Over the years, LSI Logic's core businesses became increasingly broad-based and stretched thin. The company was less focused on its strengths. In 2002, LSI Logic had two separate businesses that were not well related to each other—high-end chips (80 percent of sales in 2002) and low-end storage (20 percent of sales in 2002). It was difficult for the company to manage advanced and complex products in the former business while it was involved in the commodity-like storage business.

IMC's management lost focus as it began to drill for oil and gas and operated salt and soda ash businesses that provided minimal synergies with its core crop nutrients business. The company was involved in an assortment of nonprofitable efforts outside of its core businesses, contributing to a lack of focus. IMC in the early- to mid-1990s tried to enter related markets. During this time, it was attempting to become a “full-line provider” to global agricultural markets. It moved into salt, soda ash, other farming-related chemicals, and oil and gas markets to achieve this end. The cost to move into these markets, however, was not cheap. For example, to finance the acquisition of Harris Chemical Group, Inc. and its affiliate Penrice Soda Products Pty. Ltd. in 1997, IMC spent $450 million in cash and assumed approximately $950 million of debt. Unfortunately, as the company assumed this debt, fertilizer prices fell sharply, which put IMC in a difficult position.

The company rewrote its strategic plans three times thereafter. In an effort to rebound, it sold assets to reduce debt. It cut capacity and restructured. By 2003, it had sold essentially all noncore assets, but it was not much better off. The depressed state of agricultural markets offset any positive results it had hoped to achieve. Having inconsistent executive management led to varying strategies that resulted in unfocused decisions. The company's strengths were in mining. It made poor growth decisions by acquiring companies outside its core. It did not have transferable capabilities that it could move easily to the new industries it entered.

Goodyear had little continuity in its strategy. Divestitures in the 1980s were followed by acquisitions in the 1990s, which spread the company thin by putting it in many market positions simultaneously. With the purchase of Kelly and Dunlop, Goodyear shifted from the lower to the higher end of the market, but its products were neither the lowest in price nor the highest in quality. They did not stand out.

Bridgestone and Michelin chose particular market segments and stuck to them. Smaller, niche rivals like Cooper concentrated only on the replacement market. Cooper diversified into the related auto parts' business. Pirelli made high-performance tires. Goodyear did not have such a focus. Alternating attempts to position itself as an upscale, higher-priced brand and as a low-cost, mass-market brand confused consumers and dealers. Goodyear was not focused in how it competed with other brands on design, performance, price, reputation, warranty, customer service, and customer convenience.

In addition to tires, Goodyear manufactured and marketed rubber and other products for industrial and consumer markets. It had a line of chemical products that it made and sold. It owned rubber plantations in Malaysia. The company also had retail outlets that provided automotive repair and other services.

Goodyear was in all ends of the business from raw materials (the rubber plantations), to manufacturing, to related product lines, to retail distribution. It produced oil for fuel (divested in 1998). It made chemicals that went into the tires. It produced the isoprene, nylon and polyester, yarn and wire for synthetic rubber. It provided warehousing and distribution. It marketed and sold to OEMs and retail stores and repaired and retreaded the tires, as well as developing and designing them. It had independent retailers and placed product in discount retailers. Its dealers competed with its business partners. The company's noncore businesses, such as chemical products, were in commodity industries, giving it little chance for differentiation. The disarray of these diverse holdings was hard to manage.

Campbell struggled with where to focus. It had a long-standing commitment to quality products and “good, wholesome, high-quality food.” The company started as a soup firm, but it did not maintain the focus on soups for long.

In 1915, Campbell began to acquire other firms with the purchase of the Franco-American Food Company. Additional acquisitions included V8 Vegetable Juice (1948); C.A. Swanson & Sons (1955), the originator of the TV dinner; Pepperidge Farm (1960); Biscuits Delacre (1960); Goldiva Chocolatier, Inc. (1966); Vlasic Foods, Inc. (1978); and Swift-Armour S.A. Argentina (1980). In 1992, Campbell bought Arnotts, Ltd., the seventh-largest biscuit manufacturer in the world. In 1993, it purchased Fray Bentos, the United Kingdom's leading brand in premier canned meat. In 1995, it bought Pace Foods, the world's leading producer and marketer of Mexican sauces. It also purchased Green Healthy Foods and Fresh Start Bakeries Inc. in that year. In 1996, Campbell's acquisitions included Erasco, a canned fruit and vegetable company in England. In 1998, they included a canned soup firm in Germany, Forton Foods. The company's acquisitions in 2001 included Oxo, Batchelors, Heisse Tasse, Bla Band, and Royco, which were leading instant dry soup and bouillon brands in Europe. In 2002, the company bought Snack Foods Limited, a leader in the Australian salty snack category, and Erin Foods, Ireland's second largest dry soup business.

