Strategy (N1021) and Strategy for Finance (N1542)

Strategy (N1021) and Strategy for Finance (N1542)
Individual Project Report – 30%
Word count: 1500 words (+/- 10%, excluding Tables and Figures)
Project brief:
Read the below case study ‘Warburtons Bread’ and review the appendices. Analyse
Warburtons industry and resources and capabilities by addressing the following questions
and justifying your answers with conceptual tools learned in class:
1. Is this an attractive and profitable industry? What structural factors make it attractive
or unattractive? Please elaborate your answer in detail using the tools taught in class.
2. Discuss the various strategies Warburtons implemented and explain how they relate
to the industry structure. Propose two additional strategies that could help
Warburtons achieve greater profitability in this industry and explain your reasoning.
3. Analyse Warburtons resources and capabilities and assess the extent to which the key
resources and capabilities contribute to the creation of sustainable competitive
advantage.
 The report could make use of secondary sources, which you can find using on-line
resources tools or other sources. If you make assumptions, please clearly state them in
your report.
 If the references are used throughout the main text, a complete list of bibliography
must be provided at the end using Harvard style.
 The answers should be in essay format addressing the questions presented. Each
question is worth 30%.
Assessment criteria
 Presentation (structure, coherence, referencing, appendices) => 10%
 Answers to the three questions above => 90% (30% X 3)
Fail Pass Satisfactory Good Distinction
% 1-49 50-59 60-69 70-79 80-100
Criteria
Presentation:
structure,
coherence,
presentation
style,
referencing,
appendices
Inadequate,
insufficient or
incomplete
Reasonable
presentation
but
inconsistent,
unclear
structure, many
errors, poor
proof-reading
Satisfactory
structure, style
with some
errors
remaining
Good
presentation
with consistent
accurate
referencing,
fluent style and
sound structure.
Minimal errors.
Excellent
presentation,
clear structure
with coherent
arguments and
explanation
throughout,
with exemplary
referencing and
use of relevant
appendices
Discussion of
three
questions
Demonstrates
little or no
understanding
of the
questions and
the strategic
tools to
address them.
Lack of relevant
arguments and
no evidence of
critical and
analytical
abilities.
Shows some
awareness and
understanding
of the questions
and the
strategic tools
to address
them, but with
little
development.
Shows a
reasonable
understanding
of the questions
and the
strategic tools
to address them
but formulates
the answers in
patchy sections
where
argument is
somewhat
logical and
sustained.
Develops
focussed and
clear arguments
when answering
the questions
using the
appropriate
strategic tools.
Articulates
clearly and
convincingly a
sustained train
of logical
thought while
demonstrating a
detailed
understanding
of the question.
Develops
sophisticated
arguments.
Shows a
rigorous use
and a
sophisticated
understanding
of relevant
materials and
tools, balancing
appropriately
between factual
detail and
logical
reasoning.
Overall
recommendat
ion and
conclusions
Mostly/Complet
ely fails to
address the
questions.
Does not really
address the
questions.
Includes
irrelevant info.
Does not
address all
aspects of the
questions.
Contains
irrelevant info.
Addresses the
questions
adequately.
Little or no
irrelevant info.
Addresses the
question
correctly, fully
understanding
the requirement
of the
assignment
Warburtons Bread1 Case
Sliced bread went on sale in the US in 1928 and soon became a British staple. But in the UK, sales of sliced
bread are flat. The Bread and Bakery Goods Production industry has been under considerable pressure
over the past five years because consumers’ interest in industrially produced goods has been fading.
Bread produced by large plant bakeries has traditionally accounted for the majority of bread eaten in
the UK but this is now less attractive to consumers and consumption of plant bread has been
declining. In contrast, small artisan bakeries have proliferated and proven increasingly popular, while
alternative baked products have also taken off. Apart from these changing consumer trends, industry
operators have also had to deal with fluctuations in wheat prices, which spiked in 2011 due to
pressure on global wheat supplies.
This industry is estimated to have a low level of market share concentration, since the top four
players2 are expected to account for 25.7% of industry revenue in 2015-16. The UK bread market is
dominated by industrial products, but no individual company has significant control over the industry.
