, 2013, p. 4)

2.4.5 Dividend analysis. Not only is the company generous to its employees, it manages to make a healthy return on its shareholders' investments as well reflected in Sysco's recent divided history set forth in Table 4 below.

Table 4

Sysco Divided History: 2000 to Date

Ex/Eff Date

Type

Cash Amount

Declaration Date

Record Date

Payment

Sysco Dividend History (2013) at http://www.nasdaq.com/symbol/syy/dividend-history#ixzz2iNjCA1Ie

2.4.6 Management efficiency analysis. Some indication of the efficiency of Sysco's management is the fact that although the company experienced higher operating expenses in Fiscal Year 2013 compared to fiscal 2012, it improved its performance across most of its measures (Sysco annual report, 2013).

2.4.7 Stock price analysis. The company has turned in impressive year-to-year stock performance, even during the post-September 11, 2001 terrorist attacks as shown in Figure 1 below.

Figure 1. Sysco Corporation Common Stock (NYSE) Performance: 1987 to Date:

Source: http://finance.yahoo.com/q/bc?s=SYY&t=my&l=on&z=l&q=l&c=

2.4.8 Summary of financial analysis. The company has enjoyed strong financial performance over the past 40 years as shown in Figure 1 above.

14 pages

2.5.0 Strategic analysis

2.5.1 Corporate level strategy and international strategy. With business operations in North American and Europe, Sysco Corporation is truly a multinational enterprise. Given the company's wide-range of products, it is noteworthy that Sysco has formulated such an effective overarching strategy. The company's most recent annual report (2013) makes Sysco's corporate-level and international strategy clear. According to the annual report, the company is "focused on optimizing its core broadline business in the United States, Canada and Ireland, while continuing to explore appropriate opportunities to profitably grow its market share and create shareholder value by expanding beyond its core business" (2013, p. 3). To this end, the company has implemented a wide range of business-level strategies in recent years that are closely aligned with the above overarching corporate-level and international strategies and these are discussed further below.