Campbell had a full array of domestic and international brands. The problem was the haphazard pattern of how it acquired and divested these firms. Its strategy changed about every three years. It did not have the patience to follow through with long-term plans. In 1993, the company recorded restructuring charges of $353 million in closing two frozen food plants and selling of nonstrategic businesses, many of which served niche markets. In 1997, it sold Fresh Start Bakeries, a business it had acquired only two years earlier. In 1998, it carried out another major series of divestitures in a continued portfolio reconfiguration, selling off Continental Sweets, Melbourne Mushrooms, Spring Valley Juice, Specialty Foods (Vlasic), and Swanson.

Safeco showed a lack of focus in determining which market and product segments to operate in. It had 18 different business lines, many of which were counterproductive to its core business—property and casualty insurance. It needed to focus its business around what it was really good at. Since its founding, Safeco had been a vertically integrated firm. It physically underwrote its own policies and assumed the risk that went hand in hand with underwriting. Underwriting insurance policies was a risky business, because a large number of different events could trigger claims against the policies.^[1] Firms as vertically integrated as Safeco had to have in place an infrastructure to assess, manage, and hedge against potential losses and risk. Premiums had to provide sufficient capital to maintain operations and generate dividends to stockholders, even in difficult capital market conditions. The company had to employ a costly actuarial staff, investment department, and accounting department, all of which was difficult to do simultaneously.

Many of the Gap's problems were due to the company's lack of focus. It was involved in all aspects of brand development—from product design and distribution to marketing, merchandising, and creating the right shopping environments. It controlled these activities internally. It designed almost all of its merchandise in-house, but it outsourced the manufacturing through a network of more than 1,000 vendors.

Attracting and retaining key personnel in fashion design and marketing was a challenge. Overcoming international obstacles was a challenge. About 90 percent of its production units were made outside of the United States, with approximately 13 percent coming from China and Hong Kong. Getting the advertising right was another challenge. Merchandise was advertised heavily through a variety of media, including major metropolitan newspapers, major newsweeklies, lifestyle and fashion magazines, mass transit posters, exterior bus panels, bus shelters and billboards, and TV and radio ads.

The company had too much to do in controlling the shopping environment and all aspects of brand management, including product design, distribution, marketing, and merchandising. It's strategy was complex. Its customer base was everyone from low- to high-income families, babies, teens, adults, men, and women, both in the United States and globally. This diverse focus brought complications in advertising, pricing, timing, and inventory management. It exposed the company to risks from other brands, rapid expansion, and design, production, marketing, and selling issues.

Hasbro's problems also were related to an undefined and unfocused strategy. The company was in many businesses simultaneously—toys, games, and retail in the United States and abroad. Its toys (35 percent of its revenues) ran the gamut from action figures, vehicle playsets, and creative play products to toys for young boys, young girls, preschoolers, and infants. Its brands included both Playskool and Tonka. It made Star Wars action figures in addition to Disney. It owned the rights to Mr. Potato Head, GI Joe, My Little Pony, Transformers, Pokémon, Furby, Hungry Hippo, Twister, Barney, Sit n' Spin, Teletubbies, Cabbage Patch Kids, Play-Doh, Nerf balls, and Harry Potter.

Internally, it was never quite clear how Hasbro should manage all these properties. The company's games (34 percent of its revenues) were equally diverse. They included board games, card games, puzzles, handheld electronic games, children's electronic games, electronic learning aids, trading cards, and role-playing games. It's brands included both Parker Brothers and Milton Bradley. It owned the rights to Monopoly, Scrabble, Dungeons & Dragons, and Trivial Pursuit.

Hasbro also operated approximately 85 retail stores under the Wizards of the Coast and Game Keeper names, which not only sold games directly to the consumer, but also provided locations for tournaments and other organized play activities.

Overall, its different divisions struggled to work together for common goals. A weakness of Hasbro's was the constant internal struggles that came about because of the diversity. In 1996, after a failed takeover attempt by Mattel, an outside consultant was brought in to reorganize. The reorganization did not help; the divisions continued to fight with each other.

LSI Logic saw itself as a technological leader. It spent 9.8 percent of revenue on R&D in 1995 (see Figure 12.2), 19 percent in 1998, and 28 percent in 2001. In 2002, it estimated that more than 60 percent of its employees were engineers pursuing technological advances. But its focus of this R&D was on products, not markets. The company was committed to updating the products even without long-term customer support for the innovations it was making. It operated with the assumption that an unusual or outstanding technology would drastically improve the health of its business. This assumption did not always prove to be true.

