I have the following case study. I need a better explanation of the financial analysis and it to be cited correctly using the two references provided. Also, if you see an amount of information not cited, please use the references provided to cite or add citations that explain.
Although General Mills has experienced a surge in sales, the company needs to prepare for what can potentially occur post-pandemic as the distribution of vaccines is beginning and consumers begin to return to work and dining at restaurants.
– General Mills finances have increased during the pandemic as more people choose to dine at home, restaurants close, and companies have maintained to keep their employees working remotely.
– General Mills made healthier adjustments to some of their products pre-pandemic which also helped them against their competitors.
– Distribution of vaccines can become an issue and lower demand for consumers since dining at home will begin to diminish.
General Mills needs to begin reducing expenses to prepare for possibilities of less demand once people start returning to work and stop dining at home. They need to focus on efforts to market their products to become appealing to a market of new customers. General Mills needs to continue to be innovative with new products as they were pre-pandemic and fulfilling different customer’s needs by debuting products with different ingredients and for different diets.
The pandemic has come as a saving grace and consequently helped the organization improve its finances. However, with the poor forecasting, the organization fears that they will suffer post-pandemic. As a result, efficient measures need to be implemented to protect the organization and contribute to the actualization that demand may start to decrease. This requires the creation of a department that will conduct better forecasting for the organization. This will help them anticipate changes before they happen and implement effective measures to manage them. General Mills will also be able to predict their marketing strategy as well as their innovative product design strategy.
The organization needs to begin forecasting its financials with lowers sales to predict how they will be performing financially as the pandemic begins to fade. They would need to start by conducting forecasts and internal audits to see how healthy they are financially and how affected they can become. As well as pinpointing what expenses they need to reduce.
The internal environment comprises various elements within the organization including the management, employees, and corporate culture. General Mills is one of the leading organizations in its industry; it maintains a leading position by carefully developing strategies that better suit its internal and external environment. As one of the leading organizations in the industry, General Mills has multiple strengths that help it thrive and succeed in the marketplace. These strengths help them with the necessary information to develop efficient and effective strategies that would help them better succeed in the market.
General Mills has a successful track record of developing innovative products. According to Watrous, being innovative is one of the main reasons General Mills has been successful in driving growth and was able to generate $10 billion in net sales in 2018 (Watrous, 2019). For example, when General Mills created the Nature Valley crispy creamy wafer bars, Jonathan Nudi, group president of North America retail, said “These new bars are made with light and crispy whole grain wafers, layers of peanut butter and crunchy granola topping, providing a differentiated texture experience for consumers. It’s still early, but wafer bars are off to a good start with strong display and consumer support plans on tap for the summer and fall” (Watrous, 2019).
Secondly, General Mills has mastered the skill of entering new markets successfully and performing better than expected. It has built expertise when it comes to entering new markets; the strategy that the organization uses is similar to its old strategy with one vital difference; it has enhanced the capability of bringing global insights to local markets. Its global footprint is vast and leads various brands in these new markets. For instance, the Company partnered with various organizations including Nestle which is headquartered in Switzerland in 1990 (Nestle.com); this was its first significant foray outside North America. General Mills’ success in new markets is a strength that can be leveraged when it comes to the launching of new products. The organization heavily invests in resources pertaining to training and development; this equips the employees with the necessary skills to be more effective and productive. According to Kathy Carlson, Director of Supply Chain learning and development, “Our leaders are keenly aware of their pipeline of employees, and the learning and development leaders work to create the right opportunities and developmental offerings to effectively and efficiently develop our employees” (Nikravan, 2012).
The success of the organization does not necessarily mean that it does not have a few weaknesses that affect its internal environment. For instance, compared to other organizations, General Mills has a high turnover rate in the workforce. The organization has been spending a lot more than other organizations in this industry. This follows the implementation of the new financial measures to pass on some of the manufacturing costs to the customers. Secondly, the organization continually faces challenges when it comes to moving to other product segments; this can be directly associated with the organization’s culture which limits it in terms of expanding to other product segments. Thirdly, the company has not been highly efficient in forecasting which leads to an increasing number of opportunities missed to be able to compare to other companies. The organization ends up keeping higher inventory than initially planned.
Financial Analysis of the Organization
According to the financial information published by the organization and Business Wire referenced in Tables 1.1 and 1.2, the Gross margins increased 120 basis points to 13.8% of net sales. This was influenced by the favorable net price realization and mix which led to a lower mark to market expenses (Businesswire.com, 2021). It also influenced lower restructuring charges which were offset by higher input costs. The organization’s adjusted gross margins increased 10 basis points to 34.9 % net sales. This was influenced by the favorable net price realizations which were consequently offset by high input costs.
