International Strategy: Context, Concepts and Implications

Chapter 4 What is Uniquely Strategic about International Strategy?

MOTIVATION

To continue an example introduced in the previous chapter, consider the following recent headline: “No Soup For You: Campbell Closes Its Oldest Factory in America”.¹ In a stated need to “improve supply chain productivity,” Campbell's announced in September 2012 that it was shutting down its oldest factory in the USA, and laying off about 700 workers. The Sacramento California soup plant had been in operation since 1947, but was apparently less efficient than Campbell's plants in North Carolina, Texas, and Ohio. The company said that the plant “had the highest production costs on a per-case basis” in its manufacturing network and therefore was no longer cost effective. North America President Mark Alexander noted, “we expect the steps we're announcing today to improve our competitiveness and performance by increasing our asset utilization, lowering our total delivered costs and enhancing the flexibility of our manufacturing network. These actions also will eliminate the capital investments needed to maintain the Sacramento plant.”

What is interesting about this event (other than the unfortunate loss of jobs) is that this decision was made solely on the basis of supply chain effectiveness. While the optimal location of Campbell's US soup factories might be contentious, might require much analysis, and might even have a noticeable, if small, effect on margins, the decision bears on what Porter refers ...