Pilgrim’s Pride Corporation (PPC) is the second largest producer/distributor of poultry products in the world. Among the Company’s main products can be named boneless/skinless chicken breasts, breast tenderloins, eggs, chicken by-products and livestock feed. According to the Company’s 2014 public profile, “PPC operates 25 fresh processing plants and eight prepared foods cook plants in the US…. Additionally, the company operates 13 distribution centers, including one in Puerto Rico and 12 in Mexico.
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It also operates nine rendering facilities including six in the US, one in Puerto Rico and two in Mexico, and three pet food plants in the US” (Pilgrim’s Pride Corporation, 2014, p. 18). It is being estimated that PPC processes about 9500 million pounds of chicken on an annual basis.
Even though PPC primarily targets the U.S. poultry-market (81.27% of total revenue), it continues to apply an extensive effort into establishing its presence in the international markets of chicken, as well. Among the main importers of the Company’s products are Mexico, Russia (up until 2014) and China. As of 2012, the number of PPC employees accounted for 38.000. Through the fiscal year of 2012, PPC declared the revenue of $8,121 billion.
There has been a steady decline in the Company’s annually generated revenues, throughout the years 2008-2012, partially caused by the onset of the economic recession in 2008. PPC is a public company – its shares are being traded at the New York Stock Exchange and NASDAQ.
The main qualitative aspects of the Company’s functioning through the years 2007-2012 were: a) The Company’s implementation of the asset disposal policy – throughout this period, PPC had sold three of its processing/distributing facilities in the U.S. to other companies. b) The Company’s decision to reduce the number of employees, as the mean of increasing the measure of its operational efficiency – something that can be illustrated, in regards to the fact that in 2007 the number of PPC employees accounted for 48.000. c)
The fact that PPC had suffered a great deal damage to its corporate reputation, because of the Company’s practice of hiring illegal aliens to work at its processing plants, and because of the lawsuits that it had to deal with, over the allegations that the operational activities of PPC are concerned with the unethical treatment of chickens.
Segments of the general environment that influence the corporation and the industry
Probably the most influential segment of the external environment, in respect of PPC, is the economic one. This segment has to do with: a) The fact that throughout the years 2011-2015 the inflation rate in the U.S. has been steadily declining. In its turn, this indirectly contributes towards the growth of the national restaurant industry: “The association projects the restaurant-industry sales to be approximately US$661 billion for 2013, which is a 3.80% increase from 2012” (Pilgrim’s Pride Corporation, 2014, p. 20). b) The fact that, as time goes on, more and more Americans face the challenge of having to deal with poverty, which in turn cause them to choose in favor of substituting the comparatively expensive food-items with the less costly ones.
It is understood, of course, that first of the mentioned trends is beneficial to PPC, because the recovery of the restaurant industry in the U.S. will naturally result in increasing the all-national demand for chicken products. The same can be said about the second trend, as impoverished people are objectively driven to substitute meat with chicken/poultry-products.
Another important segment of the external environment is the political one. In its turn, it is being concerned with: a) The FDA’s tendency to introduce the ever stricter regulations on the activities, related to the production/distribution of poultry-products. b) The rising cost of labor in the U.S., “The minimum wage rate in the US remained at US$5 per hour since 1997 and increased to US$7 per hour in July 2010…
According to the Bureau of Labor Statistics, wages and salaries increased by 1.70% during the 12 month period ending September 2012” (Pilgrim’s Pride Corporation, 2014, p. 21). This specific segment of the external environment is clearly detrimental to the measure of the Company’s commercial competitiveness, because it should inevitably result in the rise of the associative production-costs.
The most significant forces of competition
In regards to PPC, the most significant force of competition is undeniably the bargaining power of suppliers. The reason for this is that, in full accordance with the provision contained in the book by Hitt, Ireland and Hoskisson (2013), “It (the power of suppliers) is dominated by a few large companies and is more concentrated than the industry to which it sells” (p. 55).
After all, it does not represent any secret that the agricultural sector in the U.S. is dominated by Monsanto Company, which is nothing short of a monopolist in the field of manufacturing fertilizers.
Because PPC requires grain to feed chickens, it has no choice but to deal with the continually rising prices for grain – something that has been predetermined by the increasing demand for ethanol, made out of corn. The expansion of the agricultural production of corn (subsidized by the government) naturally results in driving up prices for the grain-based chicken feed, and there is nothing PPC can do about it.