The operating profit was $2.6 billion a 22% increase from 2019. The organization attributed this to high gross profit dollars influence by the high SG&A expenses including investments in the media (Businesswire.com, 2021). The adjusted operating profit was $2.4 billion, an 11% increase in constant currency. General Mills’ net earnings increased by 24% to approximately $1.9 billion and diluted EPS of $3.10 with a 22% increase. The organization’s liquidity ratio for the quarter ended in Feb this year was 0.69. The leverage on the other hand was -0.35% which was an improvement from the 2021 third quarter of 2.3.
This financial analysis information shows that General Mills’ financial situation has significantly increased; this can be directly attributed to the pandemic as more people are increasingly spending their time at home and therefore increasing the rate of consumption. However, with the distribution of vaccines, changes are to be expected. With the expected changes due to the pandemic vaccination, General Mills can start rolling out plans to be innovated with new products to reach new customers with different expectations.
For the management to implement effective strategies, they need to understand the pertinent factors that surround the Company’s situation. Two important factors need to be considered: the competitive environment and the Company’s market position and competitiveness. There are various external factors affecting General Mills. These factors will be analyzed in the context of the macro environment and the Five Forces Model. Porters’ five forces includes the threat of new entrants, the bargaining power of the supplies and the consumer, the threat of substitution, and increased rivalry from the competitors (Thompson, A. 2016).
New Entrants in Processed and Packaged Goods have brought innovation and introduced new ways of doing things. With this, the company continues to have pressure added; it is vital to note that these new entrants introduce new ways of accomplishing lower prices, eliminating expenses, and providing customers with new products and designs. General Mills can implement various measures including innovating products and services at an incredible speed. This not only provides the consumers with new products but also gives the customers reason to buy out and try the new products. General Mills should invest in lowering the fixed cost of produced goods. The organization could invest in research and development; this will provide an opportunity to produce better and more innovative goods that will define the standards and prevent new entrants.
Secondly, the bargaining power of suppliers; when it comes to Companies in the processed and packaged goods industry, most of them buy their raw materials from numerous suppliers. General Mills has been at the mercy of these suppliers as observed by the newly implemented measures to lower the costs of manufacturing. To decrease the chances of this, the organization needs to start building efficient and effective supply chains. They need to experiment with a variety of products so they can cater to different customers and markets.
The organization’s external environment is affected by the bargaining power of buyers. Consumers are always searching for the next best thing and can often shift from organization to organization as they want to buy the best offerings. With multiple organizations dealing with the same products General Mills does, this becomes challenging and difficult. The organization runs the chance of losing its customer base and consequently, its market share. To handle this, the organization needs to start by becoming more appealing to wider range of customers. By doing this, the company will reduce the consumer’s bargaining power and gain more opportunities for the company. The external environment is also affected by the threat of new substitute products and services. General Mills can change and redesign itself to be service-oriented rather than just product-oriented.
Other strategic actions to be employed
Once the organization has analyzed its internal and external environment and implemented the necessary strategies, it can look at other strategic actions that can complement the competitive approach chosen. For instance, the organization can employ aggressive strategic moves to defend its market position post-pandemic. The ending of the pandemic is expected to affect the organization significantly; as a result, they need to implement better and more effective measures that will help protect their position. For instance, the Company can start diversifying their customer segments to include office workers; they can invest in research to identify some of their products that can easily be integrated within the office. This way, the post-pandemic downturn will not significantly affect them.
Cereal partners worldwide. (n.d.). Retrieved April 17, 2021, from https://www.nestle.com/aboutus/overview/businesses/cereal-partners-worldwide
Nikravan, L. (2018, August 21). General Mills: Nourishing Lives Through Learning. Chief Learning Officer – CLO Media. https://www.chieflearningofficer.com/2012/05/21/general-mills-nourishing-lives-through-learning/
General Mills, Inc. – Financial Information. (2021). General Mills. https://investors.generalmills.com/financial-information/annual-reports/default.aspx
General Mills Reports Fiscal 2021 Third-quarter Results. Business Wire (2021, March 24). https://www.businesswire.com/news/home/20210324005425/en/General-Mills-Reports-Fiscal-2021-Third-Quarter-Results
Speed, not perfection, central to General Mills innovation strategy. (2019). Food Business News. https://www.foodbusinessnews.net/articles/14097-speed-not-perfection-central-to-general-mills-innovation-strategy
Sudip SahaManaging, Five trends defining the food Industry Post-COVID. https://foodsafetytech.com/column/five-trends-defining-the-food-industry-post-covid/
Thompson, A. A. (2016). Strategy: Core concepts and analytical approaches. Blue Ridge, IL: McGraw Hill Education.
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