Scotts Miracle-Gro Case Analysis

Unit 7: Scotts Miracle-Gro Case Study Analysis

Kaplan University

School of Business and Management

MT460 Management Policy and Strategy

Author: Shadrach Diamond

Date: July 1, 2012

Introduction:

Scotts Miracle-Gro is a company that produces and sells home improvement products. This organization is a combination of two very powerful companies. Scotts was founded in 1868 and Miracle-Gro in 1951. They merged in 1995 and became the largest company of North America in the lawn and garden industry. These companies, however, had one major difference, outsourcing.

Outsourcing is defined as acquiring an activity, service, or product necessary to provide a company’s products or services from a foreign supplier (Pearce & Robinson, n.d.). Miracle-Gro outsourced all production from contract manufacturers and had no internal production like Scotts did. Once these companies merged, this strategy played a key role in reducing some of their costs, but also threatened to close down manufacturing plants like the one in Temecula, California.

Synopsis of the Situation:

The Temecula plant kept showing improvement and had maintained steady growth with productivity, but the comparatively high plant and labor costs of the plant continued to create intense cost pressure. Scotts historically spent $500 thousand from their capital to keep this plant open compared to $300 thousand if it used a contract manufacturer (Gray & Leiblein, n.d.). Although the company could save a large amount of money by doing this, they would have to consider the negative effects of outsourcing as well.

Key Issues:

In-mold labeling is a procedure where the brand is molded directly onto the product. This is a great marketing technique because the name does not fade in time, nor can it be scratched off. The Temecula plant was a pioneer in this procedure and by outsourcing it would have to share the knowledge of this innovation. The issue of confidentiality...