Another major force of competition, faced the Company, has to do with the rivalry among competing firms that target the same market with PPC, such as Tyson, Perdue Farms, Sanderson Farms, Foster Farms and Smithfield. Even though these companies are much smaller in size, they nevertheless proved themselves fully capable of driving consumers away from PPC – mainly, because of their awareness of the importance of investing in new technologies. The fact that PPC began to lose a competition to some of these companies became clear as early as in 2009, when the Company announced its decision to sell one of its chicken processing plants to Foster Farms for $80 million.
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In the past, PPC has been deploying the extensive (as oppose to intensive) approach to address the mentioned forces of competition. That is, it continued to increase prices for the lines of its products, on one hand, and to lay off its U.S.-based employees (as the mean to maintain its functional efficacy), on the other. The fact that PPC has been repeatedly caught hiring illegal immigrants, while pursuing with the policy of outsourcing (moving its production lines to Mexico), can be considered the part of the Company’s strategy, in this respect.
The company’s ability to address the forces of competition
In the future, PPC is likely to proceed with addressing the outlined competitive challenges in the same manner that it has done up until now. The main precondition for this to be the case is that most of the Company’s top-officials, as well as the bulk of its private shareholders, are older individuals, strongly affiliated with the so-called ‘traditional values’.
This, in turn, presupposes that they would be quite unwilling to consider the implementation of the discursively innovative strategies for sharpening the Company’s competitive edge, such as investing into the appropriation of new technologies, for example. The fact that, as it was pointed out earlier, there is a good reason to expect the substantial increase of the rate of chicken-consumption among Americans in the future, adds even further to the likelihood of the mentioned scenario.
The scenario’s another prerequisite is the Company’s sheer size, which puts its top-executives in the position of being able to get rid of the least competitive branches/subsidiaries, without fearing that the would-be ensued negative effects will be strong enough to end up exceeding the expected positive ones. The Company’s large size also presupposes that, as compared to its smaller rivals, PPC is in the much better position to take full advantage of the benefits of outsourcing.
The reason for this is apparent – the larger is a particular company, the more likely it is for this company to succeed in moving its production lines to the countries of the Third World, where the cost of labor is much lower, as compared to what it is being the case in the U.S. The Company’s top-managers appear to be fully aware of this, which in turn explains why, throughout the last decade, PPC has been applying much effort into establishing its strong presence in the Mexican poultry market.
As of today, it appears to be only the matter of time, before PPC becomes the leading supplier of chicken-products in this country. At the same time, however, it would be rather inappropriate to rule out the possibility that the Company’s officials decide in favor of resorting to the intensive methods of tackling the competitive challenges at stake, such as developing the new types of chicken feed that would be more agriculturally independent.
External threats affecting the corporation and the opportunities available to the corporation
Given the field of the Company’s specialization, one of the major external threats that it is bound to face, is the periodic occurrence of different poultry diseases, “Every year poultry diseases such as coccidiosis cause losses of more than US$600 million in the US and US$3200 million worldwide” (Pilgrim’s Pride Corporation, 2014, p. 21).
The acuteness of this particular threat cannot be underestimated, especially in light of the fact that 90% of the Company’s revenues are directly related to its sales of poultry-products. Among the most pressing external threats can also be mentioned the fact that, during the course of the recent decades, consumers have been growing increasingly aware of the unethical treatment of chickens at the Company’s facilities.
Given the actual realities of how chickens are being treated at the facilities of just about any poultry-company, there is nothing surprising about the fact that PPC has been repeatedly accused of subjecting animals to cruelty, which in turn would have a negative effect of the value of the Company’s stock.
There are also a number of opportunities, which PPC is more than capable to capitalize upon. The main of them has to do with the fact that: a) PPC specializes in producing food, and there will always be demand for food – at least for as long as people continue to be required to satisfy their sense of hunger from time to time. b) PPC’s capitalization is essentially concerned with the Company’s possession of physical assets (such as the chicken-processing plants), which means that it is not quite as prone to the outbreaks of financial crises, as it is being the case with the companies, associated with the economy’s banking/servicing sectors.
The best strategy for PPC to deal with the mentioned threat is to invest in scientific research, aimed to identify the factors that trigger the outbreaks of poultry diseases. The Company’s strategy for taking full advantage of its ‘physicalness’ is diversifying/expanding the range of its commercial activities, in order to be able to enter the previously uncharted food-markets. The rationale behind these suggestions is apparent – their practical implementation will result in increasing the measure of the Company’s functional resilience.