Figure 12.2. R&D expenses at LSI Logic.

Snap-On's focus was mostly on product development and brand. It wanted to extend its reputation for innovative, high-quality tools for the professional user, such as the automobile mechanic. For its brand to continue to command a premium price, it was very conscious of R&D, and it had to be protective of its patents. Snap-On's R&D facility in Bensenville, Illinois opened in 1978. The company continued to increase R&D spending throughout the late 1990s despite the company's financial woes. In 1996, Snap-On spent $42.4 million on R&D. That number grew to $50.2 million in 2001. As a consequence, the company boasted one of the broadest and deepest lines of products in the industry and held 1,592 patents in 2002, with another 637 applications filed or pending.

Snap-On maintained that it wanted to break out of its vehicle service niche and reinvent itself. It was trying to extend its market niche beyond vehicle service to other industrial and commercial applications. It was attempting to provide software solutions and training programs focused on its technologies and products. However, it was still a product-based company for a limited group of users, who were becoming increasingly cost conscious. Snap-On was not effectively modifying itself to meet these customers' needs.

In 1998, Parametric named Rand Technologies as “master distributor” of its core products and gave them almost exclusive selling rights in various countries. Likewise, Rand covered most of the training and support services for PRO/Engineer. Rand distributed Parametric's core products to small businesses, which offloaded small account sales activity and enabled Parametric to focus its internal sales staff on larger accounts.

However, Rand, which was free to sell products for other software providers, also developed a relationship with IBM/Dassault Systems. Parametric did not have a way to effectively remedy this problem. Instead, it rolled out an indirect sales model called the Challenge Advantage Reseller program. This program focused on increasing alliances with other resellers and systems integrators and training them as full-service, single-point-of-contact providers. Parametric also developed relationships with the largest consulting firms (including Accenture and Deloitte) to sell and integrate its products.

By relying on these various indirect distribution channels consisting of third-party systems integrators, resellers, and other strategic partners, Parametric lost contact with its customers. Innovative methods in software design that were being developed by competitors, which were based on customer requests and research, were not given the attention they deserved.

Indeed, the marriage between Parametric and Rand ultimately turned sour. In early 2003, Rand filed a $100+ million lawsuit against Parametric, claiming that Parametric had breached the contract in several ways.

Safeco had the goal of being the financial services company that individuals and corporations looked to for all of their needs. It did not focus on a particular market or product, struggled with its identity, and lacked strategic direction.

From 1992 to 2002, the company regularly changed emphasis. Along with offering standard automobile, homeowner's, and life insurance, it also sold hospital insurance policies and had a presence in Canada. Safeco's operations included commercial lending and leasing, investment management, general insurance, and financial services distribution operations. The company underwrote personal, commercial, and surety lines of insurance including automobile, homeowner's, fire, commercial multi-peril, worker's compensation, miscellaneous casualty, and fidelity policies. Its life insurance products included individual products, retirement services (pension), and annuity products. It provided property and casualty insurance, bonds, life insurance, annuities, retirement services, commercial credit, and asset management. It had its own asset management company to manage its mutual funds, a trust company, and outside accounts. Because the mutual funds it administered were not sold through banks, Safeco was moving in the direction of partnering with banks. It was a small mutual fund player, so this was a huge challenge. Safeco credit provided loans and equipment financing to businesses, insurance agents, and affiliated companies. Although the credit operations were profitable, they also tied up nearly $1.5 billion in assets. Safeco found it increasingly difficult to justify this business while other segments of the company were struggling to survive. The diversity of company holdings was difficult to manage effectively. The company had failed to identify promising markets and was not committed itself to pursuing them.

Campbell had four different segments in 2002: (1) North America Soup and Away from Home: $2.524 billion in revenues; (2) Biscuits and Confectionery: $1.507 billion in revenues; (3) North America Sauces and Beverages: $1.182 billion in revenues; and (4) International Soup and Sauces: $920 billion in revenues. Condensed-soup shipments continued to slide, but sales from new products in the Pepperidge Farm division, such as Goldfish Colors crackers, rose. Yet management continued to declare that Campbell's highest priority was to restore the soup business. Indeed, Campbell tended to view soups as a snacking alternative: “The more we study today's consumers, the clearer it becomes that few foods are better suited to their needs than soup—as a meal, a snack, a beverage, (or) an after-school pick-me-up.” The competitors in the snack arena were strong. They included everything from SnackWell's cookies to reduced-fat, no-fat, and baked potato chips.

