CASE ANALYSIS: GERBER PRODUCTS COMPANY Case 14 in Leslie W. Rue and Phyllis
G. Holland, Strategic Management, 2nd ed. New York: McGraw Hill
The time frame of this case is 1988. Financial data for Gerber Products Company, and market share data for the baby food industry are available through calendar year 1987. This case analysis is performed from a strategic perspective. The purpose of the analysis is to (1) identify viable strategic alternatives, and (2) recommend a strategy choice for the company. The results of the analysis are presented in discussions related to (1) an analysis of the situation, (2) the identification of strategic alternatives, and (3) the recommended strategy choice.
The analysis of the situation includes (1) an environmental analysis, (2) a resource analysis, and (3) a market analysis. The American economy was generally strong in early 1988. The country was entering its fifth consecutive year of growth, and no general recession was projected in the near future. The economy had experienced and was continuing to experience, however, traveling mini recessions which struck specific industries and geographic areas of the country. The general economy in 1988, however, did not pose any major threats to either the baby food industry generally or to Gerber Products Company specifically. Human and physical resource supplies were ample, and no significant threats in these areas were in the offing for either the industry or the company.
With respect to Gerber's financial resources, analyses are performed with respect to (1) liquidity, (2) leverage, (3) activity, and (4) profitability. The company's liquidity position deteriorated from 1986 to 1987. The current ratio slipped from 2.7 times in 1986 to 2.1 times in 1987. While the decline in the current ratio was significant in the context of magnitude, the 1987 ratio remained strong. The quick ratio deterioration, however, is a different matter. T...