The corporation’s greatest strengths and most significant weaknesses. Strategy to take maximum advantage of the strengths, and the strategy to fix the weakness
The Company’s major strengths are as follows: a) The Company’s brand is familiar to most people in the U.S. and Mexico. b) PPC is able to come up with the merger offers to its smaller competitors. c) As compared to its competitors, PPC is more likely to take advantage of the newly emerged commercial opportunities abroad. d) Because PPC is a large transnational corporation, it is able to come up with better prices for the similar lines of products with its main competing firms.
These strengths are counterbalanced by what can be seen as the Company’s main weaknesses: a) Overdependence on the U.S. market of poultry, “Overdependence on the US increases the business risks of the company by exposing it to the economic and geopolitical risks associated with the region or country” (Pilgrim’s Pride Corporation, 2014, p. 19). b) The comparatively high rate of product recalls, associated with PPC, which in turn has a strongly negative effect on the Company’s corporate reputation.
The Company’s best approach for benefiting from the mentioned strengths would be adopting the policy of ‘aggressive expansion’, as the mean of consolidating its already extensive share of the market. This course of action is being dialectically predetermined by both: the Company’s currently enacted corporate philosophy and the fact that PPC’s capitalization is mainly concerned with physical assets.
The main practical measure that should be undertaken, in this respect, will be concerned with the Company’s managers taking full advantage of the fact that: a) PPC is a large commercial operator, capable of investing into the long-term projects. b) PPC exercises full control over its own lines of distribution.
For example, PPC should be able to acquire chicken feed at much lower price, as compared to its smaller rivals, simply because it is being in the position to buy this feed in much larger quantities than the latter. Consequently, this should make it possible for the Company to reduce prices for the lines of its end-products. In this respect, the Company’s large size will come in as an indispensable asset.
Alternatively, PPC can address its main weaknesses by continuing to pursue with the policy of outsourcing and by applying an additional effort into ensuring the high quality of its products. The rationale behind these suggestions is based upon the considerations of a commonsense logic.
The company’s value chain, resources, capabilities, and core competencies
What accounts for yet another strength of PPC, in regards to its value chain, is that the Company’s functioning is concerned with the practical utilization of the so-called ‘full cycle’ principle of production. This naturally puts PPC in the advantageous position, as compared to its smaller rivals, which are being strongly affected by the factor of ‘middleman’, within the context of how they go about ensuring the logistical effectiveness of their operations.
The Company’s core competence, in this respect, appears to be closely associated with the ability of PPC to swiftly alter its production/marketing strategy, in order for it to be fully consistent with the fluctuating demands of the surrounding competitive environment. At the same time, however, this is being the main obstacle on the way of the Company’s continual expansion.
The reason for this is that, the consolidation of the Company’s production/distributing assets is potentially capable of reducing the measure of PPC’s competitive resilience. Given the realities of Globalization, which require the branches/subsidiaries of just about any large company to be operationally flexible, this scenario appears thoroughly plausible (Ndhlovu, 2012).
What it means is that, while exercising the overall control over the value chain of PPC, the Company’s top-managers should be willing to allow the affiliated subsidiaries to make executive decisions. In light of what has been mentioned earlier, the set of recommendations, as to how the Company’s value chain can be brought to a qualitatively new level of effectiveness, are as follows: a) Managers must work on ensuring the discursive compatibility between the chain’s primary and support activities. b) The Company’s departments in charge of supervising the primary activities, on one hand, and the support activities, on the other, must be discouraged from meddling in the affairs of each other. c) The Company’s managers/employees need to be prompted to adopt a ‘holistic’ outlook on the significance of PPC, as a contributor to the well-being of its customers – something that will guarantee that PPC adequately reacts to the externally applied stimuli of competition.
Hitt, M., Ireland, R., & Hoskisson, R. (2013). Strategic management: Concepts and cases: Competiveness and globalization. Mason, OH: South-Western Cengage Learning.
Ndhlovu, T. (2012). Globalization: A theoretical reflection. World Journal of Entrepreneurship, Management and Sustainable Development, 8 (2), 95-112.
Pilgrim’s pride corporation: Consumer packaged goods – company profile, SWOT & financial report. (2014). Basingstoke: Progressive Digital Media.