The Sysco Corporation's Operating Environment

The Sysco Company began its operations in 1970 as a corporation that offered food services. This was an opportunity to provide its customers with quality food far away from home. Today, the company is entering its fifth decade in operation. Much of what is in the management’s agendas is that sustainability should be the driving force to push the organization forward. The company believes that it is a twofold aspect. First, it has to align itself with the values that the company has already adopted so as to strengthen the culture and secondly, it is the best practice to push the business forward. Good business practices reduce the number of risks a business faces; while at the same time build a positive relationship with all its stakeholders (Jakle & Sculle, 1999). In order to improve on the performance and efficiency, sustainability can cover the following most vital elements: social, economic, legal and political environments for ultimate success.

The growth and sustainability goals are because of the company’s continual approach to improve these areas; energy conservation, suitable agriculture and environmental protection. The company’s progress towards better sustainability as one of the most satisfying aspect is how it has managed to activate large-scale sustainable food security. The company initially founded Sustainable Food Labs® and has up to date collaborated with growers and processors. The commitment starts with the products that the company purchases by setting high standards practices to growers, and partnering with others stakeholders in the market who have similar goals. The efforts with the growers focus on maintaining a safe food supply, which also encourages prudence in the use of agricultural inputs like pesticides, water and fertilizers (Hess, 2007).

The partnership with the growers under the slogan, integrated pest management, has achieved the objective of reducing inputs and increasing on the outputs. The program has managed to track the volume of water, used in irrigation of fruits and vegetable products. There has been a notable increase in the number of suppliers who enroll unusual crop products in the system.

How the industry operates

Sysco is a company with a strong market position in the food industry with more than a hundred and seventy food distribution centers. This forms a strong supply chain network with about half a million customers. Its national distribution network focuses on the lowering of food prices, while, at the same time, increasing performance at all levels of operation. Sysco has more than ten thousand distribution trucks with equally ninety distribution centers. The company has been in a position to serve one fifth of North America food market and being able to raise about 2500 trillion US dollars (Schlosser, 2002). This has made it a market leader in its area of operation, especially in the domestic market.

Growth trends

The local food initiative came into being about two years ago. We are at a time of a growing geographical market and wide customer segmentation. The partnership with the product market association has provided successful workshops about sustainable agriculture in more than six cities. The partnership has reached hundreds of small-scale farmers in a bid to ensure that food standards have attained the quality standards the company looks for.

Sysco’s current operating environment

In order to have a clear understanding of the environment that surrounds the company’s day-to-day operation activities, some tests should be applied to its operations and management. In this case, the SWOT and PESTEL analysis will be used.

1.         SWOT Analysis.

Strengths - the company has a remarkably strong industrial position in the food market with about two hundred centers. It has a chain of reputable suppliers who operates in a market with over four thousand regular customers. The strong chain national network has favored the company economically and can enjoy the benefits of scale and produce at lower costs, making it more competitive as compared to its business counterparts.

Weaknesses - despite the strong network and high dominance in the markets of United States and Canada, Sysco has failed to have the international recognition. This can lead us to make a conclusion that it has a small share in the world market. The other weakness arises due to the economic downfall, and this has made the company’s sales to be less impressive. This has made Sysco to lose much of its domestic sales force in imposing extents. Although the company is reported to have no presence in markets that may provide high returns and growth, it has also lacked to show any potential growth in such areas. In addition, there is an increase in the cost of post retirement and other pension benefits to employees. These benefits impose unusually high pressure to the finances of the company.

Opportunities - in order to generate enough profits, the company have to expand the territorial networks across the globe. Therefore, Sysco should consider expanding its markets in Japan, India and China, which shows a high potential in Sysco’s growth, and success in its efforts to acquire a wider reach, the company has to adopt strategic acquisition as a method to sell its products in a wider market. These alliances have vital opportunities for the company to tap resources in the large untouched markets. Another opportunity that exists is the option of market diversification where Sysco can opt to offer fresh and organic products to the already existing customers.

Threats - it is not a common phenomenon to have a business undertaking operate without the existence of threats, may it be internal or external. For Sysco incorporation, government regulations are one of the main threats that make the company rag behind in terms of growth. These regulations have always been a subject to change as per the current needs of the law. The company has to keep in track with the requirement of Food and Drugs Act among other regulations. If it does not follow its expectations, the company will not sell. The corporate target will not be met and will ultimately become a failure. Wage rates have turned to be another threat in the course of business. This is because of the US government setting up a minimum rate for the human labor provided. The cost of labor is in the increasing trend over some years because of the rising cost of living and varied market conditions (Hilts, 2003). Other than those two threats, Sysco face a fierce competition from the current players in the food market who has at times  the opinion to offer their goods at low prices. This can impose a substantial threat to the profitability of the corporation.

2. PESTEL Analysis

This test entails the analysis of political, economic, social, technological, environmental and legal environments of a place about the subject matter. The analysis of Sysco Corporation can be illustrated as follows.

Political - these are the decisions that lawmakers adopt and how they affect or promote the smooth operation of business. Sysco faces an increasing amount of government interference, because of the sensitivity of what they offer to the public. The government closely monitors consumer concerns about the degree of hygiene in the food items that corporation offer to their consumers. Pressure groups have sensitized the masses on the importance of food and health safety and, therefore, the government cannot hesitate to provide the necessary measures. The farmers have also been funded right from the state coffers to maintain the required standards of quality in food items.

Economic - because of the recent past, there has been an economic crisis that has affected the larger part of US and the world. Economists had predicted that the crisis will prevail for a longer period and that people have to be a bit patient before feeling any recovery. Sysco is trying hard to stay afloat in such an economic time. The period has difficult economic situations like rising uncertainty in the financial market, which can negatively influence Sysco Corporation. These fluctuating conditions have resulted in a rise in food prices. This has made the company record extremely low sales and, on the other hand, affects the consumers buying behavior.

Social - the social and cultural trends of the people, around which a business operates, is crucial. It is from these trends that a business knows the exact needs of their target customers. They also affect the supply chain trends, from the producer to the final consumer. For instance, in America, most of the customer’s top priorities are qualities such as safety, health, cleanliness and ethical practices. From a survey by the OTA in 2007, organic food and beverages had realized increased sales. Because of this, the government enforced a regulation of all food manufacturers to display the amount of fats and calories present in the food types they display.

Technological - this is an essential tool in the distribution network because it affects how often and quick the supplier and the consumer are able to exchange. Low technology in the distribution channels may lead to a collapse in the whole organization. Most contemporary industries are becoming technology based due to growing global economic situations. The current situation of high fuel prices has caused a rise in the prices of nearly all products companies are delivering. Sysco has recently developed software that integrates all its units and processes to keep all the operations in line and consequently reducing overall costs. The system is known as Enterprise Resource Planning System.

Environmental - the company has managed to work hard to ensure that there is safety in environmental control.  Sysco has taken the lead role to impact this theme to all its area of operation. Some of these measures include introduction of pest control to farmers in a bid to promote a healthy environment (Talwar, 2002). It has also taken the initiative of protecting some sensitive areas, paper recycling, less energy consumption among others.

Legal - Sysco operation has been subject to a myriad of rules and regulations. Laws, rules and regulations of both local and international status, centered on food production and safety, have influenced a lot the operation of the company. Due to the vastness of the firms’ coverage, the management has to ensure that it abides to all the needs and requirements of the law in each state it operates.

Sysco and other firms in the industry

The company has been undergoing a transformation in the recent past to improve its technological platform. It is at this time that there is a corresponding increase in the capacity to sustainable operations that will result in a sound partnership with other stakeholders in the food industry.