Sales from Biscuits and Confectionery were increasing primarily due to the performance of Pepperidge Farm, Arnotts, and Godiva. Thus, the indulgent snack category seemed to have particular promise. So did the North America Sauces and Beverages Division, but Campbell did not give either group sufficient support to grow. The company didn't favor products that had promise, such as V8 vegetable juice, Pace Mexican sauces, and Prego sauces, in terms of resource allocation. Campbell didn't put forth sufficient marketing or R&D support toward product lines like Pace and Godiva, which were growing at double-digit rates between 1992 and 2002.

The Gap was serving different market segments utilizing three separate brands and trying to control almost the entire supply chain for all these brands from initial design to retail sale. The Gap's brands covered all segments of the population from value-conscious to high-end. The strategy of different sales channels required different growth strategies for each channel, putting the Gap in equal competition with the sophisticated style of Ann Taylor and the bargain clothing at J.C. Penney. The tasks that Gap had to accomplish were complicated.

After building the Gap brand on high-quality, moderately priced, casual styles for men, women, and children, the company expanded its portfolio to include fashion-forward, high-end Banana Republic and family-oriented budgeter, Old Navy. The company was unable to create a robust enough market distinction between the brands. The differentiation between Gap and Old Navy, for instance, was not great. Both sold casual clothes of similar type, variety, and quality.

Snap-On acquired companies to expand product lines and compete internationally, but the acquisitions did not succeed. With global expansion, it offered products in more than 150 countries, but growth for these products was slim. The market for most of the products shifted downward soon after Snap-On bought the companies. Globally, Snap-On was spread very thin. In 2001, it generated $2 billion in sales in 150 different countries, but sales outside the United States and Europe were only 5 percent of its total, and Snap-On's global businesses were not positioned for strong future growth.

Approximately half of Parametric's employees were located in the United States, with the other half operating in foreign countries such as Canada, France, Germany, and Japan. Despite its global presence, Parametric was unable to make the best of its reach because of decisions it made about what it should concentrate on.

Customers who bought the software felt that they had to invest significant amounts of their own time and money to train their personnel and to integrate the software. Customers found Parametric to be ill equipped and unresponsive about working with them on integration. Although the company had a technologically sophisticated product, Parametric did little to effectively service its client base. The result of these practices was that Parametric was unable to generate subsequent sales from its existing customer base. When Parametric attempted to reacquire a customer to generate follow-up sales or sell product upgrades, it was confronted with frustrated and hostile customers.

By means of its acquisitions, Campbell had developed a global focus, selling products in 120 countries. Its products were often tailored for specific foreign markets, such as dry soups in Europe. Overseas markets presented Campbell with good opportunities to expand its customer base and product markets. The company moved aggressively to take advantage of these opportunities, building an extensive dry soup concern in France, which it used to leverage its growth in the dry soup line in the rest of Europe. Campbell also made several acquisitions of other overseas leading producers of soups, including Erin Foods and McDonnell's in Ireland and Velish in Australia.

Campbell had success with its Arnotts brand (a leading snack foods company) in Australia. It strengthened its presence in the snack market with the acquisition of Snack Foods Limited, the number-two salty snack company in Australia.

But Campbell's global expansion did not make up for its domestic weakness. For the period 2000 to 2002, overall sales were down, and Campbell's results were mixed. (See Table 12.2.)

IMC focused on strengthening exports to several key countries, including China. Rather than providing protection against market swings, however, these ties made them worse. China was a major customer, but its demand for IMC's products basically went away when the country imposed import restrictions, causing a large reduction in sales. The reduction in sales caused available capacity to go idle, which hurt IMC's profitability.

In comparison to such competitors as Bridgestone, Michelin, and Continental, Goodyear was not sufficiently global. The company's highest growth in 2002 came from Eastern Europe, Africa, and the Middle East. The Asian and European Union markets also were strong, but the U.S. market was slumping. Without growth in global markets, Goodyear was likely to continue to lag behind its competitors. It had the leading market share in tires in North America, Latin America, China, and India, but not Japan, where Bridgestone continued to be number one, or Europe, where Michelin dominated.

About a quarter of Hasbro's revenues were from its international operations. The U.S. market was saturated. To sustain growth, it was necessary to attract the attention of children around the world. With India and China accounting for more than 700 million potential toy consumers, it was in Hasbro's best interests to pursue the opportunity. Hasbro's most successful international brands in 2002 were ActionMan, Play-Doh, Monopoly, and FurReal Friends, in addition to licensed toys from Disney, Star Wars, and Pokémon. However, Hasbro was not being aggressive enough in pursuing these global opportunities.