Furthermore, major companies tend to concentrate on certain product segments. The market for
fresh cakes, pastries, flour confectionery and other sweet bakery products is much less concentrated
and there are no major players that specialise in these areas. Nearly two-thirds of industry operators
are small firms with fewer than 10 employees.
Due to overcapacity of bread production in UK, plant closures are welcomed by most of the
participants in the trade and in some cases may provide scope for margin expansion in due course.
The closures by Hovis – the company behind the “Boy on the Bike” television advert in the 1970s –
have put the focus on other brands in the industry such as Kingsmill, owned by Associated British
Foods.
1 Adapted from Bounds, Andrew (2015) ‘Innovation helps Warburtons brand rise’ Financial Times 22 May 2015
2 The top four players are Warburtons – 10% market share, Premier Foods (Hovis) – 7.5% market share,
Associated British Foods (Kingsmill) – 6.2% market share and Brace’s Bakery Limited – 2% market share.
However, with pressure and competition mounting from supermarket own-brands, analysts say
bakeries must invest in new products while also cutting costs. The multi-billion-pound sliced bread
market is a staple that the big five supermarkets are pricing aggressively to the point of having near
loss-leaders. Bread producers are struggling with global input rises. It is essential for bread makers to
innovate and broaden the brand appeal with new and exciting products to help with more leverage
over pricing. Whatever they try, however, it is simply tough out there as bread is mostly used as a
commoditized product.
For Warburtons, the 600m-long strip of dough winding through its new £20m production line in Burnley is
the greatest thing since sliced bread. Ross Warburton, a director of the family bakery, says its low-calorie
sandwich alternative, called Thins, explains how it has become the UK’s most chosen brand. “Consumer
tastes are moving faster than they were 10 years ago,” Ross Warburton says. “People are exposed to
different countries and products more than they were before. Bread is a staple people consume every
week and they want something different.” Thins, launched in 2011, now account for almost 10 per cent of
sales. Warburtons still relies on bread for 70 per cent of sales, but sales other of products introduced in the
past few years are growing at 30 per cent a year, including pancakes, wraps, potato cakes and gluten-free
products.
Thomas and Ellen Warburton started baking bread in their grocery store in Bolton in 1876. When the fifth
generation of the family took over in 1991 it was still largely confined to Lancashire. Five years ago it
achieved national coverage and is the second-best selling grocery brand after Coca-Cola in the UK,
according to the Grocer magazine. The family’s net worth is estimated at £500m. Jonathan Warburton,
another cousin, is chairman and his signature adorns every packet. The group has 12 bakeries and 14
depots across the UK, employing 4,500. Warburtons turnover rose 7 per cent year on year to £562m in
2014. Kantar Worldpanel, the market research company, says it is the most frequently purchased product,
chosen on average 25 times a year by 86 per cent of UK households.
The Warburtons accept they have no monopoly on wisdom; they hired Neil Campbell, former boss of
Tropicana, the fruit juice brand, as chief executive. Mr Campbell’s big brand experience managing
marketing of Walkers and Tropicana and helping them stand out, made him perfect for this job. Mr
Campbell says dealing with cut-throat competition among supermarkets has been challenging. The
company has opted for growth and innovation to preserve margins. “We tell retailers that if they stock us
we can grow the bakery category as a whole,” he adds.
Mr Campbell says its fleet of lorries, which deliver to more than 18,000 outlets daily, allows the company to
control its products and quality up to the shelf. Thins took almost two years to develop. They are baked for
just 90 seconds and can be cooled in a freezer in less than a minute, accelerating the production process.
Fraser McKevitt, head of retail and consumer insight at Kantar, says Warburtons innovation has been
strong. “The sliced wrapped bread market is suffering. Volume and prices are going down. They have been
able to invest in new products while some of the other groups have had financial challenges.”
The business has spent more than £400m on new bakery technology and machinery in the past decade.
The Warburtons say holding on to staff means they have more money to invest. They also spend heavily on
marketing. Sylvester Stallone, the Hollywood star, is in the latest television and billboard campaign.
Ross Warburton crushes speculation about any prospect of a sale. It has turned down so many potential
partners over the years “they have stopped asking us. We have no intention of selling this business. It has
been our life”.
Appendix: Industry Information3
3 The Bread and Bakery Goods Production industry discussed in the case is equivalent to the Bread & Rolls
market pictured in the 3 figures above.

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